AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (2) TMI 1188
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....e course of search in the premises of the assessee 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 Offi....
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....and advice of Lt. Mr. Nagin Goradia. Q. 31 I am showing you the statement recorded u/s 132(4) of the I.T.Act, 1961 of Shri Raj Kumar Kedia at P-12, 2nd Floor, Hauz Khas Enclave, 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 a....
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....hta and Roopal Mehta. Ans. As stated above, I used to do cash loan transactions with Nilesh Bharani I am unable to recollect the exact details of cash loan transactions. I have to check the facts regarding this with my records which 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 ....
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....ddition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. 10. Mr Bindal also referred to the decision of the coordinate Bench in the case of Nilesh 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 assessmen....
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.... (ii) However, in the assessment / reassessment orders passed within the scope of section 153A of the Act, the AO cannot consider any undisclosed income detected by way of an incriminating information pertaining / relating to the said assessee, during an income-tax search conducted in the 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....
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....material available on record. In the present case, undisputedly the addition is made under section 68 and section 69C of the Act on account of alleged accommodation entries of bogus long-term capital gain. From the perusal of the assessment order, it is discernible that the said addition is not based on any material or document found during the course of search/survey action under section 132/133A 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 pa....
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....h the explanation given by the taxpayer for those documents. However, in another search based on any independent warrant of authorisation, certain incriminating documents were found. Accordingly, the issue arose that whether the taxpayer needs to be questioned based on those incriminating documents only by taking recourse to section 153C of the Act and not under section 153A of the Act irrespective of the 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 incrimina....
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....ections 153A to 153C) of the Act, it could be done only by taking recourse to section 153C of the Act and not u/s 153A of the Act irrespective of the fact whether the assessment is abated or not. This is so because, the provisions of Sections 153A and 153C of the Act are special provisions starting with non-obstante clause thereon which had been introduced in the statute only for the limited purpose of framing 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. ....
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....he only course available for the revenue was to initiate proceedings u/s 153C of the Act on the assessee whereby the AO of the entry provider was statutorily required, (and not the officers of the investigation unit of the department under any circumstance on the basis of the seized material) if he was satisfied that the seized material/information from the searched entry provider had some bearing etc. on the determination 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 pr....
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....rson, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received 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 ....
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....he 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. This amendment will take effect from 1st June, 2015." 27. On perusal of the above provision read with relevant Notes on Clause to the Finance Bill 2015, it is clear that any information or entry found in any document seized pertaining / relating to a person other than the person searched from the searched premises as was referred u/s 153A of the Act was to be handed over by 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 th....
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.... in accordance with the decision of the Hon'ble Supreme Court in the case of ITO vs Vikram Sujitkumar Bhatia (supra). Hence the consideration of denial of exemption u/s 10(38) of the Act for the long term capital gain on sale of shares of MARL could not be done by the revenue legally in the proceedings u/s 153A of the Act on the assessee." 41. Therefore, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we are of the considered view that any addition under section 68 and section 69C of the Act in the facts of 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 ....
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....e year Amt in Rs. Amt in Rs. Amt in Rs. A B C 2012-13 0 2013-14 0 2014-15 2,34,167 2,34,167 2015-16 1,59,833 6,38,750 7,98,583 2016-17 7,35,416 7,35,416 2017-18 3,80,208 3,80,208 2018-19 3,80,208 3,80,208 Total 3,94,000 21,34,582 25,28,582 16. Thus, the additions were made by the AO in the above five AYs and also estimated the interest income having been earned thereon in cash outside the declared sources of income in her return of income by the assessee on the said amounts allegedly lent by the assessee to Mr Nilesh Bharani, though there was no such evidence in the alleged material relied 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, ....
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....Revenue Officers were duty bound to take consequent action u/s 132 r.w.s. 133A to find the said record and if the assessee was not forthcoming with such information, he could have been confronted about it then and there only and not later. However, the same was also not done later including on 03/11/2017 when another panchnama was drawn to vacate the prohibited order in continuation to the search proceedings undertaken on 06/10/2017 in the premises of the assessee and admittedly by the said date Mr Kashyap K Mehta, the husband of the assessee, had already retracted his earlier statement dated 10/10/2017 vide letter dated 23/10/2017, a fact not denied by the Revenue. The learned counsel of the assessee also drew the attention of the bench to the said statement of the husband of the assessee, 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 ....
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....rial found from the search and statement per se cannot be reckoned as incriminating material. 23. It is a well settled proposition by various High Courts that addition cannot be made only on the basis of admission made by the assessee in the absence of any incriminating material. The Hon'ble Delhi High Court in the case of PCIT vs. Pavitra Realcon Pvt. Ltd. and others in ITA No. 579/2018, 587/2018 and 590/2018 vide judgment dated 29/05/2024 had referred to various decisions which are as under:- "20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content 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 herein....
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.... statements on a stand alone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation, [Emphasis supplied] 23. In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment. 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, t....