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TMI Blog2022 (9) TMI 1636X X X X Extracts X X X X X X X X Extracts X X X X ..... nly on the premise that the details were not submitted before the AO or they were insufficient. It is therefore noted that, none of these additions/disallowances were based on any incriminating material or evidence found in the course of search. CIT, DR was also not able to point out the relevant incriminating material or evidence based on which the impugned additions were made by the AO. Having regard to the above facts, in our considered opinion therefore, the additions impugned before us in the assessment order passed u/s 153A/143(3) by the AO were not supported or backed by any incriminating material found or seized in the course of search and therefore these additions made in the unabated AY 2010-11 was legally impermissible. Hence, we set aside the order of the lower authorities below and allow this ground of the assessee and direct the AO to delete the additions made in the assessment order. Decided in favour of assessee. - Shri Aby T. Varkey, JM And Shri Gagan Goyal, AM For the Assessee : Shri Bharat Kumar. For the Revenue : Dr. Mahesh Akhade (DR). ORDER PER ABY T. VARKEY, JM: These appeals preferred by the assessee are against the common order of the Ld. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessments as per second proviso to section 153A of the Act. 3. Since the issues raised and the additions involved in all the appeals are similar, we first take up the appeal filed by the assessee for AY 2010-11 in ITA No. 1046/Mum/2019 as the lead case. It is noted that, the assessee is engaged in the business of real estate development. During the course of the search, on 10-12- 2013, according to AO, one of the partners of the assessee, Shri Jitendra Jain was confronted with the statements recorded of various persons who were purportedly engaged in the business of providing accommodation entries in the form of unsecured loans in lieu of cash, to which Shri Jitendra Jain in his statement recorded u/s 132(4) of the act on 13-12-2013 explained the manner in which they got unsecured loans from various parties by paying 0.25% brokerage and that they paid interest in the range of 9% to 24% of interest to the lenders, depending upon the amount, tenure and requirement of group companies. The Investigating authorities had put forth names of twenty eight (28) unsecured loans creditors from whom the Kamla Group has taken unsecured loans, to which Shri Jain admitted in his statement that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation entries in the form of loans. The Ld. AR of the assessee pointed out to us that, when the statement was provided to it ultimately on 25-02-2016, then only it came to their notice that certain admission was extracted from Shri Jitendra Jain under duress /coercion, and that purported admission made by Shri Jitendra Jain has been retracted by him, and the same was filed before the AO, along with the relevant details/documents for proving the identity, creditworthiness and genuineness of the lenders from whom the assessee had taken unsecured loans and paid interest thereon, vide letters dated 07-03-2016 18-03-2016. In the said letters the assessee had also sought cross examination of the so-called entry operators based on whose statements, admission was extracted under duress from Shri Jitendra Jain. Taking note of the submissions put forth by the assessee, the Ld. CIT (A) held that, the AO had indeed not considered the letters dated 07-03-2016 18-03-2016 before passing the assessment order. Exercising the co-terminus powers vested in him u/s 250 of the Act, the Ld. CIT (A) observed that these submissions of the assessee would be duly considered in the appellate proceedings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expenses formed part of WIP or was it debited to P L A/c and to the extent such expenses were capitalized to WIP, the disallowance ought to be reduced. The Ld. CIT (A) also confirmed the AO s action disallowing portion of the interest paid on partner s capital on the ground that the purpose of excess withdrawal from the capital account had not been justified by the partners. Aggrieved by the order of the Ld. CIT(A), the assessee in now in appeal before us. 8. Assailing the action of Ld. CIT(A), the Ld. AR of the assessee, in the first instance, pointed out that, the statement of Shri Jitendra Jain did not have any relevance to the case of the assessee in as much as the assessee did not belong to the Kamla Group as alleged by the lower authorities. Taking us through the original partnership agreement dated 02-08-2006 and supplementary deed dated 05-02-2008, the Ld. AR pointed out that the key person of the assessee firm was always Shri Naresh Jain and not Shri Jitendra Jain. He submitted that Shri Jitendra Jain was admitted as a partner much later after the formation of the partnership and that the bank account of the assessee was controlled by Shri Naresh Jain along with any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lower authorities confirming the additions made u/s 68 of the Act and the consequent disallowance of interest paid on loans and notional commission etc. was factually perverse. 9. Taking cognizance of the above contentions, vide order sheet entry dated 17.05.2022, this Tribunal had directed the Ld. CIT, DR to verify and furnish a report as to whether the statement of Shri Jitendra Jain was in connection with any document found during the course of search of the assessee. Vide letter dated 21- 06-2022, the Dy. CIT, CC-3(4), Mumbai ( AO ) has furnished relevant clarification along with details, which has been perused and taken on record. The Ld. CIT, DR pointed out that Shri Jitendra Jain had inter alia provided the details of the bank account of the assessee, in response to his Answer to Q No. 4, which were being run from his premises. He further showed us that Shri Jitendra Jain had also named the assessee as one of the concerns which were running from his premises in Annexure -B provided in response to Q No. 10. He also brought to our notice that, Shri Jitendra Jain in his Answer to Q No. 23, had also furnished the ledger of the assessee as a part of his statement marked as A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of any incriminating material found in the course of search. For this, the Tribunal had relied on the decision of another coordinate Bench in the case of Smt. Kalpana M. Ruia Vs DCIT, CC 2(2) and the CBDT Circular F No. 286/2/2003-IT(Inv) dated 10-03-2003. After holding so, following the judgment of the Hon ble Bombay High Court in the case of CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd (374 ITR 645), this Tribunal deleted the additions made in the unabated AYs holding that they were made without referring to any incriminating material found in the course of search. The Ld. AR accordingly contended that this Tribunal was bound by judicial discipline to follow the ratio laid down in the second appellate order passed by the coordinate Bench of this Tribunal (supra) in their Group s case and thus urged that all the additions made in the unabated AYs of the assessee be deleted, since they were not based on any incriminating material found during the course of search. 11. Per contra, the Ld. CIT, DR appearing on behalf of the Revenue supported the order of the lower authorities. He urged that, the contention of the assessee that unabated assessments can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra ordinary powers of conducting search and seizure operations after complying with stringent preconditions prescribed in Section 132 of the Act. We do not deny the Revenue s contention that, once a search u/s 132 is conducted against a person, then irrespective whether any incriminating material is found, the AO is required to proceed against such person for completing the assessments u/s 153A of the Act for the specified six assessment years. To this extent, there is no quarrel. However, we find that Section 153A itself creates the fine distinction/differentiation amongst specified six assessment years depending whether prior to the date of search, the assessment proceedings are pending or not before the AO. We note that the relevant section itself (second proviso to section 153A of the Act) clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending, then such appeals or other proceedings do not abate. We should keep in mind that merely because an assessee is subjected to search u/s 132 of the Act, such action by itself does not give carte blanche to the Department to subject such an assessee to the rigors of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. During the assessment proceedings for A.Y. 2005-06, the Assessing Officer added an amount of Rs. 93.72 lakhs (declared as gifts) as being covered by Section 68 of the Act and an amount of Rs. 43.67 lakhs (accumulated profits of the lendor) out of Rs. 1.5 crores received as loan from one K.P. Developers Pvt. Ltd. as deemed dividend under Section 2(22)(e) of the Act. Undisputedly, respondent-assessee was a shareholder in M/s K.P. Developers (P) Ltd. The aforesaid additions are reflected in an assessment order dated 31 December 2008 passed under Section 143(3) r/w 153A of the Act determining the respondent-assessee's total income at Rs. 1.47 crores. 4. In appeal, the CIT (A) held that the addition of an amount of Rs. 43.67 lakhs as deemed dividend has to be deleted. This on the ground that there were no accumulated profits available with M/s K.P. Developers (P) Ltd. to distribute amongst it's shareholders. However, so far as the addition in respect of the unexplained gifts aggregating to Rs. 93.70 lakhs is concerned, the CIT (A) did not disturb the finding of the Assessing Officer. 5. On further appeal before the Tribunal, the assessee inter alia challenged the validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue that the decision of this Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under Section 153A of the Act. The occasion to consider the issues raised on merits in the proposed questions becomes academic. 13. Identical view was expressed by the Hon ble jurisdictional Bombay High Court in the case of CIT Vs SKS Ispat Power Ltd (398 ITR 584) wherein it was held as follows: 5. We have considered the arguments canvassed by the learned counsel for the respective parties. On perusal of section 153A of the Act, it is manifest that it does not make any distinction between assessment conducted under section 143(1) and 143(3). This court had occasion to consider the scope of section 153A of the Act in the case of Gurinder Singh Bawa and in the case of Continental Warehousing Corpn. (Nhava Sheva) Ltd. (referred to supra). It has been observed that section 153A cannot be a tool to have a second inning of assessment either to the Revenue or the assessee. Even in the case of Gurinder Singh Bawa (referred to supra) the assessment was under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order has held that in the audited report filed by the assessee along with the report, cash book, ledger, bank book etc. were mentioned; that the respondent assessee was maintaining books on TALLY Accounting Software which was seized during the search and was being treated as incriminating material; however, regular books of account of the assessee, by no stretch of imagination, could be treated as incriminating material to form basis of framing assessment under Section 153A read with Section 143(3) of the Act. (emphasis supplied by us) 16. In view of the above, we are of the considered view that the regular books of accounts maintained by the assessee in tally software, now being referred by the Revenue, to justify the impugned addition did not constitute incriminating material unearthed during the search. 17. As far as the reliance placed by the lower authorities and Ld. CIT, DR, on the statement of Shri Jitendra Jain which was recorded u/s 132(4) of the Act to justify the impugned addition/s, is concerned; we find that the coordinate Bench of this Tribunal in the batch of cases decided in the matters of M/s Kamla Landmarc Enterprises Vs DCIT Others (supra) of the Kamla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 15. The Ld. AR responded to the said contention of the Ld.DR relying on various case laws wherein it is categorically observed and held that the statement recorded u/s 132(4) of the Act itself cannot be treated as incriminating material for making any additions in respect of non -abated assessments. Considering the above said contention, it is to be seen whether the statement recorded u/s 132(4) is liable to be treated as incriminating evidence or not. In case CIT v. Harjeev Aggarwal (supra), it is held that: - 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 of search would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt, the Ld. DR placed reliance upon the case of B. Kishore Kumar (T.C.A 738 to 744 of 2014, dated 3.11.2014) of Hon'ble Madras High Court for considering the statement given by the assessee has good evidence value, does not override the contentions of the Ld. AR, as the facts of the said case of B Kishore Kumar are distinguished with the facts of the case of the Assessee mainly on the ground that the sworn statement of B Kishore Kumar was taken by showing him the three print outs of the amount of loan given found during the search and not recorded in his regular books of accounts and in response to the same he admitted in his statement that there is a separate business carried out by him the income of which is not included in his return of income. In the case of the assessee, the statement was not recorded on the basis of any incriminating materials found during the search. The assessee relied upon the case law of the Hon ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom) wherein it is held that for assessment under section 153A in case of unabated assessment, if no incriminating material was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court held that that no addition can be made in respect of completed assessment u/s. 153A without incriminating materials found during the search. We are of the view that the original assessment for the Assessment Year 2008-2009 was completed u/s. 143(3) and for the assessment years 2009-2010 to 2012-2013, the period for issuing the notice u/s 143(2) has elapsed on the date of search i.e. 10.12.2013 and no notices were issued u/s 143(2) for the aforesaid years. Therefore, the assessment for the assessment years 2008- 2009 to 2012-2013 are non abated and no additions can be made in respect of the non abated assessment years without referring to any incriminating materials found during the search. It is apparent that no incriminating material was found during the search. 18. In other words, the reference is to those assessments in whose case assessment under section 143(3) cannot now be done. It is not at all the case of the revenue that in the appeals which have been claimed as unabated here there was time for assessment under section 143(3). In this view of the matter, in our considered opinion, the submission of the learned counsel of the assessee succeeds that addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of learned CIT (A) that incriminating material need not be specific has no legs to stand. This very observation by the learned CIT (A) itself is an admission that no specific incriminating material has been seized and referred in the assessment order Hence, in all cases of unabated assessment the assessment fails on jurisdictional defect. Thus, ITA No. 6519/MUM/2019, 6520/MUM/2019, 6515/MUM/2019, 6516/MUM/2019, 6513/MUM/2019 6514/Mum/2019 are dismissed on account of jurisdictional defect. 19. In the background of aforesaid discussion and following the judgements of the jurisdictional High Court, the addition made in these assessment orders passed by the assessing officer under section 153A without reference to any incriminating material found in search is not sustainable. Hence, we set aside the orders of authorities below and allowed the claim of the assessee and delete the addition. Since we have already directed to delete the addition of loan itself, the addition of commission and interest thereon disallowed are also directed to be deleted as the same are also without reference to any material foundering search. The appeal of the assessee for the A.Ys. 2008-2009 to 2012- 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2019, our decision in the case of ITA No. 1046/Mum/2019, for A.Y. 2010-11 of the assessee s appeal shall apply mutatis mutandis to the assessee`s appeals in ITA Nos. 1047/Mum/2019 1048/Mum/2019. Hence, the appeals for the AYs 2011- 12 2012-13 also stands allowed. 23. Now we take up the appeals of the assessee for the abated assessments for AYs 2013-14 2014-15. Having heard both the parties, we find that on similar facts and circumstances, this Tribunal in the batch of cases decided in the matters of M/s Kamla Landmarc Enterprises Vs DCIT Others (supra) of the Kamla Group, had set aside the addition/s back to the file of the AO to review and decide the issue afresh, by holding as under: 21. With regard to abated assessments for the A.Y. 2013-14 and A.Y. 2014-15 are concerned, we observed that Assessing Officer has made the addition without there being any corroborative piece of evidences except relying on statement recorded u/s. 132(4) of the Act. However, these assessments are abated, we direct Assessing officer to review the issues afresh based on the material available on records and complete the assessment on merits after providing proper opportunity of being heard to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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