Income Tax Appellate Tribunal - Jaipur
Deputy Commissioner Of Income Tax, ... vs M/S A.M. Exports , Jaipur on 7 January, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "B", JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 561/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2010-11
Deputy Commissioner of cuke M/s A.M. Exports.
Income Tax, Vs. 197, Johari Bazar,
Central Circle-1, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAPFA 6271 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Ranjan Kumar (CIT-DR)
fu/kZkfjrh dh vksj l@
s Assessee by : Shri Vijay Goyal &
Shri Gulshan Agarwal (CA).
lquokbZ dh rkjh[k@ Date of Hearing: 13/12/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 07/01/2019
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M.:
This appeal by the revenue is directed against the order dated 21/02/2018 of ld. CIT(A)-4, Jaipur for the A.Y. 2010-11. The revenue has raised following grounds of appeal:
"(i) Whether on the facts and in the circumstances of the case the ld.
CIT(A) was right in deciding that no addition can be made during assessment U/s 153A, in the absence of incriminating documents.
(ii) Whether on the facts and in the circumstances of the case, the Id.
CIT(A) was right in deleting the addition of Rs. 4,82,00,000/- U/s 68 of the IT Act."
The appellant craves, leave or reserves the right to amend, alter, add or forego any ground(s) at any time before or during the hearing of this appeal."
2ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
2. The assessee is a partnership firm and engaged in the business of manufacturing and trading of gold and silver ornaments, precious/semi precious and coloured stones etc. The assessee filed its return of income U/s 139(1) of the Income Tax Act, 1961 (in short the Act) on 11/10/2010 declaring total income of Rs. 19,72,000/-. Subsequently there was a search and seizure action U/s 132 of the Act on 03/4/2013 at the business premises of the assessee. During the course of search from 03/04/2013 to 05/04/2013, statement of the assessee was recorded on three days. Even during the post search investigation, the statement of the assessee was again recorded on 30/5/2013. Consequently, the Assessing Officer issued notice U/s 153A of the Act and completed the reassessment by making the addition on account of loan taken by the assessee from 12 parties, total amounting to Rs. 4,82,00,000/- U/s 68 of the Act.
3. The assessee challenged the action of the Assessing Officer before the ld. CIT(A). The ld. CIT(A) deleted the addition made by the Assessing Officer on two aspects viz (i) there was no incriminating material either found or seized during the search and seizure action and further the assessee has established the claim of genuineness of the transaction, creditworthiness and identity of the creditors by producing the evidence.
4. Aggrieved by the order of the ld. CIT(A), the revenue has filed the present appeal.
3ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
5. Before us, the ld CIT-DR has submitted that during the statement recorded on oath U/s 132(4) of the Act, the managing partner Shri Mahendra Kumar Agarwal admitted to have received accommodation entries of loan. The ld CIT-DR has referred to the question No. 77 of the statement recorded U/s 132(4) of the Act on 04/4/2013, therefore, the admission of the assessee in the statement recorded U/s 132(4) is an admissible evidence for establishing the fact that the alleged loans were taken by the assessee as accommodation entries. The assessee has also explained that the loans were only book entries taken by it to adjust his unaccounted cash. Therefore, once the transaction itself was bogus deducted during the course of search, then the addition made by the Assessing Officer U/s 68 of the Act while completing assessment U/s 153A of the Act is justified. The ld. CIT-DR has further contended that though the assessee has reiterated its earlier statement, however, the statement given on oath is an admissible evidence and the retraction of the assessee will not affect the evidentiary value of the statement. In support of his contention, he has relied upon the decision dated 13/5/2016 of the Hon'ble Jurisdictional High Court in the case of CIT vs Ravi Mathur in DBIT No. 67/2012 wherein the Hon'ble High Court has held that the statement recorded U/s 132(4) of the Act have great evidentiary value and it cannot be discarded by simply on the basis of the retracted statement given by the assessee. Further the payment of interest claimed by the assessee was 4 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports not found to be shown as income in the hands of the recipient. All the loan creditor companies are paper/shell companies without any actual business transactions, therefore, the ld. CIT(A) has committed an error in deleting the addition made by the Assessing Officer.
6. On the other hand, the ld AR of the assessee has submitted that the loans were received in the month of March, 2010 and were already repaid by the assessee prior to the date of search on 03/4/2013. Therefore, there was no outstanding of any loan as on the date of search. During all these years, the assessee has paid interest after deduction of TDS which was allowed by the Assessing Officer, therefore, in absence of any incriminating material found or seized during the course of search and seizure action, no addition can be made to the income of the assessee when the assessment was not pending on the date of search. The ld AR has pointed out that the assessee filed return of income U/s 139(1) of the Act on 11/10/2010 and the time to issue notice U/s 143(2) of the Act expired on 30/10/2011 and therefore, the assessment for the assessment year under consideration was not pending as on the date of search. Admittedly there is not incriminating material or document was found during the course of search disclosing any undisclosed income of the assessee. All the transactions of loan were duly recorded in the books of account of the assessee and were subjected to a verification of the Assessing Officer. The ld AR has further submitted that the alleged 5 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports admission in the statement recorded U/s 132(4) of the Act is nothing but it was obtained by the department when the assessee was continuously grilled for three days to get this admission. He has referred to the question No. 77 and again referred to question No. 39 which was already put to the assessee prior to question No. 77 and in reply to the question No. 39, the assessee has clearly stated that no outstanding was there and it was a genuine loan which was already repaid, however, the department has insisted the assessee again and put the same question No. 77. The ld AR has referred to the answer to the assessee and submitted that it was only due to confusion and as a result of stress of continuous investigation by the department for three days that the assessee has stated that loan from one party out of the 12 was an accommodation entry. However, during the statement recorded U/s 131 of the Act on 30/5/2013 as part of the post search investigation, the assessee has again clarified that it was a mistake on the part of the assessee to say that the loan was an accommodation entry. Even otherwise it was only in respect of one party namely M/s Dipnarayan Vyapar Pvt. Ltd.. Thus, the ld AR has submitted that it is not a case of retraction of the assessee just to deny the admission but the statement of the assessee was recorded in the continuation of investigation of the DDIT as the assessee was summoned U/s 131 and again ask to explain about the loans in which the assessee has explained that the statement made in question No. 77 was mistakenly given by the 6 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports assessee due to consistent pressure. The ld AR has thus, contended that when there is no incriminating material found or seized during the search and seizure action and the assessee was not pending or abated by virtue of the search then no addition can be made to the total income of the assessee while passing the assessment U/s 153A of the Act. In support of his contention, he has relied upon the decision of the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR 82 (Del) and submitted that the Hon'ble High Court has followed the earlier decision in case of Pr.CIT Vs. Meeta Gutgutia (2017) 395 ITR 526 and the SLP filed by the revenue against the decision in the case of Pr.CIT Vs. Meeta Gutgutia has already been dismissed by the Hon'ble Supreme Court. The ld AR has submitted that the decision in the case of CIT Vs. Kabul Chawla 380 ITR 573 (De) has been followed in the case of Meeta Gutgutia, the SLP which has been dismissed by the Hon'ble Supreme Court reported in 257 taxman 441. The ld AR has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Jai Steel (India) Vs ACIT (2013) 259 CTR 281 (Raj). Hence, the ld. CIT(A) has rightly deleted the addition on the ground that there was no incriminating material found or seized during the search and seizure operation.
6.1 On merits, the ld AR of the assessee has submitted that the Assessing Officer issued noted U/s 136 of the Act to all the loan creditors which was duly responded. The assessee has also filed all the relevant 7 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports supporting documentary evidence in respect of all the loan creditors to establish the identity and creditworthiness of the creditor as well as genuineness of the transaction. He has referred to the documents filed by the assessee before the Assessing Officer in support of the claim at page No. 207 to 505 of the paper book. Further no cash was either found or deposited in the bank accounts and the loan creditors to arrive to the conclusion that these are accommodation entries against the payment of the cash. In support of his contention, he has relied upon the decision of Hon'ble Mumbai High Court in the case of CIT Vs. Deepak Kumar Agarwal 398 ITR 586 and the decision of the Kolkata Benches of the Tribunal in the case of ITO Vs M/s Shlok Fashions Pvt. Ltd. order dated 07/12/2018 in ITA No. 695/Kol/2017. The ld AR has also referred to the master data of ROC/MCA and submitted that none of the loan creditor company has been shown in the category of non-active but all are in the category to active companies, therefore, without any tangible material, the Assessing Officer has treated the loan transaction as accommodation entries on surmises and conjectures. He has supported the finding of the ld. CIT(A).
7. In rejoinder, the ld CIT-DR has submitted that the decision in the case of CIT Vs. Kabul Chawla (supra) as well as the decision of Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia (supra) are not applicable in the case of the assessee as for framing of assessment U/s 153A of the Act. There is no requirement of any incriminating document 8 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports found or seized during the search. He has reiterated its contention that the statement on oath is an admissible evidence. He has relied upon the decision of the Hon'ble Delhi High Court in the case of Munjal Showa Ltd. Vs. DCIT 211 Taxman 61 (Del).
8. We have considered the rival submissions as well as relevant material on record. The first aspect involved in the matter is sustainability of the addition made by the Assessing Officer without any incriminating material found or seized during the course of search and seizure action. There is no dispute that the original return of income filed by the assessee U/s 139(1) of the Act on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1) and it was not abated due to the search and seizure action U/s 132 of the Act on 03/4/2013. The order of the Assessing Officer is based on the statement of the assessee recorded U/s 132(4) of the Act and specifically the question No. 77. It is pertinent to note that during the course of search and seizure action, the statement of the assessee was being recorded from 04/4/2013 to 05/4/2013 and as many as 78 questions were put to the assessee. The statement of the assessee recorded U/s 132(4) runs into about 50 pages. The statement of the assessee was recorded from 12.00 noon on 04/4/2013 and continued up to 1.00 a.m. on 05/4/2013. After the break, the recording of statement again resumed at 7.50 a.m. on 05/4/2013 we note that up to question No. 67 were recorded 9 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports on 04/4/2013 and up to 1.00 a.m. on 05/4/2013 and thereafter the statement of the assessee was again resumed in the morning of 05/4/2013 and continued up to question No. 78. It is manifest from the statement recorded U/s 132(4) of the Act that repeated questions were asked about the genuineness of the loans taken by the assessee during the financial year 2009-10 relevant to the assessment year under consideration and the assessee has given the answer and stated that all these loans are genuine and taken through banking channel and the assessee also repaid these loans prior to the date of the search. These transactions are very much part of the regular books of account of the assessee. However, the search team again put question to the assessee as question No. 77 in which the assessee has stated that the assessee has checked the details of the loans from M/s Dipnarayan Vyapar Pvt. Ltd. for which the assessee received cash and the same was declared as undisclosed income for the year of the search. We find that prior to that the assessee was also asked question No. 34 to 36 and question No. 39. Even after the statement recorded U/s 132(4) of the Act, the Investigation Wing again summoned the assessee U/s 131 of the Act for conducting post search enquiry and the statement of the assessee was recorded on 30/05/2013 wherein in response to question No. 12, the assessee clarified that the earlier statement of the assessee in question No. 77 was not a correct statement regarding the loan taken from M/s Dipnarayan Vyapar 10 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports Pvt. Ltd.. Thus, for understanding of the issue, all the relevant questions put to the assessee and answered to them are to be read conjointly. Hence, we quote question No. 34 to 36 and question No. 39 of assessee's statement recorded U/s 132(4) dated 04/4/2013 and question No. 77 of statement recorded U/s 132(4) on 05/4/2013 and question No. 12 and reply of the statement of the assessee recorded U/s 131 of the Act in post search investigation by the ADIT as under:
iz-34 eSa vkils vkidh Hkkxhnkjh QeZ ,-,e-,DliksVlZ cqd esa fuEufyf[kr vuflD;ksjMZ yksu ØsfMVlZ ds ystj fn[kk jgk gw¡&
(i) Interlink saving & finance Pvt. Ltd. 57 Adarsh Nagar, Rishikesh, dehradun, Uttranchal.
(ii) Parmatma Developers Pvt. Ltd., 101, Balaram Dey Street, Gr Floor, Kolkata
(iii) Rameshwar Finvest Pvt. Ltd., 101 Balaram Dey Street, Kolkata
(iv) Sri Ram Tie Up Pvt. Ltd., 2, Banarashi Ghosh, 2nd Bye Lane, Kolkata
(v) ________________________do _________________________
(vi) Tara Vinimay Pvt. Ltd., 101, Balaram Dey Street, G. Floor, Kolkata
(vii) Victor Project Pvt. Ltd., 2 Mullick Street, Ist Floor, Kolkata
(viii) Yatan Traders Pvt. Ltd., 62/1, Hriday Krishna Banerjee Lane, Howrah.
mijksDr lHkh Transactions dh izek.k Li"V djs\a mÙkj& mÙkj mijksDr [kkrksa dh udyksa dks eSua s ns[kdj ;g dguk pkgrk gw¡ ;g foÙk o"kZ 2009&2010 C;kt ij dtkZ fy;k gqvk foÙk o"kZ 2011&12 eSua sa pqdk fn;kA iz-35 mijksDr of.kZr lHkh dEifu;ka vkids lEidZ esa dSls vk;h fooj.k nsA mÙkj& mÙkj esjh QeZ }kjk t;iqj ,oa t;iqj ds ckgj eSa tgka ls Hkh O;kikj ds fy, eq>s dtkZ izkIr gqvk eSua s fy;k rFkk yksVk;k ,oa xr o"kksZa eas buls esjk lEidZ dSls jgk eq>s vHkh ;kn ugha vk jgk gSA 11 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports iz-36 bu dEifu;ksa ls D;k jsV vkWQ buVªsLV fn;k gS fooj.k ns\ mÙkj& xr o"kksZa dh ckr eq>s tckuhrkSj ij ;kn ugha gSA ;g QeZ }kjk is'k dh xbZ [kkrksa esa x.kuk dj fudkyuk gksxk tks Jheku~ ds dk;kZy; esa gktjh nsus vkÅaxk tc x.kuk dj crkÅaxkA iz-39 vkidh QeZ A.M. Exports dk Dipnarayan Vyapaar Pvt. Ltd. ds lkFk D;k lEcU/k gS] Li"V djs\a mÙkj& mÙkj eSua s Dipnarayan Vyapaar Pvt. Ltd. ls yxHkx rhu o"kZ igys C;kt ls iSlk m/kkj fy;k Fkk eq>s ;g iSlk fdl C;kt nj ij fnyk;k Fkk eq>s vHkh ;kn ugha vk jgk gSA Dipnarayan Vyapaar Pvt. Ltd. ls fdl O;fDr ds ek/;e ls iSlk m/kkj fy;k Fkk vHkh eq>s ;kn ugha vk jgk gSA bl lEcU/k esa tkudkjh izkIr dj eSa vkidks crk nwx a kA iz-77 geus iz'u la- 39 esa A.M. Exports ,oa Dipnarayan O;kikj ds Trancsa tions ds ckjs esa iwNk rks vkius v/kwjh tkudkjh nh Fkh D;k vc vkidks bl ckcr~ vkSj vf/kd fooj.k crkuk gS\ mÙkj& mÙkj th gk¡] ^^esjs dks nks fnu ls ;kn djrs gq, ;kn vk jgk gS ,oa foHkkx ls lg;ksx dh bPNk j[krs gq, crkuk pkgrk gw¡ fd eSua s eSllZ Dipnarayan Vayapar Private Limited dks pSd fn;k Fkk ftldk eq>s bl lky esa dS'k izkIr gks x;k ftls eSu a s bl foÙk o"kZ dh v?kksf"kr vk; ds :i esa foHkkx dks lefiZr dj fn;k^^A iz-12 vkius iz'u la[;k 11 ds tokc esa ,usDlj As Exibit-5 ds ist la[;k 37 d tokc esa crk;k fd vkius eSllZ nhiukjk;.k O;kikj izk-fy- ls C;kt ij iSlk fy;k gqvk gSA mldk , ,e ,DliksVZ dh ys[kk iqLrdksa esa fnukad 01-04-11 ls fnukad 31-03-12 dh vof/k dk ystj gSA eSa vkidks ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku vkids l'kiFk ntZ c;ku dk iz'u la[;k 77 fn[kk jgk gw¡ ftlds mRrj esa vkius dgk Fkk fd-------
^^th gka esjs dks nks fnu ls ;kn djrs gq, ;kn vk jgk gS ,oa foHkkx ls lg;ksx dh bPNk j[krs gq, crk;k pkgrk gwa fd eSua s eSllZ nhiukjk;.k O;kikj izk-fy- dks pSd fn;k Fkk ftldk eq>s bl lky esa dS'k izkIr gks x;k ftls eSua s bl foRr o"kZ dh v?kksf"kr vk; ds :i esa foHkkx dks lefiZr dj fn;kA^^ d`i;k ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku vkids l'kiFk ntZ c;ku dk iz'u la[;k 77 ds tokc dks ,d ckj iqu% i<+dj le> ysosa fd vkius mijksDr iz'u la[;k 11 ds tokc esa D;k lgh mRrj fn;k gSA bl lac/a k esa eSa vkidk /;ku vk;dj vf/kfu;e 1961 ds vfHk;kstu izko/kkuksa dh rjQ vkidk /;ku vkdf"kZr djuk pkgrk gw¡ fd xyr c;kuh dh n'kk eas vkids fo:) vfHk;kstu dh dk;Zokgh izkjEHk dh tk ldrh gSA d`i;k ,d ckj iqu% lkspdj crk;sa fd vkius 12 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports eSllZ nhiukjk;.k O;kikj izk-fy- ls fdruk :i;k m/kkj fy;k gS vFkok vkius pSd nsdj muls okil uxn jkf'k izkIr dh Fkh] Li"V djsAa mÙkj eSua s vkids }kjk fn[kk;s x;s ,usDlj AS Exibit-5 ds ist la[;k 37 ,oa ryk'kh ,oa mÙkj& tCrh dh dk;Zokgh ds nkSjku ntZ esjs c;kuksa dks vPNh rjg ls i<+dj le> fy;k gSA eSa ;gka ;g dguk pkgrk gwa fd ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku foHkkx ds vf/kdkfj;ksa }kjk bl lac/a k esa eq>ls ckj&ckj iwNk x;k rks eSua s ekufld :i ls Fkddj ;g tokc ns fn;k FkkA ysfdu vc eSua s viuh iwjh ys[kk iqLrdksa dks ns[k fy;k gS vkSj eSa vc ;g 'kiFkiwod Z c;ku djuk pkgrk gw¡ fd eSua s eSllZ nhiukjk;.k O;kikj izk-fy- pSd ls C;kt ij iSlk fy;k Fkk ,oa mldk Hkqxrku Hkh pSd ls gh fd;k gSA eSua s bl dEiuh ds lkFk dksbZ uxn ysu&nsu ugha fd;k gSA tgka rd vk;dj izko/kkuksa dh ckr gS mlds lac/a k esa esjs c;ku ntZ djrs oDr foHkkx }kjk eq>s voxr djk fn;k x;k Fkk tks esjh tkudkjh esa gSA fQj Hkh eSa iw.kZ :i ls larq"V gksdj bl i`"B ds ckjs esa tokc ns jgk gwaA In reply to the question No. 34, the assessee has clearly stated that the transaction of loan from all the parties were taken on interest in the F.Y. 2009-10 and these were repaid in the F.Y. 2011-12. Thereafter a specific question was put to the assessee regarding the loan taken from M/s Dipnarayan Vyapar Pvt. Ltd. as question No. 39 and in reply to the same, the assessee stated that the loan was taken about three years back on interest but the assessee was not able to remember the person through whom the loan was taken. Therefore, there was no ambiguity in the reply to question No. 39 except that the assessee was not able to tell the name of the person who helped the assessee in procuring the loan. Since the Investigation Wing was not satisfied with the answers of the assessee as they could not extract the statement which can be used against the assessee, therefore, question were continuously put to the assessee for two days and it is a matter of record that the assessee was grilled up to 13 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports 1.00 a.m. on the night of 04/4/2013 and again restarted in the morning at 7.50 a.m. and the question No. 77 was again asked specifically regarding loan from M/s Dipnarayan Vyapar Pvt. Ltd. in reply to that the assessee has explained that after trying to remember for continuously for two days and hoping the cooperation from the department, he said that he received cash against the said loan which was declared as undisclosed income for the year of search. The Investigation Wing was still not satisfied with the statement of the assessee and again called the assessee for further investigation on 30/5/2013 and thereafter on 21/6/2013. The assessee was again put the question about the loan taken from M/s Dipnarayan Vyapar Pvt. Ltd., in reply, the assessee explained that on repeated instances of the investigation team and due to exhausted mind, the assessee given an incorrect reply to question No. 77 recorded U/s 132(4) of the Act on 05/4/2013 and again stated that after verifying the books of account, the said loan was taken on interest and was also repaid both the transactions are through banking channel. Thus, having regard to the background of the circumstances in which statement of the assessee regarding said transaction of loan from M/s Dipnarayan Vyapar Pvt. Ltd. was recorded and finally statement recorded in post search inquiry we are of the view that the assessee finally clarified the issue in the statement recorded U/s 131 of the Act and therefore, there was no admission on the part of the assessee. Except the statement of partner of the assessee, 14 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports there was nothing incriminating found or seized during the course of search and seizure action, therefore, the statement of the assessee recorded during the search and post search enquiry has to be read together and the outcome of the said statement is that the assessee has never admitted any bogus transaction except the misunderstanding due to continuous grilling by the Investigation Wing and due to mentally exhausted, the assessee given some inconsistent reply to question No. 77 which was subsequently clarified in question No. 12 of the statement recorded by the investigation Wing in the post search enquiry U/s 131 of the Act. Even otherwise, all these statements are only regarding one transaction of loan that cannot be applied to the entire transactions of loan taken from 12 parties. Therefore, except the statement of the assessee to question No. 77, which was subsequently clarified in question No. 12, there was nothing in the shape of any material or document much less incriminating material with the Assessing Officer to make the addition to the total income of the assessee. If the statement of the assessee is read in toto then there will be no admission regarding any of the loan transactions being an accommodation entry. Therefore, the question arises whether in absence of any incriminating material, the Assessing Officer can make any addition to the total income of the assessee when the assessment was not abated due to the search and seizure action. The 15 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra) has considered and observed in para 37 and 38 as under:
37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion
38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was 16 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports unearthed during the search, no additions could have been made to the income already assessed.
Thus, the Hon'ble High Court has ruled that the Assessing Officer while making the assessment U/s 153A of the Act can make the addition only on the basis of some incriminating material unearthed during the course of search or requisition of documents, which were not produced or not already disclosed or made known in the course of original assessment. In the case in hand, all the transactions were duly recorded in the books of account. Even the loans were already paid during the F.Y. 2011-12 and therefore, these transactions were disclosed and known in the course of original assessment/return of income. Hence in absence of any incriminating material, the Assessing Officer cannot make any addition to the total income of the assessee. In the subsequent decision, the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia (supra) has held in para 57 to 72 as under:
57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla (supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed:
"11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized 17 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports material. Obviously an assessment has to be made under this Section only on the basis of seized material."
58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under:
"31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search.
32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with."
59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under:
'33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:
"22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:
(a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;
(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and
(c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made."
34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. 18 ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under:
"26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'- have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."'
60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under:
"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 19 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."
61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla(supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under:
'15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is 20 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act.
Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.
16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under
section 153A of the Act.
** ** **
19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition.
If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the 21 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.'
62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd.(supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court held that:
"6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings."
63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015.
The decision in Dayawanti Gupta
64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was:
"We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms."
65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein.
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66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus:
"Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes."
67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta (supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017.
68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under:
"23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee."
69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 23 ITA No. 561/JP/2018
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71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.
Conclusion
72. To conclude:
(i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04?
(ii) Question (ii) is answered in the affirmative i.e., in favour of the Assessee and against the Revenue. It is held that with reference to AY 2004-05, the ITAT was correct in confirming the orders of the CIT (A) to the extent it deleted the additions made by the AO to the taxable income of the Assessee of franchise commission in the sum of Rs. 88 lakhs and rent payment for the sum of Rs. 13.79 lakhs?
The said decision of Hon'ble High Court was challenged by the revenue before the Hon'ble Supreme Court, however, the SLP of the revenue was dismissed vide order dated 02/7/2018 reported supra. Thus, the Hon'ble High Court has reiterated its view as taken in the case of CIT Vs. Kabul Chawla (supra) and specifically held that once the assessment has attained the finality i.e. is not pending then the same cannot be subject to tax in proceedings U/s 153A of the Act except some incriminating material are gathered in course of search or during the proceedings U/s 153A of the Act. The Hon'ble Jurisdictional High court in the case of Jai Steel (India) Vs ACIT (supra) has also considered this issue in para 22 to 26 as under:
22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:
(a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;24 ITA No. 561/JP/2018
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(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and
(c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated.
23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:--
"19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.
20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search.For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose 25 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports case is covered by Section 153A, by even making reassessments without any fetters, if need be.
21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied)
24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de 26 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken.
25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act.
26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. Thus, the Hon'ble High Court has held that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. The ld. CIT(A) has decided this issue in para 7 to 7.7 as under:
"7. I have perused the order of the AO and submissions made in this regard. I have also gone through the various case laws cited by the AR. For the sake of convenience the legal ground is adjudicated 1st as it goes to the root of the matter.
7.2 In support of the additional ground taken/ contention raised detailed written submission are made wherein the appellant has challenged the legal validity of the addition made in the order framed u/s 143(3)/153A. It is submitted that such additions cannot be made as they are not relatable to any incriminating seized material found during the course of search. The appellant has cited following judgments in support of the contention taken:
1) Jay Steel limited vs. ACIT (88 DTR 1) [Raj HC]
2) Kabul Chawla vs. ACIT 380 ITR 573 (Del HC) 27 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports
3) Continental warehousing Corporation 374 ITR 645 etc. 7.3 I have perused the order of the AO and submissions made in this regard.
Perusal of assessment order passed u/s 143(3)/153A shows that all the additions made by the AO are not relatable to any seized material. I also find that for the A.Yr the assessment stood completed on the date of search.
7.4 The issue of additions made by the AO in the assessment u/s 143(3)/153A without any reference to incriminating seized material was considered by the Hon'ble Rajasthan High court in the case of Jai Steel limited vs. ACIT (88 DTR 1). The Hon'ble court was of the view in case of completed assessments no addition can be made if no incriminating seized material is found during the course of search. The relevant observation of the judgment is reproduced below:
"In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:
(a) The assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;
(b) Regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and just In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or 13 D.B. INCOME TAX APPEAL NO.53/2011 Jai Steel (India), Jodhpur vs. Assistant Commissioner of income Tax, Jodhpur (Along with other 16 similar matters) reassessment can be made."
7.5 Similar view point was expressed by the Hon'ble Delhi High court in the case of Kabul Chawla vs. ACIT 380 ITR 573 (Del HC). The relevant observation of Hon'ble court could be seen in para 37 & 38 of order, same is reproduced below:
Para 37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.28 ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Aos as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post- search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
Conclusion
38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.0n the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
7.6 The issue of additions made by the AO while framing the assessment u/s 143(3)/153A, if no incriminating material is found during the course of 29 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports search was considered by Hon'ble Gujarat High court in the case of Soumya construction PL Vs CIT 387 ITR 529. In its order dated 14/03/2016 Hon'ble court has categorically stated that, in cases of completed assessment, if no incriminating material is found then no additions can be made in the assessment framed u/s 153A of the act. The relevant para no. 18 8s 19 of the court order can be referred to.
Similar view of also taken in the following judgments, including by Hon'ble Jaipur ITAT Hon'ble ITAT Jaipur in many cases:
a. Continental warehousing Corporation 374 ITR 645 b. PCIT vs. Meeta Gutgutia 152 DTR 153 c. Vijay Kumar D Agarwal V/s DCIT in IT(SS)A Nos. 153,154,155 & 156/Ahd/2012 d. Ratan Kumar Sharma vs. DCIT ITA 797 & 798 /Jaipur/2014 e. Vikram Goyal vs. DCIT ITA 174/Jaipur/2017 etc f. Jadau Jewellers & Manufacturer PL Vs ACIT (686/Jaipur/2014) g. Prateek Kothari Vs. ACIT (312/Jaipur/2015.
7.7 Considering the above I am of the view that as the additions made by AO are without any reference to the seized material, they are not legally tenable. The same are therefore directed to be deleted. The legal ground taken by the appellant is thus allowed. The appellant succeeds on legal ground."
In view of the above facts and circumstances as well as in the light of binding precedents as discussed in the forgoing paragraphs, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue.
8.1 On merits, the stand of the revenue is that the statement made on oath U/s 132(4) of the Act is an admissible evidence and therefore, once the assessee has admitted the loan as an accommodation entry and in return the assessee received the cash then the Assessing Officer justified 30 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports in making the addition U/s 68 of the Act. However, we find that the statement which is relied upon by the Assessing Officer is only one part and that too a selected part without considering the prior statement and subsequent statement recorded by the Investigation Wing. Therefore, if we consider the statement of the assessee in the context of the questions put and if all the relevant statement is read together then it would not amount to admission of any bogus transaction. Further the transactions were duly recorded in the books of account at the time of taking the loans in the F.Y. 2009-10 and again at the time of repayment of these loans in the F.Y. 2011-12, which was not disturbed by the Assessing Officer. Even the interest paid by the assessee after deducting TDS was not disturbed by the Assessing Officer in the assessment order passed U/s 153A read with Section 143(3) of the Act for the A.Y. 2011-12. The copy of the said order was filed by the ld AR of the assessee, which reveals that the Assessing Officer though made disallowances of certain expenditure but has not made any disallowance of the interest paid by the assessee in respect of the loans in question. We further note that the assessee has produced documentary evidence in support of claim and to discharge the onus of proving the identity and creditworthiness of the creditor as well as the genuineness of the transaction. The documents produced by the assessee in respect of these creditors are as under:
31ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports Name of party from Particulars of Documents submitted whom loan taken Interlink Saving & Confirmation of party of loan taken.
Finance Pvt. Ltd PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
Yatan Traders Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
Zenith Tradecom Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
Regency Devcon Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
Victor Projects Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
32
ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
Rameshwar Finvest Pvt. a) Pertaining to AY 2010-11: -
Ltd. Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
b) Pertaining to AY 2011-12: -
Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2011.
c) Pertaining to AY 2012-13: -
Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2012-13.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2012.
33
ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
Tara Vinimay Pvt. Ltd a) Pertaining to AY 2010-11: -
Confirmation of party of loan taken.
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
b) Pertaining to AY 2011-12: -
Confirmation of party of loan taken.
The copy of ITR for AY 2011-12.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2011.
c) Pertaining to AY 2012-13: -
Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2012-13.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2012.
Copy of bank statement showing the relevant
entry.
Dipnarayan Vyapaar Pvt. a) Pertaining to AY 2010-11: -
Ltd Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
b) Pertaining to AY 2011-12: -
Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of ITR for AY 2011-12.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2011.
Copy of bank statement showing the relevant
entry.
c) Pertaining to AY 2012-13: -
Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2012-13.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2012.
Copy of bank statement showing the relevant
entry.
34
ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
Sri Ram Tie Up Pvt. Ltd a) Pertaining to AY 2010-11: -
Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
b) Pertaining to AY 2011-12: -
Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2011.
Parmatma Developers a) Pertaining to AY 2010-11: -
Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of ITR for AY 2010-11.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Copy of bank statement showing the entry of
payment made to assessee.
b) Pertaining to AY 2011-12: -
Confirmation of party of loan taken.
PAN Card Copy of Party
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2011.
c) Pertaining to AY 2012-13: -
Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2012-13.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2012.
Chitravali Vincom Pvt. Ltd Confirmation of party of loan taken.
PAN Card Copy of Party.
The copy of ITR for AY 2010-11.
Copy of bank statement showing the entry of
payment made to assessee.
The copy of director report, audit report, Balance
Sheet and Profit & Loss a/c along with all annexure
of 31.03.2010.
Naulakha Transmedi Pvt. Confirmation of party of loan taken.
Ltd The copy of ITR for AY 2010-11.
Copy of bank statement showing the entry of
payment made to assessee.
35
ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
It is manifest that the assessee filed confirmation of the parties, the PAN card, copy of ITR, their financial statements/accounts duly audited alongwith audit report, copy of bank statements showing the payment and receipts of the amounts of loan. All these documents are relevant for proving the transaction of loan in questions and Assessing Officer has not brought any contrary material or record to disprove or contradict the documentary evidence produced by the assessee. The identity of the loan creditors is even otherwise not in dispute. The only ground of the Assessing Officer is that these are accommodation entries, however the Assessing Officer has not pointed out any discrepancy in the documentary evidence filed by the assessee either in the bank account statement or in the financial statement of the loan creditors. Once the loan creditors have accepted the transactions and which is also established from the relevant record then the said documentary evidence cannot be rejected merely on the basis of the statement recorded U/s 132(4) of the Act, which is also not an admission on the part of the assessee. We further note that the assessee also established the fact that all the loan creditors were having sufficient funds and reserve to give the loan to the assessee even the share capital and reserve and surplus of all the creditors were much more than the loan amount as is evident from the balance sheets of the relevant assessment year as on 31/3/2010. Thus, once the assessee has established the transaction by producing the documentary evidence then 36 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports in absence of any contrary material or record, this addition made by the Assessing Officer is not sustainable. The ld. CIT(A) has considered this issue in para 8 and 9 as under:
"8. I have pursued the assessment order and submission made in this regard.
I have also gone through the various judgements cited by the Ld A/R, it is seen that the appellant has furnished the following
(i) confirmations of all the parties containing their PAN and addresses
(ii) Copy of ITR's (iii) Copy of audit report, Balance sheet etc. of the companies and (iv) Copy of bank statements of the companies showing the entry of payment made to appellant. No cash deposit was found deposited in bank a/c of any company. It was stated by ld. AR that the appellant has submitted these documents which prove identity, creditworthiness and genuineness of share capital.
None of notice sent u/s 133(6) received back as "Un-served" and in some of the cases it was also complied.
8.2 There is no incriminating material except the admission in statement by the partner of appellant any positive material to controvert the documentary evidence furnished by the appellant. From perusal of the records it reveals that all the loans were received through a/c payee cheque/banking channels. The appellant has paid the interest thereon after deducting the due TDS thereon. Further all the loans were repaid prior to the search through a/c payee cheque/banking channels. The ld. AO has not pointed out any discrepancies on the documents submitted by the appellant. Further the notices issued u/s 133(6) of Income tax Act, 1961 issued to all the companies were served to the companies which shows that the parties were existing on the given address and as it confirmed the transaction, therefore the transaction cannot be termed as non-genuine. Further some of the companies also complied the notices issue by AO.
With respect to the statement of the of the partner Shri Mahendra K Agarwal the records reveal that Shri Mahendra Kumar Agarwal in his 37 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports statement recorded on dated 04.04.2013 recorded during the course of search in answer to Q. No. 77 admitted that the transaction with M/s Dipnarayan Vypar Pvt. Ltd was not genuine transaction. However in his post search statement recorded on 21.06.2013 before the ADIT he retracted from the admission made in Q. No. 77 of statements dated 04.04.2013 and said that admission was due to mental tiredness because of repetitive questions of department officer. Further in the answer to same question of post search statement he stated that he took loan from M/s Dipnarayan Vypar Pvt. Ltd through cheque and repaid the same through cheque. He further said that he did not do any cash transaction with this company. The relevant question and its answer is reproduced as under: -
iz-12 vkius iz'u la[;k 11 ds tokc esa ,usDlj As Exibit-5 ds ist la[;k 37 d tokc esa crk;k fd vkius eSllZ nhiukjk;.k O;kikj izk-fy- ls C;kt ij iSlk fy;k gqvk gSA mldk , ,e ,DliksVZ dh ys[kk iqLrdksa esa fnukad 01- 04-11 ls fnukad 31-03-12 dh vof/k dk ystj gSA eSa vkidks ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku vkids l'kiFk ntZ c;ku dk iz'u la[;k 77 fn[kk jgk gw¡ ftlds mRrj esa vkius dgk Fkk fd-------
^^th gka esjs dks nks fnu ls ;kn djrs gq, ;kn vk jgk gS ,oa foHkkx ls lg;ksx dh bPNk j[krs gq, crk;k pkgrk gwa fd eSua s eSllZ nhiukjk;.k O;kikj izk-fy- dks pSd fn;k Fkk ftldk eq>s bl lky esa dS'k izkIr gks x;k ftls eSua s bl foRr o"kZ dh v?kksf"kr vk; ds :i esa foHkkx dks lefiZr dj fn;kA^^ d`i;k ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku vkids l'kiFk ntZ c;ku dk iz'u la[;k 77 ds tokc dks ,d ckj iqu% i<+dj le> ysosa fd vkius mijksDr iz'u la[;k 11 ds tokc esa D;k lgh mRrj fn;k gSA bl lac/a k esa eSa vkidk /;ku vk;dj vf/kfu;e 1961 ds vfHk;kstu izko/kkuksa dh rjQ vkidk /;ku vkdf"kZr djuk pkgrk gw¡ fd xyr c;kuh dh n'kk eas vkids fo:) vfHk;kstu dh dk;Zokgh izkjEHk dh tk ldrh gSA d`i;k ,d ckj 38 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports iqu% lkspdj crk;sa fd vkius eSllZ nhiukjk;.k O;kikj izk-fy- ls fdruk :i;k m/kkj fy;k gS vFkok vkius pSd nsdj muls okil uxn jkf'k izkIr dh Fkh] Li"V djsAa ` ` `mÙkj& mÙkj eSua s vkids }kjk fn[kk;s x;s ,usDlj AS Exibit-5 ds ist la[;k 37 ,oa mÙkj ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku ntZ esjs c;kuksa dks vPNh rjg ls i<+dj le> fy;k gSA eSa ;gka ;g dguk pkgrk gwa fd ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku foHkkx ds vf/kdkfj;ksa }kjk bl lac/a k esa eq>ls ckj&ckj iwNk x;k rks eSaus ekufld :i ls Fkddj ;g tokc ns fn;k FkkA ysfdu vc eSua s viuh iwjh ys[kk iqLrdksa dks ns[k fy;k gS vkSj eSa vc ;g 'kiFkiwoZd c;ku djuk pkgrk gw¡ fd eSua s eSllZ nhiukjk;.k O;kikj izk-fy- pSd ls C;kt ij iSlk fy;k Fkk ,oa mldk Hkqxrku Hkh pSd ls gh fd;k gSA eSua s bl dEiuh ds lkFk dksbZ uxn ysu&nsu ugha fd;k gSA tgka rd vk;dj izko/kkuksa dh ckr gS mlds lac/a k esa esjs c;ku ntZ djrs oDr foHkkx }kjk eq>s voxr djk fn;k x;k Fkk tks esjh tkudkjh esa gSA fQj Hkh eSa iw.kZ :i ls larq"V gksdj bl i`"B ds ckjs esa tokc ns jgk gwAa At this juncture it is important to point out that the mere statement u/s 132[4] per se does not constitute incriminating material for the purposes of assessment u/s 153A. Judgments of Hon'ble Delhi High court in the case of Best Infrastructure'[84 taxmann.com 287] is the case in the point. The head note of the judgment is as under:
II. Section 153A of the Income-tax Act, 1961 - Search and seizure -
Assessment in case of (General) - Assessment years 2005-06 to 2009-10 - Whether where during search proceeding one of directors of assessee company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer were not justified - Held, yes [Para 36][ln favour of assessee] 8.3 Section 68 is attracted where an entry relating to a sum is found to have been credited in the books kept by the appellant, which thus implies, 39 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports existence of books and recording of a sum which the Assessing Officer considers as doubtful. The Assessing officer then starts enquiry, specifically to satisfy himself of the source of such credit. If during the enquiry, he is satisfied that the entries are not genuine, them he will have every right to add the said sum represented by such credit entry as income of the appellant. The satisfaction of the assessing officer is the basis of invocation of his powers under section 68. However, such satisfaction must not be illusory or imaginative but must have been derived from relevant facts and factors, and is on the basis of proper enquiry of all material before him but also to which he has commanded.
Therefore u/s 68, the onus is on the appellant to offer explanation where any sum is found credited in the books of account and if the appellant offers no explanation or the explanation offered is not in the opinion of the AO, satisfactory, then such cash credit is liable to be charged to the income tax as income of the appellant. In this case the appellant discharged its onus by filing the documents for which the AO has not pointed any discrepancy.
8.4 Hon'ble Rajasthan High Court and other Hon'ble Courts held that appellant cannot be asked to explain the source of the source. The relevant portions of the verdicts given by Hon'ble High Courts in the following cases are as under:-]
(i) In the case of CIT vs Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj):-
Held, dismissing the appeal, that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs. 17,27,250 under section 68 was not justified.
(ii) In the case of Nemi Chand Kothari vs CIT (2003) 264 ITR 254 (Gau):
Held that it is not the business of the assessee to find out the source or 40 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports sources from where the creditor had accumulated the amount which he had advanced in the form of loan to the assessee and section 68 cannot be read to show that in the case of failure of sub-creditors to prove their creditworthiness the amount advanced as loan to the assessee by the creditor shall have to be read as corollary as the income from undisclosed source of the assessee himself.
(iii) In the case of Shankar Industries vs CIT (1978) 114 ITR 689 (Cal.):
Observed that that mere establishing identity of the creditor and nothing more is not sufficient and something more is to be proved by the assessee and in the aforesaid case, the assessee was unable to prove beyond identity and, therefore, the Calcutta High Court upheld the findings of the Tribunal. However, in the present case, I notice that not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove the genuineness also.
(iv) In the case of Kanhailal Jangid vs ACIT (2008) 217 CTR 354 (Raj): Held that the burden does not go beyond to put the assessee under an obligation to further prove that where from the creditor has got or procured the money to be deposited or advanced to the assessee. The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the Department that source of such money comes from the assessee himself or such source could be traced to the assessee itself.
(v) In the case of Aravali Trading Co. vs ITO (2008) 220 CTR (Raj):
Observed that the fact that the explanation furnished by the four creditors about the sources where from they acquired the money was not acceptable by the Revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source.
(vi) In, the case Commissioner of Income-tax, Jaipur-II Versus Morani Automotives (P.) Ltd. No. D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 Hon'ble Rajasthan High Court held that :
"10. The points as sought to be raised by the appellant-revenue in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour 41 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company.
11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:-
"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."
12. In the case of CIT v. Chandra Prakash Rana [2001] 48 DTR 271 (Raj.), this Court noticed similar nature grounds urged on behalf of the revenue and found the same not leading to any substantial question of law. This Court noticed, observed, and held as under:
7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and lastly learned counsel made sincere attempt on his part after taking us through factual scenario of the explanation and contended that it can never be taken as satisfactory explanation for deleting the addition made by AO. We do not agree to this submission for more than one reason.
8. In the first place, it is a pure question of fact, what to say question of law, much less substantial question of law. Secondly, this Court cannot again in 42 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports this appeal undertake the examination of factual issues nor can draw factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by the two appellate Courts i.e. CIT(A) and Tribunal in this case, then in such event, a concurrent finding recorded on such explanation by two appellate Courts is binding on the High Court.
9. Perusal of impugned finding quoted supra would go to show that Tribunal did examine the explanation offered by assessee in detail and then recorded a finding for its acceptance. Such finding when challenged does not constitute a substantial question of law within the meaning of s. 260A ibid in an appeal arising out of such order.
10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entire!, de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law' on such finding can be said to have been made out.
11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted."
13 In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- "19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation of evidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact 43 ITA No. 561/JP/2018 DCIT Vs M/s A.M. Exports based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under S.260A of the IT Act."
14. The ratio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all. Thus, no case for interference in the findings of the appellate authorities is made out.
In the result, the appeal fails and is, therefore, dismissed."
9. Taking into consideration the facts and circumstances of the case and case laws relied on (supra), the identity, creditworthiness and genuineness of transactions of these companies cannot be held doubtful and AO is not justified in making the addition of Rs. 4,82,00,000/- more so when as a result of search, post search and assessment proceedings no incriminating material or evidence was gathered to show that impugned loans represents to undisclosed income of the appellant. Thus the AO is directed to delete the addition of Rs.4,82,00,000/- appeal is stand allowed in Ground No. 1 & 2."
As regards the decision of the Hon'ble Jurisdictional High Court in the case of the CIT vs Ravi Mathur (supra) we note that the Hon'ble High Court has given the finding and observation on the specific facts of the said case in para 14 and 15 as under:
"14 Having noticed the arguments of the learned counsel for the parties, we deem it proper at the outset to take into consideration the finding of the Tribunal about retraction/resiling of the statements recorded under Section 132(4) as the Tribunal has primarily come to a finding that retraction is proper. We would also deal with the judgments relied on by the learned counsel which has a bearing on the issues and would then give our own view on questions posed by the Revenue.44 ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports
15. In our view, the statements recorded under Section 132(4) have great evidentiary value and it cannot be discarded as in the instant case by the Tribunal in a summary or in a cryptic manner.
Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finidng as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 09/11/1995 and onwards but retraction is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly sworn affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, looses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under Section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a statement is recorded under section 132(4) such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time and in the instant case we notice that the A.O. in the assessment order observes:-
"Regarding the amount of Rs. 44.285 lakhs, it is now contended that the statement u/s 132(4) was not correct and these amounts are in thousands, not lakhs i.e. it is not attempted to retract from the statements made at the time of S&S operations."45 ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports Therefore, what we gather from the assessment order and on perusal of the above finding that the retraction was at the stage when the assessment proceedings were being finalized i.e. almost after a gap of more than an year. Such a so-called retraction in our view is no retraction in law and is simply a self serving statement without any material."
Thus, it is clear that the issue before the Hon'ble High Court was retraction of statement by the assessee after expiry of more than one year from the date of the statement recorded U/s 132(4) of the Act whereas in the case in hand, first of all there is no admission and secondly the clarification is given by the assessee in the same process of investigation by the Investigation Wing during the post search enquiry. Hence, it cannot be considered as an afterthought retraction of the admission without any basis. Therefore, the said decision of the Hon'ble High Court will not help the case of the revenue. The Hon'ble Bombay High Court in the case of CIT Vs. Deepak Kumar Agarwal (supra), it was held in para 34 and 35 as under:
34. There as well, reliance was placed on All Cargo Global Logistic Ltd. (supra) and equally, the conclusion that has been reached that once there is no incriminating material in support of the addition and brought on record by the Revenue, then, the earlier view of this Court binds the Revenue even on this addition. Thus, even this question cannot be termed as substantial question of law in the light of the two judgments of this Court in Continental Warehousing Corpn. and All Cargo Global Logistics Ltd. (supra) followed by SKS Ispat & Power Ltd. (supra).
35. As a result of the above discussion and the question being common to all the Appeals, we dismiss all the Appeals of the Revenue. There will be no order as to costs.
Thus, the statement recorded U/s 132(4) of the Act cannot be considered as an incriminating material found and seized during the search. 46 ITA No. 561/JP/2018
DCIT Vs M/s A.M. Exports Accordingly, in view of the facts and circumstances as discussed above and further the documentary evidence produced by the assessee which established the fact of transaction of loan taken by the assessee, their identity, capacity and genuineness being routed through the banking channel at the time of receipt as well as repayment of the loan alongwith payment of interest which was subjected to TDS, we do not find any error or illegality in the finding of the ld. CIT(A) qua this issue, hence, we uphold the same.
9. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 07th January, 2019.
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vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT, Central Circle-1, Jaipur.
2. izR;FkhZ@ The Respondent- M/s A.M. Exports, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k]t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 561/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar