TaxTMI 
TaxTMI 
2024 (9) TMI 1274
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....covered u/s 153A of the Act for initiation of assessment proceedings u/s 153C of the Act (23-38) iii) 30.3.2021 Satisfaction note of the learned Assessing Officer of the appellant Satisfaction note in the case of M/s Pragati Glass (P) Ltd. for dissemination of information for taking action u/s 153C of the Act(41-54) iv) 30.3.2021 Notices issued for assessment year 2014-15 to 2019-20 by learned Assistant Commissioner of Income Tax, Circle61(1), Delhi u/s 153C of the Act v) 12.4.2021 Return of income filed by appellant in response to notice u/s 153C of the Act Sr. No. Assessment year Income declared in 12.4.2021 Return i) 2014-15 26,09,730 ii) 2015-16 18,09,080 iii) 2016-17 23,80,900 iv) 2017-18 26,30,151 v) 2018-19 37,46,910 vi) 2019-20 63,28,050 vi) 7.7.2021 Order u/s 127 passed by learned Pr. Commissioner of Income Tax-12, New Delhi vii) 7.3.2022 Show cause notice issued by learned Assistant Commissioner of Income Tax, Central Circle 17, Delhi viii) 15.3.2022 After the Show cause, notice has been issued u/s 143(2) of the Act ix) 23.3.2022 ....
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....0,226 4,27,50,931 93,31,825 2,49,26,243 ii) 2015-16 93,31,825 4,18,24,445 4,29,00,000 72,17,526 2,61,94,514 iii) 2016-17 72,17,526 3,93,71,184 3,41,00,000 1,14,76,672 3,03,70,379 iv) 2017-18 1,14,76,672 3,33,64,357 3,27,00,000 88,04,411 2,34,55,383 v) 2018-19 88,04,411 5,26,42,713 4,52,37,375 1,56,40,904 3,02,30,766 vi) 2019-20 1,56,40,904 6,20,47,551 5,96,24,756 1,47,24,813 3,34,21,765 4 It is submitted that learned Assessing Officer in show cause notice dated 7.3.2022 (reproduced in pages 4 to 12 of order of assessment) has relied upon the following: i) documents quoted as "Annexure -A (pg1)"found in the possession of the MD of PGPL at the Airport;(page 3 of order of assessment for assessment year 2014-15) ii) part statement dated 12.5.2019 of Sh. Dinesh S Gupta(pages 3-5 of order of assessment for assessment year 2014-15) and, iii) part statement dated 12.5.2019 of Sh. Hari Om Goel, accountant of the PGPL during the course of survey proceedings conducted at the premises of Pragati Glass (P) Ltd., ONGC Road, Kharach, Bharuch.(pages 6-11 o....
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....as failed to provide any documentary evidence/petition copy in this regard. Further, the assessee has also failed to explain the nature of suit filed, reason for the suit filed, how the same is related to cash purchase. The assessee has requested to cross examine the MD and accountant of M/s Pragati Glass Limited with the only objective to delay the proceedings as the assessee knows the stated person and has admitted to purchase goods from it. The copy of statement of M.D. was duly given and assessee failed to furnish any evidence/proof to support his version. In view of the above, it is evident that the assessee has made cash purchase amounting to Rs. 2,49,26,243/- from M/s Pragati Glass Private Limited in the year under consideration for which the assessee has failed to provide any documentary evidence for source of expense. Therefore, the same is added to the income of the assessee as unexplained expenditure under section 69C of the income Tax Act, 1961." 5 At the time of hearing, Ld AR submitted that in respect of Ground 1 of grounds of appeal is the issue of assumption of jurisdiction u/s 153C of the Act and, framing of assessment u/s 153C/143(3) of the Act. 5.1....
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.... is not the requirement in law. Such disastrous and harsh consequences cannot beat tributed to Parliament. On the other hand, a plain reading of section 153-C supports the interpretation which this Court adopts. 11. For the foregoing reasons, the Court finds no merit in these appeals; they are accordingly dismissed, without order on costs." ii) 465 ITR 101 (Del) PCIT vs. Ojjus Medicare (P) Ltd. (pages 459-545 of JPB-II) iii) 380 ITR 612 (Del) CIT vs. RRJ Securities Ltd. (pages 33-48 of JPB) iv) ITA No. 1685/D/2023 Rakesh Bansal vs. ACIT (pages 260-270 of JPB) v) ITA No. 3095/D/2013 dated 30.5.2024 Esha Securities (P) Ltd. vs. DCIT 6 With regard to Ground 1.1 and 1.3 of grounds of appeal, Ld AR submitted in respect of issue that notice issued u/s 153C of the Act and assessment framed u/s 153C of the Act were without satisfying the statutory preconditions contained in the Act and therefore without jurisdiction and therefore deserves to be quashed as such. 6.1 It is submitted that satisfaction note recorded by the AO of searched person does not satisfy the statutory preconditions u/s 153C of the Act and is therefore illegal, invalid a....
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....other person" and further provides that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. 6.5 It is therefore submitted that it is evident that from perusal of section 153C of the Act, that satisfaction of learned Assessing....
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....er FDI route as share capital and share premium. In support of this, the assessee had duly provided all the necessary documents as listed above. The assessee from the inception had always taken the stand that it had not sent any monies abroad in hawala route. The assessee cannot be asked to prove the negative. It is for the revenue to prove the same with cogent evidences, which is not done in the instant case. We find that the revenue had merely proceeded to make the addition on suspicion. It is trite law that suspicion howsoever strong would not partake the character of legal evidence and hence a greater onus is casted on the revenue to bring on record cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during search which only contained the details of „amounts sent‟ and "amounts received‟. Nowhere the said material even suggested that the amounts were sent by assessee company in illegal route which in turn had surfaced back in the form of share capital and premium under FDI route from Cyprus. Though the presumption u/s 292C of the Act would go i....
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....or six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 7.3 It is submitted that as it is evident from aforesaid relevant extract of satisfaction note of learned Assessing Officer of assessee; there is no satisfaction that the documents seized or requisitioned have a bearing on the determination of the total income of such other person. i.e. assessee for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. It is therefore submitted that as the condition precedent as stated in section 153C of the Act has not been fulfilled, the notices issued under Section 153C are not in accordance with law. 7.4 Reliance is placed upon following judicial pronouncements: i) 451 ITR 371 (Del)Pr. CIT v. Prominent Real Tech (P) Ltd. (pages 387-391 of JPB) "6. Further, in the present case, the Assessing Officer in the satisfaction note has recorded that the documents found during the search pertained to assessee and therefore it is a fit case for initiation of proceedings under section 153C of the....
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....ed to be satisfied that the material or documents unearthed pertain to a person or entity other than the one searched. The relevant extracts of the decision in SSP Aviation Ltd are reproduced hereinbelow: .. 39. The principle that the AO of the searched person is only required to be satisfied that the documents or materials pertain to the "other person" at the stage of transmission of material or documents to the jurisdictional AO of the non-searched entity was reiterated in RRJ Securities. We deem it apposite to extract the following passages from that decision: .... 40. It is thus apparent that it is only when the transmitted documents and material reaches the desk of the jurisdictional AO that it becomes empowered to initiate action under Section 153C of the Act. This is evident from a plain textual reading of that provision and which speaks of the commencement point being the handing over of documents or assets seized or requisitioned to the AO of the "other person" and it in turn proceeding to issue notice to assess or reassess the income of the non-searched entity in accordance with Section 153A. However, the initiation of action under Sect....
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....g contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to any person, other than the person referred to in section 153A, then books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A if he is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A. The amendment will take effect from 1st October, 2014." 42. It would also be apposite to notice the Notes on Clause 53 of the Finance Bill, 2014, which sought to amend Section 153C and which is reproduced here....
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....the total income of such other person" for the six preceding AYs' or the "relevant assessment year" as referred to in Explanation 1 to Section 153A. Prior to the promulgation of these amendments, the AO of the non-searched party was not obliged to form an opinion that the material received by it was likely to impact the estimation of income of that person. Significantly, although this prerequisite came to be incorporated in Section 153C, no such corresponding precondition was included in Section 153A. This, although the legislative history of the search assessment provisions placed in the Act would indicate that they were amended from time to time in order to constitute a complete and homogeneous code. This becomes apparent from the legislative mandate of those two provisions being applicable to searches undertaken in a particular time period, the principles of abatement being replicated and the search assessment power being available to be invoked for the "relevant assessment year", and which extended the power to be exercised over a ten year block, being simultaneously introduced in those provisions. The Legislature clearly intended both these provisions to form part of a cohesiv....
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....tolerate, behaviour past all bearing // (pl.) position in relation to some reference point // (pl/) grasp of one's situation, to find one's bearings // a part of a machine that bears the friction set up by a moving part. Sliding friction is reduced by making the bearing of Babbitt metal, and by separating it and its moving part by a thin film of lubricant. By the introduction of ball bearings (or roller bearings) sliding friction is replaced by rolling friction, which is must less in effect// an angle measured from true north, magnetic north, or from some given survey line to lose one's bearings to be lost// to be puzzled." 47. This too speaks of "relevancy" as one of the meanings one may gather where that particular expression is used. This leads us to the inevitable conclusion that the initiation of action under Section 153C would have to be founded on a formation of opinion by the jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the "determination of the total income" and would be of relevancy for the purposes of assessment or reassessment. F. INCRIMINATING MATERIAL- CASCADING EFFECT? 48. In terms....
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....year". The Act thus sanctions and confers an authority upon the AO to exercise the power placed in its hands for up to a maximum of ten AYs'. Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six AYs' immediately preceding the AY pertaining to the search year or for the "relevant assessment year". 51. Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be ....
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....ed is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdicti....
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...., he is required to transfer the assets or documents, which he believes belongs to the assessee, to the assessing officer having jurisdiction over that assessee. The assessing officer of the assessee on receipt of such asset or document seized would have jurisdiction to commence proceedings under Section 153C of the Act. The assessing officer has, thereafter, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the Assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act. Section 153A of the Act requires that a notice be issued to the person sought to be assessed, calling upon the said assessee to file his return of income in respect of each year falling within the specified six AYs. It is further specified that the provisions of the Act shall, so far as may be, applied as if such returns were returns required to be furnished under Section 139 of the Act. Thus, the assessing officer has to, thereafter, proceed with the as....
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....t any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act.: v) The appellant also seeks to place reliance on the decision of Kolkata Bench of Hon'ble Tribunal in the case of IQ City Foundation vs ACIT reported in 186 ITD 555 wherein it has been held as under: 7. According to us, the aforesaid exercise which has been discussed has to be carried out by the AO of the searched person and the condition precedent as discussed are sine qua non before the AO of the other person(third party) gets jurisdiction u/s. 153C of the Act to issue notice u/s. 153C f the Act to the third party. However, it has to be taken note that an additional requirement/ satisfaction of AO has been brought in Finance Act, 2014w.e.f. 1-10-2014 which is an additional conditional precedent inserted by the Parliament which also need to be complied before the AO of the other persons (third party, the assessee in this case) before he issues notice to asse....
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....TR 106 (Del) CIT vs. Living Media India Ltd. (pages 90-96 of JPB) ii) 439 ITR 333 (Bom) Hindustan Lever Ltd. v. DCIT (pages 112-114 of JPB) iii) 355 ITR 102 (Bom) Dynacraft Air Controls vs. Sneha Joshi and Ors iv) 324 ITR 154 (Bom) Prashant S. Joshi vs. ITO(pages 82-89 of JPB) v) 455 ITR 286 (Bom) Tumkur Minerals (P) Ltd. v. JCIT vi) 456 ITR 261 (Bom) Survival Technologies (P) Ltd. v. DCIT vii) 69 ITR 461 (All) Jamna Lal Kabra v. ITO viii) 189 ITR 786 (Pat) CIT v. Agarwalla Brothers ix) 272 ITR 154 (Raj) BanswaraSyntex Ltd. v. ACIT x) 174 ITR 741 (Cal) Equitable Investment Co. (P) Ltd. xi) W.P. NO. 2192/2009 dated 20.8.2011 (Uttarakhand) M/s National Petroleum Construction Co. vs. UOI xii) 319 ITR 282 (Guj) Gujarat Fluorochemicals Ltd. v. DCIT xiii) 455 ITR 539 (Jhar) Naveen Kumar Jaiswal v. ITO xiv) 456 ITR 316 (Kar) CIT v. Canara Bank 8.1 Similar view has been expressed in the context of section 153C of the Act in the following judicial pronouncements: i) 439 ITR 154 (Bom) Jainam Investments v. ACIT (115-224 of JPB) ii) 439 ITR 168 (Bom) Ananta....
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....rving as under: "65. On going through page 463 of the paperbook, which is copy of page 10 of annexure A-4, it is found that on these documents, some figure has been noted. From the noting on this paper, the details of FDRs cannot be detected. The assessee has denied this to be in his handwriting. The entries do not correlate any date or the signatures. The Assessing Officer did not collect any other evidence from banks or post office to correlate investment of the assessee in any other FDRs except the FDRs of Rs. 12,25,000/-, the source of which has been duly disclosed by the assessee. 66. Keeping in view of the above facts and also after taking to account the nature of entry on the seized document which is to be treated as dumb document, the addition of Rs. 27,50,000/- cannot be justified in block assessment year. In this view of the matter, the addition is deleted and the ground is allowed." It may be noted that the Tribunal saw the seized paper as a "dumb document" which meant that nothing could be understood from it. The document, according to the Tribunal, merely noted a figure of Rs. 27,50,000/-without any details whereas details of other fixed depo....
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....ied has been held to be highly questionable and has not been accepted by the Hon'ble Supreme Court and various High Courts in following judgments. CBI vs. VC Shukla 3 SCC 410 (SC) CIT vs. GirishChaudhary (2008) 296 ITR 619 (Delhi) CIT vs. Anil Bhalla (2010) 322 ITR 191 (Delhi) CIT vs. Atam Valves (P.) Ltd. 184 Taxman 6 (P&H) Atul Kumar Jain vs. DCIT (1999) 64 TTJ (Delhi) 786 15. In the case of CIT vs. Jaipal Aggarwal [2013] 212 Taxman 1 (Delhi)- wherein it was held that Dumb documents seized, i.e., from which nothing could be clearly understood, cannot form a justified base for making additions to income of the assessee. Decision of the hon'ble Delhi ITAT in the case of ACIT vs. Sharad Choudhary [2014] 165 TTJ 145 (Delhi-Trib.) wherein it has been held that "a charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all four components of charge of tax. If it is not so, the document is only a dumb document and no c....
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....breviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." xxxxxxxxxxxxxxx 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this quest....
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.... person for his own benefit. According to Mr. Sibal, in business parlance "account" means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words "regularly kept" mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'." (Emphasis added by us) ....
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....vestigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of accounts but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. We find the materials which have been placed on record either in the case of Birla or in the case o....
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...." ii) 39 STC 478. (SC) State of Kerala vs. K.T. Shaduli Yusuff (Three Judge's Bench) iii) 294 ITR 49 (SC) CIT vs. P.V. Kalyansundaram affirming the decision of Hon'ble Madras High Court reported in 282 ITR 259 iv) 97 ITR 696 (Bom) Addl. CIT vs. Miss Lata Mangeshkar v) 163 ITR 249 (Guj) CIT vs. M.K. Brothers vi) 300 ITR 426 (All.) CIT vs. Salek Chand vii) 209 ITR 821 (Kerala) P.S. Abdul Majeed vs. Agricultural Income Tax and Sales Tax Officer viii) 220 Taxman 168 (Del.) CIT vs. Prem Prakash Magpal ix) ITA 984/2019 dated 4.3.2024 PCIT vs. Rashmi Rajiv Mehta (pages 404-408 of JPB-II) x) 148 TTJ 517 (Hyd) Smt. K.V. Lakshmi Savitri Devi vs. ACIT xi) ITA No. 208 of 2011 dated 12.09.2012 Commissioner of Income Tax vs. M/s Khosla Ice & General Mills xii) ITA No. 507/2009 dated 27.04.2010 CIT vs. Samrat Builders xiii) 52 TTJ 533 (Ahd) ACIT vs. Prabhat Oil Mills xiv) 63 ITD 203 (TM) (Mad) ITO vs. M. A. Chidambaram xv) 86 ITD 13 (Del.) (TM) Amarjit Singh Bakshi (HUF) vs. ACIT xvi) ITA No. 5516 & 5517/D/2012 ACIT vs. Anil Khandelwal xvii) ITA Nos 336/D....
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....ovision of section 69C for making the impugned addition in both the years treating the alleged cash transactions as expenditure incurred by the assessee towards purchase of gold/bullion from M/s. JBL, the Ld. CIT(A) was in a fix. So he confirmed the impugned addition in AY 2016-17 under section 69C as unexplained expenditure and in AY 2017-18 under section 69A as unexplained money. In our view the impugned addition made by the Ld. AO in both the AY(|s) is not sustainable because it is based on mere suspicion, surmise and conjectures and not on legally sound footing and the Ld. CIT(A) admittedly confirmed the addition based alone on facts which emerges from the details and findings made by the Ld. AO (para 6.5 of appellate orders refers). 9.4 For the reasons set out above and on the facts and in the circumstances of the case, we allow the appeals of the assessee and direct the Ld. AO to delete the impugned addition in both the AY(s)." 12 It is also submitted that statements recorded/material relied and gathered behind the back of the assessee and without any opportunity for cross examination despite specific request made during the course of assessment proceedings, canno....
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.... aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opport....
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....han Son reported in 352 ITR 480 iii) 263 ITR 101 (Ker) Paul Mathews and Sons v. CIT iv) 2 SOT 402 (Coch) Kurunnem Velil Financiers (P) Ltd. v. DCIT v) 394 ITR 383 (Raj) CIT vs. ARL Infratech Ltd. vi) 256 ITR 730 (Raj) CIT v. Mool Chand Salecha vii) 97 ITD 361 (Ahd) Ashok Manilal Thakkar v. ACIT 14 THAT EVEN OTHERWISE ONCE THE STATEMENT WAS RETRACTED NO FURTHER ADDITIONS CAN BE MADE RELYING ON STATEMENT OF SUCH PERSON IN ABSISNCE OF SOME MORE SUPPORT TO THE STATEMENT: It is submitted that in the statement of third parties i.e. statement of Sh. Dinesh S Gupta and Sh. Hariom Goyal, relied upon by learned Assessing Officer, has been retracted by them as is evident from pages 88-97 of Paper Book. 14.1 It is further submitted that once the statement is retracted, no additions can be made relying on statement of such person further assessing authority has to gather some more support to the statement for passing an order of assessment. Reliance is placed on the judgment of Hon'ble Andhra Pradesh and Telagana High Court in the case of Gajjam China Yellappa v. ITO reported in 370 ITR 671 it was held as under: "The Act empowers th....
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....eters, while adjudicating the appeals filed before them. On the undisputed facts of the case, there was absolutely no basis for the Assessing Officer to fasten the liability upon the appellants. Our conclusion find support from the Circular dated 10.03.2003 issued by the Central Board of Direct Taxes, which took exception to the initiation of the proceedings on the basis of retracted statements." 14.2 The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Naresh Kumar Aggarwal reported in 369 ITR 171 has held that a statement is not a limited licence to script the financial obituary of an assessee. It was held as under: "The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item....
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....ticles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such person under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking th....
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....on (4A) to Section 132 of the Income Tax Act would not be available for the purpose of framing a regular assessment. However, retention of books etc., can be used as a piece of evidence for the purposes of framing of the regular assessment. Thus going by the above-said decision, while the statement rendered at the time of search under Section 132(4) may be used in evidence in any proceeding, yet, that by itself, does not become the sole material to rest the assessment more so when the assessee seeks to withdraw the same by producing material evidence in support of such retraction. 13. Thus going by the said decision of the Supreme Court, as well as the law declared in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another) that it is always open to a person, who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so, we hold that the Tribunal is not justified in placing undue emphasis on the confession statements made by the assessee iv) 225 Taxman 28 (Guj)(Mag) CIT vs. Agew Steel Mfg. (P) Ltd. v) 221 Taxman 47 (Guj) (Mag) CIT vs. Sun Builders ....
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....ore, addition made representing difference between declared income and income shown in return had to be deleted - Held, yes - Whether assessee can retract after making statement under section 132(4) read with Explanation 5 to section 271(1)(c) as admission under one provision of law cannot have a different status under any other provision of law, whether of same Act or any other enactment, unless specifically so provided or capable of being accorded such extraordinary status by interpretation - Held, yes x) 50 ITD 524 (Ahd) ACIT v Mrs. Sushila Devi S. Aggarwal A search operation, particularly under the Income-tax Act is a lawful invasion on the privacy, life and property of a citizen which may affect him/ her mentally also, causing several other inconveniences, hardships, embarrassment and harassment. There is every likelihood of a statement tendered to or recorded by the search officers on the search day being incoherent or at variance with subsequent statements tendered to or recorded in any further or collateral proceedings, but to make addition to the returned income or to put such person to sufferance or to adverse consequence on such statement is not justifi....
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.... asstt. year in question. 8. (i) The general rule is that 'onus of proof' is always on the party, who asserts a proposition or fact, which is not self-evident. In the present case, the AO presumes and asserts that the appellant has earned income, from job work, therefore, onus lies upon him, to prove the same, by bringing relevant corroborative and credible material, on record, before making the impugned addition. The assessee appellant has not made any surrender, in respect of income from job work and no document has been adduced by the revenue, to support its finding that assessee has earned income from job work, in the past asst. years. 9. It is categorically held by the Hon'ble Apex Court in a plethora of decisions, that it is a well settled principle of law that revenue cannot decide, an issue, without proper facts and law, supporting its decision. A decision based on mere surmises, guess work or conjectures or irrelevant material and evidence is liable to be quashed. The Hon'ble Apex Court, in plethora of decisions has often frowned upon the tendency of Assessing Officers, to frame assessment orders or make additions purely on surmises. In th....
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....sessment on Rs. 4 lakhs. Thus when the assessee had explained his statement as not correct in the context of the materials produced, as held by the Apex Court in the decision in Pullangode Rubber Produce Co. Ltd.'s case (supra), we do not think that the Tribunal would be justified in its conclusion that the statement made would clothe the assessment with legality. Quite apart from that, the case of the assessee also stands supported by the Circular dated 10-3-2003 of the Central Board of Direct Taxes, which has given categorical directions to the officers, who are entrusted with the job of assessment that undue emphasis should not be placed on the statements recorded. In fact, it had given a mandate not to obtain confession as to the undisclosed income. Thus applying the Circular dated 10-3-2003 to the facts of the case, which is binding on the revenue, we have no hesitation in setting aside the order of the Tribunal. As already pointed out that except for the statements referred to by the Tribunal, it had not adverted its attention to the materials produced by the assessee before the Commissioner of Income-tax (Appeals) explaining the claim that the said amount could not be in....
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.... by applying the test of human probabilities [CIT v. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC)]. In the light of above discussion, we apply the ratio of Apex Court in the case of Durga Prasad (supra), i.e., test of human probabilities, we do not find any material on record on which basis it can be said that the disclosure of the assessee for Rs.16 lakhs is in accordance with law and in spirit of section 132(4). Under the circumstances, we find that the CIT(A) has correctly deleted the addition. vii) ITA No.671/Del/2012 dated 20.06.2013 ACIT v. Sh. Dharam Pal Gulati In the assessee's case also, this admission of additional income is not based upon any credible evidence and the same has been retracted within 6 days from the search. Non-asking any question regarding seized papers/documents from the premises of the assessee clearly shows that there was no focus and consideration of the search party on the collection of evidence of income which lead to information on what has been disclosed or is not likely to be disclosed before the revenue authorities. There is no evidence found and seized that assessee has carried out speculation trading durin....
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....h income has been utilized or invested as stated by the assessee in the retracted statement. Nothing of such sort borne out of the facts. In our considered view, no addition can be made merely on the basis of surrender without existence of any corroborative evidence found against the assessee 15 THAT ADDITION MADE MECHANICALLY IN DISREGARD OF THE MATERIAL ON RECORD BY FOLLOWING DIKTATS OF INVESTIGATION REPORT IS OTHERWISE TOO UNTENABLE: Reliance is placed on the following judicial pronouncements: i) 178 ITD 823 (Delhi - Trib.) Smt. Karuna Gargvsf. ITO (pages 340-346 of JPB) affirmed by Hon'ble High Court of Delhi reported in 457 ITR 591 (Del) 19........... 20. There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. 21. A perusal of the assessment order clearly shows that the Assessing Officer was carried away by the report of the Investigation Wing Kolkata. It can be seen that the entire assessment has been framed b....
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....le." It has also held that there is a difference between question of law and a "substantial question of law". Consequently, this Court finds that there is no perversity in the findings of the ITAT. iii) 431 ITR 361 (Del) PCIT vs. Smt. Krishna Devi iv) 200 Taxmann 186 (Del) (Mag)CIT v. Vishal Holding & Capital (P) Ltd. 15.1 THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES: It is also settled law that no addition can be made on the basis of surmises, suspicion and conjectures, as has been held by following cases: i) 37 ITR 271 (SC) Uma Charan Shaw & Bros. Co. v. CIT Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. ii) 37 ITR 151(SC) Omar Salay Mohammad Sait v CIT The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circums....
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....ection 145(3) of the Act and, profit declared stands accepted as such. Thus addition made is not in accordance with law: It is submitted that it is undisputed that, it is submitted appellant is regularly assessed to tax. It is submitted that the books of accounts of the appellant have been regularly maintained and also duly audited both under the Income Tax Act' 1961 and under the Companies Act' 2013. It is submitted that no defect has been pointed out in such books of accounts maintained by the appellant company even in the entire order passed u/s 153C/143(3) of the Act. In other words, the books of accounts so maintained by the appellant were not rejected by the learned Assessing Officer by invoking section 145(3) of the Act and, profit declared stands accepted as such. It is emphasized here that it is well settled law that in absence of rejection of books of accounts, no addition can be made by assuming that assessee has made unaccounted receipts or made unaccounted payments in the instant year. Reliance is placed on the following judgments: i) 315 ITR 185 (P&H) CIT vs. OM Overseas ii) 320 ITR 116 (All) CIT vs. Mascot India Tools & Forgings (P) Ltd. ....
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....e of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the 57[Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :] Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.]" 17.1 It is submitted that it is evident from plain reading from aforesaid provision that where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. It is thus submitted that focus under section 69C of the Act, is on source of expenditure and not on expenditure, therefore amount of expenditure must be paid by asse....
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....t did not make it mandatory on his part to deal with the investment as income of the assessee as soon as the latter's explanation happened to be rejected. On that view, the Tribunal allowed the appeals of the assessee and cancelled the assessment made by the ITO." iv) 107 ITR 938 (SC) Roshan Di Hatt vs. CIT v) 328 ITR 513 (SC) Sargam Cinema vs. CIT vi) 131 ITR 597 (SC) K.P. Varghese vs. ITO vii) 261 ITR 664 (Del) CIT vs. Naresh Khattar (HUF) viii) 328 ITR 516 (Del) CIT vs. Naveen Gera ix) 316 ITR 46 (Del.) CIT vs. Shakuntala Devi x) 335 ITR 572 (Del.) CIT vs. Bajrang Lal Bansal xi) ITA no. 610/2012, Dated 19.10.2012 (Del) CIT vs Dinesh Jain HUF xii) ITA No. 176/204 dated 25.4.2014 (Del) CIT v. Agile Properties (P) Ltd. xiii) 81 taxmann.com 257 (Bom) CIT v. Devesh Agarwal, xiv) 64 taxmann.com 332 (Del) ACIT v.Rakesh Narang, xv) 22 SOT 174 (Mum) Rupee Finance & Management (P.) Ltd. v ACIT 17.3 In view of the above it is submitted that additions made are not in accordance with law. 18 In view of the aforesaid it is submitted that, the proceedings initiated by invoking ....
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....2015-16 to AY 2020-21. Therefore, the AY outside the jurisdiction would be AY 2014-15. Hence, the assessment made for AY 2014-15 is outside the jurisdiction . Accordingly, the grounds raised by the assessee in this regard is partly allowed and the AY 2015-16 is within the jurisdiction. The above findings is determined based on the following ratio of the Hon'ble High Court decision in the case of RRJ Securities Ltd (supra), for the sake of brevity, the ratio of the decision is reproduced below: "24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reasse....
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....essment of the Assessee's income for that year." Respectfully, following the above decisions, we hold that the assessment completed u/s 153C in AY 2014-15 is beyond jurisdiction and accordingly, the ground raised by the assessee is partly allowed. 22. With regard to other AYs are concerned, we observe that the AO of the assessee recorded the following satisfaction note, for the sake of brevity, it is reproduce below: "4. Based on the details submitted by Pragati Glass Private Limited, Shri Dinesh S Gupta and analysis done, beneficiaries have been identified. As the parties (Chaudhary Trading Company) involved are making part payment in cash for the purchase of goods from the company M/s Pragati Glass Pvt. Ltd. same has to be taxed in their hands. I am satisfied that the incriminating documents found during the search as discussed above relates to the assessee Chaudhary Trading Company (CTC), PAN-ACCPC9165C. Therefore, it is a fit case for action as per provisions of section 153C of the Income Tax Act, 1961 in the case of Sh. Anil Chaudhary Prop. of M/s Chaudhary Trading Company (PAN- ACCPC9165C) for the A.Y. 2014-15 A.Y. 2019- 20." 23. In our view, the proceedings....
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....e former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the....