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TMI Blog2023 (10) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... t Kolkata in ITA Nos.126 to 131/GAU/2020 arising from assessment years 2011-12 to 2015-16 and 2017-18. As all the appeals involve identical factual and legal issues, hence, the same have been heard together and shall be decided by this common judgment. 3. The revenue has filed the 3(three) appeals aforestated proposing the following substantial questions of law:- "ITA No.10/2022 1. Whether, on the facts and circumstances of the case, Hon'ble ITAT, Gauhati Bench, Guwahati is justified in holding that the notice under Section 153A was issued by the Assessing Officer without authority of law and without satisfying the essential jurisdictional fact? 2. Whether, on the facts and circumstances of the case, Hon'ble ITAT, Gauhati Bench, Guwahati was justified in holding that the seized document GCL-HD-1 referred by the Assessing Officer for justifying the additions made under Section 68 of the Act did not constitute 'incriminating material'? Proposed substantial question of law as per the Interlocutory Application filed in ITA No.10/2022 - Whether under the present facts and circumstances of the case seized documents GCL-HD-1 are incriminating materials relevant for making asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king assessment under Section 153A and 153C of the Income Tax Act? 2. Whether, on the facts and circumstances of the case, Hon'ble ITAT, Gauhati Bench, Guwahati was justified in holding that the assessee had discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transactions involving receipt of share application monies? 3. Whether, in the facts and circumstances of the case, Hon'ble ITAT, Gauhati Bench, Guwahati was justified in deleting the addition under Section 68 of share application money of Rs.22,22,99,990/- received from Prefer Infrastructures Private Limited, Capital Steel Trading Private Limited and Consistent Constructions Private Limited and Transparent Tie Up Trafin Private Limited?" 4. Mr. Keyal, learned counsel for the appellants seeking admission of the appeals on the proposed substantial questions of law reproduced (supra) urged that the view taken by the learned Income Tax Appellate Tribunal (ITAT) that the documents seized during the search proceedings being the GCL-HD-1 (Goldstone Cements Limited Hard Drive-1) did not constitute incriminating material and thus reassessment under Sections 153A and 153C of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 23. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/ unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/ unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs.50 lakhs or more; and only thereafter the AO can venture to make any other additions/disallowance which are not in the nature & character of 'Asset' but represents undisclosed/unexplained income/expenditure/credit etc. Perusal of the assessment order impugned before us, shows that that AO did not make any addition/s in respect of escaped/undisclosed asset in the relevant AY 2011-12. We therefore find ourselves in agreement with Shri Dudhwewala that, unless the AO made addition/s of Rs.50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. liabilities like credit entry etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153A of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs.50 lakhs or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the 7th to 10th AY. It is therefore incumbent upon the AO to show that the key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd deserves to be accepted. 8.23. In view of the above and on perusal of the impugned re-assessment order, we note that the only addition made by the AO in AY 2011-12 was on account of unexplained cash credit represented by share application monies of Rs.5,38,35,000/- u/s 68 of the Act. According to the AO, the source of source of the monies received from shareholder, M/s Hari Trafin Pvt Ltd was not properly explained, and therefore the same was added as unexplained cash credit u/s 68 of the Act. As noted above, the additions on account of unexplained cash credit and that too share capital, which is in the nature of 'liability' could not have been made by AO, unless he first made an addition of undisclosed 'asset' valued at Rs.50 Lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO's hand or in his possession when he assumed jurisdiction u/s 153A for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153A of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the contents of the seized document GCLHD-1, it is first relevant to understand as to the meaning of the expression "incriminating material" or evidence. There can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary for the AO to establish that the information, document or material, whether tangible or intangible, is of such nature, which incriminates or militates against the person from whom it is found. Some common forms of incriminating material, inter alia, are for instance, where the search action u/s. 132 of the Act reveals information (oral or documentary) that the assets found from the possession of the assessee in form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income (which includes earlier AY's return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible, which suggests or leads to an inference that the assessee is conducting transactions outside the reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts did not represent the true state of affairs and rather that can be the starting point of inquiry to un-earth further material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document found in the course of search as incriminating in nature qua the assessee justifying the additions in unabated assessments. In other words, any and every seized material, which comes in AO's possession cannot be construed as 'incriminating material' straightaway. For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as 'incriminating material' unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to understand or correlate so as to justify the AO's inference of undisclosed income from such seized incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition/s made u/s 68 of the Act in the orders impugned before us, did not constitute 'incriminating material' and therefore no addition/s was legally permissible in the assessments framed u/s 153A for the AYs 2011-12 to 2015-16 for which the assessment did not abate, when the search was conducted on 22-12-2017. The assessee thus succeeds on Question (B) as well. Accordingly Ground No. 3 of the Revenue's appeal for AYs 2011-12 to 2015-16 thus stands dismissed." (Emphasis supplied) 11. The issue whether a document, which in these cases is the electronic device in the form of a hard drive extracted from the computer of the assessee during search conducted in the year 2017 constitutes incriminating material or not, would unquestionably require evaluation, assessment and appreciation of contents of such document which is an exercise of evaluation of evidentiary worth of the document. Thus, this Court has no doubt in its mind that the conclusions recorded on the nature of contents of the document by the competent forum, be it the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal as to whether the same was incriminating or not, would definitely be findings of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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