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TMI Blog2017 (8) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... see's Directors in the course of search under Section 132 of the Act were not justified?" 3. In the other appeals, ITA Nos. 13 to 20 and 22 of 2017, the question of law framed by this Court by the order dated 21st March, 2017 reads as under: "Whether having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the assessee, additions made by the Assessing Officer under Section 153A, were not justified as held by the ITAT?" Background facts 4. The facts which lead to the filing of these appeals are that a search took place in the case of both Mr. Tarun Goyal as well as the Best Group of Companies on 15th September, 2008. During the search various loose papers were found. According to the Revenue, the seized documents were with regard to unaccounted receipts from sale of certain properties and unrecorded expenditure in the construction business. 5. In support of its assumption of jurisdiction under Section 153 A of the Act, the Revenue places reliance on the statements of Mr. Tarun Goyal and Mr. Anu Aggarwal as recorded on the day of search i.e. 15th September 2008 and the statements of Mr. Anu Aggarwal and Mr. Harjeet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch confrontation or cross examination. Ans. I confirm that I was taken to the office of Best Group of Companies for confrontation/cross examination by the directors of the company however they refused any such cross examination/confrontation regarding transactions mentioned in my answer to Q. No. 2 of this statement. Q. No. 6 Please mention the name of the companies and the bank accounts which are used for the purpose of accommodation entries as stated by you in the answer to question No. 5. Ans. Though I do not remember exactly the name of the companies and name of the bank accounts which are used for accommodation entry purpose however I confirm that the accounts of M/s Max-well Securities (P) Ltd. are mostly used for accommodation entries. Regarding rest of the companies and bank accounts used for the purpose can be stated by me after going through the records, which I will submit later on. Q. No. 7 Please state for the last six years what amount of accommodation entries have been given by you through the entities controlled by you. Please also give the name of the beneficiary with corresponding amount and the year of the transactions. Ans. For the last six years the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of share premium of various companies of M/s Best Group for the last six years. Ans. I will be providing these details in due course of time as the computer prints is being taken out. Q. No. 13 Please provide the details of secured loans raised by you for your various projects and also give details of the security provided against the secured loan. Ans. We have taken a secured loan of Rs. 16 Cr from Bank of Baroda, Naharpur, Rohini, New Delhi in our company M/s Best City Developers (I) (P) Ltd. against the security of our flat no. 14 and No. 26 both situated at Sector-20, Dwarka, New Delhi. Q. No. 14 Please provide the details of unsecured loans raised by you for your various projects by your various companies, during last six years. Ans. I am not able to give an immediate reply and I could give details of the unsecured loan after going through the looks of accounts in short time. Q. No. 15 I am showing you Annexure A-I of party BO-1 page No. I to 71, which gives details of cash received for sale of property not reflected in the books of accounts, Annexure A-4, pages 1 to 31 and Annexure A-11 pages I to 100 which give details of expenses made for construction work whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference and give explanation. Ans: The cash in question was received from different persons on account of advance on account of sale of properties. As I have already mentioned in my earlier statement dated 15-09- 2008 to question No. 15 where I had clearly mentioned that we have received cash from different persons in lieu of bookings of properties. I may clarify that the amount of Rs. 8 crores surrendered at the time of search, includes this unexplained cash of Rs. 30 Lacs (Approximately.) Q. No. 6 During the course of search on Sh. Tarun Goyal, he has stated in his statement that he has provided you accommodation entries. Please explain the same. Ans. I personally do not know Sh. Tarun Goyal, except that he may have invested in our group companies. However we have not received any accommodation entries from anybody. I have already given my statement on 15-09-2008 in which in my answer to question no. 15. I had surrendered a total amount of Rs. 8 Cr. on account of unexplained cash received from various bookings in my group companies and the unexplained expenses towards the work in progress of various projects in those companies and other outgoing. These unexplained receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital and share premium received. Do you agree with the statement given by Sh. Anu Aggarwal? Ans. Yes I agree with the statement given by Sh. Anu Aggarwal. He is fully authorized to take decision in the best interest of the Group. I stand by his statement and promise to pay tax liabilities within the time allowed by the Department. Assessment Order 11. Although separate assessment orders were passed in respect of each Assessees for the AYs in question, illustratively, the assessment order dated 30th December, 2010 passed by the Assessing Officer ('AO') in the case of Best Infrastructure (India) Pvt. Ltd. For AY 2005-06 is being discussed herein. 12. In the above assessment order, the AO set out a tabulated chart on the basis of the above statements of Mr Tarun Goyal and Mr Anu Aggarwal and concluded that the share premium and share application money was nothing but an unexplained credit and accordingly added Rs. 3.60 Crores to the assessable income of the Assessee under Section 68 of the Act. The reason given by the AO for this addition was that the Assessees had failed to give any explanation or furnish any documentary evidence to prove the identity of the investors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly it has been held that statement under Section 132(4) is an important evidence collected as a result of search and seizure operation. Therefore, I hold that in the instant case the addition of share capital is based on evidence gathered during the search." 17. Reference was made by the CIT (A) to the decision of this Court in CIT v. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) where it was held that the AO had the jurisdiction under Section 153A of the Act to make assessment for all the six years and compute the total income of the Assessee, including the undisclosed income, notwithstanding that the Assessee filed returns before the date of search which stood processed under Section 143 (1) of the Act. Therefore, the challenge to the assessment orders on the ground of erroneous assumption of jurisdiction under Section 153A of the Act was negatived by the CIT (A). 18. As regards the merits of the additions made under Section 68 of the Act, the CIT (A) again referred to the statements recorded in the course of search and in particular the statement of Mr. Anu Aggarwal where he accepted undisclosed income of Rs. 8 crores earned during the year on account of "unexplained cash receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before the CIT (A) for admission of additional evidence in the form of bank statements of the share holders. This application was forwarded by the CIT (A) to the AO who by his letter dated 25th October, 2012 opposed to the admission of the additional evidence. Even then, the CIT (A) admitted the additional evidence and directed the AO to conduct an enquiry. In pursuance to which, the AO by letters dated 10th July and 19th August, 2013, submitted the remand report. The AO stated that the summons under Section 131 were issued to Mr. Goyal but he did not appear. Then the AO requested Mr. Harjeet Singh and Mr. Anu Aggarwal to produce Mr. Tarun Goyal to which they replied that they "do not presently know the whereabouts of Mr. Tarun Goyal." The AO maintained that during the entire course of the assessment proceedings, the Directors of the Best Group had never demanded to cross- examine Mr. Goyal. 21. The CIT (A) had further noted the submission of learned counsel for the Assessee that Mr. Tarun Goyal had later retracted his statement made under Section 132 (4) of the Act on 10th October and 4th November, 2008 and stating that they had been taken under coercion. The CIT (A) relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries was itself incriminating material for the purposes of assumption of jurisdiction under Section 153A of the Act. In support of his contention, learned counsel for the Revenue placed considerable reliance on the decision of this Court in Smt. Dayawanti Gupta v. CIT (2016) 390 ITR 496 (Del) and sought to distinguish the judgment of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (2016) 380 ITR 573 (Del). He submitted that apart from the above, the documents A-1, A-4 and A-11 that were seized during the search, also constituted incriminating material. According to him, there was no requirement that incriminating material qua each of the AYs, for which the addition was made, needed to exist. He relied upon the observations of this Court in the decision in CIT v. Anil Kumar Bhatia (supra). He also sought to distinguish the recent decision of this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia 2017 (295) CTR 466 (Del). 27. As regards additions made on merits under Section 68 of the Act, Mr. Kaushik again took this Court through the materials and submitted that the deletion made by the ITAT, of the additions which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the said decision in Smt. Dayawanti Gupta v. CIT (supra) is being again discussed herein. 32. In Smt. Dayawanti Gupta v. CIT (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that the papers recovered during the search contained "details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside books of accounts" and they were "actually unaccounted transactions made" by two of the firms of the Assessees. Thirdly, the Court found as a matter of fact that the Assessees were "habitually concealing income" and that they were "indulging in clandestine operations" and that such persons " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A- 1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement." 41. The Court has not been persuaded to hold that the above finding of the ITAT on the legal position regarding the Revenue being disabled from relying on the statement of Mr. Tarun Goyal suffers from any perversity. Further the ITAT has in the impugned order in paras 45 and 46 observed as under: "45. Now, we come back to the facts of the assessee's case in respect of the share application money received. The assessee has furnished the affidavit of the director of share applicant company, share application form, conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares Occupation: Business Income Tax PAN Number: AADCA5439P Ward 1(3), New Delhi. Share Certificates Received: Yes We do hereby confirm that the information furnished above is correct. For Aries Crafts Private Limited Sd/- Authorised Signatory 46. From the above, it is evident that the share applicant company has given the confirmation on its letter head which gives the complete address of the said company. In the confirmation, number of shares applied and the amount invested has been given. Details of payments i.e., cheque number, date of cheque and name of the bank on whom cheque is drawn is given. Address of the bank and bank account number has also been given, source of fund is given as well as permanent account number of the company is also given." 42. Thereafter the ITAT held in para 48 as under: "48. .....In the case under consideration before us, the assessee has duly furnished the declaration of the director of the share applicant company, share application form, confirmation and certificate of incorporation from Registrar of Companies as well as income tax return of the share applicant comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT.
45. The question framed in ITA Nos. 13 to 20 and 22 of 2017 by the order dated 21st March, 2017 is answered in the affirmative i.e. in favour of the Assessee and against the Revenue by holding that having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the Assessee, the assumption of jurisdiction under Section 153 A of the Act and the consequent additions made by the AO were not justified.
46. Consequently, the appeals of the Revenue are dismissed but in the circumstances, with no orders as to costs.
CM 831/2017 in ITA 11/2017;CM 834/2017 in ITA 12/2017
CM 836/2017 in ITA 13/2017; CM 839/2017 in ITA 14/2017
CM 842/2017 in ITA 15/2017; CM 845/2017 in ITA 16/2017
CM 848/2017 in ITA 17/2017; CM 851/2017 in ITA 18/2017
CM 854/2017 in ITA 19/2017; CM 857/2017 in ITA 20/2017
CM 865/2017 in ITA 21/2017; CM 862/2017 in ITA 22/2017
47. For the reasons stated in the applications, the delay in filing the appeals is condoned. The applications are, accordingly, disposed of. X X X X Extracts X X X X X X X X Extracts X X X X
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