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TMI Blog2022 (6) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... icular fact that even the Ld. AO admitted the fact of not having any incriminating material found during the search of the assessee s premises. Quashing of the proceeding by the Ld. CIT(A) initiated u/s 153A against the assessee applying the ratio laid down by the judicial forums as indicated hereinabove is just and proper so as to warrant interference.Decided against revenue. - I.T. (SS)A. Nos. 448&465/Ahd/2019, I.T. (SS)A. Nos. 451&450/Ahd/2019, I.T. (SS)A. Nos. 452&463/Ahd/2019, I.T. (SS)A. No. 453/Ahd/2019, I.T. (SS)A. Nos. 454&466/Ahd/2019 And I.T. (SS)A. No. 464/Ahd/2019 - - - Dated:- 8-6-2022 - Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Vartik Choksi, C.A. with Shri Biren Shah, A.R. For the Revenue : Shri A.P. Singh, CIT DR. ORDER PER MADHUMITA ROY, JM: The bunch of appeals preferred by the Revenue are directed against the orders dated 02.07.2019, 03.07.2019, 01.07.2019 passed by the Ld. CIT(A)-11, Ahmedabad arising out of the orders passed by the ACIT, Central Circle-1(2), Ahmedabad dated 27.12.2016 26.12.2016 under Section 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961(here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. Ground Nos. 1 to 4 are basically on the common issue of addition of Rs. 94,33,504/- on bogus exempt long term capital on sale of shares. Thus, these are taken up and decided together. 4. The brief facts leading to the case is this that the appellant, an individual, mainly having income from share from partnership firm and also having income from interest, commission etc. filed its return of income under Section 139(1) of the Act on 30.09.2016 declaring income at Rs.3,38,875/-. Subsequently a search operation was conducted in the case of Accommodation Entry Provider Group on 04.12.2014. Consequently warrant of authorization under Section 132 of the Act was issued in the case of the assessee. Copies of loose papers were also seized from the residence of the appellant. Accordingly, a notice under Section 153A was issued whereupon the appellant filed the return of income of Rs.3,35,875/- on 21.11.2016. The Ld. AO initiated assessment proceeding and finally concluded with the addition of Rs.94,33,504/- as Cash credit under Section 68 of the Act and addition of Rs.2,54,130/- under Section 69C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through synchronized traders and therefore this long term capital gain in question from sale of scripts of SGSL is nothing but accommodation entries opted in lieu of payment of unaccounted cash and the payout received on sale of shares of Rs.94,33,504/- is treated as unaccounted cash credit under Section 68 of the Act. Further commission is being charged for providing/arranging capital gains to various parties ranging from 0.5% to 3% in such type of accommodation entries being provided and therefore an amount of Rs.2,54,130/- being 3% of Rs.84,71,004/- has been added to the income of the assessee under Section 69C of the Act. 7. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that no incriminating material was found from the premises of the appellant during the course of search under Section 132 of the Act and there is no mention of any such material in the assessment order too. Moreso, the Ld. AO admitted in the assessment order as the transaction completed long way back there would have been no reason to keep any incriminating material with the assessee. In support of his submission the Ld. Counsel appearing for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Ltd. and Shri Ganesh Spinners Ltd. Further enquiry revealed that (SGSL now named as Yantra Natural Resources Ltd.) no activity of the company namely SGSL were conducted at the premises at Hyderabad office, the said companies having meager profit and profession and its share price was abnormal. Furthermore, SEBI suspended the share trading of the said company by and under the order dated 25th August, 2015. On this premises the Ld. AO concluded that SGSL was controlled by SCS and the share prices were artificially managed by him. The appellant got accommodation entry of LTCG through Satish Chandra Shah and Pradeep Birewar by paying cash and therefore, the LTCG shown by the appellant was not considered as genuine and addition was made. 10. The main contention of the assessee is this that during the course of search no incriminating material was found from the premises of the appellant which we have further been considered Ld. CIT(A). We also do not find any mentioning of incriminating material in the assessment order. On the contrary, at page 76 of the assessment order the Ld. AO stated it is noted here that the transactions took place in Financial Year 2009-10 to 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the far end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al High Court in the case of CIT vs. Saumya Construction (supra)and since no incriminating material was unearthed during the search, no additions could have been made to income already assessed and concluded. 7. We have carefully 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 V/s Continental Warehousing Corporation [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12th May, 2004 was challenged by the respondent-assessee. 23. That Writ Petition was allowed and hence, the Revenue was in Appeal. 24. Mr. Ahuja's argument overlooks this factual aspect and when he relies upon the 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 substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during first appellate proceedings, it has categorically been admitted by Ld. AO that there was no incriminating material in the case of the assessee. Nothing has been shown to us to controvert these findings of Ld. AO. Therefore, the ratio 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, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating 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 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 V/s DCIT (ITA No.982/Mum/2020 dated 09/02/2021). The relevant observations were as under: - **** ***** **** 13. The Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla (supra) held that - completed assessments ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) agreeing for the addition there is no seized incriminating material found in the premises of the assessee in the course of assessment proceedings. When there is no incriminating material found in the course of search in assessee's premises the addition/disallowance cannot be made merely on the statements recorded in the course of the search proceedings. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changed circumstances the same shall apply mutatis mutandis. 18. Ground No. 8:- This ground has already been decided by us in IT(SS)A No. 448/Ahd/2019 for A.Y. 2011-12 in Ground No. 5 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. IT(SS)A No. 451/Ahd/2019(A.Y. 2011-12):_ 19. Ground Nos. 1 to 7:- These grounds have already been decided by us in IT(SS)A No. 448/Ahd/2019 for A.Y. 2011-12 in Ground No. 1 to 4 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 20. Ground No. 8:- T his ground has already been decided by us in IT(SS)A No. 448/Ahd/2019 for A.Y. 2011-12 in Ground No. 5 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. IT(SS)A No. 450/Ahd/2019(A.Y. 2012-13):_ 21. Ground Nos. 1 to 7:- These grounds have already been decided by us in IT(SS)A No. 448/Ahd/2019 for A.Y. 2011-12 in Ground No. 1 to 4 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 22. Ground No. 8:- This ground has already been decided by us in IT(SS)A No. 448/Ahd/2019 for A.Y. 2011-12 in Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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