AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 843
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.... in all these appeals, for the sake of convenience the same are disposed by this common order. 2. First, we deal with IT(SS)A Nos.194 & 195/ Ahd/2021 relating to the Asst. years 2015-16 and 2016-17 filed by the Revenue. 3. The brief facts of the case are that there was Search and Survey action under sections 132/133A were conducted on 06/03/2018 and on subsequent dates in the cases of "SSS Group". SSS stands for three separate but internally connected groups viz Sangani Group, Satyam Group and Shaligram Group. Though, these groups have interests and transactions in various vertexes of business, these groups are renowned in and around of Ahmedabad for their core activity and function related to "Real Estate Sector" in which these groups had carried out development and construction of multi-story residential and commercial towers, bungalows/villas, plots, etc. 3.1 During the course of search action, the office premises of the assessee M/s. Shaligram Infra Projects LLP was also covered u/s. 132 of the Act and consequent to search action, a notice u/s. 153A of the Act was issued on 30/01/2019 through ITBA and served upon the assessee. In response the assessee filed its return ....
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....nd building in AY-2015-16 and 2016-17. Year wise detailed breakup of payment/ investment and reference of seized incriminating material, on the basis of which the Special Auditor calculated such out of books investment to the extent of Rs. 60,85,42,590/- the on-money payment based on the entire area of the scheme. This amount was bifurcated as follows: Asst. Year Amount in Rs. 2015-16 7,09,1 1,386 2016-17 53,76,31,204 Total 60,85,42,590 3.5 Accordingly, the assessee was requested to show cause as to why suitable adverse inference should not be drawn in assessee's case vide notice dated 04-11-2019. In response the assessee filed a detailed reply objecting the report given by Special Auditor and basis of seized material the conclusion arrived by the Special Auditor is absolutely incorrect and beyond the provisions of law and without valid materials in hand. The AO was not satisfied with the reply given by the assessee and thereby the AO estimated that the assessee has purchased the entire society with land by paying on-money of Rs. 66,521/Sq yard and added as addition Rs. 7,09,11,366/- relating to the A.Y. 2015-16 and addition Rs. 53,76,22,722/- relatin....
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....on 40A(2)(b). 3.8 The learned CIT(A), after considering the material on record, held that the entire addition made by the Assessing Officer under section 69B towards unexplained investment in land was unsustainable. He observed that the documents relied upon by the Assessing Officer were not seized from the assessee but from the premises of third parties, namely Shri Ashwin B. Dudhat and others. In such a situation, the proceedings ought to have been taken under section 153C and not under section 153A. The learned CIT(A) further held that, in the case of a searched person, additions under section 153A can be made only on the basis of incriminating material found during the course of search in that person's case, and in the absence of such material, no addition is warranted. He also found merit in the assessee's grievance that no cross-examination was afforded in respect of the alleged recipients of on-money, which rendered the addition contrary to the settled principles of natural justice. 3.9 As regards the disallowance of interest under section 40A(2)(b), the learned CIT(A) held that the same was without justification. He noted that the Assessing Officer had merely applied ....
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....ounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec.158BB falls, would not be applied where a search was initiated u/s. 132 after 31/5/2003. 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee, and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. Further, the AO is duty bound to assess correct income of assessee as held by the Hon'ble Apex Court in the case of Mahalaxmi Sugar Mills, 160 ITR 920(SC). 6. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the decisions of Hon'ble Delhi High court in....
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....AO deserved to be restored. 7. The learned Authorised Representative(AR) supported the order of the CIT(A) and placed reliance on his detailed findings. It was pointed out that the Assessing Officer had made the impugned additions solely on the basis of certain loose papers being page nos. 58 and 60 seized from a third party, namely Shri Ashwin Dudhat, and not from the premises of the assessee. The AR also pointed out that Shri Ashwini Dudhat is not a partner or related to the assessee. The AR also stated that the CIT(A) had rightly held that no incriminating material whatsoever was found in the course of search at the premises of the assessee and, therefore, no addition could be made under section 153A in respect of completed assessments. It was further emphasised that as per the settled legal position, when search is conducted after completion of the original assessment, proceedings under section 153A do not abate and additions can be made only on the basis of incriminating material unearthed during the search of the assessee. 7.1 The AR also drew attention to the observation of the CIT(A) that in case any seized material found in the course of search pertains to a person o....
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....9.1 It is an undisputed fact that the assessee was subjected to search under section 132 of the Act. In terms of section 153A(1), where a search is initiated under section 132, the Assessing Officer is required to issue notice to the person searched, requiring him to furnish returns of income for the six assessment years immediately preceding the year of search, and thereafter proceed to assess or reassess the total income of such years. The provision is mandatory in its operation once the assessee is a searched person. 9.2 On the other hand, section 153C of the Act applies in a situation where, during the course of a search on one person, the Assessing Officer is satisfied that money, bullion, jewellery or documents seized actually pertain to another person, who was not subjected to search. In such a case, the law requires the Assessing Officer of the person searched to hand over such seized material to the Assessing Officer of that other person, who will then proceed against that other person under section 153A. Thus, section 153C is intended to cover "a person other than the person referred to in section 153A." 10. The issue for our consideration is whether, in the present....
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....) or 143(3). However, that decision was premised on the fact that incriminating material (loan documents and supporting GPAs) was actually recovered during the search of the assessee himself, which linked the assessee directly to undisclosed transactions. Likewise, in E.N. Gopakumar (supra), the Kerala High Court took the view that additions under section 153A are not confined only to incriminating material found in the search, but that the Assessing Officer has jurisdiction to conclude assessments "in any manner known to law." That judgment also arose in the factual setting where the Tribunal had restricted additions despite existence of seized materials, and the High Court reversed such restriction. In the present case, however, the position is materially different. The additions have been sought to be made solely on the basis of loose sheets seized from third parties, without any corroborative evidence found during the search in the premises of the assessee, and without affording cross-examination of those third parties despite specific request. The Hon'ble jurisdictional High Court in CIT v. Saumya Construction Pvt. Ltd. and the Hon'ble Delhi High Court in CIT v. Kabul Chawla h....
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....e CIT(A) has emphasised that the relevant assessment years were already completed when search took place and, therefore, any addition had to be anchored in specific seized incriminating evidence. Since no such document was shown to be found from assessee, the conclusion was that AO exceeded the permissible scope. 12.6 The CIT(A) analyses the seized pages themselves and notes that the contents did not name the assessee or show any receipt/payment by it. The AO's reliance was described as inconsistent, since even he treated the papers as relating to transactions of Ashwin Dudhat and his brothers. The contemporaneous statement of Mr. Dudhat confirmed that the papers were only a comparison between himself and his brothers. This factual position diminishes the evidentiary value of the papers against assessee. The AO had also conducted some independent verification with other society members, but the replies did not establish receipt of any unaccounted consideration from the assessee. Importantly, Mr. Dudhat was never confronted again to confirm any linkage with assessee, nor was cross-examination given. Thus, the addition rests on assumption rather than corroborated material. Importa....
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..... Dudhat were not sustainable, as no document was seized from the assessee and no independent evidence of unaccounted consideration was brought on record. These decisions, rendered on substantially identical facts within the same group search, reinforce the principle that third-party loose papers without direct nexus cannot justify additions under section 69B in the assessee's hands. 12.9 We also note that the grounds raised by the Revenue on merits are framed in very generic terms without elaborating the precise error in the findings of the ld. CIT(A). Further, during the course of hearing, the ld. DR did not advance any specific or detailed arguments to assail the findings on merits. In these circumstances, our scope of adjudication on this ground is necessarily confined to the contentions argued before us, and more particularly to those assessment years where the assessments had already attained finality as on the date of search. In such circumstances, the addition of Rs. 7,09,11,386/- for A.Y. 2015-16 and Rs. 53,76,31,204/- for A.Y. 2016-17 under section 69B cannot be sustained. This ground of the Revenue is dismissed. 13. Ground 8 - Merits of the addition u/s 40A(2)(b....
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.... Group", comprising Sangani Group, Satyam Group and Shaligram Group. These groups, though having diverse business interests, are prominently engaged in the real estate sector in and around Ahmedabad, where they have undertaken development of multi-storey residential and commercial projects, bungalows, villas and plotted schemes. The residence of the assessee, M/s. Shaligram Infra Projects LLP, PAN: ACPFS7047A, was also covered in the search. Pursuant to the centralisation order dated 23.04.2018 of the Principal Commissioner of Income Tax-3, Ahmedabad, the assessments were framed by Central Circle-2(2), Ahmedabad. 15.2 The assessee had originally filed its returns under section 139(1) declaring total income of Rs. 1,74,14,770 for A.Y. 2017-18 and Rs. 4,73,08,150 for A.Y. 2018-19. Consequent to notice under section 153A, fresh returns were filed declaring the same income. During assessment proceedings, the Assessing Officer invoked section 142(2A) and directed a special audit through M/s Talati & Talati LLP, who furnished their report. Relying on seized material, statements recorded during search, and the special auditor's findings, the AO made various additions in both years. The....
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....ed Annexure A/5 (pages 28-29), corroborated by digital data showing higher investment 4,20,00,000 Unexplained investment in Kathwada & Hanspura land u/s 69 Same Annexure A/5 showing coded figures; not recorded in books 1,36,00,000 Unexplained money received from K.P. Sangvi, Surat u/s 69A Page 39 of Annexure A/5 recording Rs. 1 crore receipt; no explanation or confirmation provided 1,00,00,000 Disallowance of interest u/s 40A(2)(b) Interest @15% paid to related parties vs. 9-12% to others; excess 3% disallowed 3,61,700 15.7 The assessee preferred appeals before CIT(A) against the orders of Assessing Officer In case of A.Y. 2017-18 and A.Y. 2018-19. The ld. CIT(A) carefully examined the seized documents, statements recorded, special audit report, and the detailed submissions of the assessee for both years. It was observed that the Assessing Officer had extrapolated certain instances of alleged on-money receipts found in seized papers and statements and applied them to the entire turnover of the projects "Shaligram Plush" and "Shaligram Lakeview". The CIT(A) held that such blanket extrapolation was unjustified but at the same time, it was not possible....
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....e incriminating material indicating existence of on-money with the legal position that only real income could be taxed, the CIT(A) held that it would be fair and reasonable to estimate the profit at 12% of the on-money receipts, treating the same as business income and not under sections 68/69A. He also clarified that consequently, the special rate of section 115BBE would not apply. The computation was tabulated as under: Assessment Year On-Money extrapolated by AO (Rs.) Income estimated @12% (Rs.) 2017-18 9,65,73,000/- 1,15,88,760/- 2018-19 23,76,60,875/- 2,85,19,305/- Total 33,42,33,875/- 4,01,08,065/- Accordingly, additions were sustained to the extent of Rs. 1,15,88,760/- for A.Y. 2017-18 and Rs. 2,85,19,305/- for A.Y. 2018-19, while deleting the balance additions of Rs. 8,49,84,240/- and Rs. 20,91,41,570/- respectively. 15.1 Regarding Interest Disallowance u/s 40A(2)(b), the CIT(A) noted that the Assessing Officer, while completing the assessment u/s 143(3) r.w.s. 153A, had disallowed interest under section 40A(2)(b) of the Act purely on the basis of the observations of the special auditor. The AO held that the assessee had paid intere....
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..... 2.06 crore in these lands, which was not recorded in its regular books. Further, on perusal of assessee's ledger, it was found that while Rs. 3 crore advance against Ambli land was recorded in November 2017, an additional Rs. 70 lakh reflected in seized notings was not recorded. Likewise Rs. 80 lakh for Kathwada and Rs. 56 lakh for Hanshpur were also not reflected in the books. The AO accordingly invoked section 69B to add Rs. 4.20 crore for undisclosed investment in Ambli and section 69 to add Rs. 1.36 crore for Kathwada and Hanshpur. 16. In reply, the assessee claimed that the seized notings were only rough jottings, possibly by brokers, and were not in the handwriting of its key persons. It was argued that such loose papers did not represent real transactions. The CIT(A), however, rejected this as a self-serving plea and, on appreciation of the circumstantial evidences, held that the seized papers represented the true value of the assessee's investments. He therefore confirmed the AO's finding that Rs. 4.20 crore (Ambli) fell under section 69B and Rs. 1.36 crore (Kathwada and Hanshpur) under section 69, aggregating to Rs. 5.56 crore. 16.1 Separately, page 39 of Annexure ....
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....e issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or reassess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec.158BB falls, would not be applied where a search was initiated u/s. 132 after 31/5/2003. 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said ....
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....ney of Rs. 4,01,08,065/- (Rs.2,85,19,305 for A.Y.2018-19 + Rs. 1,1d,88,760 for A.Y.2017-18) is telescoped against the undisclosed investment/payment of Rs. 6,56,00,000/-. 3. On the facts and ill the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,61,000/- made on account of disallowance of interest u/s 40A(2)(b) of the I.T. Act, 1961 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 18.2 Assessee's Grounds in ITA No. IT(SS)A 167/Ahd/2021 - A.Y. 2017-18 1. The order passed by AO is bad in law and required to be quashed as barred by limitation as same has been passed beyond time- period mention as per provision of section 153B applicable for relevant period. Tax Effect: N.A. being a technical ground. 2. Ld. CIT (A) erred in law and on facts in upholding dual contention of AO as on one side AO state that "The Taxation and other laws (Relaxation of certain provisions) Ordinance, 2020" is not a....
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....t be so held now. (B) Ld. CIT (A) erred in law and on facts in confirming Rs. 2,54,91,935/- (Addition of Rs. 6,56,00,000/- in Ground # 4 above Less Rs. 4,01,08,065/- after allowing telescoping of on-money receipts earned in A.Y. 17-18 & A.Y. 18-19) ignoring fact that addition of Rs. 6,56,00,000/- are based on dumb documents / rough jottings which does not have any evidentiary value. Tax Effect: Rs. 89,07,901/- Your appellant craves leave to add, amend, alter, edit, delete, modify, or change all or any of the grounds of appeal before the appeal is heard and decided. 18.4 It is pertinent to note that the Revenue has raised Grounds No. 1 to 6 in IT(SS)A Nos. 196/Ahd/2021 and 291/Ahd/2021 relating to the interplay of sections 153A and 153C of the Act, and the scope of additions in respect of incriminating material. We have already dealt with these legal grounds in detail while adjudicating the Revenue's appeals for A.Ys. 2015- 16 and 2016-17 in IT(SS)A Nos. 194 & 195/Ahd/2021. For the reasons recorded therein, and following our findings in those years, Grounds No. 1 to 6 raised by the Revenue in the present appeals are also decided against the Revenue. We,....
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....ing the addition to Rs. 2,85,19,305/- being 12% of the estimated on-money receipts and deleting the balance addition of Rs. 20,91,41,570/- made under section 69A (Revenue Ground No. 1), while the assessee in its Ground No. 3 has similarly urged that the addition should be further restricted to 8% or at best to the net profit rate of 9.95% declared in the books. 19.3 The Revenue has assailed the orders of the CIT(A) on the ground that the Assessing Officer had rightly made additions under sections 69A/69B by extrapolating on-money payments based on seized documents, third-party statements and the Special Audit Report. According to the AO, the assessee was systematically receiving on-money averaging about one-third of the actual consideration in the Shaligram Plush project and other schemes, corroborated by seized papers from Shri Viral K. Patel and statements of Shri Vasant Maganbhai Patel. It was argued that the CIT(A) erred in restricting the additions to 12% of turnover by treating the receipts as business income, instead of confirming the entire additions made under sections 69A/69B. The Departmental Representative further emphasised that the seized papers, statement of buyer....
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....-money receipts, having regard to the NP rate of 9%-10% already disclosed by the assessee and margins in this line of business. The assessee's plea to restrict it further to 8% or the exact NP rate cannot be accepted, as the estimate of 12% is reasonable in the facts and circumstances and also factors in the element of unrecorded cash transactions. At the same time, the Revenue's plea to restore the full additions under sections 69A/69B cannot be sustained. 22.2 Accordingly, for A.Y. 2017-18 and A.Y. 2018-19, the additions sustained by the CIT(A) of Rs. 1,15,88,760/- and Rs. 2,85,19,305/- respectively are upheld, and the cross grounds raised by both parties are dismissed. 23. Grounds relating to Undisclosed Investment in Lands & Telescoping (A.Y. 2018-19) 23.1 During the course of search at Shaligram House on 06.03.2018, certain incriminating papers were found and seized as Annexure A-5 (56 pages). Vide letter dated 09.12.2019, the assessee confirmed that the transactions appearing therein pertained to it. On perusal of pages 28, 29 and 39 of Annexure A-5, it was noticed that the assessee had made investments in lands at Kathwada, Hanshpura and Ambli, recorded in coded fig....