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TMI Blog2019 (4) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... any of these persons, based on whose statements, the ld. D/R claims that the additions have been made. AS in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] had held that the opportunity of cross-examination must be provided to the assessee. Also it is not clear as to which of these statements were recorded during the course of search operation u/s 132 or whether the statements were recorded during the course of any survey operations u/s 133A. It is well settled that a statement recorded during the course of survey operation cannot be used as evidence under the Act. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever that cash has been routed from the assessee company to any of these chain of companies. There is no evidence that any cash was deposited by the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions made in the assessment u/s 153A/143(3), on the ground that they were not based on any incriminating material found during the course of search and seizure proceedings and as the assessments for this Assessment Year has not abated. 5. Aggrieved the revenue is in appeal before us on the following grounds:- That on the facts and in the circumstances of the case the ld. Commissioner of Income Tax (Appeal) has erred in allowing assessee s appeal by observing that the addition of ₹ 1,60,00,000/- made by the Assessing Officer in the assessment order passed under section 153A/143(3) is not based on any incriminating documents/papers seized during the search operation without calling for independent enquiry regarding existence of seized material and the merit of the case. 6. The ld. D/R, submitted that the incriminating material need not necessarily be found during the course of search and seizure proceeding conducted in the premises of the assessee and its group and that the material which is gathered during the course of any proceedings under the Act, undertaken in connection with any other persons and the material gathered during post search operations i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of donation paid. He submitted that the cash trial is not part of the seized documents and was not prepared by the revenue even in post search proceedings as claimed and that they do not relate to the relevant Assessment Year and that the material based on which the alleged cash trial was prepared was bank statements of disclosed bank accounts and hence not incriminating material. 7.1. He relied on certain case-law to submit that deposits made in the earlier year cannot be taxed in the current Assessment Year. He pointed out on facts that no cash deposits were allegedly made in this Assessment Year. He further argued that the addition cannot be made based on the cash trial because the assessee was not provided with the copy of the bank statement of those third parties which allegedly formed a chain of companies and in the companies in which the alleged cash deposits were made. He further submitted that copy of the alleged statement recorded from those third parties who are allegedly part of the chain of companies who are the bank account holders of the alleged chain of companies were not provided to the assessee nor any opportunity was given to the assessee to cross-examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating material found during the course of search and seizure, when the assessment for the Assessment Year in question has not abated. In the case on hand, the assessee filed its original return of income on 30.09.2011. The time limit for issual of notice u/s 143(2) of the Act, was 30/09/2012. The search and seizure operation was conducted in this case on 13/12/2012. The statutory period for issual of notice u/s 143(2) of the Act, in the case of impugned Assessment Year had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Year has not abated. 8.2. On the legal position, we find that the various Courts of law under similar circumstances have held as follows:- CIT,Kolkata-III Vs. Veerprabhu Marketing Limited [2016] 73 taxmann.com 149 (Calcutta) : In this case The Honourable Calcutta High Court expressed the following views: We are in agreement with the views of the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to legal issue raised vide ground no.5 by the assessee that the additions made in this year are beyond the scope of assessment u/s.153A, as no incriminating material was found during the course of search for the impugned Assessment Year; and the assessment had attained finality and was not abated in terms of 2nd Proviso to Section 153A. As stated above, the original return of income was filed in July, 2006 and said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Since no notice u/s. 143(2) was issued thereafter or any other proceedings have been commenced to disturb said return of income, accordingly, it had attained finality much prior to the date of search which was on 20.01.2012. Hence in terms of 2nd Proviso to Section 153A the assessment for the Assessment Year 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of Hon'ble Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in, in the assessments framed u/s.153A, would only be with regard to any incriminating material or evidence unearthed or found during the course of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed 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 153 A 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. This judgment of the Hon'ble Delhi High Court has been followed in several judgments not only by the Hon'ble Delhi High Court but also by other Hon'ble High Court like, Pr. CIT vs. Somaya Construction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te incriminating material and assumption of jurisdiction by the Assessing Officer u/s.153A solely based on statement is unsustainable when there is no incriminating material found during the course of search. Again in the case of PCIT vs. Dharampal Premchand Ltd., in ITA No.512 to 514/206, the Hon'ble Delhi High Court held that ratio laid down in the case of Kabul Chawla, Meeta Gutgutia, still holds ground and the Revenue s contention that the matter should be referred to a larger bench was turned down. Apart from these judgments, there are catena of other judgments of other High Courts laying down similar ratio and proposition. The main underlying principle permeating in all the judicial precedents is that, in the case of the unabated assessment which had attained finality on the date of search, which are reckoned as unabated assessments, no addition over and above the originally assessed income can be made sans any incriminating material found or unearthed during the course of search. The principle reiterated time and again is that something should be found as a result of search which is incriminating in nature so as to implicate the assessee and acquire jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whereby the High Court held that no substantial question of law arose since there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search and that the assessing officer was not justified in invoking section 68 of the Act for the purpose of making additions on account of share capital 9. Applying the propositions of law laid down in the above case-law to the facts of the case on hand, we find that the only addition made for these Assessment Years is of share application money received u/s 68 of the Act and disallowance of donation paid. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have been admittedly retracted by them and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in the assessment order. Only a general reference is made that there were cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court in the case of CIT vs. Veerprabhu Marketing Ltd. (supra) and PCIT vs. Salasar Stock Broking Limited (supra). 10.2. Thus, none of these material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Thus, we hold that the additions in question are not based on any incriminating material. The ld. CIT(A) on page 30 of his order held as follows:- I have considered the findings of the AO in the assessment order, different case laws was brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during the search seizure operations conducted u/s 132 of the IT Act, 1961, incriminating documents/papers were not seized. At least addition made by AO in the assessment order passed u/s 153A/143(3) are not based on any incriminating documents/ papers seized during the search operation. It would also not to be out of context to mention here that in this case, on the date of search, no assessment for this year was pending. Therefore, keeping in view the ratio decided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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