TaxTMI 
TaxTMI 
2024 (5) TMI 1581
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....and legal position of the case, the Worthy CIT(A), Gurgaon-3 in Appeal No. CIT (A), Gurgaon-3/ 10254/2018- 19 dated 30.03.2022 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on facts, circumstances and legal position of the case, the Worthy CIT(A)has erred in not quashing the impugned assessment framed u/s 153A even when the relevant papers on the basis of which entire addition has been made were not found from the premises of the appellant and also when the procedure mandated u/s 153C was not followed by the Ld. AO in the case of the appellant. 3. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the addition of Rs. 2,65,06,482/- on account of alleged suppressed sale of 54 plots by extrapolating the figures. 4. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the addition of Rs. 2,65,06,482/- on account of alleged suppressed sale of the plots in the order passed u/s 153A even when no incriminating material qua the year in question was found during the course of search u/s 132 on t....
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....ged the admission of the additional ground of appeal and it was submitted that the said ground of appeal has been raised for the first time before the Tribunal and the said ground was neither raised either before the AO or before the Ld. CIT(A). It was accordingly submitted that at this stage, the said additional ground therefore does not deserves to be admitted. 6. We have heard the rival contentions and purused the material available on record. We find that in the additional ground, the assessee firm has assailed the impugned assessment order passed u/s 153A on the ground that no search u/s 132 was carried out on the assessee firm and only a survey u/s 133A was carried out. We find that the same is purely legal in nature and no new facts are required to be gone into to decide this ground of appeal. Therefore, in accordance with the law laid down by the Hon'ble Supreme Court in case of NTPC (Supra), the additional ground raised by the appellant is hereby admitted for adjudication on merits. 7. Before we advert to rival contentions in respect of various grounds of appeal, including the additional ground of appeal taken by the assessee firm, it would be relevant to refer to th....
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....see firm on 20/11/2018 and in response, the assessee firm submitted that it has sold plots on the basis of agreement and on giving possession of plot with the option of executing the sale deed immediately or at latest stage as per the buyer's convenience either in his / her own name or in the name of any other name. It was submitted that the colony is jointly developed by Ganesh Builders and Luxmi Builders and all the expenses and income earned is divided equally between them. It was submitted that during the year under consideration, both firms have effected total sales turnover of Rs. 5,17,10,072/- and 50% share which comes to Rs. 2,58,55,036/- is accounted for in the books of Luxmi Builders and remaining 50% share is accounted for in the books of Ganesh Builders and complete details of plot wise sales accounted for in the books of the assessee firm were submitted. It was stated that no addition should be made on this count. 8.3 Thereafter, another show cause dt. 29/11/2018 was issued to the assessee firm wherein referring to the ongoing proceeding, it was stated that as per document A-1 (Allotment Letters issued by your firm) seized from your premises, it contains the details....
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....f allotment letter. Copy of the receipt, allotment letter, ledger account in the books of the assessee firm evidencing sale of plot to Mr. Kashmiri Lal was also submitted as part of the assessee's submission. It was further stated that Mr. Kashmiri Lal came back to the assessee firm after re-sale of allotted plots tendered his receipts and all other documents to the assessee firm. The amount was paid back to him vide cheque which was received from re-allottee in respect of plot No. 168. In respect of other three Plot Nos. 10,11 & 169, the amount was directly received by the allottee Mr. Kashmiri Lal with no involvement of the assessee firm at all. Copy of bank statement & ledger account showing refund of money to Mr. Kashmiri Lal in respect of Plot No. 168 was submitted for necessary examination by the AO. 8.6 It was further submitted that noting at the back side of this receipt could be some calculation carried out by Shri Kashmiri Lal as the original documents remained in his possession from the date of issue i.e 28/12/2010 till these were returned to the assessee firm for subsequent re-allotment. It was submitted that there is every possibility that some noting may have been ....
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.... statement recorded under section 132(4) has stated that the same is not in his handwriting, the same cannot be taken as successful discharge of the onus placed on the assessee firm. 9.2 Regarding contentions of the assessee firm that the working at the back side of the sized page no. 178 has been done by Shri Kashmiri Lal and these papers were in his possession, the AO stated that the said contention is not supported by any evidence. It was held by the AO that no evidence has been furnished that the documents were in possession of Shri Kashmiri Lal during the aforesaid period as no confirmation from Shri Kashmiri Lal has been submitted let alone the sworn affidavit. As per the AO, the assessee firm itself has admitted that it had no role in resale of the three plots. And if it is the case and all documents were handed over to Shri Kashmiri Lal, the receipt issued to him for Rs. 12,300/- on 28/12/2010 for initial booking amount for plot no. 10 & 11 and receipt issued to him for Rs. 15,000/- on 28/12/2010 for plot no. 169 should not have been in possession of the assessee firm as these were of no use in resale of the plot of the land but all these receipts have been seized vide p....
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....d by the AO that the above analysis makes it clear that content of the above page depict the true transaction details and actual rates in the year under consideration varied from Rs. 6500 per sq.yards to Rs. 7000 per sq. yards. 9.4 Regarding the contention of the assessee that no incriminating material other than the above material has been seized in order to apply this rate on other transactions, it was held by the AO that it is not expected to find out incriminating material for each and every transactions in a search because no businessman will keep entire records pertaining to on-money in a systematic manner. It is sufficient that credible evidence of receipt of on-money is found and application of that evidence is done in all the similarly placed transactions and not the unrelated transactions. Reliance was placed on the decision of Hon'ble Delhi High Court in case of CIT Vs. Chetan Dass Lachman Das reported in 25 taxmann.com 227 and Hon'ble Kerala High Court in case of Sunny Jacob Jewellers and Wedding Centre Vs. DCIT reported in 48 taxmann.com 347 wherein the High Court has held that there is no bar in applying the finding on the basis of the seized material for a very sh....
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....er section 132 of the Act was carried out on 13/07/2016 at various locations of Barnala Builders group of cases. The assessee firm having its place of business at Jakhal Road, Sunam was also covered in this search. It was submitted that in the above search, residential premises of one of the partners Shri Ramesh Garg was also covered wherefrom various documents were found and impounded. It was submitted that these impounded documents contained mainly his own transactions but also included 4 cancelled booking receipts issued to the buyers of the assessee firm. These were four in number and were in respect of plot number 10, 11, 168 and 169. There were certain notings on the backside of these cancelled booking receipts. It was submitted that the assessee firm had sold more than 50 plots during the year in question and the selling price was in the range of Rs. 1200 to 1500 p. sq. yard. However by illogically reading the contents written at the backside of these canceled booking receipts, the AO had held that the assessee firm has sold these 4 plots @ Rs. 7000 per sq. yards and not @ 1200 to 1500 per sq. yards as recorded in its books of accounts. It was further submitted that the AO h....
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....ssessment, no addition was warranted. 10.7 As regard the contents of the documents in question, it was submitted that these were cancelled / transferred plots and the data written at the back of receipt appears to be some working done by the original allottee. It nowhere leads to the fact that the assessee firm was selling the plots @ Rs. 7000 per sq. yards. It was submitted that the assessee firm has clearly stated that working at the back of the cancelled receipts appears to be in the handwriting of original allottee. The Ld. AO never called for an independent explanation from these original allottees when the address were available with him and still applying these documents in the hands of the assessee firm is absolutely illegal and the addition deserves to be deleted. 10.8 It was further submitted that looking at the contents of these documents, it is absolutely clear that these are dumb documents. It was submitted that during the course of search or during post search enquiries or during assessment proceedings, not even single material or evidence was found by the department which could corroborate the findings of the Ld. AO that the assessee firm was selling the plots ....
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....the assessee and therefore the impugned addition in respect of other 50 plots deserves to be deleted. 10.11 It was further submitted that during the year in question, the assessee firm sold 54 plots. The sale deeds have been executed and prices as per the sale deed have been duly recognised by the assessee firm in its books of account in respect of four plots. There was no incriminating material against the assessee firm so as to justify the sale rate of Rs. 7000/- per sq. yards. In respect of other 50 plots, there was absolutely no material at all which could justify the sale rate of Rs. 7000 per sq. yards. It was submitted that it is a settled preposition of law the sale deed as well as the values as per the sale deeds are the primary documents prevailing over all other information and the said sale deed cannot be discarded unless strong adverse material is found. 10.12 It was further submitted that it is apparent from the relevant documents that the slips primarily pertain to F.Y 2010-11 and the year in question is F.Y 201112. If the booking receipts was issued in F.Y. 2010-11 the AO failed to point out as to how and why the alleged on-money can be said to have been receiv....
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....ted as a dumb paper particularly, when transactions in respect of these 04 plots have been recorded and are part of books of account of the assessee firm and the document has been found and seized from the possession of the assessee firm (partners of the assessee firm). 11.3 The ld CIT(A) referred to the provisions of section 132 (4A)/ 292C of the Act which states that where any books of account, other documents etc are found in possession or control of any person during the course of search, it may be presumed that the said books of accounts, other documents etc belong to such person and contents thereof are true. There is no denying of the fact that the relevant seized document has been found in possession of Sh. Ramesh Garg, partner of the assessee firm which contained transactions recorded for sale of plot by the assessee firm during the year under consideration. In the circumstances, it is presumed that the said document belongs to the assessee firm and its contents are true until the said presumption is rebutted by the assessee firm duly supported with satisfactory evidences. The assessee firm has merely stated that the said document does not belong to it rather it belongs....
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.... one case of re-allotment, the new buyer made payment of Rs. 4,76,000 to the assessee firm which was subsequently refunded back to Sh. Kashmiri Lai on 23.2.2016. 11.5 Referring to the above submission of the assessee firm, the ld CIT(A) stated that it is found that Sh. Kashmiri Lal has made full payment in respect of sale amount of above referred 04 plots during the FY 2011-12 itself as discussed above and accordingly allotment letters were issued by the assessee firm in his name on 12.3.2012, 12.3.2012 18.3.2012 as placed on page no. 7 to 10 of the paper book. Therefore, the above submission of the appellant has been found factually incorrect that Sh. Kashmiri Lal at the stage of booking itself without making full payment to the assessee firm had sold these plots onwards to another buyer. Further, the letter 'R' as appearing on the booking slips reproduced by the AO in the assessment order are in context of registration and not for re-submit as explained by the assessee firm. It is corroborated from the record that conveyance deed in respect of plot no. 10 was executed on 6.8.2014, This date is found mentioned on seized page no. 178 ( page no 4 of the assessment order] against ....
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....under consideration @ Rs. 6500-7000 per sq yard. 11.8 The ld CIT(A) further held that based upon the principle of pre-ponderance of probability, it is logically inferred that all the plots sold during the year (similar time frame) which were located in the same township, situated in similar location therefore, would have been sold at the same rate. The assessee firm has disclosed the selling rate in the range of 1200-1500 per sq yard in the books of account. On going through the assessment order and other relevant record, it is found that the assessee firm has sold 128 plots during the year alongwith M/s Luxmi Builders for total consideration of Rs. 5,17,10,070/-(35051.22 sq. yards) as recorded in their books of account. On such facts, the AO in the assessment order applied rate of Rs. 7000 in respect of 54 plots (151 67 sq. yards). It is not clear on what basis the AO applied the selling rate of Rs. 7000 per sq yard only in respect of 54 plots and not in respect of entire 128 plots sold during the year. Logically, if the assessee firm has sold 04 plots as per the seized documents @ of Rs. 6500-7000 per sq yard during the year then rate of Rs. 7000 should have been applied in re....
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....High Court in the case of CIT vs Narrondas Manordas (Bom) 31 ITR 909, Hon'ble Delhi High Court in the case of CIT vs Gurinder Mohan Singh Nindrajog (2012) 348 ITR 170 (Del), Hon'ble Delhi High Court in the case of CIT vs Union Tyres (1999) 240 ITR 556 (Del), Hon'ble Delhi High Court in the case of CIT vs Sardari Lai and Co. [2001] 251 ITR 864 (Delhi) (FB) in his favour on the issue of powers of the CIT (A) to make enhancement u/s 251 of the Act. 11.11 On consideration of the above submission of the assessee firm, the ld CIT(A) stated that as per the provision of section 251 (1) (a) of the Act, the CIT (A) has the powers to confirm, reduce, enhance or annul the assessment. It is further provided in the explanation to the said section that the CIT (A) while disposing off an appeal may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the CIT (A) by the assessee firm. It is evident from the facts of the case as discussed above that the subject matter of show cause dated 29.10.2021 u/s 251 of the Act, emanates out of the proceedings in which order appealed w....
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.... show cause notice u/s 251 of the Act (supra) as the proposed addition germinates from the order of the AO itself. Powers for enhancement is not confirmed to the subject matter of appeal but to the subject matter of assessment There is enough material emanating from the assessment order to show that the AO has examined the issue of suppression of sale consideration in respect of similarly placed sale of plots which was the source of income for the assessee firm for the year under consideration. Therefore, the AO has examined the sales of plots for the point of view of taxability and thus, no new source of income has been proposed to be enhanced in the show cause issued to the assessee firm. The issue for the enhancement is arising out of the ITR, assessment order and assessment record the same has been considered by the AO from point of view of the taxability. On such facts it is noted that the ratio of case laws relied by the Ld. AR is not applicable to the facts of the present case. Further, reliance is place upon the decision of Hon'ble Supreme Court in the case of C1T vs Nirbheram Daluram (1997) 224 ITR 610 where it is held that the Appellate Assistant Commissioner was havi....
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....ch have been claimed and allowed by the AO. The on-money received from the sale of plots has resulted into suppression of sale consideration. Therefore, on such facts there is no logic to apply profit rate on the amount of suppressed sale consideration. 11.14 Further, Ld. CIT(A) stated that if the explanation of the assessee firm is accepted that Sh. Kashmiri Lai has sold these plots independently at the rates mentioned in the referred seized documents @ Rs. 6500-7000 per sq yard, even this finding is important to be considered when the assessee firm is selling the same plots during the year under consideration in the range of Rs. 1200-1500 per sq yard whereas the plots in reference are similarly placed. The seized material thus, reflects the correct market rates of the plots sold by the assessee firm. This observation also substantiates the findings of the AO that the assessee firm has suppressed the sale consideration in the books of account. The assessee firm has raised the issue that no undisclosed assets have been found or seized during the search proceedings in order to corroborate the findings of the AO that the assessee firm has earned extra profit by suppressing the sal....
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....e firm only. It is quite logical that the document of the firm would be found only in the possession of the partners. Thus, no distinction can be made between the partner and the firm in the eyes of law. Further, the facts of the case of Anand Kumar Jain, HUF as relied by the assessee firm are found to be different from the facts of the present case. Moreover, SLP against the decision of the Hon'ble Delhi High Court in this case has been admitted by the Hon'ble Supreme Court. 11.17 It was further stated by Ld. CIT(A) that in terms of provision of 153A (l)(b), the AO was required to assess/reassess the total income for the year under consideration. It has been held by the Hon'ble Kerala High Court in the case of CIT vs KP Ummer that when a notice u/s 153A is issued, it enables the Department to carry out assessment/re-assessment with respect to 06 immediate prior years and this does not require any incriminating material recovered during search relating to those prior years in which there is no time left on the date of search for an assessment u/s 143 [3). The same view has been up-held by the Hon'ble Allahabad High Court in the case of Rajkumar Arora 367 ITR 517,....
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....accorded on 24.12.2018. From the perusal of contents of the letter of the AO sent to the Addl.CIT, it is observed that the AO has proposed to make assessment in respect of income on account of undisclosed sale consideration in respect of sale of plots and has forwarded the assessment record with the same. The seized record is also a part of assessment record for the purpose of assessment proceedings. The Addl. CIT has considered the issue involved in the draft assessment order in the light of the relevant seized documents and made the perusal of assessment record. The allegation of the appellant that the action of the Addl. CIT, Chandigarh granting approval was a mere mechanical exercise without any independent application of mind is without any basis. It is stated that in the Central Charges, only few group cases where search u/s 132 of the Act conducted, are centralized. The Addl. CIT as Range Head is actively involved in assessment of all such cases from beginning and at all stages of search and seizure assessment, the Assessing Officer discusses and seeks his guidance. In this regard it is worthwhile to reproduce certain paras of the guidelines for assessments in search and sei....
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....istrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon ahy rights of the assessee. The Joint Commissioner, while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV". 11.22 It was held by Ld. CIT(A) that the allegation of the appellant that the Addl. CIT, Chandigarh has granted the approval u/s 153D in mechanical manner and without application of mind has no meaning as the approval is an administrative action which is required to be based on existence of set of circumstances and on subjective satisfaction as per the provisions of the Act. Further, approval u/s 153D being an official act provided under the statute, it is to be presumed that before according approval, the Range Head has looked into the records, applied his mind and he did not find any reason to disapprove the order passed by the Assessing Authority and thereafter he has accorded approval.....
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....orization for H.No. 834, Sec 21, order appointing the witnesses and Panchnama drawn for H.No. 834, Sec 21, the ld AR has contended before us that though search was authorized in the case of the assessee firm for H.No. 834, Sec 21 but witnesses having not been appointed for the assessee firm and more so when the Panchnama also does not name the assessee firm, it is a case where search was actually not initiated and conducted on the assessee firm and it remained only a case of survey u/s 133A on its business premises at Maya Garden Enclave, Jakhal Road, Sunam. He contended that appointment of witnesses which mentions the name of one of the searched person, the nonmentioning of other names means that witnesses were not appointed for those other persons including the assessee firm and once the witnesses were not appointed, the search cannot be said to have been initiated. Further, the signature of witnesses on warrant can only be said to be for the searched person for whom they were served order u/r 112(6) and not for all persons mentioned in the warrant and if it is meant otherwise, it would render the requirement of preparing and serving the order u/r 112(6) as redundant/ otiose. Bas....
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....m. 14.5 The Ld. CIT/DR contented that the authorisation/ warrant was acknowledged and signed by Sh. Ramesh Garg who is also a partner in the assessee firm. The firm is filing ITRs mentioning this very address as its registered address in its ITRs. Once the partner of the assessee firm had signed the authorization, it is deemed that he had signed the said authorization in the capacity of partner of the assessee firm and also for himself. He also contended that the search action is premises specific and not person specific. For this, he emphasized on the language of Rule 112(6)/(7). Based on this argument that the search is premises specific, he contended that the non-mentioning of the name of the assessee firm in witnesses appointment order and Panchnama drawn is inconsequential. Finally, he contended that once the partner has signed the search warrant when the searched party entered the premises, it amounted to initiation of search and therefore, the AO has assumed valid jurisdiction to pass order u/s 153A of the Act. 14.6 Against the above contention of the Ld. CIT/DR, the Ld. AR relied upon decision of Hon'ble Gujarat High Court in Zinzuwadia and sons vs. DCIT (2019) 419 IT....
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....e gone through the orders of the appointment of two witnesses and find that it talks about search in case of Ramesh Garg and House no 834, Sector 21, Panchkula. Even though the appointment order doesn't specifically carry the name of the assessee firm but the fact that the premises address which happens to be registered address of the assessee firm has been clearly stated, we find that the search has been duly authorised and initiated in case of the assessee firm at its business premises. Further, in terms of contents of the pachnama, we find that certain loose papers, relating to business dealings/transactions of the assessee firm and its sister concern, have been found and inventoried and therefore, merely the fact that the panchnama carries the name of Shri Ramesh Garg and not that of the assessee firm doesn't make any difference as the pachnama equally carries the business address of assessee firm i.e, House no 834, Sector 21, Panchkula. The documents thus have been found and seized from the business premises of the assessee firm and the panchnama has been drawn accordingly. We are therefore of the considered view that the search has been duly authorised, initiated and conducte....
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....he mandatory provisions of Section 153C. In the present case, the Ld. AO has overlooked the provisions of proviso to s. 153C, not issued any notice u/s 153C and did not record the mandatory satisfaction before initiating proceedings and which has rendered the entire impugned assessment framed u/s 153A as illegal. 15.3 In support, he relied upon the decision of Hon'ble Gujarat HC in the case of PCIT vs. Hitesh Ashok Vaswani [SCA No. 11998/2023 dtd. 02.11.2023] wherein it was held that material found/seized from the premises of some other assessee firm could not be used against the assessee firm without invoking s. 153C even when search was carried out simultaneously or even if the assessee firm was of same group. In the present case, it was submitted that the assessee firm was not even part of search carried out and therefore, the consequential assessment order passed u/s 143(3) r.w.s.153(A) deserves to be quashed. 15.4 The Ld. CIT/DR relied upon his contentions made earlier in context of the additional ground of appeal that a search u/s 132 has clearly been conducted on the assessee firm itself and therefore, the material has been found from the premises of the assessee firm.....
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.....2018 and the Addl.CIT granted approval on same date on 24.12.2018. It has been mentioned by the Addl. CIT in approval granting letter that only assessment record has been perused and there is no mention of perusal of the seized records. He also argued that on perusal of approval granting order u/s 153D, it is apparent that no words have been written, except that approval is being granted, to show that there has been due application of mind by the approving authority. 16.3 In his submissions, Ld. CIT/DR argued that the seized record is a very sensitive data and its custodian is only the Assessing officer and therefore, it cannot even travel to the approving authority. Therefore, the Ld. AO has rightly not shown the seized record to the approving authority. However, at the same time, the assessments in Central charges are framed wherein the AOs as well as Addl. CIT (approving authority) work in tandem and the approving authority is always kept apprised of the developments in the case. Therefore, he argued that, to say that the approving authority never saw the seized record is incorrect. At the same time, the Ld. CIT/DR submitted that the entire case was based on 2-3 loose sheets....
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.... similar documents regarding various other plots. All these including documents of Shri Kashmiri Lal in the seized record were regarding those plots which had been re-sold by the original allottees and therefore, there was a purpose behind the finding of these allotment letters/ affidavits/ sale deeds from the partner. All these facts were neither presented to the Addl. CIT nor he himself looked into these on his own and when complete seized record was not shown to him, the decision making was made by the Ld. AO and not by Addl. CIT. Infact, while granting approval u/s 153D, what is to be shown and what not, was decided by the Ld. AO himself and not by the approving authority. The approval u/s 153D is not only for the benefit of Revenue to collect right tax but is also a safeguard for the assessee firm that the assessment order is passed after looking into all records, facts and surrounding circumstances. Since, this was totally missing in the present case, the approval u/s 153D was mechanical and ritualistic. Further, ld. AR relied upon decision in Akshata Realtors Pvt. Ltd. Vs ACIT (ITAT Raipur) (IT(SS)A No.09/RPR/2018 dtd. 27.03.2023) wherein it was held that approval granted un....
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....er plots also. This shows that the Ld. AO was not applying his mind while doing assessment and the same fact was not even verified by the approving authority and he also granted approval u/s 153D on the same day in a mechanical manner. 16.10 It was further submitted that no corroborative material even regarding plots sold to Shri Kashmiri Lal was found during search or even during assessment proceedings. No effort was even made to find out any such corroborative material. Still addition was made not only on plots sold to Shri Kashmiri Lal but also to other 51 plots for which not even a single material was found. This was not looked into by the Ld. AO and then also not by the Addl. CIT. Hence, the approval u/s 153D was mechanical. 16.11 The Ld. AR relied upon the decision of Hon'ble Orissa High Court in case of ACIT vs. M/s Serajuddin& Co. Kolkata [(2012) 210 Taxman 0084] wherein it was held that CBDT Circular No. 3 of 2008 dtd. 12.03.2008 in context of approval u/s 158BG under old scheme of block assessment will equally apply u/s 153D also. Therefore, the approving authority must grant hearing to the assessee firm, the AO should place draft order atleast one month in advance ....
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....elied upon the ratio of following judgements: * ACIT vs. Dilip Constructions Pvt. Ltd (ITA No. 22 of 2020) (Orissa HC) dtd. 28.06.2023 * PCIT vs. M/s Shilpa Seema Construction Pvt. Ltd. (ITA No. 31 of 2020) (Orissa HC) dtd. 28.06.2023 * Sanjay Duggal vs ACIT (ITA No. 1813/Del/2019) dtd. 19.01.2021 (ITAT Del.) 16.15 In his submissions, the ld CIT/DR contended that calculation errors highlighted by the AR are just clerical in nature. The Addl. CIT was not required to check each and every calculation made by the Ld. AO. Further, loose papers and noting on the backside of the booking receipt, being the relevant material, which was required to be brought to the knowledge of Addl. CIT and the said loose papers and noting on receipt was part of draft assessment order and was presented before the Addl. CIT. Further, he also contended that, throughout the assessment proceedings, Ld. AO must have discussed case with the Addl. CIT on regular basis, though orally. In such circumstances, Ld. Addl. CIT had complete knowledge of the case and also of the seized record. Further, the draft assessment order was forwarded on 24.12.2018 and Ld. Addl. CIT had sufficient tim....
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....on and how the rate per sq yards has been derived for the year under consideration where the stated rate per sq yard as per books of accounts for the other years was accepted and besides the noting, the necessity for corroborative evidence to be brought on record. The above facts highlighted by the Ld. AR clearly establish that the approval given by the approving authority is without application of mind and was mechanical. 16.17 Further, Ld. AR relied upon decision of Hon'ble Orissa High Court in the case of ACIT vs. M/s Serajuddin & Co. Kolkata (Supra) which has now been affirmed by Hon'ble Supreme Court in SLP(C) Diary No(s). 44989/2023 dtd. 28.11.2023. In this decision of the Hon'ble Orissa High Court, it was held that requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. Further, it was also held that the approving authority must grant hearing to the assessee, the AO should place draft order atleast one month in advance of time barring date and only then final order can be pa....
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....on the Department. In Commissioner of Customs v. Indian Oil Corporation Ltd. 2004 (165) E.L.T. 257 (S.C.) the Supreme Court observed as under: "Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Central Board of Central Excise, Vadodara v. Dhiren Chemicals Industries: 2002 (143) ELT 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under Section 37B of the Central Excise Act, 1944 was reiterated after it was drawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5)SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound....
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....material in hands of the department at the time of initiating search proceedings, material or documents found and seized during search operation and materials found and unearthed during post search investigations and enquiries. Therefore, said provision provides and requires application of mind by the approving authority of the department which, in turn, provides safeguard to the both the parties i.e. revenue and the assessee. Therefore, the provisions of section 153D of the Act cannot be treated as a mere formality and mandate therein required to be followed by the approving authority in a judicious manner by due application of mind in a manner of cautious judicious or quasi judicial authority. This view has also been expressed by Pune Bench of the ITAT in the case of Akil Gulamali somji, in ITA Nos.455 to 458(Pune) of 2010 vide order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. We also take respectful cognizance of the fact that the Hon'ble Bombay High Court in the case of Akil Gulamali Somji (supra) has concurred with the said findings and view taken by the Pune Tribunal t....
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....re unable to see any exercise by the approving authority and even in the approval orders (supra), he has not mentioned that the relevant appeal folders/files along with assessments/reassessment orders have been perused or any discussion or consultation has been made with the AO prior to granting of approval u/s.153D of the Act. Accordingly, we are compelled to hold that the approval granted by the ld JCIT in the appeals under consideration has been granted in a mechanical manner without application of mind and that the assessments/reassessment orders passed by the AO on such approval are declared to be void and bad in law. We hold so. 41. In view of aforesaid discussion, we clearly find that approving authority has not applied his mind to the relevant assessment records and draft assessment orders prior to granting approval to the Assessing officer for passing assessment orders u/s.153A/143(3) of the Act. Therefore, the contention of ld A.R. of the assessee is justified and sustainable that the approval was granted in most mechanical manner without application of mind and respectfully following the proposition rendered by Hon'ble Bombay High Court in the case of Smt. Shree....
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....onsequentially the assessment order passed by the AO on such approval deserve to be setaside as not passed in accordance with the mandate of the statue and laid down jurisprudence. The ground of appeal so taken by the assessee firm is thus allowed. 17. In Ground No. 4, the assessee firm has challenged that when no incriminating material, for the year in question, was found during search and year in question was a case of unabated/completed assessment, no further addition could have been made in search based assessment framed u/s 153A, as held by the Hon'ble Supreme Court in PCIT vs. Abhisar Buildwell Pvt. Ltd (2023) 454 ITR 0212 (SC). 17.1 In this regard, the Ld. AR submitted that the search having been conducted on 13.07.2016 and that the assessment for the year in question was already completed u/s 143(3) on 09.02.2015. It was submitted that the only alleged incriminating material during the entire search is a handwritten noting at the backside of booking slip of Plot No. 10 available at APB pages 215 -216. He submitted that the handwritten noting at the backside does not contain any date. Further, the front side contain 2 dates i.e. 28.12.2010 which fall under AY 2011-12 a....
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....an be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132 A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under section 132 or requisition under section 132A, the assessment has to be done under section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to pass assessment orders and to assess the 'total income' taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments. 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred t....
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....#39;assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had hel....
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.... assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search o....
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....le regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking ex....
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....tion under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 11. As per the provisions of Section 153A, in case of a search under section 132 or requisition und....
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....such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basi....
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....ent of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 13. The Hon'ble Supreme Court in the aforesaid decision has held that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act and thus, the object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material unearthed during the course of search, the AO would assume the jurisdiction to assess or reassess the total income in case of completed/unabated assessment taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the return. In case, no incriminating material is unearthed during the search, the AO ....
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....property discovered in the course of search. 15. We deem it appropriate to reproduce the findings of the Hon'ble Bombay High Court in case of Continental Warehousing Corporation (supra) and the same read as under: "30. Even otherwise, we agree with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A of the Act. Since we are not required to trace out the history and we can do nothing better than to reproduce the observations and conclusions as above that we are not repeating the same. Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year i....
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....g assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason bein....
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....sfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" ....
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.... for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency." 16. The matter relating to incriminating material coupled with various other issues again came up for consideration before the Hon'ble Bombay High Court recently in case of Ashok Commercial Enterprises vs Assistant Commissioner of Income tax (Writ petition no 2595 and others dated 04/09/2023). Referring to the decision of Hon'ble Supreme Court in case of Pr. CIT Vs. Abhisar Buildwell (P) Ltd. (supra), it was held that no addition can be made ....
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....tes to Assessment Year 2017-2018 only records that: (i) an account of petitioner in the books of Hubtown Limited was found. It is important to note that the said account agreed exactly to the account of Hubtown Limited in the books of petitioner, a fact verified during the course of the survey on the day after the search, i.e., 31st July 2019. (ii) petitioner had entered into transactions of purchase and sale of shares of Hubtown Limited which have been recorded in petitioner's books of accounts and tax paid on the resulting gain. (iii) reference is made to an alleged re-cast of loan from petitioner to Hubtown Limited into an advance against property during year ended 31st March 2019 and the same is not relevant to Assessment Year 2017-2018. (f) Accordingly, it is irrefutable that no incriminating material relating to petitioner has been found during proceedings under Section 132 of the Act in the case of Hubtown Limited;" 17. We therefore find that the term "incriminating material" have to be read and understood in the context of one or more of the conditions stipulated in section 132(1) and on satisfaction of which, a search c....
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....ted on 26/02/2016. 19. As per section 153A of the Act, once a search and seizure action is carried out, the AO has to assess or reassess the total income of the assessee in respect of six years immediately preceding the assessment year relevant to the previous year in which a search is conducted or requisition is made. In case the assessment is pending on the date of search the same shall be abated as per proviso to section 153A(1) of the Act and the AO is free to assess the income of the assessee as regular assessment. However, in case of completed assessment and not abated as on the date of search, as in the instant case, the AO has to reassess the total income of the assessee and the assessment already completed can be tinkered with or distrusted where some incriminating material is found and seized during the course of search indicating undisclosed income of the assessee. Therefore, the AO would assume the jurisdiction to reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the return. In case no incriminating material is unearthed durin....
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....the assessee firm vide ground nos. 3 and 6 has challenged the addition of Rs. 2,65,06,482/- on extrapolation to 54 units when alleged material was found for 4 units only and further enhancement of addition by the ld CIT(A) to Rs. 7,03,17,753/- by extrapolating to 128 units and also that based on the material on record, no addition could have been made at all. 18.1 During the course of hearing, the ld AR submitted that the assessee firm had been selling plots in its developed colony to the buyers. Based on search, assessment u/s 153A r/w section 143(3) was framed for the block period of AY 2011-12 to 2017-18. During this entire block period, the assessee firm had sold various plots in the range of Rs. 1200 to 2000 per sq. yard. During this block period, the assessee firm had sold 4 plots to Kashmiri lal i.e. number 10, 11, 168 & 169 all @ Rs. 1300 per. Sq. yard (approx.). This amount stands recorded in books of the assessee firm and there is no dispute qua this amount. However, during search, booking slips and allotment letters issued to Kashmiri lal were found from the premises of Sh. Ramesh Garg. There was some handwritten noting at the backside of booking receipt of Plot No. 1....
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....16.03.2012/12.03.2012. Thereafter, he re-sold plot no. 168, amount paid by him was refunded to him by the assessee firm and fresh amount was received by the assessee firm from the new allottee. Further, the amounts in respect of other 3 plots numbered 10, 11, 169 were directly received by Sh. Kashmiri lal who gave affidavit of having directly sold these plots to new buyer and received the full & final amount and requested the assessee firm to get the sale deed executed directly in favour of new buyer. It was also argued that it was explained to the Ld. AO that the booking receipt, on which certain noting was made, were in the possession of Kashmiri lal from the date of issue (28.12.2010) till the same were returned to the assessee firm for subsequent re-allotment(06.08.2014) and it is during that time, he might have done some noting. Further, sale deeds in respect of these 4 plots were executed in favour of re-allottees as per instruction of Sh. Kashmiri lal. It was also argued that the affidavit of Kashmiri lal for Plot No. 10 (AR PB Pg. No. 693) bears the date of 06.08.2014 and same date is at the bottom of booking slip on backside of which handwritten noting was found and also t....
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....he assessee firm, was illegal. For this proposition, reliance was placed in the case of CIT vs. Ved Prakash Chaudhary (305 ITR 245) Del. HC and CIT vs Girish Chaudhary (296 ITR 619) Del. HC. Further, for the proposition that presumption howsoever strong cannot take place of evidence, Ld. AR relied upon the following judgments namely, Dhakeshwari Cotton Mills vs. CIT (1954) (26 ITR 775) (SC), Umacharan Shaw and Bros. vs. CIT (1959) 37 ITR 271 (SC) and CIT vs. Shri Ram Narain Goel, (P&H HC) 224 ITR 180. 18.6 It was further submitted that out of the 4 plots numbered 10, 11, 168 and 169 of Kashmiri lal which formed the base for framing assessment, only 3 plots were included in the list of 54 plots on which the rate of Rs. 7000 was applied by the Ld. AO. Plot No. 168 was not considered for making addition though noting for the same was there in the above referred handwritten document. This shows total non-application of mind by the Ld. AO. It was further submitted that the handwritten noting was found at the backside of booking slip. This booking slip is dated 28.12.2010 and this date falls in AY 2011-12 whereas the AO had made the addition in AY 2012-13, which is incorrect. 18.7 ....
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.... addition was made by the Ld. AO in year under question because more than 95 % of the sale consideration was received in the year in question and these receipts were booked as income in the profit and loss account in the same financial year since the assessee firm is booking revenue in P&L A/c when entire payment is received from buyer and allotment letter is issued. Therefore, addition in this very year has been made logically and fairly. Further, it was also argued by the Ld. CIT/DR that there is no requirement in law to reject books of accounts to doubt the sales made by the assessee firm. The addition in the sales can also be made without rejecting the books of the assessee firm. In support of his claim, he relied upon decision of Hon'ble Kerala HC in the case of CIT vs. Orma Marble Palace (P) Ltd. (Supra) which has been affirmed by Hon'ble Supreme court where it was held that addition, based on incriminating material, can be made without rejecting books of accounts. 18.11 In his rejoinder, the Ld. AR pointed out that in the judgement of Hon'ble Kerala HC in the case of CIT vs. Orma Marble Palace (P) Ltd. (Supra) relied upon by the Ld. CIT/DR, it was held that addition on es....
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....control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." 18.13 The Ld. AR has argued that the protection with the Revenue u/s 292C is only qua the ownership of document, that the contents of the document are true, they are in the handwriting of the particular person and when required to be stamped - it is sufficiently stamped. He argued that firstly as per ....
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.... considered and it was held as under: "7. As regards unrecorded sales being made the basis for drawing inference for addition, the Tribunal has clearly recorded a finding of fact that addition beyond unrecorded sales evidenced by 17 sale bills was without any basis. The said finding has not been shown to be perverse. 8. Learned counsel for the revenue relies upon the judgment of the Hon'ble Supreme Court in Commissioner of Sales Tax v. H.H. Esufali H.M. Abdulali, 90 ITR 271 to submit that in a proper case, the Assessing Officer could make addition by seeing the pattern of undisclosed income even without material. 9. The proposition of law propounded in the judgment of Hon'ble Supreme Court in H.H. Esufali H.M. Abdulali's case (supra) is undisputed. Where an assessee suppresses the particulars of assessable income, appropriate inference can be drawn in a fact situation. It is not always necessary that there should be tangible material. Inference itself can be basis to justify addition. Whether or not a case is made out for addition being a question of fact, the view taken by the Tribunal is a possible view." 18.15 In light of the aforesaid d....
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....CIT(A) and the said action of the ld CIT(A) therefore deserve to be set-aside. 19.2 The Ld. CIT/DR strongly supported the order and findings of ld CIT(A) and case law relied upon by him and submitted that there is no infirminity in exercise of enhancement of powers by the ld CIT(A) after issuing of show-cause and due opportunity to the assessee and the exercise of such powers is very much arising out of the assessment proceedings and which is within the mandate of the law. 19.3 We have heard the rival contentions and purused the material available on record. From the records, it is clear that ld CIT(A) has issued the show-cause, an opportunity has been provided to the assessee firm to explain its position and enhancement has thereafter been made on matter arising out of the assessment proceedings that is, in respect of sale of the plots of land numbering 128 as against 54 plots of land taken into consideration by the AO and applying the rate of Rs 7000 per sq yards. No new source of income has been brought to tax by the ld CIT(A). In Kanpur Coal Syndicate (Supra), it was held by the Hon'ble Supreme Court that the scope of power of the AAC is coterminous with that of the AO an....