TaxTMI 
TaxTMI 
2025 (4) TMI 1952
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....erits specifically when the assessee was not able to satisfactorily discharge his onus u/s 69C with regard to unexplained expenditure of Rs. 2,22,008/- for commission to acquire accommodation entries of Rs. 1,11,00,396/- in respect of penny stock transaction. 3. The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appeal proceedings. The revenue has also raised an additional ground vide letter dated 31.12.2024 which reads as under :- "Whether on facts and circumstance of the case, the ld. CIT(A) is justified in invalidating the assessment order u/s 153A despite the fact that search proceedings u/s 132 of the IT Act, 1961 at the residence premise of the assessee was conducted on 31.10.2017 and duly discussed in the assessment order." 2. We have heard the ld. A/R as well as the ld. D/R on the admission of additional ground. The additional ground raised by the revenue is nothing but new legal plea arising out of the appellate order passed by ld. CIT(A)-2, Udaipur which is under challenge before this Tribunal. The new legal plea does not require investigation into factual aspects before either accepting or rejecti....
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.... CIT(A) after considering the submissions of the assessee and elaborately discussing the matter, allowed the appeal of the assessee. Now, the Revenue has filed the present appeal before us. 4. The additional ground relates to challenging the invalidating the assessment order passed under section 153A of the Income Tax Act, 1961. 5. Before us, the ld. D/R has submitted the written submission which are reproduced hereunder :- " 4.4 The appellant has challenged the ground of appeal that no incriminating material was unearthed during the course of search and seizure action and hence no addition could have been done in the assessment order under section 153A of the Act. The appellant has also relied upon various judgements in support of his legal argument. The issue is no longer res integra after the judgement of Honourable Supreme Court in the case of 'Abhisar Buildwell' (supra). As per principles emanating from the Judgements of Hon'ble High Courts and Hon'ble Supreme Court the addition in assessment u/s 153A should be connected with something found during the search or requisition and that in such a scenario the ld. assessing authority while determining the....
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....fficer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition ...." (emphasis supplied) Further in para 14 Hon'ble Supreme Court has held as under :- "14. In view of the above and for reasons stated above, it is concluded as under :- (i) ...... (ii) ....... (iii) In case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) ......" (emphasis supplied) It is important to note that in the judgements i.e. CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi) and Pr. CIT vs. Saumya Construction (P) Ltd. (2017) 81 taxmann.com 2....
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....t to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as held by Apex Court in B Kishore Kumar vs. DCIT 234 Taxman 771 (SC) and even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an The provisions of section 153A/153C are not the normal assessment provisions like 143(3); rather they are curative provisions to plug the mischief of evasion of table income based on evidence found in pursuance to search and if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries/earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be s....
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.... or otherwise of the material gathered during the search an seizure for the purpose of making of assessment is to be seen from prospective of the stage at which assessment enquiry on the issue is initiated in the assessment proceedings. Such material may or may not be fully conclusive in its self as the same is subject to verification and enquiries and replies of the assessee in the case of MG Automobiles Ltd. vs. ACIT (ITAT Delhi) ITA Nos. 4212 & 4213/DEL/2011 dt. 28.06.2013, the issue whether statement recorded u/s 132(4) can be considered as incriminating material was discussed as under :- "15. Similar views were held by ITAT (Mum) in the case of Shri Gurinder Singh Bawa Vs. Dy. CIT, ITA No. 2075/Mum/2010 and LMJ International Ltd. Vs. DCIT (20080 119 itj (Kol)214 and in the case of Anil P. Khimani vs. DOT, 2010- TIOL-1 77-ITAT-Mum. During proceedings before us, the bench asked a question to Ld. AR as to whether any statement u/s 132(4) was recorded during search to which the Ld. AR replied in negative and Ld. Departmental Representative also showed his ignorance about such statement. This question was asked because the view of the Benchis that if during course....
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....an be seen that even according to the assessee, there was no sized document or disclosure made but findings of asset (FDR) from undisclosed sources the Assessing Officer, by virtue of the power conferred on him under section 153A was competent to issue notice under the said provision and require the assessee firms to furnish the returns as provided thereunder. Neither under section 132 or under section 153A, the phraseology "incriminating" is used by the Parliament. Therefore, any asset which was unearthed during search operations or any Statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke section 153A of the In view of the above it is held that evidence in statement u/s 132(4) of the Act is "connected with something found during the search" or in itself "something found during the search" and also is "somed incriminating material" and further also certainly discloses the otherwise "undisclosed income", as referred in judgements including in the judgements of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P) Ltd. (supra), CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (D....
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....see's submission ignored the significance of this material and its implications under Section 153A. 4. Contradictions in Statements * While claiming the share transactions were genuine, the assessee did not adequately explain : * The absence of any direct proof of purchase and sale of shares * The fact that SEBI categorized HPC Biosciences Limited as a penny stock used for accommodation entries. 4.4C Sustainability of the Additions as Incriminating Material 1. FDRs as Incriminating Material: * The discovery of FDRs during the e search is directly linked to unexplained income, fulfilling the requirement for incriminating material under Section 1523A. * Judicial precedent supports the addition based on such material : * PCIT vs. Meeta Gutgutia (2017) 395 ITR 526 (SC): Additions under Section 153A must be based on fresh material found during the search. 2. Link to Bogus LTCG * The LTCG of Rs. 1,11,00,396/- claimed by the assessee was derived from penny stock transactions involving HPC Biosciences Limited, which SEBI identified as a sham entity facilitating accommodation entries.....
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....the FDR investments and the bogus LTCG. * The AO had conclusively demonstrated that the FDR investments were sourced from unexplained income generated through accommodation entries in penny stocks, including HPC Biosciences Limited. 8. Link Between FDR and Bogus LTCG : * The source of the FDR investment was traced to bogus LTCG derived from penny stocks, making it part of unexplained income. * The declaration of such shares in the ITR does not absolve the assessee if the shares are found to be part of an accommodation entry scheme. * CIT vs. N.R. Portfolio Pvt. Ltd. (2024) 29 taxmann.com 291 (Delhi HC): * Held that where the transaction's genuineness is suspect, the burden of proof lies on the assessee to establish its legitimacy. 9. Conclusion : * The discovery of FDRs linked to bogus LTCG, corroborated by SEBI findings, constitutes fresh incriminating material, justifying the reassessment under Section 153A. * Judicial precedents unequivocally support the Revenue's position that such reassessment is valid and sustainable, even if the pending assessment was completed post search. 10. Prayer: ....
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....the assessee, the Ld. CIT(A) has rightly held that assumption of jurisdiction u/s 153A is not found to be valid. We further note that in the remand report submitted by AO during the appellate proceedings it is categorically asserted that no incriminating material is found with respect to the assessee and, therefore, it would be relevant to reproduce para 4.10 of the order of CIT(A) as under:- " 4.10. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under :- In ground number 1, the appellant has raised the issue that no incriminating material was found during the search. The assessee also claimed that there was no search conducted on the assessee. The appellant has raised the issue of assumption of jurisdiction by the AO in the ground number 1. Therefore, this issue needs to be dealt first before examining the other grounds. Therefore, this issue is discussed and decided first. On going through the assessment order, it is seen that no referenc....
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....ition made by the AO during the year. This is also noted that assessment of this year was not abated because though assessment was pending on the date of search but the assessment u/s 143(3) was completed on 22.12.2017. Hence, the pending assessment was not abated. As noted above, this is an unabated assessment. In case of unabated assessment, the additions cannot be made if any incriminating material is not found. In case no incriminating material have been found addition cannot be made in an unabated assessment as held by Hon'ble Apex Court held in the Civil Appeal No. 6580 OF 2021 in the case of Principal Commissioner of Income Tax, Central-3 Versus Abhisar Buildwell P. Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023] as under - "14. In view of the above and for the reasons stated above, it is concluded as under : i) That in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) All pending assessments/reassessments shall stand abated; iii) In case any incriminating material is found/unearthed, e....