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TMI Blog2022 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... nating material unless it is corroborated by some other evidence found during the course of search and the said statement cannot be relied upon solely for the purpose of making an assessment. The decisions in this regard have already been dealt elaborately by the CIT(A) as detailed hereinabove The assessment for A.Y.2009-10 is a concluded assessment as on the date of search in the instant case and assessment has been framed by the ld. AO by making additions u/s.68 of the Act without reference to any incriminating material found during the course of search relatable to such additions. This issue is very well settled by the decision of Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT ] - Decided against revenue. - ITA No.2184/Mum/2021 - - - Dated:- 28-9-2022 - Shri M.Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Assessee : Ms. Poojan Mehta For the Revenue : Mr. Chetan Kacha ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.2184/Mum/2021 for A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49, Mumbai/10086/2019-20 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share Premium (Rs.) 1. 27.03.2009 Pace Logistics (India) Pvt. Ltd. 1,35,00,000/- 2. 31.03.2009 Dazzel Confindive Ltd. 90,00,000/- 3. 31.03.2009 IFSL Ltd. 1,93,50,000/- 4. 31.03.2009 Rallis Commercial Pvt. Ltd. 31,50,000/- 4,50,00,000/- 4.1. Further the assessee company also received unsecured loans of Rs.1,87,500/- during the year under consideration from the following parties:- Sr. No. Name of the Party Amount of Loan (Rs.) 1. Kumar Madan 18,500/- 2. DevKumar Thakkar 1,19,000/- 3. Jayesh Dedhia 50,000/- 4.2. The ld. AO observed that one of the Directors of the assessee company Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s point has been given credence by the ld. CIT(A) while granting relief to the assessee by observing as under:- 6.2.7. The facts are that a search and seizure operation was conducted in the case of Thakkar and Ashar Group on 05.07.2017 and the Appellant was also covered in the said search operation. Subsequently, assessment of the Appellant was completed u/s 143(3) r.ws. 153A of the Act, wherein addition on account of share premium amounting to Rs. 4.50 crore and unsecured loans amounting to Rs 1,87,500/- for the A.Y. 2009-10 and unsecured loans amounting to Rs. 55 Lakhs for the A.Y. 2010-11. were made u/s 68 of the Act by treating the same as not genuine. 6.2.8. In the assessment order, the AO has referred to statement of Shri Devkumar Thakkar, wherein he had admitted that he was not aware of the transactions of this company and his name was used by one Shri Kirit Nagda in an unauthorized manner for making him director in this company. This statement, is however, not with reference to any document or any other evidence found during the course of search. 6.2.9. The primary contention of the assessee is that the assessment was previously conducted u/s 147 r.w.s.143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO was empowered only to make additions based on the incriminating material found and seized during the course of search operation. It is a material fact on record that the AO had failed to bring on record any incriminating material found during the course of search either during the course of the assessment proceedings or the remand proceedings, despite being provided with several opportunities. In fact, there is no discussion in the assessment order about any specific incriminating material, which have been found during the course of search operation in relation to the impugned share premium unsecured loans raised by the Appellant, neither any such material was brought on record during the remand proceedings. 6.2.12. In the detailed submissions made before me the assessee has contended that the Ld. AO has primarily relied upon the statement of Shri Dev Kumar Thakkar recorded u/s 132(4) of the Act. But, in a submission dated 19.12.2019, it was clarified to the Id. AO that Shri Thakkar has become director of the appellant company on 16.02.2009 and he was not associated with the day-to-day functions of this company and financial decisions of the company were taken by anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings as to the genuineness of the claim of the assessee despite the fact that the details of the transactions were duly filed during the course of assessment proceedings. It was therefore submitted by the assessee that even on merit there was no reason or occasion to make such additions which were made merely on the basis of conjecture and surmises. 6.2.15. I have considered the facts of the case, It is evident from the assessment order that the Ld. AO has not referred to any documents found or seized during the course of search: The additions are primarily based on the basis of statements of Shri Thakkar and Shri Bhoncha. Shri Bhoricha is an employee of the proprietorship concern of Shri Thakkar. On perusal of his statement, as reproduced in the assessment order, it is evident that he has merely stated that he is not aware of the existence of the assessee company at the given address and that Mr. Thakkar would be knowing about the company. As such he has not categorically said that the assessee company did not exist at the given address. Shri Devkumar Thakkar, in his statement have said that he was not aware of the transactions of the assessee company, which he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of capital formation cannot be taken to be representing only unaccounted funds or impeded. The sources of capital introduced in the assessee company was established during the original assessment proceedings. No evidence was found during the search to indicate introduction of unaccounted cash / funds in the form of share capital. Therefore, the contention of the assessee that the conclusion based on the facts relied upon by the ld. AO that the share capital introduced in the assessee company, are unexplained, is unsubstantiated and not based on any evidence found during the course of search appears to be justified. In fact, the Id. AO could not even find any evidence to treat the same as bogus during the course of enquiry conducted during the course of assessment proceedings as notices issued u/s 133(6) of the Act were duly replied and the impugned transactions were confirmed by the respective parties. 6.2.18. However, irrespective of the merit of the facts, what is required to be adjudicated as to these grounds is whether the Ld. AO had jurisdiction to make addition in an assessment u/s 153A for an assessment year which is not abated merely on the basis of statements rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 6.2.24. This position was reiterated by Hon'ble Delhi High Court in the case of Pr. CIT Vs. Best Infrastructure (India) Pvt. Ltd., 397 ITR 182 (Delhi.), in order dated 01.08.2017. The relevant finding of the Hon'ble High Court is reproduced as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1588(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6.2.29. 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 accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 158BC of the Act. 6.2.31. In view of the above finding of the Hon'ble High Courts statements of Shri Thakkar and Shri Bhoricha recorded under section 132(4) of the Act alone cannot be considered as incriminating material unless any corroborating incriminating material is found during the course of the search from the premises of the assessee. Hence, there is nothing on record to hold a view that the impugned additions were made on the basis of any incriminating material found and seized during the course of search. In the given facts and circumstances of the case, the view taken by the Id.AO on this issue in this case cannot be upheld as the AO did not have jurisdiction to make additions during the impugned assessment without referring to any incriminating material found during the course of search. The additions of Rs. 4.50 crore made on account of share premium received and Rs. 1,87,500/- on account of loans received are accordingly directed to be deleted. Grounds No. 1, 3 and 4 of the appeal are accordingly allowed. 4.4. All the issues that are in dispute before us have been addressed elaborately by the ld. CIT(A) both on legal grounds as well as on m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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