Income Tax Appellate Tribunal - Delhi
Kamal Sharma,New Delhi vs Dcit Central Circle-Ii, Faridabad on 24 October, 2024
1
ITA nos. 3400 & 3402/Del/2023
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C": NEW DELHI
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER
ITA No. 3400/DEL/2023 A.Y. 2008-09
AND
ITA No. 3402/DEL/2023 A.Y. 2014-15
Shri Kamal Sharma, Vs DCIT, Central circle-II,
Prop. M/s Kamal Trading Co., Faridabad.
Gate no. 693, Khasra No. 37/43,
Village Bakoli, Delhi.
PAN: AWSPS 7332 M
APPELLANT RESPONDENT
Assessee by: Shri Ved Jain Adv. &
Shri Ayush Garg, CA
Department by: Sh. Dayainder Singh Sidhu, CIT( DR)
Date of hearing 09.10.2024
Date of pronouncement 24.10.2024
ORDER
PER KUL BHARAT, JM:
The captioned appeals, preferred by the assessee, are directed against the common order of the learned Commissioner of Income-tax (Appeals)-3, Gurgaon, dated 30.06.2018, pertaining to the assessment years 2008-09 and 2014-15. Both the appeals were heard together and are being disposed of by a common order for the sake of convenience.
2ITA nos. 3400 & 3402/Del/2023
2. In ITA no. 3400/Del/2023 for assessment year 2008-09. The assessee has raised following grounds of appeal:
"1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eyes of law and on facts
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the order passed by the AO under section 153A(1)(b) read with 143(3) of the Act despite the same is illegal and void-ab initio in the absence of any search initiated under section 132 of the Income Tax Act in the name of the assessee.
3. On the facts and circumstances of the case, the notice issued by the AO and proceedings initiated thereto under section 153C of the Act is bad in law, being barred by limitation and hence the assessment order passed in consequence thereto is liable to be quashed.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and assumption of jurisdiction by AO are illegal and void ab initio.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and the assessment order passed in consequence thereto are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of search.
6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition made by the AO is not emanating from any incriminating material found during the course of search.
7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C is bad and the consequent assessment order is liable to be quashed in the absence of any satisfaction being recorded by the AO on the searched person that the incriminating material belonging to the assessee was found during the course of the search.3
ITA nos. 3400 & 3402/Del/2023
8. (1) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 6,07,392/- made by the AO treating the sales/ purchases made by the assessee as not genuine.
(ii) That the above addition has been confirmed despite the same has been made on estimated basis by arbitrarily rejecting the explanations and the evidences brought on record by the assessee.
(iii) Without prejudice to the above, the CIT(A) has erred in rejecting the contention of the assessee that profit on the sale transaction has already been declared by the asessee, and thus, the addition made by the AO will lead to double taxation of income in the hands of the assessee.
9. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the books of accounts of the assessee have been rejected by the AO without pointing out any defect specified under section 145(3) of the Act.
(ii) That the CIT(A) has erred in rejecting the contention of the assessee that the addition has been made by the AO despite the assessee has been maintaining regular books of accounts and financial statement are audited as per law and nothing adverse has been pointed out by the AO
10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition has been made by AO relying upon the statement recorded of third party without providing the opportunity of cross examination to the assessee to rebut the same.
11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that assessment order has been passed by AO on the basis of surmises and conjectures, without there being any adverse material on record.
12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in passing the order without providing adequate opportunity of being heard to the assessee in clear violation of principle of natural justice
13. That the appellant craves leave to add, amend or alter any of the grounds of appeal."4
ITA nos. 3400 & 3402/Del/2023
3. In ITA no. 3402/Del/2023 for assessment year 2014-15, the assessee has raised following grounds of appeal:
"On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eyes of law and on facts.
2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 12,86,416/- made by the AO treating the sales/ purchases made by the assessee as not genuine. (ii) That the above addition has been confirmed despite the same has been made on estimated basis by arbitrarily rejecting the explanations and the evidences brought on record by the assessee.
(i) Without prejudice to the above, the CIT(A) has erred in rejecting the contention of the assessee that profit on the sale transaction has already been declared by the asessee, and thus, the addition made by the AO will lead to double taxation of income in the hands of the assessee.
3. (1) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the books of accounts of the assessee have been rejected by the AO without pointing out any defect specified under section 145(3) of the Act.
(ii) That the CIT(A) has erred in rejecting the contention of the assessee that the addition has been made by the AO despite the assessee has been maintaining regular books of accounts and financial statement are audited as per law and nothing adverse has been pointed out by the AO.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition has been made by AO relying upon the statement recorded of third party without providing the opportunity of cross examination to the assessee to rebut the same.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that 5 ITA nos. 3400 & 3402/Del/2023 assessment order has been passed by AO on the basis of surmises and conjectures, without there being any adverse material on record
6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in passing the order without providing adequate opportunity of being heard to the assessee in clear violation of principle of natural justice.
7. That the appellant craves leave to add, amend or alter any of the grounds of appeal."
4. Facts, in brief, are that for the assessment years under consideration i.e. A.Y. 2008-09 and A.Y. 2014-15 the case of the assessee was opened u/s 153C on account of certain documents found and seized during the course of search conducted on Sunstar Group of cases on 19.12.2013. Notice u/s 153C was issued to the assessee on 20.01.2016 i.e. in AY 2016-17.
4.1 In response to notice issued u/s 153C, for A.Y. 2008-09 the assessee filed its return of income on 15.03.2016 at a total income of Rs. 1,19,780/-. The AO completed the assessment vide order dated 30.03.2016 u/s 153(1)(b) read with section 143(3) of the Act at Rs. 7,27,172/- by adding Rs. 6,07,392/- on account of bogus sales/purchases.
4.2 Similarly, in response to notice issued u/s 153C, for A.Y. 2014-15 the assessee filed its return of income on 15.03.2016 at a total income of Rs.
8,21,340/-. The AO completed the assessment vide order dated 30.03.2016 u/s 6 ITA nos. 3400 & 3402/Del/2023 143(3) of the Act at Rs. 21,07,560/- by adding Rs.12,86,416/- on account of bogus sales/purchases.
4.3 Aggrieved against the assessment orders passed by the AO the assessee preferred appeals before the learned CIT(Appeals) who vide his impugned consolidated order dated 30.06.2018 for A.Y. 2008-09, 2013-14 & 2014-15, dismissed the appeals and affirmed the orders of the AO. Aggrieved against this now the assessee is in appeal before this Tribunal.
5. First we take up assessee's appeal for A.Y. 2008-09 being ITA No. 3400/Del/2023. In ground no. 3 the assessee has taken legal ground challenging the initiation of proceedings u/s 153C being barred by time, falling beyond the period of six years from the date of recording of satisfaction note. Learned counsel for the assessee submitted that the case of the assessee was opened u/s 153C on account of certain documents found and seized during the course of search conducted on Sunstar Group of cases on 19.12.2013. Notice u/s 153C was issued to the assessee on 20.01.2016 i.e. in AY 2016-17. Therefore, the period of six years for the purposes of Section 153 related to A.Y. 2010-11 to 2015-16. The assessment year under consideration being AY 2008-09 is beyond the period of six years referred to in Section 153C and thus outside the scope of Section 153C of the Act. Thus the AO had no jurisdiction to make an assessment of the assessee's income for the year 7 ITA nos. 3400 & 3402/Del/2023 under consideration. In support of his contention, learned counsel also relied on following decisions of the Tribunal:
- M/s Marconi Infratech (P) Ltd. v. ACIT 2024 (7) TMI 129 dated 21.06.2024;
- ACIT Central Circle-1, Gurgaon V. Enpro Telecom Pvt. Ltd., Delhi (Vice Varsa), 2024 (2) TMI 543, dated: 8-2-2024
- DCIT Central Circle -20 New Delhi Versus Rajesh Vashisht, 2023 (12) TMI 294 Dated: 29-11-2023
- DCIT Central Circle -20 New Delhi Versus Rajesh Vashisht, 2023 (12) TMI 294 Dated: 29-11-2023
- M/S Esha Securities Pvt Ltd. V. The Dy. C.I.T Central Circle - 13 New Delhi and (Vice-Versa), 2024 (7) TMI 638, Dated: 30-5-2024 5.1 In support of his contention learned counsel has also filed synopsis. For the sake of clarity the same is reproduced as under:
"Ground no. 3
1. This is an appeal filled by the assessee against the order passed by the CIT(A) confirming the action of Ld. AO in making the addition of Rs. 6,07,392/-on account of undisclosed income holding the sales/purchases made by assessee as bogus/ not genuine.
Initiation of Assessment Proceedings u/s 153C are time barred on account of falling beyond the period of six years from the date of recording of satisfaction note
2. Brief facts of the case are that the case of the assessee was opened u/s 153C on account of certain documents found and seized during the course of search conducted on Sunstar Group of cases on 19.12.2013.
3. The notice u/s 153C dated 20.01.2016 was issued to the assessee (PB Pg. 8) 8 ITA nos. 3400 & 3402/Del/2023
4. At the outset, it is an undisputed fact that the Assessment Year under consideration is AY 2008-09 and the notice was issued on 20.01.2016. i.e. AY 2016-17.
5. It is now a settled position of law that the period of six years for the purposes of Section 153C has to be construed from the assessment year relevant to the previous year in which satisfaction for issue of notice u/s 153C was recorded.
6. Therefore, the six years of which the assessment proceedings could have been initiated u/s 153C were AYs 2010-11 to AY 2015-16.
7 The above has been summarized as below:
Date of Search in case of Sunstar Group (third person) 19.12.2013 Notice issued u/s 153C 20.01.2016 Deemed Search year for the purpose of section 153C AY 2016-17 Period of six years for the purposes of Section 153C AY 2010-11 to AY 2015-16 Assessment year under consideration AY 2008-09
8. Since the assessment year under consideration is AY 2008-09, it falls beyond the period of six years referred to in Section 153C and thus is outside the scope of Section 153C of the Act and thus the AO had no jurisdiction to make an assessment of the assessee's income for the year under consideration.
9. Reliance is placed on the following judicial pronouncements in this regard wherein it has been held that the issuance of notice u/s 153C beyond the period of Six Assessment Years immediately preceding the Assessment year in which satisfaction note is recorded is not in accordance with law.
ITAT Delhi in the case of M/S. Marconi Infratech (P.) Ltd. V. ACIT Central Circle - 11 Faridabad, 2024 (7) TMI 129, dated 21-6-2024, held that-
"14. Having regard to the aforesaid facts, since admittedly, the satisfaction was recorded by the Learned AO of the assessee on 31.10.2018, falls in the Assessment year 2018-19, the immediately preceding 6 Assessment Years would be the Assessment Years from 9 ITA nos. 3400 & 3402/Del/2023 2013-14 to 2018-2019. Therefore, the notice under Section 153C of the Act could not have been issued for A. Ys. 2011-12 and 2012-13 as rightly pointed out by Learned Counsel appearing for the assessee. Thus, taking into consideration the entire aspect of the matter and further having regard to the amendment under 2017 Act w.e.f 01.04.2017 with prospective effect as clarified by CBDT Circular No. 2/2018 dated 15.02.2018, as the recording of satisfaction was made by the Learned AO of the assessee only on 30.10.2018, the issuance of notice under Section 1530 of the Act for A. Ys. 2011-12 & 2012-13 since had not fall in the previous 6 years, the assumption of jurisdiction in reopening of assessment under Section 153C of the Act for A. Ys, 2011-12 and 2012-13, therefore, found to be not maintainable. The same is void ab initio and thus, quashed.
15. In the result, the assessee's appeals for A. Ys. 2011-12 and 2012-13 are allowed"
ITAT Delhi in the case of ACIT Central Circle-1, Gurgaon V. Enpro Telecom Pvt. Ltd., Delhi (Vice Varsa), 2024 (2) TMI 543, dated: 8-2-2024, held that-
"6............... In the case on hand also the date of handing over of the materials was not mentioned in the satisfaction note and, therefore, in the absence of mentioning the date of handing over of the materials the date of satisfaction note shall be reckoned as the date of handing over of the materials and consequently the time limit of calculating the six years has to be calculated from this date ie. 02.02.2016 In this scenario the assessment year 2008-09 is beyond the period of six assessment years and, therefore, respectfully following the decision of the jurisdictional High Court and the coordinate bench, we hold that the assessment made for the AY 2008-09 is barred by limitation. Grounds raised in the cross objection of the assessee on this issue are allowed. Since, we have held that the assessment made u/s 153C r.w.s 153A is time barred. The appeal of the Revenue challenging the order of the Ld.CIT(A) on the merits of the addition/disallowance becomes infructuous."
ITAT Delhi in the case of DCIT Central Circle -20 New Delhi Versus Rajesh Vashisht, 2023 (12) TMI 294 Dated: 29-11-2023, held that-
10ITA nos. 3400 & 3402/Del/2023 "4. Without going into the merits of the case a perusal of the grounds read with the order of the CIT(A) we find that the first appellate authority has decided the appeal in favour of the assessee following the binding decision of the Hon'ble Delhi High Court in the case of RRJ Securities Limited 380 ITR 612 and subsequent amendment in the section 153C of the Act w.e.f. 01.04.2017. We do not find any merit in the grievance of the revenue. If the revenue is aggrieved by the binding decision of the Hon'ble Jurisdictional High Court of Delhi (supra) the revenue may approach the Hon'ble Supreme Court but in no case the revenue can be aggrieved by the binding decision before this Tribunal."
ITAT Delhi in the case of M/S Esha Securities Pvt Ltd. V. The Dy. C.I.T Central Circle - 13 New Delhi and (Vice-Versa), 2024 (7) TMI 638, Dated:
30-5-2024, held that-
"16. The law as interpreted by the Hon'ble Supreme Court and the Delhi High Court as above, declares that as per provisions of section 153C of the Act, the commencement date for computation of the six assessment years is deemed to be the date of receipt of books of account/materials/asset belonging/pertaining to non-searched person, by the jurisdictional AO of the non-searched person. In other words, date of recording of the satisfaction in the case of the searched person qua the non-searched person becomes date of search in the case of non-searched person [the assessee in the present case] in the instant case of the assessee (non-searched person), the date of search would become the date of recording satisfaction i.e., 23.11.2010. The impugned A. Y 2004-05 would therefore fall beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the assessing officer of the searched person. In light of the decision of the Hon'ble Supreme Court and Delhi High Court [supra], therefore, we have no hesitation in quashing the impugned assessment order being made without jurisdiction.
17. Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case."
10. Similar Reliance is placed on following judgements:
11ITA nos. 3400 & 3402/Del/2023 ITAT Delhi Judgement in the case of JASJIT SINGH VERSUS ACIT, CENTRAL CIRCLE-11, NEW DELHI AND VICE-VERSA, 2014 (11) TMI 1012-ITAT DELHI, dated: November 5, 2014 The above-mentioned judgement of Hon'ble ITAT, Delhi was affirmed by the Hon'ble Delhi High Court in the case COMMISSIONER OF INCOME TAX- 14 VERSUS SHREE JASJIT SINGH, 2015 (8) TMI 982-DELHI HIGH COURT, Dated. - August 11, 2015.
Furthermore, the above-mentioned Delhi High Court judgement was affirmed by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME TAX 14 VERSUS JASJIT SINGH, 2023 (10) TMI 572- SUPREME COURT, dated-September 26, 2023.
Delhi High Court in the case of Commissioner Of Income Tax-7 Versus RRJ Securities Ltd. And Vica-Versa, 2015 (11) TMI 19, dated: 30-10-2015 Delhi High Court in the case of ARN Infrastructure India Ltd. Versus Assistant Commissioner Of Income-Tax, Central Circle28, New Delhi, 2017 (4) TMI 1194 - DELHI HIGH COURT Delhi High Court in the case of PCIT Versus Sarwar Agency Pvt. Ltd., 2017 (8) TMI 733, Dated: -17-8- 2017 ITAT Delhi in the case of DCIT CENTRAL CIRCLE 14 NEW DELHI VERSUS M/S. RAJESH SHARMA, 2023 (8) TMI 1181, Dated: 23-8-2023 ITAT Delhi in the case of ACIT, CENTRAL CIRCLE-13, NEW DELHI VERSUS PRAGUN FINANCE PVT. LTD, 2024 (7) TMI 1414, Dated: 30-5- 2024 ITAT Chennai in the case of M/S. KSJ INFRASTRUCTURE PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1 (1), CHENNAI, 2024 (8) TMI 1421, Dated: - 6-3-2024
11. Therefore, in view of the above-mentioned facts and circumstances of the case and the case laws relied upon by the assessee, the initiation of assessment proceedings u/s 153C beyond the period of six Assessment Years 12 ITA nos. 3400 & 3402/Del/2023 immediately preceding the assessment year relevant to the previous year in which satisfaction has been recorded is illegal and liable to be quashed.
Ground no. 5-6 Addition on the basis of material which is not regarded as incriminating Where no incriminating material is found during the search proceedings, no addition can be made in respect of completed assessments
12. Your honour, in the present case, search in the case of Sunstar Group has been initiated on 19.12.2013 and notice u/s 153C was issued to the assessee on 20.01.2016 (PB Pg. 8). Thus, the AY 2008-09 stood 'completed as per second proviso to section 153A r.w.s. 153C of the Act.
13. Further, it is submitted that nothing incriminating has been found in the search of third person which can be said that it belongs to, pertains to or related to the assessee in case.
14. In the search conducted on the premises on M/s Sunstar Group, certain documents were seized (page 82, 84 and 85 of A-21) and on the basis of such documents the Id. AO has resorted to the provisions of Section 153C of the Act to make the assessment. The documents seized during search and considered to be incriminating material by the Id. AO for making assessment are merely dumb documents and by any means cannot be correlated to the assessee.
15. On the basis of the seized material, the Ld. AO made various allegations ie, the payment of salary, office rent, and Audit fee of the assessee is being approved by the Vice President and CFO of M/s Sunstar overseas. No clarity and no explanation provided by AO as to how the information printed on some loose sheets be taken as legit evidence against the assessee. Merely, from bare perusal of the loose sheet, it cannot be concluded that the assessee is bogus entity. Also, it settled principle of law that loose sheets or statements recorded without any conclusive evidence will not be considered as incriminating material 13 ITA nos. 3400 & 3402/Del/2023
16. It is a well settled law that in the absence of incriminating material, no addition would be made u/s 153C of the Act. Reliance can be placed on the following judgements: -
Delhi High court in the case of COMMISSIONER OF INCOME TAX (CENTRAL) -III VERSUS KABUL CHAWLA, 2015 (9) TMI 80 - DELHI HIGH COURT, dated August 28, 2015, has laid down the ratio that completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search.
The ratio laid by Delhi High in above mentioned judgement has been confirmed by the HON'BLE APEX COURT in the case of PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3 VERSUS ABHISAR BUILDWELL P. LTD., 2023 (4) TMI 1056-SUPREME COURT, dated: -
April 24, 2023.
The Supreme Court following the ratio of Abhisar Buildwell (supra) has applied the same ratio to section 153C of the Act vide SC order in the case of DCIT Central Circle 20 V. M/S U.K. Paints (Overseas) Ltd. [2023] 454 ITR 441 (SC), dated April 25, 2023 ITAT Delhi in the case of GOLDIES TRADING CO. LTD. FARIDABAD C/O RRA TAXINDIA VERSUS DCIT, CENTRAL CIRCLE-II, FARIDABAD HARYANA, 2024 (6) TMI 419, Dated: - May 31, 2024 ITAT Delhi in the case of VIDHYA DEVI C/O M/S. RRA TAX INDIA VERSUS DCIT CENTRAL CIRCLE NOIDA, 2024 (2) TMI 1199, Dated: February 22, 2024
17. Thus, in view of the above discussion and precedents laid down by the judgments, it can be concluded that in the absence of any incriminating material in the possession of the AO, the exercise of jurisdiction u/s 153A/153C is not legally sustainable. Hence, the additions made by the AO is not sustainable and bad in law and liable to quashed Ground no. 8 14 ITA nos. 3400 & 3402/Del/2023 Addition of Rs. 6,07,392/- on account of undisclosed income treating the sales/purchases made by assessee as not genuine.
Seized Documents do not pertain to the relevant assessment year
18. Your honour, in the present case, during the course of search on Sunstar Overseas at Bhalgarh, certain document was seized (attached at PB pg. no. 5-7) On the basis of above AO has drawn various misconceptions and allegations.
19. In this regard it is to be submitted that, the 3 documents which were seized from the premises of M/s Sunstar Overseas Ltd, on which hefty reliance had been placed and considered incriminating by the Id. AO, they do not even pertain to the assessment year under consideration.
First is page no. 81 of Annexure 21, on the close observations the document is related to Audit fees and years mentioned is FY 2009-10, 2010-11 and 2011-12, there is no clarity whether the documents refer to the financial years or the assessment years. Therefore, the conclusions drawn are vague and contrary in Nature • Secondly, upon perusal of the seized documents (page no. 82 and 85 of Annexure 21), it can be observed documents pertain to October, 2013 and November, 2013, i.e. FY 2013-14 and have details of salary and office rent and bonus. The AY mentioned in these documents is belong only to FY 2013-14 and therefore, no adverse inference can be drawn in other AYs.
20. Further, the seized documents cannot be considered as incriminating, as nothing was stated in the said documents which can lead to the conclusion that assessee has some unaccounted/ undisclosed income.
21. Therefore, in view of above, the actions AO were based merely only on surmises and conjectures as no adverse material has been brought on record by the AO to form a belief that the transactions of the assessee are bogus. Hence, the additions made by AO are without any basis and just based on mere surmises and conjectures and on preconceived notions without applying his mind 15 ITA nos. 3400 & 3402/Del/2023 AO has rejected books of accounts u/s 145(3) of the Act without detecting even a single defect in the books of accounts
22. Further, the AO has also the ignored all the detailed submissions and documents brought on record like its books of accounts, copy invoices, GR, bilties etc. with a view to corroborate the sale/purchase transactions entered into during the year under consideration. It beyond the reasonable understanding of the assessee that despite of the fact that all relevant material has been brought on record, still the AO has preferred to place his reliance only on his whims and Fancies. Moreover, the AO without detecting even a single defect in the books of accounts blatantly rejected the same. The provisions of section of 145(3) of the Act expressly provides that books of accounts can be rejected only when the Id. AO is satisfied that the books are not correct or incomplete. However, in the case of assessee the Id. AO has failed to record his satisfaction that the books are incomplete or incorrect.
AO after rejecting Books of accounts u/s 145(3) relied upon the turnover and GP rate shown in Trading P&L Account, which is contradictory in itself.
23. The AO estimated a GP rate and applied the same on the sales recorded in the books of accounts of the assessee it is beyond the reasonable understanding of the assessee that, how come the AO has placed the reliance on the books of account which he has already has rejected for the calculation of the GP rate and applying the same on the sales as per books of account.
24. Therefore, in view of the above, the actions of the AO are itself contrary to his views and this further supports the contention of the assessee that the addition has merely based on surmises and conjectures and on pre- conceived notion without applying his mind.
25. The AO has made an addition of Rs.6,07,392/- by applying the GP rate of 36.48% (declared in its books of accounts) on the total turnover accounted by it in its books of accounts. Your Honor, what is worth noticing here is that as a consequence of the aforesaid action, the Id. AO has made addition of Gross Profit which has already been considered by the assessee for computing its tax liability.
16ITA nos. 3400 & 3402/Del/2023 Double taxation of the same amount
26. The AO by adding gross profit again to the income of the assessee has made double taxation which is unsustainable and unjust in the eyes of law, in the present case the assessee has already recorded all the transactions without concealing any income and has duly paid taxes on the receipts during the relevant year. The actions of the AO are entirely vague and erroneous, as the addition was made mechanically by applying a GP rate to the total turnover without any substantiated basis. It is to be noted that, the AO did not question the GP rate declared by the assessee as the same is evident from the fact that GP rate declared by the assessee was accepted by the AO.
27. Without prejudice to above, even if the Id. AO sought to tax the gross profits in the hands of assessee, he should have given credit to the gross profits already declared by the assessee. Meaning thereby, the amount to be added in the hands of assessee should have been Gross Profits computed by the AO less Gross Profits accounted for in books of accounts. It is be noted that an amount can be brought to tax in the hands of assessee only once and subjecting the same amount to tax again would be detrimental to the interest of assessee.
28. Therefore, in view of the above, the addition made by AO is bad in law and liable to quashed.
Without prejudice to the above, the AO has erred in calculating the amount of addition
29. Your honour, on page no. 8 of the assessment order, the Id. AO has calculated the amount of addition as Rs. 6,07,392/-(166500 x 36.48%).
30. The above calculation is erroneous, since the correct amount calculated as Rs. 60,739/- and not Rs. 6,07,392/-.
Ground no. 10:
No addition can be made relying on the statements recorded on the back of the assessee without providing an opportunity of cross-examine the same.17
ITA nos. 3400 & 3402/Del/2023 Un-confronted third-party Statements without opportunity of cross- examination is illegal and addition made on That basis is unsustainable in the eyes of law
31. During the course of search operation on M/s Sunstar Group (third party), the statements of CFO/ Director of Sunstar Overseas Ltd were recorded under oath, which was used to bring out a case against the assessee by the Id. AO.
32. It is to mentioned here that, the aforesaid statements have been collected at the back of the assessee without giving the assessee an opportunity to reconcile the same. The said statements were never even confronted to the assessee during the course of search proceeding and at is only in the assessment order the Ld. AO has quoted the said statement, and hence the assessee was not aware about how these statements were being used to draw negative inferences against the assessee.
33. It is also pertinent to note that the principles of natural justice form an integral part of procedural fairness and justness, thereby excluding the scope of arbitrariness. In the present case, the assessee was debarred of any opportunity provided to cross examine the statements of such witnesses. The said action of the Id. AO is in sheer violation of principal of natural justice.
34. In case the Id. AO proposes to use the result of any private enquiry made by it against the assessee, he should communicate to the assessee the substance of such information so as to put the assessee in possession of full particulars of the case he is expected to meet, and should further give him sufficient opportunity to meet it
35. Reliance is placed on the following judicial pronouncements wherein it was held that no adverse inference can be drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same The Supreme Court in the case of Andaman Timber Industries v. CCE 2015 SCC Online SC 1051, wherein, it was held that not providing the opportunity of cross- examination to the assessee amounts to gross violation of the principles of natural justice and the same will render the order passed 18 ITA nos. 3400 & 3402/Del/2023 null and void. The relevant paragraph of the said decision is extracted herein below: -
"6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such ari opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them."
Delhi High Court in the case of PCIT, Delhi V. Best Infrastructure (India) Pvt. Ltd., 2017 (8) TMI 250, dated:1-8-2017 "37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the 19 ITA nos. 3400 & 3402/Del/2023 fact that he was not produced for cross-examination is sufficient to discard his statement.
..... .
40. Turning to the additions under Section 68 of the Act made on merits for three of the AYs. A perusal of the common impugned order of the ITAT reveals that a very detailed discussion has been undertaken after analysing the seized material. Para 38 of the impugned order is relevant in this context which reads as under
38. .......... On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because:
(i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-
examine him.
(ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement."
...... .
43. With the Assessees discharging the burden placed on them to explain the credit appearing in the books of accounts, the Court is satisfied that even on this aspect the impugned order of the ITAT suffers from no legal infirmity warranting interference."
36. The above judgement has been affirmed by Hon'ble Supreme Court in the case of PCIT-2 Delhi V. M/S Best Infrastructure (India) Pvt.Ltd., 2018 (6) TMI 971, dated: -14-5-2018
37. Delhi High Court in the case of PCIT (Central) -2 V. M/S. JPM Tools Ltd., M/S Jay Fecylinder Ltd., M/S. Jay Iron and Steel Ltd., M/S. Jay Auto 20 ITA nos. 3400 & 3402/Del/2023 Components Ltd. M/S. Jay Acetechnologies Ltd., 2022 (9) TMI 1330, dated:-
26-9-2022 "13. In any event, in the present cases, as the Respondents-Assessee's were denied the opportunity to cross-examine Mr. Rajesh Agarwal, despite a specific request, this Court is in agreement with the ITAT that his statement needs to be excluded and cannot be relied upon as a piece of evidence to make any addition. In fact, the Supreme Court in the case of M/s Andaman Timber Industries vs. CCE (SC), 127DTR 241 has held "...not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."
14. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present batch of appeals and accordingly, the same are dismissed along with pending applications.
38. Reliance is also placed on following judgements:
ITAT Delhi in the case of M/s. Maple Destinations And Dreambuild Pvt. Ltd. Versus DCIT, Circle-16 (1), New Delhi, 2024 (3) TMI 1071, dated: 21-3- 2024 ITAT Delhi in the case of M/S. Rswm Ltd. Versus DCIT, Central Circle-31, New Delhi, 2024 (2) TMI 278, dated: 31-1-2024 ITAT Delhi in the case of Divya Exim Pvt. Ltd. C/O. Kapil Goel, Adv., Renu Jain C/O. Kapil Goel, Adv., Nisha Jain C/O. Kapil Goel, Adv. Versus DCIT Central Circle 25 New Delhi 2024 (1) TMI 750. dated:-15-1-2024
39. In view of above judicial pronouncements, the adverse inference drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same is illegal, unjustified and against the principles of natural justice.
21ITA nos. 3400 & 3402/Del/2023 Ground no. 11:
Assessment order has been passed by the AO on the basis of surmises and conjectures Surmises and Conjectures
40. It is further submitted that that Ld.AO has engaged in surmises and conjectures to conclude his findings. He has failed to examine the facts of the case in the light of evidences and explanation provided by the assessee.
41. In this regards it is submitted that Ld.AO cannot engage in surmises and conjectures to conclude his findings This contention of assessee is supported by the following judicial pronouncements-
➤LALCHAND BHAGAT AMBICA RAM VERSUS COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA, 1959 (5) TMI 12-SUPREME COURT, Dated.- May 14, 1959 ➤COMMISSIONER OF INCOME-TAX VERSUS DINESH JAIN HUF, 2012 (10) TMI 158 DELHI HIGH COURT, Dated.- September 28, 2012 ➤SR. VENKATA RATNAM VERSUS COMMISSIONER OF INCOME-TAX, KARNATAKA I AND ANOTHER, 1980 (8) TMI 73-KARNATAKA HIGH COURT, Dated.- August 14, 1980 ➤ASSTT. COMMISSIONER OF INCOME TAX VERSUS SHRI SHARAD CHAUDHARY, 2014 (8) TMI 309 -ITAT DELHI, Dated.- July 25, 2014
42. In the view of above-mentioned submissions and judicial pronouncements, addition made by AO by engaging in surmises and conjectures and solely relying upon some dumb documents is liable to be deleted."
5.2 On the other hand learned DR supported the orders of authorities below. He, however, could not controvert the factual position that for the assessment year 22 ITA nos. 3400 & 3402/Del/2023 under consideration i.e. A.Y. 2008-09, the notice u/s 153C was issued on 20.01.2016 which related to A.Y. AY 2010-11 to AY 2015-16.
5.3 We have heard rival submissions and perused the material available on record including the case laws relied upon by the learned counsel for the assessee.
There is no dispute that in assessee's case for A.Y. 2008-09 notice u/s 153C was issued on 20.01.2016, therefore the assessment year 2008-09 is beyond the period of six assessment years. We find that coordinate Benches of the Tribunal have decided identical issue in favour of the assessee. Therefore, following binding precedent, we hold that the assessment made for A.Y. 2008-09 is barred by limitation, therefore, the same is hereby quashed. Ground is allowed.
6. Since for A.Y. 2008-09 we have quashed the assessment itself being barred by limitation the other grounds raised by the assessee have become of academic interest only and we refrain to adjudicate the same at this stage and is kept open.
7. Appeal of the assessee for A.Y. 2008-09 stands allowed.
8. Now coming to assessee's appeal for A.Y. 2014-15 in ITA no.
3402/Del/2023, we find that assessee has filed ground-wise synopsis. For the sake of clarity the synopsis is reproduced as under:
"1. This is an appeal filled by the assessee against the order passed by the CIT(A) confirming the action of Ld. AO in making the addition of Rs.23
ITA nos. 3400 & 3402/Del/2023 12,86,416/- on account of undisclosed income holding the sales/purchases made by assessee as bogus/ not genuine.
Assessment order passed u/s 143(3) is illegal, invalid and liable to be quashed as the assessment has been made without complying to the mandatory provisions of section 153C of the Act.
2. Brief facts of the case are that the assessment has been made u/s 143(3) on the basis of certain documents found and seized during the course of search conducted on Sunstar Group of cases on 19.12.2013.
3. At the outset, it is an undisputed fact that the Assessment Year under consideration is AY 2014-15.
4. It is now a settled position of law that the period of six years for the purposes of Section 153C has to be construed from the assessment year relevant to the previous year in which satisfaction for issue of notice u/s 153C was recorded. In present case, satisfaction was recorded on 20.01.2016 i.e. AY 2016-17. Consequently, the period of six years of which the assessment proceedings have to be initiated u/s 153C were AYs 2010-11 to AY 2015-16
5. The above has been summarized as below.
Date of Search in case of Sunstar Group (third 19.12.2013 19.12.2013 person) Notice issued u/s 153C of the Act 20.01.2016 Deemed Search year for the purpose of section AY 2016-17 153C Period of six years for the purposes of Section AY 2010-11 to 2015-16 153C Assessment year under consideration AY 2014-15
6. In view of the above, the assessment year under consideration is covered under the provisions of section 1530 of the Act and assessment should have been framed under section 153C of the Act after issuing notice under section 153C of the Act.24
ITA nos. 3400 & 3402/Del/2023
7. Your honour, it is relevant to point out that 6 assessment years i e., AY 2008-09 to AY 2013-14 has been opened under section 153C of the Act. (All Notices u/s 153C for AY 2008-09 to AY 2013-14 are attached at PB Pg. 75-
80)
8. Your honour, it is here to be mentioned that in the present case assessment for AY 2014-15 has been wrongly framed under section 143(3) of the Act by ignoring the mandatory provision of section 153C of the Act.
Hence, the same is not sustainable in the eyes of the law on account of jurisdictional error and therefore liable to be quashed.
9. Reliance is placed on the following judicial pronouncements in this regard wherein it has been held that if any assessment year falling within the period of six years immediately preceding the assessment year relevant for the previous year in which search was conducted for initiating proceeding u/s 153C of the Act, then the assessment ought to have been made under section 153C by issuing notice u/s 153C of the Act and not u/s 143(2) of the Act.
10. ITAT Delhi in the case of RAJA VARSHNEY v. DCIT, CENTRAL CIRCLE-31, New Delhi, ITA No.1459/Del/2024, dated: 26.09.2024, wherein Tribunal has quashed the Assessment Order holding that assessment for AY 2021- 22 has been wrongly framed under section 143(3) of the Act by ignoring the mandatory provision of section 153C of the Act. Relevant extract is being reproduced below as under. -
"13. From the above discussion the date of recording of the satisfaction will be the deemed date for the possession of the seized documents which is 03-10-2022 and six years would be reckoned from this date. The submission made by Ld AR is tenable that the assessment year relevant for previous year in which search was conducted in the case of the assessee will be AY 2023-24 and six years immediately preceding the assessment year relevant for u/s 153C of the Act will be AY 2018-19 to 2022-23. The assessment for AY 2021- 22 should have been carried out by issuing notice u/s 153C of the Act and not u/s 143(2) of the Act. Therefore, the assessment order dated 29-12-22 passed u/s 143(3) of the Act is bad in law and liable to be quashed and quashed accordingly. The additional grounds filed by the assessee are allowed."25
ITA nos. 3400 & 3402/Del/2023
11. ITAT Delhi in the case of Akanksha Gupta VS. ACIT, Central Circle-04, Delhi, 2024 (7) TMI 1133, dated 10.07.2024 wherein Hon'ble Tribunal under the verbatim same circumstances quashed the Assessment Order holding that assessment for AY 2021-22 has been wrongly framed under section 143(3) of the Act by ignoring the mandatory provision of section 153C of the Act. Relevant extract is being reproduced below as under: -
"9. Therefore, in view of the above decision, the date of recording of the satisfaction will be the deemed date for the possession of the seized documents, which is 30.06.2022 in the present case and the date of search and six years period would be reckoned from this date Le. 30.06.2022. Therefore, there is merit in the submission of the assessee that the assessment year relevant for previous year in which search was conducted in the case of the assessee will be AY 2023-24 and the six assessment years immediately preceding the assessment year relevant for the previous year in which search was conducted for initiating proceeding u/s 153C of the Act will be AY 2018-19 to 2022-
23. Therefore, respectfully following the decision of the cited case, it is held that in the present case, the assessment for AY 2021-22 should have been carried out by issuing notice u/s 153C of the Act and not u/s 143(2) of the Act as done by the AO in this case. No other contrary facts or decision was brought on record by the Ld. DR Therefore, it is held that the assessment order dated 29.12.2022 passed u/s 143(3) of the Act by the issuance of notice u/s 143(2) of the Act dated 30.06.2022 is bad in law and hence the notice u/s 143(2) of the Act, dated 30.06.2022 and the consequent assessment order dated 29.12.2022 passed u/s 143(3) of the Act are hereby quashed. The additional grounds filed by the assessee are allowed."
12. ITAT Delhi in the case of DCIT, CENTRAL CIRCLE-19, DELHI v. BENNETT WILLIAMSON ENGINEERS LTD. DELHI, 2024 (5) TMI 905, dated: 02.01.2024. Relevant extract is being reproduced below: -
"9. Thus, ongoing through the judgments of Hon'ble jurisdictional High Court and Hon'ble Apex Court, we have no hesitation to hold that the Assessments made for A.Y. 2012-13 u/s 144 r.w.s. 142(1), consequent to the satisfaction note recorded on 18 11 2013 (Α.Υ. 2014-15), ought to have been made u/s 153C of the Income Tax Act, 26 ITA nos. 3400 & 3402/Del/2023 1961. Since, the provisions of Section 153C have not been invoked and since, the proceedings u/s 153C have not been initiated, the assessment made u/s 144 r.w.s. 142(1) is treated as void ab initio.
13. ITAT Mumbai in the case of DIWAKAR N. SHETTY v. DY. CIT, CENTRAL CIRC LE-6 (1), MUMBAI, 2020 (11) TMI 560, Dated: 30-9- 2020, Relevant extract is being reproduced below: -
"11. The Assessing Officer in the impugned assessment year has made assessment under regular provisions. Since, the impugned assessment year forms part of the block of six assessment year prior to the date of search, the assessment should have been made u/s. 153C of the Act. Therefore in our considered view, the assessment order for the impugned year suffers from legal infirmity and hence, is liable to be quashed. We hold and direct accordingly. The assessee succeeds on legal issue raised in additional ground of appeal."
14. ITAT Delhi in the case of M/S SPLENDOR LANDBASE LIMITED v. ACIT, CIRCLE-9 (1), NEW DELHIL 2020 (1) TMI 85-ITAT DELHI, Dated:
- 31.12.2019. Relevant extract is being reproduced below "5.3 Coming to ITA No.3533/Del/2010 pertaining to assessment year 2008-09, we agree with the contention of the learned Authorised Representative that since the seized material alleged to be belonging to the assessee was handed over to the Assessing Officer of the assessee on 27.11.2008, the six years falling within the purview of section 153C would be assessment years 2003-04 to assessment year 2008 09. In view of the settled legal position that the date of initiation of search in the case of the third party should be construed with reference to the date of receiving the requisitioned material by the Assessing Officer having jurisdiction over the person to whom such material relates (as propounded by the Delh High Court in the case of Pr Commissioner Of Income Tax vs. Sarwar Agency Pvt. Ltd., reported in [2007] 397 ITR 400 (Delhi)) and duly noting from the records that admittedly and undisputedly no notice u's 1530 was issued in assessee's case for assessment year 2008-09 and only notice u/s 143(2) was issued, it is our considered opinion that the impugned assessment has not been passed in conformity with the provisions of law. We note that the impugned assessment order has been passed u/s 27 ITA nos. 3400 & 3402/Del/2023 143(3) and no notice u/s 153C has been issued although this year falls within the period of six years when counted from the date of recording of satisfaction note which is deemed date of search. The Assessing Officer should have framed the assessment u/s 153C of the Act for assessment year 2008-09 also and should have at the time of initiating the proceedings against the assessee issued notice u/s 153C of the Act which has not so be done in this case. The issuance of notice u/s 153C is mandatory and is a pre-condition if the case falls within the block period of six years. The assessment order for assessment year 2008- 09 is therefore, unsustainable in the eyes of law. Accordingly, we are left with no option but to quash the assessment for assessment year 2008-09 also.
15. ITAT Delhi in the case of SHRI JAGJIT SINGH v. ACIT, CENTRAL CIRCLE 21, NEW DELHI, 2019 (10) TMI 350- ITAT DELHI, dated:
01.10.2019, Relevant extract is being reproduced below.
"25. In view of what has been discussed above, we are of the considered view that assessment framed by the assessee u/s 153A r/w section 153C for AYs 2009-10, 2010-11 and 2011-12 is bad in law for want of jurisdictional error with the AO. At the same time, assessment framed u/s 143 (3) for AY 2012-13 is also bad in law because date of handing over the seized document is 20.01.2014 and the assessment in this case was required to be framed u/s 153C of the Act. Because Hon'ble jurisdictional High Court in case of CIT vs. RRJ Securities Ltd. (supra) has categorically held that, "In terms of provisa to section 153C of the Act, a reference to the date of the search under the second proviso to section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee.
26. So, in these circumstances, the assessment framed u/s 143(3) of the Act for AY 2012-13, which was otherwise required to be framed u/s 153C, is also not sustainable in the eyes of law on account of jurisdictional error.
27. In view of what has been discussed above, we are of the considered view that without going into the merits of the case, 28 ITA nos. 3400 & 3402/Del/2023 assessment orders framed u/s 153C r/w section 153A of the Act for AYs 2009-10, 2010- 11 and 2011-12 and u/s 143(3) of the Act for AY 2012-13 are bad in law and as such not sustainable, hence quashed. Consequently, all the appeals filed by the assessee are allowed."
16. ITAT Delhi in the case of EON AUTO INDUSTRIES (P) LTD. v. DCIT, CENTRAL CIRCLE 17, NEW DELHI, 2017 (12) TMI 49, Dated: 28-11- 2017 Relevant extract is being reproduced below. -
"12. If the ratio of the Hon'ble jurisdictional High Court in the aforesaid case is to be applied on the facts of the present case, then, firstly, reference date has to be reckoned as date of recording of 'satisfaction under section 1530 which is20/11/2009; and secondly, if such a date is taken as date of initiation of the search or requisition for the purpose of second proviso to section 153A(1), that is, for the purpose of abatement of pending assessment proceedings, then the year of search in terms of clause (b) of section 153A(1) would be assessment year 2010-11; and 2008-09 would fall within the category of six assessment years prior to the year of search. In such a situation, assessment for assessment year 2008-09 should have been completed in terms of section 153C read with 153A and not as a regular assessment under section 143(3). The reason being entire concept of abated; unabated as laid down in 2nd proviso to section153A(1) and other issue of limitation as contained section 153 B has to be seen with reference to such reference date which has different consequences. Like for instance in section 153 B the period of limitation for completion of regular assessment for the year of search and for the assessment falling in each of the six assessment years are different. Thus, in our humble opinion, assessment for assessment year 2008-09 should have been completed under section153A read with 153C and not as regular assessment under section 143(3), by treating the A.Y. 2008-09 as yea of search."
17. Further reliance is placed on the Hon'ble ITAT Delhi Judgement in the case of JASJIT SINGH VERSUS ACIT, CENTRAL CIRCLE-11, NEW DELHI AND VICE-VERSA, 2014 (11) TMI 1012-ITAT DELHI, Dated.- Novembe 5, 2014 29 ITA nos. 3400 & 3402/Del/2023
18. The above-mentioned judgement of Hon'ble ITAT, Delhi was affirmed by the Hon'ble Delhi High Court in the cas COMMISSIONER OF INCOME TAX-14 VERSUS SHREE JASJIT SINGH, 2015 (8) TMI 982 - DELHI HIGH COURT, Dated. - August 11, 2015.
19. Furthermore, the above-mentioned Delhi High Court judgement was affirmed by the Hon'ble Supreme Court the case of COMMISSIONER OF INCOME TAX 14 VERSUS JASJIT SINGH, 2023 (10) TMI 572 - SUPREM COURT, Dated: September 26, 2023.
20. In view of the above-mentioned submissions and judicial pronouncements, the assessment framed under sectio 143(3) of the Act for AY 2014-15, which was otherwise required to be framed under section 153C of the Act is no sustainable in the eyes of law on account of jurisdictional error and therefore liable to be quashed.
Addition of Rs. 12,86,416/- on account of undisclosed income treating the sales/ purchases made by assessee as not genuine.
AO has rejected books of accounts u/s 145(3) of the Act without detecting even a single defect in the books c accounts
21. Further, the AO has also the ignored all the detailed submissions and documents brought on record like its books of accounts, copy invoices, GR, bilties etc. with a view to corroborate the sale/purchase transactions entered into during the year under consideration. It beyond the reasonable understanding of the assessee that despite of the fact that all relevant material has been brought on record, still the AO has preferred to place his reliance only on his whims and Fancies. Moreover, the AO without detecting even a single defect in the books of accounts blatantly rejected the same. The provisions of section of 145(3) of the Act expressly provides that books of accounts can be rejected only when the ld. AO is satisfied that the books are not correct or incomplete. However, in the case of assessee the ld. AO has failed to record his satisfaction that the books are incomplete or incorrect.
AO after rejecting Books of accounts u/s 145(3) relied upon the turnover and GP rate shown in Trading P& Account, which is contradictory in itself.
30ITA nos. 3400 & 3402/Del/2023
22. The AO estimated a GP rate and applied the same on the sales recorded in the books of accounts of the assessed it is beyond the reasonable understanding of the assessee that, how come the AO has placed the reliance on the books of account which he has already has rejected for the calculation of the GP rate and applying the same on the sales as per books of account.
23. Therefore, in view of the above, the actions of the AO are itself contrary to to his views and this further supports the contention of the assessee that the addition has merely based on surmises and conjectures and on pre- conceived notion without applying his mind.
24. The AO has made an addition of Rs, 12,86,416/- by applying the GP rate of 0.24% (declared in its books of accounts) on the total turnover accounted by it in its books of accounts. Your Honor, what is worth noticing here is that as a consequence of the aforesaid action, the Id. AO has made addition of Gross Profit which has already been considered by the assessee for computing its tax liability.
Double taxation of the same amount
25. The AO by adding gross profit again to the income of the assessee has made double taxation which is unsustainable and unjust in the eyes of law, in the present case the assessee has already recorded all the transactions without concealing any income and has duly paid taxes on the receipts during the relevant year. The actions of the AO are entirely vague and erroneous, as the addition was made mechanically by applying a GP rate to the total turnover without any substantiated basis. It is to be noted that, the AO did not question the GP rate declared by the assessee as the same is evident from the fact that GP rate declared by the assessee was accepted by the AO
26. Without prejudice to above, even if the Id. AO sought to tax the gross profits in the hands of assessee, he should have given credit to the gross profits already declared by the assessee. Meaning thereby, the amount to be added in the hands of assessee should have been Gross Profits computed by the AO less Gross Profits accounted for in books of accounts. It is be noted that an amount can be brought to tax in the hands of assessee only once and 31 ITA nos. 3400 & 3402/Del/2023 subjecting the same amount to tax again would be detrimental to the interest of assessee.
27. Therefore, in view of the above, the addition made by AO is bad in law and liable to quashed.
No addition can be made relying on the statements recorded on the back of the assessee without providing an opportunity of cross-examine the same.
Un-confronted third-party Statements without opportunity of cross- examination is illegal and addition made on that basis is unsustainable in the eyes of law
28. During the course of search operation on M/s Sunstar Group (third party), the statements of CFO/ Director of Sunstar Overseas Ltd were recorded under oath, which was used to bring out a case against the assessee by the Id. AO.
29. It is to mentioned here that, the aforesaid statements have been collected at the back of the assessee without giving the assessee an opportunity to reconcile the same. The said statements were never even confronted to the assessee during the course of search proceeding and at is only in the assessment order the Ld. AO has quoted the said statement, and hence the assessee was not aware about how these statements were being used to draw negative inferences against the assessee
30. It is also pertinent to note that the principles of natural justice form an integral part of procedural fairness and justness, thereby excluding the scope of arbitrariness. In the present case, the assessee was debarred of any opportunity provided to cross examine the statements of such witnesses. The said action of the Id, AO is in sheer violation of principal of natural justice
31. In case the Id. AO proposes to use the result of any private enquiry made by it against the assessee, he should communicate to the assessee the substance of such information so as to put the assessee in possession of full particulars of the case he is expected to meet, and should further give him sufficient opportunity to meet it 32 ITA nos. 3400 & 3402/Del/2023
32. Reliance is placed on the following judicial pronouncements wherein it was held that no adverse inference can be drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same"
The Supreme Court in the case of Andaman Timber Industries v. CCE 2015 SCC Online SC 1051, wherein, it was held that not providing the opportunity of cross- examination to the assessee amounts to gross violation of the principles of natural justice and the same will render the order passed null and void. The relevant paragraph of the said decision is extracted herein below: -
"6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex- factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them."
Delhi High Court in the case of PCIT, Delhi V. Best Infrastructure (India) Pvt.Ltd., 2017 (8) TMI 250, dated:1-8-2017 33 ITA nos. 3400 & 3402/Del/2023 "37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement.
......
40. Turning to the additions under Section 68 of the Act made on merits for three of the AYs. A perusal of the common impugned order of the ITAT reveals that a very detailed discussion has been undertaken after analysing the seized material. Para 38 of the impugned order is relevant in this context which reads as under
"38 On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because:
(i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-
examine him.
(ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement."
43. With the Assessees discharging the burden placed on them to explain the credit appearing in the books of accounts, the Court is satisfied that even on this aspect the impugned order of 34 ITA nos. 3400 & 3402/Del/2023 the ITAT suffers from no legal infirmity warranting interference."
33. The above judgement has been affirmed by Hon'ble Supreme Court in the case of PCIT-2 Delhi V. M/S Best Infrastructure (India) Pvt.Ltd., 2018 (6) TMI 971, dated:-14-5-2018
34. Delhi High Court in the case of PCIT (Central) -2 V. M/S. JPM Tools Ltd., M/S Jay Fecylinder Ltd., M/S. Jay Iron and Steel Ltd., M/S. Jay Auto Components Ltd. M/S. Jay Acetechnologies Ltd., 2022 (9) TMI 1330, dated:-
26-9-2022 "13. In any event, in the present cases, as the Respondents-Assessee's were denied the opportunity to cross-examine Mr. Rajesh Agarwal, despite a specific request, this Court is in agreement with the ITAT that his statement needs to be excluded and cannot be relied upon as a piece of evidence to make any addition, In fact, the Supreme Court in the case of M/s Andaman Timber Industries vs. CCE (SC), 127DTR 241 has held...not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."
14. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present batch of appeals and accordingly, the same are dismissed along with pending applications.
35. Reliance is also placed on following judgements:
ITAT Delhi in the case of Mis. Maple Destinations And Dreambuild Pvt. Ltd. Versus DCIT, Circle - 16 (1), New Delhi, 2024 (3) TMI 1071, dated: 21-3-2024 ITAT Delhi in the case of M/S. Rswn Ltd. Versus DCIT, Central Circle-31, New Delhi, 2024 (2) TMI 278, dated: 31-1-2024 35 ITA nos. 3400 & 3402/Del/2023 ITAT Delhi in the case of Divya Exim Pvt. Ltd. C/O. Kapil Goel, Adv., Renu Jain C/O. Kapil Goel, Adv., Nisha Jain C/O.Kapil Goel, Adv. Versus DCIT Central Circle 25 New Delhi 2024 (1) TMI 750, dated:-
15-1-2024
36. In view of above judicial pronouncements, the adverse inference drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same is illegal, unjustified and against the principles of natural justice.Assessment order has been passed by the AO on the basis of surmises and conjectures.
Surmises and Conjectures
37. It is further submitted that that Ld.AO has engaged in surmises and conjectures to conclude his findings. He has failed to examine the facts of the case in the light of evidences and explanation provided by the assessee
38. In this regards it is submitted that Ld.AO cannot engage in surmises and conjectures to conclude his findings This contention of assessee is supported by the following judicial pronouncements-
➤ LALCHAND BHAGAT AMBICA RAM VERSUS COMMISSIONER OF INCOME-TAX BIHAR AND ORISSA, 1959 (5) TMI 12- SUPREME COURT, Dated.- May 14, 1959 ➤ COMMISSIONER OF INCOME-TAX VERSUS DINESH JAIN HUF, 2012 (10) TMI 158 DELHI HIGH COURT, Dated.- September 28, 2012 ➤ SR. VENKATA RATNAM VERSUS COMMISSIONER OF INCOME-TAX, KARNATAKA AND ANOTHER, 1980 (8) TMI 73 - KARNATAKA HIGH COURT, Dated.- August 14, 1980 ➤ ASSTT. COMMISSIONER OF INCOME TAX VERSUS SHRI SHARAD CHAUDHARY 2014 (8) TMI 309-ITAT DELHI, Dated.- July 25, 2014
39. In the view of above-mentioned submissions and judicial pronouncements, addition made by AO by engaging in surmises and conjectures and solely relying upon some dumb documents is liable to be deleted.
36ITA nos. 3400 & 3402/Del/2023
9. On the issue of framing of assessment u/s 143(3) of the Act instead of Section 153C, learned DR supported the assessment order and opposed the submissions. He contended that there is no prohibition under law. The AO can proceed u/s 143(3) of the Act.
9.1 We have considered the rival contentions on the issue of framing of assessment u/s 143(3) of the Act. The learned CIT(Appeals) affirmed the order of the Assessing Officer passed u/s 143(3) of the Act on the basis that framing of assessment under a wrong provision of law is curable u/s 292BB of the Act. We are not inclined to accept this reasoning of the learned CIT(Appeals) as the proceedings u/s 143(3) and 153C of the Act operate in two different and distinct fields. The law is well settled that issue related to jurisdictional error cannot be cured u/s 292BB of the Act. In the case in hand the AO wrongly passed order u/s 143(3) of the Act while the initiation of the proceedings was by way of issuing notice u/s 153(2). It is also recorded by the Assessing Authority that the order of assessment was passed with the statutory approval of the Joint Commissioner of Income-tax in accordance with section 153D of the Act. It goes to demonstrate that the proceedings were related to section 153C of the Act. The coordinate Bench of this Tribunal in the case of Shri Jagjit Singh v. ACIT, Central Circle-21, New Delhi, 2019 (10) TMI 350 -ITAT Delhi, dated 01.10.2019, following the judgment of the Hon'ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. held that assessment framed u/s 143(3) of the Act which was otherwise required to be framed u/s 153C of the Act is also snot sustainable in the eyes of law on account of jurisdictional error. We, therefore, respectfully following the binding precedence hold that the finding of the learned CIT(A). Undisputedly, the AO in opening observations noted that a search operation was carried out in pursuance of authorization by Director of Income Tax (Chandigarh) under Section 132(1)(A) of 37 ITA nos. 3400 & 3402/Del/2023 the Act. It is also noted that a notice u/s 153C read with Section 153A was issued. In response thereto the assessee had filed his return of income. Thereafter, the Assessing Officer assessed income u/s 143(3) of the Act. The AO has also recorded that the assessment is made u/s 143(3) of the Income Tax Act at column 10 of page one of assessment order. Thus, the assessment order is contrary to law and deserves to be quashed. Moreover, the AO could have rectified the order, if it was a clerical mistake. He did not do so. Be as it may, at this stage before us it is the order stated to have been passed u/s 143(3) of the Act, which is patently illegal. We hold so.
9.2 On merit, we find that Assessing Officer has made addition of Rs. 12,86,416/- treating the sales/purchase made by the assessee as not genuine. It is seen that the Assessing Officer rejecting the books of account maintained by the assessee u/s 145(3) of the Act, made the impugned addition of Rs. 12,86,416/-, inter alia, by observing as under:
"3.4 The assessee neither has filed any evidence in response to the query given in the questionnaire nor in response to the show cause letter dated 21.03.2016 in support of his claim of sale/purchase as discussed. In view of the discussion above I am satisfied that the books are not reliable and are hereby rejected u/s 145(3) of the Act, therefore, I hold the purchases/sale claimed to have been made by M/s Kamal Trading Company amounting to Rs. 54,14,14,119/- as bogus. The assessee has adopted GP rate of 0.24% in this year, therefore, applying the said GP rate of 0.24%, an addition of Rs. 12,86,416/- (541414119 x 0.24% is made to the total income of the assessee. The assessee had not disclosed this income suo-moto and without the search operation, this income would not have been unearthed had there been no search on the premises of the assessee. Hence, I am satisfied that the assessee has concealed income or filed inaccurate particulars to the extent as discussed above and thereby liable to be initiated the penalty u/s 271 AAB of the Act."
9.3 In appeal the learned CIT(A) affirmed the addition made by the AO. Aggrieved against it, now the assessee is in appeal before this Tribunal.
38ITA nos. 3400 & 3402/Del/2023 9.4 Learned counsel for the assessee reiterated the submissions as made in the synopsis filed on behalf of the assessee and submitted that all relevant details in the form of books of accounts, copy invoices, GR, bilties etc. were filed before the Assessing Officer. The AO without detecting any defect in the books of accounts, rejected the same u/s 145(3) of the Act and made addition of Rs.12,86,416/- by applying the GP rate of 0.24% (declared in its books of accounts) on the total turnover accounted by it in its books of accounts. Learned counsel submitted that the AO has made addition of Gross Profit which has already been considered by the assessee for computing its tax liability. He submitted that the AO by adding gross profit again to the income of the assessee has made double taxation which is unsustainable and unjust in the eyes of law. He submitted that the AO has made the addition by relying on the statements recorded on the back of the assessee without providing an opportunity of cross-examine the same. Relying upon the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE 2015 SCC Online SC 1051 he submitted that no adverse inference could be drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same. In support of his contention learned counsel also placed reliance on following judgments:
- ITAT Delhi in the case of Mis. Maple Destinations And Dreambuild Pvt. Ltd. Versus DCIT, Circle - 16 (1), New Delhi, 2024 (3) TMI 1071, dated:
21-3-2024
- ITAT Delhi in the case of M/S. Rswn Ltd. Versus DCIT, Central Circle-31, New Delhi, 2024 (2) TMI 278, dated: 31-1-2024
- ITAT Delhi in the case of Divya Exim Pvt. Ltd. C/O. Kapil Goel, Adv., Renu Jain C/O. Kapil Goel, Adv., Nisha Jain C/O.Kapil Goel, Adv. Versus DCIT Central Circle 25 New Delhi 2024 (1) TMI 750, dated:-15-1-2024 9.5 On the other hand, learned DR supported the orders of authorities below.39
ITA nos. 3400 & 3402/Del/2023 9.6 We have heard rival submissions and perused the material available on record. The stand of assessee is that all details in the form of books of accounts, copy invoices, GR, bilties etc. were filed before the Assessing Officer and the AO without pointing out any specific defect therein rejected the books of account u/s 145(3) and made the impugned addition of Rs. Rs.12,86,416/- by applying the GP rate of 0.24% on the total turnover accounted by the assessee in its books of accounts. We fail to understand the reasoning of AO as at one hand he stated sale/purchase claimed to have been made by M/s Kamal Trading Company amounting to Rs. 54,14,14,119/- as bogus then he proceeds to make addition on the basis of GP disclosed by the assessee without any justification and explanation. Such order, on merit as well, fails to meet the test of law and deserves to be quashed. The grounds raised by the assessee are allowed. Appeal of the assessee is allowed.
10. In the result, assessee's appeal in ITA no. 3400/Del/2023 for A.Y. 2008-09 and ITA no. 3402/Del/2023 for A.Y. 2014-15 are allowed.
Order pronounced in open court on 24th October, 2024.
Sd/- Sd/-
(BRAJESH KUMAR SINGH) (KUL BHARAT)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*MP*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI