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TMI Blog2021 (11) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Bombay High Court in CIT Vs. Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] There must be a nexus between the statement recorded and the evidence/material found during search in order to sustain additions on the basis of recorded statement. Similar is the view of Hon'ble High Court in an earlier judgment of CIT Vs. Sunil Aggarwal [ 2015 (11) TMI 286 - DELHI HIGH COURT] wherein Hon'ble Court refused to give any evidentiary value to the statement made by the assessee u/s. 132(4) as the department could not find any unaccounted money, article or thing or incriminating document either at the premises of the company or at the residence of managing director or other directors. In such circumstances, the finding of the Tribunal that the statement of managing director recorded patently u/s. 132(4) did not have any evidentiary value, was upheld. The ratio of all these decisions makes it clear that the surrendered income must be correlated with some incriminating material found during the course of search action so as to justify the addition. We find that there is no such incriminating material in the case of the assessee which would show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 While doing so, the A.O. failed to appreciate that: (i) The case of the appellant did not fall within the parameters laid down by section 153A of the Act; (ii) The necessary preconditions for initiating and completion thereof were not satisfied. 2.3 It is submitted that in the facts and the-circumstances of the case, and in law, the reassessment framed is bad, illegal and void. 3. The Ld. AR for assessee, at the outset, raised a pertinent legal ground to submit that the impugned additions as made in the assessment order are not based on any incriminating material found during the course of search operations and this being non-abated year, the additions are not sustainable in law as per the binding decision of Hon'ble Bombay High Court in CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645]. The Ld. AR also submitted that the similar legal issue has been allowed by the SMC bench of the Tribunal in group case of Smt. Reena A. Ajmera Vs. DCIT (ITA No. 982/Mum/2020 dated 09/02/2021). The copy of the order has been placed on record. The Ld. CIT-DR, on the other hand, referring to the documents found during the course of search operations, controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on assessee group, Shri Jasmin Ajmera offered the amount of LTCG for taxation. However, the said income was not offered to tax in the return of income on the ground that the transactions were genuine in nature. On the basis of data obtained from BSE Ltd. for the period from 01/04/2009 to 31/12/2011, it was observed by Ld. AO that the shares sold by the assessee group were purchased by various group concerns/entities of Shri Shirish C. Shah. During the course of search action on Shri Shirish C. Shah, blank signed cheque books, bank statements, books of accounts etc. were found and the directors of these entities denied having any involvement as director in these entities. The search action on the premises of Prraneta Industries Ltd. revealed that this entity was not carrying our any business activities and had no underlying assets. Accordingly, it was concluded that the share prices of this entity were manipulated to provide benefit of tax free long-term capital gains to various parties. The data as well as ledger account maintained by Shri Shirish C. Shah of the assessee group was confronted to the assessee. It was alleged by Ld. AO that the ledger account showed movement of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elations and therefore the documents were otherwise mere dumb documents. The assessee denied having carried out any transaction with Shri Shirish C. Shah group. 5.7. However, in the background of material gathered during search operation on Shri Shirish C. Shah group, it was alleged that the assessee indulged in systematic transactions in the shares of Prraneta Industries Ltd. to earn huge tax free gains which would defy all possible human probabilities. The Ld. AO, in the assessment order, tabulated the dummy entities floated by Shri Shirish C. Shah along with affidavits of directors etc. of all these companies. These directors were held to be dummy directors of various entities being controlled by Shirish C. Shah. Out of this web of companies, certain companies purchased and sold the shares of Prraneta Industries Ltd. Accordingly, these transactions were held to be influenced/manipulated transaction in exchange of cash to Shri Shirish C. Shah. The cash so paid to Shri Shirish C. Shah was unexplained cash and therefore, the same was added to the income of the assessee. To procure such gains, the assessee must have paid certain commission which was estimated @ 5.25%. Finally, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly heard the rival submissions and perused relevant material on record including the documents seized by the department from the assessee group during the course of search operations. We find that the assessee had filed original return of income on 20/07/2011 and search operations were carried out on assessee group on 25/07/2013. It is quite evident that on the date of search, no assessment proceedings were pending against the assessee and no notice u/s. 143(2) was ever issued to the assessee till the date of search. The time limit for issuance of such notice had already expired on 30/09/2012 i.e. within 6 months from the end of relevant assessment year. Thus, AY 2011-12 was a non-abated year. In such a case, the additions which could be made has necessarily to be on the basis of incriminating material found by the department during the course of search operations as held by Hon'ble Bombay High Court in CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645]. In other words, unless any incriminating material was unearthed, no additions could be sustained in the hands of the assessee. So far as the arguments of revenue that intimation u/s. 143(1) would not constitute an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations of the Hon'ble Supreme Court, and particularly in paragraph 13, he forgets that they were made in the context of a challenge to the notice under Section 148 of the IT Act. The Supreme Court, in paragraph 13 of this judgment, noted that intimation under Section 143(1)(a) was given without prejudice to the provisions of Section 143(2). Though technically this intimation issued was deemed to be a demand notice issued under Section 156, that did not per se preclude the Assessing Officer to proceed under Section 143(2). The right preserved was not taken away. The Hon'ble Supreme Court referred to the period between April 1, 1989 and March 31, 1998, and the second proviso to Sub-section (1) Clause (a) of Section 143 and its substitution with effect from 1st April, 1998. The sending of intimation between 1st April, 1998 and 31st May, 1999 under Section 143(1)(a) was mandatory. That requirement continued until the second proviso was substituted by the Finance Act, 1997, which was operative till 1st June, 1999. 25. The Hon'ble Supreme Court therefore, relied upon these amendments and, tracing their history, held that the intimation under Section 143(1)(a) cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io of cited decisions as referred to in para-6 is quite applicable to the facts of the case. 9. So far as the admission in the form of assessee's own statement is concerned, we find that this statement has been retracted by the assessee by way of on affidavit on 02/08/2013 (page Nos. 7 to 10 of assessee's paper book) and therefore, in the absence of any corroborative evidence/material supporting the admission made by the assessee, the addition would become unsustainable in the eyes of law. The additions made merely on the basis of retracted statement without there being any corroborative evidence/material, in our considered opinion, is not sustainable in law since the same run contrary to CBDT Circular F. No. 286/2/2003-IT(Inv.), dated 10/03/2003 which has clearly stated that no attempt should be made to obtain confession/surrender as to the undisclosed income during search. Such confession, if not based on credible evidence, when retracted, would not serve useful purpose and an therefore, the authorities should focus on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any evidentiary value, was upheld. The ratio of all these decisions makes it clear that the surrendered income must be correlated with some incriminating material found during the course of search action so as to justify the addition. We find that there is no such incriminating material in the case of the assessee which would show that the transactions under consideration were sham transactions and there was any connection/nexus between the assessee and the group entities of Shri Shirish C. Shah. 11. We also find that this legal issue stood covered in assessee's favor by the decision of SMC bench of Tribunal rendered in the case of another assessee of the group i.e. Smt. Reena A. Ajmera Vs. DCIT (ITA No. 982/Mum/2020 dated 09/02/2021). The relevant observations were as under:- 4. Coming to Ground No. 2 of grounds of appeal, Learned Counsel for the assessee submitted that the assessment made u/s. 153A is bad in law as there is no incriminating material found in the course of search and the assessment is not abated. Learned Counsel for the assessee submitted that assessee filed return of income on 20.07.2011 and return was processed u/s. 143(1) of the Act on 21.09.2011. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Ld. DR vehemently supported the orders of the authorities below. 9. Heard rival submissions, perused the orders of the authorities below. In this case assessee filed return on 20.07.2011 and the same was processed u/s. 143(1) of the Act on 21.09.2011 and time limit for issue of notice u/s. 143(2) lapsed on 30.09.2012 and no assessment or re-assessment proceedings were pending as on the date of search. Therefore, admittedly in this case the assessment is unabated on the date of search i.e. 25.07.2013 since there were no pending proceedings either u/s. 143(3) or 148 of the Act. 10. Hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (supra) held that- In a case where pursuant to issue of notice under section 153A assessments are abated. Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately. No addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search . 11. Hon'ble Bombay High Court in the case of CIT v. Gurinder Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment. Pursuant to search carried out in case of the assessee, a notice under section 153A(1) was issued. In course of assessment, Assessing Officer made addition to assessee's income in respect of deemed dividend. It was undisputed that assessment for assessment years in question had already been completed on date of search. Since no incriminating material was unearthed during the search, no additions could have been made to income already assessed. Consequently, the impugned addition was to be deleted . 14. The Hon'ble Delhi High Court followed this decision in the case of CIT v. RRJ Securities Ltd., [380 ITR 612]. 15. The Hon'ble Delhi High Court in the case of Pr. CIT v. Meeta Gutgutia (supra) held that invocation of section 153(A) to reopen concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment years. 16. In all the above decisions of various Hon'ble High Court's, the legal position is that no addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, it cannot be said that those statements on the basis of which impugned additions were made by the AO, were incriminating material found during the course of search. As we have already noted that no incriminating material was found during the course of search and the additions were made by the AO while framing the assessments u/s. 153A of the Act, the said additions need to be restricted or limited only to incriminating material found during the course of search. However, in the present case, no such incriminating material was found during the course of search from the possession of the assessee. .... 121. In the present case also, the AO made the additions on the basis of the statements of third parties recorded u/s. 132(4)/133A of the Act and third parties evidences/documentation. However, no live nexus with the incriminating material found in the course of search in the case of the assessee was established. The statements of the third parties were recorded behind the-back of the assessee but the opportunity of cross-examination of such parties was not allowed to the assessee, even the statements were retracted later on. It is well settled that the presumption u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is bad in law on the preliminary ground, I am not inclined to go into merits of the addition/disallowance made by the Assessing Officer at this stage as it would only become academic in nature. The facts in the above case are quite identical to the case before us since the additions permeates from same search action and similar additions were made in the case of this assessee. Therefore, the ratio of above decision is quite applicable here and we see no reason to deviate from the same. 12. Finally, on the given facts and circumstances, we concur with the submissions of Ld. AR that in the absence of any incriminating material, the additions could not be made in the hands of the assessee as per settled legal proposition. Accordingly, the impugned additions stand deleted. We order so. Since legal grounds raised by the assessee have been allowed, the adjudication on merits have been rendered merely academic in nature. The legal ground raised by the assessee stand allowed. The appeal stand allowed. 13. Facts as well as issues are quite identical in all the other appeals. The assessment orders as well as appellate orders are on similar lines. Aggrieved, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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