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TMI Blog2019 (5) TMI 1604X X X X Extracts X X X X X X X X Extracts X X X X ..... re us, we find substantial force in his contention that the year under consideration viz. A.Y 2007-08 does not fall within the period for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, in case the A.O of the searched person and that of the assessee is the same person, then the date of recording of satisfaction by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of the assessee that the year under consideration vis. A.Y.2007-2008 falls beyond the scope of six assessment years from the aforementioned date of recording of satisfaction or receiving of documents or assets seized or books of accounts by the A.O of the assessee, as the case may be, then the assessment framed by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he observations of the lower authorities that the assessee was engaged in the business of facilitating/providing of accommodation entries, however, the very basis for quantifying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matter requires to be restored to the file of the A.O with certain specific directions. Undisclosed silver weighing 11.2 Kgs and cash - undisclosed income of the assessee for the previous six assessment years - HELD THAT:- As we have restored the issue as regards the quantification of the undisclosed income of the assessee to the file of A.O for fresh adjudication for the year under consideration and the preceding years, therefore, in all fairness the said issue is also restored to his file for adjudicating the same afresh. In case, the assessee is able to substantiate in the course of set aside proceedings that he had sufficient funds available with to explain the investment made towards the value of 11.2 kg of silver jewellery and the cash of 11,00,000/- found from his locker no. 596 during the course of the search proceedings, then the addition to the said extent towards unexplained inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard. 3. The authorities below have erred in assessing the income/ upholding the assessment without specifying the section or head of the Income Tax Act, 1961 under which it is taxable. 4. The authorities below have erred in taxing the short term capital gain/upholding the same at normal rates instead of the prescribed rate of 10%." 2. Further, the assessee has also raised an additional ground of appeal for the year under consideration viz. A.Y 2007-08, which reads as under :- "The above appeal was slated to be heard on 01.04.2019 and after part hearing it was adjourned to 04.04.2019. Now it is to be heard on 10.05.2019. The appellant requests the Hon. Bench to admit the enclosed additional ground of appeal." 3. As the assessee by raising the aforementioned additional ground of appeal has assailed the validity of the jurisdiction assumed by the A.O u/s.153C of the Income-tax act, 1961 (for short "I-T Act"), therefore, the same being purely a legal issue, is admitted in the backdrop of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. National Thermal Power Corporation (1998) 229 ITR 383 (SC). 4. Briefly stated, the assessee had filed his return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Initially, the assessee in his statement distanced himself from the aforementioned concern viz. M/s Patel Ashokkumar Mohanlal Ni Co. and claimed that he was not aware of any such entity. However, at the same time, the assessee stated that the cash of ₹ 11,00,000/- and silver valued at ₹ 7,23,060/- that was found and seized from the aforesaid locker No. 596 belonged to him. On the basis of the incriminating material and the valuables found and seized from the locker, proceedings u/s.153C of the I.T Act were initiated in the case of the assessee. In compliance to the notice issued to the assessee u/s.153C r.w.s.153A of the Act, the assessee filed a copy of his 'Original' return of income for the year under consideration viz. A.Y.2007-2008, that was earlier filed by him u/s 139(1) on 31.07.2007. 7. During the course of assessment proceedings, it was observed by the A.O that though the assessee had initially in his 'statement' recorded u/s.132(4) of the I-T Act stated that the contents of the locker No.596 belonged to him, however, in the post search proceedings, he changed his stand and in reply to question No.4 & 5 of his statement recorded u/s.131 of the I-T Act, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents which were found and seized from locker No.596 during the course of the search proceedings were liable to be drawn in his hands. The assessee in the course of the assessment proceedings tried to persuade the A.O that no estimation of commission income in his hands could be made on the basis of the aforesaid documents for certain reasons viz (i) that, it could not be substantiated that the assessee had any connection with the parties whose documents were seized from his locker No.596; (ii) that, no reference as regards the fate of the notices issued u/s.133(6) of the I-T Act to the aforementioned parties by the department was conveyed to him; (iii) that, as the papers found in the locker No.596 were the photocopies of returns, challans etc., hence, no adverse inferences on the basis of the same could validly be drawn; and (iv) that, the aforesaid seized documents in no way established that the assessee was either a proprietor/partner or director of the concerns therein mentioned. However, the A.O after deliberating on the contentions advanced by the assessee was not persuaded to accept the same. It was noticed by the A.O that the assessee in his reply to a specific Que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his aforesaid deliberations, the A.O was of the view that the claim of the assessee that as he was not the proprietor/partner or director in either of the aforementioned concerns, therefore, no adverse inferences as regards the documents pertaining to the said parties was liable to be drawn in his hands did not merit acceptance. 10. The A.O in the course of assessment proceedings, called for the requisite details from the Economic Intelligence Unit, Sales Tax Department, Maharashtra as regards 45 parties whose documents were found and seized from the locker No. 596 of the assessee during the course of the search proceedings. In reply, the Sales Tax Department furnished the details as regards 37 parties, which were tabulated by the A.O as "List A". Insofar the remaining 8 parties were concerned, it was stated by the Sales Tax Department that either their details could not be found, or their registration certificates had been cancelled. Further, the A.O on the basis of details as were discernible from the 'seized material' tabulated the turnover of 16 parties under the head "List B". In nutshell, the A.O on the basis of his aforesaid deliberations prepared a consolidated chart of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Sec. 153C the assessments/reassessments for six assessment years in the case of the assessee was to be reckoned from the date of handing over of assets/documents by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, it was averred by him that in case where the A.O of the person in respect of whom search was conducted, as well as that of the other person is one and the same, then the date on which 'satisfaction' of the A.O of the assessee is recorded, would be the date on which the A.O is to be assumed to have taken possession of seized assets/documents in his capacity as that of the A.O of the person other than the one in respect of whom search has been conducted. In sum and substance, it was the contention of the ld. A.R that as per the 'first proviso' of sub-section (1) to Sec. 153C of the I-T Act, the period of six assessment years have to be reckoned from the date of receiving the book of accounts or documents or assets seized or requisitioned by the A.O having jurisdiction over such other person. The ld. A.R in order to fortify his aforesaid contention took us through the 'first proviso' of sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower authorities had lost sight of the fact that the locker No.596 could be operated not only by the assessee, but also by three other persons. Apart there from, it was submitted by him that the key of the locker was also not found from the assessee but was recovered from Shri Ashokkumar Mohanbhai Patel. As regards the 'statement' of the assessee which was recorded u/s 132(4) during the course of search operation on 20.11.2012, wherein he had owned the contents of the locker, it was submitted by the ld. A.R that the said 'statement' was thereafter retracted by the assessee on 02.02.2013. The Ld. A.R in order to drive home his contention that no adverse inferences on the basis of the documents found and seized from locker No.596 could validly be drawn in the hands of the assessee, submitted, that a perusal of the so called incriminating documents revealed that the same were merely photocopies of the PAN Cards, VAT details, Aadhaar Cards etc. of certain parties, which could not be pressed into service for drawing adverse inference against the assessee. The Ld. A.R submitted that merely on the basis of the aforementioned standalone documents found in the course of search and seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t" had in reference to 37 parties forming part of the list "A" that was prepared by the AO, therein claimed that names of 13 parties in the said list did not figure in the list of suspicious dealers which were blacklisted by the Sales Tax Department, Govt. of Maharashtra in the month of March, 2013. Apart therefrom, the assessee had also given details as regard the respective turnovers of the said parties. As such, it is the claim of the assessee that as against the aggregate turnover of ₹ 1029,22,10,910/- of the aforementioned 37 parties spread over the period A.Y.2007-2008 to A.Y.2013-2014 turnover of ₹ 216,31,83,843/- pertained to the aforementioned 13 parties whose names did not figure in the aforementioned list of suspicious dealers. 15. Per Contra, the ld. Departmental representative (for short 'D.R') relied on the orders of the lower authorities. Insofar the validity of the jurisdiction assumed by the A.O u/s.153C of the Act was concerned, it was submitted by the ld. D.R that the date of receiving the books of accounts or documents or assets seized or requisitioned by the A.O having jurisdiction over such other person, as stated in the 'first proviso' of sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. Further, it was submitted by the ld. D.R that the CIT(A) had most whimsically without giving any reasoning reduced the commission rate of 3% as adopted by the A.O for estimating the income of the assessee, to an arbitrary rate of 0.05%. It was submitted by ld D.R that the order passed by the CIT(A) may be 'set aside' and that of the A.O be restored. 16. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities, material available on record and the judicial pronouncements relied upon by them. We shall first advert to the contention of ld. A.R wherein he has assailed the validity of jurisdiction assumed by the A.O for framing the assessment u/s.153C of the I.T Act for the year under consideration i.e. A.Y 2007-2008. We have deliberated at length on the issue under consideration and find substantial force in the contentions advanced by the ld. A.R, that as per the 'first proviso' of sub-section (1) of Section 153C, the date of initiation of search u/s.132 of the Act for the purpose of framing of an assessment u/s.153C has to be construed as the date of receiving the books of accounts or documents or assets seized or requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of PCIT Vs. Sarwar Agency (P.) Ltd. [2017] 397 ITR 400 (Delhi), wherein it was observed as under: 5. In terms of Section 153 A(1) (b) of the Act, the AO shall assess or reassess the total income of six AYs immediately preceding the AY relevant to the previous year in which the search was conducted. The second proviso to sub-section (1) of Section 153 A of the Act, states that assessment or reassessment relating to any AY falling within the period of six AYs referred to in the said sub-section pending on the date of initiation of the search under Section 132, would abate. 6. The case of the Revenue is that the first proviso to Section 153 C refers only to the second proviso to Section 153 A(1) of the Act, which only indicates that any assessment relating to any AY falling within the period of six AYs which is pending as of the initiation of search shall abate. Therefore, the second proviso to Section 153 C is also concerned only with the aspect of abatement of pending assessments. According to the Revenue, this makes no difference to the computation of the block of six years preceding the AY relevant to the previous year /in which the search was conducted. In other words, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years..... 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. As per the facts stated by the ld. A.R before us, we find substantial force in his contention that the year under consideration viz. A.Y 2007-08 does not fall within the period for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, in case the A.O of the searched person and that of the assessee is the same person, then the date of recording of 'satisfaction' by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of the assessee that the year under consideration vis. A.Y.2007-2008 falls beyond the scope of six assessment years from the aforementioned date of recordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been found from my locker No: 596 maintained with Gold Sukh Safety Vaults Ltd. Kalbadevi. Mumbai. To the best of my knowledge, page number 1 to 145 are photocopies of Income Tax and Sales Tax Return and related documents of those parties for which I have became brokerage, These documents are generally required to get orders from customers to prove the genuinity of the supplier party. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.51 I am showing you the loose papers found and seized from your locker No.596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages.1 to 157. The same is marked as loose paper folder Annexure A-2 in the List / Inventory of A/c. Books etc., found / seized dt.20-11-20 12. Please confirm that the same have been found and seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 157 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai. To the best of my knowledge, page number 1. to 157 are the copies of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies to the queries as regards the seized documents viz Annexure-A/1 to A/4, it can safely or rather inescapably be concluded that the said documents belonged to the assessee. As such, we are not inclined to accept the contention of the ld.A.R that the assessee was in no way connected with the documents which were found and seized during the course of search proceedings from his locker No.596 with M/s Gold Sukh Safety Vaults Ltd., 65 Vithalwadi, Mumbai-400002. 21. We shall now deliberate on the nature of the documents and the contents thereof, and in the backdrop of the same, the maintainability of the view taken by the lower authorities. As is discernible from the orders of the lower authorities, the A.O in the course of assessment proceedings, had vide his letter dated 22.01.2015 sought information from the Jt. Commissioner of Sales Tax, Economic Intelligence Unit, Mumbai, as regards 45 concerns, documents pertaining to whom were recovered from the aforementioned locker No.596 of the assessee. In the said query letter the A.O had categorically requested the Sales Tax Department to furnish the year wise sales/turnover of the said concerns, and had also sought a finding as to whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was involved in the business of providing/arranging accommodation entries for third parties. In our considered view, the very fact that PAN Nos, VAT details, Aadhaar cards etc of certain tainted parties were found in the possession of the assessee, in itself supports the view taken by the lower authorities that the assessee was a part of a chain which facilitated providing of accommodation entries. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT, (1995) 214 ITR 801(SC), as per which the principle of preponderance of human probability can be put into service by a fact finding authority for arriving at the true state of affairs in a given case. In fact, the admission by the assessee in his 'statement' recorded u/s.132(4) on 20.11.2012 that the documents pertaining to the aforementioned parties belonged to him, clearly speaks for itself and establishes the nexus of the assessee with the said documents. Apart from that, the specific replies given by the assessee in his statement recorded u/s.132(4), dated 20.11.2012, on being confronted with the seized documents viz. Annexure-A/1 to A/4 as have purposively been cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serious doubts as regards the purpose for which the same were retained by him, however, the same on the said standalone basis could not have justified drawing of an assumption that all the said concerns were involved in the business of providing accommodation entries. Our aforesaid view is further fortified from the fact that though the A.O had raised a specific query vide his letter dated 22.01.2015 addressed to the Jt. Commissioner Sales Tax Department, Economic Intelligence Unit, Mumbai, as regards the fact as to whether the 45 parties, details as regards which were sought were genuine or not, however, the said query was returned unanswered by the Sales tax department in its reply dated 26.02.2015 (coply placed on record). As a matter of fact, no material has been placed on our record which could substantiate the very basis for estimation of the commission income of the assessee. Rather, a perusal of the orders of the lower authorities does not point out any such evidence which could prove to the hilt that all the aforementioned 53 parties were accommodation entry providers, which, thus, would have justified working out the commission income of the assessee on the respective tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matter requires to be restored to the file of the A.O with certain specific directions viz:- i) that, the AO shall make necessary verifications from the Sales Tax Department, Government of Maharashtra and therein place on record 'material' which would substantiate that the names of the aforementioned 53 parties whose documents were found lying in locker No.596 of the assessee had figured in the list of the accommodation entry providers published by the Sales Tax Department; ii) that, the fate of the notices which were issued to the aforementioned parties u/s.133(6) of the I-T Act shall be brought to the notice of the assessee, with an opportunity to him to produce the said parties in order to substantiate its claim that it had not rendered any services as an accommodation entry provider/facilitator; iii) that, the copies of the statements of the parties which had responded to the notices issued by the AO u/s.133(6) of the I-T Act shall be made available to the assessee; and iv) that, the very basis as per which the 16 parties tabulated in "List B" along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is found to be in order, then the assessment shall stand quashed and our observations as regards the merits of the case would be rendered as merely academic in nature. Otherwise, the matter on merits shall be restored to the file of the A.O, in terms of our aforesaid observations. With the aforesaid directions, the appeal of the assessee for the assessment year 2007-08 in ITA No.7374/Mum/2017 is allowed. ITA No.7375 to 7378/Mum/2017 (AY : 2008-2009 to 2011-2012) 29. As the issue on merits involved in the present appeals is similar to that which was there before us in the appeal of the assessee for the A.Y 2007-08 in ITA No.7374/Mum/2017, wherein we have given our findings on merits, therefore, we restore the matter involved in the captioned appeals in terms of our observations recorded while disposing off the aforementioned appeal of the assessee for A.Y 2007-08 on merits. As such, the observations and findings given by us on merits in the aforesaid appeal for A.Y 2007-08 viz. ITA No. 7374/Mum/2017, shall also apply mutatis mutandis to the present appeals of the assessee for A.Y 2008-09 to A.Y 2011-12 viz. ITA No. 7375 - 7378/Mum/2017. Accordingly, the aforementioned appeals v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial force in the aforesaid contentions of the ld A.R. As a matter of fact, the ld. A.R by raising the aforesaid contention has sought telescoping of the addition made by the A.O on account of undisclosed silver and cash aggregating to ₹ 18,23,060/- against its 'undisclosed income' assessed for the preceding six assessment years. As we have restored the issue as regards the quantification of the 'undisclosed income' of the assessee to the file of A.O for fresh adjudication for the year under consideration and the preceding years, therefore, in all fairness the said issue is also restored to his file for adjudicating the same afresh. In case, the assessee is able to substantiate in the course of 'set aside' proceedings that he had sufficient funds available with to explain the investment made towards the value of 11.2 kg of silver jewellery and the cash of ₹ 11,00,000/- found from his locker no. 596 during the course of the search proceedings, then the addition to the said extent towards unexplained investment shall stand deleted. However, we do not find favour with the claim of the ld. A.R that the lower authorities had not given any basis for taking the value/uphold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, therefore, prays that on the grounds stated above, the order of the CIT(A)-48, Mumbai may be set aside and that of the Assessing Officer restored. 36. We find that the only grievance of the revenue is that the CIT(A) had erred in reducing the commission/brokerage income of the assessee from 3% to 0.05% of the total turnover. As we have on the basis of our extensive deliberations in the appeals of the assessee for the assessment years 2007-2008 to 2013-2014, restored the matter on the said aspect to the file of A.O for fresh adjudication in terms of our aforesaid observations, therefore, on the same terms, the aforesaid appeals of the revenue are also being restored to the file of A.O. The A.O shall after quantifying the turnover of the tainted parties, which are found to be involved in the business of providing accommodation entries, therein in terms of our aforesaid observations, on the basis of a logical reasoning work out the commission income of the assessee. Accordingly, all the appeals of the revenue for the assessment years 2007-2008 to 2013- 2014 viz. ITA Nos.83 to 89/Mum/2018 are allowed for statistical purposes. 37. In the result, appeal of the assessee for A.Y 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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