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TMI Blog2024 (6) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 AY 2014-15, the addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. Further in the case of IBC Knowledge Park Pvt. Ltd. [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT] had held that unless material seized during the course of search which suggest undisclosed income and are incriminating in nature, jurisdiction u/s 153C of the Act cannot be assumed. Same view has been taken by Hon ble Supreme Court in the case of Abhisar Buildwell (P) Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] - Decided in favour of assessee. Validity of assessments u/s 153A consequent to search action u/s 132 - AY 2015-16 - HELD THAT:- The assessment in this case was to be completed u/s 153A of the Act and the AO was under a statutory obligation to consider entire material irrespective of the place from where it was found whether assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are in the nature of dumb documents having no evidentiary value. The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondent- assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands. We find that the conclusions reached by the Assessing Officer are merely based on presumptions and assumptions without bringing corroborative material on record. It is settled position of law that no addition in the assessment can be made merely based on assumptions, suspicion, guess work and conjuncture or on irrelevant inadmissible material. Thus a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. In view of the above discussion, we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4) of the Act supported by the unsubstantiated loose slips. Accordingly, the addition is deleted though we are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to be considered as income from normal business of the assessee. Revenue authorities were not able to submit any evidence to show that such income is not connected with the business income of the assessee or accumulated from non-recognising sources. Hence, all the incomes earned by the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69 or 69A or 69B or 69C of the Act. Hence, taxing such income at special rate u/s 115BBE of the Act is improper. It is settled principle of law that when there is no separate source of income identified during the course of search action or survey or during the course of assessment proceedings or appellate proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only. For this purpose, we place reliance on the judgement of Deepak Setia [ 2023 (9) TMI 942 - ITAT AMRITSAR] Hence, the addition sustained by CIT(A) u/s 69B r.w.s. 115BBE has to be treated as income from business. - Shri Chandra Poojari, Accountant Member And Shri Keshav Dubey, Judicial Member For the Assessee : Shri C. Ramesh, A.R. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search u/s. 132(4) of the Act. 3. The CIT(A) erred in deleting the addition ignoring the fact that the additions made was based on estimate slips found during the course of search which means that there was material found during the search proceedings. 4. The CIT(A) erred in deleting the addition ignoring the fact that the assessee offered the additional income of Rs. 4,11,86,426/- to tax in the statement u/s. 132(4) only after being confronted with the evidences found during the course of search. 5. The CIT(A) erred in giving relief to the assessee without going into the merits of the case. 6. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order to be restored. 4. In ITA No. 1156/Bang/2023, the assessee has raised following grounds of appeal for the AY 2017-18. 1. The order of the learned Commissioner of Income Tax (Appeals)-2, Panaji, Goa is opposed to the facts of the case and law applicable to it. 2. The learned Commissioner of Income Tax (Appeals)-2, Panaji, Goa erred in holding that, stock of jewellery valued at Rs. 1,36,73,613/- found at the residence of partners has to be considered as undisclosed inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the decision of Hon'ble Supreme Court as below: PARA 5 5. We have heard learned counsel for the respective parties at length. The question which is posed for consideration in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132A or not, i.e., whether any addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under Section 132 A of the Act, 1961 or not. PARA 8 8. For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of an incriminating material. PARA 13 13: for the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore there being no assessment under section 143(1 )(a), the question of change of opinion, as contended, does not arise. (Emphasis supplied) (vi) Therefore, as the Ld.CIT(A), in his orders for A. Y. 2013-14 to A.Y. 201516 has The Ld. CIT(A) has made SIMILAR ERRONEOUS STATEMENTS IN PARA 4.7 (A.Y.2013-14). PARA 4.8 (A.Y.2014-15) PARA 4.8 (A.Y.2015-16) and MISPLACED HIS RELIANCE on the decision of Hon'ble SC, as the decision of Hon'ble Court of India in the case of Principal Income-tax, Central-3 vs Abhisar Buildwell (P) Ltd. (2023) 149 Taxmann.com 399 (SC) IS ON completed/unabated assessments and as NO assessments were made by the A.O in the case of appellant for the A. Y. 2013-14 to A.Y. 2015-16, the order of Ld. (A) BEING BAD IN LAW AND ON ERRONEOUS FACTS IS TO BE S ASIDE and order of A.O be restored. 7. The ld. A.R. for the assessee submitted briefly explaining the facts of the case stated that the assessee M/s. S. Ramachandra Setty Sons, a partnership firm carrying on business of trading in gold jewellery and also silver articles. Action u/s. 132 of the Act was conducted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search party relates to F.Y.2016-17 relevant to A.Y.2017-18 and not F.Y.2012-13 relevant to A.Y.2013-14. There was no incriminating material found during the course of search for the A.Y.2013-14. 7.3 The ld. A.R. submitted that the ld. CIT(A) has deleted the addition with elaborate discussions in paras 4.6 4.7 of his order which is extracted hereunder: - 4.6 The rival submissions have been considered. It is a fact that the return for assessment year 2013-14 falls under the category of unabated assessment case as there were no pending assessment proceedings when the search was initiated on 24.06.2016. It is also a fact that there were no incriminating material relevant to A.Y.2013-14 found during the course of search. All the seized materials belong to A.Y.2017-18 based on which the admission was made by the appellant for A.Y.2013-14 on account of unaccounted sales. However, this statement was retracted later. 4.7 In view of the fact above, the claim of the appellant is accepted because in respect of completed/unabated assessments, no addition can be made by the AO in the absence of any incriminating material found during the course of search u/s. 132 of the Act. From the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(2) of the Act. Consequently, no assessment could be framed u/s 153A of the Act as there was no seized material to reopen or reassess the assessment of the assessee for the assessment year 2013-14 2014-15. As such, these assessments to be quashed as ab-initio to assume jurisdiction u/s 153A of the Act. 8. We have heard the rival submissions and perused the materials available on record. There was a search in this case on 24.6.2016. Consequently, the assessment for the assessment year 2013-14 2014-15 are reopened by issuing notice u/s 153A of the Act on 13.3.2017 and the assessment for the assessment years 2013-14 2014-15 were framed u/s 143(3) r.w.s. 153A of the Act. The primary contention of the ld. A.R. is that in these two assessment years, the ld. AO made addition of Rs. 2 Crores in the assessment year 2013-14 and Rs. 3.5 Crores in the assessment year 2014-15 and these are not based on any seized material unearthed during the course of search u/s 132 of the Act and the addition is not supported by any material other than statement recorded u/s 132(4) of the Act. In the assessment year 2013-14, the ld. AO observed that an addition of Rs. 2 Crores has been made on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pealed against the Joint Commissioner of Commercial Taxes (Appeals), Malnad Division, Shivamogga has passed an order in appeal No. KVAT/AP-65/2017-18, dated 02.11.2017 setting aside the enhanced assessed turnover. In this context it is worthwhile to mention that though the assessee has objected to the proposal to include the aforesaid amount as undisclosed turnover for AY 201415 without prejudice to the findings detected during search, it is noteworthy to mention that to mention that in this case the income Tax authorities had conducted a search prior to the passing of the asst order and the incriminating material on the basis of which the partner Mr. Ravish had voluntarily declared the undisclosed income, was seized by the department and not available with the commercial Tax authorities while passing the VAT order. Hence the setting aside of the VAT appellate authority is not applicable in this case. The declaration has been made on sound footing and the retraction is therefore totally baseless. On the basis of the above discussion on the modus operandi observed to be followed by the said assessee's and discovery of authentic evidences as mentioned in the preceding paragraphs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, AO would have authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). 4. Return of income filed by the assessee. Intimation passed or not u/s 143(1) and time limit for issue of notice u/s 143(2) has expired. Return of income of the assessee shall be treated as having being accepted and attained finality. AO loses jurisdiction to verify the return of income Since, no assessment would be pending there would be no abatement of any proceedings. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 5. Notice u/s 143(2) issued and assessment pending u/s 143(3) Pending regular assessment proceedings would abate and would converge/merge in proceedings u/s 153A. Accordingly the scope of assessment under section 153A would cover the pending return filed as well and would not be restricted to incriminating material found during the course of search. 6. Assessment u/s 143(3) completed. Since regular assessment proceedings have been completed are not pending, there would be no abatement of proceedings. AO loses jurisdiction to review the completed assessment. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra. 54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the Revenue. Substantial question of law No. 2 in ITA No. 382/2018 and substantial question of law No. 3 in ITA Nos. 380/2018, 383/2018 to 385/2018 does not arise for our consideration since the same are not pressed by the Revenue. Appeals stand disposed of accordingly. 8.6 Being so, in assessment year 2013-14 2014-15, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in these cases filed original returns of income on 24.09.2013 27.9.2014 respectively. Time limit to issue a notice u/s 143(2) of the Act was on or before 13.09.2014 30.09.2015 respectively. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.4.2014 30.9.2015 for AY 2013-14 2014-15 respectively. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 24.6.2010. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Coordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd. supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good .. 8.7 Same view has been taken by Hon ble Supreme Court in the case of Abhisar Buildwell (P) Ltd cited (supra). Accordingly, we quash the assessment for the assessment years 2013-14 2014-15 and the revenue appeals in ITA Nos. 1163 1164/Bang/2024 are dismissed. ITA No. 1165/Bang/2023 (AY 2015-16): 9. In this appeal the revenue has raised the following revised grounds of appeal: 1. The order of the Learned CIT(A) is opposed to law and facts of the case. 2. The CIT(A) erred in deleting the addition of Rs. 4,00,00,000/- made by the Assessing Officer ignoring the fact that incriminating material was found during the course of search and a part of the same was shown and confronted to the assessee while recording his statement u/s 132(4) of the Act and the additions made are based on the response given by the assessee when confronted with the incriminating materials. 3. The CIT(A) erred in deleting the addition of Rs. 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 4,89,39,000/-. A sum of Rs. 3,00,00,000/- was added to the returned income on account undisclosed sales and a sum of Rs. 1,00,00,000/- was added on account of unaccounted URD purchases. 10.1 She submitted that during the course of search, various incriminating documents and material were found and seized. Loose sheets inventorised and marked as 'A/SRS/04' contain loose sheets 113 in number. These loose sheets are actually estimate of sale figures given to customers who wish to purchase gold jewellery. The estimate itself serves as a proof of purchase of jewellery from the assessee in case the customer does not insist for a proper bill. The assessee was confronted with the evidence found. The assessee admitted unaccounted sales that are being made and accordingly voluntarily offered additional income as under On account of undisclosed sales Assessment Year Undisclosed sales 2013-2014 Rs. 2,00,00,000/- 2014-2015 Rs. 2,00,00,000/- 2015-2016 Rs. 3,00,00,000/- TOTAL Rs. 7,00,00,000/- On account of unaccounted URD Purchases - Assessment Year Unaccounted URD Purchases 2014-2015 Rs. 1,50,00,000/- 2015-2016 Rs. 1,00,00,000/- TOTAL Rs. 2,50,00,000/- 10.2 In the Statement record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 10.5 She submitted that the order of the CIT (Appeals) is not acceptable for the following reasons - (a) Various incriminating documents and material were found and seized during the course of search action. Loose sheets inventoried and marked as 'A/SRS/04' contain loose sheets 113 in number. These 100 sheets are actually estimate of sale figures given to customers who wish to purchase gold jewellery. The estimate itself serves as a proof of purchase of jewellery from the assessee in case the customer does not insist for a proper bill. (b) When confronted with the findings and the incriminating material found, which clearly evidenced that sales were being affected and a part of the sales were not at all accounted, the assessee admitted unaccounted sales that are being made and accordingly voluntarily offered additional income on account of undisclosed sales. (c) The retraction of the declaration given is also not tenable as the statement was not given under any stress and that the claim of the assessee that the assessee had no time to look for evidences is also not acceptable. The retraction is totally an afterthought as the declaration given was confirmed on three diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. For the A.Y.2015-16 there were no material is seized evidencing any escapement of income. However, during the course of search a statement was recorded from Mr. R. Ravish, Managing Partner of the firm under the provisions of section 132(4) of the act. Though there were no evidences relevant to A.Y.2015-16, the search party has taken a statement u/s. 132(4) of the act wherein the following income was allegedly disclosed even though there was no incriminating material found. Undisclosed sales Rs. 3,00,00,000/- Unaccounted URD purchases Rs. 1,00,00,000/- Rs. 4,00,00,000/- 12.1 The ld. A.R. submitted that the assessee however has retracted this statement for the reason that, there were no evidences or incriminating material in support of the declaration and hence no such income accrued for the A.Y.2015-16. Accordingly in the return filed in response to notice u/s. 153A of the act on 22.10.2017, no income was declared in regard to this declaration which was under duress and there was no material supporting the same. 12.2 The ld. A.R. submitted that the Assessing Officer has concluded the assessment u/s. 143(3) r.w.s 153A of the act on 21.12.2018 wherein a total addition of Rs. 4,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in subsection (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 12.4 The ld. A.R. submitted that the ld. Commissioner of Income Tax (Appeals) has basically highlighted the fact that, for the A.Y.2015-16 there was no assessment pending which got abate and therefore in the absence of any incriminating material seized during the course of search no additions can be made and no assessment order could have been made under the provisions of section 143(3) r.w.s 153A of the act. 12.5 In the backdrop of the above facts, the stand of the Assessing Officer and the findings of the Commissioner of Income Tax (Appeals) in his order, the ld. A.R. submitted on each of the grounds of appeal of the revenue as under: - GROUND No. 1 OF THE GROUNDS OF APPEAL (a) The order of the Learned CIT(A) is opposed to law and facts of the case. 12.5.1 He relied on the findings of the ld. Commissioner of Income Tax (Appeals) in paragraph 4.7 4.8 extracted above. He further submitted that the ld. Commissioner of Income Tax (Appeals) has relied on the decision of Hon ble Supreme Court in the case of Pr. Commissioner of Income Tax, Central-3 V. Abhisar Buildwell (P) Ltd (2023) 149 Taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. 12.5.5. The ld. A.R. submitted that the revenue has taken up a ground that, the additions made was based on estimate slips found during the course of search and has inferred that, there was material during the search proceedings. He denied the above findings of the Assessing officer. The issue involved in the present case is an addition of Rs. 4,00,00,000/- for the A.Y.2015-16 which comprises of alleged undisclosed sales of Rs. 3,00,00,000/- and undisclosed purchases of Rs. 1,00,00,000/-. It is the case of the assessee that, there was no material seized during the course of search relevant for the A.Y.2015-16. In this connection, he extracted a statement recorded u/s. 132(4) of the act on 24.06.2016 which forms the basis for the total addition of Rs. 4,00,00,000/- to the income declared for the A.Y.2015-16. Basis for alleged undisclosed sales of Rs. .3,00,00,000/- Q.16: During the course of search proceedings today in your premises, loose sheets in exhibit marked A/SRS/04 containing loose sheets 113 in number. Serially numbered loose sheets from page 104 to page 113 contains estimates of sales figures. However, the same are not in your sales register. Please comment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 1,00,00,000/- could have been made to the income declared towards undisclosed purchases. 12.5.8 He submitted that, there is no evidence for the A.Y.2015-16 and therefore the addition made above is erroneous and not as per the provisions of the act. The addition made is only on an estimate relying on certain material relatable to A.Y.2017-18 and not to A.Y.2015-16. The stand taken by the Assessing Officer that the addition made was on the basis of seized material is factually incorrect. 12.5.9 He submitted that the Commissioner of Income Tax (Appeals) rightly deleted the addition of Rs. 4,00,00,000/- made by the Assessing Officer considering the position of law and facts of the case. He relied on Commissioner of Income Tax (Appeals) findings and decision, hence in the light of the above facts he submitted that, the ground taken up by the revenue is on misrepresentation of facts and hence the ground would not sustain. GROUND No. 4 OF THE GROUNDS OF APPEAL (d) The CIT(A) erred in deleting the addition ignoring the fact that the assessee offered the additional income of Rs. 4,00,00,000/- to tax in the statement u/s. 132(4) only after being confronted with the evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome and undisclosed assets detected during search can be brought to tax in assessment year under the provisions of section 153A of the act. As recorded by the Assessing Officer in the assessment, the only material relied upon are certain estimates of the transactions stated to have been carried out during the F.Y.2016-17 relevant to A.Y.2017-18. There is no material for the A.Y.2015-16. There is no evidence of either undisclosed asset or undisclosed income. Hence, we submit that, no additional income could have been brought to tax for the A.Y.2015-16. 5. We rely on the decision of ITAT, Bangalore Bench C in the case of BMM Ispat Ltd V. DCIT, Central Circle 1(2), Bangalore (2018) 93 Taxmann.com 76 (Bangalore Trib), wherein in the context of the provisions of section 153A of the act, the Hon ble Tribunal has held as under in para 3.4.5 of its order. The said paragraph is extracted hereunder: - 3.4.5 In the case on hand, the assessment for Assessment Year 2005-06 has been completed as the time limit for issue of notice had expired on 30-9-2006; before the date of search on 28-9-2010. Therefore, since no assessment was pending, there was no question of abatement of assessment. Respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view was earlier taken by the Hon ble Delhi High Court in the case of Kabul Chawla. In the light of the above ratio, we submit that, for the facts of the appellant proceedings u/s. 153A of the act could not have been initiated and the additions made without corroborative evidences would not sustain. 7. We rely on the decision of High Court of Gujarat in the case of Pr.Commissioner of Income Tax-4 V. Saumya Construction (P) Ltd (2017) 81 Taxmann.com 292 (Guj) The Hon ble High Court of Gujarath has held that, unless there is incriminating material found during the course of search no addition can be made in a proceedings u/s. 153A of the act. It is further held that, the material collected later cannot be basis for addition. While doing so the Hon ble High Court of Gujarath has relied on the following decisions wherein similar ratio has been laid down. i) Pr. CIT V. Desai Construction (P) Ltd (2016) 387 ITR 552/(2017) 81 Taxmann.com 271 (Guj) ii) CIT V. Deepak Kumar Agarwal (2017) 86 Taxmann.com 3/251 Taxman 22/398 ITR 586 (Bom) iii) CIT V. Gurinder Singh Bawa (2016) 386 ITR 483/(2017) 79 Taxmann.com 398 (Bom) iv) CIT V. Kabul Chawla (2016) 380 ITR 573/234 Taxmann 300/61 Taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid-years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the Assessing Officer shall assess or reassess Lhe total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the Assessing Officer by initiation of proceedings under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the time limit for issue of notice u/s 143(2) of the Act not expired which is available up to 30.9.2016 and the intimation is not akin to assessment and time limit for notice u/s 143(2) of the Act is not expired, even though return has been processed, it will be a case where return has not been attained finality Consequently, ld. AO would have authority/jurisdiction to assess the entire income similar to jurisdiction in regular assessment u/s 143(3) of the Act as held by All Cargo Logistics Ltd. cited (supra). As such, the quashing of assessment by ld. CIT(A) is not possible. 13.2 Hence, the assessment was pending as on the date of assessment since the search took place on 24.6.2016 return was filed for this assessment year u/s 139(1) of the Act on 29.9.2015. The same was processed u/s 143(1) of the Act on 5.5.2016 there was a time limit to issue notice u/s 143(2) of the Act up to 30.9.2016. Hence, on the date of search i.e. 24.6.2016 there is a time limit to issue notice u/s 143(2) so as to complete the assessment u/s 143(3) of the Act. Hence, this assessment cannot be said that assessment has not been pending on this date and the assessment is not abated. As discussed earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidentiary value which was not supported by any material evidence in support of the declaration obtained from the assessee and the same has been made without understanding position of law and also mistaken impression of facts. Further, the search procedure went on for a long period without any break and the partner was under great pressure and stress. The statement has been given under stress and in the absence of any corroborative evidence no addition could be made. To make an addition, the ld. AO shall have sufficient material in the form of incriminating/seized material. In the present case, the case of the assessee is that there were no corresponding seized material to make an addition of Rs. 4 crores as discussed above in the assessment year 2015-16. The addition is based on statement recorded u/s 132(4) of the Act supported by the unsubstantiated loose slips, which do not have no evidentiary value. 13.9 Moreover, the statements of Mr. R. Ravish have been recorded post search. They do not have any evidentiary value. Reliance is placed on the decision of the Hon'ble Bombay High Court in Commissioner of Income-tax v. Shankarlal Bhagwatiprasad Jalan [2017] 84 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not mention anything about the alleged unaccounted transactions by the assessee nor the details of when such alleged undisclosed sales or unaccounted purchases. There is no mentioning of any details in these loose slips. They are mere loose slips cannot be treated as incriminating material to sustain the addition. There is nothing in the loose sheets to evidence the undisclosed sales or unaccounted purchases. 13.13 The AO extracted the loose sheets in page Nos. 5 to 8 in the assessment order and confronted the same to Mr. R. Ravish. The reply of Mr. R. Ravish is reproduced at page 9 of the assessment order vide question No. 16 and he offered an amount of Rs. 3 crores towards undisclosed sales and answered question No. 17 reproduced in page Nos. 10 11 of the assessment order, he offered an amount of Rs. 1 crore towards unaccounted purchases. It is not known who has written in these loose slips and what details it contains. It was mentioned therein that estimate with some random figures. These details therein cannot be presumed as unaccounted sales or unaccounted purchases. These are dumb sheets which have no relevance and its authenticity to rely upon on its face value. Such loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to support the contention of the AO that there were unaccounted transactions carried on by the assessee. This is a mere case of guess work of investigating team as well as assessing officer as there is no concrete evidence to-prove such unaccounted transactions. The AO has hastily presumed that these loose slips contain details of unaccounted sales and purchases by extracting answer to question No. 16 17 vide statement recorded u/s 132(4) of the Act. In our opinion, the additions were made as per AO s discretion and arrived at an imaginary amount by treating the unaccounted transactions. This addition has no legs to stand alone as such it was not based on any corroborative material other than statement recorded u/s 132(4) of the Act. 13.16 The ld. AO has merely relied upon the loose papers, obscure notings made in certain note books, statement of Mr. R. Ravish and has come to the above conclusion. The conclusions drawn by him are not forthcoming from the documents and statements. The AO has made his own analysis below each extract of the seized material. The analysis is not supported by any corroborative evidence. 13.17 The Tribunal in the case of Sri Y. Siddaiah Naidu, Tirupat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the types of evidences need to weighed properly before rejecting one for the other. 13.21 The seized material shows vague figures presumed by the AO to be unaccounted transactions. These are unsigned documents and not supported by any corroborative material. Further the alleged parties to the transactions were not examined or cross-examined. At this point, it is appropriate to rely on the judgment of the Mumbai Bench in the case of ACIT v. Layers Exports P. Ltd [2017] 53 ITR (Trib) 416 (Mumbai), wherein it was held that no addition could be simply made on the basis of uncorroborated notings in the loose papers found during the search because addition on account of alleged payment made simply on the basis of uncorroborated noting and scribbling on loose sheets made by some person have no evidentiary value and is unsustainable and bad in law. 13.22 The Hon'ble Supreme Court in Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC) observed with regard to evidentiary value that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making addition cannot be sustained. 13.23 The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2Q17 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is rot a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is may be and not shall . Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present case, the assessee from the very beginning stated that the documents found during the course of search did not belong to him. 13.24 Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false. Unless the burden of proving that the materials and cash belong to the assessee, is discharged those materials can neither be seized under section 132 nor relied upon to make assessment under section 153A. Therefore, the seizure of such material i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of Andaman Timber Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 13.27 Further, the Hon'ble Supreme Court in the case of CIT v. Odeon Builders (P.) Ltd., 418 ITR 315 (SC) head-note is as follows: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to assessee, thus, denying opportunity of cross examination to assessee, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by assessee was acceptable and disallowance was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and re- examination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties. We have also examined the records and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parative instance that alone can be the foundation of such estimate in case the accounts are really found to be unreliable and requiring to be rejected. Therefore, in the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result, we decline to answer the question. 13.30 No assets commensurate with the alleged undisclosed income is found by the AO. The unbounded loose sheets having jottings are not speaking either by itself or in the company of others and not corroborated by enquiry, cannot be the basis of any inference so as to sustain the addition. 13.31. The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words may be presumed in section 132(4) of the Act given an option to the AO concerned to presume these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a nonspeaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. In these cases, moreover the documents are relied upon by the AO without confronting to any parties i.e seller or buyer of unaccounted transactions. These documents cannot bring assessee into tax net by merely pressing to service the provision of Sec 132(4A) r.w.s Sec 292C of the IT act, which creates deeming fiction on the assessee subject to search wherein it may be presumed that any such document found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 13.36 As per section 31 of Indian Evidence Act, 1878, admissions are not conclusively proved as against admitted proof. In the absence of rebuttable conclusion, admission bind the maker when these are not rebutted or retracted. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and the maker can show that it was incorrect. In our opinion admission made by the assessee will constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be relied upon without considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely. From the above Circular, it is amply clear that the CBDT has emphasized on its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/under influence. Keeping in view the guidelines issued by the CBDT from time to time regarding statements obtained during search and survey operations, it is undisputedly clear that the lower authorities have not collected any other evidence to prove that the impugned income was earned by the assessee. 13.38 At this stage, it is pertinent to refer to the judgment of the Supreme Court in the case of Vinod Solanki (2009) (233) ELT 157 observed as under : 22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order be vitiated. Reference may be made to a decision of the Full Bench of the Madras High Court in Roshan Beevi vs. Jt. Secretary to the Government of Tamil Nadu, Public Deptt. etc. (1983) Mad LW (Crl.) 289 : (1984) 15 ELT 289 : AIR 1984 NOC 103, to which one of us (S. Ratnavel Pandian, J.) was a party. 13.41 In our opinion, the above additions cannot be made solely based on the statements recorded u/s 132(4) of the Act. Reliance is placed on following decisions: The Hon'ble Delhi High Court in Commissioner of Income-tax v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi) held as under: 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examination to assessee. Accordingly, appeal was allowed for statistical purpose. 13.42 We further rely in the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon'ble Supreme Court has held that: - Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. 13.43 We also rely on the decision of the Hon'ble Tribunal in the case of Kamla Devi S. Doshi v. Income-tax Officer [2017] 88 taxmann.com 773 (Mumbai - Trib.) / [2017] 57 ITR(T) 1 (Mumbai - Trib.) held as under: - We however are unable to persuade ourselves to subscribe to the view that such information arrived at on the basis of the stand-alone statement of the aforesaid person, viz. Sh. Mukesh Chokshi (supra), falling short of any corroborative evidence would however justify drawing of adverse inferences as regards the genuineness of the share transactions in the hands of the assessee. We though are also not oblivious of the settled position of law, as per which a very heavy onus is cast upon the assessee to substantiate the LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the retraction made by the assessee. 16.4 We have duly considered the contention of the assessee and also perused the documentary evidences produced by the assessee. On perusing the facts, it is apparent that the addition is made based on the general practice of cash payments made outside the books of accounts in the case of immovable property transactions. The AO was of the opinion that there are ample instances that cash payments are made outside the books of accounts in effecting money lending transactions and therefore, the statement made by Mr, R. Ravish can be relied and the addition sustainable. However, we do not subscribe to this view of the AO. In order to establish that the assessee had paid amount outside the books of accounts for effecting money lending transactions substantial evidence has to be placed on record which is absent in this case. It would be unjust if an addition is made on the assessee based on a statement made by third party without further making inquiries and collecting evidence. Therefore, we hereby request to delete the additions made by the Ld. AO in the concerned AY's. This entire question is based on facts and therefore, no interference is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice prevalent in the similar trade. The relevant findings vide para 14 and 15 are as under: . 14. In Lalchand Bhagat Ambica Ram Vs. Commissioner of Income Tax, Bihar and Orissa (1959) 37 ITR 288, the Supreme Court disapproved the practice of making additions in the assessments on mere suspicion and surmise or by taking note of the notorious practices prevailing in trade circles. At page 299 of the report, it was observed as follows: Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. 15. This takes care of the argument of Mr. Sabharwal that judicial notice can be taken of the practice prevailing in the property market of not disclosing the full consideration for transfer of properties . 13.48. The Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary state ment, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disbelieve the retrac tion made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee. [Emphasis supplied] 22. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gad Technical Education Society (2018) 11 SCC 490 and held as follows: - 18. Further, while writing the order it has come to our notice that the Hon ble Apex Court in the case of Sinhgad Technical Education Society has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the impugned assessment year. 19. In view of the above, the additional grounds raised by the assessee in the case of M/s Pavitra Realcon Pvt. Ltd. And M/s Delicate Real Estate Pvt. Ltd. are accepted. Since the assessee succeeds on this legal ground, we refrain ourselves from adjudicating the issue on merit as far as these two cases are concerned. 25. Also, the Supreme Court in the case of CIT v. Abhisar Buildwell (P) Ltd. 4 , has clarified that in case no incriminating material is found during the search conducted under Section 132 of the Act, the AO will have no jurisdiction to make an assessment. The relevant paragraph is reproduced herein below: - 36.4. In case no incriminating material is unearthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of a notice under Section 153C. Here too, the AO would have to firstly identify the AYs' to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of AYs' falling within the block of six AYs' or for that matter all years forming part of the block of ten AYs', appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to Section 153A as well as Section 153C ex abundanti cautela. Which however takes us back to what had been observed earlier, namely, the existence of the power being merely enabling as opposed to a statutory compulsion or an inevitable consequence which was advocated ***** 56. We also bear in mind the pertinent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an expression which stands defined by Explanation 1 to Section 153A. Of equal significance is the introduction of the concept of abatement of all pending assessments as a consequence of which curtains come down on regular assessments. B. Both Sections 153A and 153C embody non-obstante clauses and are in express terms ordained to override Sections 139, 147 to 149, 151 and 153 of the Act. By virtue of the 2017 Amending Act, significant amendments came to be introduced in Section 153A. These included, inter alia, the search assessment block being enlarged to ten AYs' consequent to the addition of the stipulation of relevant assessment year and which was defined to mean those years which would fall beyond the six year block period but not later than ten AYs'. The block period for search assessment thus came to be enlarged to stretch up to ten AYs'. The 2017 Amending Act also put in place certain prerequisite conditions which would have to inevitably be shown to be satisfied before the search assessment could stretch to the relevant assessment year . The preconditions include the prescription of income having escaped assessment and represented in the form of an asset amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year of search. The block of six AYs' would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A. F. While the identification and computation of the six AYs' hinges upon the phrase immediately preceding the assessment year relevant to the previous year of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it from the end of the assessment year . This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology immediately preceding when it be in relation to the six year period and employing the expression from the end of the assessment year whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts to gross violation of the principles of natural justice and the same will render the order passed null and void. The relevant paragraph of the said decision is extracted herein below: - 6. According to us, not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of natural justice which have been from time to time used, but, whatever standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case. [Emphasis supplied] 33. Further, the argument of learned counsel for the Revenue that this mistake is curable under Section 292B of the Act lacks merit as the plain language of the said Section makes it abundantly clear that this provision condones the invalidity which may arise merely by mistake, defect or omission in notice. The said Section reads as under: - 292-B. Return of income, etc., not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent of Rs. 4,11,86,426/- should be considered as undisclosed business incomes to be taxed at normal rates and not u/s. 115BBE. 3. The CIT(A) has erred in not considering the fact that during the course of search various incriminating documents and material were found and seized. The material found and seized related to various business concerns and investments made by the family members who are partners in the assessee-firm. The search and seizure operation unearthed large scale suppression in the income generated and investments. The assessee, when confronted with the evidence found, voluntarily admitted the discrepancies and offered Rs. 5,48,60,039/- as undisclosed stock, unaccounted investments and unaccounted sales. The CIT(A), while upholding that the additions of Rs. 1,36,73,613/-, being undisclosed investments, are to be taxed u/s. 115BBE has erred in holding that the balance of Rs. 4,11,86,426/- is to be taxed at normal rates. 4. The CIT(A) erred in holding that the investments of Rs. 1,36,73,613/- only are to be taxed u/s. 115BBE and the balance of Rs. 4,11,86,426/- should be taxed at normal rates, despite the fact that the entire amount of declaration of Rs. 5,48,60, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the respondent on 24.06.2016. During the course of search there were some excess stock and also some loose slips of paper were found. On the basis of this, the assessee made declaration of undisclosed income under the provisions of section 132(4) of the act. A return of income was filed on 22.10.2017, declaring total income of Rs. 6,59,91,240/- as business income wherein the following income which was quantified and declared in the statements recorded u/s. 132(4) of the act during the course of search has been declared in the profit loss account. Stock with gold smith 1,59,69,750/- Business Stock at residence 93,63,957/- Excess stock in shop 1,52,07,375/- Business stock at residence seized 1,36,73,614/- Sale of silver (Deficit stock) 6,45,344/- Gross profit on URD purchases 8,37,297/- Sale of gold 89,600/- 5,57,86,937/- 16.1 Assessment has been concluded u/s. 143(3) of the act on 21.12.2018 accepting the income declared in the return filed. The income quantified during the course of search for the current year was declared in the return filed and accepted in the assessment also. Though the Assessing Officer has accepted the income declared, as far as the following income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order) Gold Jewellery at residence seized 1,36,73,614/- Aggrieved by the order of the ld. CIT(A) both the revenue and also the respondent are in appeal. Revenue Appeal in ITA/1166/Bang/2023 16.4 The ld. A.R. submitted that the revenue had filed certain grounds of appeal originally on which submissions have been made in AR s letter dated 21.02.2024. The revenue has now been filed revised grounds of appeal and the ld. A.R. submitted his written submissions on each of the revised grounds of appeal in the following paragraphs. GROUND No. 1 OF THE REVISED GROUNDS OF APPEAL (a) The order of the Learned CIT(A) is opposed to law and facts of the case. 16.4.1 He submitted to kindly consider his submissions on the other grounds of appeal filed hereunder. GROUND No. 2 OF THE REVISED GROUNDS OF APPEAL (b) The CIT(A) erred in holding that the additions/adjustments made with regard to undisclosed stock admitted by the assessee to the extent of Rs. 4,11,86,426/- should be considered as undisclosed business income, to be taxed at normal rates and not u/s. 115BBE. 16.4.2 The ld. A.R. submitted that as explained while elaborating on facts, the Assessing Officer has brought to tax the following items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears that the power of the AO u/s. 69B is not an absolute one. It is subject to the satisfaction of the AO where explanation is offered. It therefore, provides for an opportunity to the assessee to explain the source of such investment. Once an explanation is offered, it is incumbent upon the AO to consider the same and form an opinion whether the explanation is satisfactory or not. The opinion so found must be reasonable and based on the material found and shall not be perverse. The AO is empowered to examine the materials found or produce by the assessee and conduct necessary enquiries to arrive at an opinion. But the assessee has the right to question the findings and counter the conclusions arrived at by the AO. The assessee may point out the perversity in the finding. It may point out that particular material was not considered or the enquiry made was not reasonable or was half heartedly done. The onus lies and shifts based on the rate of the evidence on the side of the assessee and the AO. If the conclusion of the AO is adverse, it is incumbent on the AO to intimate or show cause the assessee on the proposed action. 5.6 In this case, it is seen from the assessment order th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business activity of the appellant or distinguish the excess stock from the accounted stock of the business. However, the AO had not brought on record any evidence or material to establish that the appellant had generated income outside its reported business activity and made investments therefrom. 5.8 The following judgments cited below are also referred to and relied upon to arrive at the conclusion. ACIT, Central Circle-2(1) Karsangiribuddhgiri Goswami (2021) 127 Taxmann.com 699 (Ahmedabad-Trib) Jain Plywood and another V. DCIT and another (Hon ble ITAT, Chandigarh) (2023) 68 CCH 0287 Chd Trib. Principal Commissioner of Income Tax V Deccan Jewellera (P) Ltd (2021) 132 Taxmann.com 73 (Andhra Pradesh) CIT V. S.K.Srigiri Bros (2008) 171 Taxman 264 (Karnataka) Overseas Leathers V. DCIT (2023) 152 Taxmann.com 595 (Chennai-Trib) 5.9 It is also incomprehensible that any assessee would invest in business stock the unexplained money earned from other sources because at some point of time, the income earned out of such business stock has to be offered to tax and thus there is no apparent advantage or logic to invest the unexplained money in business assets. Therefore, I am convinced th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the assessee and that nowhere in the assessment order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the assessee. The AO has not brought on record any iota of evidence to demonstrate that the assessee had any other source of income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the assessee at the rate of 60% in terms of provisions of section 115BBE of the Act. 10.18 The Hon'ble Andhra Pradesh High Court in the case of Principal Commissioner of Income Tax Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d u/s 69 of the Act and further where once such investment or expenditure is brought within the purview of tax as undeclared business receipt, then taxing it further as deemed income u/s 69 would be completely out of place. 10.21 Similar view was taken by the Coordinate Bench of ITAT Ahmedabad in the case of Chokshi Hiralal Maganlal Vs. DCIT reported in 131 TTJ 1 (Ahd.) 10.22 It is also seen that the Ld. CIT(A) has relied on the judgement of the Hon'ble Punjab Haryana High Court in the case of Kim Pharma Ltd. Vs. CIT in ITA No. 106 of 2011 (O M) and the Ld. CIT DR has also quoted the same in his arguments before us. However, after going through the aforesaid judgement of the Hon'ble Punjab Haryana High Court, it is seen that in that particular case, the only issue was with regard to the cash surrendered at the time of survey and no other income. The cash found could not be related to the already disclosed and accepted source of income of the assessee and, therefore, the Hon'ble Punjab Haryana High Court held that such surrendered cash was to be treated as deemed income u/s 69 of the Act. However, in the present case before us, the assessee has only one source of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption that, such stock has been sold without bills, a declaration u/s. 132(4) of the act has been obtained wherein the amount of Rs. 6,45,344/- has been admitted as undisclosed income. Primarily the declaration is wrong for the reason that, the whole of unaccounted sale of silver would not become income but only a percentage of such sale being gross profit should have been taxed as income. The respondent however with a view to avoid litigation declared the whole of the amount of Rs. 6,45,344/- as income and paid taxes under the regular provisions of the act. The Assessing Officer in the order of assessment has held that, this income is assessable under the provisions of section 115BBE of the act and taxes are to paid at higher rates. On appeal the ld. CIT(A) has held that, this cannot be an addition u/s. 69B of the act as brought out in the order of assessment and therefore the taxes are to be paid under the regular provisions. The relevant findings of the ld. CIT(A) are in para 5.12 of his order is extracted hereunder:- 5.12 As far as the shortage of physical stock of silver in the office of the appellant at Hassan, the AO rightly concluded that the shortage of silver to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115BBE of the act. He requested us to consider its submission to Ground No. 2 above. GROUND No. 4 OF THE REVISED GROUNDS OF APPEAL (d) The CIT(A) erred in holding that the investments of Rs. 1,36,73,613/- only are to be taxed u/s. 115BBE and the balance of Rs. 4,11,86,426/- should be taxed at normal rates, despite the fact that the entire amount of declaration of Rs. 5,48,60,039/- has been generated using the same modus operandi and invested in gold. 16.4.15 He requested us to consider its submission to Ground No. 2 above. GROUND No. 5 OF THE REVISED GROUNDS OF APPEAL (e) The CIT(A) erred in holding that the investments of Rs. 1,36,73,613/- only are to be taxed u/s. 115BBE and the balance of Rs. 4,11,86,426/- should be taxed at normal rates, ignoring the fact that the entire declaration of Rs. 5,48,60,039/- has been made voluntarily by the assessee. 16.4.16 He requested us to consider its submission to Ground No. 2 above. GROUND No. 6 OF THE REVISED GROUNDS OF APPEAL (f) The CIT(A) ought to have appreciated the fact that even though the sources for investment made by the assessee are from income generated from jewellery business, the investments made partakes the character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wellery business activity and the excess stock represents income generated from such activity. The appellant has offered the excess stock found in the (1) Business premises is Rs. 1,52,07,375/- at residence is Rs. 1,36,73,614/-, (2) stock with Gold Smith, at shop Rs. 1,59,69,750/- at their residence is Rs. 93,63,957/-, shown in the Profit Loss account of the firm. The Assessing Officer has accepted the returned income and taxed the whole of excess stock of jewellery found u/s. 69B of the act. He referred to para 6.1 and 6.3 of the assessment order. The Assessing Officer held jewellery stock found at residence as undisclosed investment and added u/s. 69B of the act and levied tax u/s. 115BBE of the act. Under the circumstances, it cannot be held that, stock of jewellery found at residence is assessable u/s. 69B of the act and taxes leviable under the provisions of section 115BBE of the act. However, the Commissioner of Income Tax (Appeals) while passing appeal order has accepted partly explanation of the appellant held that Rs. 4,05,41,082/- is taxed u/s. 28 of the act, whereas the jewellery found in residence of partner of Rs. 1,36,73,614/- is taxable u/s. 69B of the act liable at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 115BBE of the act. The said provisions as it stood on 24.06.2016 reads as under: - 115BBE (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income tax payable shall be the aggregate of: - (a) The amount of income tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty percent, and (b) The amount of income tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). 16.5.6 He submitted that, since the income is quantified on 24.06.2016, the law prevailing on that day should be applied and the taxes will have to be levied at 30%. However, the above provisions were amended by Finance Act 2016 w.e.f 01.04.2017. The amendment got the president s assent on 05.12.2016. Consequent to this, the provisions read as under: - 115BBE. Where the total income of an assessee (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Tribunal has held as under in the last paragraph of its decision. Thus it is a cardinal principle of tax law as propounded by the Courts that law to be applied which is in force in the relevant assessment year unless and otherwise provided expressly or by necessary implication a clarificatory amendment by insertion of an explanation can be read into the main provision but if a change is brought in the existing law by insertion of a new provision then the same cannot be applied in the case when no such law was in force at the relevant point of time and, therefore, a new tax liability cannot be created by a subsequent amendment in respect of a transaction as well as the return of income filed when such law was not in the Statute book .. 16.5.8 The ld. A.R. requested us to consider the submissions above and hold that, for the facts and circumstances of the appellant taxes will have to be levied at 30% on the unaccounted jewellery of Rs. 1,36,73,613/- quantified during the course of search on 24.06.2016. 17. The ld. D.R. submitted that it cannot be possible to hold the value of unaccounted stock of jewellery found in the business premises of the assessee as business income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es u/s 69B r.w.s. 115BBE of the Act. 18.2 We note that assessee is in jewellery business. The assessee had admitted excess stock found in the business premises of the assessee as well as residence of the assessee as business income and offered the same for taxation by bringing the same to P L account of the assessee. The ld. AO accepted the returned income and taxed the whole excess stock of jewellery. The assessee has been explaining before the lower authorities that excess stock found during the course of search action had emanated from the stock of earlier years and it is nothing but the flow back of the business income earned by assessee from year to year. Unless the department is having any material to show that the assessee has earned the same from any other unknown sources of income, it is to be treated as business income only. In our opinion, when the assessee has explained that the source was from the business and except stock difference no other investment with any other asset was found and particularly, this unexplained excess stock is surrendered as business income has to be assessed as business income and not under the head unexplained investment under the head investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not under the head unexplained investment u/s. 69B of the Act. This is because, excess stock found during the course of survey does not have any independent identity as the asset is a mixed part of overall stock found in the business premises of the assessee, which in our considered view represents business income. 18.3 Being so, under the facts and circumstances of the case, we note that the assessee has declared additional income towards excess stock found during the course of search action both at the business premises of the assessee as well as partner of the assessee (Mr. Ravish) and there was no material to suggest that the assessee has not earned this income other than from the jewellery business carried on by the assessee from assessment year to assessment year and it has to be treated as income earned from the assessee only in the assessment year under consideration or earlier years from business and the same has been surrendered as income of the assessee to be treated as accordingly, especially, the ld. AO has not done anything to dispute the claim of assessee that the source was not from the business. The lower authority cannot apply the provisions of section 69B r. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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