TaxTMI 
TaxTMI 
2025 (3) TMI 1833
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee is contesting the addition made by the AO u/s 68 of the Act in respect of alleged accommodation loans taken by the assessee. 3. The facts relating to the case are stated in brief. The assessee herein belongs to "Span Group" and it is a leading builder and developer. This group is engaged in the business of construction and sale of residential and commercial buildings in Mira and Bhayander areas in the District of Thane. The Revenue carried out the search and seizure action u/s. 132 of the Income Tax Act, 1961 ("the Act") on 12-01-2021 in the business as well as the residential premises of the group. Consequent thereto, the assessments of assessment years 2015-16 to 2020-21 were completed by the AO u/s. 143(3) r.w.s 153A of the Act. The assessment of AY 2021-22 was completed u/s 143(3) of the Act. 4. The common issue urged by the assessee in all the assessment years under consideration relates to the profit estimated by the AO on the alleged on-money receipts. 5. During the course of search action, the residential premises of one of the employees named Mr. Anil Morarka was also subjected to search. It was noticed that the above said person used to maintain cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the profit @ 15% of the alleged on-money receipts. Further, he submitted that the AO did not bring any comparable cases to support the rate of profit of 15% determined by him. The Ld.AR further submitted that the average rate of net profit declared by the assessee in its books of accounts during the period from AY. 2014-15 to 2021-22 was 9.01% only. No other material to show that the assessee had earned profit at higher rate than that disclosed by the assessee was found. Further, during the course of search, no unaccounted cash was seized from the assessee. Even though physical cash amounting to Rs. 3.48 crores was seized from certain persons as belonging to the "Span Group", but it has been accepted to belong to another concern named M/s. Span Venture, wherein the above said cash was telescoped against the profit estimated in its hands in respect of the alleged on-money received by that assessee. Accordingly, the Ld.AR submitted that the AO was not justified in estimating the profit of the assessee @ 15%, ignoring the peculiar facts surrounding this case. The Ld.AR further submitted that in the case of M/s. Platinum Properties Vs. DCIT, ITA No. 2600/Mum/2012, the net profit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enches and also by Hon'ble High Courts. In the case of Platinum Properties (supra) and also in the case of Dhanlaxmi Builders Vs DCIT (ITA No. 504/Mum/2009), the Tribunal estimated the rate of profit from on-money receipts @ 8%. In an unreported decision rendered by Ahmedabad bench of Tribunal in the case of Anand Builders, the Ahmedabad bench of Tribunal had estimated the profit from on-money receipts @ 8% and the same was upheld by Hon'ble Gujarat High Court. It was submitted that the SLP filed by the revenue has been dismissed by Hon'ble Supreme Court in the same case of ITO Vs Anand Builders reported in 265 ITR 37(Stat.). 8.3. We noticed that the assessee has declared average profit @ 9.01%. Accordingly, we are of the view that, in the facts and circumstances of the present cases, the profit from alleged on-money receipts may be estimated @ 9%. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue in AY 2015-16 to 2020-21 and direct the AO to assess the profit from on-money receipts @ 9% thereon in the above said years. 8.4. In the appeals of the assessee filed for AYs. 2016-17 and 2018-19 to 2021-22, the above said issue alone is being contested. With th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n entries, without there being any incriminating material found during the course of search. In support of this proposition, the Ld.AR placed reliance on the decision rendered by the Hon'ble Supreme Court in the case of Abhisar Buildwell (P) Ltd., [2023] 454 ITR 212 (SC). He submitted that the search officials did not find any incriminating material during the course of search conducted in the hands of the assessee in order to show that the loans taken by the assessee from various companies are in the nature of accommodation entries. 9.4. The Ld.DR, on the contrary, contended that the AO has received "Incriminating information" regarding accommodation loans taken by the assessee from various paper companies. He also submitted that the enquiries/search conducted in the hands of those paper companies have brought to light that they were providing only accommodation entries to the beneficiaries. He submitted that the revenue has found incriminating materials in respect of on-money receipts for both these years, which were unabated assessment years. Hence the AO has validly assumed jurisdiction to assess or reassess the total income of these two years. He submitted that the AO was i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that year. The Ld A.R submitted that, under the erstwhile scheme of block assessments made u/s 158BA to 158BD of the Act, the AO was required to assess only the "undisclosed income" found during the course of search. However, under the present scheme of assessment u/s 153A of the Act, the AO is required to assess or reassess the "total income", which can be arrived at by adding the undisclosed income found during the course of search to the total income already assessed by the assessing officer. He submitted that the Hon'ble Supreme Court has used the expression, viz., "other material available with the AO including the income declared in the returns" only to make it clear that the final total income of an unabated assessment year can be arrived by consolidating the undisclosed income and other income already known to the AO. Accordingly, he submitted that the AO could not get power to consider any other addition in the case of an unabated assessment year, which was not supported by the incriminating material found during the course of search conducted in the hands of the assessee. Accordingly, he submitted that the alleged incriminating information about accommodation loans canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search." 9.8. The scope of assessments to be framed u/s 153A/153C of the Act has been explained by Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573)(Delhi) and by Hon'ble Gujarat High Court in the case of Saumya Construction (387 ITR 529)(Guj). Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quired to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons(supra) would show that there are two aspects involved while framing assessment u/s 153A of the Act. One is making addition and another one is computing total income. In case of an unabated assessment year, the Hon'ble Gujarat High Court has made it clear that any addition or disallowance can be made only on the basis of material collected during the search or requisition. It was further held that, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (36 taxmann.com 523), the earlier assessment would have to be reiterated. 9.10. The Hon'ble Supreme Court has extracted the submissions made by the assessee in a tabular form in paragraph 4.1 of the order. A perusal of the same would show that the assessees have stated that the addition u/s 153A can be made only on the basis of any incriminating material found during the course of search. It is further contended that, if the AO was having any other information available with him or any other information was found from external sources, then the AO can use those information in a separate proceeding initiated u/s 147 of the Act or u/s 263 of the Act. 9.11. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment order that the search action u/s 132 of the Act was undertaken in the hands of the group on the basis of pre-search information that the assessee group has availed accommodation entries in the form of loans. However, it is no where stated that the revenue could find any incriminating material during the course of search proceedings in order to support the above said view of the revenue/AO. Accordingly, in our view, that the AO has only entertained presumption that the loans taken by the assessee are in the nature of accommodation entries and further, the assessee would have paid equal amount of cash to the lender in order to get the loans through banking channels by way of accommodation entries. 9.14. First of all, the above said suspicion of the revenue cannot be termed as "incriminating information" as contended by the Ld.DR. Secondly, even if it is accepted as incriminating information, the same was not unearthed during the course of search conducted in the hands of the assessee. Thirdly, the said information would only trigger further investigation and hence it cannot be said to be concrete proof to show that the assessee has availed accommodation entries. Fourthly, ....