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TMI Blog2024 (9) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... ad changed his stand of treating the entries as interest paid instead of earlier observation as interest received and alleged that the amount appearing under the column Adjustment is the amount of interest paid by assessee out of his undisclosed sources and not recorded in the books of accounts. During the assessment proceedings in the case of the Maverick group, it was observed that excel sheet was received from some finance broker who had been working for many persons apart from Maverick Group and that broker was asking the additional interest which was not given. As relying on the case of the M/s. Marverick Share Brokers Private Limited [ 2022 (9) TMI 1334 - ITAT JAIPUR] interest whatever actual paid is duly recorded in the respective parties accounting only the additional interest claim across all the parties which were neither paid nor any supporting evidence have been found to have been paid. Based on that set of facts we do not find any reasons to sustained the addition made in the hands of the assessee. Based on these observations ground raised by the assessee. - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Tarun Mittal (C.A) For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out on 30.10.2014 at the various premises of NIMS Group. The residential premises of the assessee were also covered. Therefore, notice u/s 153A was issued to the assessee on 05.08.2015. In response to this notice, the assessee furnished his return of income on 10.09.2015 declaring total income of Rs. 3,30,450/-. The assessee is an employee in Reserve Bank of India, Jaipur. He is engaged in the business of trading of shares and business income from sale of shares during this year. However, he has declared income from salary and business during this year. Information was received from DCIT, Central Circle-4, Jaipur, that the assessee has received cash loans from various persons/entities through Maverick Group, on which the assessee has paid out of books cash interest. Thereafter, notice u/s 148 of the Income-tax Act, 1961 was issued to the assessee on 26-03- 2018 with approval from Pr. CIT (Central), Jaipur. Further, query letter along with notice u/s 142(1) was issued on 08.08.2018. In response to the notice, the assessee had filed his return of income on 01.9.2018 declaring total income of Rs. 3,30,450/-. The assessee has requested for copy of reasons recorded for re-opening and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contentions/submissions of the appellant are being discussed and decided as under;- 5.3 In this case as per material on record the appellant entered into transactions with parties and the details are found in the pen drive seized during the course of search operation in the Maverick Group, Jaipur wherein a pen drive was found and seized from the possession of Shri Kailash Chand Khandelwal, who is one of the employee of the Maverick Group. The pen drive so seized contained some files in excel software. The excel sheets contains adjustment entries in the last column with remarks of 2.4%. In connection with these entries, in the reasons of reopening it is inter-alia noted in para 2 that ......... During the course of search assessment proceedings in the Maverick Group, Jaipur the entries of Rs. 2,51,22,735 were asked to be explained by the assessee. .. implying that inquiry was done regarding these entries in case of assesses of Maverick Group and the findings were recorded as noted in the reasons of reopening. 5.4 The nature of 2.4% and the quantification etc. are not in dispute as on page 120 of the order of Hon'ble ITAT (as referred in below para) it has been accepted by oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion heavily tilts against the appellant. In normal course it can be safely said that nobody would write and record financial transaction in documents in clear terms what is not yet decided in financial matters and would write and record in documents the financial details only after that is finalized. The inquiry was also done in the case of Maverick group persons which has been referred by the Ld. AO. Purther the manner in which the details are recorded also shows that this is an adjustment entry and not the under negotiation interest. In the excel file it is specifically mentioned as adjustment. Further the adjustment is mentioned separately in percentage and not in absolute numbers, in the context of the facts of the present appeal the use of the word adjustment in the Excel file further corroborates that it represents something other than the disclosed transaction and this corroborates the strand of the Ld. AO. As observed by Hon'ble Supreme Court that the direct evidence is rarely available for the transactions which take place in secret. An inference about such transaction has to be drawn on the basis of the circumstances available on the record. (lumati Dayal v. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically accepted by the Hon'ble ITAT on merits. 5.8 On page 122 of the order (of Hon'ble ITAT) it is seen that it was argued on the behalf of the assessee that substantive addition is not done in hands of any assessee then how the protective edition can survive and it was submitted that protective edition are required to be deleted. Whereas in the present appeal it is the appellant in whose hands the substantive addition has been done whereas it is seen from the Hon'ble ITAT order page 123 and 124 wherein an earlier order has been referred that the main ground for giving relief to the assesses is that addition has been done in protective manner and it has not been identified in whose hands the substance addition has been done. Whereas in the present appeal, the substantive addition has been done in the hands of the appellant. 5.9 It is noted by the Ld. AO that the assessee never produced himself during the course of assessment proceedings to contradict the information available in the records of the revenue; he has failed to comply with the show cause notices given to him in view of natural justice. It is important to note that the notice u/s 148 of the Act was issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had not given relief or direction on the issue of cross objections. In view of the discussion, the objection of the appellant regarding cross objection is dismissed. In view of the above, the grounds of appeal no. 2 and 3 (3, 3.1, 3.2 and 3.3) are dismissed. 5. Feeling dissatisfied with the order of the ld. CIT(A), the assessee has preferred the present appeal challenging the finding recorded in that order of ld. CIT(A). To support the grounds so taken by the assessee, the ld. AR for the assessee has submitted his written submission and the same reads as under:- Brief facts of the case are that the assessee is an individual, deriving income from, Salaries, Business and Other sources. Return u/s 139(1) was filed on 28.03.2014. A search Seizure operation was carried out at various premises of NMIS group, and simultaneously search was also carried out at the residential premises of the assessee. Pursuant to issue of notice u/s 153A, the return of income was filed on 10.09.2015 by the assessee, showing a total income of Rs. 330,450/-, which was the same as declared in return filed u/s 139(1). Assessment u/s 143 r.w.s.153A was completed at an assessed income of Rs. 82,38,133/-, by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some excel sheet, which further contained details of amount borrowed, interest paid, Tax deducted, amount returned with dates, as also the last column which read as Adjustment Account This column had further sub columns which had details regarding some calculation of amount. The ld. AO considered the amount appearing against the name of assessee in the last column as the interest paid over and above the interest paid through payees account cheque and recorded in the books of accounts and accordingly held the same as being interest paid by the assessee from his undisclosed sources and made addition of Rs. 1,76,342/- solely based on this noting, found in possession of a third party case of the assessee was re-opened, which had already been completed u/s 153A r.w.s. 143(3) of the Act on 31.12.2016. In this regard it is submitted that the primarily condition for initiating action u/s 147 is that AO must have reason to believe that any income chargeable to tax has escaped assessment. This satisfaction must be of AO himself and not a borrowed satisfaction. Reason to believe cannot be at the instance of audit party or investigation conducted by others or third party statement etc. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for having reasons to believe that the income as chargeable to tax, has escaped assessment. We are unable to hold that the jurisdiction assumed u/s 147/148 was legal and valid. It is further submitted that the validity of initiation of reassessment proceedings has to be judged with regard to the material available with the assessing officer and that too by framing the opinion strictly based on the documents and information in possession, that certain income has escaped assessment and not in a mechanical manner as has been done in the case in hand. The re-opening of the case based on the borrowed satisfaction on the information provided by some other official without in any manner recording his own independent satisfaction deserves to be held illegal. In this regard reliance is placed on the decision of Hon ble Delhi High court in case of Sarthak Securities Co. Pvt. Ltd. Vs. ITO reported in 329 ITR 110 wherein it has been held as under: Reassessment Notice Condition precedent Formation of belief that income escaped assessment Assessing Officer treating share application money as bogus accommodation entries Payments through banking channel and companies investing money genuine No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings and hold the reassessment proceedings u/s 147 as null and void. Thus this ground of appeal is decided in favour of the assessee and direct the AO to restore the total income as determined u/s 143(3) vide order dated 25.10.2010 as the assessed income for the AY 2008-09. A Raman Co 67 ITR 11(SC): Held that the word information means instruction or knowledge derived from external source or as to law relating to a matter bearing on the assessment 34 DTR 49 CIT Vs. Kelvinator of India Ltd. (SC) Reassessment Reason to believe Change of opinion After 1st April, 1989, power to reopen is much wider However, mere change of opinion cannot per se be reason to reopen AO has power to reassess but no power to review If the concept of change of opinion is removed, as contended on behalf of the Department review would take place in the grab of reopening of assessment Concept of change of opinion is an in-built test to check abuse of power by the AO Hence, after 1st April, 1989 AO has power to reopen the assessment under section 147 provided there is tangible material to come to the conclusion that there is escapement of income from assessment reasons must have a live link with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80IB allowed to the assessee being covered by a decision of the jurisdictional High Court, assessment was reopened merely on the basis of change of opinion of the AO and, therefore, reassessment is not valid. In the circumstances it is submitted that no independent application of mind was applied by Ld. AO while issuing notice u/s 148 and he simply proceeded on borrowed satisfaction reached by some other officials on the basis of material found in possession of a third party which has no evidentiary value. It also submitted that ld. CIT(A), while deciding the matter, without considering the submission made by assesseeand without bringing any corroborative evidences simply that ld. AO had applied independent mind and had not initiated proceedings on the basis of borrowed satisfaction. Moreover, during the course of assessment proceedings when the reopening was objected by the assessee(APB 5-6), the Ld. AO failed to bring on record any corroborative evidence of material except the part of so called notings in the excel sheet found in possession with an employee of Maverick group during a search conducted in that group on 17.07.2015 for supporting the allegation that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in our opinion is a substantive defect which goes to the root of the matter. We have carefully perused the order of ldCIT(A) and find no infirmity therein as the ld CIT(A) allowed the appeal of the assessee on this legal issue by following various decisions as discussed in the appellate order. It is trite law that the assessment framed without disposing of objections filed by the assessee against the re-opening of assessment is not a valid assessment and cannot not be sustained. The case of the assessee finds support from the decision of the GKN Driveshafts (India) Ltd. vs. DCIT MANU/SC/1053/2002 : (2003) 259 ITR 19 (SC) wherein the Hon'ble Apex Court has held that when a notice u/s. 148 of the Act is issued and the assessee has filed its return of income and sought the reasons for issuance of notice u/s. 148 of the Act, the AO is bound to furnish the copy of reasons within the reasonable time and assessee on receipt of the reasons is entitled to file objections to issuance of notice. The Hon'ble Apex Court held that the AO is bound to dispose of the objections filed by the assessee by passing a speaking order. However in the instant case before us, the AO has not dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in subsection (1) of section 153A] :] Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to subsection (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules 59 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 153C of the Act. It is also submitted that in absence of any satisfaction that documents so found and seized during the course of search pertains to the assessee or any information contained therein relates to the assessee, no linkage or nexus has been established with the assessee and what has been received by the Assessing officer is pure raw data in abbreviated form and information which per se cannot constitute as tangible material and unless and until the said data and information is properly analyzed and examined and necessary linkage and nexus is established with the assessee, the same cannot form the basis for initiating action u/s 147 in hands of assessee. It is submitted that since action could not be taken under section 153C, Assessing officer has no jurisdiction to initiate action u/s 147 of the Act also. Courts have held from time and again that reopening of assessment proceedings is a potent power which cannot be casually and mechanically invoked and lightly exercised by the Assessing officer and the invocation of such powers is based on satisfaction of certain cardinal tests and principles which have not been fulfilled in the instant case. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53C starts with non-obstante clause. The procedure for assessment/reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessment or reassessment under Sections 139, 147, 148, 149, 151 153. 28. The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational period of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148. 29. The Department has not set up a case that for initiating proceedings under Section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under Section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing total income in case of incriminating material found d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of search at third party has to be made u/s 153C of the Income Tax Act and not u/s 147/148 of the Act and it is requested that order passed by ld.AO u/s 147 is contrary to the law settled by the Hon ble jurisdictional High Court and therefore, deserves to be quashed and consequent additions made vide such order be deleted. Without prejudice to the legal ground of appeal, the submission on the merits of the issue is as under: Ground of Appeal No. 2: In this ground of appeal, the assessee has challenged the action of ld. CIT(A) in confirming the addition of 1,76,342/- made by ld. AO on the basis of an excel sheet found with an employee of the Maverick group, by alleging the same as containing details of interest paid by the assessee out of undisclosed income, without appreciating the explanation/documents filed by the assessee. In this regard it is submitted that an addition of amount Rs. 1,76,342/- was made by relying upon the material stated to have been found noted in the pen drive seized from the possession of an employee of Maverick Group, Jaipur wherein contained an excel sheet. The said excel sheet contained three columns titled as adjustment containing entries of amount R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 153A r.w.s.143(3) of the Act. The sole reason for making the impugned addition was the noting found in the pen-drive found with a third party, totally unconnected to the assessee. It is worth noting that the assessee had elaborately demonstrated the fact that the said pen-drive was not prepared by the assessee and the ld.AO has not doubted this. The assessee has fully explained the entries as appearing in the books of the assessee other than the ones appearing under the column Adjustment entries for which it was categorically stated that they were not made by assessee. This is further evident from the fact that the assessee has deducted due tax on the amount of interest actually paid by him and the same is appearing as such in the excel sheet. The entries appearing in the adjustment column was the additional interest asked by the lender, which was never paid by the assessee, as is evident from the fact that no TDS was deducted there on. Further no incriminating document was found during the course of search corroborating the allegation of the ld. AO nor was anything brought on record during the post search assessment proceedings by the ld.AO to substantiate the allegation that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y technical rules of evidences, also that there is no provision for permitting cross-examination and also that right to cross-examination is not necessarily a part of reasonable opportunity by quoting the decision of the Hon ble Rajasthan High court in the case of Rameshwar Lal Mali Vs. CIT(256 ITR 536) and the judgment of Hon ble Allahabad High Court in the case of Shyamlal Biri Merchant vs. UOI (1993) 68 ELT 548,551 In this regard, it is submitted that the said cases are distinguishable on facts for the following reasons: i. Impugned addition have been made solely on the basis of some entries found recorded in a pen drive seized from some employee of Maverick group - Shri Kailash Khandelwal, who is completely unknown and unrelated to the assessee and except for the entries found noted in the pen drive found from his possession there is no corroborative evidence found either during the course of search or assessment proceedings to corroborate the allegations of ld.AO. Thus, cross examination of the said person is sine qua non, as only he could have explained the entries made by him, no other material has been referred to by the Ld. AO. ii. The requirement of allowing cross-examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anged his stand of treating the entries as interest paid instead of earlier observation as interest received and alleged that the amount appearing under the column Adjustment is the amount of interest paid by assessee out of his undisclosed sources and not recorded in the books of accounts. It is further submitted that, loans from parties to whom it was alleged that the assessee had paid excess interest were fully examined in detail during the assessment proceedings u/s 153A wherein after scrutinizing the details and confirmations filed by the assessee, the same were duly accepted and no addition was made in this regard in order passed u/s 153A r.w.s. 143(3) of the I T Act. Also during the reassessment proceedings nothing was brought on records to establish that the alleged interest was paid over and above the interest claimed by the assessee. Nor any questionnaire/ notice was summoned to the parties concerned when all details pertaining to those parties were already submitted by the assessee during the proceedings u/s 153A r.w.s.143(3) of the Act. The sole reason for making the impugned addition was the noting found in the pen-drive found with a third party, totally unconnected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held as under 15. We have heard the rival contentions, submission made and relied upon relevant judicial decisions by both the party. The bench has noted that when the PEN drive find during the search proceeding no questions are raised to the parties not only that the employee from this PEN drive found, his statement is not recorded. Thus, merely from that PEN when the veracity about that evidence is not recorded no addition either protective or substantive can be made. Not only that even on the merits the addition cannot be made on two counts, one is that there is no substantiative addition in those persons who claimed to have additional interest as duly confirmed before us by the AO and secondly when the substantive addition is not made protective addition cannot survive. The amount in dispute is nothing but the amount of the additional interest demanded and not paid by the assessee. Based on the decision relied upon by the ld. AR and on careful consideration of the facts in this case we hold that the ld. AO before completing the assessments on protective basis, the AO is supposed to point out the name of the assessee who may be the owner of such income. It is common grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excel sheet found in the PAN drive seized during the course of search from the possession of Shri Kailash Khandelwal were also made and same were finally deleted . Relevant extract of order is reproduced as under 40.5 Similar issue we have decided in the ITA No. 41/JP/2020 where in the arguments, facts are similar in group search case and the bench noticed that the issues raised by the assessee in this cross objection are equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various contentions raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 41/JP/2020 shall apply mutatis mutandis in this case also. The relevant finding in 41/JP/2020 is extracted here in below 15. We have heard 16. It is not 40.6 Based on the above observations the cross objection No.16/JPR/2020 is allowed. Thus, the addition so made merely on suspicion without any corroborative evidence on record deserves to be deleted. 6. To support the various contentions so raised in the written submission the ld. AR of the assessee relied upon the following evidences:- S. No. PARTICULARS PAGE NOS. 1. Copy of reasons for reopening of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch Seizure operation carried out at various premises of NMIS group, and simultaneously search was also carried out at the residential premises of the assessee. Because of those reasons notice u/s 153A of the Act was issued to the assessee, the return of income was filed on 10.09.2015 by the assessee, showing a total income of Rs. 330,450/-, which was the same as declared in return filed u/s 139(1). During search action carried out in the case of Maverick Group, wherein a pen drive stated to have been found and seized from the possession of some Shri Kailash Chand Khandelwal, who is one of the employees of the Maverick Group, Jaipur. According to ld. AO, some entries pertaining to the individuals/ concerns of Maverick group as also some other persons, and had an amount of Rs. 1,76,342/- against the name of assessee. On the basis of this information reasons were recorded u/s 147 and a notice was issued to the assessee u/s 148 of the Act by recording the reasons. The assessee had filed objections against the reasons so recorded which were rejected by ld.AO in a summary manner and the assessment was completed u/s 143(3) r.w.s.147 of the Act, by adding the said sum of Rs. 1,76,342/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Brokers Private Limited, Jaipur in ITA no. 38 to 41 wherein the while dealing with the PEN drive the bench has held as under:- 15. We have heard the rival contentions, submission made and relied upon relevant judicial decisions by both the party. The bench has noted that when the PEN drive find during the search proceeding no questions are raised to the parties not only that the employee from this PEN drive found, his statement is not recorded. Thus, merely from that PEN when the veracity about that evidence is not recorded no addition either protective or substantive can be made. Not only that even on the merits the addition cannot be made on two counts, one is that there is no substantiative addition in those persons who claimed to have additional interest as duly confirmed before us by the AO and secondly when the substantive addition is not made protective addition cannot survive. The amount in dispute is nothing but the amount of the additional interest demanded and not paid by the assessee. Based on the decision relied upon by the Id. AR and on careful consideration of the facts in this case we hold that the id. AO before completing the assessments on protective basis, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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