2022 (2) TMI 808 - AT - Income Tax

Validity of Assessment u/s 153C - Assessment in case of search or requisition - HELD THAT - As noted except for the statement of Shri Abhinandan Lodha, there is no material whatsoever, that the cash seized at the premises which did not belong to the assessee belong to the assessee. In such circumstances, the said cash account cannot be said to be material found under the proceedings of section 153C giving jurisdiction to the AO to frame the assessment. Same is a situation of the material found relating to receipt of on money. These are also based upon materials found in the case of search of Lodha group and the statement of other employees of Lodha group and the statement of Abhinandan Lodha. There is no material whatsoever specifying the material pertaining to the assessment year found belonging to the assessee company. In this view of the matter, there is a jurisdictional defect in the assessment framed under section 153C and the same is liable to be set aside on the account itself. Addition of on money received and the cash found relating to undeclared sale of parking space and flats - The assessee is a separate legal entity. There is no mention whatsoever regarding the nature of particular material belonging to the assessee company, which gives rise to the inference of on money receipt. This is based upon statement of other employees of Lodha group and that of Shri Abhianndan Lodha. As pointed out by us above, assessee has already disputed that assessee is a distinct legal entity and the term Lodha group cannot be used to incriminate the assessee and that Shri Abhinandan Lodha is not at all related to the assessee company. Hence, the material referred are not germane and hence, the addition on merits is also not sustainable. None of the statement referred here are identified to be belonging to the assessee company. In these circumstances, we note that none of the case laws referred by ld.CIT(A) expound that statement of persons not belonging to the assessee company can be an evidence against the assessee and which can be the basis of addition of undisclosed income. CIT(A) has elaborately dealt with evidences and evidences act, his order is conspicuously silent on the evidences of electronic data referred in this case and the compliance with the above exposition of law. We are conscious that this issue has not been raised, but then it is also settled that there is no estoppel as to law. In the background of aforesaid discussion and precedents in our considered an addition of merits also is not sustainable. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of addition under section 153C.
2. Merits of addition of ?105,84,000 and ?207,21,096.
3. Disallowance of set-off of brought forward loss of ?28,68,288.

Issue-wise Detailed Analysis:

1. Jurisdiction of Addition under Section 153C:

The assessee challenged the jurisdiction of the addition under section 153C, asserting that the provisions were not satisfied, making the assessment defective and liable to be quashed. The Tribunal noted that section 153A provides the procedure for assessment in search cases, and section 153C applies to persons related to whom materials are found during a search of another person. The Tribunal emphasized that for jurisdiction under section 153C, incriminating material must pertain to the specific assessment year in question. The Tribunal found no specific material correlating to the assessment year under reference, which belonged to the assessee. The entire finding was based on the search and material found in the case of Lodha Group, with no mention of specific material related to the assessee. The authorities below relied on statements from Lodha Group employees and Shri Abhinandan Lodha, who was not a director of the assessee company. Thus, the Tribunal concluded that the assessment under section 153C suffered from a jurisdictional defect and set it aside.

2. Merits of Addition of ?105,84,000 and ?207,21,096:

The additions were based on materials found in the search of Lodha Group and statements from its employees, including Shri Abhinandan Lodha. The Tribunal noted that the assessee is a separate legal entity, and there was no specific material found during the search that belonged to the assessee company. The Tribunal highlighted that the statements and materials referred to were not identified as belonging to the assessee company. The Tribunal also referred to the Supreme Court's decision in the case of Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal, which dealt with the admissibility of electronic records. The Tribunal found that the electronic evidence referred to did not comply with the requirements under section 65B of the Evidence Act. Consequently, the Tribunal concluded that the additions on merits were not sustainable.

3. Disallowance of Set-off of Brought Forward Loss of ?28,68,288:

The AO disallowed the set-off of brought forward loss, citing a significant change in the shareholding pattern, invoking the provisions of section 79. The CIT(A) agreed with the AO's view. However, the Tribunal noted that the assessee provided a chart claiming that the findings of the authorities were factually incorrect. The Tribunal remitted the issue to the AO for fresh examination in light of the documents submitted by the assessee regarding the change in shareholding pattern.

Conclusion:

The Tribunal allowed the appeal by the assessee, setting aside the assessment under section 153C due to jurisdictional defects and finding the additions on merits unsustainable. The issue of carry forward losses was remitted to the AO for fresh examination.

Order Pronounced:

The order was pronounced in the open court on 09.02.2022.

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