TaxTMI 
TaxTMI 
2025 (7) TMI 1417
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....t during the course of hearing, the Ld. AR of the assessee submitted that the legal issue taken in ground of appeal No. 2 is common in all these appeals wherein the assessee has challenged the additions made in the assessment completed u/s 153A of the Act without referring to incriminating material unearth during the course of search carried out in the case of each respective assessee when the assessment year involved is unabated year. Therefore, he requested to take the appeal no.3872/Del/2024 in the case of M/s Gulshan Investment Pvt Ltd. vs. JCIT for Assessment Year 2013-14 as a lead case. The Ld. CIT-DR also confirmed this fact that this issue is common in all the appeals and, therefore, he has not objected to the request of the Ld. AR of making arguments in the case of Gulshan Investments Pvt. Ltd. for 2013-14 as lead case in ITA No. 3872/Del/2024. 3. From the perusal of all the appeals, the legal ground that additions were made in the assessment order passed u/s 153A of the Act without referring to any incriminating material found/seized as a result of search from its possession is common in all the cases, therefore, the legal issue challenged in ground of appeal No. 2 in ....
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....10131/2012-13 has dismissed the appeal of the assessee. 7. Aggrieved by the said order of Ld. CIT(A), the assessee is in appeal before the Tribunal wherein following grounds of appeal are taken by the assessee: "1. That on facts and in law, the impugned assessment order dated 28.09.2021 and the impugned order dated 24.06.2024 is arbitrary, erroneous, without jurisdiction and justification and hence unsustainable in law. 2. That the Ld. A.O and the Ld. CIT(A) have erred in ignoring the mandate of Sec. 153A of the Act (as it existed on the date of search) and the settled position of law that categorically requires additions for unabated assessment years to be made solely on the basis of "incriminating material" unearthed during the course of the Assessee's search. 3. That the Ld. A.O and the Ld. CIT(A) have erred in ignoring the mandate of Sec. 142 of the Act, by failing to conduct such independent investigation, enquiry and/or recording of statements on his own u/s 142(2) of the Act, to thereafter put such adverse material gathered u/s 142(2) to the Assessee u/s 142(3) of the Act, which is consonance to the Appellant's right to cross examination....
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.... incriminating material unearth during the course of search in the case of assessee itself. 10. Brief facts leading to this ground of appeal are that a search and seizure operation was carried out in "Amit Jain Group" on 11.10.2018 of which the assessee company is one of the member. During the course of search not a single loose paper/document was found and seized what to say an "incriminating material" as defined in section 132(1)(c) and 132(4) of the Act. The AO in para 3.2 of the assessment order observed that on the same day a search action was simultaneously carried out in the case of "PMC Group" which include Shri Raj Kumar Modi and other business concerns managed and controlled by him to examine various forms of accommodation entities in the shape of LTCG/STCG/unsecured loans. During the course of search in the case of Shri Raj Kumar Modi of PMC group, it was admitted by Shri Raj Kumar Modi in the statements recorded u/s 132(4) that he was involved in providing accommodation entries in the shape of LTCG/STCG, unsecured loan and share capital through various business entities managed by him. Based on the statements of Shri Raj Kumar Modi and his associates recorded during ....
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....olutions Pvt. Ltd. from whom the assessee had taken unsecured loan of Rs. 75.00 lacs, AO reached to the conclusion that genuineness and creditworthiness of transactions is not proved and made the addition 75.00 lacs u/s 68 of the Act. 11. Before us, the Ld. AR of the assessee argued that no money, bullion, jewellery, valuable article or thing had been found or seized during the course of search in the case of the assessee. Further, no books of accounts, electronic data or other material was seized indicating any transactions carried by the assessee with reference to such money bullion, jewellery valuable article or thing that has not been disclosed or nor otherwise would be disclosed. He further submitted that in the case of the assessee, for Assessment Years 2013-14 and 2014-15, assessments were completed u/s 143(3) wherein proper enquiry and investigations were carried out and no doubts were raised with regard to these loans. According to the Ld. AR, the addition has been made solely on the basis of the statements of 3rd party namely Sh. Raj Kumar Modi and Sh. Jagdish Purohit, which statements were also retracted by both the persons within few days from the date of search in t....
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....s held that no addition could be made for any unabated year without any incriminating material found from the possession of person searched u/s 153A of the Act. 11.3. Ld. AR further submitted that since, the statements relied upon Revenue of Shri Raj Kumar Modi and Shri Jagdish Purohit are retracted by them, therefore, they cannot be made basis for making addition unless there is direct link of incriminating material found as result of search from the possession of the assessee. In the instant case, according to Ld. AR, the AO has miserably failed to brought on record any corroborative material found and seized as a result of search either from the possession of the assessee or from the possession of any for its Directors which could lead to belief that there were some money, bullion, jewellery, valuable article or thing and books of accounts which was not disclosed and could be termed as "incriminating material" based on which additions could have been made in the hands of the assessee company in the assessment completed u/s 153A of the Act. 11.4. For this proposition, reliance is placed on the judgments of Hon'ble Jurisdictional High Court in the case of DCIT vs. Best Infra....
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....dish Purohit contained incriminating material related to the assessee and, thereafter, copies of all such statement along with other material should be handed over to the Assessing Officer of the assessee, who, after receiving such statements and material should record his satisfaction and initiate the proceedings u/s 153C of the Act, in the case of assessee. Since, this process was not followed in the case of the assessee, no addition could be made in the proceedings initiated u/s 153A of the Act as the statements third persons could not have been held to be incriminating material for the purpose of making additions in the order passed u/s 153A, and, therefore, the additions made based on such statements the third parties in the order passed u/s 153A deserves to be deleted. 11.7 Besides this, the addition of Rs. 75.00 lacs on account of unsecured loan taken from M/s Sukuma Info Solutions Pvt. Ltd. is neither supported by any incriminating material found as a result of search thus could not be made in in the order passed u/s 153A of the Act and deserves to be deleted. 12. On the other hand, the Ld. DR vehemently supported the order of lower authorities and submitted that the ....
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....as not been done. Therefore, additions made in the order passed u/s 153A based on the statements of third persons deserves to be deleted. He further submitted that such statements can be treated as information for the purpose of taking action u/s 148 but since these statements are retracted by the respective persons, the burden is on the revenue to establish the allegation made with the help of tangible and cogent material thus even otherwise no action is permissible u/s 148 of the Act in the facts of the instant case. He also placed on record written submissions which reads as under: "This Supplementary Submission is filed in furtherance of the Primary Submissions (already on record) and seeks to delineate the restricted scope of "incriminating material" as defined under Sections 132(1)(c) and 132(4) of the Income Tax Act, 1961. As set forth in our Primary Submissions, during the course of the search and seizure conducted under Section 132 of the Act on 11.10.2018 and 12.10.2018 at the premises of various entities of the Anoop Jain Group, not a single item - whether money, bullion, jewellery, or any other valuable article- that had not been or was unlikely to be ....
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....a, or related documents which could have any bearing on such money, bulling. jewellery, valuable article or thing, that has not been disclosed nor was likely to be disclosed. Numerous High Court rulings have reiterated that a statement recorded under Section 132(4) can never serve as a basis for an addition unless it is directly linked to incriminating evidence found on the Assessee's premises. In the present matter, the retracted statements of Mr. Raj Kumar Modi and Mr. Jagdish Purohit, having no corroborative documentary or physical evidence from the search, fail to meet this threshold. It is well established in law that a statement recorded under Section 132(4) cannot serve as the sole basis for fastening an addition unless it is corroborated by incriminating evidence or undisclosed income discovered during the Assessee's own search. In CIT vs. Ram Das Motors Transport, (2015) 55 taxmann.com 176 (Andhra Pradesh) the Hon'ble High Court unequivocally held that in the absence of any unaccounted documents or incriminating material found during the search, a statement recorded under section 132(4) had been retracted cannot be invoked to justify ....
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....ellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding..." In addition, the Explanation to Section 132(4) declares that: "Explanation. For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act." As clarified by the Explanation to Section 132(4), the examination of any person may extend to all matters relevant for the purposes of any investigation under the Act. However, the ultimate evidentiary value of the statement depends on its linkage to Sec. 132(1)(c) where either a) money. bullion, jewellery, or any other valuable article that had not been or was unlikely to be disclosed (or) b) books of account, electronic data, or related documents which could have any bearing on such money, bulling, jewellery, valuable artic....
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....and any statement made by such person during such examination may thereafter be used in evidence in any proceeding." This provision is intrinsically linked to Section 132(1)(c), which empowers the officer to seize items such as money, bullion, jewellery, valuable article or thing (and/or) books of account/documents that represent such money, bullion, jewellery, valuable article or thing that have not been disclosed nor was likely to be disclosed; if there is reason to believe they represent undisclosed income or property. In essence, the purpose of conducting a search under Section 132 is to discover unaccounted assets or evidence of undisclosed income. Thus, the scope of Section 132(4) is limited to obtaining statements that have a direct nexus with the material evidence; and any statement that does not relate to or corroborate with the existence of such unaccounted assets cannot, by its very nature, be considered a statement made under Section 132(4) for evidentiary purposes. If a search is conducted and fails to uncover money, bullion, jewellery, or any other undisclosed assets, then the statements obtained in that search are devoid of incriminating va....
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.... a completed assessment can be made. Moreover, nor was any proceedings initiated under Sec. 153C, warranting any addition based on third party material. Therefore, the entire assessment under Section 153A is legally unsustainable, bereft of jurisdiction and non est in the eyes of the law, as it rests solely on surmises and conjectures, bereft of any incriminating material discovered during the Assessee's search. We hope you find the same to your satisfaction." 14. We have heard the rival submissions and perused the material available on record. The Ld. CIT(A) in para 4 of its order has summerized the conclusions drawn by AO, which is as under: * PMC Fincop Ltd. and related entities are providing bogus accommodation entries. * Search was conducted on PMC Group and five subgroups who were the major beneficiaries. * Various dummy companies including M/s Shivdarshan Sales Pvt. Ltd., M/s Famous Investment and Consultant Pvt. Ltd., M/s Seabird Distributors Pvt. Ltd., M/s Seabird Retails Pvt. Ltd., M/s Searbird Vincon Pvt. Itd., M/s Embassy Sales Pvt. Ltd., M/s Economy Suppliers Pvt. Ltd. & M/s Rolex Vinimay Pvt. Ltd. were recognized and they could n....
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.... * M/s Economy Suppliers Pvt. Ltd. * M/s Rolex Vinimay Pvt. Ltd. * During search proceedings, to enquire about the Involvement of above said companies, commission was issued to Investigation Wing Kolkata but said companies were not found existing at their registered office addresses based at Kolkata. * During search proceedings, it is found that staff of Sh. Raj Kumar Modi are Directors in some of companies. During search some incriminating documents in form of cheque leaves (where frequent transaction of huge amounts between the business concerns controlled by Raj Kumar Modi and the eight concerns mentioned above) were found and seized as LP-1, 81 and LP-5, 86 at the residence of Sh. R.K. Modi at Rajendra Nagar, Delhi. When the same facts were confronted during search to Sh. Raj Kumar Modi he admitted that these concerns are directly/indirectly operated by him. In many of the companies, his staff, Sh. Jay Prakash Pal & Sh. Dhirendra Kumar Gupta are directors. Besides his brother-in-law (Sh. Dileep Kumar Agrawal) is also director in few companies. * The same facts were confronted to Sh. Dhirendra Kumar Gupta during search who admitted on oat....
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....same at Manish Gupta's premise) proves the contents of Sh. Raj Kumar Modi's statement as well. * Further statement of Sh. Manish Gupta, his admissions and analysis of bank accounts of the proprietorship concerns of Sh. Manish Gupta are relevant facts as per section 6 of Evidence Act and proves the contents of the statement of Sh. Raj Kumar Modi. * Non-Existence of the above mentioned eight concerns at their registered office at Kolkata, maintaining their books of accounts at the office of Sh. Raj Kumar Modi and the fact that the directors of above eight business concerns namely Sh. Dhirendra Kumar Gupta, Sh. Jai Prakash Pal and Sh. Dilip Kumar Agrawal are either employees or relatives of Sh. Raj Kumar Modi proves that the concerns were under control of Sh. Raj Kumar Modi, Transfer of money in form of RTGS/NEFT to the desired company and the use of the same for price rigging and as exit provider are the circumstantial evidences that prove the contents of statement of Sh. Raj Kumar Modi. * Admission of cash and commission in cash for LTCG by Sh. Raj Kumar Modi, collection of cash as well as movement and delivery by Sh. Dhirendra Kumar Gupta and conv....
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....n this case there is a conspiracy by the beneficiaries of the accommodation entries to obtain unsecured loans and Sh. Raj Kumar Modi and his entire team arranged the unsecured loan to the beneficiaries for the equivalent amount of cash (along with commission) and in the whole exercise the operator got the commission. The AO further mentioned that the assessee has obtained loans from entities controlled by entry provider Sh. Jagdish Purohit. The AO inter-alia stated as under: * That the assessee company has received unsecured loan from Unisys Software and Holding industries which is a Kolkata based company operated by Sh. Jagdish Purohit. * The AO has reproduced the statement of Sh. Jagdish Purohit recorded u/s 132(4) of the Income Tax Act, 1961 during the course of search at the residential premises of Sh. Jagdish Purohit on 21.01.2015. Also, various other statements of Sh. Jagdish Purohit recorded by the investigation Directorate have been reproduced in the assessment order. * In response to questions no. 9 & 10, Sh. Jagdish Purohit has mentioned that 246 companies were managed & controlled by him which were used for providing accommodation entr....
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....dependently in the year 2015 and made sole basis for making addition in the hands of the assessee company. C. Further an addition of Rs. 75.00 lacs was also made for unsecured loan received from M/s Sukuma Infosolutions Pvt. Ltd. by holding that the loner has no creditworthiness without referring to any incriminating material found as a result of search in the case of the assessee. 14.2. Under the category "C" above, an addition of Rs. 75.00 lacs was made by holding the unsecured loan received from M/s Sukuma Infosolutions Pvt. Ltd. as unexplained however, from the perusal of the assessment order or the appellate order, it is seen that in nowhere the lower authorities had referred any incriminating material found as a result of search in the case of assessee indicating this loan as bogus. The order passed u/s 153A of the Act is for Ay 2013-14 which is unabated and completed year. The Hon'ble Supreme Court in the case of Abhisar Buildwell (supra) has held that the addition u/s 153A should be made based on the incriminating material found from the person searched during the course of search. As such, their Lordships has held as under: i) that in case of search un....
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....ect to the assessee company. The Ld. CIT(A) confirming the action of the AO in using such statements in the hands of the assessee company for making addition in the order passed u/s 153A. The ld. CIT(A) relied upon the judgments of Hon'ble Allahabad High Court in the case of Tapasya Projects Ltd. Vs. ACIT [2009] Tax LR 30, wherein the Hon'ble Court has held as under "The word person as used in Section 153A cannot be given a restricted interpretation so as to exclude the servants and agents of that person because of the obvious undesirable result to which such strict interpretation would lead. Thus, the search conducted on the premises of the directors has to be treated to be a search initiated in respect of the petitioner company." 14.6. From the perusal of the observations of the Hon'ble High Court, we find that the Hon'ble High Court has held that the company could be considered as searched in case where the search was carried out on its servant and agents such as Director of the company. In the instant case, as observed above, the statements of two independent and non-related parties i.e. of Sh. Raj Kumar Modi and Sh. Jagdish Purohit were used by the AO for making ad....
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....u/s 153A of the Act. 14.9. It is also seen that the Assessing Officer in para 4.6 of the order has referred that the statement of Sh. Raj Kumar Modi wherein in reply to question No. 80 he identified Sh. Anoop Jain, Director of the assessee company as one of the beneficiary of LTCG of more than 35 Crores. From the perusal of the assessment order, it is seen that no addition with respect to long term capital gain is made in the case of assessee, therefore, these statements are not relevant to the facts of the instant case. 14.10. In the instant case, the best course of action would be u/s 153C after following the procedure of recording of satisfaction to this effect as provided by the Hon'ble Supreme Court in the case of Calcutta Knitwears (supra). The assessing officer should have completed the proceedings initiated in terms of the notice issued u/s 153A of the Act for the year under appeal since it is an unabated assessment year, and then must followed the procedure as laid down by the hon'ble supreme court in the case of Calcutta Knitwears (supra), which was not followed by the AO thus now no action could be taken u/s 153C of the Act also for the year under appeal. It would ....
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....ertaining / relating to a person other than the person searched from the searched premises as was referred u/s 153A of the Act was to be handed over by the investigation wing to the AO of such other person (searched) and then that AO of the searched person shall handover the same to the AO of the person not searched who thereafter was to proceed against such other non-person by issuing a notice u/s 153C of the Act and then to assess / re- assess income of such other not searched person. 14.12. The Hon'ble Jurisdictional High Court in the case of PCIT (Central)-3 vs. Anand Kumar Jain (HUF) {ITA 23, 26-31/2021] has held as under: "Even if a search was conducted upon the premises of the assessee, if the AO was relying upon the incriminating material found from the search of third party, then the same cannot be used for assessment u/s 153A and AO should have restored to section 153C of the Act. 14.13. The Co-ordinate Bench of ITAT in the case of Trilok Chand Chaudhary, New Delhi vs ACIT, Central Circle- 26, New Delhi on 20 August, 2019 under identical circumstances has held as under: "In our considered opinion, when the case of the assessee is covered under the ....
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....l non obstante provisions of the section 153C of the Act and then to pass a separate assessment order u/s 153A r.w.s. 153C of the Act. Had recourse to section 153C of the Act been adopted by the revenue, then it would be in accordance with the decision of the Hon'ble Supreme Court in the case of Calcutta Knitwears (supra). Admittedly, no money, bullion, valuable article or thing or property which was not disclosed or would not be disclosed was found during the search carried out by the department in the case of the assessee. Under these circumstances, by respectfully following the decisions of Hon'ble Jurisdictional High Court in the case of Anand Jain, HUF (supra) and coordinate benches of the Tribunal in various cases, we hold that no addition could be made in the assessment completed u/s 153A of the Act on the basis of statements of third party recorded during the search in their own case and the incriminating material, if any, found during the course of search of the assessee could only be utilized for making addition. 14.17. In view of the above facts and discussions made, we direct to delete the additions as referred in category 'A' & 'B' in para 14.1 above. Furthe....