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TMI Blog2021 (3) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... of statement recorded u/s 132(4) and the power of the AO to assess or reassess total income u/s 153 A is restricted to the material found during search. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in relying upon the decision of Hon'ble Supreme Court in the case of CIT vs. Singhad Technical Education Society when the facts and circumstances of the instant case are different from that case. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred by ignoring the fact that the assessee during the assessment proceedings failed to produce the Directors of the company that gave accommodation entries to the assessee company and thereby failed to prove the genuineness and creditworthiness of the credits received in their books of account. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred by not appreciating the fact that the statement of Sh. Mulchand Malu was provided to the assessee during the post search as well as assessment proceedings. During his statement, he being the promoter of the assessee company had admitted the unexplained credits in the assessee's books of account. 5. On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has mentioned that Sh. Mool Chand Malu during the course of search action in statement dated 15/12/2014 under section 132(4) of the Act, offered undisclosed income of estimated Rs. 150 crores, including investment in unexplained share capital. The Assessing Officer has further mentioned that, Sh. Mool Chand Malu again reaffirmed his declaration of undisclosed income of Rs. 100 crores towards share application money, share premium and unsecured loans. During assessment proceedings under section 153A of the Act, the Assessing Officer observed unsecured loans worth Rs. 2,47,00,000/- from 12 parties, a list of whom mentioned by the Assessing Officer in the impugned assessment order, is reproduced as under: (i) M/s. R.K. Investment Pvt. Ltd. Rs. 7,50,000/- (ii) M/s. Facor Enterprises Pvt. Ltd. Rs. 20,00,000/- (iii) M/s. Modular Enterprises Pvt. Ltd. Rs. 4,00,000/- (iv) M/s. Prabhat Management Services Pvt. Ltd. Rs. 20,00,000/- (v) M/s. Priti Mercantile Company Ltd. Rs. 35,00,000/- (vi) M/s. RAB Marketing Pvt. Ltd. Rs. 15,00,000/- (vii) M/s. Rajni Investment Pvt. Ltd. Rs. 22,50,000/- (viii) M/s. RRP Management Services Pvt. Ltd. Rs. 20,00,0000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, capacity of the investor companies to invest and genuineness of transactions, Books of accounts maintained and the proofs for sources of the funds transferred to assessee's bank accounts. It is seen that assessee has failed to prove with the above requirement. 5.15 No real business appears to have been done by the company. No tangible assets are owned. After issuing commissions and making enquiries it has been reported by the Inspectors that the addresses of the companies were found to be for record purpose only & no business activities were found to be conducted at the premises. 5.16 The above lineup is just an example that how the unaccounted money is routed through the various paper companies. Formation and creation of such paper companies are systematically done by the entry operators especially in Kolkata. These companies do not have any infrastructure, no employees etc. As the paper companies have no source to make such investment the entire amount Is unaccounted money of Kuber Group introduced in the books through paper companies. The beneficiary company pays unaccounted cash to the entry operator. The entry operator routes the cash through many bank accounts. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed supra regarding undisclosed income on account of capital formation/share capital/share premium in the Kuber Group entities. In light of the above findings and in the facts of the case, the explanations and details furnished by the assessee company are not held to be satisfactory. The assessee cannot be held to have satisfactorily discharged its onus to prove the identity, genuineness and creditworthiness of the above lenders of unsecured loans. As per the facts discussed above the assessee company failed to prove the credits in his books of account in shape of unsecured loans and the same amount is chargeable to tax u/s 68 of the I T Act, 1961 as its income for the given assessment year. Therefore, it is held that the sum so credited in books by assessee company is to be charged to tax as the income of the assessee company for the year under consideration. 5.20 In view of above discussion, the amount of Rs. 2,47,00,000/- shown to have been raised as unsecured loans by assessee company is treated as unexplained credit and is added to its income u/s 68 of the I.T. Act, 1961. I am satisfied that the assessee company has furnished inaccurate particulars of income therefore p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first issue, the Ld. CIT(A) observed that the assessment order does not refer to any seized or incriminating material found during the course of the search and the entire addition is based upon the admission/statement u/s 132(4) of the Act of Sri Mulchsnd Malu, who was neither a director nor employee the assessee company. The Ld. CIT(A) relied on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) Mita Gutgatia (supra). The relevant part of the order of the Learned CIT(A) is reproduced as under: "I find that the additions made in the assessment order are not based on any incriminating material or documents found during search. In fact, the assessment order does not refer to any seized material or any incriminating material found during the course of search. This position of law (that addition u/s. 153A/153C can be made only on the basis of incriminating material etc. found during search), has been laid down by the Hon'ble Jurisdictional High Court in a plethora of cases. Some of which are- (a) CIT Vs. Kabul Chawla , 381 ITR 570 (Delhi) (b) Pr. CIT Vs. Kurele Papers Mills Pvt. Ltd. , 380 ITR 571 (Delhi) (c) Pr. CIT Vs. Meeta Gutgutia, 395 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, no incriminating material was found during the course of the search and no assessment order reassessment was pending on the date of the initiation of the search and therefore no addition could have been made in the instant assessment year. Accordingly, he deleted the addition of Rs. 2,47,00,000/- made under section 68 of the Act by the Assessing Officer. 6. Before us, the parties appeared through Video Conferencing facility. The assessee filed a paper-book electronically. In support of her contentions, the Learned DR also filed copy of statements of Late Sh. Mulchand Malu and his son Sh. Vinay Malu. 7. The learned DR strongly relied on the order of the Assessing Officer and submitted that Late Sh. Mulchand Malu in statement under section 132(4) of the Act offered undisclosed income of more than Rs. 150 Crores based on the incriminating materials found during the course of the search and the undisclosed income offered included share capital and loans etc. According to her addition in dispute has been made on the basis of the undisclosed income offered in statement under section 132(4) of the Act, which is an admissible evidence, and therefore, contention of the Ld. CIT(A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Kabul Chawala (supra). 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant metal on record. As far as decision of the Hon'ble Delhi High Court in the case of the Kabul Chawla (supra) is concerned, no addition could have been made in any assessment years if- (i) no incriminating material is found during the course of the search from the premises of the assessee. (ii) No assessment was pending as on the date of the search. 9.1 As far as second condition above is concerned, the assessee had filed his original return of income on 30/09/2009 declaring total income of Rs. 1,89,72,710/-. No notice under section 143(2) of the Act was issued till 30/09/2010, which was the limitation under which notice u/s 143(2) of the Act could have been issued. The search action in the case of assessee was carried out on 09/10/2014, therefore, no assessment proceeding was pending in the case of the assessee as on date of the search. This position has not been disputed by the Revenue also. 9.2 The only dispute is regarding whether there was any incriminating material found during the course of the search. According to the Learned DR statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Assessee during search operation. 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent." "18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee." "19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section 158BC of the Act." 9.5 In view of the above finding of the Hon'ble Delhi High Court statement of Sh. Mulchand Malu under section 132(4) of the Act alone cannot be considered as incriminating material unless any corroborating incriminating material i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered are in the range of Rs. 25 Lakhs to 30 Lakhs. We find no error in the procedure followed by the Assessing Officer on admitted facts. The entire exercise by the department to bring to tax undisclosed income, we find has been generous and simple. There appears to be no confusion in the quantification of the tax liability and we uphold the order of the Tribunal." 9.7 Thus, we find that in the above decision addition has been sustained on the basis of the statement recorded of the assessee himself and not based on the statement of any third-party. The facts of above case are distinguishable from the facts of the assessee. 9.8 In view of the above facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Following the finding of the Hon'ble Delhi High Court in the case of Kabul Chawal (supra), we, accordingly, uphold the same. The ground No. 1 of the appeal of the Revenue is accordingly dismissed. 10. Since no addition could have been made in the case of the assessee, we are not deciding the arguments of the parties on the merit of the addition. The grounds related to merit of the addition are accordingly dismissed as infructuous. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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