Income Tax Appellate Tribunal - Delhi
Naveen Narang , Delhi vs Pcit (Central), - 3, Delhi on 3 October, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member,
Sh. Sudhir Kumar, Judicial Member
ITA No. 1560/Del/2024 : Asstt. Year: 2016-17
Naveen Narang, Vs PCIT (Central)-3,
291, Gujrawala Town, Part-III, New Delhi
New Delhi-110009
(APPELLANT) (RESPONDENT)
PAN No. AADPN0344D
Assessee by : Sh. Pranav Yadav, Adv.
Revenue by : Sh. Subhra J. Chakraborty, CIT-DR
Date of Hearing: 27.08.2024 Date of Pronouncement: 03.10.2024
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the as sessee against the order of ld. PCIT(Central)-3 , Delhi dated 31.0 3.2024.
2. Following grounds have been raised by the assessee:
" 1 . On t h e f a ct s a n d c i r c u m s t a n c e s o f c a s e a n d in la w, t h e I d. PC IT , C ent r a l - 3 , N ew D el h i e r r ed i n i ni t ia ti n g p r oc e e di ng s u nd e r s e ct i on 2 63 o f I n c om e Ta x A ct , 1 9 61 ( A ct) b y w r o ng ly as su m in g ju ri sd ic t i o n un d e r s e ct i on 2 63 o f th e A ct a n d h e n c e, th e o rd e r pa s s ed b y t h e Ld . C I T un d e r s ec ti on 2 63 o f A c t i s bad in la w , w it h ou t ju ri sd i ct i o n a nd b a r r ed b y li mi ta t i on .
2 . On t h e f a c t s a n d c i rcu m st a n c e s o f c a s e a n d i n l a w , th e Id . PC IT e r r ed in s e tt in g a si d e th e a s s e s s m en t a n d h a s a l s o e r r ed in h ol d i ng t ha t t h e or ig in a l a s s e ss m e nt o rd e r p a s s ed by th e As s es si n g O ffi c e r u nd e r s e cti on 1 53 A /1 4 3 ( 3 ) o f A ct wa s e r r on e ou s an d p r ej u d ici a l t o t h e i nt e r est of th e r ev enu e .
3 . On t h e fa c t s a n d c i r cu m s t a n c es o f ca se a n d i n l a w , t he di r e cti on s i s su e d b y t h e Ld . P CI T u nd e r s e c ti on 26 3 of A ct a r e e r r on e ou s , v a gu e , a m bi gu ou s a nd u nt e n a bl e a n d , t h e r e fo r e t he o rd e r u / s 2 6 3 o f th e Ac t p a s sed by th e Ld . PC I T i s l ia b le t o b e qu as h ed .2 ITA No. 1560/Del/2024
Naveen Narang 4 . On t h e fa c t s a n d c i r cu m s t a n c es o f ca se a n d i n l a w , t he o rd e r p a ss e d u nd e r s e cti on 2 63 o f th e A ct by t h e Ld . P C I T i s bad in l a w a s t h e s a m e ha s b e en pa ss e d w it h out a pp li c a t i o n o f mi nd a nd d e s e rv e s t o b e q ua sh ed .
5 . On th e fa c t s a n d ci r c um s t a n c es o f t h e c a s e a nd i n l a w , t h e Id. P CI T e r r ed in s ett in g a si d e th e a s s ess m ent o rd e r w it h out app r e ciat in g th e fa ct t ha t th e sa m e w a s pa s s e d a f t er t a ki ng du e a pp r ov a l u / s 1 5 3D o f J C I T .
6 . On th e fa c t s a n d ci r c um s t a n c es o f t h e c a s e a nd i n l a w , t h e Id. P C I T e r r ed i n s ta t in g t ha t th e a s s e ss m en t pa s s ed b y t he as s e ss in g o f fi c e r w a s w i th out m a k in g in qu i ri e s o r ve r ifi c a t ion w hi c h s h ou l d h a v e b e en m a d e 7 . O n th e f a c t s a n d c i rcu m st a n ce s of c a s e a n d in l a w , t h e L d. PC IT e r r ed in i n v ok i n g t h e p r ov i si on s o f s e c ti on 2 63 o f t h e A ct , an d t h e r eb y di r ec ti n g th e A s se ss i n g O f fi c er t o r e- e xa m in e th e is s u e o f R s. 2 7 ,0 0 , 0 0 ,0 0 0 /- of a l l eg ed c a s h l oa n /i nv e st m en t .
8 . On t h e fa c t s a n d c i r cu m s t a n c es o f ca se a n d i n l a w , t he o rd e r pa ss ed b y PC I T u / s 2 6 3 i s li a b l e t o b e q ua s h ed a s i t i s ar b it ra r y and a g a i n s t t h e p rin c ip le s of n a t u ra l ju s ti c e 9 . On t h e fa c t s a n d c i r cu m s t a n c es o f ca se a n d i n l a w , t he o rd e r pa s se d b y PC I T u / s 2 63 i s l ia b l e to b e qu a sh ed a s th e o ri gin al a s s e s s m en t o rd e r i t s el f i s b a d i n la w a n d w it h out j uri sd i ct io n 1 0. On th e fa c t s a n d ci r cu m st a nc e s o f ca se a n d i n la w , o r de r pas s ed b y P C I T u / s 2 6 3 i s li a bl e t o be qu a sh e d a s t h e di r e cti on s gi v en b y PC I T a r e b e y on d t h e sc op e o f p r ovi si on s o f s ec t i on 1 53 A o f t h e A ct ."
3. Original return of income u/s 139 of the Income-tax Act, 1961 was filed on 30/07/2016 declaring income of Rs 57,91,510/-. A search and seizure action u/s 132 of the Ac t was carried out in the case of the assessee on 14/10/2020. Notice u/s 153A of the Act was issued by the AO o n 4/6/2021 in respo nse to which the assessee filed the return of income declaring the same income of R s 57,91,510/- as was originally declared in the return of income filed u/s 139 of the Ac t. The assessing officer completed the assessment u/s 1 53A/143(3) on 3 ITA No. 1560/Del/2024 Naveen Narang 30/03/2022 at income of Rs 14,93,82,868/- after making certain additions against which the assessee has filed a ppeal before CIT(A) which is pending on the additions made.
4. The Ld PCIT issued notice dated 26/03/2024 u/s 263 of the Act asking the assessee to show cause as to why the aforesaid assessment order date d 30/03/2022 should not be revised as the same was erroneous and prejudicial to the interest of the revenue. The assessee was asked to submit its reply on 27/03/2024. The assessee submitted its reply o n 27/03 /2024 explaining tha t the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The L d PCIT did not agree with the contentions of the assessee and passed order dated 30/03/2024 u/s 263 of the Act.
5. Against this order u/s 263 of the Act, the assessee is in appeal before us.
6. During the hearing before us, the ld. AR argued that the issue on whic h the ld. PCIT has passed the order u/s 263 is beyo nd the scope of provisions of sectio n 153A o f the Ac t and, there fore, the underlying Assessment Order passed u/s 153A of the Act, by no t making the addition on the issue raised in order u/s 263, was beyond the scope of provisions o f section 153A cannot be said to be erroneous in so far as it is prejudic ial to the interest o f the revenue. The ld. AR argued that as per the show cause notice and order u/s 263 of PCIT, dur ing the course of search action u/s 132 of the Income Tax Act, 1 961 in case of Shri Devesh Singh/Manoj Kumar Singh certain excel sheets were found and se ized from laptop and pen drive of Shri Devesh Singh and the ld. PCIT held that, as per the aforesaid seized 4 ITA No. 1560/Del/2024 Naveen Narang exce l sheets the assessee had advanced a sum of Rs. 27 crores as investment/loan. It was argued that the ld. PCIT wrongly held that the Assessing Officer has made additio n of Rs.11 ,41,03,645/- only without appreciating/inquiring the facts of the case and ignored the evidence of Rs. 27 crores as loan/investme nt found during the course of sear ch action. The ld. AR argue d that e ven the addition of Rs. 11,41,03,645/- made by the AO is erro neous leave alone the ques tion of making addition of Rs .27 crores and that under lying ass essment order has been made u/s 153 A of the Act and since the excel sheet have not been found or seized during the cours e of search in the case of the appellant, the same cannot be used for making addition u/s 153A in the case of the appellant. It was argued that for using such excel shee ts seized from third person, the compliance to provisions of section 153C of the Act had to be made. Accordingly, ne ither the addition of Rs. 11,41,03,645/- as made by the AO nor the addition of Rs. 27,0 0,00,000 /- as alleged by ld. PCIT can be made u/s 153A of the Act. The ld. AR re lied on the judgment of Hon'ble High Court in the case of PCIT (Central) - 3 Vs. Anand Kumar Jain (HUF) 2021 (31 TMI
8). The ld. AR referred to the relevant finding of the Hon'ble Cour t which is as under:
" 10 . N o w , c oin i ng t o th e a sp e ct v iz th e in v oc a ti on o f s e ct i on 1 53 A on th e ba s i s o f t h e s tat e m ent r e c o rd ed i n s ea r ch a cti on a g a in s t a th i rd p e rs on . W e m ay n ot e t h a t t he A O h a s u s e d th i s sta te m ent on o a th r e c or d ed in t h e c ou rse o f s ea r ch c on du ct ed i n t h e c a s e of a t hi rd p a rt y ( i . e ., s e a r c h o f Pr a d e ep Ku ma r J in d a l) for m a k i ng the a d di t i on s in the hands of th e as s e ss e e . A s p er t h e m a nd a t e o f S e c ti o n 1 53 C , i f t hi s sta t e men t w a s t o b e c ons t ru ed a s an in c ri mi n a tin g m a t er ia l b e l on g in g t o o r p e rt a i ni ng to a pe r son oth e r t ha n p e r s on s ea r ch ed ( a s r e fe r r e d t o in S e cti on 1 5 3 A ), t h en 5 ITA No. 1560/Del/2024 Naveen Narang th e onl y l eg al r e c o u r s e a v ail a bl e t o t h e d ep a r tm en t w a s t o p r o c e ed in te rm s o f S ec ti on 1 5 3C o f t h e A ct b y h a n di ng o v er t h e s a m e t o t h e A O wh o h a s j u ri s di c ti on ov e r su c h p e rs on . He r e , t h e a s ses s m en t h a s b e en f ra m ed u nd e r s ec t i on 1 5 3A o n th e b a si s of a ll eg ed in c rim in a t in g m a t e ri a l ( b ei n g th e st at e m ent r e c o r d ed u n d e r se ct i on 1 3 2( 4) o f th e A c t ). A s n ot ed a b o v e, th e A s s ess e e h a d n o opp o rt un i t y t o cr o ss - ex a min e th e sa i d w it n e s s, b u t th a t a p a rt , th e m a n da t o ry p r o c edu r e u n de r sect i on 1 53 C h a s n ot b e en f oll ow e d. On t h i s c ou n t a l on e, w e fin d n o p e rv e r s it y i n t h e v i ew t a k en b y th e I TA T. Th er e f o r e , w e d o n ot fi n d a n y s u b s t a nt ia l qu e s tion of la w t hat r equ i r e s ou r c on si d e ra t i o n. "
7. At this juncture, we find that the invocation of proceedings u/s 153C on the statement of the third person and the state ment was construed as an incriminating material.
8. The ld. AR further argued that the Assessment Order has been passed by the AO after making due inquiries. It was argued that recourse to Sectio n 263 of the Income Tax Act, 1961 cannot be taken if the impugned order is erroneous but not prejudicial to the interest of revenue or if it is prejudicial to the interest of revenue but not erroneous. It was argued that if Assessing Officer acting in accordance w ith law makes a certain assessment, the same cannot be brande d as "erroneous" by the ld. PCIT mere ly because, according to him, the order s hould have been written differently or more ela borately. The provisions of Section 263 of the Act do not visualize the substitution of the judgment of the Commissioner for that of the AO unless his order is not in accordance with law. There again every erroneo us order cannot be the subject matter of revision because the second requirement has also to be fulfilled.
6 ITA No. 1560/Del/2024Naveen Narang
9. On the o ther hand, the ld. DR supported the order of the ld. PC IT passe d u/s 263 of the Act.
10. Heard the arguments of both the parties and peruse d the material available on record.
11. For the sake of ready re ference and completeness , the order of the ld. PCIT is reproduced as under:
" A s e a r c h a n d s e i z u r e a c t i o n u n d e r s e c t i o n 1 3 2 o f t he I n c o m e - t ax A c t , 1 9 6 1 w a s c a r r i e d o ut o n 1 4 . 1 0 . 2 0 2 0 i n t he c a s e o f S h . M a n o j K um a r S i n g h, h i s a s s o c i a t e s a nd v a r i o us t r a n s a c t i n g p a r t i e s . D u r i ng t h e co ur s e o f s e a r c h p r o c e e d i n g s , i t w a s fo u n d t h a t S h . Ma no j K um a r S i ng h e n t e r e d i n t o un a c c o u nt e d c a s h t r a ns a c t i o n s w i t h t h e va r i o us p e r s o n s / e nt i t i e s . T he p r e m i s e / l o c k e r o f t he a s s e s s e e S h . N a ve e n N a r a ng w a s a l s o c o v e r e d d u r i ng t he s e a r c h o p e r a t i o n . D ue t o s e a r c h a c t i o n , p r o c e e d i ng s u/ s 153A of the Act was initiated vi d e issuing no t i c e dated 0 4 .0 6 . 2 0 2 1 i n t h e c a s e o f S h . N a v e e n N a r a ng , I n r e s p o n s e t o t he no t i c e , t he a s se ss e e f i l e d r e t ur n o f i n c o m e d e c l a r i ng i n c o m e o f R s .5 7 , 9 1 , 5 1 0 / - . D u r i n g t he c o ur s e o f s e a r c h a c t i o n, c e r t a i n e x c e l fi l e d na m e l y " My d at a . x l s x, S u n n y . xl s x e t c . w e r e f o u nd a n d s e i ze d f r o m L a p t o p & P e nd r i v e o f S h . D e v e s h S i ng h , a t r us t e d a n d k e y e m p l o ye e o f Sh . M a n o j K u m a r S i n g h. T he s e e xc e l fi l e s c o nt a i n r e c o r d o f c a s h t r a n s a c t i o n s m a i nt a i n e d b y D e v e s h Si ng h ( e m p l o y e e o f S h . M a no j K u m a r S i ng h w ho w a s c o n t r o l l i ng a nd m a n a g i n g G D G o e n k a P u b l i c S ch o o l , D w a r k a) . T h e r e a ft e r , t he a ss e s s m e n t p r o c e e d i n g s w e r e c o m p l e t e d i n t he c a s e o f t h e as s e s s e e a t t o t a l i nc o m e o f R s . 1 4 , 9 3 , 8 2 ,8 6 8 / - u / s 1 5 3 A/ 1 4 3 ( 3 ) o f t he Ac t o n 3 0 . 0 3 . 2 0 2 2 a ft e r m a k i ng f o l l o w i ng a d d i t i o ns :
S. No. P a r t i c ul a r A m o u nt o f ad d i t i o n ( R s .)
1. A d d i t i o n m a d e u/ s 6 8 o f t h e A c t o n R s . 2 ,0 2 , 7 7 ,0 2 1 / -
a c c o u nt o f L T C G
2. A d d i t i o n m a d e u/ s 5 9 o f t h e A c t o n Rs. 80,00,000/-
a c c o u nt o f u na c c o u n t e d i n v e st m e nt
3. Addition made u/s 69A of the Act on Rs. 12,10,692/-
a c c o u nt o f u na c c o u n t e d c o m m i s s i o n
4. A d d i t i o n m a d e u/ s 6 9 o f t h e Act on R s , 1 1 , 4 1 0 3 ,6 4 5 / -
a c c o u nt o f c a s h l o a n
2. The asse ssment records of this c as e ha v e been examined i n c l ud i ng t he
questionnaire issued a nd the compliances made by t he assessee. We h a ve
7
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Naveen Narang
c a r e f ul l y p e r u s e d a l l t he s e d e t a i l s a l o ng w i t h t h e a s s e s sm e nt o r d e r p a s s e d i n t he c a se . O n p e r u s a l o f a s s e s s m e nt r e c o r d s fo l l o w i n g r e l e v a nt p o i n t s a r e e m e r g e d .
2 . 1 E v i d e n c e fo u n d a n d s e i z e d s ho w i ng un a c c o u nt e d l o a n / i n ve s t m e n t m a d e b y S h . N a v e e n N a r a n g t o t h e t u ne o f R s . 2 7 c r o r e s .
2 . 1 . 1 D u r i n g p o s t s e a r c h a na l y s i s o f s e i z e d m a t e r i al s , a n e x c e l f i l e b y t h e n a m e ' N a r a ng ( 0 1 - 0 1 - 2 0 1 6 ) . x l s x w a s fo u n d fr o m t h e l a p t o p o f S h . D e v e s h S i ng h a t t hr e e d i f fe r e nt l o c a t i o n s a nd t h e s a m e w a s e x t r a c t e d . T he s a i d e x c e l fi l e i .e . ' N a r a ng ( 0 1 - 0 1 - 2 0 1 8 ) .x l s x ' c o n t a i n s t h r e e s he e t s n a m e l y Bi l l i n g ( G D G PS ) , N a r a ng a nd ' S u m m a r y ' . O n a na l y s i s o f e x c e l s he e t " N a r a n g " , i t w a s no t i c e d t h a t i t ha s t hr e e p o r t i o n s :
i. I n t e r e s t L e d g e r o f Mr . N a r a n g ( S c ho o l S h a r e A / c ) f r o m 0 1 - 0 1 - 2 0 1 6 t o 31-03-2016 ii. I n t e r e s t L e d g e r o f M a n o j K S i ng h iii. I n t e r e s t F r e e L e d g e r o f N a r a ng ( S c h o o l s ha r e A / c ) f r o m 0 1 . 0 1 . 2 0 1 6 2 . 1 . 2 A s t he na m e s u g g e s t , t he fi r s t p o r t i o n i . e . ' I n t e r e s t L e d g e r o f M r . N a r a n g (School Share A/c) from 01-01-2016 to 31-03-2016' pertain to t r a n sa c t i o n s b e t w e e n S h . N a v e e n N a r a ng a nd S h . M a n o j K um a r S i n g h o n a c c o u n t o f t he i nv e s t m e nt m a d e b y S h . N a ve e h N a r a n g i n G . D . G o e n k a P u b l i c S c ho o l , D w a r k a , N e w D e l h i ( S c h o o l c o nt r o l l e d a n d m a n a g e d b y S h . M an o j K u m a r Si n g h) . T he s c r e e ns ho t o f t h e s a i d e x c e l s h e e t i s g i ve n h e r e u n d e r :
FIRST PORTION Intere st Ledger of Mr. N ara ng ( Schoo l share A/c) fro m 01.01.2016 to 31.03.2016 Date Particulars Recd. Paid Cum. Days Intt. @ Balance 15% P.A. 01 February Naveen 27,00,00,000 - 27,00,00,000 - -
2016 Narang
05 February Tran sfer - 50,00,000 26,30,00,000 4 4,43,836
2016 from Billin g
A/c
15 February Tran sfer - 50,00,000 26,00,00,000 10 10,89,041
2016 from Billin g
A/c
01 March Tran sfer - 26,53,501 25,73,46,499 15 16,02,740
2016 from Billin g
A/c
01 March C to Mr. - 1,00,00,000 24,73,46,499 - -
2016 Narang
02 March Tran sfer - 4,02,007 24,69,44,492 1 1,01,649
2016 from Billin g
A/c
03 March Tran sfer - 3,32,225 24,66,12,267 1 1,01,484
2016 from Billin g
A/c
04 March Tran sfer - 13,07,075 24,53,05,192 1 1,01,348
2016 from Billin g
A/c
05 March C to Mr. 1,00,00,000 - 25,53,05,192 1 1,00,810
2016 Narang
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Naveen Narang
05 March Tran sfer - 9,53,538 25,43,51,604 - -
2016 from Billin g
A/c
07 March Tran sfer - 22,10,300 25,21,41,304 2 2,09,056
2016 from Billin g
A/c
08 March Tran sfer - 11,98,426 25,09,42,878 1 1,03,620
2016 from Billin g
A/c
14 March Tran sfer - 16,42,559 24,93,00,319 6 6,18,763
2016 from Billin g
A/c
15 March Tran sfer - 9,70,000 24,83,30,319 1 1,02,452
2016 from Billin g
A/c
16 March Tran sfer - 9,80,567 24,73,49,752 1 1,02,054
2016 from Billin g
A/c
01 April 2016 Inerest till 16 16,26,409
31.03.2016
28,00,00,000 3,26,50,248 24,73,49,752 63,03,262
Summar y of intere st led ger till 31.03.2016
Pr incipal out standing 24,73,49,752
Interest outstanding 63,03,262
Tot al outstanding 25,36,53,014
2 . 1 . 3 O n p e r u s a l o f t h e a b o ve s h e e t , i t c a n b e s e e n t h a t S h . N a v e e n N a r a n g h a d a d v a n ce d a s u m o f R s . 2 7 C r o r e ( a s i n v e s t m e n t / l o a n ) o n 0 1 .0 2 . 2 0 1 6 o n a c c o u nt of S ch o o l share A/c. A g ai n s t t he said i nv e s t m e nt / l o an , amount of R s . 3 , 2 6 ,5 0 , 2 4 8 / - ha s b e e n r e p a i d up t o 3 1 . 0 3 . 2 0 1 6 .
2 . 1 . 4 S i n c e , t h e a b o ve s a i d t r a ns a c t i o ns w e r e c a r r i e d o u t i n t he n a m e o f G . D .
G o e n k a P u b l i c S c ho o l , D w a r k a , i t s b o o k s o f a c c o u nt s f o r t h e r e l e va nt p e r i o d w e r e ve r i fi e d . O n s u c h v e r i fi c a t i o n, i t w a s fo u n d t h a t t h e s e t r a n s ac t i o n s ha ve no t b e e n r e c o r d e d i n t he r e g u l a r b o o k s o f a c c o u nt s . T he r e l e v a nt c o p y o f ac c o u n t o f S h. N a v e e n N a r a n g i n t h e b o o k s o f G . D . G o e n k a P u b l i c S c ho o l , D w a r k a i s r e p r o d u c e d he r e u nd e r :
G. D. Goenka Public School, (From 1- April-2015) Elephan ta Lane , Behind 10 /6 Market Near Golak Dham, Sector-10 Dwarka, New Delhi-110075 Naveen Narang Ledger Account 1-A pr -2015 to 31 -Mar -2016 Date Particulars Vch Type Vch No. Debit Credit Balance 11.6.2015 By Axis Bank Receipt 1328 25,00,000 25,00,000 Cr.
913020041423814 14.7.2015 To Axis Bank Payment 650 25,00,000 913020041423814 10.12.2015 By Axis Bank Receipt 4119 20,00,000 20,00,000 Cr.
913020041423814
13.1.2016 To Axis Bank Payment 1294 20,00,000
913020041423814
45,00,000 45,00,000
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2 . 1 . 5 T he s a i d l o a n w a s b e i ng r e p a i d i n c a s h o r t hr o u g h b o g u s b i l l i n g fr o m t he s c ho o l w i t h t h e narration "transfer fr o m b i l l i ng A / c. " T he s c r e e n s ho t o f t h e na r r a t i o n s ho w i ng the r e p a ym e nt of R s . 3 , 2 6 ,5 0 , 2 4 8 / - is p r o d u ce d below fo r reference:
S. No. Date Repayment N a r r at i o n
A m o u nt i n ( R s . )
1 05 February 2016 50,00,000 Tran sfer from Billing A/c
2 15 February 2016 50,00,000 Tran sfer from Billing A/c
3 01 March 2016 26,53,501 Tran sfer from Billing A/c
4 01 March 2016 1,00,00,000 C to Mr. Narang
5 02 March 2016 4,02,007 Tran sfer from Billing A/c
6 03 March 2016 3,32,225 Tran sfer from Billing A/c
7 04 March 2016 13,07,075 Tran sfer from Billing A/c
8 05 March 2016 9,53,538 Tran sfer from Billing A/c
9 07 March 2016 22,10,300 Tran sfer from Billing A/c
10 08 March 2016 11,98,426 Tran sfer from Billing A/c
11 14 March 2016 16,42,559 Tran sfer from Billin g A/c
12 15 March 2016 9,70,000 Tran sfer from Billing A/c
13 16 March 2016 9,80,567 Tran sfer from Billing A/c
2 . 1 . 5 F r o m t he a b o v e s he e t i t c a n b e s e e n t h a t m o st o f t h e r e p a y m e n t s h a ve b e e n d o ne t h r o u g h B i l l i ng a / c , b ar r i n g a n e n t r y w h e r e i n t he p ay m e n t h a s b e e n m a d e i n c a s h . T he s a i d e n t r y ha s b e e n g i v e n i n t h e fi r s t p o r t i o n o f t h e e x c e l s he e t a s C t o M r . N a r a ng ' . Wh e n t h e s ai d c a s h p a y m e nt e n t r y w as c o m p a r e d w i t h t he e xc e l f i l e s " M y d a t a . x l s x a n d S u n n y . xl sx w h i c h c o nt a i n d e t a i l s o f u n a c co u n t e d c a s h t r a ns a c t i o n s c ar r i e d o ut b y S h . M a n o j K u m a r S i n g h , i t w a s fo u n d t h a t t he s a i d e n t r i e s m a t c h e d . F u r t h e r , i t w a s a l s o no t i c e d t h a t t h e c as h r e c e i p t e n t r y o f R s . 1 C r o r e d a t e d 0 5 .0 3 . 2 0 1 6 i n t h e e x c e l s he e t ' N a r a ng ' al s o m a t c h e d w i t h t h e r e l e v a n t e nt r y g i v e n i n t he e xc e l fi l e s M y D a t a . xl s x ' a n d S u n n y . x l s x ' . T h e D e t a i l s o f t h e s a m e a r e g i v e n he r e un d e r :
Cash transactions as per Excel Sheet named Cash transactions as per Excel Sheet named 'MyData.xlsx', 'Narang' 'Sunny.xlsx' S.No. Date Received Paid Date Particulars Recd. Payment Cum. Bal (in Rs.) (in Rs.) 1 1.3.2016 - 1,00,00,000 1.3.2016 Naveen - 10,000 16,897,855 Narang Ji 2 5.3.2016 1,00,00,000 - 5.3.2016 Naveen 10000 - 11,223,505 Narang Ji 2 . 1 . 6 F ur t he r , w i t h r e g a r d t o r e m a i n i n g p ay m e n t s d o n e t h r o u g h h i l l i ng , r e fe r r e d a s ' T r a n s fe r f r o m b i l l i n g a/ c . ' , i t ha s b e e n fo u n d t h a t t he y ha ve b e e n d o ne t hr o u g h b o g u s b i l l s b o o k e d i n G . D . G o e n k a P ub l i c S c ho o l , D w a r k a ( a s ve r i f i e d fr o m t h e b o o k s o f a c c o u nt s o f t he S c h o o l ) .
2 . 1 . 7 T h e r e i s a n o t h e r e x c e l s h e e t n am e d ' B i l l i n g ( G D G P S ) ' m a i nt a i ne d i n t h e s a m e e x c e l f i l e N a r a ng ( 0 1 - 0 1 - 2 0 1 6 ) . xl s x ' w hi c h c o n t ai n s t h e d e t a i l s o f b o g u s b i l l s b o o k e d i n t he n a m e o f S c ho o l . T he s a i d b i l l s h a v e b e e n d ul y r e fl e ct e d i n t he b o o k s o f G . D . G o e nk a . H o w e v e r , t h e s um m a r y o f b i l l i n g t i l l 1 8 . 0 3 . 2 0 1 6 g i ve n i n 10 ITA No. 1560/Del/2024 Naveen Narang t he s a i d e x c e l s he e t d ul y m a t c h e s w i t h t h e e nt r i e s fo u n d i n t h e s c r e e n s ho t o f fi r st p o r t i o n i n s e r t e d ab o v e . F o r t h e s a k e o f c l ar i t y a nd r e a d y r e f e r e n c e , t he s c a n ne d i m a g e o f r e l e v a nt p o r t i o n o f t h e s a i d e x c e l s he e t i s i n se r t e d he r e un d e r :
Summary of Billing till 16.03.2016 Cheque Amount paid to Vendo 2,80,61,432 Less: Commission 8,43,685 From Vednors to Narang Ji 2,72,17,747 Le ss: Tra nsfer to Inte re st Ledger 16/01/2016 25,00,000 (as per Mr. Narang) 05/02/2016 50,00,000 (as per Mr. Narang) 15/02/2016 50,00,00 (as per Mr. Narang) 01/03/2016 26,53,501 (Balan ce billing amount transfer to School Intt. A/c) Balance in hand with Narang Ji: 1,20,64,246 Le ss: Tra nsfer to Inte re st Ledger (on the basis of che que cle ar ing) 02/03/2016 4,02,007 03/03/2016 3,32,225 04/03/2016 13,07,075 05/04/2016 9,53,588 07/03/2016 22,10,300 08/03/2016 11,98,426 14/03/2016 16,42,559 15/03/2016 9,70,000 16/03/2016 9,80,567 Balance in hand with Narang Ji 20,67,499 2.1.8 i t i s e vi d e nt f r o m t h e d i s c us si o n m a d e a b o v e a n d p e r us a l o f t h e r e l e v a n t p o r t i o n o f t h e d i f fe r e nt e x c e l s he e t s i ns e r t e d a b o v e t ha t M / s G . D. G o e n k a P ub l i c S c ho o l , D w a r k a r un b y L a k h m i C h a nd C ha r i t a b l e S o c i e t y ha s r e c e i ve d u n a c co u nt e d i nv e s t m e nt / l o a n i n c a s h o f R s .2 7 C r o r e d u r i ng t h e F . Y . 2 0 1 5 - 1 6 r e l e v a n t t o A . Y . 2 0 1 6 - 1 7 . I t i s f u r t he r s e e n t h a t t h i s a m o u n t w a s r e t ur ne d b a c k i n d i f f e r e nt w a ys i .e . p a r t l y i n c a s h a nd p a r t l y b y w a y o f b o g us b i l l i n g .
2 . 1 . 9 T he a b o v e d i s c u s s e d f a c t s a nd e vi d e nc e s f o u nd d ur i ng t he c o ur s e o f s e a r c h p r o c e e d i ng s c l e a r l y e s t a b l i s h t h a t S h. N a v e e n N a r a n g h a s g i v e n l o a n / i n ve s t m e nt o f R s . 2 7 ,0 0 , 0 0 , 0 0 0 / - d u r i n g t he A Y 2 0 1 6 - 1 7 .
2 . 2 P e r us a l o f a s s e s s m e n t r e co r d s , r e p l i e s o f t he a s s e s s e e & s e i ze d m a t e r i a l s r e v e al fo l l o w i ng l a p s e s o n t h e p a r t o f A O w hi c h i n d i c a t e u nd e r - a s s e s s m e nt o f i nc o m e o n t h i s i s s u e :
2 . 2 . 1 F r o m t h e a b o v e d i s c us se d f a c t s a n d s e i z e d e x c e l fi l e " N a r a n g ( 0 1 - 0 1 - 2 0 1 6 ) . x l s x " w h i c h c o nt a i ns a s he e t " N a r a n g " w h o s e 1 s t p o r t i o n p e r t a i n s t o t he ' I nt e r e s t L e d g e r o f M r . Ha r a ng ( S c ho o l s h a r e a / c ) " fr o m 0 1 . 0 1 . 1 8 t o 3 1 . 0 3 . 1 8 .
F r o m t h e s a i d e x c e l s he e t . I t i s e vi d e n t t h a t S h . N av e e n N a r a ng ha s g i ve n c a s h o f R s . 2 7 ,0 0 , 0 0 , 0 0 0 / - i n t h e fo r m o f l o a n / i n v e st m e nt o n a c co u nt o f s c ho o l s h a r e a c co u nt d u r i ng t he AY 2016-17. However, the AO made addition of 11 ITA No. 1560/Del/2024 Naveen Narang R s . 1 1 ,4 1 , 0 3 , 6 4 5 / - o n l y w i t ho ut a p p r e c i at i n g / e n q u i r i n g t he f a c t s o f t h e c a s e a nd i g n o r e d t he e vi d e n c e s o f R s . 2 7 , 0 0 , 0 0 , 0 0 0 / - a s l o a n/ i n v e s t m e n t fo u n d d ur i ng t he c o ur s e o f s e a r c h a c t i o n.
2 . 2 . 2 S h . N a v e e n N a r a n g h a d g i ve n l o a n/ i n v e s t m e n t o f R s . 2 7 c r o r e s t o S h. M a n o j Kumar Si n g h on a c c o u nt of s ch o o l share account during FY 2015-18, t he u na c c o u nt e d l o a n / i nv e s t m e nt am o u nt i n g t o R s . 2 7 C r o r e s i s t he o p e n i ng b a l a nc e a nd t h e s a m e w a s t o b e r e q ui r e d t o b e a d d e d i n t he i n c o m e o f t h e a s s e s s e e d u r i n g t he y e a r u nd e r c o ns i d e r a t i o n .
2.2.3 T he A O c o n s i d e r e d t h e a m o u n t o f R s . 1 5 , 5 8 ,9 6 , 3 5 5 / - o f b o g u s b i l l i n g provided by Sh. N a ve e n N a r a ng and c a l c ul a t e d c o m m i ss i o n income of Rs. 1 2 ,1 0 , 6 9 2 / - f o r t h e A . Y . 2 0 1 6 - 1 7 t o A . Y . 2 0 2 0 - 2 1 i n h a nd s o f S h . N a v e e n N a r a n g . T h u s , t h e A O c o nc l u d e d t ha t t he b o g u s b i l l i ng h a v e b e e n a r r a n g e d b y S h . N a v e e n N a r a ng f r o m A . Y . 2 0 1 8 - 1 7 t o A . Y . 2 0 2 0 - 2 1 . T h e e xc e l s he e t f o u nd d u r i n g t he s e a r c h & s e i z ur e a c t i o n c l e a r l y d e p i c t s t h a t t h e u n a c co u n t e d l o a n/ i n v e s t m e n t o f R s . 2 7 O r i n s c h o o l s h a r e a / c h a s b e e n m a d e d ur i ng A. Y . 2 0 1 6 - 1 7 b y Sh . N a v e e n N a r a ng . T h us , t h e r e i s n o l o g i c b e h i nd r e d uc i n g t h e t o t a l a m o u n t o f b o g u s b i l l i n g a r r a ng e d Sh. N a ve e n N a r a ng till A.Y. 2020-21 from the un a c c o u nt e d l o a n/ i n v e s t m e n t m a d e b y S h . N a v e e n N a r a n g d u r i n g A . Y . 2 0 1 6 - 1 7 . A s p e r t he e v i d e n c e s f o u nd , t h e s a i d b o g us b i l l i n g f r o m s c h o o l w as us e d fo r r e p a yi n g t he l i a b i l i t i e s o f l o a n / i n v e s t m e n t o f R s . 2 7 , 0 0 ,0 0 , 0 0 0 / - g i v e n b y S h . N a ve e n N a r a n g . A s s u c h t he a c t i o n o f t he A O w a s no t c o r r e c t i n r e d uc i ng t h e a m o u nt o f b o g u s b i l l i n g f r o m u n a c c o un t e d c a s h l o a n / i n v e s t m e nt m a d e b y S h. N a ve e n N a r a ng .
2.2.4 F ur t he r , t he s e i z e d e x c e l sh e e t n o t o n l y m e n t i o ne d c a s h I n v e s t m e nt o f R s . 2 7 C r . o n 0 1 .0 2 . 2 0 1 6 b ut t h e v e r y s a m e l e d g e r a / c a l s o m e n t i o ne d l o a n- r e p a y m e nt of Rs.3.28 Cr. d u r i ng that period itself w hi c h proves that this i nv e s t m e nt w a s no t a s i ng u l a r t r a ns a c t i o n . T h u s , t h e r e w as no s c o p e o f a m b i g u i t y t ha t a s p e r t h e s e i z e d m a t e r i a l , t he a m o un t o f R s . 2 7 C r . w a s a d i s t i nc t & u na c c o u nt e d l o a n / i nv e s t m e nt b y Sh . N a v e e n N ar a n g t o M a n o j Si n g h a s p a r t o f " s c ho o l s h a r e a / c " . H o w e ve r , t he A O f a i l e d t o i n v e s t i g a t e t he i s s u e o f i nv e s t m e nt of Rs. 27 crore.
2.2.5 T h e A O h a v e c l a i m e d i n t h e as se s s m e n t o r d e r t ha t " a ft e r v e r i f i c at i o n o f fa c t s " , instead of R s .2 7 Crores, addition of R s . 1 1 , 4 1 , 0 3 ,8 4 5 / - was made as u na c c o u nt e d c a s h fo r t h e A. Y . 2 0 1 8 - 1 7 a nd a n a m o u nt o f R s . 1 5 , 5 6 , 9 8 , 3 5 5 / - , c o m m i s s i o n i n c o m e w a s ad d e d i n a s s e s s m e nt y e a r s , b u t t h e " e n q ui r y / d i l i g e n c e "
w hi c h s up p o s e d l y l e d t o t he a b o ve c o n c l us i o n i s ne i t he r a v a i l ab l e i n a s s e s s m e nt r e c o r d s / a s s e s s m e n t o r d e r . T he r e i s a b s o l u t e l y no j u s t i f i c at i o n o r fa c t ua l e v i d e nc e 12 ITA No. 1560/Del/2024 Naveen Narang a s t o w h y a n a d d i t i o n o f R s . 1 1 . 4 1 C r . w a s m a d e i n s t e ad o f R s . 2 7 c r o r e s o n a c co u nt o f u na c c o u n t e d l o a n/ i n v e s t m e n t .
2.2.6 I t i s c l e a r l y m e nt i o ne d i n t h e i n f o r m a t i o n t h a t t he i s s ue o f t h e " c a s h i nv e s t m e nt / l o a n o f R s . 2 7 C r o r e s b y N a v e e n N a r an g i n S c h o o l s h a r e a / c o f M a n o j S i ng h " i s c l e a r l y d i s t i ng ui s h ab l e f r o m " c o m m i s s i o n o n b o g u s b i l l i n g " b y N a v e e n N a r a ng . T he A O h a s c o n ve r g e d t he t w o d i s t i n c t i s s ue s s u o - m o t o r e s ul t i ng i nt o u nd e r a s s e s s m e nt o f t h e c as e t o t h e e x t e nt o f R s .1 5 , 5 8 ,9 8 , 3 5 5 / - o n ac c o u n t o f u na c c o u nt e d l o a n / i n v e s t m e nt . A s s u c h, t h e o r d e r p a s s e d b y t h e A O i s e r r o ne o us a nd p r e j ud i c i a l t o t h e i nt e r e s t o f r e v e n ue .
2.2.7 A p e r u s a l o f p a r a 4 8 o f r e l e v a nt a s se s s m e n t o r d e r r e v e a l s t ha t t he A O ha s w i t ho ut a n y b a s i s / fi n d i ng s c o n c l u d e d t h at o u t o f t hi s R s . 2 7 C r o r e s , a m o unt i n g t o R s . 1 5 , 5 8 , 9 8 , 3 5 5 / - w e r e i d e n t i f i e d b o g u s b i l l s a r r a ng e d b y S h . N av e e n N a r a ng f o r G . D . G o e n k a Sc ho o l o n w h i c h c o m m i s s i o n w a s r e c e i ve d b y S h . N av e e n N ar a n g . I t i s cl e a r t h a t R s . 2 7 C r . w a s c a s h l o a n / i nv e s t m e nt m a d e b y S h . N av e e n N a r a ng , i t ha d n o c o r r e l a t i o n w h a t s o e ve r w i t h b o g us b i l l i ng . I t i s f ur t he r n o t i c e d t h at w h i l e t he t r an s a c t i o n o f R s . 2 7 C r . w a s " C a s h p a y m e nt " r e c o r d e d i n e x c e l s h e e t fo r A . Y . 2018-17. Further, the b o g us bills worth Rs.15,58,98,355/- belong to 5 s ub s e q u e nt A s s e s s m e nt Years, so fi r st l y , it is illogical & b e y o nd all hu m a n p r o b ab i l i t y t o p r e s um e t h at t h e u n e xp l ai n e d c a s h " p a y m e n t " i n A . Y . 2 0 1 6 - 1 7 h a d any correlation with "bogus bills to be raised in 5 f u t ur e years". In fact , " c o m m i s s i o n " o n b o g us b i l l i ng w a s b e i ng e a r ne d b y S h . N a r a ng a s a s e p a r a t e t r a n s a c t i o n w hi c h ha s b e e n s e p a r a t e l y a d d e d b y t he A O . T hu s , b o g us b i l l i n g h a d a b s o l ut e l y no c o r r e l a t i o n w i t h t he c a s h l o a n g i v e n b y N a r a n g t o M . K S i n g h o n a / c o f i n v e s t m e nt i n s c h o o l .
2.2.8 It is no t i c e d t ha t not even bare m i ni m u m preliminary enquiry was c o nd u ct e d b y t h e A O b y i s s ui n g S um m o n s / s h o w ca u s e t o t h e c o nc e r ne d p ar t i e s , i .e . , S h . N a ve e n N a r a ng a n d Sh . M a n o j S i ng h r e g a r d i ng t h e U na cc o un t e d c a s h i nv e s t m e nt o f R s . 2 7 C r . d e s p i t e i t b e i n g i n t e g r a l p a r t o f s e i ze d m a t e r i a l , F u r t h e r , t he A O a l s o f a i l e d t o ad d t h e i n t e r e s t a c c r ue d o n t h e s a i d i n v e s t m e nt / l o a n d u r i n g t he y e a r u nd e r c o n s i d e r a t i o n . A s s u c h t he o r d e r p a s s e d b y t he A O i s e r r o ne o us a nd p r e j ud i c i a l t o t h e i nt e r e s t o f r e v e n ue .
3. K e e p i n g m v i e w o f t he a b o ve f a c t s , t h e a d d i t i o n w a s t o he m a d e s o l e l y i n t he ha n d s o f S h . N a v e e n N a r a ng w ho h ad m a d e c a s h i n ve s t m e n t / l o a n t r a ns a c t i o n o f R s .2 7 C r o r e s i nc e i t w a s a n u n r e c o r d e d & u na c c o u n t e d c a s h i nv e s t m e nt m a d e by Sh. Naveen N a r a ng in G. D. G o e nk a s c ho o l . Howe ver, the AO failed to t ho r o u g h l y e n q ui r e / i n v e s t i g a t e t he i n fo r m a t i o n a v ai l a b l e w i t h hi m a nd p a s s e d t he 13 ITA No. 1560/Del/2024 Naveen Narang o r d e r w i t h o u t v e r i f y i ng t he f a c t s . A s s uc h , t he a s s e s s m e nt o r d e r p a s s e d b y t he A O , i n t hi s c a s e fo r A . Y . 2 0 1 6 - 1 7 i s n o t o nl y e r r o n e o us b ut a l s o p r e j u d i c i al t o t he i nt e r e s t o f t he R e v e n u e i n t e r m s o f s e c t i o n 2 6 3 o f t he i nc o m e - t a x A c t , 1 9 6 1 .
4. A c c o r d i ng l y , s h o w c a u s e n o t i c e u / s 2 6 3 ( 1 ) o f t he I T . A c t , 1 9 6 1 fo r t he A . Y . 2 0 1 6 - 1 7 d a t e d 2 6 . 0 3 . 2 0 2 4 w a s i s s u e d t o t he a s s e s s e e t hr o u g h I T B A P o r t a l a s k i n g i t a s t o w h y t he a s s e s s m e n t o r d e r s o p a s s e d s ho ul d n o t b e r e v i s e d as t he s a m e w a s e r r o ne o u s & p r e j u d i c i a l t o t h e i n t e r e s t o f t he r e v e n u e . I n r e sp o n s e , t he a s se ss e e f i l e d p a r t r e p l y v i d e l e t t e r d a t e d 2 7 . 0 3 . 2 0 2 4 a nd r e q ue s t e d t i m e f o r fi l i ng r e p l y . C o n s i d e r i n g t he r e q ue s t , t he a s s e s s e e w a s r e q u e s t e d t o fi l e c o m p l e t e r e p l y b y 2 8 . 0 3 . 2 0 2 4 a s t h e c a s e i s g e t t i n g b a r r e d b y l i m i t a t i o n f o r c o m p l e t i ng t he p r o c e e d i ng s a s o n 3 1 . 0 3 .2 0 2 4 . I n r e s p o n s e , t he a s s e s s e e a g a i n r e q u e s t e d 1 5 d a y s t i m e fo r f i l i ng r e p l y v i d e h i s l e t t e r d a t e d 2 8 . 0 3 . 2 0 2 4 , D e s p i t e o f m ul t i p l e o p p o r t u n i t y , o n e m e r e fi n al o p p o r t u ni t y w a s g i v e n t o t h e a s s e ss e e f o r fi l i n g c o m p l e t e r e p l y v i d e l e t t e r d a t e d 2 8 .0 3 . 2 0 2 4 fo r f i l i n g r e p l y b y 2 9 . 0 3 .2 0 2 4 . T he s p e c i fi c a l l y i n fo r m e d t h a t t h e p r o ce e d i ng s i s g e t t i ng b a r r e d b y l i m i t at i o n a s o n
3 1 .0 3 . 2 0 2 4 . Despite ha v i ng knowledge of t he fact of time l i m i t at i o n , t he a s se ss e e , v i d e hi s r e p l y d a t e d 2 9 . 0 3 . 2 0 2 4 , o n c e a g a i n s o u g ht t i m e o f 1 5 d a ys s t a t i ng a s u n d e r : -
" A s ea rli e r r eq u e st e d, pl e a s e g ra n t m e t im e of 1 5 d a y s a s i t wi ll ta k e t i m e f or p r epa r a ti on a nd s ub mi s s i o n of r e p l y b y m y co un s e l/ a dv o ca t e w h o i s pr e sen tl y n ot in t o w n " .
4.2 T he above discussed facts s ho w s t ha t t he a s s e s se e r e s p o nd e d with a p a r t i a l r e p l y o n 2 7 . 0 3 .2 0 2 4 , r e q ue s t i ng a d d i t i o n a l t i m e t o s u b m i t u c o m p l e t e response. Considering the request of t he assessee and time limitation fo r completion of t he p r o c e e d i ng s as on 3 1 .0 3 . 2 0 2 4 , the assessee was granted opportunity for fi l i ng complete reply by 28.05 2024. However, the assessee s o ug h t a f ur t he r e xt e n s i o n o f 1 5 d a y s t hr o u g h a l e t t e r d a t e d 2 8 . 0 3 . 2 0 2 4 . A g a i n fi n a l o p p o r t u ni t y w a s g i ve n t o t he a s s e s s e e fo r fi l i ng r e p l y b y 2 9 .0 3 . 2 0 2 4 b ut o n ce a g a i n t he a s s e s s e e s o u g h t i m e o f 1 5 d a ys . T h e r e p e a t e d ad j o u r n m e nt s o f t he a s s e s s e e s ho w s t h a t t he as s e s s e e h a s no t h i ng t o s ub m i t a p ar t f r o m r e p l y a l r e a d y s u b m i t t e d v i d e l e t t e r d a t e d 2 7 . 0 3 . 2 0 2 4 o n t h e i s su e u n d e r co ns i d e r a t i o n . T h e r e q u e s t o f t he a s s e s s e e , f o r g r a n t i ng f ur t he r t i m e , c a n no t b e a c c e p t e d a s t he m a t t e r i s g e t t i ng b a r r e d b y l i m i t a t i o n a s o n 3 1 . 0 3 .2 0 2 4 . t he r e fo r e , t h e r e p l y fi l e d b y t h e a s s e s s e e v i d e l e t t e r d a t e d 2 7 . 0 3 . 2 0 2 4 h a s b e e n c o n s i d e r e d f o r c o n c l ud e t he p r o ce e d i n g s . T he r e l e v a n t p o r t i o n o f t he r e p l y fi l e d b y t h e a s s e s s e e v i d e l e t t e r d a t e d 2 7 .0 3 . 2 0 2 4 i s r e p r o d u c e d b e l o w fo r r e f e r e n c e :
14 ITA No. 1560/Del/2024Naveen Narang " 3 . W it h ou t p r eju d i c e t o th e a b o v e, i n o rd e r t o ma k e c o mp lia nc e to th e ca p t i on ed sh o w c a u s e n ot i c e , th e a ss e s s e e i s h e r eb y s ub mi t tin g th e b e lo w r epl y i n p ar t . Pl e a s e n o te t h a t th e b el ow r epl y i s i nc o m pl et e a n d i s b ei n g fil ed t o m ak e c o mp l i a nc e t o t h e n ot i ce; c on si d e ri ng th e t i me c on st r a in t , it is n ot p o s sib l e f o r th e a ss e s s e e t o f i l e p ro p e r r epl y . It i s r ei t e ra t ed t ha t th e n oti c e i s i ll ega l a n d i n g r o s s v i ol a t i o n of p ri n ci pl e o f n a t ura l j u sti c e ."
4. A s p e r y ou r c a pt i on ed sh ow ca u s e n oti c e , d u rin g th e c o u r s e of s ea r c h ac t i o n u/s 132 of the I n c om e Tax Act 19 6 1 in c a se of Sh ri D ev e s h Si n gh / Man oj Ku ma r S in gh c e rt a i n e x c el sh e et s w e r e f ou nd a nd s ei z ed fr o m la p t op a n d p en d ri v e of S h ri D ev e sh S i n gh , in th e ca pt i on ed sh ow ca u s e n oti c e , i t h a s b e en a ll eg e d t h a t a s pe r t h e a f o r e sa i d s eiz ed ex c el sh e et s th e a s s e ss e e h ad a dv a n c ed a su m o f R s . 27 c r or e s a s i nv es tm en t/ l oa n .
Ac c o rd in g t o y ou r c a pt i on ed S C N, th e a s se s s in g of fi c e r ha s ma d e a dd it i on o f R s. 1 1 ,41 ,0 3 , 64 5 /- on l y w it h out a p p r e c ia t i ng /i n q ui rin g t h e f a c ts o f th e ca s e and i gn o r ed th e e v id en c e o f Rs . 2 7 c r o r e s a s l oa n /i n v est m en t f ou n d du ri ng th e c o u r s e o f s e a rch a c ti on . Vi d e p a ra 3 .3 o f y ou r ca p t i on ed n ot i c e yo u ha v e st at ed th a t " T h e or d e r i s p a s s ed w it h out m a k i ng in qu i ri e s or v er ifi c a t i on w hi ch s h oul d h a v e b e en m a d e ."
5. In t hi s r ega rd , it is hu mb ly su b m it t ed th a t e v en th e a dd it i on of R s .1 1 ,4 1 , 0 3 ,64 5 /- m a d e b y t h e A s s e ss i ng O f fi c er i s e r r on e ou s l ea v e al on e th e qu e s ti on o f m a k in g a d di t i on o f R s .2 7 c r o r es . It i s p e rt i n en t t o p oi n t ou t th a t u n d e rl y in g a s s e ss m ent o rd e r h a s be en m a d e u / s 1 5 3 A of t h e A ct . Th e s o c all ed e x c el sh e et h a v e n ot b e en f ou nd o r s ei z ed d u ri n g t h e cou r s e of s ea r ch i n m y ca s e . T h e s o c a ll ed e x c el sh e et s s e iz ed / f ou nd f r o m Sh ri D e v esh S in gh du rin g th e c ou r s e o f s e a r ch i n hi s ca s e ca n n ot b e u s e d f o r ma k i ng ad di ti on u / s 15 3 A i n m y ca s e. Fo r u si ng su c h e x c e l s h e et s s e iz ed f ro m t hi r d p e r so n , t h e c o mp lia n c e t o pr ov i s i on s o f s e cti on 1 5 3C o f th e A c t h a d t o b e m a d e . A c c o r d in gl y, n ei th er th e a d dit i on o f R s . 11 ,4 1 , 03 ,6 45 / - ( a s m a d e b y th e A O ) n o r th e a dd it i on o f R s. 27 ,00 ,0 0 , 00 0 / - ( a s a ll e g ed in yo u r cap t i o n ed S C N ) c a n b e m a d e i n m y ca s e . On c e a n a d di ti on can n ot ma d e in th e a ss e s s m en t o rd e r pa ss e d u n d e r s e cti on 1 5 3A it s el f , r e s o rt ca nn ot b e m ad e t o 2 6 3 p r oc e e din g s f o r th e s a id pu rp o se . I t i s a s et tl ed la w th a t w h a t c an n o t b e d on e d i r e ct l y ca n n o t b e d on e in di r e ctl y .
15 ITA No. 1560/Del/2024Naveen Narang 6 . Fu rt h e r , th e v a r i ou s a ll eg a t i on m a d e/ d ou b t s r a i s ed in yo ur ca p ti on ed sh ow c au s e n oti c e a bou t a l l eg e d b ogu s b ill in g a nd / o r ma t e r i a l s s e iz ed fr om th i r d pa rt y a r e e r r o n e ou s a nd a c c o rd in gl y d en i ed . I h a v e n eit h e r m a d e a n y lo a n n or any i nv e s t m en t of R s .2 7 c r o r es as a ll eg e d/ d oub t e d in y ou r ca p t i on ed sh o w ca u s e n o t ic e .
7 . W it h out p r ej ud i c e t o a b ov e , it i s sub mi tt ed th a t t h e r e i s n o a pp li c a bi li ty o f t h e p r ov i si on s o f s ec t i on 2 6 3 of th e A c t i n th e p r e s ent c a s e of m in e. F o r r ea d y r e f e r en c e o f y o u r h on ou r, t h e p r ov is io ns o f s e ct i on 26 3 o f t h e A ct ar e r ep r odu c ed a s u n de r:
... ... ...... ... ... ... ... ...... . "
4.3 T he a s s e s s e e h as s u b m i t t e d t h a t t h e e x c e l s h e e t fo u n d d ur i ng t h e se a r c h a c t i o n c o u l d no t b e u s e d w i t ho u t c o m p l i a n c e o f s e c t i o n 1 5 3 C o f t he A c t , 1 9 6 1 a nd d e n i e d I n v o l v e m e n t i n b o g us b i l l i ng a nd i n v e st m e nt o f R s . 2 7 c r o r e s w i t ho ut a n y s up p o r t i ng e vi d e nc e s / e x p l a na t i o n . T h e a s s e s se e h a s a l s o c i t e d c e r t a i n c a s e l a w s i n s up p o r t o f hi s c l a i m . T he r e p l y f i l e d b y t he a s se s s e e h a s b e e n co ns i d e r e d b u t t he r e p l y o f t he a s s e s e h as n o t b e e n fo u n d t e na b l e d ue t o t h e f o l l o w i ng r e a s o n s :
(i) D u r i n g t h e co ur s e o f s e a r c h a c t i o n t h e as se s s e e S h . N a v e e n N a r a n g w a s c o v e r e d , t he r e fo r e , t h e p r o c e e d i ng s u/ s 1 5 3 A o f t he I nc o m e - t a x A c t , 1 9 6 1 w a s i ni t i a t e d a s w a r r a nt e d b y t he I nc o m e - t a x A c t , 1 9 6 1 fo r t he p e r s o n s co ve r e d d u r i n g t he s e a r c h . D ur i ng t h e c o ur s e o f s e ar c h a c t i o n e vi d e nc e o f U n a c co un t e d L o a n / I n v e s t m e n t o f R s . 2 7 c r o r e s w as fo u n d i n t he se i z e d e x c e l f i l e , " N a r a ng ( 0 1 -
01-2016).xlsx" m a i n t ai n e d by Sh. D e v e sh S i n g h, clearly establishes t he i nv e s t m e nt o f f un d b y S h . N a v e e n N a r a n g r e g a r d i ng t he i n ve s t m e n t m a d e i n G . D . G o e n k a P ub l i c S c ho o l , D w a r k a . T he e xc e l s h e e t s ho w s t h at S h . N av e e n N a r a ng a d v a n ce d a s u m o f R s . 2 7 c r o r e s a s i nv e s t m e nt / l o a n o n 0 1 .0 2 . 2 0 1 6 , a nd r e c e i v e d r e p a y m e nt s o f l o a n o n s u c h i n ve s t m e n t t o t a l i n g R s . 3 , 2 6 ,5 0 , 2 4 8 / - t i l l 3 1 .0 3 . 2 0 1 6 t hr o u g h b o g us billing fo r G.D. G o e nk a P ub l i c School. F ur t he r m o r e , t he L o a n / i n v e s t m e n t t r a n s a c t i o ns w e r e n o t fo u nd r e f l e c t e d i n t h e fi n a n c i a l / I T R o f S h . N a v e e n N a r a n g a n d t he r e p a ym e nt s w e r e m ad e t hr o ug h b o g us b i l l i ng fr o m G . D . G o e n k a P ub l i c S c ho o l a s w e l l as r e p a y m e n t i n c as h, w h i c h i s e v i d e nc e d f r o m t he s e i z e d m at e r i a l s fo un d a nd s e i z e d d u r i ng t h e c o ur s e o f s e a r c h a c t i o n.
(ii) I t i s p e r t i ne nt t o m e nt i o n h e r e t ha t S h. D e v e s h S i ng h i s t he k e y e m p l o y e e o f S h. M a n o j K um a r Si n g h w h o c o n t r o l a n d m a n a g e t h e af f ai r s o f G . D . G o e n k a P ub l i c S c h o o l . S h . N a v e e n N a r a n g i s t he b us i n e s s p ar t ne r o f S h . M a n o j K um a r 16 ITA No. 1560/Del/2024 Naveen Narang S i ng h , S h . N a v e e n N a r a n g a l s o i n ve s t e d f u n d s i n v a r i o u s b u s i ne s s e n t i t i e s o f S h . M a no j K um a r S i ng h . D ur i ng t he c o u r s e o f s e a r c h a c t i o n u / s 1 3 2 o f t h e I n c o m e - t a x Act, 1961, t he residential premise of Sh. Devesh S i ng h was covered on 1 4 ,1 0 . 2 0 2 0 w h e r e i n s t a t e m e nt o f S h . D e v e s h S i n g h w a s r e c o r d e d o n o a t h u / s 1 3 2 ( 4 ) o f t h e I nc o m e - t ax Ac t , 1 9 6 1 o n 1 4 .1 0 . 2 0 2 0 w h e r e i n S h . D e v e s h Si ng h g a v e hi s s t a t e m e nt o n o at h u / s 1 3 2 ( 4 ) o f t he I T Ac t , 1 9 6 1 t h a t t he d a t a fo u nd a nd se i z e d f r o m h i s p o s s e s s i o n c o nt a i n r e c o r d o f c a s h t r a ns a c t i o ns w hi c h w a s m a i nt a i ne d o n t he i ns t r u c t i o ns o f S h . M a n o j K u m a r S i ng h . He a l s o t o l d a b o ut t he c a s h t r a n s a c t i o n s b e t w e e n S h . N a v e e n N a r a n g a n d S h . M a no j K um a r S i ng h . T he e v i d e n c e s fo u n d f r o m t he p o ss e s s i o n o f S h . De v e s h Si ng h i s o f u n a c co u nt e d l o a n/ i n v e s t m e n t t o t h e t u n e o f R s . 2 7 c r o r e s a s d i s c u s s e d i n p a r a 2 . 1 . 2 a nd 2 . 1 . 3 . I t c l e a r l y t e l l s t ha t a n am o u nt o f R s . 2 7 , 0 0 , 0 0 , 0 0 0 / - w a s g i v e n b y S h . N a v e e n N a r a ng t o S h. M a no j K um a r Si n g h o n 0 1 F e b r u a r y 2 0 1 6 . T he r e l e v a nt p o r t i o n o f t he e xc e l s h e e t d i s c u s s e d i n p a r a 2 . 1 . 2 o f t h i s o r d e r i s g i v e n a s u nd e r again:
Intere st Ledger of Mr. N ara ng ( Schoo l share A/c) fro m 01.01.2016 to 31.03.2016 Date Particulars Recd. Paid Cum. Days Intt. @ Balance 15% P.A. 01 Naveen 27,00,00,000 - 27,00,00,000 - -
February Narang 2016 05 Tran sfer - 50,00,000 26,30,00,000 4 4,43,836 February from Billin g 2016 A/c 15 Tran sfer - 50,00,000 26,00,00,000 10 10,89,041 February from Billin g 2016 A/c 01 March Tran sfer - 26,53,501 25,73,46,499 15 16,02,740 2016 from Billin g A/c 01 March C to Mr. - 1,00,00,000 24,73,46,499 - - 2016 Narang 02 March Tran sfer - 4,02,007 24,69,44,492 1 1,01,649 2016 from Billin g A/c 03 March Tran sfer - 3,32,225 24,66,12,267 1 1,01,484 2016 from Billin g A/c 04 March Tran sfer - 13,07,075 24,53,05,192 1 1,01,348 2016 from Billin g A/c 05 March C to Mr. 1,00,00,000 - 25,53,05,192 1 1,00,810 2016 Narang 05 March Tran sfer - 9,53,538 25,43,51,604 - - 2016 from Billin g A/c 07 March Tran sfer - 22,10,300 25,21,41,304 2 2,09,056 2016 from Billin g A/c 08 March Tran sfer - 11,98,426 25,09,42,878 1 1,03,620 2016 from Billin g A/c 14 March Tran sfer - 16,42,559 24,93,00,319 6 6,18,763 2016 from Billin g A/c 15 March Tran sfer - 9,70,000 24,83,30,319 1 1,02,452 2016 from Billin g A/c 17 ITA No. 1560/Del/2024 Naveen Narang 16 March Tran sfer - 9,80,567 24,73,49,752 1 1,02,054 2016 from Billin g A/c 01 April Inerest till 16 16,26,409 2016 31.03.2016 28,00,00,000 3,26,50,248 24,73,49,752 63,03,262 Summar y of intere st led ger till 31.03.2016 Pr incipal out standing 24,73,49,752 Interest outstanding 63,03,262 Tot al outstanding 25,36,53,014
( i i i ) D e s p i t e ha v i n g e v i d e n c e o f t hi s l o a n/ i n v e s t m e n t t h e A s s e s s i ng O f fi c e r o n l y added Rs.11,41,3, 645/- to the income without proper investigatio n or c o ns i d e r a t i o n o f t h e e vi d e n c e . T h e A O at t r i b ut e d R s . 1 5 ,5 8 , 9 6 , 3 5 5 / - o f b o g us b i l l i n g t o S h. N a v e e n N a r a n g a nd c al c u l a t e d c o m m i s s i o n i n co m e f r o m A . Y . 2 0 1 6 - 17 to A. Y . 2020-21. T he seized e xc e l sheet i nd i c a t e d t h at t he u na c c o u nt e d l o a n/ i n v e s t m e n t o f R s . 2 7 C r . w a s m ad e d u r i ng A . Y . 2 0 1 6 - 1 7 , a nd t h e b o g u s billing was utilized to repay this lo an/investment from A.Y. 2016-17 to 2020-21 .
T h u s , t he r e w a s no b a s i s fo r r e d u c i n g t h e b o g u s b i l l i n g fr o m t h e u n a c co u nt e d c a s h i n v e s t m e n t d ur i ng t he y e a r u n d e r c o n s i d e r a t i o n . T he a m o u nt o f R s . 2 7 c r o r e s i s t he fi r s t e ve n t o f e xt e n d i ng l o a n / i n v e s t m e n t i n G . D . G o e n k a P ub l i c S c ho o l , D w a r k a d u r i n g t h e A . Y . 2 0 1 6 - 1 7 a f t e r t h a t i n s ub s e q u e nt y e a r s t he b a n / i n v e s t m e nt was paid off vi a bogus b i l l i ng fr o m S c ho o l . T h us the total i nv e s t m e nt o f R s . 2 7 C r o r e s m ad e b y S h . N a v e e n N a r a ng d ur i n g A . Y . 2 0 1 6 - 1 7 i s r e q ui r e d t o b e t a x e d d ur i ng A . Y . 2 0 1 6 - 1 7 .
(iv) T he perusal of as s e s s m e n t record shows t ha t he AO tailed f ai l e d to i nv e s t i g a t e t he i s s u e o f l o a n/ i n v e s t m e n t o f R s . 2 7 c r o r e s d e s p i t e h a v i n g t he d o cu m e n t a r y e v i d e nc e s . T he A O a d j us t e d t he a m o u nt o f b o g u s b i l l i ng a g a i n st t he u na c c o u nt e d l o a n / i nv e s t m e nt m a d e b y S h. N a v e e n N a r a n g , d e m o ns t r a t i ng l a c k o f hi s i n v e s t i g a t i o n a s t he b o g us b i l l i n g i s s e p ar a t e f r o m t h e i n v e s t m e nt m a d e b y S h . N a v e e n N a r a ng . T he A O h a s c a l c u l a t e d c o m m i s s i o n i nc o m e o f R s . 1 2 , 1 0 ,6 9 2 / - o n t h e b o g u s b i l l i ng a r r a ng e d b y t h e a s s e s s e e d u r i n g A . Y . 2 0 1 6 - 1 7 t o A . Y . 2 0 2 0 -
21.
(v) T he s e i z e d e x c e l s he e t no t o n l y r e c o r d e d t h e c a s h i n v e s t m e n t o f R s . 2 7 C r . o n 0 1 F e b r u a r y 2 0 1 6 b ut a l s o m e nt i o n e d a l o a n r e p a y m e n t o f R s . 3 . 2 6 C r . d u r i ng t he f i na n c i a l y e a r 2 0 1 5 - 1 6 , i n d i c a t i ng t ha t t h i s i n v e s t m e n t w a s n o t a o n e - t i m e t r a n s a c t i o n . Ho w e v e r , t h e A O f a i l e d t o i n v e st i g a t e t he i s s ue o f t he R s . 2 7 C r . i nv e s t m e nt t ho r o u g h l y. N o fa c t u al e vi d e n c e w a s p r e s e n t e d i n t h e a s s e s s m e nt o r d e r w h i c h s up p o r t t h e d e c i s i o n t o l i m i t t he a d d i t i o n t o R s . 1 1 . 4 1 C r . i ns t e a d o f t he f ul l R s . 2 7 C r . a s u na c c o u n t e d l o a n / i n v e s t m e nt . A s d i s c u s s e d e ar l i e r t h a t t he 18 ITA No. 1560/Del/2024 Naveen Narang a m o u nt o f R s . 2 7 c r o r e s r e p r e s e nt t he fi r s t e v e n t o f e x t e nd i ng l o an / i n v e s t m e nt a s S c ho o l S h a r e A c c o u nt d u r i ng t h e A . Y . 2 0 1 6 - 1 7 . He n c e , R s . 2 7 C r o r e s ho ul d h a ve b e e n a d d e d d ur i ng t h e y e a r .
(vi) T he A O f a i l e d t o c o nd uc t r e q ui s i t e e n q ui r y/ i n ve s t i g a t i o n r e g a r d i ng t he u na c c o u nt e d c a s h i n v e s t m e nt o f R s . 2 7 C r m a d e b y S h . N a v e e n N a r a ng i n " S c ho o l S h ar e a/c" on 01 F e b r u a r y 2 0 1 6 . T he seized material shows t h a t t hi s cash i nv e s t m e nt w a s m a d e i n A . Y . 2 0 1 6 - 1 7 a n d t he r e p a y m e n t t h r o u g h b o g us b i l l i ng ha s b e e n r e c e i ve d i n s ub s e q u e nt y e a r s b y S h . N a ve e n N a r a n g . T h e r e f o r e , t he o r d e r p a s s e d b y t h e A O i s e r r o n e o us an d p r e j u d i c i a l t o t h e i nt e r e s t s o f r e ve n u e i n t e r m s o f s e c t i o n 2 6 3 o f t h e I n c o m e - t ax A c t , 1 9 6 1 .
4.4 K e e p i ng i n vi e w o f t h e a b o v e d i s c u s s e d fa c t s, d ur i ng t h e c o ur s e o f s e a r c h a c t i o n a n e x c e l fi l e t i t l e d " N a r a ng ( 0 1 - 0 1 - 2 0 1 6 ) . x l s x, " m a i nt a i n e d b y S h . D e v e s h S i ng h , w as f o u n d w h i c h c o n t a i n r e c o r d o f u n a c c o u nt e d l o a n / i n v e s t m e nt o f R s . 2 7 c r o r e s b y S h . N a v e e n N a r a ng i n G . D . G o e n k a P ub l i c Sc h o o l , D w a r k a . F ur t he r , t he e xc e l s he e t c o nt a i n r e p a y m e n t s t o t al i n g R s .3 , 2 6 , 5 0 , 2 4 8 / - w e r e m a d e t h r o ug h b o g u s b i l l i ng a n d c a s h p a y m e nt s , t i l l 3 1 . 0 3 . 2 0 1 6 , F u r t h e r t h e s e i z e d m a t e r i a l s ho w s b o g u s b i l l i n g t o t h e t u n e o f R s . 1 5 , 5 8 ,9 6 , 3 5 5 / - d ur i ng t h e A . Y . 2 0 1 8 - 1 7 t o A . Y . 2 0 2 0 - 2 1 . Ho w e v e r , d e s p i t e h a vi n g c l e a r e v i d e n c e , t he A s s e s si ng O f f i c e r o nl y a d d e d R s . 1 1 , 4 1 , 0 3 , 6 4 5 / - t o t h e i n co m e o f t h e a s s e ss e e d u r i n g t he y e a r u nd e r c o ns i d e r a t i o n w i t ho ut p r o p e r i nv e s t i g a t i o n . T he A O r e d u c e d t h e a m o u nt o f R s . 1 5 ,5 8 , 9 6 ,3 5 5 / - o f b o g us h i l l i ng a t t r i b u t e d t o s ub s e q u e nt e ve nt w h i l e p a ss i n g t he a s se ss m e n t o r d e r i n t he c a s e o f S h. N a ve e n N a r a n g fo r t h e A . Y . 2 0 1 6 - 1 7 w i t h o ut c o ns i d e r i n g t he f u l l e xt e nt o f t h e u n a c c o u nt e d l o a n / i n v e s t m e n t o f R . 2 7 cr o r e s w hi c h i s t he fi r s t e v e nt o f u n a c c o u n t e d c a s h t r a ns a c t i o n s a n d w a r r a nt e d f ul l a m o u nt of addition d ur i ng t he year u nd e r c o n s i d e r at i o n as u n e xp l ai ne d m o n e y / i nv e s t m e nt of Sh. Naveen N am a g . The AO's fa i l ur e to t h o r o ug h l y i nv e s t i g a t e t he R s . 2 7 C r . i n v e s t m e nt , s h o w s t ha t t he o r d e r p a s s e d b y t h e AO fo r t he A . Y . 2 0 1 6 - 1 7 i n t h e c a s e o f S h . N a v e e n N ar a ng i s e r r o n e o u s a nd p r e j u d i c i a l t o t he i nt e r e s t s o f r e v e n ue i n t e r m s o f s e c t i o n 2 6 3 o f t he I nc o m e T a x Ac t , 1 9 6 1 .
5. In view of t he a b o ve , t he assessment co mpleted in this c as e u/s 1 5 3 A / 1 4 3 ( 3 ) o f t h e I nc o m e T a x A ct , 1 9 6 1 d at e d 3 0 .0 3 . 2 0 2 2 c l e a r l y a t t r a c t s t he p r o v i s i o n s o f s e c t i o n 2 6 3 o f t h e I n c o m e T a x A ct , 1 9 6 1 an d n e e d s t o b e r e c t i fi e d a c co r d i n g l y .
5.2 He n c e , t h e p r o v i s i o n s o f c l a u s e ( a ) o f E xp l a n a t i o n 2 t o s e c t i o n 2 8 3 o f I . T , A c t . 1 9 8 1 a r e c l e a r l y a p p l i c a b l e i n t hi s c a s e . F o r r e ad y r e fe r e nc e , t he E x p l a n a t i o n 2 t o s e c t i o n 2 6 3 o f I . T . A c t , 1 9 6 1 a r e r e p r o d uc e d a s u nd e r :
19 ITA No. 1560/Del/2024Naveen Narang " E xp l a n at i o n 2 . -- F o r t h e p ur p o s e s o f t hi s s e c t i o n , i t i s h e r e b y d e c l a r e d t ha t a n o r d e r p a s s e d b y t he A s s e s s i ng O f fi c e r s ha l l b e d e e m e d t o t he e r r o n e o u s i n s o f a r a s i t i s p r e j ud i c i a l t o t he i nt e r e s t s o f t he r e v e n ue , i t i n t h e o p i ni o n o f t he P r i n c i p a l C o m m i s s i o ne r o r C o m m i s s i o n e r --
(a) t he o r d e r i s p a s s e d w i t ho u t m a k i n g I n q ui r i e s o r ve r i f i c at i o n w hi c h s ho ul d ha v e b e e n m a d e ;
(b) t he o r d e r i s p a s s e d a l l o w i n g a n y r e l i e f w i t h o ut i nq ui r i ng i n t o t h e c l a i m ;
(c) t he o r d e r h as no t b e e n m a d e i n ac c o r d a n c e w i t h a n y o r d e r , d i r e c t i o n o r i ns t r u c t i o n i s s ue d b y t he B o a r d u nd e r s e c t i o n 1 1 9 ; o r
(d) t he o r d e r h as no t b e e n p a s s e d i n a c c o r d a n c e w i t h a ny d e c i s i o n w h i c h i s p r e j u d i c i a l t o t he a s s e s s e s , r e nd e r e d b y t h e j u r i s d i c t i o n al Hi g h C o u r t o r S up r e m e C o u r t i n t he c a s e o f t h e as s e s s e e o r a n y o t h e r p e r s o n . .. . "
6. T h u s , i n t h e p r e s e n t c a s e , t h e A s se s s i ng O f f i c e r n o t o n l y f ai l e d i n v e r i fy i ng a nd c a l l i ng fo r a d e q ua t e i n fo r m a t i o n b ut a l so failed in c o nd u c t i n g proper e nq u i r i e s / i n v e s t i g a t i o n u p o n t he i n fo r m a t i o n a v a i l a b l e w i t h h i m a nd j u st r e l i e d up o n t he s u b m i s s i o n f i l e d t he a s s e s s e e w i t h o u t v e r i f y i n g t h e fa c t s o f t h e ca s e a n d c a se l a w p r e s e n t e d b y t h e a s s e s s e e . T h e r e a r e s e v e r al j u d g m e nt s o f H o n ' b l e C o u r t s w he r e i n i t ha s c l e a r l y b e e n he l d t ha t t h e A O i s n o t o n l y a n a d j ud i c at o r b ut a l s o a n i n v e s t i g a t o r a n d he c a n no t r e m a i n p a s s i ve i n t h e f a c e o f a r e t u r n w h i c h i s a p p a r e n t l y i n o r d e r b ut c a l l s fo r f u r t he r e nq u i r y , i t i s a l s o h i s d u t y t o a s c e r t a i n t r u t h o f t h e f a c t s . T h u s , o n a l l t h e a b o v e i s s u e s , t he A O ' s o r d e r i s c r y p t i c a n d no t a s e l f- c o nt a i ne d order g i v i ng the relevant f ac t s a nd reaso ns fo r co m i ng to c o nc l u s i o n b a s e d o n t h o s e fa c t s a n d l a w a nd t he o r d e r d o e s no t i nd i c a t e t h e b r i e f e st o f r e a s o n s f o r a c c e p t i ng t h e i n c o m e d e c l a r e d b y t he a s se ss e e .
6.1 I n t he c a s e o f M a l ab a r I n d u s t r i a l C o L t d . V s . C I T [ ( 2 0 0 0 ) 1 0 9 T a xm a n 8 6 ( S C ) / [ 2 0 0 0 ] 2 4 3 I T R 8 3 ( S C ) / ( 2 0 0 0 ] 1 5 9 C T R 1 ( S C ) ] , H o n ' b l e S up r e m e C o u r t h a s he l d t h at , w he r e A s s e s s i ng O f f i c e r h a d a c c e p t e d e n t r y i n s t at e m e n t o f a c c o u nt fi l e d b y a s s e s s e e , i n a b s e n c e o f a n y s u p p o r t i n g m a t e r i al w i t h o ut m a k i ng a n y e nq u i r y , e xe r c i s e of j ur i s d i c t i o n by C o m m i s s i o ne r under section 263(1) was j u s t i fi e d .
6.2 i n t he c a s e o f D e n i e l M e r ch a n t s Pv t . L t d . v s . I T O [ 2 0 1 7 - T I O L - 4 5 5 - S C - I T ] , Ho n ' b l e S u p r e m e C o u r t h as u p he l d t h a t d e c i s i o n o f H o n ' b l e C al c u t t a H i g h c o u r t i n w hi c h i t w a s he l d t h a t C I T i s e nt i t l e d t o r e v i s e t h e a s s e ss m e nt o r d e r u/ s 2 8 3 o n t he g r o u n d t ha t t h e A O d i d n o t m a k e a ny p r o p e r i nq ui r y w h i l e ac ce p t i n g t he 20 ITA No. 1560/Del/2024 Naveen Narang e xp l a na t i o n o f t he a s s e s s e e i ns o fa r as r e c e i p t o f s h ar e a p p l i c a t i o n m o n e y i s c o nc e r n e d c a n n o t b e i n t e r fe r e d w i t h. T h e r e l e va nt e x t r a c t s o f t he d e c i s i o n o f Ho n ' b l e S up r e m e C o ur t i s b e i n g r e p r o d uc e d a s u n d e r :
" In a l l t h e s e c as e s , w e fi n d t h a t th e C om mi s si on e r o f i n c om e T a x h a d pa s s ed an o rd e r un d e r S e c t i o n 26 3 o f th e I nc o m e T a x A c t , 1 9 6 1 w ith th e ob se rv at i on s t h a t t h e A s s e s s in g Of fi c e r did n ot m a k e a n y p r op e r i n qu i r y w hi l e ma k i ng th e a s s e s sm ent and a c c ep t i n g the ex pl a na t i on of th e as s e ss e e (s) i n s of a r a s r e c eip t o f sh a r e a ppl i ca t i on m on e y i s c on ce rn e d . On th a t b a s i s th e C om m is si on e r o f In c om e Ta x ha d , a ft e r s ett in g a s id e th e o rd e r o f t h e A s s es s in g Of fi c e r; s i m pl y d i r e ct ed t h e A s s e s s in g O f fi c e r t o ca r r y t h o r ou gh an d d et a i l ed in q ui r y . I t i s t hi s o rd e r w h i c h i s up h el d b y th e Hi gh C our t , W e s e e n o r e a s on t o in t e r fe r e w it h th e o r de r of t h e Hi gh C o u r t. "
....................
7. I n vi e w o f a b o ve - m e nt i o n e d f a c t s a n d c i r c u m s t a nc e s o f t he c a s e , i t c a n c l e a r l y b e c o nc l ud e d t h at t he a s s e s s m e n t o r d e r fo r A . Y . 2 0 1 8 - 1 7 w a s p a s s e d w i t ho ut i n q ui r y a nd i t c a n a l s o b e he l d t h a t t hi s a c t i o n o f t h e A s s e s s i ng O f f i c e r i s no t o n l y e r r o ne o us b u t a l s o p r e j u d i c i a l t o t h e i n t e r e s t o f r e ve n u e . T h e r e fo r e , t h e a s se ss m e n t o r d e r p as s e d i n t he e a se o f t he a s s e s s e e fo r t he A . Y . 2 0 1 6 - 1 7 u / s 153A/143(3) o f the Income-tax Act, 19 61 o n 30.03.2022 is required to be revised b y v i r t ue o f t h e p r o vi s i o ns o f S e ct i o n 2 6 3 o f t h e I n c o m e T a x A c t , 1 9 6 1 . F o r t he s a k e o f c l a r i t y , t he r e l e v a nt p o r t i o n o f S e c t i o n 2 6 3 o f t h e I nc o m e T a x A c t , 1 9 6 1 i s r e p r o d u c e d a s u nd e r :
" ... .. 2 6 3 (1 ) Th e ( P ri nc ip a l C o mm i s si on e r o r) C o m m i ss i on e r m a y c a ll f o r a n d e xam i n e t h e r e c or d o f a n y p r o ce e d in g u n de r ( hi s A ct, a n d i f h e c on s i d e r s th a t a n y o r d e r p as s ed t h e r ein by t h e ( A s se s sin g ) O ffi c e r I s e r r on e ous in s o fa r a s i t i s p r ej ud i c i a l t o t h e in t e r es ts o f t h e r ev en u e , h e m a y , a ft e r gi vin g th e a ss e s s e e a n o pp o rtu n i t y o f b ein g h e a r d a n d a ft e r m a k i n g o r ca u si n g t o be ' ma d e su ch i n qu i ry a s h e d e e m s n e c e s sa ry , pa s s su c h o rd e r t h e r e on a s th e ci rcu m stan c e s o f t h e ca s e j u st if y , i n cl u din g a n o rd e r en ha n c in g o r mo dif yi ng th e a ss e s s m en t or ca n c ell i n g t h e a ss e s sm ent a n d d i r ect in g a f r esh a s s e ss m en t .. . . "
8 . He n c e i n v i e w o f f o r e g o i ng , I a m s a t i s f i e d a nd ho l d t he a s s e s s m e nt o r d e r f o r A . Y . 2 0 1 6 - 1 7 p a s s e d b y t he A s s e s s i n g O f fi c e r u / s 1 5 3 A / 1 4 3 ( 3 ) o f t he I nc o m e T a x 21 ITA No. 1560/Del/2024 Naveen Narang Act, 1961 dated 30.03.2022 as e r r o n e o u s a nd p r e j ud i c i a l t o the interest of R e v e n u e a nd t h e r e f o r e , s e t a s i d e i t fo r f r e s h a d j u d i c a t i o n b y t he A s s e s si n g O f fi c e r w i t h t h e d i r e c t i o n s t o c a r r y o ut t ho r o u g h a nd d e t a i l e d e nq u i r i e s i n t h e l i g h t o f d i s c u ss i o n made in above paras on t he i s s ue cash l o a n / i n ve s t m e n t of Rs. 2 7 ,0 0 , 0 0 ,0 0 0 / - m a d e b y t h e a s s e s se e S h . N a v e e n N a r a ng ( PA N : A A D P N 0 3 4 4 D ) during the A.Y. 2016-17 af t e r gi ving an o p p o r t u ni t y of being he a r d to the a s se ss e e . "
12. The main arguments of the ld. Counsel was that the details of excel shee ts found from the pendrive of Sh. Devesh Singh. Sh. Devesh Singh is the key employee of Sh. Manoj Kumar Singh. Sh. D. Singh a nd Sh. M. K. Singh were s earched along with the assessee Sh. Naveen Narang on 14.10.2020 in consequence to the same satisfaction note which led to action u/s 132 of the Income Tax Act, 1961. The Section 132 of the Income Tax Act, 1961 reads as follows:
" S ea r ch an d sei zu r e .
( 1) Wh e r e th e 5 9 [P ri n ci p a l D i r e ct o r G en e ra l o r] D i r e ct o r G en e ral or [ P rin ci p al D i r e ct o r o r] D i r ec t o r o r th e [ P rin ci p a l Ch i e f C om m i ss i on e r o r] C hi ef C o m mi s si on e r or [ P rin ci p a l C o m mi s si on e r o r] C o mm i s si on e r or Ad di ti on al D i r e ct o r o r Ad di ti on a l C o m m i s si on e r o r J oi nt D i r e c t o r o r J oi nt C o mm is si on e r i n c o n s equ en c e o f i n f or m a ti on in h i s p o s s e s si on , ha s r ea s on to b eli e v e th at --
( a ) a ny p e r son t o w h om a su m m on s u n de r sub - s e c ti on ( 1) o f s e c ti on 3 7 o f th e I nd ia n In co m e-t a x A c t , 1 92 2 ( 1 1 o f 19 2 2) , o r u n d e r s u b- se c ti on ( 1 ) of s ect i on 1 3 1 o f t hi s A ct , o r a n ot ic e u nd e r su b- s e ct i on ( 4 ) o f s e ct i o n 2 2 o f th e Ind ian In c om e- t a x Ac t , 19 2 2, o r u n de r su b - s e ct i on ( 1 ) o f s e ct i on 1 42 o f th i s Ac t w as i s s u ed t o p r odu c e , o r c a us e t o b e p r od u c e d , a ny b o ok s of ac c oun t o r ot h er d o c um ent s h a s omi tt e d o r f a il ed t o p r odu c e, o r c a u s e t o be p r od u c ed , su c h bo ok s o f a cc ou nt o r ot h e r d o cu m en t s a s r e q u i r ed by su c h su mm on s o r n ot i c e , o r 22 ITA No. 1560/Del/2024 Naveen Narang ( b) a n y p e r s on t o w h om a su m m on s o r n o t i ce a s a f o r es a id h a s b e en o r mi gh t b e i ssu e d w il l n o t , o r w oul d n ot , pr o du c e o r c a u s e t o b e p r odu c ed , an y b o o k s of a cc o u nt o r oth e r d o cu men ts w hi ch w il l b e u se fu l f o r, o r r el e va n t t o , a n y p r o c e ed in g u n d e r th e I n di a n I n c om e-t a x A ct , 1 92 2 (1 1 o f 1 92 2 ) , o r u n d er th is A ct , o r ( c) an y p e r s on is i n p o s s es si on o f a n y m on e y , b ul li on , j e w ell e ry o r oth e r va lu ab l e a rti cl e o r th in g and su ch mon e y , b ul li on , j e w ell e ry or oth e r va lu ab l e a rti cl e o r t hi ng r ep r e s en t s eit h e r w h o l ly o r p a rt l y i n com e o r pr op e rt y wh i ch h a s n ot b e en, or w ou l d not b e, di s cl os e d fo r th e pu rp o s e s o f th e I n d ia n In c o m e- t a x A ct , 19 2 2 ( 1 1 of 1 9 2 2 ) , o r t hi s A ct ( h e r ein a ft e r in th i s s e ct i on r e f e r r ed t o a s t h e u n di s cl o s ed in c om e o r p r o p e rt y) , th en , --
( A) th e [ P ri n ci p a l D i r ec to r G en e ra l o r] D i r ec to r G en e r a l or [ P rin c ip a l D ir e c t o r o r] D i r ec t o r or the [ P rin c ip a l Ch i e f C om m i s si on e r or ] Ch i e f C o mm is si on e r o r [ P ri n c ip a l C om mi s si on e r o r] C omm is si on e r , a s t h e c a s e ma y b e, ma y au th or i s e a n y A ddi ti on a l D i r e ct o r o r A d d it i on a l C omm is si on e r or J oin t Di r e c t o r, J oi nt C o mm is s i on e r , A s si st a n t D i r e ct o r or D ep u ty D ir e c t o r , A ss is ta n t C o mm i s si on e r o r D epu t y C omm is s i on e r o r In c om e -t a x O ffi c e r , o r ( B) su c h A d d it i on a l D ir e c t o r o r A d di t i o n a l C o m mi s si on e r o r J oi n t D i r e ct o r, o r J o in t C om m is s i o ne r , a s t h e ca s e m a y b e, ma y a ut h o ri s e a n y A ss i st a nt D ir e c t o r or D ep u ty D ir e c t o r , A ss i st a n t Co mm is si on e r or D ep ut y C o mm is si on e r o r I n c om e- t a x O ff i c e r , ( th e o ffi c e r so au th o ri s ed i n a ll ca s e s b ei n g h e r ei na ft e r r e fe rr e d t o a s th e au th o ri s e d o f fi c e r ) t o --
( i) ent e r an d s e a rc h a n y b u il din g , pl a c e , v e ss el , v eh i cl e o r a ir c ra ft w h e r e h e h a s r ea s on t o s u s p e c t t ha t su ch b o ok s of a c c oun t , o t h e r d o cu m en t s , mon e y , bu l li on , j e w ell e r y o r oth e r v a lu a b l e a rti cl e o r th i ng a r e k ep t;
( ii) b r e a k op en th e l o ck o f a ny d o o r , bo x , l o c k e r, s a f e , a lm i r a h o r oth e r r e c ept a cl e f o r e x e r c is in g t h e p o w e rs c o n f e rr e d b y cl a u s e (i ) w h er e th e k e y s th e r e o f a r e n ot a v a i la b l e;23 ITA No. 1560/Del/2024
Naveen Narang ( iia) s ea r ch an y p e r s on wh o h a s g o t out o f, o r i s a bo ut t o g et in t o , o r i s in , th e b u il din g , pl a c e, v es s el , v eh i cl e o r a i r c ra ft , i f t h e a u th o ri s ed of fi c e r ha s r ea s on t o su sp e ct t h a t s u ch p er s on h a s s ec r e t ed a b ou t h i s pe r s on a n y su c h bo ok s o f a c cou n t , ot h e r d o cu m ent s, m on e y , b ul li on , j e w ell e ry o r o th e r va lu ab l e a rti cl e o r t hi n g;
( iib ) r e q ui r e a n y p e r s on w h o i s f ou n d t o b e i n p o s s es si on o r c on t r ol of an y bo ok s o f a c c ou nt o r o th e r d ocu m en t s ma in t a in ed in th e f o rm o f el e ct r on i c r e c or d a s d ef i n ed in cl a u s e ( t ) o f su b -s e ct i o n ( 1) o f s e ct i on 2 o f t h e In fo rm at i on T ech n o l og y Ac t, 2 0 00 ( 21 o f 2 00 0 ), t o a f f o rd t h e a u t h o r is e d o ffi c e r t h e n e c e ss a ry fa ci li ty t o in s p e ct su ch b o ok s o f a c cou n t o r o th e r do cu m en t s ;
( iii ) s eiz e a n y su c h b o o k s of a cc ou n t, oth e r d o cum ent s , mon e y , bu l l i on , j e w el l e ry o r ot h e r v a lu a b l e a r ti cl e o r th in g f oun d a s a r e su lt o f s u ch s ea r ch :
Pr o vi d e d t h a t b ul li o n , j ew e ll e ry o r o t h e r v a l u a b l e a rt i cl e o r th i n g, b ein g st o ck -i n- t ra d e o f th e bu s in e s s, fou n d a s a r es u lt of su ch s ea r ch sh a l l n ot be se iz ed bu t t h e a u th o ri s ed offi ce r sh a l l ma k e a n o te o r i nv en t o ry of s u ch st o ck -i n- t ra d e of th e bu s in e s s;
( iv ) place ma r ks of id ent i fi ca t i on on any b o ok s of a c c ou n t or o th e r do cu m en t s o r m a k e o r c a u s e t o b e m a d e ext r a c ts o r c op i es t he r e fr o m;
( v) m a k e a n ot e o r a n in v en t o ry o f a n y s u ch m on ey , b u ll i on , j ew el l e ry o r ot h e r v al ua b l e a rt i c l e or t h in g :
[ P r ovi d ed t hat where any bu i l din g , pl a c e, v e s s el , v eh i cl e or a i r c ra ft r e fe r r e d t o in cl a u s e (i ) is w i th in t h e a r ea of j u ri s di ct i on o f a n y [ P r in c ip a l C hi ef C o m mi ss i on e r o r] C h i ef C o mm i s si on e r o r [P r i n c i pa l C om mi ss i on e r o r] C o mm is si on e r , but s u ch [ P rin cip a l Chief C o m mi ss i on e r o r] Ch i e f C o mm is si on e r or [P rin ci p a l C om mi s s ion e r o r] C o m mi ss i on e r has no j uri sd i c t io n o v e r t h e p e r s on r e f e r r ed t o in cl a u s e (a ) o r cl a u s e (b ) o r cla u s e ( c) , t h en , n ot w it h st a n d in g a n y t h in g c ont a in ed in s ec t i on 1 2 0 , it sha l l b e c om p et en t f or hi m t o e x e r ci se t h e p ow e r s u nd e r t hi s su b- s e ct i o n in a l l c a s es wh e r e h e h a s r ea s on t o b eli e v e th a t a ny d e l a y in g et t i ng th e 24 ITA No. 1560/Del/2024 Naveen Narang au th o ri s at i on f r om th e 6 5[ P rin ci p a l Ch i ef C omm i s si o ne r o r] Chief C o mm is si on e r or 6 5 [P rin ci p a l C o mm i s s i on e r o r] C o mm i s si on e r] ha vi n g j uri sd i c t io n ov e r su c h p e r s on m a y b e pr ej ud ic i a l t o t h e i n t e r e st s of th e r ev e n u e :
Pr o vi d e d fu rth e r that where it i s n ot p o s si bl e or p ra c ti ca bl e to take ph y s i c a l po s s e ss i on o f a n y v a l ua bl e a rt i cl e o r t h in g a n d r e mo v e i t t o a sa f e pl a c e du e t o it s v ol u me , w ei gh t o r oth e r p h ys i c a l c ha ra ct e ri s t i c s or du e t o it s b ein g o f a d a n g e r ou s n a t u r e , t h e a u th o ri s ed o ffi c e r m a y s er v e a n o rd e r on t h e own e r o r t h e p e r s on w h o i s i n i m m edi a t e p o s s e s si on o r c on t r o l th e r e o f th at h e s h a ll n o t r em o v e , p a rt w i th o r oth e rw i s e d ea l w it h i t , e xc e pt w it h t h e p r e v i ou s p e rmi s si on o f s uch a u th o ri s ed o ffi c e r a nd su c h ac t i o n o f th e a u th o ri s ed of fi c e r sha l l b e d e e m ed t o b e s ei z u r e of su ch va lu ab l e a rti cl e o r t hi n g un d er c la u s e (i ii ):
Pr o vi d e d a l s o th at n ot hi ng c on ta in ed i n th e se c o n d p r o vi s o sh a ll a p pl y i n ca s e o f a n y va lu abl e a rt i cl e o r t h in g , b e i n g st oc k - in -t r a d e of t h e bu sin e ss :
Pr o vi d e d a l so th a t n o a u th or i s a ti on sh a l l b e i s su ed b y t h e A d di ti on a l D ir e c t o r or A d di t i on a l C om mi ss i on e r or J oin t D ir e c t o r or J oi n t C o mm is si on e r on o r a ft e r th e 1 s t d a y o f O ct ob e r, 20 0 9 un l e ss h e h a s b e en em p ow e r ed b y th e B oa rd t o d o s o .
[ (1 A) W h er e an y [P rin ci p a l Ch i e f C om m i s si on e r o r] C h i ef C om m i s s i on e r o r [ P rin ci p al C om m i s si on e r o r] C om mi s si o n e r , i n c on s equ en c e o f i n fo rm at i on in hi s p o ss e s si on , h a s r e a s on t o s us p ec t t h a t a ny b o ok s of a c c ou nt , oth e r do cu m en t s , m on ey , bu ll i on , j e w ell e r y o r oth e r v a l ua b l e a rti cl e o r t hi ng in r e s p e c t o f w h i ch a n o f fi c e r h a s b e en a u th o ri s ed b y t he [ P rin cip a l D i r e ct o r G en e ral o r] D i r ec to r G en e r a l o r 6 8[ P ri n ci p a l D i r ec t o r o r] Di r e ct o r o r a n y ot h e r [P ri n ci pal C h i e f C om m i s si on e r o r ] C h i e f C o mm i s si o n e r o r [ Pr in c ip a l C o mm is si on e r or] C om m i s s i on e r or A dd i t i on a l D i r e ct o r or Ad di ti on a l C o mm is si on e r o r J o i n t D i r ec t or or J oin t C o m m i s si on e r t o ta k e a c ti on u n d er cla u s e s ( i) t o ( v ) o f s ub - s e c ti on ( 1 ) a r e o r i s k ep t in a n y bu ild in g , p la c e , v es s el , v ehi cl e o r a ir c ra ft n ot m en ti on ed i n t h e a ut h o ri s a t ion un d e r su b- s ect i on ( 1 ) , su ch [ P ri n c ip a l Ch i e f C om m is si on e r o r] C h i ef C om mi ss i on e r o r [ P rin ci p al C o mm i s s i on e r o r] C omm is si o n e r m a y , n ot w i th st a n di ng a nyt hi n g 25 ITA No. 1560/Del/2024 Naveen Narang c ont a i n ed in s ec ti o n 1 2 0 , a u th o ri se t h e sa i d o f fi c er to ta ke a ct i o n u n d e r an y o f t h e cl au s e s a f o r e s a id in r e sp e ct o f su ch bu il d in g , p l a c e, v e s s el , v ehi cl e o r ai r cra ft .] ( 2) Th e au t h o r i s e d o ffi c e r m a y r equ i si t i on th e s e r vi c e s of a n y p ol i c e o f fi ce r o r of a n y o ffi c e r o f th e C en t ra l G o v e rn m en t , o r of b oth , t o a s si st hi m f o r all o r an y o f t h e pu rp o s e s sp e c i fi ed in s u b- se ct i on ( 1) o r s ub -s e ct i on (1 A) an d it sha l l be the d ut y of ev e r y s uc h o ff ic e r to c o mp ly w it h su c h r equ i si ti on .
( 3) T h e a u t h o ri s ed of fi c e r m a y , w h e r e i t i s n ot p ra cti c a bl e t o s ei z e a ny su c h b o ok s o f ac c ou n t , oth e r d o cu m en t s, m o n e y , bu l l i on , j e we l l e ry or ot h e r v a lu ab l e a rti c le o r th in g , f o r r ea s on s oth e r th a n t h os e m en ti on ed in th e s ec on d p r o v i s o t o su b - s ec ti on ( 1 ) , s e rv e a n o rd e r on t h e ow n e r o r th e pe r son w h o i s i n i m m e di a t e p o s ses s i on o r c ont r ol t h e r e of t h a t h e sh a ll n ot r em o v e, p a rt w it h o r oth e rw i s e d e a l w i th i t e x c ept w i t h th e pr e vi ou s pe r mi ss i on o f su ch o ffi c e r a n d s uch o f fi ce r ma y t a k e su ch s tep s a s ma y b e n e ce ss a ry fo r en su ri n g c omp l i a n ce w it h t h is su b- s e ct i o n .
E xp l a na t i on . --F o r t h e r e m ov a l o f d ou b t s , i t i s h e r eb y d ec la r ed t h a t s e rvi n g o f a n o rd e r a s a f o r e sa i d un d e r th i s su b -s e c ti on sh a l l n ot b e d e e m ed t o b e s eiz u r e of su ch b o ok s of a c c o u nt , oth e r d o cu m ent s , mon e y , bu ll i on , j e w el l e ry o r ot h e r v a lu a b l e a rt ic l e o r th i ng un d e r cl a u s e ( i ii ) o f su b- s e ct i o n ( 1) .
( 4) Th e a ut h o ri s ed o ffi c e r m a y , d u rin g th e c ou rs e of t h e s e a r c h o r sei zu r e , e xam i n e on oa th a n y p e r s on w h o i s f ou n d t o b e i n p o s s e s si on o r c on t r ol o f an y b o ok s of a c c o u nt , d o cum ent s , m on e y , b u l l i on , j e w el l e r y or oth e r va lu ab l e ar t i c l e o r th in g a n d a n y st a t e m en t m a d e b y su ch p e r s on d u r in g su c h e xa m in ati on ma y th e r ea ft e r b e us ed in ev id en c e in a n y p r oc e e d in g u nd e r t h e In d ian I n c om e-t a x A c t , 1 92 2 (1 1 o f 1 9 22 ) , o r u n de r t hi s A ct .
E xp l a na t i on . --F o r t he r em o v a l o f do u b ts , it i s h er e b y d e cla r ed t h a t th e e xam i n a ti on of an y p er s on u nd e r t h is su b - s e ct i on m a y b e n ot m e r el y i n r e s p e c t o f an y b o o ks o f a c c ou n t , ot h e r d o c u m en t s o r a s s et s f oun d a s a r e s ul t o f t h e s e a rc h , bu t a l s o in r e sp e c t of a l l ma tt e r s r el e va n t f o r th e 26 ITA No. 1560/Del/2024 Naveen Narang pu rp o s e s o f a ny in v es t i ga t io n c onn ec t ed wi th an y p ro c e e di ng u n d e r th e In dia n I n co m e- ta x A ct , 19 2 2 ( 11 o f 19 2 2 ), o r u n d e r th is A c t .
( 4A ) Wh e r e an y b o ok s of a c c oun t , oth e r d ocu m en t s , m on e y , bu ll i on , j e w el l e ry or oth e r valuable a rt ic l e or t hi ng are or is f ou n d in th e po s s es si on o r c ont r ol of a n y p e r s on i n t h e c ou r s e o f a se a r ch , i t ma y b e pr e su m e d --
( i) t h at suc h b o ok s of a cc ou n t , o t he r d o cu m en t s, mon e y , bu l li on, j e w el l e ry o r oth e r v a l u a bl e a rt i cl e o r t hi ng b e l on g or b el ong s t o s u ch pe r son ;
( ii) th a t th e con t e n ts o f su ch b o ok s o f a cc ou n t a n d ot h e r d o cu m en ts a r e tru e ; a n d ( iii ) th at th e sig n a t u r e a n d ev e r y ot h e r p a rt of su ch b o ok s o f a c c o un t a n d ot h e r d oc u m en t s w h ic h p u rp o rt to b e i n t h e h a n dw r i ti ng o f a n y pa rt i c ul a r pe r son o r w hi ch ma y r ea s ona b ly b e a ss u me d t o h a v e b e en si gn ed b y, o r t o be i n th e h an d w rit in g o f, a n y pa rt i cu la r p e r s on , a r e i n t ha t p e r s on 's h a nd w ri t in g , an d i n th e c a s e o f a d o cu m ent s ta m p ed , e x ecu t ed o r a t t es t ed , th a t i t w a s d u ly st a m p ed a n d ex e cut e d o r a t t est ed b y t h e p e r s on b y w h o m it pu rp o rt s t o h a v e be en s o e x e cu t ed o r a tt e st e d .
( 5) [ * ** ] ( 6) [ * ** ] ( 7) [ * ** ] ( 8) Th e b o ok s of a c c ou n t o r ot h e r d o cu men ts s ei z ed u n d e r su b- s ec ti on ( 1) o r su b- s e ct i on ( 1 A) sh a l l n ot b e r eta i n ed b y th e a u t ho r i s ed o ffi c er fo r a pe ri o d e x c e edi n g t hi rt y da y s f r om t h e d a t e o f th e o rd e r of a s s e s sm ent u nd e r s e ct i on 1 5 3 A o r c l a u s e ( c) o f s e cti on 15 8 BC u nl e ss th e r e a so ns f o r r eta in in g t h e sa m e a r e r e c o rd ed b y h i m i n w rit in g a n d th e a p p r ova l o f th e [ P rin ci p al C h i ef Co m m is si on e r o r] Chief C o m mi s si on e r , [ Pr in c ipa l C o mm is si on e r o r] C o m m i s s i on e r , [ P ri n cip a l D i re ct o r G en e ra l o r D i r e ct o r G en e ral o r [ P ri n ci p a l D i r e ct o r o r] D i r e c t o r f o r s u ch r et en ti o n i s ob t a in e d :27 ITA No. 1560/Del/2024
Naveen Narang Pr o vi d e d t ha t t h e [ Pr in c ip a l C hi e f C om mi s si on e r o r] C h i ef C o mmi s si on e r , [ P rin ci p al C omm is s i on e r o r] C o m mi s si o n e r , [ P ri n ci p a l D i r e ct o r G en e ra l o r] D ir e c t o r G en e ral o r [ P rin c ip a l D i r e c t o r o r] Di r e ct o r s h a ll n ot a u th o ris e th e r et en t i on o f th e b o ok s of a cc ou n t a nd ot h e r d ocu m ent s for a p e ri od e xc e e din g t hi rt y da y s a ft e r a l l t h e p ro ce ed in g s u n d e r th e In d ia n In c om e - ta x A ct , 19 2 2 ( 1 1 o f 19 22 ) , o r th i s A ct i n r e sp e c t o f th e y e a rs fo r w hi ch th e b o ok s o f a c c oun t o r ot h e r d o c u m en t s a r e r el e va n t a r e c om pl et ed .
( 8A ) An o rd e r un d e r s u b- s ec t i on (3 ) sh a l l n o t b e i n f o r c e fo r a p e ri o d e xc e e din g s i xt y da y s f r om t h e d a t e o f t he o rd e r.
( 9) Th e p er s on f r om whose c u st od y any b o ok s of a c c oun t or oth e r do cu m en t s a r e sei z ed un d e r s ub - s e c ti o n ( 1) o r su b- s e ct i on (1 A) ma y m ak e c opi e s th e r e of , or ta k e e xt r a ct s t h e r ef r o m, in th e p r e s en c e of th e au th o ri s e d o ff ic e r o r a n y ot h e r p e r son em p ow e r ed by h i m i n th i s b eh a l f, at su c h p la ce an d ti m e a s th e a u th o ri s ed o ffi c e r m a y a p p oi nt i n th i s b eh a l f .
( 9A ) Wh e r e t h e a u th o ri s ed o f fi c er ha s n o j u ri s di c t i on o v er th e p e r s o n r e fe r r e d t o i n c la u s e ( a ) o r c la u s e (b) o r cl a u s e ( c) o f s u b - s e ct i on (1 ) , th e bo ok s of a c c ou n t o r ot h e r d o c um ent s , o r a n y m on ey , b u l l i on , j e w el l e r y o r ot h e r v al ua b l e a rt i c le o r t hi ng (h e r ea ft e r i n t hi s s e c ti on a nd i n s e cti on s 1 32 A an d 13 2 B re f e r r ed t o a s t h e a s s et s) s ei z ed un d e r t ha t su b- s e ct i on sha l l b e h an d ed o v e r b y th e a ut h o ri s ed o f fi c er t o th e A s s e ss in g Of fi c e r h a vi n g ju ri sd i c ti on ov e r s u ch p e r s on w i th in a p e ri od o f s i xt y d a y s f r om th e da t e o n w hi ch t h e l a s t o f th e a u th o ri sa ti on s fo r s ea r ch w a s e x e cu t ed an d th e r eu p on th e po w e r s e x e r ci sa b l e b y t h e a u t h o r i se d o f f ic e r u n d e r s ub - s ect i on ( 8) o r su b -s e c ti on ( 9) sha l l b e e xe r ci sa b l e b y su c h A s s e s si n g O ffi c e r .
( 10 ) If a p er son l eg a l l y en t i t l ed to th e b o ok s of a c c oun t or ot h er do cu m en t s s e iz ed un d e r s u b-s e c t i on ( 1 ) o r su b- s e ct i on (1 A) ob j e ct s f o r an y r e a s on t o t h e a p p r ov a l g iv en b y t he 72 [ P rin cip a l Ch i e f Co mm is s i on e r o r] Ch i e f C om mi ss i on e r , 7 2 [ P rin ci pa l C om m i s si on e r o r] C om m i s s i on e r, 7 2[ P r i nc ip al D i r e ct o r G en e ra l or ] D i r e c t o r G en e ral o r 7 2[ P r i ncip a l D i r e ct o r o r] D i r e ct o r u n d e r s ub - s e c ti on (8 ), h e m a y m ak e a n a pp li c a ti on t o th e Bo a rd st a ti ng th e r ei n t h e r e a s on s f o r su c h ob j e ct i on a n d r e qu e st i ng f o r t h e 28 ITA No. 1560/Del/2024 Naveen Narang r etu rn o f t h e b o o k s o f a c c oun t o r o t h e r do cu m en t s a n d t h e B o a rd may , aft e r gi vi n g t h e a pp li c a n t a n o pp o rt un it y o f b ein g h ea rd , p a s s su ch o rd e rs as i t t hi n ks fit .
( 11 ) [ ** * ] ( 11 A) [* * *] ( 12 ) [ ** * ] [ (1 3) Th e p r o vi si on s o f t h e C od e o f C ri m in a l P r o c ed u r e , 19 7 3 ( 2 o f 19 7 4 ), r ela tin g t o sea r ch e s a n d s ei z u r e s h a l l a p pl y , s o fa r a s ma y be , t o s ea r c h es an d s eiz u r e u n d e r s u b- s e c ti on (1 ) o r su b- s e ct i on (1 A ). ] ( 14 ) Th e B o a rd m a y m a k e r ul es in r el a t i on t o a n y s ea r ch o r s eiz u r e u n d e r th i s s e ct i on ; i n p a rti cu l a r, a nd wi th ou t p r eju di c e t o th e g en e ra l ity o f th e f or e go in g po w e r , s u ch ru l e s ma y p ro v i d e fo r t h e p r o c ed u r e t o b e f ol l o w ed by t h e a u th o ri s ed of fi c er --
( i) f or ob ta i ni ng i ng r e s s i nt o a n y b ui ld in g , p l a ce, v e s s el , v eh ic l e o r air c r aft t o b e s e a rc h ed w h e r e f re e in g r e s s th e r et o i s n ot a v a il a b l e ;
( ii) f o r ens u r in g s a f e c u st od y o f a ny b o ok s o f a cc ou nt o r oth e r d oc u m en t s o r a ss et s sei z ed .
E xp l a na t i on 1. --F o r th e p u rp o s es o f s u b -s e ct i on (9 A) , " e x ec u ti on of a n au th o ri s at i on f o r s e a r ch " sh a l l ha v e t h e s a m e m ea ni n g a s a s sig n ed t o i t i n E xp l a na t i on 2 t o s e c t ion 1 58 B E. E xp l a na t i on 2 . --I n t hi s s e c ti on , the w o rd " p r oc e e d i n g" m ea n s an y pr o c e ed in g i n r es p e c t o f a n y y ea r , wh eth e r u n d e r t h e In d ia n In c om e- t a x Ac t , 19 2 2 ( 1 1 of 1 9 2 2) , o r t hi s A ct , w h ic h ma y b e p en di ng on th e d a t e on w hi c h a s e a r ch i s a ut ho ri s ed u nd e r th i s s e cti on o r wh i ch ma y h a v e b e en c omp l et ed on o r b e f or e su c h d a t e a n d in cl u d es a ls o a l l p r o c e edi ng s u nd e r th i s A ct wh i ch m a y b e c om m en c ed a ft e r s u ch d a t e in r e sp e c t of a n y y e ar . "
13. A comprehensive reading o f the Section elucidate that the warrant of authorization would be issued by the DGIT/PDIT/CIT 29 ITA No. 1560/Del/2024 Naveen Narang on any premises/person on who m the w arrant issuing authority has a reason to believe that the unaccounted inco me /doc ument of the assessee are kept at. The person who has been searched can have an immediate possession of the evidences leading to undisclosed income in his own custody or the same may be available in a mediate possession with somebody else w ho is having an association with the person se arched a nd such person is also covered under the same action u/s 132 of the Act. What is to be obser ved whether the material found and seized re veals the undisclosed income or no t? For e xample, in case of an assessee "ABC" who is a founder, promo ter and Director of the company and he keeps the second set o f books of accounts to be ke pt with his manager on day to day basis, the manager is only in constructive possession of the documents but the manager is ne ither the owner of the documents nor has any say in such second set of books of accounts. It is the docume nts of the assessee which were believed to be in the possession of the manager by the revenue authorities and based on that belief, the revenue authoritie s have issued warrant of authorization on the manager as per the provisions of Section 132 of the Act. Even the legislative intention was not to burde n an assessee with 7 asses sments u/s 153A, 7 assessments u/s 153C and some more as sessments u/s 148. The purpose o f legislation is to aid its citizens with least possible procedural hitches to pay the r ight taxes but not to entangle in own citizens by subjecting them with ple thora of assessme nts under various Sections as a result of one single action taken u/s 132 of the Ac t.
14. The seize d material available reads as under :
30 ITA No. 1560/Del/2024Naveen Narang FIRST PORTION Intere st Ledger of Mr. N ara ng ( Schoo l share A/c) fro m 01.01.2016 to 31.03.2016 Date Particulars Recd. Paid Cum. Days Intt. @ Balance 15% P.A. 01 February Naveen 27,00,00,000 - 27,00,00,000 - -
2016 Narang
05 February Tran sfer - 50,00,000 26,30,00,000 4 4,43,836
2016 from Billin g
A/c
15 February Tran sfer - 50,00,000 26,00,00,000 10 10,89,041
2016 from Billin g
A/c
01 March Tran sfer - 26,53,501 25,73,46,499 15 16,02,740
2016 from Billin g
A/c
01 March C to Mr. - 1,00,00,000 24,73,46,499 - -
2016 Narang
02 March Tran sfer - 4,02,007 24,69,44,492 1 1,01,649
2016 from Billin g
A/c
03 March Tran sfer - 3,32,225 24,66,12,267 1 1,01,484
2016 from Billin g
A/c
04 March Tran sfer - 13,07,075 24,53,05,192 1 1,01,348
2016 from Billin g
A/c
05 March C to Mr. 1,00,00,000 - 25,53,05,192 1 1,00,810
2016 Narang
05 March Tran sfer - 9,53,538 25,43,51,604 - -
2016 from Billin g
A/c
07 March Tran sfer - 22,10,300 25,21,41,304 2 2,09,056
2016 from Billin g
A/c
08 March Tran sfer - 11,98,426 25,09,42,878 1 1,03,620
2016 from Billin g
A/c
14 March Tran sfer - 16,42,559 24,93,00,319 6 6,18,763
2016 from Billin g
A/c
15 March Tran sfer - 9,70,000 24,83,30,319 1 1,02,452
2016 from Billin g
A/c
16 March Tran sfer - 9,80,567 24,73,49,752 1 1,02,054
2016 from Billin g
A/c
01 April 2016 Inerest till 16 16,26,409
31.03.2016
28,00,00,000 3,26,50,248 24,73,49,752 63,03,262
Summar y of intere st led ger till 31.03.2016
Pr incipal out standing 24,73,49,752
Interest outstanding 63,03,262
Tot al outstanding 25,36,53,014
15. This seized material clearly denotes that the assessee Sh.
Naveen Narang had advanced a sum of Rs.27 Cr . and received back an amount of Rs.3,26,50,248/-. Further, the seized material mentioned above in the order of the ld. PCIT clearly 31 ITA No. 1560/Del/2024 Naveen Narang prove s that the said lo an was being repaid in cas h to the extent of Rs.3,26,50,248/-.
16. We have further examined another se ized ma terial available on record mentioned in the order of the ld. PCIT which is as under:
S. No. Date Repayment N a r r at i o n
A m o u nt i n ( R s . )
1 05 February 2016 50,00,000 Tran sfer from Billing A/c
2 15 February 2016 50,00,000 Tran sfer from Billing A/c
3 01 March 2016 26,53,501 Tran sfer from Billing A/c
4 01 March 2016 1,00,00,000 C to Mr. Narang
5 02 March 2016 4,02,007 Tran sfer from Billing A/c
6 03 March 2016 3,32,225 Tran sfer from Billing A/c
7 04 March 2016 13,07,075 Tran sfer from Billing A/c
8 05 March 2016 9,53,538 Tran sfer from Billing A/c
9 07 March 2016 22,10,300 Tran sfer from Billing A/c
10 08 March 2016 11,98,426 Tran sfer from Billing A/c
11 14 March 2016 16,42,559 Tran sfer from Billing A/c
12 15 March 2016 9,70,000 Tran sfer from Billin g A/c
13 16 March 2016 9,80,567 Tran sfer from Billing A/c
17. From the above sheet, it can be found that the repayments have been made through the billing account and cash o f Rs.1 Cr. was also paid to the assessee on 1 s t March 2016.
18. Reliance is being placed on the judgment of Hon'ble Courts wherein the Hon'ble Courts have held that assessment made witho ut proper enquiry is erroneous and prejudic ial to re venue and C IT can re vise the Assessment Order u/s 263:
CIT Vs. Pushpa Devi, 173 ITR 445 (Patna) Addl. CIT Vs. Mukur Corporation, 111 ITR 312 (Guj.) Swamp Vegetable Products Industries Ltd. Vs. CIT , 187 ITR 412 (All.) Thalibai F. Jain & others Vs. UO & Anr. (Kar.) 101 ITR 1 Tejinder Singh Makker Vs. ACIT (ITAT, Mum-TM) 6 1 ITD 67 Rampyari Devi Saroogi Vs. CIT, 67 ITR 34 (SC) 32 ITA No. 1560/Del/2024 Naveen Narang CIT Vs. McMillan Co., 33 ITR 182 (SC) Lajja Wati Singhal Vs. CIT, 226 ITR 527(All.) Gee Vee Enterprises Vs. Addl. CIT & Ors., 99 ITR 375 (Del.) Jai B harat Tanners Vs. CIT, 264 ITR 673 (Mad) Ashok Leyland Ltd. Vs. CIT, 264 ITR 599 (Mad)
19. In the backdrops of these facts and the jurisprudence, the Assessing Officer considered an amount of Rs.15,58,96,355/- as bogus billing provided by Sh. Naveen Narang and calculated and taxed only the commission income of Rs.12,10 ,692/- in the hands of Sh. N aveen Narang. Thus, it can be conc luded that the AO has committed an error of br inging an amount of Rs.12 ,10,692/- to tax instead of the undisclosed amount of Rs.27 ,00,00,000/-. Thus, the Assessment Order passed is erroneous as well as prejudicial to the interest of revenue and hence, we dec line to interfere w ith the order passed u/s 263 by the ld. PCIT(Central)-3.
20. In the re sult, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 03/10/202 4.
Sd/ - Sd/-
(Sudhir Kumar) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 03/10/2024
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR