TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 1581
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....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 the appellant and the assessment for the year in question was a completed....
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.... 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 the facts of the case, the submissions made by the assessee firm during the course of assessment and appellate proceedings, an....
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.... 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 of different size of plot sold by you. The details of these plots have been given in the excel sheet which has been prepared from t....
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....r. 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 made by the original allottee on the back side of the alleged receipt. However it does not pertain or belong to the assessee firm and has ....
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....he 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 page no. 177, 178 and 179 of the seized documents. 9.3 Further referring to the contents at the back side of page 178, it was stated by the AO that ....
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....er 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 short period of time even in seven years in the proceedings under section 153A of the Act and in the present case, the rates are being applied in the same....
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.... 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 has held the same rate to not only four plots but also to other plots sold by the assessee firm during the year under consideration. 10.3 It was further submitted....
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....ta 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 @ Rs. 7000 per sq. yards. It was submitted that in absence of corroborative material or evidence, making of addition on the basis of dumb documents or loose paper which was n....
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....ee 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 received and become income of the assessee firm for the year in question i.e; 2011-12. It was accordingly submitted that the transaction in question do not pertain to year in question and ....
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....d 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 to Sh. Kashmiri Lai who might have recorded certain transactions at the back side of page no. 178 and the said transactions did not belong to it. The said submission has not been supported ....
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....ubmission 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 letter 'R' and in the said page the word registration against 'R' is clearly mentioned. Therefore, there is no merit in said submission of the assessee firm that Sh. Kashmiri Lai....
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....ing 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 respect of all the similar 128 plots sold during the year within the same year in order to compute the actual sale consideration received by the assessee firm from M/s Luxmi Builders from sale of plots ....
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....rt 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 was passed. The assessee firm has filed an appeal against order of the AO in which the AO has applied sale rate of Rs. 7000 in respect of 54 plots sold during the year on the basis of evidence found in respe....
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....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 having jurisdiction u/s 251 of the Act to consider new entries which were not considered at all by the ITO. Further, reliance is placed upon the decision of Hon'ble Allahabad High Court in the case of SD Tr....
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....he 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 sale consideration. On this account it is stated that there is no onus upon the Revenue to reconcile the undisclosed profit earned with the detection of corresponding undisclosed assets. 11.15 Further, Ld. CIT(A) s....
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.... 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, Hon'ble Kerala High Court in the case of EN Gopa kumar vs CIT (2016) 75 taxman.com 215, Hon'ble Allahabad High Court in the case of CIT vs Kesarwani Zarda Bhandar (2016), ITA no, 270/2014. Keeping in view the ....
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....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 seizure cases issued by the CBDT vide F.No. 286/161/2006-IT (Inv.-ll) dated 22.12.2006 which highlight the consultative approach between the Assessing Officer and the Range Head in search and seizure assessments. "Para 1.3 On....
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....ioner, 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. In the given facts of the case, it can be said that the Addl. CIT has applied his mind on the issue involved and has accorded his approval in accordance with the provisions of the Act. Such approval cannot be said as mechanical and without application of ....
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....inted 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. Based on this, he contended that once it was a case of survey u/s 133A, the Ld. AO lacked powers to frame assessment u/s 153A since assessment u/s 153A is specific to search actions having been initiated. For this proposition, he relied upon the decision of the Hon'b....
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....he 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 ITR 169 wherein it was held that the search under Section 132 in accordance with Rule 112 is not just location/premises specific but is also person specific. Finally, he contended that in present case, order u/s 112(6) having not been issued in the name of the assessee firm, ....
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....emises 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 conducted at the business premises of the assessee firm. As far as survey operations u/s 133A is concerned we find that the same has been carried at Maya Garden Enclave, Jakhal Road, Sunam on 13/07/2016 which is the site office of the assessee firm and its sister concern. The fact th....
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....ment 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. He also stressed on the point that mere nonmentioning of the name of the assessee firm in the Panchnama is not fatal and therefore, the Ld. AO has rightly framed assessment u/s 153A and there was no requirement to follow any procedure u/s 153C or to pass order u/s 153C of the Act. 15....
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....r 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 and notings on back side of receipt and these were part of assessment folder and was also pasted in the body of the draft assessment order. The Ld. CIT/DR submitted his written submission on this issue, the relevant extract wherefrom is reproduced as under: "The request for approval was sent ....
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.... 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 under section 153D on 'presumption' basis is invalid. 16.6 It was further submitted by the ld AR that the approval in this case was sought and granted on the same day. In such limited time, granting approval on same day, when it contained complex seized record and the issue of framing of assessment u/s 153A....
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....lots 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 of time barring date and only then final order can be passed. It was submitted that in the instant case, no hearing was granted by Addl. CIT, the AO sent draft order on 24.12.2018 and approving authority granted approval u/s 153D on 24.12.2018 itself when time barring date was 31.12.2018. Hence, the approval does not ....
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....T/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 time to go through the facts as the time barring date was 31.12.2018 and the entire case was based on only 3 loose papers. The Ld. CIT/DR also contended that the facts of the case law referred and relied upon by the Ld. AR are completely different from the present case. 16.16 We have heard the rival contentions and purused the material available on record. During the course o....
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.... 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 passed. Further, it was also laid down that the approving order u/s 153D must contain reasons which are missing in the present case also. The relevant findings from this decision read as under: "22. As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants ....
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....e 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 by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argume....
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....re, 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 that not following the provisions of section 153D of the Act will render the related order of assessment void. 39. In view of foregoing discussion, we reach to a logical conclusion that it is the duty of the approving authority to act in accordance with the mandate and provisions of law while granting approval and discharging statutory function lay on his shoulders by following proper procedure and also by applying his judicious and ....
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.... 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. Shreelakha Damani (supra), the order of ITAT Delhi Bench in the case of M3M India Holdings (supra) and decision of ITAT Cuttack Bench in the case of Geetarani Panda (supra), we hold that no valid approval has been sanctioned or accorded by the ld JCIT before allowing the AO to pass the relevant assessment orders. From the relevant approval orders dated 23.11.2017, it is vivid that ld JCIT has not mentioned in the approval orders that he has gone through the re....
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....urther 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 and another date i.e. 06.08.2014 which fall under AY 2015-16. Therefore, both these dates do not pertain to the year in question and hence, the so called incriminating material in form of above handwritten document does not pertain to the year in question. He argued that if this document is taken away from the assessment for the year in question, there is not even a single incriminating material on which Revenue is relying upon. In this situation, in absence of ....
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....ideration 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 to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. CIT v. Mehndipur Balaji [2022] 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of th....
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.... 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 held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: "15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Ac....
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.... 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 or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only....
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....he 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 extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling with....
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....al 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 under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other le....
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....at 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 basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the rea....
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.... 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 cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments and has upheld the decisions of Hon'ble Delhi High Court in case of CIT Vs. Kabul Chawla [2016] 380 ITR 573 and Hon'ble Gujarat High Court in case of Pr. CIT Vs. Saumya Construction (P.) Ltd. [2016] 387 ITR 529. 14. As to what constitute incriminating material found/unearthed during the course of search, the Hon'ble Delhi High Court in case of Kabul Chawla (Supra) held that completed assessment can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property disco....
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....ose 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 in which such search is conducted or requisition is made. Thus, the crucial words "search" and "requisition" appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro Products Ltd. (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question. 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held ....
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....surd 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 being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. 49. Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upo....
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....n 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" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment,....
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....or 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 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. Referring to the decision of Hon'ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society 397 ITR 344 (SC), it was held that the incriminating material seized must pertains to assessment year in question and notice issued under section 153C for other assessment years are not sustainable. It was further held by the Hon'ble Bombay High Court that the question whether any material found during the course of proceedings under section 132 is incriminating or otherwise has to be tested based only on the satisfaction note recorded by the AO. It was held that the contents of the said satisfaction note are the only statement/material to be looked at and the Revenue cannot seek the augment....
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....uring 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 can be authorised and search warrant can be issued. That is, there is information in possession of the competent authority and basis which he has reasons to believe that (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced under the erstwhile 1922 Act or under section 142(1) of the present Act, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. Therefore the information in possession of the competent authority at the time of authorization of search becomes relevant and basis the same, his satis....
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....ssume 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 during the search, the AO cannot reassess taking into consideration the other material in respect of completed assessments/unabated assessments." 17.4 In the instant case, it is an undisputed fact that as on the date of search, the original assessment proceedings already stood completed. It is also an undisputed fact that only document claimed to be incriminating material by the Revenue is a booking slip and more particularly, noting on the backside of the said booking slip for one of the plots of land. It is noted that handwritten noting at backside of the booking slip for plot no. 10 is undated and date in front side do not pertain to year in question. This clearly proves that the document in question do not pertain to the year in question. Therefore, as per the law laid down by the Hon'ble Supreme Court in case of Abhisar Buildwell Pvt. Ltd. (Supra), the Ld. AO could not have made addition in respect of an alre....
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....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. 10. The Ld. AO deciphered this noting and held that these plots have actually been sold by the assessee firm @ Rs. 7000 p. sq. yard. Based on this, he further held that 54 plots, for which booking slips were found during search on Ramesh Garg, must also have been sold @ Rs. 7000 p. sq. yard and he, therefore, made the addition of undisclosed sale for these 54 plots. At the same time, the assessee firm had actually sold 128 plots during the year but the AO had made addition for 54 plots since booking records for these very 54 plots only was found. During appeal, the ld CIT(A) not only confirmed the addition to 54 plots but also enhanced it to all 128 plots sold during the year. It is against addition for 54 plots made by the Ld. AO that the assessee firm has preferred Ground No. 3 and then against the enhancement made by the ld CIT(A) to 128 plots, that the assessee firm has preferred Ground No. 6. 18.2 It was submitte....
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....s 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 that the sale deed (AR PB Pg. 120-132) executed in favour of third party mentioned in affidavit of Kashmiri lal is also of same date. The same was stated to be the situation in respect of other plots and affidavit of Kashmiri lal. It was also stated before the Ld. AO that besides noting on the backside of one of the booking receipt of Plot No. 10, no other incriminating material was found in respect of any other plot and therefore, the sale rates as per rough notings made by Kashmiri lal cannot be applied just based on presumptions/ assumptions on all other plots. 18.4 It was further submitted that an affidavit dated 26.05.2015 by Kashmiri lal for plot No. 169, stating that he has sold his plot to some third party for a consideration of Rs. 5,50,000/- which amounts to Rs. 2000/-(approx.) per Sq. Yds was also part of seized record. The sale deed for this very plot is at pages 130132, which is also of same date of 26.05.201....
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....he 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 It was further submitted that without prejudice to the above arguments, even if addition is to be made on the basis of alleged material found during the search, then the said addition at maximum is to be restricted to 4 plots only for which alleged noting was found. In this regard, it was submitted that apart from nothing on backside of one of the booking receipts, no material was found in regard to remaining plots sold. It was submitted that it is an important fact to note that the Ld. AO did not reject the books of the assessee firm u/s 145(3) and accepted the sale price declared by the assessee in its books. But while making addition, he made the addition on 54 plots even when the alleged material was found only for 3 plots out of 54 plots. Thereafter, the ld CIT(A) enhanced the addition by applying rate of Rs. 6500/7000 p. sq. yds. on the entire 128 plots sold. 18.8 The ld AR also relied upon following decisions where assess....
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....ccounts. 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 estimate basis must be in direct correlation to material, transactions or aspects found during the search. In the present case, no material was found to substantiate that assessee firm was suppressing sale price and sold plots on higher prices. It was only presumption which is based on a dumb document and by ignoring the affidavit of Kashmiri Lal wherein figure mentioned were completely different from the estimation made. Therefore, estimation of sale proceeds made by the Ld. AO did not have any correlation with the material found. 18.12 We have heard the rival contentions and purused the material available on record. The entire assessment proceedings and addition was based on noting on the backside of one of the booking receipt. The Ld. AR explained the normal business practice and contended that the said receipt was in the possession of Kashmiri Lal during the relevant period of time and the noting made on the backside was not in the handwriting of any partner or ....
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....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 P.R. Metrani vs. CIT [2006] 287 ITR 209 (SC), Section 292C only gives power of presumption to the revenue and not holds that something becomes direct evidence. He further argued that Section 292C presumption is rebuttable. In the present case, we find that the assessee firm has sufficiently rebutted this presumption by bringing on record contrary material in the form of affidavit of Kashmiri lal, by denying that the document is in its handwriting and by stating from the dates on the booking slip/affidavit/ further sale deed that the booking slip remained with Kashmiri lal for sufficiently long time and that Kashmiri lal might have been selling these plots based on his handwritten noting. Further, the contention of both the lower authorities that Section 292C gives power to the Revenue to presume the contents of a document as the revenue wants and then the appellant has to rebut that kind of presumption drawn is not what has been contemplated in Section 292C. He also argued that Section 292C comes....
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....ion. 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 discussions, we are of the considered view that there is clearly lack of tangible material and evidence on record as well as absence of any corroborative material on the basis of which addition could have been made. The AO was not justified in making addition on presumption and assumption and on estimate merely on the basis of noting on a solitary booking receipt, ignoring rest all material available on record including the affidavit of Kashmiri Lal and having accepted similar transactions so undertaken by the assessee in other years and that too wrongly, extrapolating to 54 units and the ld CIT(A) enhancing the extrapolation to 128 units. We therefore order the deletion of addition of Rs. 2,65,06,482/- so made by the AO and the enhancement of Rs. 7,03,17,753/- so made by the ld CIT(A) and both the grounds of appeal are allowed. 19. In Ground No. 7, the assessee firm has challenged the action of the ld CIT(A) in assuming the powers of enhancement u/s 251 and carrying out the enhancement of income in the hands of the asse....
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.... 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 and he can do what the AO can do. In light of the same, the contention raised by the Ld. AR that the ld CIT(A) has wrongly assumed jurisdiction to make enhancement of income, in the present facts of the case is not acceptable and the ground of appeal no. 7 so taken by the assessee firm is hereby dismissed. 20. No other grounds of appeal have been argued or pressed during the course of hearing, the same are thus dismissed as infructious. 21. In the result, the appeal of the assessee is partly allowed. ITA No. 451/CHD/2022 22. In ITA No. 451/CHD/2022, the assessee has taken the following grounds of appeal: "1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A), Gurgaon-3 in Appeal No. CIT (A), Gurgaon-3/ 10250/2018- 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 ....