9911796707
TMI Blog2024 (9) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO of the assessee, he has not recorded how the documents seized have a bearing on the determination of the total income of the assessee for six assessment years immediately preceding the assessment year. It clearly shows that the satisfaction note recorded are not as per the provisions of section 153C. As relying on Saksham Commodities Ltd [ 2024 (4) TMI 461 - DELHI HIGH COURT] we observe from the satisfaction recorded in this case, the AO failed to record the satisfaction as per the provisions of the Act and failed to record the assessment of the potential impact on the income not declared by the assessee earlier and the impact that may have on the total income for the six AYs immediately preceding the AY, in this case AY 2021-22. Therefore, non recording of proper satisfaction to initiate the proceedings u/s 153C of the Act, the proceeding initiated in the present case is without proper jurisdiction. Accordingly, the ground raised by the assessee is allowed. - Shri S. Rifaur Rahman, Accountant Member And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri Gautam Jain, Advocate, Shri Lalit Mohan, CA For the Revenue : Ms. Amisha Gupt, CIT DR ORDER PER S.RIFAUR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) 2018-19 37,46,910 3,02,30,766 3,39,77,680 vi) 2019-20 63,28,050 3,34,21,765 3,97,49,820 xi) 24.8.2022 Learned Commissioner of Income Tax (Appeals), dismissed the appeal of the appellant. 3 The brief facts of the case are, assessee is proprietor of M/s Chaudhary Trading Company and, is engaged in the business of trading of glass bottles. 3.1 It is submitted that trading result of assessee as per audited books of accounts of assessee, which has been accepted by learned Assessing Officer and assessed in orders of assessment is as under: Sr. No. Assessment Year (page of Paper Book) Sales (in Rs.) Purchases (in Rs.) Gross Profit (in Rs.) Gross Profit (in %) i) 2014-15 (18) 6,56,14,007 5,54,78,280 66,32,741 10.11 ii) 2015-16 5,93,17,385 4,63,69,207 63,02,797 10.63 iii) 2016-17 6,82,10,408 6,26,08,382 72,71,655 10.55 iv) 2017-18 8,04,05,296 6,53,52,116 84,55,803 10.66 v) 2018-19 12,01,83,894 9,15,38,363 1.17,39,943 9.77 vi) 2019-20 19,96,30,263 15,58,82,182 1,87,59,133 9.40 3.2 It is submitted that transaction of assessee with M/s PGPL (entity under consideration) is as under: Sr. No. Assessment Year Opening Balance Purchases Remittance via Banking Channel Closing Balance Addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has rejected the contentions made by assessee during the course of assessment proceedings, had made the aforesaid addition by holding as under: 6. I have gone through the reply of the assessee and same is not found tenable on the following grounds: On perusal of seized material it is M/s. Pragati Glass Private Limited has made cash sales, which has not been recorded in books of account of the assessee. The cash sales has been duly admitted by the MD and accountant of M/s. Pragati Glass Private Limited at the time of recording statement. Copy of the relevant extract of the statement recorded of MD and accountant of M/s Pragati Glass Private Limited have been confronted to the assessee and he has failed to provide any documentary evidence in contradiction of the same. The assessee in his reply has admitted that he has made purchases from stated party which are recorded in his books which proves that the assessee knows the above stated party. The assessee has submitted that the stated party has filed bogus recovery case against the assessee. However he has failed to provide any documentary evidence/petition copy in this regard. Further, the assessee has also failed to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement. 10. This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials of the search party, under section 132 would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually relate back as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot beat tributed to Parliament. On the other hand, a plain reading of section 153-C supports th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in subsection (1) of section 153A : 6.4 It is submitted that on perusal of aforesaid it is evident that section starts with heading namely Assessment of income of any other person and further provides that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Hon ble Delhi bench of Tribunal in case of Alchemist Technology vs. ACIT in ITA No. 1689/D/2022 placed at pages 376- 386 of JPB; wherein it has been held as under: 10. We find that from perusal of the records, there is no evidence to prove that the amounts sent‟ shown in the hard disk is actually amounts sent by assessee company in hawala route which had ultimately found its way in the form of share capital and share premium under FDI route. The revenue had completely addressed this issue and made an addition purely on suspicion and surmise without any basis thereby making the addition totally unsustainable in the eyes of law. On the contrary, the assessee had stated that LGF had sent 19500000 USD from Cyprus and after deduction of LC charges and other overseas bank charges , the assessee could ultimately receive only 18621973.93 USD equivalent to Rs 100 crores in India under FDI route as share capital and share premium. In support of this, the assessee had duly provided all the necessary documents as listed above. The assessee from the inception had always taken the stand that it had not sent any monies abroad in hawala route. The assessee cannot be asked to prove the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Anil Chaudhary Prop. of M/s Chaudhary Trading Company (PAN- ACCPC9165C) for the A.Y. 2014-15 A.Y. 2019- 20. 7.2 It is submitted that even the satisfaction recorded by the Assessing Officer of assessee does not satisfy the rigor of section 153C of the Act, as in view of provisions of section 153C(1) of the Act once the AO of searched person handed over the books of account, documents, assets seized or requisitioned to Assessing Officer having jurisdiction over such other person, and then that Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 7.3 It is submitted that as it is evident from aforesaid relevant extract of satisfaction note of learned Assessing Officer of assessee; there is no satisfaction that the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year . The expression relevant assessment year has been duly defined by Explanation 1 placed in Section 153A and is explained to include those years which fall beyond the six AYs spoken of earlier but not later than ten AYs from the end of the AY relevant to the FY in which the search was conducted. 38. As was held in SSP Aviation Ltd v. Deputy Commissioner of Income Tax[17], the AO of the searched person while proceeding to transmit the material gathered in the course of the search to the AO of the other person is not obliged to form any opinion with respect to escapement of income or for that matter the material likely to have an impact on the total income of the non-searched entity. At the stage of transmission of material, the AO of the searched person is only required to be satisfied that the material or documents unearthed pertain to a person or entity other than the one searched. The relevant extracts of the decision in SSP Aviation Ltd are reproduced hereinbelow: .. 39. The principle that the AO of the searched person is only required to be satisfied that the documents or materials pertain to the other person at the stage of transmission of material or documents to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to any person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. It is proposed to amend section 153C of the Act to provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to any person, other than the person referred to in section 153A, then books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with the provisions of section 153A, if, such Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A. This amendment will take effect from 1st October, 2014. 43. It was consequent to the passing of the aforesaid Act that Section 153C came to incorporate provisions relating to the AO being satisfied that the books of accounts, documents or assets seized or requisitioned must have a bearing on the determination of the total income of such other person for the six preceding AYs or the relevant assessment year as referred to in Explanation 1 to Section 153A. Prior to the promulgation of these amendments, the AO of the non-searched party was not obliged to form an opinion that the material received by it was likely to impact the estimation of income of that person. Significantly, although this prerequisite came to be incorporated in Section 153C, no such corresponding precondition was included in Section 153A. This, although the legislative history of the search assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lexicon[19], authored by P. Ramanatha Aiyar explains Bearing on, Having as referring to something having a relation with. For ease of reference, the meaning assigned to the aforesaid expression is reproduced hereinbelow: Bearing on, Having. Having relation with 46. The New Lexicon Webster s Dictionary[20] defines the word bearing as follows: The action of carrying // carriage, deportment// (heraldry) a single charge // relevancy, that has no bearing on the matter // endurance, the capacity to tolerate, behaviour past all bearing // (pl.) position in relation to some reference point // (pl/) grasp of one s situation, to find one s bearings // a part of a machine that bears the friction set up by a moving part. Sliding friction is reduced by making the bearing of Babbitt metal, and by separating it and its moving part by a thin film of lubricant. By the introduction of ball bearings (or roller bearings) sliding friction is replaced by rolling friction, which is must less in effect// an angle measured from true north, magnetic north, or from some given survey line to lose one s bearings to be lost// to be puzzled. 47. This too speaks of relevancy as one of the meanings one may gather ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that action is founded on satisfaction being reached that the books of accounts, documents or assets seized have a bearing on the determination of the total income of such other person . We in this regard bear in mind the well settled distinction which the law recognizes between the existence of power and the exercise thereof. Section 153C enables and empowers the jurisdictional AO to assess or reassess the six AYs or the relevant assessment year . The Act thus sanctions and confers an authority upon the AO to exercise the power placed in its hands for up to a maximum of ten AYs . Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to have a bearing on the determination of the total income . It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the relevant assessment year . It is only once the AO of the non-searched entity is satisfied that the material comin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, he is required to transfer the assets or documents, which he believes belongs to the assessee, to the assessing officer having jurisdiction over that assessee. The assessing officer of the assessee on receipt of such asset or document seized would have jurisdiction to commence proceedings under Section 153C of the Act. The assessing officer has, thereafter, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the Assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act. Section 153A of the Act requires that a notice be issued to the person sought to be assessed, calling upon the said assessee to file his return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act unless the incriminating material belonging to the Assessee has been seized. 38. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act.: v) The appellant also seeks to place reliance on the decision of Kolkata Bench of Hon ble Tribunal in the case of IQ City Foundation vs ACIT reported in 186 ITD 555 wherein it has been held as under: 7. According to us, the aforesaid exercise which has been discussed has to be carried out by the AO of the searched person and the condition precedent as discussed are sine qua non before the AO of the other person(third party) gets jurisdiction u/s. 153C of the Act to issue notice u/s. 153C f the Act to the third party. However, it has to be taken note that an additional requirement/ satisfaction of AO has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II) 8 It is also submitted that satisfaction note alone can be looked into, has to read as such and, cannot be supported by any supplementary or additional material. Reliance is placed on the following judgments: i) 359 ITR 106 (Del) CIT vs. Living Media India Ltd. (pages 90-96 of JPB) ii) 439 ITR 333 (Bom) Hindustan Lever Ltd. v. DCIT (pages 112-114 of JPB) iii) 355 ITR 102 (Bom) Dynacraft Air Controls vs. Sneha Joshi and Ors iv) 324 ITR 154 (Bom) Prashant S. Joshi vs. ITO(pages 82-89 of JPB) v) 455 ITR 286 (Bom) Tumkur Minerals (P) Ltd. v. JCIT vi) 456 ITR 261 (Bom) Survival Technologies (P) Ltd. v. DCIT vii) 69 ITR 461 (All) Jamna Lal Kabra v. ITO viii) 189 ITR 786 (Pat) CIT v. Agarwalla Brothers ix) 272 ITR 154 (Raj) BanswaraSyntex Ltd. v. ACIT x) 174 ITR 741 (Cal) Equitable Investment Co. (P) Ltd. xi) W.P. NO. 2192/2009 dated 20.8.2011 (Uttarakhand) M/s National Petroleum Construction Co. vs. UOI xii) 319 ITR 282 (Guj) Gujarat Fluorochemicals Ltd. v. DCIT xiii) 455 ITR 539 (Jhar) Naveen Kumar Jaiswal v. ITO xiv) 456 ITR 316 (Kar) CIT v. Canara Bank 8.1 Similar view has been expressed in the context of section 153C of the Act in the following judicial pronouncements: i) 439 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 65. On going through page 463 of the paperbook, which is copy of page 10 of annexure A-4, it is found that on these documents, some figure has been noted. From the noting on this paper, the details of FDRs cannot be detected. The assessee has denied this to be in his handwriting. The entries do not correlate any date or the signatures. The Assessing Officer did not collect any other evidence from banks or post office to correlate investment of the assessee in any other FDRs except the FDRs of Rs. 12,25,000/-, the source of which has been duly disclosed by the assessee. 66. Keeping in view of the above facts and also after taking to account the nature of entry on the seized document which is to be treated as dumb document, the addition of Rs. 27,50,000/- cannot be justified in block assessment year. In this view of the matter, the addition is deleted and the ground is allowed. It may be noted that the Tribunal saw the seized paper as a dumb document which meant that nothing could be understood from it. The document, according to the Tribunal, merely noted a figure of Rs. 27,50,000/-without any details whereas details of other fixed deposits made with Karnataka Bank were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Supreme Court and various High Courts in following judgments. CBI vs. VC Shukla 3 SCC 410 (SC) CIT vs. GirishChaudhary (2008) 296 ITR 619 (Delhi) CIT vs. Anil Bhalla (2010) 322 ITR 191 (Delhi) CIT vs. Atam Valves (P.) Ltd. 184 Taxman 6 (P H) Atul Kumar Jain vs. DCIT (1999) 64 TTJ (Delhi) 786 15. In the case of CIT vs. Jaipal Aggarwal [2013] 212 Taxman 1 (Delhi)- wherein it was held that Dumb documents seized, i.e., from which nothing could be clearly understood, cannot form a justified base for making additions to income of the assessee. Decision of the hon ble Delhi ITAT in the case of ACIT vs. Sharad Choudhary [2014] 165 TTJ 145 (Delhi-Trib.) wherein it has been held that a charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all four components of charge of tax. If it is not so, the document is only a dumb document and no charge of tax can be levied on the assessee on the basis of a dumb document. Further it has been held that in absence of any suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for and whom they refer to. xxxxxxxxxxxxxxx 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed. 18. Book ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words regularly kept mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'. (Emphasis added by us) 19. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus; 37. In Beni v. BisanDayal it was observed 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 all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. We find the materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation of a police investigation. 22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A.No.4. The Settlement Commission has observed that the scrutiny o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural Income Tax and Sales Tax Officer viii) 220 Taxman 168 (Del.) CIT vs. Prem Prakash Magpal ix) ITA 984/2019 dated 4.3.2024 PCIT vs. Rashmi Rajiv Mehta (pages 404-408 of JPB-II) x) 148 TTJ 517 (Hyd) Smt. K.V. Lakshmi Savitri Devi vs. ACIT xi) ITA No. 208 of 2011 dated 12.09.2012 Commissioner of Income Tax vs. M/s Khosla Ice General Mills xii) ITA No. 507/2009 dated 27.04.2010 CIT vs. Samrat Builders xiii) 52 TTJ 533 (Ahd) ACIT vs. Prabhat Oil Mills xiv) 63 ITD 203 (TM) (Mad) ITO vs. M. A. Chidambaram xv) 86 ITD 13 (Del.) (TM) Amarjit Singh Bakshi (HUF) vs. ACIT xvi) ITA No. 5516 5517/D/2012 ACIT vs. Anil Khandelwal xvii) ITA Nos 336/D/2012 and 5515/D/2013 dated 29.11.2016 SamtaKhinda v. ACIT xviii) ITA No. 1314/D/2023 dated 7.3.2024; Surender Kumar Jain vs. ACIT (pages 395-403 of JPB) 7. The Ld. AR submitted that the assessee did not enter into any cash transaction with M/s. JBL, the entity searched under section 132 of the Act. According to him, all transactions made by the assessee with M/s. JBL were through banking channel and has been found to be recorded in the books of the assessee. Apart from the ledger account in Hajir Johri which is not maintained by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition based alone on facts which emerges from the details and findings made by the Ld. AO (para 6.5 of appellate orders refers). 9.4 For the reasons set out above and on the facts and in the circumstances of the case, we allow the appeals of the assessee and direct the Ld. AO to delete the impugned addition in both the AY(s). 12 It is also submitted that statements recorded/material relied and gathered behind the back of the assessee and without any opportunity for cross examination despite specific request made during the course of assessment proceedings, cannot be relied upon as it has no evidentiary value. Reliance is placed on the following judicial pronouncements: i) 418 ITR 315 (SC) CIT v. Odeon Builders (P) Ltd. (231-232 of JPB) However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price-list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of such person further assessing authority has to gather some more support to the statement for passing an order of assessment. Reliance is placed on the judgment of Hon ble Andhra Pradesh and Telagana High Court in the case of Gajjam China Yellappa v. ITO reported in 370 ITR 671 it was held as under: The Act empowers the Assessing Officers or other authorities to record the statements of the assesses, whenever a survey or search is conducted under the relevant provisions of law. The statements so recorded are referable to Section 132 of the Act. Sub-section 4 thereof enables the authorities not only to rely upon the statement in the concerned proceedings but also in other proceedings that are pending, by the time the statement was recorded. If the statement is not retracted, the same can constitute the sole basis for the authorities to pass an order of assessment. However, if it is retracted by the person from whom it was recorded, totally different considerations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under Section 164 Cr.P.C. The evidentiary value of a retracted statement becomes diluted and it loses the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.C by operation of sub-section (13) of Section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act. This, in turn, is referable to a time-tested right of an individual which is recognised u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under Section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle. Learned counsel for the appellant is not able to point out any differentiating factors. The precedent covers the facts of the present case. 14.3 Reliance has been further placed on below mentioned Judicial pronouncements: i) 328 ITR 384 (Del) CIT vs. Dhingra Metal Works In any event, it is settled law that though an admission is an extremely important piece of evidence, it cannot be said to be conclusive and it is open to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements made by the assessee iv) 225 Taxman 28 (Guj)(Mag) CIT vs. Agew Steel Mfg. (P) Ltd. v) 221 Taxman 47 (Guj) (Mag) CIT vs. Sun Builders vi) 201 Taxman 95 (Jhar) (Mag) CIT vs. Ravindra Kumar Jain Section 132 of the Income-tax Act, 1961 - Search and seizure - Assessment year 1994-95 - During course of search operation, assessee first stated that he had no undisclosed income and thereafter he surrendered a sum of Rs. 7 lakhs as his undisclosed income - Out of said amount Rs. 4 lakhs was stated to have been invested as stock of 'H' and amount of Rs. 3 lakhs was stated to have been deposited in different saving bank accounts - Assessing Officer made addition on basis of assessee's statement - On appeal, Commissioner (Appeals) deleted addition on ground that assessee later on retracted his statement and surrender was not corroborated by independent evidence - Tribunal upheld order of Assessing Officer - Whether when amount, which assessee stated to have been deposited in bank, was not found in any bank and, thus, part of alleged admission of assessee was not found correct, Assessing Officer was duty bound to collect more evidence in respect of undisclosed income of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferance or to adverse consequence on such statement is not justified in law. All that is stated by any deponent on the search day should not be taken as the truth, the whole truth and nothing but the truth. Such statements indubitably have evidentiary value and credibility in law, but the same should be viewed with great caution, particularly when the same is denied, varied or retracted or established by the defendant to have been obtained or given under mental stress, coercion, undue influence or due to any other abnormal condition and circumstances when such statement was given, if a person at later stage retracts from the statement given on the search day, then the court or Tribunal should try to ascertain the reasons or circumstances from such person for doing so and, if satisfied, not to place heavy reliance on such earlier statement which has subsequently been denied and retracted. xi) 139 ITD 10 (Pune) Jyotichand Bhaichand Saraf Sons (P) Ltd. vs. DCIT Section 132 of the Income-tax Act, 1961 - Search and Seizure - Whether admission made under section 132(4), though important piece of evidence, is not conclusive - Held, yes - Whether assessee can retract from it showing that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and the CIT (Appeals), as reproduced above, clearly reveals that no material has been brought on record, to support the impugned additions. The AO as well as CIT (Appeals), being quasi-judicial authority must not base their findings, on no-material or no-evidence. This is a fundamental rule of justice and established legal proposition that there may be something more than bare suspicion, to support the findings, in the assessment order, as held by the Hon'ble Supreme Court, in the case of Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736; Omar Salay Md. Sait v. CIT [1959] 37 ITR 151 (SC), Dhakeswari Cotton Mills Ltd.v. CIT [1954] 26 ITR 775 (SC); Lal Chand Bhagat Ambica v. CIT [1959] 37 ITR 288 (SC). In the present case, AO had not made any enquiry except quoting Question No. 10 and reply thereto. The AO, further, failed, to bring any material on record, even prima-facie to suggest earning of income from job work, by the appellant. Therefore, the AO, being quasi-judicial authority is not competent, to draw inferences in vacuum, without the base of foundational material, evidence and relevant provisions, as has been done, in the present case. The AO is required to act in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orawar Singh M. Rathod 6. We have heard the learned Representatives of the parties and perused the record. After considering the facts of the case, we find that the AO had made the addition merely on the basis of statement recorded under section 132(4) at the time of search. We find that at the time of search no evidence or material or assets, immovable or movable properties were found which supports the disclosure of Rs. 16 lakhs. The assessee had retracted from the said disclosure which has not been accepted by the Department. It is true that simple denial cannot be considered as a denial in the eyes of law but at the same time, it is also to be seen (that) the material and valuable and other assets are found at the time of search. The evidence ought to have been collected by the Revenue during the search in support of the disclosure statement. The decision cited by learned Departmental Representative is distinguishable on facts. In the said case, the disclosure was of Rs. 7 lakhs which was supported by investment in house property, unaccounted cash, unaccounted investment in furniture and unaccounted in gold ornaments, etc., whereas in the case under consideration no such assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the residence of Shri Prem Arora was related to the financial year 2003-04 and the income earned in those transactions has been received by the assessee through banking channels and not by cash and the same has been duly accounted for. In such a situation, the presumption that assessee might have carried out speculation business during the year on the basis of such document seized is completely untenable and unsustainable and additions based on such presumption cannot be sustained. The inference that Shri Prem Arora was in possession of the cash and being the close person of the assessee, assessee might have been indulging in the speculation business of the commodity trading is also unsustainable presumption. No adverse inference can be drawn about the assessee on such presumption. The Assessing Officer's reliance that assessee has also narrated about the investment of the undisclosed speculative income in the purchase of gold and jarau jewellery, investment in shares and investment in vaida bazaar and advances given to the parties trading in agricultural field is also not supported by any document. Nothing has been found during the search and no such assets had been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. .. 31. We accordingly direct the Assessing Officer to accept the long term capital gains declared as such. ii) I.T.A. No.1691/Del/2019 dated 07.10.2019 in Reeshu Goelvs ITO 18. .. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that all the transactions undertaken of the scrip M/s. CCL International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of any material or evidence against the assessee, we do not find any reason as to why the claim of Long Term Capital Gain from sale of such share should be denied. Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer. The aforesaid decision affirmed by the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this Court. iii) 26 ITR 736 (SC) Dhirajlal Girdharilal v CIT, Bombay When a Court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the Court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material iv) 26 ITR 775 (SC) Dhakeshwari Cotton Mills Ltd. v CIT The estimate of the gross rate of profit on sales, both by the Income-tax Officer and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question. Both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the assessee with vouchers and the books of account were complete and correct in all respects. The accounts which are regularly maintained in the course o business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the Revenue to show that either the books of accounts maintained by the assessee were incorrect or incomplete or method of accounting adopted by him as such that true profits of the assessee cannot be deducted therefrom. v) ITA No. 999/2010 dated 03.08.2010 (Del)CIT vs. M/s Rice India Exports Pvt. Ltd. 3 It is settled law that in revenue matters, the onus of proof is not a static one. Though the initial burden of proof lies on the assessee yet when it files purchase bills and affidavits, the onus shifts to the Revenue. One must not forget that it is Revenue which has powers regarding discovery, inspection, production and calling for evidence as well as survey, search, seizure and requisition of books of accounts. vi) ITA No. 165/2010 dated 04.05.2017 CIT vs. M/s Pashupati Nath Agro Food Products (P) Ltd In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronouncements: i) 131 ITR 597 (SC) K.P. Varghese v. ITO ii) 159 ITR 71 (SC) CIT v. Shivakami Co. (P) Ltd. iii) 237 ITR 570 (SC) CIT vs. Smt. P. K. Noorjahan The appeals relate to the asst. yrs. 1968-69 and 1969-70. The assessee is a Muslim lady who was aged about 20 years during the previous year relevant to the asst. yr. 1968-69. On 15th November, 1967, she had purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase of Rs. 34,628. On 27th November, 1968, she purchased another 12 cents of land at Ernakulam and the total investment for this purchase was Rs. 25,902. The explanation of the assessee regarding the source of the purchase money for these investments was that the same were financed from out of the savings from the income of the properties which were left by her mother's first husband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the ITO who made an addition of Rs. 32,628 as income from other sources in the asst. yr. 1968-69 and an addition of Rs. 25,902 in the asst. yr. 1969-70. The said orders were affirmed in appeal by the AAC. The Tribunal, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue notice u/s 153C. The AO also mentioned the same in the notice itself that this case falls u/s 153C of the Act, hence this is complete compliance as far as initiation of proceedings in the case of the assessee is concern. He submitted that the initiation of proceedings u/s 153C is just and proper and he supported the findings of lower authorities in this regard. 21. Considered the rival submissions and material placed on record. We observed from the record that the proceedings initiated in the case of the assessee on the basis of documents found during search in the case of PGPL (Annexure A), statement of Sh. Dinesh S Gupta and statement of Sh. Hari Om Goel (during Survey proceedings). By relying on the above statements, AO proceeded to make additions in the hands of the assessee. The Ld AR has submitted before us with regard to AY 2014-15 and 2015-16 that the assessment orders passed by AO is beyond the period of 6 assessment years immediately preceding AY relevant to the previous year in which search is conducted in the case of the assessee. After considering the submission of the rival parties, in order to initiate the proceedings u/s 153C, as per the provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observe that the satisfaction note recorded by the AO of the assessee, he has not recorded how the documents seized have a bearing on the determination of the total income of the assessee for six assessment years immediately preceding the assessment year. It clearly shows that the satisfaction note recorded are not as per the provisions of section 153C of the Act. We observe from the decision of Saksham Commodities Ltd (Delhi) (Supra), in which it is held as under: 63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to have a bearing on the determination of the total income and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the relevant assessment year . 64. In our considered view, abatement of the six AYs' or the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the relevant assessment year would follow the formation of that opinion and satisfaction in that respect being reached. 67. On an overall consideration of the aforesaid, we come to the firm conclusion that the incriminating material which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the relevant assessment year would not justify a sweeping or indiscriminate invocation of Section 153C. 68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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