TaxTMI 
TaxTMI 
2025 (2) TMI 1188
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....where the material relied was found in income-tax searches with no common search / joint warrant in searches. Secondly, no mandatory DIN on the body of the assessment orders. Thirdly, incompetent and mechanical approval u/s 153D of the Act by the Addl CIT. Lastly, illegal jurisdiction of the AO based on a void ab initio assessment jurisdictional order passed u/s 127(2) of the Act. 3. Brief facts are that during the course of the search, statements of the assessee and her husband, Mr Kashyap Kanaiyalal Mehta were recorded u/s 132(4) of the Act. The assessee categorically stated therein that her all financial matters are handled by her husband. It is also an admitted fact, that no material or information qua the additions made in all the assessment orders in appeal were found during the course of search as the AO has also not mentioned any such material having being detected during the search action in the premises of the assessee. Whatever material has been referred to in the assessment order as confronted to the husband of the assessee during the course of search, was available with the Authorised Officers at the relevant time having being procured from extraneous sources in....
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....lave, New Delhi. In the said statement in answer to Q. No. 11 he has stated that the D. B. (International) Stock Brokers Limited is a paper company controlled and managed by various accommodation entry operators. Please offer your comments for this observation and state why the long term capital gain claimed as exempt u/s 10(38) by you, your wife Smt. Rupal K. Mehta and Kashyap K. Mehta HUF should not be treated as bogus long term capital gain and why the exemption claimed by you, your wife Smt. Rupal K. Mehta and Kashyap K. Mehta HUF should not be disallowed and taxed accordingly in the relevant years? Ans. Sir, I am not aware that D. B. (International) Stock Brokers Limited is a paper company or not. All documentary evidences including demat statement and contract notes pertaining to D. B. (International) Stock Brokers Limited within a week's time. 5. Further, as is mentioned in the relevant para 5.22 of the assessment orders for the AYs 2014-15 to 2018-19, the husband of the assessee was asked as below: "5.2 Statement of the assessee's husband Mr. Kashyap Mehta: During the search action, statement of the assessee has been recorded, wherein she stated that she is not aware....
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....ch are not with me. Please give me three days time by the end of which I will file the details of these cash transactions with Nilesh Bharani. It is clearly evident from the above deposition that assessee has provided cash loan to Mr. Nilesh Bharani and earned interest income on the same. 6. The Ld. Counsel of the assessee submitted that all these questions and answers relevant to the additions made in the hands of the assessee in the respective AYs clearly demonstrate and confirm the contention of the assessee that no such evidence much less incriminating the assessee in any manner was found during the course of search in the premises of the assessee searched u/s 132 of the Act and therefore, by following the judgment of the Apex Court in PCIT vs Abhisar Buildwell (P) Ltd [2023] 149 taxmann.com 399 (SC), no addition at all could be made in any assessment order passed u/s 153A of the Act. 7. The ld. CIT (DR) relied on the orders of the lower authorities and vehemently stressed that since the assessee was confronted with the said information, though admittedly not found during the course of search in the premises of the assessee but was sourced by the Authorised Officers from so....
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....lesh Bharani vs DCIT in appeal no. ITA/612/Mum/2020 dated 28/02/2023 where the Bench held as below: 91. We have already observed in our earlier paragraphs that the entire procedure to make an assessment or reassessment of income of the alleged escaped income either u/s 148 or section 153C of the Act practically is the same except the jurisdiction and root cause which are different. The legislature has specifically carved out scope of assessment / reassessment of income of a person not searched of such alleged escaped income based on some incriminating information found during a search on some other person searched by taking recourse to the section 153C of the Act. The AO has not been empowered to extend the scope of an assessment/ reassessment u/s 153A read with the section 153C of the Act beyond the alleged incriminating material found during the course of search in the case of some other person, because assessment / reassessment in such case is specifically restricted to the income based on the said incriminating information only. Whereas, in the proceedings initiated u/s 148 of the Act, the AO may extend the scope of the assessment / reassessment on other amounts also if any i....
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....premises of some other assessee(s), even conducted at the same time or in some connected matter. In such a case where AO gets any information or material about any assessee from the search of some other person, he can, make assessment of the undisclosed income/ amount emanating from such information or material for the assessment / re assessment vide separate assessment / reassessment orders to be passed u/s 153A by taking recourse to the provisions of the section 153C of the Act. Because the cause of action for the said incriminating information for different amounts had originated in different search(es) in the different premises of other assessees and for the same, the mandatory route legislated u/s 153C of the Act must be followed. (iii) Further, an assessee can also be assessed multiple times u/s 153C r.w.s 153A of the Act, despite having already been assessed u/s 153A of Act on the basis of an income-tax search in his premises, where the incriminating information has been received u/s 153C of the Act by the AOs of the searched person as well as of the person not searched, which information originates in different searches at different times on different persons as well. 11....
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.... of the Act conducted at the residential premises of the assessee. It is further evident that the AO has placed reliance upon the findings of the Investigation Wing, Kolkata, wherein the scrip M/s Shree Nath Commercial & Finance Ltd. was included in the list of 84 companies whose share prices were manipulated by a syndicate of entry operators. The AO from pages 4-12 of the assessment order discussed the findings of the Investigation Wing, Kolkata, wherein the modus operandi of providing bogus accommodation entry, players on the scheme, role of the operator, role of the promoters of the penny stock companies, role of shareholders and exit providers has been discussed. fluctuation, the history of the company, and the financials of the scrip M/s D.B. (International) Stock Brokers Ltd. From pages 18-27, the AO has analysed the statements of the entry providers in the scrip of M/s D.B. (International) Stock Brokers Ltd. It is pertinent to note that these statements were recorded under section 132(4) of the Act on 13/06/2014 during the course of the search action at their premises. Thus, it is worth noting that none of the statements were pursuant to search/survey action under section 13....
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....e fact whether the assessment is abated or not. The coordinate bench of the Tribunal while deciding this issue in favour of the assessee, vide order dated 05/10/2023, held that any addition on the basis of some incriminating material found elsewhere could not be assessed in the assessment order passed under section 153A of the Act, but it could be considered only in a separate assessment order by taking recourse to the mandatory and special non obstante provisions of section 153C of the Act and then to pass a separate assessment order under section 153A r/w section 153C of the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows:- "23. It is pertinent to note that though the ld. AO had stated that large number of incriminating documents were found and impounded during the search, we find that ultimately no addition was made based on the same by the ld. AO in the assessment proceedings, as the ld. AO was convinced with the explanations given by the assessee for those documents. The fact of assessee claiming exemption u/s 10(38) of the Act for sale of shares of MARL was duly disclosed in the return of income filed on 29.11.2015 pr....
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....assessments pursuant to search actions carried out and information / materials surfaced therein. 24. We find that the assessment for this assessment year was not completed as the time limit to issue any notice u/s 143(2) of the Act was still available to the ld. AO and undoubtedly, as per the law as existed then, no addition in an assessment order passed u/s 153A of the Act in the case of the assessee was possible on the basis of some alleged incriminating information/ material seized / statements from / of the alleged entry providers as no incriminating material in any manner at all depicting bogus LTCG was found during the course of search in the premises of the assessee or on the strength of any search warrant in the name of the assessee in any premises anywhere. Thus, the only course available to the revenue was to initiate proceedings u/s 153C of the Act as has been held by the Hon'ble Supreme Court in Vikram Sujitkumar Bhatia vs ITO reported in 149 taxmann.com 123 (SC). We find that the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt Ltd reported in 149 taxmann.com 399 (SC) had not overruled / could not at all overrule the special provisions u/s 153C of t....
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....ation of the assessable income of the assessee by sending the same to the AO of the assessee and then the AO of the assessee should have proceeded to assess the same by a separate assessment order u/s 153A read with the section 153C of the Act. Undisputedly, section 153C of the Act is a non obstante section and a complete code by itself and both the AOs involved were bound to act as per this provision as term deployed therein is "shall". No option was available with the AOs to act otherwise overruling the law at their whims. Therefore, if the material found and seized from an entry provider 'pertains or pertain to, or any information contained therein, relates to the assessee, then the ld. AO of the said entry provider must have initiated the assessment process u/s 153C of the Act. It is in his exclusive domain to be satisfied whether 'pertains or pertain to, or any information contained therein, relates to' or not and the statute in an unambiguous language has not bestowed this power on any other authority, which admittedly here has been completely misunderstood to be with the Investigation Unit of the income-tax department by the ld. AO while completing the assessme....
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.... by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year-- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A." (emphasis supplied by us) 26. It would not be out of place to refer to the Notes on Clauses of the Finance Bill 2015 when the legislat....
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.... the investigation wing to the AO of such other person (searched) and then that AO of the searched person shall handover the same to the AO of the person not searched who thereafter was to proceed against such other non-person by issuing a notice u/s 153C of the Act and then to assess / re-assess income of such other not searched person. 28. Further on perusal of the proviso to section 153C of the Act, it is very clear that the first proviso as it existed then, the deemed date of search for initiation of proceeding u/s 153C of the Act in the case of a non-searched person (assessee here) was the date of receiving the documents by the AO of the assessee. It is pertinent to note that the panchanama was finally closed in the hands of the assessee on 31.3.2016 at 8.40 P.M. The case of the assessee got centralised only on 5.9.2016, which means the AO could have received any information relating to bogus LTCG based on entry operators statements only on or after 5.9.2016 and certainly not before that date. This is so because absolutely no documents of incriminating nature was found and seized in the premises of the assessee during the course of search on 30.3.2016 which got concluded on ....
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....f the present case cannot be done by taking recourse to the provisions of section 153A of the Act. Accordingly, the additional grounds and ground no. 1 raised by the assessee are allowed. 13. Thus, respectfully following the above findings and directions of coordinate bench of the ITAT which applies squarely on the facts of the present case also, the addition of Rs 1,26,85,229/- made in respect of an already declared LTCG, claimed exempt u/s 10(38) of the Act in the original return of income in the assessment order passed u/s 153A of the Act for the AY 2012-13 is hereby deleted as it is beyond the scope of assessment u/s 153A as not based on any seized or incriminating material. 14. Consequently, the addition of Rs 3,80,557/- made u/s 69C of the Act alleging unexplained expenditure incurred to earn the said LTCG is also deleted. AY 2014-15 to AY 2018-19 15. Further, similarly for the AY 2014-15 to 2018-19, the additions were made by the AO by working out the unexplained cash loan given by the assessee to one Mr Nilesh Bharani relying on some information found in a different search and premises of Mr Nilesh Bharani where the name of the assessee was not there in any panchnama b....
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....d upon as per the above chart. 17. For such additions in respect of the cash loans lent, the learned counsel of the assessee also placed reliance on the decision dated 31/01/2025 of the coordinate bench of the ITAT Mumbai in the case of Rajesh kumar Rameshchandra Shah in appeal nos. ITA 5568 to 5573/Mum/2024 where the facts were identical based on an income-tax search on Mr Nilesh Bharani as in this case, except to the extent that there the assessee denied any knowledge of any such transactions rather knowledge of Evergreen Enterprises but here Mr Kashyap K Mehta, the husband of the assessee on confrontation admitted to have undertaken some transactions in cash with Nilesh Bharani / Evergreen Enterprises but also in the same breath categorically stated that he is not aware of the quantum and would respond in 3 days thereafter, after looking into his records. 18. In respect of these additions, the learned counsel of the assessee submitted that the search in the premises of the assessee continued for 6 days from 06/10/2017 till 11/10/2017, including the residential and business premises of the assessee as well as other associates when no such records or books of account were found ....
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....sessee, which interestingly was not signed at all on any page by the Authorised Officer Mr Ashwini Prasad, the then DDIT, Unit 5(4), Mumbai, as is placed on PB page no. 19-33 with annexures thereto from PB page no. 34-57 dated 20/01/2025. He also drew the attention of the bench to the copy of the statement of the husband of the assessee to Q. No. 31 on Page no. 10 and 32 of the PB showing that the said statement was resumed on 07/10/2017 at 12:00 pm with Q. No. 21 and closed on 07/10/2017 at 10:00 pm at Q. No. 33 as per Page 18 of the PB, being another statement recorded by Mr Raghav Gupta, DDIT Investigation. Thereafter, another statement dated 10/10/2017 allegedly recorded by Mr Ashwani Prasad u/s 132(4), though not signed by him nor his any stamp is there, commenced with Q. No. 1. and which does not mention time of its commencement on 10/10/2017 nor mentions time of closure on 10/10/2017. 20. The ld. Counsel also demonstrated that Q. Nos. 30 and 31 were practically the last questions in the entire said proceedings wherein the statement had total 36 questions and Q. No. 32 to Q. No. 36 were just confirmatory questions about the seizure and return devices and cash etc. The entire....
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....of the statements. 21. In the case of Kailashben Manharlal Chokshi v. CIT', the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: - 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority, We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission, We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disb....
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....24. Coming to the findings of the ITAT with respect to incriminating material in the case of M/s Pavitra Realcon Pvt. Ltd and M/s Delicate Real Estate Pvt. Ltd, it is seen that the ITAT has explicitly held in paragraph no. 18 that no addition has been made on the basis of any incriminating material found during the course of search. Further, the ITAT relied on the decision of the Supreme Court in the case of CIT v. Sinhgad Technical Education Society and held as follows: - "18. Further, while writing the order it has come to our notice that the Hon'ble Apex Court in the case of Sinhgad Technical Education Society has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the 19. In view of the above, the additional grounds raised by the assessee in the case of M/s Pavitra Realcon Pvt. Ltd. And Mis Delicate Real Estate Pvt. Ltd. are accepted. Since the assessee succeeds on this legal ground, we refrain ourselves from adjudicating the issue on merit as far as these ....