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TMI Blog2024 (6) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of the assessee as well as the statements of other parties - HELD THAT:- CIT(A) observed that main motive of the assessee was to bring unaccounted cash of various beneficiaries to the mainstream of books of accounts by claiming the same as long-term capital gain and in this whole process the assessee played a very crucial role by interlinking beneficiaries, brokers, intermediaries and exit provider for which he charged a specific commission. But the analysis of the seized document submitted by the learned departmental representative before us do not indicate any such lead regarding the role of the assessee in interlinking of beneficiaries, brokers, intermediaries and exit provider. In the entire seized documents there is no reference of any commission charged by the assessee. This entire addition made by the Assessing Officer is merely based on the confessional statement of the assessee, statement recorded in earlier search and addition proposed in earlier assessment years. The said statements cannot be held to be incriminating material in view of the decisions of the various Hon ble High Courts discussed above. The addition of commission income made by the AO merely re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case and in law, the learned CIT(A) erred in holding the assessment order passed by the Assessing Officer u/s.153A r.w.s. 144 of the Act as valid without appreciating the fact that the assessment made by the Ld. Assessing officer u/s 153A of the Act was beyond jurisdiction as no incriminating material was found during the course of search u/s 132 of the Act with respect to the addition made by the Ld. AO. Additional Ground No. 02 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding the notice issued by the Ld. AO u/s 153A of the Act on 29.08.2019 as valid, without appreciating the fact that for the search conducted u/s 132 of the Act on 20.10.2016, the notice u/s 153A of the Act was already issued by the DCIT CC-2(1), Pune on 18.09.2018 and thereby erred in not appreciating the fact that there cannot be two notices u/s 153A issued in respect of the same search u/s 132 of the Act. Additional Ground No. 03. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in considering the impugned order of the Ld. AO u/s 144 r.w.s. 153A of the Act dated 12.09.2019 as valid, without appreciating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,88,667/- being expenses incurred through credit card of ICICI Bank. 6.4 Accordingly, the AO is directed to allow the deduction of Rs.1,88,667/- to the appellant. Thus the Ground No. 5 of appellant is partly allowed. 5. Before us the ld. Counsel for the assessee, addressing the additional grounds, challenged the validity of the addition made in assessment u/s. 153A of the Act without the aid of any incriminating material. He referred to the assessment order and submitted that the AO has only made the addition for the credit card expenses which is based on the Annual Information Return (AIR). He further submitted that the year under assessment was unabated assessment, therefore, any addition could have been made only with the aid of incriminating material as held by the Hon ble Mumbai High Court in the case of CIT V. Continental Warehousing Corporation [2015] 374 ITR 645] which has been upheld by the Hon ble Supreme Court in PCIT v. Abhisar Buildwell (P) Ltd. [2023] 454 ITR 212 (SC). Therefore, he submitted that in absence of any incriminating material, the addition made by the AO cannot be sustained. 6. On the contrary, the ld. D.R. relied on the orders of the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), no addition could have been made in the year under consideration without the aid of incriminating material. The addition made by the AO and sustained by the ld. CIT(A) is accordingly deleted. Additional Ground No. 1 of the assessee is accordingly allowed. 9. Since we have already held that no addition could have been made in the instant assessment year without the aid of incriminating material, therefore, the other additional grounds as well as the regular grounds raised by the assessee are rendered merely academic and not required to be adjudicated upon at this stage. ITA Nos. 240 -244/Mum/2023 for AY 2013-14 to 2017-18 10. Now, we take up the second set of appeals from AYs 2013-14 to 2017-18. Identical grounds have been raised in above set of the assessment years and therefore for sake of brevity, we only reproduce the grounds raised by the assessee in AY 2013-14: 1. Under the facts and circumstances of the case and in law, the CIT (A) has erred in confirming the order passed by the AO being bad in law on various ground in law and in equity and the same should be annulled. 2. Under the facts and circumstances of the case and in law, the CIT (A) has grossly erred in not allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid ab intio since it does not bear any Document Identification Number (DIN) on its assessment order body as mandated by the Circular No. 19/2019 issued by the CBDT. 2.2 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in dismissing the appeal of the assessee without appreciating fact that the notice issued under section 143(2) of the Act by the ld. Assessing Officer is void ab intio since it does not bear any document Identification Number (DIN) on it Notice body as mandated by the circular No. 19/2019 issued by the CBDT. Additional Ground No. 03 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition made by ld. AO, without providing any opportunity of cross examination on whose statements the Ld. AO relied in the assessment order and also without providing copies of statements relied upon. 11.1 The additional grounds raised being legal in nature and not requiring investigation of fresh facts ,therefore, after considering the rival submissions of the parties, we admitted the additional grounds for adjudication in view of the decision of the Hon ble Supreme Court in the case of NTPC Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch Ltd . which was carried out along with the search dated 20.10.2016. Thereafter, the AO has made his observation on the analysis of the seized material and submissions during the present search, which is the genesis of this assessment proceedings u/s. 153A of the Act. 13. The AO referred to the statement of Shri Bhupesh Rathod and statement of Sh Jigar Ghogari , recorded u/s. 132(4) of the Act during the search proceedings on 19.03.2019. The AO further referred to the following statements as under: i. Statement of Shri Hemant Sheth recorded u/s. 132(4) of the Act during the search proceedings on 19.03.2019 at 39A, Orbit Height Tower, Nana Chowk, J.D Marg, Mumbai 400007. ii. Statement of Shri Rakesh Shah recorded u/s. 132(4) of the Act during the search proceedings on 19.03.2019 at C-2, Arihant Society, Ashok Road, Kandivali East, Mumbai 400101. iii. Statement of Shri Bhavesh Pabari recorded u/s. 132(4) of the Act during the search proceedings on 19.03.2019 at Flat No. 61, Sant Namdo Krupa Building, Gamdevi, Mumbai 400007. iv. Statement of Shri Bhavesh Pabari recorded u/s. 131 of the Act on 29.05.2019 at Room No. 1818, Air India Building, Nariman Point, Mumbai where he was asked r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the assessee has not provided the accurate bifurcation of entries pertaining to the above three categories of accomodation entires, the definitive value is not ascerainable.In veiw of the same, the undisclosed commission income of Shri Naresh Jain is at least 3% of the entire trade value/containg element of transactions of LTCG/STCL/Cireular trading) of Rs. 319,38,11,692/-effected during the year and thus commission income is computed at Rs. 9,58,14,350/-. 15. Further, the ld. CIT(A), also upheld the commission income observing as under: 7.21 Besides, the confessional statements, a large number of incriminating documents/digital data have been found during the course of search, which conclusively prove that the appellant and the various group concerns have been used as conduits for providing accommodation entries. 7.22 In view of the above detailed discussion, it is clear that Shri Naresh M. Jain is the main person operating with his several associates to rig the stock market and to provide accommodation entries (in the form of bogus LTCG, bogus short term loss/gain) to various beneficiaries who intended to bring their unaccounted income into their books of without paying taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional ground No. 1 of the appeal is concerned, the moot issue in dispute is whether the addition in dispute of commission income amounting to Rs.9,58,14,350/- has been made based on incriminating material found during the course of search dated 20.03.2019. In the case of Continental Warehousing Corporation (supra), the Hon ble Bombay High Court held that if the assessments of any years is pending as on date of search, the same stands abated due to search action and AO can make any addition in those assessment years based on the facts and circumstances of the case and not limited to the additions based on incriminating material. But in assessment years in relation to which the assessments were already completed as on the date of search action, those are unabated assessments and in those cases no addition could have been made except based on incriminating material found during the course of search action. However, as far as any incriminating material related to the any other person found during the course of search of searched person, action in the case of the other person can be taken in terms of s. 153C of the Act if the said material is either belonging to the assessee or books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 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 any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others observed that statement of supplier parties (third parties), along with additional facts of lack of evidence in support of transport/delivery of material and nonexistence of the parties during verification, constitute existence of incriminating material. 19.3 In view of decisions discussed above, it is evident that the statement of assessee recorded under section 132(4) except voluntarily, cannot constitute incriminating material on standalone basis without corroboration of any incriminating material found during the course of the search. Similarly statement recorded of third parties under section 132(4) of the Act also cannot constitute an incriminating material unless same is corroborated with any incriminating material seized from the premises of the assessee. Therefore, in the instant case, we hold that the statements of the assessee or the various third-party mentioned by the Assessing Officer in the impugned assessment order could not be made the basis of addition, unless those statements are corroborated with any incriminating material found during the course of search. Thus, the issue now precipitated is whether any incriminating material was found during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee and alleged beneficiary of LTCG or exit provider except relying on statements of third parties. Further, regarding the email of [email protected] also the AO has not pointed out the incriminality in correspondence through email. 21. The ld CIT(A) also concluded that Cash was deposited in various Dummy bank accounts and then layered through several pass-through bank accounts and then would reach the bank accounts linked to dummy trading accounts. He further concluded that said cash was the unaccounted cash of the beneficiaries that was routed through various bank accounts to reach the bank accounts that were linked to the dummy trading accounts controlled, operated and managed by Shri Naresh Jain. But, the ld CIT(A() has not referred to any seized material for this conclusion except relying on investigation in the case of Kolkata entry providers. The ld CIT(A) further concluded that Once the pre-arranged transaction between beneficiary and dummy trading account is executed on the stock exchange, the beneficiary receives his cash into his bank account and books of account. The ld CIT(A) further observed that the accounting of the above explained pre-arranged transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainment Ltd. The daughter of the assessee being director of 52 Weeks Entertainment Ltd. from 23.08.2014 and who subsequent became director of Four Lions P. Ltd. on 01.07.2015 , therefore, same was maintained as part of routine business practice, devoid of any incriminating content regarding share manipulation. Further, page Nos. 144-120 are in relation to pledge of shares of M/s Four Lions Films Pvt. Ltd. in lieu of convertible loan of 500 lacs given by M/s 52 Week Ltd. to Four Lions Ltd. Those documents were part of chain of documents in continuation to share of agreement available on page No. 72-145 of the said annexure. Regarding pages 119 to 112, which is a list of share allotment made on 18.09.2014 along with full address PAN etc. The Ld. Counsel for the assessee submitted that same is a public document downloaded from the Ministry of Company Affairs (MCA) Site. Regarding the loose papers seized at Serial No. 111 to 93 the Ld. DR submitted that those empty stamp papers in the name of M/s 52 Weeks Entertainment Ltd. are clinching evidences in support of the statement of the assessee that he was involved in front running and manipulation of scrip to accommodate bogus LTCG. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hter of the Assessee, was serving as a director. But none of, those seized materials qualify as incriminating in nature by collating with those 12 scrips. In view of detailed rebuttal by the ld Counsel for the assessee, it is evident that the documents seized alleged by the ld DR as incriminating material are general documents and nowhere suggest any kind of link with the allegation of accommodation entry business or commission income earned there on. The documents in any manner does not lead to the allegation of the lower authorities that cash was received from accommodation entry seeker by the assessee and after deposit into some personal accounts it was routed to the accounts of buyers of such scrip i.e. exit provider, and the assessee earned commission on such accommodation entry transactions. The above documents do not corroborate the statement recorded of the assessee as well as of the third parties under section 132(4) of the Act. 26. Ultimately, after meticulous consideration and rebuttal of each document by the counsel for the assessee, we find that none of the materials seized from Annexure-A substantiate the allegations of accommodation entries or commission income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steel exchange of India Ltd. The first page of annexure U-2 refers to email related to annul report of Divine Multimedia (India) Ltd., second page refers to some name of shares and their numbers, third page refers to notice for annual general meeting of Nyssa Corporation Ltd. , other pages refers to annual general meeting or ledger account etc. These mails are on behalf of Monotype India Ltd. We find that no efforts have been made by the lower authorities that those email correspondence corroborate to statement of assessee of having engaged in providing accommodation entries. It seems that lower authorities have first concluded that assessee was engaged in providing accommodation entries and thereafter they have referred to certain pages claiming to be incriminating material, without actually analysing those documents. 30. Similarly, the image of logo of Monotype India Ltd. or other images which have been referred by the ld. D.R. as part of data seized, does not establish that those documents are incriminating in nature. 31. Further, the ld DR submitted that cash of Rs. 1,11,790/- found from the premises of the assessee was incriminating material. We find the Assessing Officer in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various Hon ble High Courts discussed above. 33. In view of the above, the addition of commission income made by the AO merely relying on the statement of the assessee as well as the statements of other parties, cannot be sustained in absence of an incriminating material corroborating those statements, in view of the decision of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation (supra) which has been upheld by the Hon ble Supreme Court Abhisar Buildwell (P) Ltd. (supra). The additional ground No. 1 of the appeal of the assessee is accordingly allowed. 34. Before us the learned counsel for the assessee has raised another additional ground challenging that the Assessing Officer had not followed direction of the CBDT issued by way of circular for citing document identification Number (DIN) on the assessment orders. The learned counsel for the assessee extensively argued in support of this additional ground. Since, we have already allowed the first additional ground in favour of the assessee, therefore adjudication of the additional ground on the issue of the DIN is merely rendered academic and thus, we are not adjudicating upon the same. The other groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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