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TMI Blog2024 (3) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... A) quashing the assessment in all these three years i.e., assessment years 2013-14, 2014-15 2015-16. Therefore, these appeals of Revenue are dismissed. - Shri Mahavir Singh, Vice President And Shri Manoj Kumar Aggarwal, Accountant Member For the Revenue : Shri V. Nandakumar, CIT. For the Assessee : Shri G. Baskar Shri P.M. Kathir, Advocates. ORDER PER MAHAVIR SINGH, VICE PRESIDENT: These three appeals by the Revenue and three cross objections by the assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-18, Chennai in ITA Nos. 971, 972 973/22-23 dated 03.05.2023. The assessments were framed by the ACIT, Central Circle-2(3), Chennai for the assessment years 2013-14 to 2015-16 u/s. 143(3) r.w.s. 153A of the Income-tax Act, 1961 (hereinafter the Act ) vide orders of even date 31.12.2017. 2. The only common issue in these three appeals of Revenue is against the order of CIT (A) holding that the addition cannot be made u/s. 153A of the Act on the basis of material seized during the course of search of another person rather than assessment should have been made u/s. 153C of the Act instead of 153A r.w.s. 143(3) of the Act. For this, Revenue has raised comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting in books whereas the assessee received cash over and above the stated consideration. Hence, the Ld. CIT (A) erred in deleting the addition made by the AO in the assessment framed u/s. 1534 holding that the addition was made only on the basis of material seized during the course of search of another person. 2.5 Sec. 250(2) of Income tax Act, 1961 states that the assessing officer, either in person or by a representative, has the right to be heard at the hearing o' the appeal. But while deciding the above additional ground raised by the assessee with regard to legal validity of assessment made u/s. 153A on material seized during the search of another person, no opportunity was given to assessing officer i.e. DCIT, central Circle-2(3), Chennai. This is against the appeal procedure prescribed in the Act itself. This has denied the assessing officer an opportunity to present facts of the case. 3. Brief facts are that search u/s. 132 of the Act was conducted in the case of Dr. Murugu Sundaram and Dr. Raja Sundaram on 06.07.2015 u/s. 132 of the Act. Simultaneously, search was conducted on the assessee s firm on 06.07.2015 u/s. 132 of the Act also. During the course of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential and commercial properties. The BSR Mall is one of such properties, which is being developed by the assessee at OMR, Thoraipakkam, Chennai in a joint venture, where the land belongs to some other party and commercial building is being developed by the assessee firm. Admitted facts are that the commercial property area of 27522 sq.ft., is sold to Dr. Murugu Sundaram and Dr. Raja Sundaram. The AO noted that the assessee has received this cash payment of Rs. 3.20 crores in financial year 2012-13 relevant to this assessment year 2013-14 and assessee s reply is evasive in regard to project completion method and hence, he assessed this cash received of Rs. 3.20 crores as unaccounted income. Aggrieved, assessee preferred appeal before CIT(A). 4. Before CIT(A), the assessee raised additional ground as under:- 1.1 The AO erred in making the addition of Rs. 3,20,00,000/- to the appellant s income in the impugned order of assessment passed u/s. 143(3) r.w.s. 153A of the Act. 1.2 The addition being based on the documents and materials found during the search conducted in the case of Dr. Raja Sundaram and Dr. Murugu Sundaram, the appellant being the person other than the person refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the search in the case of Dr. Murugu Sundaram and Dr. Raja Sundaram is not legally sustainable. Accordingly, the AO is directed to delete the addition of Rs. 3.20 Crores, Rs. 3.80 Crores and Rs. 3.20 Crores made in the assessment orders for AYs 2013-14 to 2015-16 respectively. The additional grounds of appeal are accordingly allowed. 38. As the addition made in the assessment orders for A Ys 2013-14 to 2015-16 has been held to be untenable in law on legal grounds, it is considered that the grounds of appeal raised by the appellant dealing with the merits of the issue are not required to be adjudicated. The Grounds of appeal Nos. 1.1 to 1.4 are therefore treated as dismissed for statistical purposes. Aggrieved, now Revenue is in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. Brief facts are that search and seizure operation was conducted u/s. 132 of the Act in the case of Dr. Murugu Sundaram and Dr. Raja Sundaram on 06.07.2015 from where unaccounted money in cash along with other incriminating evidences was found. Certain loose sheets were found and seized during the search operation which contained details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 153A of the Act, which deal with assessment in the case of a search and are applicable for making assessment in the case of a person, in whose case, search was conducted u/s. 132 of the Act. It was further argued that in case, where books of accounts or documents seized during the search pertain to or information contained therein relate to a person other than the person referred to in section 153A of the Act i.e., the searched person, the seized books of account or documents are required to be handed over to the AO having jurisdiction over such other person and if the said AO is satisfied that the same have a bearing on the determination of total income of such other person, he shall proceed against such other person in term of section 153C of the Act and issue notice accordingly for assessing the income of that other person . The ld. counsel for the assessee before us relied on the decisions of Hon ble Delhi High Courts in the case of PCIT vs. Anand Kumar Jain (HUF) in ITA No. 23 of 2021 and PCIT vs. Subhash Khattar in ITA No. 60 of 2017. The ld. counsel also relied on the decision of Co-ordinate Bench of this Tribunal, Bangalore Bench in the case of P. Shyamaraju a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidentiary value and relevance as contemplated under the explanation to section 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. This court in Principal Commissioner of Income Tax, Delhi v. Best Infrastructure (India) P. Ltd., has inter-alia held that: 38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal. 9. In Commissioner of Income Tax v. Harjeev Aggarwal, this Court had held as follows: 23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 24. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. ( ) 27. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were all found and seized was during the course of search carried out in the premises of one Sri .V. Shambamoorthy pursuant to a separate warrant of search. The A.O. is certainly entitled to use these materials to make addition in the hands of the assessee, provided, he had initiated proceedings u/s 153C of the I.T. Act and assessed the income u/s 153C r.w.s. 143(3) of the I.T. Act. There is no dispute that the A.O. in the instant case has not initiated proceedings u/s 153C of the I.T. Act. Now the question arises whether the incriminating material found and seized in the search of Sri. V. Shambamoorthy can be used in an assessment of the assessee in a proceedings u/s 153A of the I.T .Act without invoking the provisions of section 153C of the I.T. Act. The answer to the above question would be no . The reason being that as per the provisions of section 153C of the I.T .Act. it is imperative that in order to use the material found and seized in a search of an another person other than the person who is subjected to assessment, such material cannot be used without invoking the provisions of section 153C of the I.T. Act. The proceedings u/s 153C of the I.T. Act ought to have been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonging / pertaining to the assessee, found in the search of Sri. V. Sambamoorthy, is handed over to the AO of the assessee, which is to be considered for determining whether proceedings u/s 153A of the I.T. Act is initiated and is pending on the date of receipt of such material. In the present case the date of initiation of proceedings u/s 153A of the I.T. Act definitely precedes the date on which material found in the search of Sri. V. Sambamoorthy is received for the purpose of assessing the same in the hands of the assessee. Thus, the AO ought to have initiated proceedings u/s 153C of the I.T. Act inasmuch as the proceedings u/s 153A of the I.T. Act had already commenced. 7. After going through the judicial precedents and particularly the decision of Hon ble Delhi High Court in the case of Anand Kumar Jain, supra, we are of the view that as per the mandate provided by the provisions of section 153C of the Act, the statement made by assessee cannot be a base for making assessment u/s. 153A of the Act on the basis of alleged incriminating material (being the statement recorded u/s. 132(4) of the Act) on the basis of which assessment was framed u/s. 153A of the Act rather assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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