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2026 (4) TMI 1016
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.... us, we are inclined to condone the delay and admit the appeal for hearing. 3. The issue raised by the Revenue in ground no.1 is against the order of ld. CIT(A) annulling the assessment framed u/s 147 of the Income-tax Act, 1961 (the Act) by the ld. AO on the ground of being invalid and void ab initio without considering the facts on record. 3.1. The facts in brief are that the assessment in this case was originally completed on 31.12.2018 u/s 143(3)/153A. There was search in the case of some finance brokers Kasera and Sanwaria on 30.11.2018. During the course of said search, some documents/papers were found and seized. Their statements were also recorded with regard to their modus operandi of arranging cash loans. However, none of the brokers in their statement named the assessee as loan provider or loan taker nor in any of the seized papers the name of the assessee .i.e. Suresh Kumar Banthia was found/appeared. Thereafter there was a survey conducted u/s 133A on 19.2.2020 on the assessee and his group concern namely Citizen Umbrella Mfg Co Ltd. In the course of survey, some papers with identification mark SKB/1 and 2 were found from the assessee and CUML/1 and 2 from Citize....
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....ab initio for the reason that the proceedings u/s 147 read with section 148 of the Act was invalidly initiated whereas the correct proceedings would have been u/s 153C of the Act because the source of information on the basis of which the reassessment proceedings were initiated emanated during the course of search on the third party M/s Uma Shankar Kasera, Anil Kumar Kasera and Jai Bhagwan Sanweria on 30.11.2018. While allowing the appeal of the assessee on legal issue the learned CIT(A) has taken into account the reply / submissions of the assessee and remand report called for during the appellate proceedings including the reply filed by the assessee. The relevant finding of the ld. CIT(A), are as under:- "5.2. Discussion and decision: 5.2.1. I have gone through the assessment order as well as the submission of the assesses On perusal of the same, it is observed that a search operation u/s 132 of the Act was conducted in the case of three brokers namely Shri. Uma Shankar Kasera, Anil Kumar Kasera, Jai Bhagwan Sanweria on 30.11.2018. Subsequently, a survey operation u/s 133A was carried out on 19.02.2020 by Directorate of Income Tax, Investigation, Kolkata at vari....
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....20 wherein he admitted income of Rs. 50 crores which statement was made during survey operations. Apart from that the AO has also relied on the statement made by Praveen Kasera and Jai Bhagwan Sanwaria recorded u/s 132(4) of the Act in search operation conducted in the case of the brokers i.e., Sanweria and Kasera. Based on the seized material of the said search action of the brokers, the AO also concluded that the assessee generated Rs. 36.65 crores during the year as unaccounted income which was utilized for cash loan and further the assessee also earned interest income on the said cash loan. 5.2.3. It is also observed that the AO had relied on the documents found and seized in the case of search of Sanwaria and Kasera and their statement recorded in the course of search in their hands, The AO relied on the seized material of the said search in the case of the brokers Sanwaria and Kasera ie., the alleged 'Rukkhas' in the present case of the assessee In this regard, the assessee in his submission had raised a legal concern that if the whole assessment was conducted by the AO only relying upon the said seized material in the said search action on the aforesaid brok....
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....r as unaccounted income which was utilized for cash loan and further the assessee also earned interest income on the said cash loan, IN TAX DEPARTMENT. 5.2.3. It is also observed that the AO had relied on the documents found and seized in the case of search of Sanwaria and Kasera and their statement recorded in the course of search in their hands. The AO relied on the seized material of the said search in the case of the brokers Sanwaria and Kasera i.e., the alleged 'Rukkhas' in the present case of the assessee. In this regard, the assessee in his submission had raised a legal concern that if the whole assessment was conducted by the AO only relying upon the said seized material in the said search action on the aforesaid brokers, the AO should adhere the provision of section 153C of the Act which was prescribed in the Act separately for seized documents found of any person in a third-party search action. Hence, there is a rudimentary flaw in the action of the AO to initiate section 147 in the present case of the assessee instead of invoking section 153C of the Act on account of dealing with seized material in a third-party search. The AO is given an opportunity to ....
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.... Officer issued a notice under section 148, for reassessment of income after prior approval from the competent authority. The reassessment order was passed wherein additions were made under section 68 with respect to ledger submitted by the assessee indicating receipt of entries from shell companies operated by 'J' and 'N': amount which was disclosed to be the commission paid for the alleged entries; and, an amount paid to the assessee for investment in penny stock. Just because parallel proceedings cannot be conducted for the same year under consideration ie., one under section 147 and one under 153C, the Hon'ble High Court ruled in the favour of the revenue stating hereunder In the present case, the reassessment proceedings are initiated under section 147 not only on the basis of the material containing information that was found during the search conducted in respect of Jain Brothers, but is also founded on the basis of other information as obtained by the Investigation Wing, namely, that the assessee had purchased units of a penny scrip. This being the case, the decision of the Assessing Officer to reassess the income of the assessee under ....
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....riminating material seized or requisitioned belonging or relatable to person other than on whom search was conducted, section 153C of the Act is to be resorted to, relevant portion of the decision in verbatim is reproduced as under: "32. The argument that section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under section 153C, the AO has to proceed in accordance with section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assess or reassess the "total income". It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, section 153C is to be resorted to. 5.2.7. Attention in this regard is further drawn to the another decision of the Hon'ble Rajasthan High Court delivered in the case of "Tirupati Construction Company vs ITO, reported in [2024] 16....
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.... all these figures have been correlated with different years is coming out from the seized material only. 5.2.10. Further, it may be mentioned that the AO also stated about Rs 16 crores as confirmed by the assessee as loan given to Praveen Kasera However, this statement was recorded by the assessee during the course of survey on the seized material of Sanwena and Kasera only. These definite figures of 1.6 crores is not available anywhere in the Impounded papers. More, so the statement itself was retracted immediately after 3 days and has no evidentiary value for which the judgement of the Supreme Court has been cited. The AO had also referred to the judgment of Hon'ble Supreme Court in the case of 'National Thermal Power Corporation Ltd. v. CIT 229 ITR 383', on the ground that the assessee had failed to explain the reason for not raising the above legal dispute on earlier occasion and also not given any reason for such omission. In this regard, the exact citation of the order is quoted hereunder: "Para 5. Under section 254 of the Income-tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, ....
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....an be raised even in second round of proceedings Thus, the interpretation of judgment in National Thermal Power as done by the AO is not applicable 5.2.12. Hence, on going through the above-mentioned citation and the contention of the AO in the remand report, it is palpable that that the said judgments as relied on by the AO bears no resemblance on the facts as well as on the law points involved in the case of the assessee. The fact of the present case strongly contradicts the observations of the AD as presented in the remand report. The fact of the case reveals that information used for the assessment of the AY 2016-17 by the AO was outcome of search conducted at brokers le.. Sanweria and Kasera. Thus, it is submitted that the present assessment was based on incriminating material that was found and seized in the premises of those brokers i.e.. Kaseras and Sanwerias and therefore, the present case is also to be considered as a case connected with search and seizure operations. Section 153C deals with the procedure of assessment of income of 'any other person' other than the person in whose name the warrant is issued and who is covered u/s. 153A. Therefore, the mai....
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....cordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: 5.2.14. Hence, from a bare reading of section 153C, it is clear that section 153C inter-alia provides that notwithstanding anything contained in section 147/148/149/151/153, where the Assessing Officer of the searched person is satisfied that any seized money, bullion, jewellery or other val....
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....Anr. ... Petitioners and ors vs Versus Union of India & Ors. ...Respondents" wherein it was held as under:- "23. Insofar as Mr. Suresh Kumar's contention supporting the proceedings under Section 147 and 148 of I.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring to the decision of the Supreme Court in Phool Chand Bajrang Lal (supra), however, the facts in the present case are distinct. There cannot be any doubt on the position in law when the Revenue intends to proceed purely on materials relevant for an action under Section 148 read with Section 147. We have already observed that the provisions of Sections 147, 148 vis-a-vis Section 153A and Section 153C are quite compartmentalized. To avoid any overlapping of these provisions, the legislature in its wisdom has thought it appropriate to provide for an independent effect, to be given under Section 153A read with Section 153C by incorporating the "non-obstante" clause, in t....
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....vor of the assessee and decision of only one Hon'ble High Court that too for the presence of other materials along with seized material supported the revenue for action u/s 147 of the Act. In a situation when there are contradictory decisions by the Hon'ble High Courts and no decision of Jurisdictional High Court is available, the one which is favoring the assessee is to be adopted. Further, in this regard, it is respectfully contended that where there are two possible interpretations of a tax law, the one favouring the assessee should be adopted as held by the Hon'ble Apex Court in the case of 'CIT vs. Vegetables Products Ltd. [1973], 88 ITR 192 SC'. The relevant ruling by the Hon'ble Apex Court is as under: 'since there was a conflict in High Court decisions on the issue, the court ruled in favour of the assessee, holding that if two reasonable constructions of a taxing provision are possible, the one that favours the tax payers should be adopted.' 5.2.18. The same ratio of Law had been also followed by different Hon'ble Courts including the Apex Court in the following judicial pronouncements: i. Manish Maheshwari: 289 ITR 341 (SC); ii. ACIT V.....
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....ka)' had held that: "Section 147, read with section 153C, of the Income-tax Act, 1961 - Income escaping assessment - General (Recording of satisfaction) - Assessment years 2005-06 to 2007-08 - During search conducted at premises of 'A', a diary was seized which contained details of payment made by 'A' to assessee - Later on, survey was conducted in assessee's premises and he agreed to other additional receipts as income but did not file his revised return - Thereafter, Assessing Officer initiated proceedings under section 147 - Whether since no proceedings were initiated under section 153C against assessee, there was patent non- application of mind - Held, yes - Whether since Assessing Officer had not recorded his satisfaction with regard to escapement of income and he had based revenue's case entirely on statement of assessee, impugned reassessment order was not sustainable as assessee's admission could not be conclusive evidence - Held, yes". Further, on SLP preferred by the revenue the Apex Court in same case, dismissed the SLP vide its order in (2023) 151 taxmann.com 489 (SC) which says as under: Section 147, read with sect....
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....initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). I also draw my support from the ITAT, New Delhi decision in the case of Rajat Shubra Chatterji vs. ACIT, New Delhi ITA No. 2430/Del/2015 dated 20.5.2016, wherein the reassessment was quashed on the similar facts and circumstances by following the ITAT, Amritsar decision in the case of ITO vs. Arun Kumar Kapoor (supra). In the present case before me, it is an admitted fact, as also evident from the r....
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....amely Sanweria and Kasera, the assessee should be treated as 'Other person' and the same seized incriminating details or documents whatever found should be used to conduct an assessment u/s 153C of the Act not U/s 147 of the Act for the AY 2016-17. Hence, the proceedings u/s 147 of the Act is not appropriate in the assessee's case. Therefore, the assessment made u/s 147 of the Act is treated as annulled and void-ab-initio. Consequently, these grounds raised by the assessee are allowed. 3.4. After hearing the rival contentions and perusing the materials available on record, we find that a search action u/s 132 of the Act was conducted on finance brokers Kasera and Sanweria on 30.11.2018. We note that during the course of said search, certain documents/ papers were impounded and seized. The statements of the finance brokers were also recorded u/s 132(4) of the Act with regard to the modus operandi of arranging loans. We note from the said statements that though the brokers admitted to have engaged in the business of arranging cash loans but the none of the brokers in the statements named the assessee as loan provider or loan receiver nor the documents seized during the course of s....
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.... clause overriding the other provisions of the Act. Therefore, the ld. CIT(A) has correctly passed the order that the proceedings u/s 147 of the Act as well as the consequent assessment proceedings were invalid and void ab initio. The same have been initiated under the wrong provisions of the Act. We note that the ld. CIT(A) while passing the order relied on several decisions as extracted above. Therefore, we do not find any occasion to interfere with the said appellate order which is very reasoned and speaking order. Consequently, we uphold the order of ld. CIT(A) on this issue by dismissing the ground no.1 of Revenue's appeal. 4. Ground nos.2, 3 and 4 of the Revenue's appeal are against the order of ld. CIT(A) deleting the addition of cash loans amounting to Rs.36.65 crores u/s 69A of the Act and interest income of Rs.1,64,92,500/- u/s 69A of the Act on technical ground without deciding the issue on merit. 5. Besides, the assessee has raised the issue in the cross objection in ground nos.7 to 9 in the cross objection, which is qua the addition of Rs.36.65 crores u/s 69A of the Act and Rs.1,64,92,500/- towards interest u/s 69A of the Act not in accordance with the law and th....
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....nducted on a date which falls prior to the start of the assessment year i.e. A.Y. 2020-21 and even the start of the financial year relevant to A.Y. 2020-21. Therefore, material found during the course of said search on 'Kaseras' and 'Sanwaria' has nothing to do with the assessment of income in the assessment of the assessee. Therefore, we hold that finding recorded by the ld. AO at pages no. 1 to 4 and 20 to 45 are not relevant for the purpose of assessment of income for the year under consideration. We also note that the assessee retracted his statement given during the course of survey u/s 133A of the Act immediately on 24.2.2020 which was within 5 days of the date of survey by filing affidavit on the ground that the statement was taken under coercion and there was no corroborative material found during the course of survey. In the said retraction, the assessee also stated that entries in the impounded documents CUM1 and SKB were not relevant or they were part of the books of account maintained by the assessee. Therefore, we find merit in the contention of the assessee that the ld. AO could not bring on record any substantive material to corroborate the entries the documents/mate....
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....considering the facts and circumstances of the case and the nature of documents which contains only jotting, we are of the view that there can be best described as dumb document as there was no corroborative material to support the entries made in the said documents and therefore, no adverse inference could be drawn against the assessee. The case of the assessee is squarely covered by series of decision; (i) Satyapal Wassan (supra) (ii) VC Shukla (supra) (iii) Rakesh Goyal (supra) (iv) Mohan Foods Ltd. (v) SM Agarwal (supra) (vi)Chandra Chemouse P. Ltd.(supra) (vii) S. Khader Khan Son (supra). We also find supports in the decision of Hon'ble Apex Court the case of Vinod Solanki & Others vs. UOI (SCC 537 209) wherein it has been held as under: "22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted....