TaxTMI 
TaxTMI 
2026 (6) TMI 551
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.... years. Therefore, for the sake of brevity, grounds of appeal filed for the A.Y. 2017-18 in ITA No.792/Hyd/2026 are re-produced as under: "1. The Learned CIT(Appeals) erred in both law and facts while passing the Order. 2. On the facts and circumstances of the case and in law, the Ld.CIT (Appeals) is not correct in not appreciating that the assessment order u/s 143(3) r.w.s 147 of the Income Tax Act ("Act") is void ab initio as the re-assessment proceedings initiated by the issue of notice u/s 148 without due compliance with the requirements of sections 148 and 149(1)(b) is without jurisdiction and unsustainable in law. 3. On the facts and circumstances of the case and in law, the Ld.CIT (Appeals) is not justified in rejecting the plea of the appellant that the assessment order u/s 143(3) r.w.s 147 of the Act is void ab initio, as the prior approval for the issue of notice u/s 148 was accorded by the specified authority u/s 151 in a mechanical manner without proper application of mind. 4. On the facts and circumstances of the case and in law, Ld.CIT (Appeals) is not justified in rejecting the plea of the appellant that the assessment order passed....
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.... the seized material with regard to some transactions, without appreciating the explanation furnished by the appellant. 11.On the facts and circumstance of the case, the Assessment order which was confirmed by Learned CIT(A) has been passed with surmises and conjectures. 12. Without prejudice to the above grounds, Ld. CIT (Appeals) is not justified in rejecting the plea of the appellant that AO erred on facts and in law in excessively estimating the additional income arising out of unaccounted cash receipts as quantified by him at 16% of such receipts as against estimation made by the assessee at 10% of the admitted quantum of unaccounted cash receipts. 13. Any other legal grounds or factual grounds that may be urged at the time of hearing of the appeal." 3. The brief facts of the case are that, the assessee firm, M/s. Sohini Developers LLP, is engaged in the business of real estate construction and sale of residential flats and commercial spaces. The return of income for A.Y. 2017-18 was filed on 30.10.2017 admitting total income of Rs. Nil. The case was selected for scrutiny, and the assessment has been completed under Section 143(3) of the Income-ta....
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....ourse of postsearch examination on 07.12.2022, in response to Question Nos. 19 and 20, he stated that part of the sale consideration is received in cash and record of such cash transactions are maintained by Shri Atla Chandrashekar, Assistant Manager (Accounts). Based on the statement of Shri Regu Venkata Vara Prasad, summons were issued to Shri Atla Chandrashekar to appear before the Authorized Officer at the corporate office of M/s. Vamsiram Group on 07.12.2022. In response to the summons, when he appeared at the corporate office of M/s. Vamsiram Group, a statement under Section 131 of the Act, was recorded by the Authorized Officer and in response to Question No. 6, Shri Atla Chandrashekar confirmed the maintenance of cash transactions in diary and Excel sheets. The Authorized Officer requisitioned Shri Atla Chandrashekar to produce such material in Question No. 7, for which he stated that, he kept the same at Sri Venkata Sai Kirana and General Stores near Perfect Towers, Miyapur, Hyderabad, i.e., near his residence. Based on the statement, summons were issued to Shri Atla Chandrashekar by the Authorized Officer at his residence to appear at the camp office along with the materi....
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....oncluded on 11.12.2022. Subsequently, the assessee group obtained the copies of sworn statements from the Investigation Department. The prohibitory order at the corporate office was revoked on 08.02.2023 and the search was concluded on the same day. During the search proceedings, two mobile phones brought by Shri Sasmeer Yegge Kadel, which were kept under prohibitory order, were seized and inventorised as Annexure A/ENX01/PO/01. On 09.02.2023 Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad filed retracting affidavits before the DDIT (Investigation) and further detailed additional affidavits were filed on 17.03.2023 and 05.04.2023 respectively. 5. Consequent to the search, assessment has been reopened on the ground that there was information which suggested that income chargeable to tax had escaped assessment in the case of the assessee. Accordingly, the A.O., after recording the reasons, issued notice under Section 148 of the Act, on 07.12.2023 after obtaining due approval of the competent authority. In response to notice under Section 148 of the Act, the assessee filed return of income on 26.02.2024 admitting total income of Rs. 40,00,000/-. In the return of income fi....
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....ate the objections raised by the assessee. 7. The A.O. after considering the relevant explanations coupled with the statements recorded from various persons and also relying upon the enquiries conducted with eighteen parties, observed that, the cash book maintained by Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad clearly demonstrates the receipts and payments after suppressing two zeroes and the same has been confirmed from the statements of eighteen parties, including vendors, landlords and other service providers. Further, the sworn statements recorded under Section 132(4) and Section 131 of the Act, clearly reveal the admission of Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad regarding receipts and payments after truncating two zeroes. Therefore, the subsequent retractions filed by the parties by filing affidavits were only an afterthought to cover up the issue and hence the retraction affidavits filed by Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad cannot be considered in view of the specific admissions made during the course of search proceedings in the statements recorded under Section 132(4) of the Act. The A.O. discussed the issue at ....
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....is clearly established from the seized material and the statements recorded during the course of search that the receipts pertain to unaccounted business transactions of the group relating to sale of residential flats and commercial spaces. The A.O. further observed that the assessee has accepted the fact of receipt of onmoney from customers and the same was not recorded in the regular books of account. Therefore, the books of account were rejected under Section 145(3) of the Act in so far as the unaccounted cash receipts are concerned. Taking into account the financial results declared by the assessee and other group entities in earlier years, the A.O. observed that the average net profit margin was 19.43% and the median net profit margin was 16.05%. Therefore, adopting 16% as a reasonable rate of profit, the A.O. estimated the additional income of the assessee at Rs. 64,00,000/- being 16% of the total unaccounted cash receipts of Rs. 4,00,00,000/- pertaining to A.Y. 2017-18 and brought the same to tax as business income. 9. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the issue of notice ....
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....s estimation of profit at 16% on total receipts computed as per the unaccounted cash book found during the course of search and held that upon noticing the detailed reasons given by the A.O. in the assessment order coupled with the evidence relied upon for making the additions including the statements recorded from various parties and their subsequent retractions, examination of eighteen parties, including vendors, landlords and service providers and their cross-examination, it is very clear that there is enough evidence to prove that there was truncating of two zeroes while recording receipts and payments in the seized cash book maintained outside the regular books of account. Although the assessee has argued the case in light of the subsequent retractions filed by Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad and the statement of Shri Badvelu Subba Reddy denying the statements of the above persons, but facts remain that going by the affidavits filed by the parties along with the retraction statements, it is very clear that the retractions are general in nature without any specific reasons as to why the initial statements given during the course of search were incorrec....
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....an entry or entries in the books of accounts and unless the said jurisdictional conditions are fulfilled, the notice issued under Section 148 of the Act, is invalid and void ab initio. 14. CA. MV Prasad, learned counsel for the assessee submitted that the term "asset" has been specifically defined in Explanation to Section 149 of the Act to include immovable property, shares and securities, loans and advances and deposits in bank account. The learned counsel for the assessee submitted that in the present case, while recording reasons for reopening the assessment, the A.O. has not identified any undisclosed asset and further no addition has been made towards any unexplained asset. The learned counsel for the assessee submitted that even with regard to entries in the books of accounts, the A.O. has not identified any accommodation entry or unexplained entry in the books of accounts so as to satisfy the conditions prescribed under Section 149(1)(b) of the Act. The learned counsel for the assessee submitted that the concept of "entry in books of accounts" contemplated under Section 149(1)(b) of the Act refers to accommodation entries or unexplained entries involving inflow of money ....
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....Arun Kumar & Ors. Vs. Union of India & Ors. reported in 286 ITR 89 (SC) submitted that existence of jurisdictional facts is sine qua non for assumption of jurisdiction and unless jurisdictional facts exist, no authority can confer jurisdiction upon itself. The learned counsel for the assessee submitted that fulfilment of conditions prescribed under Section 149 of the Act, constitutes jurisdictional facts and unless the said conditions are fulfilled, notice issued under Section 148 of the Act is liable to be quashed. The learned counsel for the assessee further by relying upon the decision of the Hon'ble Supreme Court in the case of Hansraj Gordhandas Vs. H.H. Dave reported in AIR 1970 SC 755 submitted that intention of legislature has to be gathered strictly from the language employed in the statute and therefore, the mandatory conditions prescribed under Section 149(1)(b) of the Act, cannot be diluted or inferred beyond the language employed in the provision. The learned counsel for the assessee submitted that in the present case, the assessment years 2017-18 to 2019-20 fall beyond the period of three years and therefore, the A.O. ought to have specifically established that the al....
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....R further submitted that, the newly inserted Section 148 by the Finance Act, 2021 is information driven and further subsequent amendment in 2022, by insertion of relevant Explanation has widened the definition of 'escapement of income'. In the present case, there is a separate warrant in the case of the assessee and others and as per the warrant, Panchanama was drawn and therefore, Explanation 2(i) is applicable for the assessment years upto 3 three years and beyond three years, the A.O. has recorded reasons which clearly show information which suggests escapement of income in the form of an 'asset' or expenditure or entry in the books of account and, therefore, the arguments of the assessee that the reasons recorded by the A.O. for issuance of notice under Section 148 of the Act, do not show any escapement of income, is incorrect. The Ld. CIT-DR, further referring to the search proceedings and consequent statements recorded from various persons, submitted that the search is specific to premises and not to persons and in the present case, the material found from Shri Sameer Egge Kadel and Shri Atla Chandrashekar pertains to Vamsiram Group and, as per the surveillance, the Departmen....
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....tutes must be strictly interpreted so as to give clear and unambiguous meaning. The legislative intent is primarily to be gathered from the specific words used by the Legislature. Therefore, going by the newly inserted provisions of Section 148 of the Act, it is very clear that where there is a search under Section 132 of the Act, the A.O. shall be deemed to have information which suggests escapement of income up to three years and only in cases of reopening of assessment beyond three years, the A.O. should form a reasonable belief of escapement of income which represents an 'asset' or entries in the books of account or an expenditure. In the present case, going by the documents found during the course of search coupled with the statements recorded from various persons, it is abundantly clear that the A.O. has in his possession information which suggests escapement of income for the relevant assessment years. Therefore, the arguments of the counsel for the assessee that the reopening of assessment in the given facts and circumstances is incorrect, is totally contrary to the new scheme of reassessment as provided under Section 148 of the Act and cannot be accepted. 20. We have he....
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....limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021. Provided also that for cases referred to in clauses (i), (ii) and (iv) of Explanation 2 to section 148, where: (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice....
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....under section 148 shall be issued for every such assessment year or re-assessment or recomputation, as the case may be. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151." 21. Section 149 of the Act stipulates the limitation for issuing notice u/s 148. The normal time limit as provided u/s 149(1)(a) is 3 years from the end of the relevant A.Y. However, if the case which fall in the ambit of sub clause (b) of section 149(1) of the Act, the time limit is extended up to 10 years from the end of the relevant A.Y subject to the condition that material in the possession of the Assessing Officer including the books of account or other documents or evidence reveals that the income chargeable to tax is represented in the form of an asset, expenditure in respect of transaction or in relation to an event or an occasion, or an entry or entries in the books of account and further such income which has escaped the assessment amount to or likely amounts to fifty lakh rupees or more. In the case in hand, undisputedly the notice issued u/s 148 of the Act for the A.Ys. 2017-18 to 2019-20 were issued after 3 years from the en....
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....veals that the Assessing Officer has recorded his satisfaction in the reasons mechanically without application of mind so far as the correct amount of escaped income for each of the assessment years. This non-application of mind at the time of recording the reasons also corroborated by the fact that in the assessment order, the Assessing Officer has determined the escaped income for each A.Y on estimation basis. Even if for the sake of argument, it is presumed that the quantum of escaped income for each A.Y was more than Rs. 50 lakhs and the Assessing Officer at the time of recording the reasons was not supposed to undertake a detailed or depth examination of evidence collected during the search, the prima facie undisputed fact is that the details of unaccounted cash receipts and cash payments found during the course of search & seizure action were not specifically attributed to each of the group companies and further only the receipts found in the said seized material are taken into consideration for arriving to the conclusion that the income of more than Rs. 50 lakhs for each of the companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details ....
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....Officer has completely failed to bring the case of the assessee in the ambit of sub clause (i) of clause (b) of section 149(1) of the I.T. Act. Further, the seized material is not in the nature of books of account, therefore, the details recorded in the seized material would not constitute as entry or entries in the books of account. Therefore, we are of considered view that the provisions of section 149 of the Act explicitly state that the AO should be satisfied regarding the fulfilment of the conditions specified there in, such requirement of satisfaction of the AO is implicit by necessary implication, having regard to restriction imposed on the powers of the AO to issue notice u/s. 148 unless the conditions specified therein are satisfied. Moreover, since the satisfaction of the said condition is a jurisdictional requirement, the same should be reduced in writing in order to unambiguously demonstrate that he has assumed jurisdiction correctly as per the provisions of the Act and facts of the case. We further observed that the satisfaction should be recorded in writing with reference to books of accounts, other documents or evidence found during the course of search. Notice u/s. ....
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....2019-20, wherein the coordinate Bench of the Tribunal on identical set of facts, has held as under: "23. The Assessing Officer in the reasons recorded for reopening of the assessment stated that the income chargeable to tax represented in the form of an asset and an entry/entries in the books of account as per the provisions of section 149(1)(b) of the Act. Therefore, the Assessing Officer proposed to bring the case of the assessee in sub-clause(i) and sub-clause (iii) of clause (b) of section 149(1) of the Act. From the details of the transactions as found in the Laptop, it is clear that these are receipts and payments in cash and no corresponding cash or any other assets were found during the course of search and seizure action representing these entries. It is not the case of either party that these transactions as found in the Laptop in question are in respect of purchase or acquisition of any asset. Therefore, the business transactions of sale of scrap or commission income etc, as well as the expenditure incurred in relation to the business activity would not constitute of an asset in terms of section 149(1)(b) of the Act. It is also a matter of fact and record that t....
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....he companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details provided by the ADIT (Inv) and not proceeded on the basis of the seized material containing these transactions of unaccounted cash receipts and payments. The reasons recorded by the Assessing Officer manifest that no such minimum verification was done by the Assessing Officer regarding the nature of the transaction, the net outcome of the receipt and payment as recorded in the said seized material, apportionment of the amounts of receipts and payments to each of the group companies to quantify the income escaped assessment for the A.Ys 2014-15 to 2018-19. Thus, it is a simple case of non-application of mind and a borrowed satisfaction on the part of the Assessing Officer while recording the reasons for reopening. 25. Apart from the non-application of mind regarding the nature of the transaction, quantification of the income and allocation of the amounts of receipts and payment to each of the group companies, the Assessing Officer has though recorded that the income chargeable to tax represented in the form of an asset and an entry or entries in the books of account as per t....
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....d assessment during financial year 2017-18 was less than 50,00,000; therefore, the assessments for assessment year 2018-19 could not be reopened after the expiry of three years from the end of the relevant assessment year. However, it is noted that the Assessing Officer had held to the contrary. The order dated 31-3-2024 issued under section 148A(d) indicates that the Assessing Officer had proceeded on the basis that the income that had allegedly income that has escaped assessment for assessment years 2015-16, 2016-17, 2017-18, 2019-20 and 2020-escaped assessment during the assessment year 2018-19 was required to be considered along with the 21 for the purposes of determining whether the Income escaping assessment exceeded the amount of Rs. 50,00,000 as mentioned in section 149(1)(b). [Para 9] Although, the Assessing Officer had proceeded on the basis that the allegedly unaccounted cash transactions related to an event, there is no material on record to indicate that the income in various previous years, which is alleged to have escaped assessment is represented by 'an asset' or arises from one singular event or occasion which is spread over several previous years.....
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...., he has to necessarily record the reasons to reopen assessment qua each of the assessment years. It is only through such reasons recorded that a co-relation can be made between the material gathered during the search, and a particular assessment year. Any issuance of notice without fulfilling such jurisdictional mandate would amount to a "fishing and roving enquiry", which cannot be permitted. 165. Since the reasons stated in the satisfaction note for AY 2013-14 are devoid of merit and as the Revenue cannot be permitted to justify issuance of notice for AY 2013-14 by relying upon the reasons recorded for the AY 2016-17, it must be stated that the impugned notice for AY 2013-14 contains no reasons alleging the existence of income escaping assessment in the form of an asset. As such, the impugned notice dated 31.03.2024 under Section 148 of the Act for AY 2013-14, is bad in law and needs to be set aside." 29. In this view of the matter and considering the facts and circumstances of the case and also by following various case laws discussed hereinabove, we are of the considered view that, the conditions precedent for invoking Section 148 of the Act, for A.Ys. 2017-18 to 2019-20 ar....
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...., submitted that even though the search proceedings are illegal, the evidences collected during the course of search cannot be ignored and the same can be considered, as held by the Hon'ble Supreme Court in the case of Dr. Prathap Singh and another Vs. Director of Enforcement and others reported in (1985) 155 ITR 166 (SC) that illegality of a search does not vitiate the evidences collected during the course of search. The only requirement is that the Court or the authority before which such material or evidence is placed has to be cautious and circumspect in dealing with such material as evidence. He further referred to the decision of the Hon'ble Apex Court in the case of Pooran Mal Vs. DIT reported in (1974) 93 ITR 505 (SC) and the decision of the Hon'ble Rajasthan High Court in the case of CIT Vs. Kamal & Co., reported in (2009) 308 ITR 129 and argued that the Revenue is entitled to rely upon the material collected during the course of illegal survey. Since the material found from the possession of Shri Sameer Egge Kadel is in relation to the search in the case of the assessee and the CMD of the assessee group has also admitted the fact that the material in possessio....
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....partment. 33. In our considered view, going by the provisions of Section 131(1A) of the Act, the Principal Director General or Director General or Deputy Director General or Assistant Director General or authorised officer referred to in Section 132(1), before taking action under clauses (i) to (v) of the said sub-section, if he has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within his jurisdiction, then for the purpose of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under Section 131(1) of the Act notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other Income-tax Authority. From the provisions of Section 131(1A), it is very clear that, the authorised officer can issue summons only before taking any action under Section 132(1) clauses (i) to (v) of the Act. If we go by Section 132(1) clauses (i) to (v), the authorised officer, before entering any premises, can summon any person for examining and collecting details. In the present case, the authorised officer issued summons ....
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....sing the ground taken by the assessee on the issue of validity of assessment order passed by the A.O in light of provisions of section 148 of the Act, without fulfilling the prescribed conditions and consequently, the assessment order passed by the A.O is void ab initio. The ld. Counsel for the assessee submitted that the A.O invoked explanation (2) clause (i) of section 148 of the Act, on the presumption that once a search is initiated under section 132 of the Act on or after the 1st day of April, 2021, in the case of the assessee, the A.O shall be deemed to have the information which suggests that the income chargeable to tax has escaped the assessment in the case of the assessee. However, Exp. (2) provides only a limited relaxation and the 1st proviso to section 148 of the Act negated the condition that the A.O with the rider that the information which suggests that the income chargeable to tax has escaped the assessment for the relevant assessment year. Therefore, the correct interpretation can be that notice under section 148 cannot be issued automatically to the searched person and the A.O needs to apply his mind and while seeking approval under section 151 of the Act from th....
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.... Act, for approval of the DGIT (Inv.) had given elaborate reasons and satisfaction that during the course of search and seizure action under section 132 of the Act it was found that the assessee has unaccounted cash receipts from sale and the assessee had admitted undisclosed income for the year under consideration. These unaccounted cash receipts have resulted in suppression of income and escapement of income for the relevant A.Y. Therefore, from the reasons recorded by the A.O for issuance of notice under section 148 of the Act, it is very clear that the A.O had arrived at a satisfaction regarding the undisclosed income in the case of the assessee for the A.Y 2020-21 to 2022-23. Therefore, the arguments of the learned Counsel for the assessee that the A.O has not quantified income escaping assessment before issuing notice under section 148 of the Act is contrary to the scheme of re-assessment proceedings provided in the case of search & seizure action conducted under section 132 of the Act. 38. We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant case la....
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....A.O, it is undisputedly clear that the A.O while arriving at the undisclosed income harped on the material seized and undisclosed income quantified by the DDIT(Inv), without even any verification as to what is nature of escaped income and whether it pertains to the assessment year in question or not. The Assessing Officer in all the Assessment years from Asst Years 2020-21 to 2022-23 have not quantified the income escapement in writing the reasons for reopening. Without quantification of income escapement leads to violation of provision of Section 147. The scope of deemed information under Explanation 2 of Section 148 cannot be extended to deem the contents of the information. For the Assumption of Jurisdiction U/s 147, it is necessary to know the quantum of income escaping Assessment and the relevant Assessment year so as to evaluate whether it satisfies condition U/s 149(1). If Search does not reveal the quantum of income and relevant assessment year, it may not be possible to infer that the AO has correctly assumed Jurisdiction u/s 147 to proceed U/s 148. Even though, deemed information by way of search allows the AO to issue notice U/s 148, in absence of information about the q....
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....rdingly, the other plausible interpretation can be that the notice under Section 148 cannot be issued automatically to the person searched. The Assessing Officer now needs to apply his mind and while seeking approval under Section 151 from the specified authority, demonstrate that the information obtained/discovered during search suggests that income has escaped assessment under Explanation is for the relevant Assessment year for which notice under Section 148 proposed to be issued. Such demonstration can be possible only when the AO has examined the seized assets/ documents, and records in writing that such seized assets/documents are related to the relevant assessment year. Therefore, despite the deeming fiction, even in the case of searched person, the AO may still be required to demonstrate that income of the relevant assessment year has escaped consequent to the information obtained/discovered during the search before issue of notice under Section 148. The harmonious interpretation of the deeming fiction created in respect of searched person under Explanation 2 and the proviso to section 148 may be that notice under Section 148 can be issued only when there is material for the....
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....e from a 'proviso', as the latter excepts, excludes or restricts, while the former explains or clarifies and does not restrict the operation of the main provision. It is true that an 'Explanation' may not enlarge the scope of the section, but it also does not restrict the operation of the main provision. Its purpose is to clear the cobwebs which may make the meaning of the main provision blurred. Ordinarily the purpose of insertion of an 'Explanation' to a section is not to limit the scope of the main provision but to explain or clarify and to clear the doubt or ambiguity in it." 42. The assessee has relied upon the decision of Hon'ble Delhi High Court in the case of Divya Capital One Pvt. Ltd. vs ACIT, Circle-7(1) [TS-5518-HC-2022(DELHI)-O], wherein the Hon'ble Court has held "whether it is 'information to suggest' under amended law or 'reason to believe' under erstwhile law, the benchmark of 'escapement of income chargeable to tax' still remains the primary condition to be satisfied before invoking powers under section 147 of the Act'. We may also point out that a similar issue has come up before Karnataka High Court in Smt. Vasanthi Ramdas Pai vs ITO, Mangalore [TS-5059-HC-20....
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.... although there is a deeming provision of information for issuance of notice under section 148 of the Act where search is conducted under section 132 of the Act, but because of 1st proviso of section 148 of the Act, the A.O shall ascertain from the information gathered during the course of search that income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y. Going by the proviso to section 148 of the Act, Explanation 2 provides only a limited relaxation and the 1st proviso to section 148 put a negative condition on the A.O with the rider that information which suggests that income chargeable to tax has escaped the assessment for the relevant A.Ys. Therefore, from the above provisions of the Act, it is very clear that no notice under section 148 shall be issued automatically to the searched person and the A.O needs to apply his mind while seeking approval under section 151 from the specified authority and demonstrate that the information discovered/obtained during the search suggest that income has escaped assessment for the relevant A.Y for which notice under section 148 is issued. Further, the satisfaction of the A.O can be demonstrated ....
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....ven remotely, found with Bsafal Group or City Estate Management India or City Procon Realtors Private Limited. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment. Thus, in our considered opinion, the provisions of Section 148 of the Act are not attracted, hence the action of the respondents in re-opening of the assessment requires to be quashed." 45. Therefore, from the above provisions of section 148 of the Act and the ratios of the case laws discussed herein above, it is very clear that no notice under section 148 shall be issued automatically to the searched person and the A.O needs to apply his mind while seeking approval under section 151 from the specified authority and demonstrate that the information discovered/obtained during the search suggest that income has escaped assessment for the relevant A.Y for which notice under section 148 is issued. Further, the satisfaction of the A.O can be demonstrated from the reasons recorded. However, in the present case, going by the reasons recorded, there is no such demonstration by the A.O which is evident from the relevant reasons where the A.O simply relied upon the ....
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....nt Assessment year and issued notice for the concerned Assessment year. Hence in the case dealt by Hon'ble High court the petitioner is the person other than the searched person and the Assessing Officer who is the Jurisdictional Officer has complied the three conditions while obtaining the approval for issue of notice U/s 148. In the present case, the Assessing Officer failed to bring the three ingredients laid down in the proviso to Section 148 while issuing notice U/s 148. On observation of the reasons recorded, the Assessing Officer has not demonstrated the income escapement from the information in the possession which is in the form of seized material. 47. In this view of the matter and considering the facts and circumstances of this case and also by following the rations of case laws, discussed herein above, we are of the considered view that notice issued under section 148 of the Act, on the basis of reasons recorded for reopening in light of search action conducted under section 132 of the Act is bad in law and consequently, the assessment order passed by the A.O becomes void ab initio and liable to be quashed. Therefore, we quash the assessment order passed by the A.O u....
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....at all the entries recorded in the seized material represent figures after suppressing two digits and proceeded to multiply the entire receipts and payments by hundred which is arbitrary and contrary to facts on record. 51. The learned counsel for the assessee submitted that there is an overlapping period between the diary entries and excel sheets maintained in the pen drives and when both the records are compared, the figures recorded therein tally with each other and nowhere indicate suppression of two zeroes. The learned counsel for the assessee submitted that if really the assessee had followed the method of truncating two zeroes while recording receipts and payments, then there would have been at least some corroborative evidence in the form of actual receipts, sale deeds, bank deposits, confirmations or statements from customers establishing collection of on-money over and above the figures recorded in the seized material. However, no such evidence was found during the course of search. The learned counsel for the assessee submitted that the Managing Director of the group, Shri B. Subba Reddy, in his sworn statement recorded during the course of search, specifically denied....
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....tions, there is no conclusive evidence to establish that all entries maintained in the seized material represent figures after multiplying by hundred. The learned counsel for the assessee submitted that the A.O. ignored various inconsistencies, contradictions and discrepancies in the statements recorded from third parties. The learned counsel for the assessee submitted that the presumption available under Sections 132(4A) and 292C of the Act is only a rebuttable presumption and the same cannot be extended to presume that all figures recorded in the seized material represent figures after truncating two zeroes. The learned counsel for the assessee submitted that except the statements recorded during the course of search and certain third-party statements, there is no independent evidence in the form of unaccounted assets, unexplained investments, unexplained expenditure or cash deposits to support the conclusion drawn by the A.O. The learned counsel for the assessee submitted that the A.O. proceeded on pure assumptions and presumptions without carrying out any scientific or forensic examination of the digital material seized during the course of search. The learned counsel for the a....
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....of Hon'ble Rajasthan High Court in the case of CIT Vs. Ravi Mathur reported in (2017) 1 WLC (Raj.) and also the decision of the Hon'ble Delhi High Court in the case of M/s. Huawei Telecommunications India Company Pvt. Ltd. Vs. ACIT reported in (2025) 173 taxmann.com 396 (Delhi HC) submitted that statements recorded under Section 132(4) of the Act, have evidentiary value as held by various Courts, including the Hon'ble Kerala High Court in the case of CIT Vs. Hotel Meriya. Therefore, once there is a clear admission in the statements recorded under Section 132(4) coupled with evidences found during the course of search, then subsequent retractions filed by the parties without any valid reasons cannot be accepted and the A.O. was right in placing his reliance on the initial statements recorded under Section 132(4) of the Act, from various parties for the purpose of assessment. 57. In so far as the issue of opportunity of cross-examination in the light of the principles of natural justice canvassed by the learned counsel for the assessee, the Ld. CIT-DR further submitted that, the incriminating material was found and seized from the premises of the assessee as well as from t....
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.... clearly demonstrates recording receipts and payments by suppressing two 'zeros' which is clearly evident from 131 statement recorded from 18 third parties in respect of landowners, co-partners, service providers and in respect of rental payments. Further, the evidence found during the course of search in the form of cash receipts and vouchers, also supports the case of the A.O. that the assessee was recording cash receipts and payments by supressing two 'zeros'. Therefore, the A.O. has rightly ignored subsequent retraction filed by two employees and denial statement of Shri B. Subba Reddy, CMD of the assessee company while estimating cash receipts for all these assessment years by adding two 'zeros', therefore he submitted that the additions made by the A.O. and sustained by the CIT(A) should be upheld. 59. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The Assessing Officer made addition towards 16% profit on total unaccounted cash receipts found recorded in the cash book found during the course of search and stored in pendirve on the ground that the total cash receipts and payments recorded in the....
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....s to the entries recorded therein on the ground that there is no corroborative evidence with the Assessing Officer supporting the contention that the appellant has recorded entries after truncating last two zeros. We have gone through the relevant excel sheets found during the course of search which are available in the paper book filed by the assessee which contains various kinds of receipts including cash received from sale of flats and commercial space and miscellaneous income and also various expenses incurred for the purpose of business of the assessee including vendors payments, payment to other parties, land owners etc. Although, it appears that entries recorded in the cash book seems to be very small in nature compared to the nature of the business of the assessee and the quantum of turnover achieved for the relevant assessment year, but going by the categorical denial of the Managing Director of the appellant company, in our considered view, the reasons given by the Assessing Officer for adding two zeros is without any basis and only on the basis of statements of two employees. Further going by the statements recorded from Sri Chandra Sekhar Atla, Manager (Accounts) and Sr....
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....t in our considered view, going by the timing of the statements filed by the employees and the detailed affidavits filed by them in support of their retraction, we are of the firm view that the Assessing Officer ought to have consider their retraction statements before proceeding with the estimating gross receipts by adding two zeros in the absence of supporting evidence. 61. Coming back to another reason given by the Assessing Officer to support his findings in respect of the estimation of gross receipts by adding two zeros. The Assessing Officer conducted post-search enquiries with reference to the entries recorded in cash book by issuing summons to various people and recorded their statements. The Assessing Officer has recorded the statements of 18 third parties including land owners, co-partners, vendors and other service providers and observed that all the parties have submitted relevant evidence of payment made to the appellant company or received from the appellant company with regard to the services and claimed that they have received the actual amount as per the bills submitted to the appellant company and also produced relevant copies of bills which clearly shows that ....
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....of statement of few persons that too without cross examination to the assessee, the reasons given by the Assessing Officer to make the additions by adding two zeros cannot be accepted. We further note that the admission all other parties cannot be considered as conclusive evidence against the assessee unless there is corroborative evidence on record since the maker of the statement can bind himself but he cannot bind others with his statement without there being any further evidence on record and this legal principle is supported by the decision of ITAT, Visakhapatnam Bench in the case of P. Koteswara Rao vs. DCIT in ITA.Nos.251 & 252/Vizag/2012. Similar view has been taken by ITAT, Ahmedabad Bench in the case of Prarthana Construction (P) Ltd. vs. DCIT [2001] 118 Taxman 112 (Ahd.Tribu.) wherein it was held that "loose papers and documents seized from the premises of third parties and statements recorded at the back of the assessee without it being afforded opportunity to interrogate the said deponents could not be the basis for making the addition in the hands of the assessee". Since the Assessing Officer has not brought on record any evidence to support the statement of 18 person....
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....seized during the course of search. No expert opinion was obtained to establish manipulation or coding pattern in the excel sheets or diaries. In the absence of any corroborative evidence, the theory adopted by the A.O. regarding truncating two zeroes is unsustainable in law. Therefore, we are of the considered view that, the reasons given by the AO to allege that entries in cash book are recorded by suppressing two zeros is without any basis and cannot be accepted in total. 64. Coming back to another aspect of the issue. The AO had also supported his case of suppression of two zeros in light few evidence, viz, estimate slips, hand written loose sheet papers, which were found and seized vide annexure A/EMX08/02 and observed that Shri Chandrasekar Atla on seeing those attracts had accepted the estimation slips and further stated that actual sale price of the property unit was sold at a higher price then the SRO registered and the difference the SRO value and that actual sale price is received in cash. The AO discussed the issue in Para 6.1 of Assessment Order in light of statement recorded from Shri Chandrasekar Atla and observed that there are clear evidence to prove suppression....
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....ndered prior to the Judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (supra). The learned DR has also placed reliance on the Judgment of Hon'ble Calcutta High Court in the case of PCIT vs. Swathi Bajaj [2022] 139 taxmann.com 352 (Calcutta-HC). We find that, once again the above decision is distinguishable on facts because in the said case it was held that assessee have not been shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross-examination. However, in the case of the appellant company herein, the statement of third parties indicts the appellant, and prejudice has been caused to the appellant since the Assessing Officer has placed strong reliance on the said statements for drawing adverse conclusion against the appellant. Therefore, the above case laws relied upon by the learned DR have no application and thus, rejected. 66. In this view of the matter and considering the facts and circumstances of the case and also by considering the ratios of various case laws discussed hereinabove, we are of the considered view that the Assessing Officer has failed to conclusively prov....