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TMI Blog2019 (10) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... d to unexplained income from Somnath building, agriculture income etc. Accordingly, we allow the appeal of the assessee, and quash the assessment order passed under section 153A Addition based on declaration made u/s 132(4) - HELD THAT:- If something has been inherently gone wrong, at the time of search, then during the assessment proceedings, that facts should have been ascertained by the AO. It was for the AO to call for independent witness as well as accountant of the assessee in support of the report of the investigation wing. Onus is not upon the assessee. It is the AO who has to first establish that some undisclosed expenditure was incurred by the assessee and details recorded to that were found. On the basis of simple declaration even under section 132(4) addition cannot be made. Revenue authorities have failed to carry out this inquiry, and therefore, after relying upon the decision of CIT Vs. Maulikkumar K. Shah [ 2007 (7) TMI 267 - GUJARAT HIGH COURT] and K.P.M. Nair Vs. ACIT [ 2016 (8) TMI 514 - GUJARAT HIGH COURT] we do not have any hesitation that addition is not sustainable. Assessment u/s 153A - Addition of FDRs - HELD THAT:- For the purpose of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income, but stand of the assessee was not accepted. This explanation was not found to be false by the AO. Therefore, on the addition of ₹ 9,000/- no penalty be imposed upon the assessee. However, the ld.AO to calculate penalty imposable upon the assessee only on addition of ₹ 10,00,000/-. The appeal of the assessee is partly allowed. Invocation of jurisdiction under section 153A - Non disclosure of agricultural income - HELD THAT:- Search was carried out on 11.12.2006. Time limit to issue notice under section 143(2) on the original return of income in the Asstt.Year 2006-07 was not expired till search has taken place. Thus, the assessment in this year has to be termed as not attained finality. It has abated, and fresh assessment under section 153A has to be passed. No doubt the AO was not possessing any incriminating material for making addition. In such situation, he could determine the taxable income according to the regular books of accounts. He has not made any addition separately, which is associated with search. It is the assessee who has shown agriculture income and rental income for the first time in response to notice under section 153A. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criptive in nature; they are not in consonance with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963. In the first fold of grievance, it is pleaded by the assessee that the ld.CIT(A) has erred in confirming the action of the AO in passing the assessment orders under section 153A of the Act. In other words, the grievance of the assessee is that cognizance taken under section 153A in these assessment years is illegal at the end of the AO. 3. Brief facts of the case are that search under section 132 of the Income Tax Act was carried out at the premises of the assessee on 11.10.2006. According to the AO, during the course of search certain incriminating material were found and seized. Notice under section 153A of the Act was issued on 1.10.2007 which was duly served upon the assessee. In response to the notice, the assessee has filed return of income on 24.9.2008. It is pertinent to note that the facts in this regard are common in all the years, and therefore, for the facility of reference, we take up the facts mainly from the assessment year 2001-02. 4. In this year, the assessee has declared income at ₹ 1,16,610/-, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of ₹ 11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on 11.10.2006. The AO has not referred to any seized material for the additions made to the total income of the assessee. In other words, no material was found during the course of search relating to this assessment year exhibiting escapement of taxable income or availability of undisclosed income for the purpose of assessment under section 153A of the Income Tax Act. If there is no material available, and on re-appraisal of that very material addition has been made by the AO, then such assessment order is not sustainable in the eyes of law, because, the AO has no jurisdiction to invoke section 153A in view of principle laid down by the Hon ble Delhi High Court in the case of Kabul Chawla (supra). No proceedings were pending on the date of search for this assessment. Therefore, nothing would abate for making a fresh assessment under section 153A of the Act. We have perused the comments of the AO at the time of hearing. The AO has not given any comments qua first fold of grievance shown by the assessee. His comments are related to various additions made by him with regard to unexplained income from Somnath building, agriculture income etc. Accordingly, we allow the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee as to why he has not disclosed the undisclosed income admitted during the course of search. In response to the query of the AO, it was submitted by the assessee that during the course of search, his accountant was made to write on a piece of paper various expenditure relating to construction activities of Somnath building whose total worked out at ₹ 80,69,186/-. He alleged that nothing was found during the course of search and an affidavit to this effect was filed. The ld.AO did not accept this affidavit of the assessee by observing that it was filed after 25 months from the date of search. The assessee is a regular assessee and engaged in the business of construction. He would not sit idle waiting for the department to take initiative and prove his guilt. He should have retracted his admission immediately after the search by appraising the higher authorities. In other words, the AO was of the view that disclosure made under section 132(4) is an admissible evidence, it could not be ignored. More so, this declaration is based on the discovery of certain notings on a piece of paper. The ld.AO made addition of ₹ 80,69,186/-. The appeal to the CIT(A) did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was raised by the two independent witnesses in whose presence the whole search proceedings were carried out. The statement was also not recorded in odd hours on 11.10.2006. The appellant himself declared certain income on the basis of seized material brought to his notice while recording the statement u/s 132(4) of the Act. He himself admitted the unaccounted income in the statement. If the statement was extracted under coercion or thread, what prevented the assessee to retract the statement soon after conclusion of the search. Moreover, except the allegations in the affidavit, there is no direct or circumstancial evidence brought on record by the assessee to prove that the statement was taken under coercion or threat. The evidences seized during search corroborates the genuineness of the statement given at the time of search. No iota of evidence is given by the assessee in support of retraction. This view is well supported by the decision of the Hon'ble Ahmedabad Tribunal in the case of Dy.CIT vs. Bhogilal Moolchand 96 ITD 344 (Ahd.). Thus, the statement cannot be said to be forcefully taken. 4.9 In view of the above discussion, the contention of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kumar K. Shah, 307 ITR 137 (Guj), (ii) CIT Vs. Abhalbhai Arjanbhai Jadeja, Tax Appeal Nos.233 of 2013 and others, and (iii) K.P.M Nair Vs. ACIT, Tax Appeal No.1152 of 2007. 12. On the other hand, the ld.CIT-DR relied upon the orders of the Revenue authorities. He specifically took us through finding of the ld.CIT(A) from para-4.7 to 4.9 and emphasised that the statement recorded in the presence of witnesses was sufficient to prove the case of the Revenue. He has not produced his accountant showing that entries are recorded at the behest of the Department under coercion. 13. We have duly considered rival contentions and gone through the record carefully. No doubt, the disclosure or admission made under section 132(4) of the Act during the course of search proceedings is an admissible evidence but not conclusive one. This presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or based on misconception of facts, then solely on the basis of such admission no addition is required to be made. It is true that admission being decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned. They did not pass any order which can be executed for effecting the recovery of taxes. Thus, the executable order for making any assessee liable to pay tax is the assessment order. The role of the AO is of a quasi -judicial officer who prosecute as well as adjudicate. Therefore, the right forum before whom an objection can be made is the AO. If some proceedings remained open before the investigation wing, and their adjudication give rises to refund of tax or collection of tax, probably, the Revenue authorities would be justified in making such observation. Passage of time before passing of the assessment order would not legalise any illegality. If something has been inherently gone wrong, at the time of search, then during the assessment proceedings, that facts should have been ascertained by the AO. It was for the AO to call for independent witness as well as accountant of the assessee in support of the report of the investigation wing. Onus is not upon the assessee. It is the AO who has to first establish that some undisclosed expenditure was incurred by the assessee and details recorded to that were found. On the basis of simple declaration even under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition in the quantum proceedings, as discussed hereinabove paragraphs, and therefore penalty under section 271(1)(c) of the Act has not limb to stand, which is hereby cancelled, and the appeal of the assessee is allowed. ITA No.715/RJT/2010 A.Y.2007-08 22. In ground no.1 and 2, assessee has pleaded that the ld.CIT(A) has erred in confirming the assessment order passed by the AO under section 153A of the Income Tax Act. According to the assessee, the AO has erred in assuming jurisdiction under section 153A for passing impugned assessment order. This aspect has been considered by us in the first opening part of this order. We will deal with other issues in the light of our finding recorded in the opening part of the order. If we peruse the record in the light of our discussion made, then it would reveal that in this year during the course of search a cash of ₹ 11,25,536/- was found; out of which cash balance of ₹ 1,25,480/- was available in the books. Remaining cannot be explained, and the assessee has admitted ₹ 10 lakhs as his undisclosed income. Therefore, there was a material found during the course of search authorizing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either before the CIT(A) nor before us, the assessee has demonstrated source of this cash. No submission has been made in this behalf even in the synopsis submitted before us. The only ground raised by the assessee that this addition has been made on the basis of the statement recorded under section 132(4), and therefore the addition is not sustainable. We find that addition is not based only on the basis of the statement, rather corroborated with the recovery of cash at the time of search, which remained unexplained. Therefore, the ld.CIT(A) has rightly confirmed the addition. This ground of appeal is rejected. 28. In the next ground of appeal, grievance of the assessee is that the ld.CIT(A)has erred in confirming the addition of ₹ 9,000/-. 29. Finding of the AO qua this addition of ₹ 9,000/- reads as under: (8.0) It is also seen that, the assessee has shown rent receipt of ₹ 30,000/- from Kenson Sales Corporation. However, in spite of repeated reminders, the assessee has not furnished books of accounts like balance sheet, profit and loss a/c, capital a/c etc. Absence of books of accounts, house property inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been confirmed by us while deciding the quantum appeal of the assessee in ITA No.715/RJT/2010. Appeal to the CIT(A) did not bring any relief to the assessee. 35. With the assistance of the ld.CIT-DR, we have gone through the submissions filed by the assessee. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section. 271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person (a) and (b)** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** ** ** (iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned, we find that the assessee has disclosed agriculture income, but could not substantiate that fact. Therefore, the AO has added a sum of ₹ 4,29,470/- under section 68 of the Act. On an analysis of the impugned order, we are of the view that this issue deserves to be set aside to the file of the AO because the AO has not called for the land holding possessed by the assessee. It is to be ascertained whether the assessee is having any agriculture land; if yes, whether it is cultivatable or barren land, after calling from the land record, the AO should determine whether the assessee has any agriculture income or not. 42. As far as rental income shown by the assessee is concerned, the AO has not discussed this issue in detail. A perusal of the CIT(A) s order would indicate that building from which rental income is being claimed, owned by seven persons. Upto and unless actual documents exhibiting ownership of the building, and how rental income is being recognized in the hands of the assessee is ascertained, it is not advisable to make addition under section 68. Therefore, we deem it appropriate to set aside both orders to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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