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TMI Blog2021 (8) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year. The case of the assessee is supported by the decision of the co-ordinate bench of the Tribunal in the case of DCIT vs. Shivali Mahajan others [ 2019 (3) TMI 1196 - ITAT DELHI] On the issue of statement recorded u/s 132(4) of the Act being incriminating material, we are not in agreement with the conclusion drawn by the Ld. CIT(A). In our considered view the statement recorded under section 132(4) of the Act can not be considered as incriminating material found in the course of search. Besides it is a settled legal position that in an assessment framed under section 153A of the Act which is unabated on the date of search, no addition can be made without incriminating seized materials. Deemed dividend addition u/s 2(22)(e) - In the case of Akruti City Ltd. vs. DCIT [ 2010 (8) TMI 1081 - ITAT MUMBAI] The identical issue was decided in favour of the assessee by holding that financial transactions out of business expediency between two sister concerns can not be called as loans or advances for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend and as on the date of search no assessment or reassessment was pending for the AY 2007-08 that could be abated. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not adjudicating the issue that the appellant held only 14.29% shares in Vish Wind Infrastructure Limited prior to 22.05.2010 despite the fact all the relevant material was available before the Ld. CIT(A). 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not adjudicating the ground relating to AO's action in considering the commercial and business transaction between EIL and group companies which were undertaken by EIL for the purpose of carrying on its business as payment by way of loans and advances for the purpose of section 2(22)(e). 4. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in directing the AO to verify the ledger accounts of WWIL/EIL in the books of 5 related concerns for ascertaining the claim of appellant that there are no actual payments made/received and only journal entries were passed and if found correct delete the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s complied with by the assessee by filing the return of income on 11.08.2014 declaring total income at ₹ 1,02,90,407/-. The AO noted that search team during the course of search operation has noticed that loans and advances have been given by M/s. Wind World India Ltd. to the associated concerns of the group and these were in the nature of deemed dividend within the meaning of section 2(22)(e) of the Act. The AO noted that M/s. Wind World India Ltd. has given advances to M/s. Vish Wind Infrastructure Ltd. ₹ 2,95,38,019/-, M/s. Enercon Wind Farm (AP) Pct Ltd ₹ 2,61,439/-, M/s. Enercon Wind Farms (Kerala) P Ltd. ₹ 60,14,730/0, M/s. Enercon Wind Farms (Maharashtra) P Ltd. ₹ 1,69,920/-, M/s. Enercon Wind Farms (Tamil Nadu) P Ltd. ₹ 1,78,530/- and M/s. Enercon Wind Farms (Gujrat) P Ltd. ₹ 83,30,495/-. The aggregate amount of these loans and advances came to ₹ 4,44,93,133/-. During the search it was revealed that the assessee and his mother held equity shares in M/s. Wind World India Ltd. of more than 10% and more than 20% in other related companies as stated above. The AO came to conclusion that since the M/s. Wind World India Ltd. has acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatia (352 ITR 493) and Chetandas Lachmandas (211 taxmann. 61) and Hon'ble Karnataka High Court in the case of Canara Housing Development Co. (49 taxmann.com 98). After analyzing all such decisions on the said issue, the Hon'ble Delhi High Court in the case of Kabul Chawla (61 taxmann. 412), has summarized the legal position that emerges as under:- i. Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatory issued to the person searched requiring him to file returns for six A.Ys. 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 A.Ys. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant year was a nonabated assessment which could be disturbed only on the basis of incriminating material unearthed. However, it is observed from the paperbook submitted that on the said issue of deemed dividend, the assessee (Managing Director and main person of the assessee group) was examined on oath on 10.04.2013 in course of the search action on the evidences found during the search action about the shareholding patterns of the various related concerns to whom loans/advances were given by WWIL / EIL. Thus, the issue of deemed dividend is emerging from the seized material found in course of the search action. It is relevant to note that incriminating statements recorded on oath at the time of search action can also be treated at par with the incriminating documents unearthed during the search as explained in subsequent Paras. 5.3 The Hon'ble Supreme Court in the case of P.R. Metraniv. CIT [20061 287 ITR 209/157 Taxman 325 (SC) has explained the scope of section 132. It has been explained by the Hon'ble Supreme Court that the books of accounts, documents, money, bullion, jewellery or other valuable article or thing and any statements recorded of the persons s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of the search action to warrant appropriate action u/s 153A r.w.s. 143(3). 5.6 In view of the above detailed discussion, no infirmity is found in the action of the AO in undertaking action u/s 153A rws 143(3) since there was enough evidence to incriminate the assessee in the form of statements recorded of the assessee others on the facts noted in respect of the pattern of share holding of M/s WWIL / EIL and M/s VWIL, etc. and the fact that loans have been advanced by M/s. WWIL/EIL to M/s. VWIL and other related entities for which the provisions of section 2(22)(e) are clearly attracted. Accordingly, Ground No. 1 of the appeal are dismissed. 6. The Ld. A.R. vehemently submitted before the Bench that search in this case was conducted on 14.03.2013 whereas the return was filed under section 139(1) of the Act on 30.07.2007 declaring an income of ₹ 1,02,90,409/- meaning thereby that search was conducted after more than 5 years from the date of filing the return of income. The Ld. A.R. submitted that on the date of search the assessment in the instant case has already attained finality and was unabated. The ld AR vehemently submitted that the impugned assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the year under consideration being the unabated assessment, can only be made on the basis of incriminating materials found during search. Since no incriminating material was found, addition made or sustained are without jurisdiction and have to be deleted. In defence of his arguments the ld counsel of the assessee relied on the decision of Hon ble Bombay high court in the case of CIT v. All Cargo Global Logistics Ltd (374 ITR 645) wherein it has been held that, in respect of unabated years, no addition can be made if no incriminating material is found during the course of search. Similar ratios have been laid down in PCIT v. Gahoi Foods (P.) Ltd. [2020] 117 taxmann.com 118 (SC), CIT v. Deepak Kumar Agarwal [2017] 86 taxmann.com 3 (Bom)(HC) and CIT v. Gurinder Singh Bawa [2017] 79 taxmann.com 398 (Bom)(HC). The ld AR prayed that in view of the above judicial decisions, the addition made by the Assessing Officer and upheld by CIT(A) in respect of the impugned assessment year which is an unabated year is bad in law and may be deleted since it is not based on any incriminating material found during the course of search. 7. The Ld. D.R., on the other hand, submitted that the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. We have perused the facts on records and after analyzing them in the light of various decisions of tribunal, we opine that such materials/evidences can not be said to be found during the course of search. We further find merits in the contentions of the assessee that materials has to be found during search and it has to be incriminating. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. In our considered opinion, the findings of the ld CIT(A) that statement recorded during search constitutes incriminating material is also not correct as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search. Therefore after perusing the material on record and considering rival contentions and also the decisions cited before us, we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year. The case of the assessee is supported by the decision of the co-ordinate bench of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting statement by exerting undue influence or coercion by the search party. Though the above decision in the case of Harjeev Aggarwal is with reference to the meaning of undisclosed income u/s 158BB of the Income-tax Act, however, in our opinion, the above observation of Hon'ble Jurisdictional High Court would be squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A 18. In the case of Best Infrastructure (India) (P.) Ltd. (supra), Hon'ble Jurisdictional High Court reiterated in paragraph 38 Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal . 9. Therefore, on the issue of statement recorded u/s 132(4) of the Act being incriminating material, we are not in agreement with the conclusion drawn by the Ld. CIT(A). In our considered view the statement recorded under section 132(4) of the Act can not be considered as incriminating material found in the course of search. Besides it is a settled legal position that in an assessment framed under section 153A of the Act which is unabated on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of installing wind Mills and sales thereof. In order to install the windmills it needs land. The Wind Word (India) Ltd. purchases land in the name of these related companies in order to overcome the land ceiling conditions imposed by Land Ceiling Act in vogue in various States. For the said purpose, The Wind Word (India) Ltd. advances loans to these companies and thereafter the necessary adjustments are made upon purchase of land. We note that the Wind Word (India) Ltd. has to buy land in the name of related entities/companies and it is only that purpose the loans were advanced to the related companies. In our opinion the money was advanced out of business and commercial consideration and therefore not covered by the provisions of section 2(22)(e) of the Act. The case of the assessee is supported by the following decisions namely (i) Chandrashekhar Maruti vs. ACIT ITA No.5410/Mum/2012 47 CCH 0783, 183 TTJ 0459, (ii). Ackruti City Ltd. vs. DCIT [ITA No. 4869/Mum/2009(iii)CIT vs. Suraj Dev Dada [(2014) 46 taxmann.com 402 (Punjab Haryana)]. In the case of Chandrasekhar Maruti vs. ACIT (supra) the co- ordinate bench of the Tribunal has held that where there is a ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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