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TMI Blog2018 (12) TMI 1863X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. The Hon ble Supreme Court in the case of Kishinchand Chellaram vs. CIT [ 1980 (9) TMI 3 - SUPREME COURT ] had held that opportunity of cross-examination must be provided to the assessee. Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation or whether the statements were recorded during the course of survey operations. It is well settled that a statement recorded during the course of survey operation cannot be used as an evidence under the Act. Only a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the matter in appeal. The ld. First Appellate Authority granted part relief. He relied on the decisions of the Hon ble Calcutta High Court in the case of PCIT vs. Salasar Stock Broking Limited (ITA No.264 of 2016) dt. 24.08.2016 and the judgment in the case of CIT vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta) and held that, incriminating material is a prerequisite for making additions in assessment u/s 153A/143(3) of the Act, wherever assessments have not abated. He pointed out that the Hon ble Jurisdictional High Court has concurred with the judgment of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 0573 (Del). He further relied upon a number of decisions of the ITAT Kolkata Bench and deleted all the additions made in the assessment u/s 153A/143(3), which were not based on any incriminating material found during the course of search and seizure proceedings and as the assessment has not abated. 5. Aggrieved the revenue is in appeal before us on the following grounds:- i. That the Ld.CIT(A) has erred in adjudicating the matter without making any independent enquiry to determine the existence of incriminating evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 6. The ld. D/R, submitted that the incriminating material need not necessarily be found during the course of search 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 can also be the basis on which additions can be made in an assessment made u/s 153A r.w.s. 143(3) of the Act. He submitted that in the case on hand the addition in question was made based on statements recorded from various entry operators during the course of search and seizure operations at their premises and also was based on a cash trail prepared by the Assessing Officer during the post search enquiry. The sum and substance of his submission is that the statements recorded during the course of survey and search operations undertaken by the department separately on several persons, who are allegedly entry operators and the details of the cash trail of the various transactions constitute incriminating material, which can be used for making addition in an assessment u/s 153A r.w.s. 143(3) of the Act. Further reliance was placed on the judgment of the Hon ble Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operators being the basis of the addition in question, he submitted that the addition was not based on any of these statements by the Assessing Officer. He argued that the fact that all these alleged entry operators had retracted from the statements allegedly made by them, is not denied by the Assessing Officer. He further argued that the copies of the alleged statements were not confronted with the assessee nor any opportunity given for cross-examining these statements. He further relied on the judgment of the Hon ble Madras High Court in the case of CIT vs S. Kader Khan Son [2008] 300 ITR 157 for the proposition that the statements recorded during the course of survey cannot be used as evidence. He relied on the order of the ld. CIT(A) and submitted that the same should be upheld in view of the binding decisions of the Hon ble Jurisdictional High Court on this matter. He distinguished the judgment of the Hon ble Kerala High Court and submitted that even otherwise, the judgment cannot be followed in view of the binding nature of the judgment of the Hon ble Jurisdictional High Court. 8. We have heard rival contentions. On careful consideration of the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved in this case. In fact, genuineness of the transactions has not been established in spite of repeated opportunities. IX) There is enough material on record to doubt the veracity of the transactions. A perusal of the above demonstrates that the additions in question are not based on any incriminating material found during the course of search. 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 already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the assessment years where assessments had attained finality. The relevant observations and the ratio laid down would be discussed in the later part of this order. 15. Now coming to the ratios laid down by the Hon ble Jurisdictional High Court, first of all, in the case of Kabul Chawala (supra), the Hon'ble Court after discussing the issue threadbare and analysing the various judgments of different High Courts laid down the following legal proposition in terms of scope of addition which can be made u/s. 153A(1) which are as under:- 37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowledge Park Pvt. Ltd. 385 ITR 346 (Kar) and CIT vs. Gurinder Singh Bawa reported in 386 ITR 483. In the latest judgment the Hon'ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia, their Lordships reiterated the same principle after discussing and analyzing catena of decisions including that of Anil Kumar Bhatia (supra) and Dayawanti Gupta. The Hon'ble High Court observed and held as under:- 62. Subsequently, in Principal Commissioner of Income Tax-1 v. Devangi alias Rupa {supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. {supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. {supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. {supra), too, followed the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. The Hon ble Supreme Court in the case of Kishinchand Chellaram vs. CIT, 125 ITR 713 (SC) had held that opportunity of cross-examination must be provided to the assessee. The Jurisdictional High Court in the case of CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 (Kol HC) held as follows:- As a matter of fact, the right to cross-examination a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural just ..... X X X X Extracts X X X X X X X X Extracts X X X X
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