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TMI Blog2021 (12) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... -13 to AY 2017-18 assuming that the assessee was searched. Thereafter, he also issued notices u/s 142(1) of the Act dated 11-11-2019 calling for several details/information. Later on, the AO realized the mistake that the assessee was not the 'searched person'. Thereafter the AO vide order sheet noting dated 05-12-2019, observed that a bunch of loose sheets comprising of 90 pages was seized from the premises of the Sagar Group, bearing identification mark SST-01. According to him, Pages 61 to 69 of SST-01 pertained to the assessee, which comprised of journal ledger and bank ledger of the assessee for the period 01-04-2010 to 04-07-2011. The AO was of the view that the said document seized from the office premises of M/s Sagar Steels had a bearing on the determination of total income of the assessee for seven (7th) assessment years prior to the date of search [however according to assessee, it is the ninth (9th ) AY as per law which will be discussed (infra)]. The AO accordingly issued notices u/s 153C of the Act for six assessment years i.e. AYs 201213 to 2017-18 and for the seventh AY i.e, relevant assessment year under consideration i.e., AY 2011-12. The assessee filed return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief to the assessee on the following grounds viz., (a) the satisfaction note was recorded on factually perverse and incorrect facts and for that reason the proceedings initiated u/s 153C of the Act was bad in law and thus the consequent order passed was void so it was quashed, (b) the AO had initially issued notices u/s 153A of the Act and thereafter switched over to proceedings u/s 153C of the Act without consigning (sic) the earlier proceedings and therefore according to him, the assessments which were framed u/s 153C based on the returns filed u/s 153A of the Act were a nullity and (c) the AO had not issued the mandatory notice u/s 143(2) of the Act after the assessee had filed the return of income and therefore non-issuance of such notice vitiated the assessment for AY 2011-12. 3. Being aggrieved by the order of Ld. CIT(A), the Revenue is now in appeal before this Tribunal. However, according to Ld. AR Shri Dudhwewala, the assessee had also challenged the legal validity of proceedings initiated under section 153C of the Act for AY 2011-12 on other grounds as well and also the merits of the addition, which was not adjudicated by the Ld. CIT(A), for which he has filed the Cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption of jurisdiction. Further according to him, the Pages 61 to 69 of SST-01 found and seized from the premises of M/s Sagar Steels did not reveal any such 'asset' which had escaped assessment. Shri Dudhwewala contended that the scope of fourth proviso to Section 153A of the Act was restricted in the sense that the assessment for four years beyond the six assessment years could be reopened only where any income represented in form of 'asset' had escaped assessment. Meaning thereby, only if any unexplained or undisclosed asset is found in the course of search, which can be added or assessed u/s 69 or 69A or 69B of the Act, that the AO can validly initiate proceedings u/s 153C for such relevant assessment year. According to Shri Dudhwewala, when the Parliament has specified the jurisdictional fact for invoking jurisdiction u/s 153A/C of the Act for AY 2011-12 viz., the AO ought to have in his possession undisclosed assets of assessee qua the AY, then this jurisdiction u/s 153A/C cannot be invoked with the aid of any material which reveal unexplained expenditure or unexplained cash credits, even if found during search. Shri Dudhwewala submitted that it was not the AO's case that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A." (emphasis supplied) 6. Regarding the second legal challenge according to Shri Dudhwewala, it is not the case of the AO that the assessee's case fell under clause (a) of Section 153C(1) of the Act in as much as there was no money, bullion or jewellery or any other valuable article or thing found in the course of search at Sagar Group which 'belonged to' the assessee. Inviting our attention to the satisfaction note, he submitted that the AO had tried to make out a case under Section 153C(1)(b) of the Act by stating that Pages 61 to 69 of SST-01 found and seized from the premises of M/s Sagar Steels pertained to the assessee and which had a bearing on the total income of the assessee. He further pointed out that the assessment for AY 2011-12 did not abate [since it was not pending on the date of search] and therefore the AO (subject to validly assuming jurisdiction) could have only made such additions in this unabated assessment which were based on any incriminating material or document found in the course of search. Taking us through the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the AO of assessee when in the capacity of AO of M/s Sagar Steels did not record the satisfaction which was essential condition precedent u/s 153C of the Act, the assessment framed consequent thereto was ab inito void. 9. Per contra, the Ld. Addl. CIT DR Shri Nongothung Jungio contended that there was no requirement in law for the AO to have pointed out the 'asset' to the assessee for which the relevant assessment year 2011-12 was being re-assessed u/s 153C read with fourth proviso to Section 153A of the Act. According to him, any item of income escaping assessment unearthed in the course of search in relation to 7th-10th AY was amenable to the fourth proviso to Section 153A of the Act. He further contended that the Pages 61 to 69 of SST-01 revealed that the assessee had sold shares during the year to several bodies corporate, which according to him was not genuine, and therefore he urged that this material had a bearing on determination of total income of the assessee and thus, the AO had validly recorded satisfaction u/s 153C(1)(b) of the Act and made addition in the unabated assessment for AY 2011-12. He further submitted that, since the AO of the assessee and the AO of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 A search operation u/s. 132 of the Income Tax Act, 1961, was conducted on 22.12.2017 at the business premise of M/s. Sagar Steels at S. J. Road, Athgaon, Guwahati. In the course of search a bunch of loose sheets were seized, having put identification mark SST-01, containing pages 1 to 90. Examination of pages 61 to 69 reveal that they are journal ledger and bank leger of M/s. Fortune Vanijya Pvt. Ltd. For the period 01.04.2010 to 04.07.2011. Further examination of the ledgers revealed that during the FY 2010-11, M/s. Fortune Vanijya Pvt. Ltd. had liquidated its investments in shares and converted it into cash held with bank. Shri Hemant Agarwal, in his statement recorded u/s. 132(4) of the Act had accepted that he had acquired the shares of M/s. Fortune Vanijya Pvt. Ltd. and is one of the Directors of the company. In view of the observation made above, I am satisfied that the pages 61 to 69 of the bunch of loose sheets having identification mark SST-01 pertain to and the information contained therein relates to M/s. Fortune Vanijya Pvt. Ltd. AABCF0295Q. I am also satisfied that such documents seized from the office premise of M/s. Sagar Steels on 22.12.2017 have a bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017." Explanation 1.- For the purpose of this sub-section, the expression 'relevant assessment years' shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2. - For that purposes of the fourth proviso, 'asset' shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. 13. From a reading of the aforesaid fourth proviso to Section 153A of the Act, it can be seen that the expression used by the Parliament, while enlarging the power of the AO to extend the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in possession of this jurisdictional fact prior to issuance of notice u/s. 153C for AY 2011-12. Since determination of this legal issue in favour of assessee will go to the root of the very jurisdiction of AO to even issue notice in this case for AY 201112 u/s 153A/C of the Act, let us first examine the same. For this, first of all we have to understand, what is jurisdictional fact? For that, let us look at the ruling of the Hon'ble Supreme Court in the case of Arun Kumar &Ors. Vs Union of India &Ors. 2006 (12) SC 121 wherein it was held/explained as to what is jurisdictional fact. The Hon'ble Supreme Court explained that, a 'jurisdictional fact' is a fact which must exist, before a Court, Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one, on whose existence or non-existence, depends the jurisdiction of a court, a Tribunal, or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he District Collector does not have the jurisdiction to acquire the land. The Hon'ble Supreme Court ruled as under; "In our opinion, the condition imposed by s. 17(1) is a condition upon which the jurisdiction of the State Government depends and it is obvious that by wrongly deciding the question as to the character of the land the State Government cannot give itself jurisdiction to give a direction to the Collector to take possession of the land under s. 17(1) of the Act. It is well-established that where the jurisdiction of an administrative authority depends upon a preliminary finding of fact the High Court is entitled, in a proceeding of writ of certiorari to determine, upon its independent judgment, whether or not that finding of fact is correct". 16. In State of M.P. & Ors. v. D.K. Jadav, AIR 1968 SC 1186 : (1968) 2 SCR 823, the relevant statute abolished all jagirs including lands, forests, trees, tanks, wells etc., and vested them in the State. It, however, stated that all tanks, wells and buildings on 'occupied land' were excluded from the provisions of the statute. The Hon'ble Supreme Court held that the question whether the tanks, wells etc., were on 'occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approached the Hon'ble Supreme Court. Allowing the appeal and setting aside the order of the Division Bench of the Hon'ble High Court, the Hon'ble Apex Court held as under: "The Appellate Bench appears to have been under the impression that the Income-tax Officer was the sole judge of the fact whether the firm in question was resident or non- resident. This conclusion, in our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned single Judge has done in this case, that the Income-tax Officer had clutched at the jurisdiction by deciding a jurisdictional fact erroneously, then the assesses was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi- judicial authority like the Income-tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen." 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th years) preceding the searched assessment year is the jurisdictional fact; and if the jurisdictional fact is in the possession of the AO, [and possession means physical possession; or personal knowledge of the existence of the undisclosed asset which need to be spelled out in clear terms (not vaguely) qua assessee qua AY 2011-12 discovered during search.] then he can assume jurisdiction u/s. 153C/153A of the Act and issue notice to assess the assessment of the escaped income for these assessment year's (7th to 10th year) which is the 'fact in issue' or 'adjudicatory fact'. On the other hand if the AO did not have in his possession the jurisdictional fact, then he is debarred from invoking/issuance of notice u/s 153C/153A of the Act for the 7th-10th AY preceding the search. 19. Having held so, let us examine the next argument of Shri Dudhwewala that, the Parliament by specifying the jurisdictional fact as 'undisclosed asset' valued Rs. 50 Lakhs or more, has impliedly excluded other items of income viz., liabilities/credit, unexplained expenditure etc. A reading of the fourth proviso to section 153A of the Act and Explanation (2) to fourth proviso to section 153A of the Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital/ Reserves/Loan/ Current Liabilities Immoveable Property/ Loans & Advances/ Shares/ Bank Balance 21. The above view of ours get bolstered from reading of Explanation 2 appended to the fourth proviso, which defines 'asset', for the purpose of fourth proviso to Section 153A, to include i) immovable property, ii) shares and securities , iii) loans and advances & iv) Deposit in bank. Hence, where search action u/s 132 of the Act reveals that, (i) the assessee owns an undisclosed immovable property, or (ii) information has been gathered which shows that the assessee had given loans or advances outside the regular books or (iii) search has revealed unaccounted investments held by assessee in shares & securities, which do not form part of regular books of accounts or (iv) if undisclosed bank accounts having deposits, have been found in the course of search, pertaining to the 7th-10th AY preceding the search; then having in his possession this jurisdictional fact, the AO may assume jurisdiction under the fourth proviso to Section 153A of the Act for the relevant seventh to tenth assessment year preceding the searched assessment year. Hence, the most important aspect is that, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly bars the AO to issue notice for the extended period (7th - 10th AY) unless the AO is in possessions of the jurisdictional fact of undisclosed asset valued Rs. 50 lakh or more qua the assessee qua the extended assessment year. So the Legislative intent is very clear that the AO would be empowered to issue notice u/s 153A/153C only if he is in possession of the jurisdictional fact otherwise he cannot issue notice u/s 153A/153C of the Act. No such bar can be seen in the case of six AY's preceding the searched AY. So the Parliament while extending the jurisdiction of AO by Finance Act, 2017, for 7th - 10th AY has prescribed this particular safeguard against arbitrary exercise of power by the AO u/s 153A/153C of the Act. It is thus prescribed in the fourth proviso that, no notice shall be issued by AO, unless the AO is in possession of the undisclosed assets valued Rs. 50 lakh or more qua the assessee qua the AY. 25. Keeping in mind the above, we note that, the assessee had specifically objected to the AO's action of reopening the unabated assessment for AY 2011-12 u/s 153C of the Act and had requested the AO to give details of the purported 'assets' (undisclosed/unaccounted assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized material bearing identification mark SST-01 for assuming jurisdiction u/s 153C read with the fourth proviso to Section 153A of the Act. The satisfaction note however does not reveal the 'asset' which escaped assessment, and which was discovered from the aforementioned seized material. We find that, the AO himself has observed that these pages comprise journal ledger and bank ledger which evidenced that the assessee had liquidated its investments in shares and proceeds were received in bank. The Ld. AR, Shri Dudhwewala, has shown us that these ledgers were print outs from the regular books of accounts of the assessee maintained in computerised system and all the entries mentioned therein formed part of regular books of accounts. We find ourselves in agreement with him, that the contents of these seized material were neither incriminating in nature nor did it in any manner reveal income represented in form of 'asset' which had escaped assessment. 28. It is also not the AO's case that these investments in shares found mentioned in the seized material, were unaccounted or their source of acquisition was unexplained so as to constitute 'asset' escaping assessment. Rather the AO st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to the fourth proviso to Section 153A of the Act, which had escaped assessment for AY 2011-12 and did not make any addition to the income of the assessee u/s. 69, 69A or 69B of the Act. So, therefore, according to Shri Dudhwewala, since the AO did not make any addition on account of escaped income represented in form of undisclosed/unaccounted asset, the AO could not have made any other addition, in respect of cash credit u/s. 68 of the Act. For this, he relied on the ratio of the decisions rendered by the case of Hon'ble High court of Bombay in the case of Jet Airways (331 ITR 236) & Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (336 ITR 136), though in the context of reopening u/s. 147 of the Act. So, according to Shri Dudhwewala, the AO's action of making addition u/s. 68 of the Act, was even otherwise, legally impermissible. 30. From our discussion (supra) it is clear that, only if any of specified 'asset/s' as defined in Explanation (2)is unearthed during the course of search and the acquisition of such an 'asset' being unexplained or undisclosed, which is valued Rs. 50 Lakhs or more, that the AO can be said to be in possession of the jurisdictional fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O gets the authority to assess/reassess the income of a searched person or other person u/s 153A/153C for the extended assessment years (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed. If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment order; then the AO cannot legally proceed further with the assessment/reassessment and/or make any other items of additions/disallowances, for the reason that the jurisdictional fact is absent or not in existence at the first place when he usurped the jurisdiction. In the light of the aforesaid discussion, and in our considered opinion, this submission of Shri Dudhwewala is well founded and deserves to be accepted. 31. 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 sale proceeds of Rs. 9,63,00,000/- u/s 68 of the Act. As noted earlier, the additions on account of unexplained 'cash credit', coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson" which is a special provision in respect of assessment of income of "any other person" (third party) against whom no search u/s. 132 or requisition u/s. 132A of the Act was carried out, provided certain condition precedents are satisfied as envisaged under section 153C of the Act. Section 153D of the Act is the provision regarding prior approvals to be obtained by the AO for completing the assessment in case of search or requisition u/s 153A/153C of the Act. 34. From a reading of Section 153A of the Act, it is noted that where a search u/s. 132 of the Act or requisition u/s 132A of the Act is made, the AO of the searched person is ordinarily empowered to issue notice to the searched person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. However, in case the AO of the searched person finds that:- a any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or b any books of account or doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly followed. 35. The rationale behind the above discussed exercise is because, ordinarily, in terms of Section 132(4A)(i) of the Act, when any document is found in the possession or control of any person in the course of a search, it may be presumed that such document belongs to such person i.e. the searched person. Section 292C(1)(i) of the Act further raises a presumption regarding the asset, books of accounts, documents etc. found in the course of search that it belongs to the person from whom the said assets/documents were found during the course of search/survey u/s. 132/133A of the Act. In other words, whenever asset/document/books of account are found from a person who is being searched, the normal presumption is that the said asset/document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the asset/document in fact belongs/pertains/relates to somebody else (third party, like the assessee in this case). There must be some cogent material available with the Assessing Officer, which was unearthed during the course of search, before he/she arrives at the satisfaction that the seized asset/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships have upheld the decision of the Hon'ble Bombay High Court reported in 378 ITR 84. The Hon'ble Supreme Court has held that, unless and until the AO can establish document-wise (or asset wise) correlation between what has been seized from the 'Searched person' - and - how the same is incriminating in nature qua each of the assessment years in question for which jurisdiction u/s. 153C is sought to be invoked for the 'other Person'[ third party] - then the notice issued under section 153C to the assessee/third party qua the said assessment year would be without satisfying the jurisdictional fact required to invoke section 153C of the Act. We may gainfully refer to the following excerpts of the decision of the Hon'ble Supreme court in Sinhgad Technical Education Society's case (supra), wherein their Lordship took note of the Hon'ble High Court's findings while confirming Tribunals view which is as under:- "6. The tribunal has found that incriminating material seized and stated to be pertaining to all six assessment years did not establish any co-relation document-wise with the assessment year in question. In other words, the tribunal concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to indicate as to in which educational courses, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. 9. We are of the opinion that the tribunal's conclusion cannot be termed as perverse and given the above-noted factual background. None of these appeals raises any substantial question of law. They are accordingly dismissed. No costs." 38. And the aforesaid finding of Hon'ble High Court has been affirmed by the Hon'ble Supreme Court by observing as under: "18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to section 153A of the Act as it applies to proceedings under section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Ld AO which can be related to the evidence found, it does 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." 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 complete assessment proceedings. Insofar as pending assessments are concerned, the jurisdiction to make the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a judgment and order dated December 28, 2007 by which the learned Income-tax Appellate Tribunal, "E" Bench, Kolkata, in CIT v. Veerprabhu Marketing Ltd. ITA Nos. 2172 and 2174/Kol/2006, pertaining to the assessment years 199899 and 1999-2000, and I.T(SS) A. Nos. 61-63/Kol/2007, pertaining to the assessment years 2001-02, 2002-03 and 2003-04, allowed the appeals preferred by the assessee. The aggrieved revenue has come up in appeal. ** ** ** 2. Mr. Jain, learned Advocate appearing for the assessee, submitted as follows: (a) The assessment under section 153C read with section 153A read with section 144 of the Income-tax Act was altogether without jurisdiction because such assessment was made for all the five years on the basis of survey conducted under section 133A of the Income-tax Act. He submitted that the power under section 153C read with section 153A cannot be exercised on the basis of any discovery made during survey under section 133A. (b) His next submission was that in any event, during the survey, no incriminating material was found which may have led the revenue to exercise power under section 153C read with section 153A. 4. He contended that even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. The appeal is, therefore, dismissed. " (emphasis supplied) 43. Gainful reference may also be made to the following observations made by the Karnataka High Court in the case of CIT vs IBC Knowledge Park (P) Ltd. [69 taxmann.com 108], which is as follows: "Materials such as books of account, documents or valuable assets found during a search should belong to a third party which would lead to an inference of undisclosed income of such third party. Such an inference should be recorded by the Assessing Officer having jurisdiction over the searched persons and communicated to the Assessing Officer having jurisdiction over such third party along with the seized documents and other incriminating materials on the basis of which the Assessing Officer having jurisdiction over such third party would issue notice under section 153C. On receipt of the aforesaid material, the Assessing Officer having jurisdiction over such third party would proceed against the said third party. Thus, where no material belonging to a third party is found during a search, but only an inference of an undisclosed income is drawn during the course of enquiry, during search or during post-search enquiry, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had sold its investments; appropriate entries in its books were routed through journal day book which was part of the assessee's books of account maintained in the course of regular business and the bank ledger reflected the payments received through banking channel upon sale of investments. Having examined the same, we also find it to be print-outs of the day books from the regular books maintained electronically by the assessee. On examination of the entries in the document, it is noted that the journal ledger inter alia contains journal entries passed during FY 2010-11 in relation to investments sold to several parties. And we find that the entries in the bank ledger tallied with the bank statement of the assessee. We thus find that these ledgers therefore formed part of the regular books of the assessee and did not have any incriminating content whatsoever. When confronted with the same, even the Ld. CIT, DR was unable to correlate or link as to how the contents of this ledgers led to unearthing of unexplained income, that too represented by an "asset" by the AO. We also note that the investments which were sold during the relevant year and which find mention in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Incriminating material also comprises of document or evidence found in the course of search which demonstrates or proves that what is apparent is not real or what is real is not apparent. In other words, if an assessee has recorded transactions in his books or other documents maintained in the ordinary course then in order to hold the material or evidence found in the course of search to be incriminating in nature, the seized document should lead to the conclusion that the entries made in the books of the assessee do not represent true and correct state of affairs. The evidence unearthed or found in the course of search should establish that the real transaction of the assessee was something different than what was recorded in the regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regular maintained or the returns filed with the authorities from time to time etc. The nature of the ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees 33. This Court does not consider it necessary to examine the merits of the case as far as the deletions by the CIT (A) of the additions made by the AO under Section 153C of the Act are concerned. In any event, a detailed analysis has been undertaken by the CIT (A) of the materials produced by the Assessee which justified the deletion of such additions. Even on this score, no interference is warranted with the impugned order of the CIT (A)." 49. We may, in this regard, gainfully refer to the decision of this Tribunal in the case of Daffodil Vincom Pvt Ltd Vs DCIT in ITA (SS) Nos. 95 & 96/Kol/2018 dated 28.06.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that the same cannot be treated as incriminating material found during the course of search." 50. We note that similar issue also came up for consideration before the Delhi Bench of this Tribunal in the case of HBN Insurance Agencies Vs ACIT in ITA No. 3783/Del/2014 dated 23.12.2019. In this case the AO had added cash deposits made in bank account in the assessments framed u/s 153A of the Act. On appeal, the assessee contended that the additions made u/s 68 were not based on any incriminating material found in the course of search whereas the Revenue claimed that the balance sheet, bank statements etc. found and seized in the course of search constituted 'incriminating material' which justified the impugned addition. The Tribunal rejected the Revenue's argument and deleted the addition by observing as under: "In our considered opinion, the profit and loss account and balance sheet of the assessee company, by any stretch of imagination, cannot be considered as incriminating material. It is also not the case of the Revenue that the bank accounts were unearthed during the search operation. On these facts, the ratio laid down by the Hon'ble High Court of Delhi in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwal, we have to see whether the statement does contain any material which implicates the assessee or based on which one may infer any undisclosed income in the hands of the assessee. The relevant extracts are as follows: "Q.No.10: A computer printout has been taken from your office computer which form a part of this statement as Annexure 1 wherein it is clearly and explicitly mentioned that you had received cash in FY 2010-11 which was diverted to for the purchase of Jamakharchi company namely M/s Fortune VanijyaPvt Ltd. Which was further diverted to M/s. Bajrangbali Ispat Pvt Ltd and M/s. Sagar hardware and Steels Pvt Ltd, Please offer your comments. Also please name the parties from whom you received cash. Ans: Yes sir, I confirm that I have taken accommodation entry in the form of Jamakharchi companies namely M/s fortune vanijyaPvt Ltd. which I further diverted to my group companies. I am disclosing the entire amount of accommodation entry taken as under: Sl.No Name of the Companies Amount of disclosure in financial year 2011-12 (in Rs.) Amount of disclosure in financial year 2013-14 (in Rs.) Amount of disclosure in financial year 2014-15 (in Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized hard disk was given. And even this document was traceable in the copy of hard disk obtained upon mahazernama. To bolster this fact, he invited our attention to the letter submitted before the AO [Page 69 to 70 of the Paperbook] and also the sworn affidavit of Shri Hemant Agarwal, placed at Pages 112 to 114 of the paper book, affirming the aforesaid facts. When confronted with these facts, the Ld. CIT, DR was unable to explain the same but he chose to stand by the statement taken by the Revenue from Shri Agarwal. Having regard to these peculiar facts of the case, the credibility of the purported document 'Annexure -1' is under serious doubt, therefore we are of the opinion that it is un-safe to rely on it, since the very existence of 'Annexure -1' which forms the basis of the statement given by Shri Agarwal to his reply to Q No. 10, had been challenged by the assessee & Shri Hemant Agarwal and such a serious allegation had not been rebutted by Revenue. And even if for argument sake 'Annexure -1' was seized, then if the AO was using it against the assessee (third party in this case) he was bound by law to furnish/confront the same with assessee, without which no adverse view c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided the order sheet noting of the satisfaction recorded on 05-12-2019 and no details of the approval sought for u/s 153D and the approval granted by the Addl. CIT has been provided by the AO. The Ld. CIT, DR was unable to controvert these facts. However, since we have already held the order u/s 153C/143(3) to be unsustainable in law, for the reasons set-out above, we are not inclined to return our findings with regard to the Ground No. 4 raised in the cross objections, since it has now become academic in nature. 60. Apart from the above, the assessee had also challenged the merits of the additions in Ground No. 5 of the Cross Objections. However since we have already held the usurpation of jurisdiction u/s 153C of the Act to be invalid and also deleted the addition made u/s 68 of the Act for want of incriminating material found & seized in the course of search, there is no need for us to adjudicate the merits of the addition has it has become academic in nature. 61. Although we have allowed the legal issue raised by the assessee in the Cross Objections and accordingly quashed the order impugned before us holding it to be ab- initio void and a nullity, but for the sake of compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be issued and omission to do so cannot be a procedural irregularity and the same is not curable. It is to be noted that the above said judgment was in the context of s. 158BC. Clause (b) of s. 158BC expressly provides that "the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply. This is not the position under s. 153A. The law laid down in Hotel Blue Moon, is thus not applicable to the facts of the present case. 64. In view of the above therefore, the Revenue succeeds in Ground No. 3 of their appeal. 65. The last ground of the Revenue pertains to the Ld. CIT(A)'s action of holding the impugned order passed u/s 153C of the Act to be a nullity on the premise that it was passed consequent to the return of income filed by the assessee in response to earlier notice issued u/s 153A of the Act. The assessee has supported this finding of the Ld. CIT(A) in Ground No. 3 of his Cross Objections. We note that the Ld. DR has rightly pointed out that, the Ld. CIT(A) had erroneously observed that the AO had first issued notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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