TMI Blog2019 (10) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, is considered and defined in the various judicial pronouncements. Assessments are classified in two categories, i.e. completed assessment and pending or abated assessment. It is held that if the assessment for the relevant year is pending as on the date of search and it is not completed, the same gets abated and the scope of assessment to be made under section 153A for the said year is wide, which includes assessment of income on the basis of incriminating material found during the course of search as well as the assessment of income, which is the subject matter of regular assessment. On the other hand, if the assessment for the relevant year is not pending as on the date of search, the same is to be regarded as completed assessment and the scope of assessment to be made under section 153A is limited to the assessment of undisclosed income on the basis of incriminating material found during the course of search. This legal position clearly emanates from the various judicial pronouncements cited and relied upon by the assessee in the written submission filed before us. No doubt, there are certain judicial pronouncements cited by the ld. D.R. in his written submission, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital of ₹ 11,80,000/- alongwith a share premium of ₹ 2,83,20,000/- aggregating to ₹ 2,95,00,000/-. As found during the course of search and seizure action, the assesee-company had raised the said share capital and share premium from seven companies. As per the information available with the Assessing Officer, some of the said companies were paper/jamakharchi companies maintained by certain entry operators having dummy Directors. The Assessing Officer also noted that as per the statements of the said entry operators and dummy directors recorded by the Investigation Wing, Kolkata, the amount of share capital and share premium was brought into the books of account of the assessee through the jamakharchi companies, routing assessee s unaccounted cash. In order to verify the share capital and share premium amount claimed to be received by the assessee during the year under consideration, notices under section 133(6) were issued by the Assessing Officer to the share subscriber companies. The said notices, however, could not be served or remained un-complied with. Even the summons issued by the Assessing Officer under section 131 failed to invoke any response from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order and the written submission as well as different case laws brought on record by the AR. The main argument of the AR is that additions made by the AO in the assessment order passed u] s 153A/143(3) are not based on any incriminating documents/papers seized during the search operation. The AR has brought on record many case laws decided by the Jurisdictional Kolkata bench of ITAT and Jurisdictional Calcutta High Court on this issue. Calcutta High Court has time and again reiterated its view that the addition in case of the search assessments has to be made on the basis of incriminating material. Some of the recent decisions of the Hon'ble Jurisdictional High Court are discussed hereunder. PCIT-2. Kolkata Vs. Salasar Stock Broking Limited (ITAT No. 264 of 2016) dated 24.08.2016: (Calcutta), In this case, the Honorable High Court observed that the Ld. ITAT, Kolkata was of the opinion that the assessing officer had no jurisdiction is] s 153A of the I.T. Act to reopen the concluded cases when the search seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. ITAT relied upon the judgments of Delhi High' Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not sustainable because no incriminating material concerning such additions were found during the course of search and further no assessments for such years were pending on the date of search-Held, present appeals concerned AYs,2002-03, 2005-06 and 2006-07-0n the date of the search the said assessments already stood completed-Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed-Question framed by the Court was answered in favour of the assessee and against the Revenue- Revenue's appeal dismissed. 6. I further find that In this regard the Hon'ble ITAT Kolkata has time and again reiterated its view that the additions in case of the search assessments has to be made on the basis of incriminating material and any deviation from the same would render the assessment order invalid. Some of the recent decision of the Hon'ble Jurisdictional Tribunal is discussed hereunder: M/s Adhunik Gases Ltd. Others vs. DCIT CC-XXX, IT(SS)A No. 47/Kol/2015, IT(SS)A No. 49/Kol/2015, IT(SS)A No. 50-2/Kol/2015, IT(SS)A No. 54/Kol/2015, IT(SS)A No. 55/Kol/2015, IT(SS)A No. 94- 96/Kol/2015 order dated 06.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Shri. Manish Mundhra Vs. ACIT-CC-XXX in ITA-469-470/Kol/2013 Dt. 16.12.2015 (ITAT Kolkata); We also are of the view that in the light of the admitted fact that no incriminating material was found in the course of search the impugned addition could not have been made in the proceedings u/s 153A of the Act. The decision of the fTAT, Delhi Bench in the case of ACIT vs M/s. Delhi Hospital Supply Pvt. Ltd. (supra) followed the decision of Hon'ble Delhi High Court in the case of Kabul Chawla (supra) supports the plea of the assesee in this regard ..... ACIT-CC-XXVII Vs Kanchan Oil Industries Ltd. in ITA-725/Kol/2011 Dt. 09.12.2015 (ITAT Kolkata); In view of the aforesaid findings and judicial precedent relied upon, we hold that the denial of deduction ix] s 801B of the Act in the assessments framed u/s 153A of the Act for the Asst Years 2003-04 and 2004-05 without any incriminating materials found during the course of search with respect to those assessment years is not warranted and held as not in accordance with law. Accordingly, the grounds raised by the revenue in this regard for the assessment years 2003-04 and 2004-05 are dismissed. We hold that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was found during the course of the search in respect of the addition made by him. We accordingly partly allowed the Cross Objections taken by the assessee. ACIT Vs. Shanti Kumar Surana Ors. in IT(SS)A Nos. 12 to 20 and CO Nos. 13 to 20 (reported in 44 CCH 241) order dt. 22.06.2015(ITAT Kolkata) In view of the facts in entirety and the legal principles enunciated by Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (NhavaSheva) Ltd., supra, of Hon'ble Allahabad High Court in the case of Shaila Agarwal, supra and Mumbai Special Bench decision in the case of All Cargo Global Logistics, supra, we are of the view that there is no incriminating material found during the course of search in the present case for these assessment years, except the statement of one Shri Sambhu Kr More, as admitted by the AO in his remand report dated 23.09.2011 and despite number of opportunities revenue could not produce any incriminating material before the Bench and the assessments are already completed for these assessment years originally, the assessments framed u/s. 153A of the Act is in valid and hence, quashed. Trishul Hitech Industries Ltd Vs. DCIT-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search on this issue when original assessment granting deduct ion on this issue was completed under sect ion 143(3). We have not expressed any opinion on the merits of the case about the allow ability or otherwise of deduct ion under section 80IB on interest income arising in the present facts and circumstances. In the result, the appeal filed by the Revenue stands dismissed. LMJ International Ltd Vs. DCIT(2008) 119 TTJ (Kol) 214. (ITAT Kolkata); Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be disturbed; items of regular assessment cannot be added back in the proceedings under s. 153A/153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. Furthermore, The Hon'ble Supreme Court has dismissed department's special leave petition(SLP) against the judgment dt.06-07-2015 of the Delhi High Court in ITA No.369 of 2015 where the High Court held that no substantial question of law arose since there was factual findings that no incriminating evidence relate to share capital issued was found during the course of search. The AR ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of loan or advance given by them to the recipient companies-AO declined to rectify the assessments-CIT also held that addition need not be restricted only to the seized material-ITAT on appeal however deleted addition on grounds that the additions made for relevant AY's u/s 2(22)(e) were not based on any incriminating material found during search operation and same was not sustainable in law-Issue was whether the additions made to the income of the assessee for the said AYs u/s 2(22)(e) was not sustainable because no incriminating material concerning such additions were found during the course of search and further no assessments for such years were pending on the date of search-Held, present appeals concerned AYs,2002-03, 2005-06 and 2006-07-0n the date of the search the said assessments already stood completed-Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed-Question framed by the Court was answered in favour of the assessee and against the Revenue- Revenue's appeal dismissed. It was also informed/brought on record that the order passed by the Hon'ble Calcutta High Court has attained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclined to adjudicate appeal on ground no 2 on merit . 4. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds (as revised): (1) The ld. CIT(A)-21/Kolkata was not justified in allowing the appeal of the assessee on technical ground, without considering the relevant provision of section 153A which provides for assessing or reassessing the total income. (2) The ld. CIT(A)-21/Kolkata was not justified in allowing the appeal of the assessee only on technical ground without considering the facts and circumstances of the case on merit and without considering the material gathered by the Assessing Officer on assessment stage while making assessment order. (3) The ld. CIT(A)-21/Kolkata, has failed to perform his statutory equivalent and coextensive power with that of the Assessing Officer as held in by the Hon ble Supreme Court in the case of Kanpur Coal Syndicate (SC) 53 ITR 225. 5. The ld. D.R. vehemently assailed the impugned order of the ld. CIT(Appeals) giving relief to the assessee on the issue under consideration by deleting the addition made by the Assessing Officer under section 68 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(lnv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is disclosed in books or audited accounts, the AO is mandated to examine whether such income / entry was disclosed fully or partly and/ or represents its real nature and source for the purposes of the Act. This inter alia would mean that even the entries disclosed in accounts which might represent income fully or partly would in itself be an incriminating material for which a search was initiated. When the non-production of books or other documents can give rise to a belief for initiating search u/s 132(1), then it may be counterproductive to conclude that the power of AO is restricted to assessment based only on incriminating material found in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act that the total income of the assessee as defined u/s 2(45) needs to be assessed for all the 6 AYs for which the Aa is mandated to issue notice u/s 153A. 1.3 Further u/s 153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s 153A whether or not any evidences were found for that year. It is also implicit that u/s 153A, the items of total income which could be assessed u/s 153A in abated proceedings cannot be different for the cases which could not be abated such as I) where no proceedings were pending; or ii) where earlier assessments were completed u/s 143(3)/147; or iii) where earlier assessments were not made at all. The only caveat could be that before making any addition to the total income, the AO must bring on the record how such items are falling into the category of total income for the purposes of the Act. Thus, if it were to be held that no addition can be made without any incriminating material in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. 1.5 There is divergence of judicial opinion on the question of whether assessment u s 153A can be restricted to only the incriminating material seized during the search or whether the AO can also take view based on something which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the judicial verdicts are as under: (a) Allahabad High Court in Raj Kumar Arora 367 ITR 517 has held that there is no requirement of incriminating material for invoking provisions of 153A. (b) However, the same Delhi High Court in case of Dayawanti Gupta Vs CIT 390 ITR 496(Del) in para 16 has observed that: Section 153A, which provides for an assessment in case of search, and was introduced by the Finance Act, 2003with effect from 1-6-2003, does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier section 15888 which is not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the question decided by Delhi High court against the revenue in Meeta Gutgutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continental warehousing, Best Infrastructure (supra). Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there was incriminating material is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prior to 1/4/2005. 1.6 The sum and substance of all the decisions above could only indicate that the question of whether the AO has powers u/s 153A to assess total income as defined u/s 2(45) dehors the incriminating material also, has not at all become final and the same is yet pending final adjudication before the SC in SLPs admitted. Hence the arguments made in preceding paragraphs can be pitched up to support the revenues' contention before courts. 2. Now next set of questions which are required to be answered are: 2.1 The 'incriminating material' can be in any form such as evidence in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not as hard evidence. The use of the expression 'books of accounts' u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also partake the character of incriminating material, if the same has a bearing on the determination of income which has not been already disclosed in the return filed, if any. Hence, the entries in the regular books of accounts would also trigger the assessment u/s 153A/C, if there is some prima facie evidence that the entry recorded therein is camouflaged, or incorrect, wholly or partially, and such entries have a bearing on determination of total income of such person. The definition under clause (ii) of 271AAB(c) also defines undisclosed income as any income based on entry in books of accounts wholly or partly false and would not have been found to be so, had the search not been conducted . This clearly implies that any entry even recorded in the books, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal). The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently in CIT Chennai vs.-Ajit S. Kumar 93 taxman.com 294(SC), the Court in the context of section 158BB has upheld the use of information collected in a survey in case of connected person carried along with search in other person for the purpose of making asstt. u/s 158BB. Provisions of 158BB are Pari material to section 153A. The Delhi High court in PCIT Vs Kabul Chawla in para 37(iv) observed as under: 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A. V.Papayya Sastry and Others Vs. Govt. Of Andhra Pradesh and others reported in (2007) 4 Supreme Court Cases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-est and nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) By Lrs reported in (2008) 8 Supreme Court Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is a nullity in the eye of law. Section 44 of the Evidence Act also enables a party otherwise bound by a previous adjudication to show that it was not final or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed in the return of income already filed prior to the search. The judicial view is very clear wherein it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. Hence, if any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A. 4. In this regard it is further pertinent to mention here that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported those words while rendering the decisions. As per the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co. vs. D.C.I. T. reported in (2014) 49 taxmann.com 98 (Kar Hc) and also as per the decisions of Kerala High Court in the case of St. Francis Clay Decor Tiles 2016, 70 taxmann. 234 Kerala, 22. March, 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax vs. Niraj Jindal dated February 9, 2017 wherein it is held that once the assessing officer accepts the returns filed u/s. 153A the original return filed u/s. 153A becomes non est which means there was no such return in the eyes of law and action taken over such assessment also becomes non est which shows that Section 153A empowers appellant to file its disclosed and undisclosed return both and similarly it empowers to the AO also to assess or reassess the income accordingly. 7. The decision of Pr. Commissioner of Income Tax vs. Niraj Jindal of Delhi High Court which has been affirmed by the Hon'ble Supreme Court, has also interpreted the same and holds that once notice under section 153A is issued and appellant files returns before the assessing officer, the eai1ierTeturn filed by the appellant becomes non est. The aforesaid decision is in consonance with the interpretation of clause (a) and (b) and proviso one of Section 153A( 1). 8. It is further to point out that the provision of Section 153A are non obstante clause which does not have any conditions of seized material or incriminating material for making assessment, filing of return or conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment which are not pending as on the date of search and the time limit for issuance of notice u/s 143(2) has expired. Thus, the assessment for the year has attained finality and any addition in the completed assessments can be made only on the basis of Incriminating material found during the course of search. Pending or Abated Assessment refers to the assessment which are pending as on the date of search and hence merges with the Block Assessment proceedings u/s 153A and assessment is made normally by the AO. 1.3 The instant case of the assessee falls in the category of the Completed Assessment as no assessment for the instant year was pending as on the date of search. The assessee filed the original return u/s 139 on 04.10.2010 declaring total income of ₹ 9,83,700/The return was processed u/s 143(1) of the I.T. Act. The period within which the statutory notice u/s 143(2) could be issued by the department also expired on 30.09.2011, i.e. much before the search and seizure operation conducted on 17.12.2014. That means no proceedings was pending before the AO on the date of search. In the course of search no incriminating documents were found on the basis of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,95,00,000/- u/s 68 of the I.T. Act on account of share capital on the ground that the share applicants did not company to summons u/s 131 of the Act and the assessee did not produce the Directors of the investor companies. The AO also alleged that some applicant companies are jamakharchi companies. He also alleged that as per the data base of the Investigation wing, Kolkata the companies namely M/s Tramel Treading Pvt Ltd and M/s Giltedge Vincom Pvt Ltd are also jamakharchi companies maintained by entry operator Mr. Jivendra Mishra whose statement was recorded. In the course of assessment all the supporting documents of the share applicants were filed to explain the identity, creditworthiness and genuineness of the transaction. The share applicants also filed reply against notice u/s 133(6) and confirmed their investment. 1.4.3 The Ld. DR during the course of hearing has alleged that statement of the entry operators was recorded which can be treated as incriminating material in the case of the assessee. In this regard, we would like to submit that the statement of alleged entry operator was not recorded consequence to search seizure operation against the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made a written submission before the Hon'ble Bench with regard to the instant matter. The Ld. DR in the submission have made generalised allegations which are completely irrelevant given the facts of the instant case. The Ld. DR in his submission has alleged that the term 'incriminating material' has not been defined under any provisions of the act. He further relied on various case laws of different courts saying that additions u/s 153A can be made without having any incriminating material on record. 1.6 In this regard, we would like to submit that the submission made by the Ld. DR is completely irrelevant given the facts of the instant case. The DR in the submission filed have relied on certain decisions out of which most of the decisions are irrelevant to the instant case. We would like to distinguish some of those judgements as under: (i) First of all, the Ld. DR relied on the decision of Hon'ble Delhi High Court in case of Mls Filatex India Ltd vs CIT (229 Taxman 555) and CIT vs Anil Kumar Bhatia (352 ITR 493) in which it has been held that addition u/s 153A can be made without having any incriminating material on record. In this regard, we wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the search of the assessee group and the statements as relied by the revenue were from the data base of the department and were recorded in case of some other group not relevant to the assessee. Further, the alleged statement was also retracted by the so called entry operator vide an affidavit dated 14.11.2014 filed as provided by the ld. DR during the course of hearing. As such, the case relied by the Ld. DR are completely on different footing and not reliable for the instant case. (v) Further, the Ld. OR has mentioned that SLP has been admitted by the Hon'ble Apex Court in case of Continental Warehousing Corporation 235 Taxman 568. In this regard, we would like to submit that mere acceptance of SLP does not state that the case has been decided in favour of the revenue. (vi) The Ld. DR has further relied on the decision of Hon'ble Apex Court in case of CIT vs S. Ajit Kumar in 404 ITR 526; In this regard, we would like to submit that in the above case, Hon'ble Apex court have held that material found or statement recorded in a survey conducted simultaneously at the premises of a connected person can be treated as incriminating material for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch/survey operations or thereafter while framing the relevant assessment orders . 1.7.1. In this regard, we rely on the following decisions of the jurisdictional High Court and co ordinate bench as under: (i) CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 (Kol HC). We have considered the contesting contentions of the parties. It is true that Shri Sukla has proved to be a shifty person as a witness. At the earlier stages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double-speaking cannot be said by any means a truthful man at any stage and no Court can decide on which occasion he was truthful. If Shri Sukla is neutralised as a witness what remains is accounts, vouchers, challans, bank accounts, etc. But we would observe here that which way lies the truth in Shri Suklas depositions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )A No. 72-78/Ko1/2015 dated 23.08.2017; 6. Aggrieved by the assessment order passed by the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who has deleted the addition made by Assessing Officer. The key findings of the order of the Id. CJT(A) are narrated below: (i) It was observed by the CJT(A) that in the course of search/survey operation u/s 132/133A of the Act conducted on 27.01.2011 in the cases of suppliers, service providers and contractors etc. of the assessee company, the statements of the persons concerned who controlled the business along with other family members etc. were recorded. These persons were Shri Ram A vtar Mittal, Director of M/s Eastern Road Carriers Pvt. Ltd. and M/s Aska Roadways Pvt Ltd; Shri Pankaj 8agaria, Director of M/s Harshit Commercial Pvt. Ltd. M/s Janaki Commercial Pvt. Ltd; Shivam Commercial Pvt. Ltd: TDS Commercial Pvt. Ltd (earlier known as Thakurdas Sureka Engg. Corporation Pvt. Ltd.). Kalinga Commercial Pvt. Ltd: M/s 8asant Commerce Pvt. Ltd; M/s Omkara Merchants Pvt. Lid, and M/s Glamour Mercandise Pvt.Ltd: Smt. Neema Bagaria, Director of M/s Prachi Commercial Pvt. Ltd; and Smt. Pushpa Bagaria, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, he did not mention anything about the books of account, bills/vouchers and bank statements produced by all of them before him. He did not record the statement of any of the persons appeared before him and he did not ask any question about their business transactions with the assessee company or purchase made by them to execute the works of the assessee company. Thus, it can be said that all the persons successfully explained before the AO that the admission of providing accommodation entries to the assessee company was not correct. The retracted statement has no evidentiary value until and unless the AO proves that the retraction was not correct and the statement is substantiated by the corroborating evidences. Therefore, the Id CIT(A) deleted the additions, which were done by the AO based on the statements.............. . 7. The Id Counsel for the Assessee has submitted, before us, that the date of search was 27.01.2011 whereas the assessments were already completed under sections 143(1)/143(3) of the Act and the date of issue of statutory notice u/s 143(2) had already elapsed on the date of search, in respect of the assessment years 2005-06, 2006-07, 200708, 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey u/s.133A has been retracted within a span of weeks time and they have sworn affidavit stating these facts before Notary Public and the same have been forwarded to the investigation wing. In the statements in the affidavit, the deponents have clearly stated that the statements recorded u/s.132(4) and during survey were made on coercion and undue pressure and thus the contents of the statements thus recorded u/s 132(4) and survey were vitiated and consequently lost its evidentiary value, if any. In the aforesaid backdrop, we note that these statements recorded u/s.132(4) and survey could not be treated as incriminating msteretstn the ... light of the affidavits filed by the deponents retracting the said statement recorded during search and moreover when the Assessing Officer has relied on the statements recorded u/s132(4) and statements recorded during survey, cannot be made the sole basis for additions because the said statements made by the Deponents has not been crossexamined by the assessee. If the Assessing Officer was relying on statements recorded under section 132(4) and statements recorded during survey, then the assessee should have been provided with an opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on the legal issue raised and direct deletion of the addition/disallowances made in these assessment years. (iv) DCIT vs M/s Yash Alloys Pvt. Ltd., In ITA NO. 689/Kol/2015 dated 14.09.2018; ''3. We have given our thoughtful consideration to rival contentions. Case file including a detailed compilation of judicial precedents as well as documentary evidence has been perused. The Revenues sole argument during the course of hearing is that the Assessing Officer had rightly made the impugned additional income addition of ₹ 10 crores as per Shri K.P. Agarwalas statement recorded during the search. It is strongly emphasized that the CJT(Appeals) has erred in law as well as on facts in deleting the impugned additional income in lower appellate proceedings. We find no merit in the Revenues sole grievance. Two basic facts emerge from the rival pleadings. First one is that the Revenue has based its case on Shri K.P. Agarwalas search statement. The CJT(appeals) has held that Shri Agarwala was never the authorized person to depose or to offer any income at assessees behest. We reiterate that this assessee is a company. It was very much imperative for the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement during the course of search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further; in respect of pending/ assessment proceedings also, the Assessing Officers should rely upon the evidences/materials gathered during the course-of search/survey operations or thereafter while framing the relevant assessment orders. (vi) Saimed Innovation vs ITO, ITA No. 2231/Kol/2016 dated 13.09.2017; 1.7.2 Thus, as per the above discussion and case laws relied on, the statements of the so called entry operators as relied by the Ld. DR has no evidentiary value and thus, they can in no way be treated as an incriminating material as evident from the assessment order for the purpose of making the addition in the hands of the assessee. Further, the statements were recorded in some other case prior to the search of the assessee and thus, they can in no way be treated as incriminating material for the purpose of making the addition. 1.8 Further, we would like to submit that our case is completely covered in the favour of the assessee by various decisions of various H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ETION OF ADDITION UNDER SECTION 68- JUSTIFIED INCOME TAX ACT, 1961, SS. 68, 153A. Held dismissing the appeal,that the order of Commissioner (Appeals) revealed that there was a factual finding that no incriminating evidence related to share capital issue was found during course of search as was manifest from the order of AD. Consequently, it was held that AO was not justified in invoking section 68 for the purposes of making addition on account of share capital. There was nothing to show that above factual determination was perverse. The judgment of the Horrble High court is reproduced as under: 1. The Revenue has filed the appeal against an order dated November 14, 2014, passed by the Income -Tax Appellate Tribunal ('ITAT) in 3761/De1/2011 pertaining to the assessment year 2002-03. The question was whether the learned Commissioner of Income -tax (Appeals) had erred in law and on the facts in deleting the addition of ₹ 89 lakhs made by the Assessing Officer under section 68 of the Income -Tax Act 1961 (the Act ) on bogus share capital. But the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is as under: 11. We have heard the arguments of both the Sides on this issue and also perused the relevant material available on record. It is observed that the claim of the assessee for deduction under section 80lA to the extent of ₹ 5,46,96,237/- was disallowed in the original assessment proceedings and since the said assessment had become final before the search and seizure operation conducted on 28.10.2010, there was no reason or occasion to raise this issue in the proceedings under section 153A read with section 143(3), especially when there was no incriminating material found during the course of search relating to this issue. As a matter of fact, in the return of income filed on 30.09.2011 in response to the notice issued under section 153A pursuant to the search and seizure action, deduction under section 80IA was claimed by the assessee only to the extent of ₹ 3,36,24,913/- as allowed in the original assessment and the additional claim of ₹ 5,46,96,237/- for deduction under section 80IA was made by the assessee by way of revised computation of total income filed during the course of assessment proceedings under section 153A read with section 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Calcutta High Court Kolkata has time and again reiterated its view that the additions in case of the search assessments have to be made on the basis of incriminating material. Some of the recent decision of the Hon'ble Jurisdictional High Court as well as other courts are discussed hereunder for your honors ready reference; (i) PCIT-2, Kolkata Vs. Salasar Stock Broking Limited (ITAT No. 264 of 2016 dated 24.08.2016: (Calcutta) In this case, the Honorable High Court observed that the Ld. ITAT, Kolkata was of the opinion that the assessing officer had no jurisdiction u/s 153A of the LT. Act to reopen the concluded cases when the search seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. ITAT relied upon the judgments of Delhi High Court in the case of CIT(A) Vs. Kabld chawla in ITA No. 701/2014 dated 28.08.2014. The Court also observed that more or less an identical view has been taken by this Bench in ITA No. 661/2008 in the case of Veerprabhu Marketing Limited. Considering the above facts, the Honorable High Court did not admit the appeal filed by the Department. (ii) CIT, Kolkata-III Vs. Veerprabhu Marketing Limited [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion framed by the Court was answered in favour of the assessee and against the Revenue- Revenues appeal dismissed. (iv) Mridul Commodities Pvt. Ltd. Vs DCIT, Cent. Cir-XXI, Kol. in (IT(SS) A Nos.14 15/Kol/2015) dt.07.10.2016. (v) M/s. All Cargo Global Logistics Ltd. Vs DCIT, Cent. Circle - 44, Special Bench Mumbai (IT Appeal Nos.S018 to S022 SOS9 (Mum) of 2010 dt.06.07.2012. (vi) ACIT vs M/s PHPL Stock Broking Pvt. Ltd. in IT(SS)A No.12/Ko1/2017 dt. 21.08.2018; (vii) DCIT vs M/s B.R. Infraprojects Pvt. Ltd. in IT(SS)A No.11/Ko1/2017 dt. 26.09.2018; (viii) DCIT vs M/s Rosemarry Sponge . Ispat Pvt Ltd. in IT(SS)A No.7S . 76/Kol/2017 dt. 30.11.2018. 1.9. Further, we would like to submit the Ld. CIT(A) has given a very categorical finding that no incriminating material has been found during the course of search based on which the addition has been made by the AO. The observation given by the Ld. CIT(A) is reproduced as under: ''I have considered the findings of the AO in the assessment order, different case laws was brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 132(1) is conducted, the Assessing Officer gets jurisdiction to issue notice under section 153A for the relevant years and complete the assessments for the said years. It is also true that there is no explicit mention in the language used in section 153A that the addition made under section 153A should be based on the incriminating material found during the course of search. The scope of assessment to be made under section 153A, however, is considered and defined in the various judicial pronouncements. In this regard, the assessments are classified in two categories, i.e. completed assessment and pending or abated assessment. It is held that if the assessment for the relevant year is pending as on the date of search and it is not completed, the same gets abated and the scope of assessment to be made under section 153A for the said year is wide, which includes assessment of income on the basis of incriminating material found during the course of search as well as the assessment of income, which is the subject matter of regular assessment. On the other hand, if the assessment for the relevant year is not pending as on the date of search, the same is to be regarded as com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly at the premises of a connected person can be treated as incriminating material for the purpose of making the addition under section 153A of the Act. In the present case, it is observed that no such survey had been conducted under section 133A simultaneously either at the premises of the assessee or of a connected person. The statements of the so-called entry operators and dummy Directors relied upon by the Assessing Officer for making the addition were thus not recorded in any proceedings such as survey conducted simultaneously or in connection with the search conducted in the case of the assessee and since the said statements were also retracted subsequently by the deponents, we find merit in the contention raised on behalf of the assessee that the same could not be treated as an incriminating material on the basis of which the addition made in the assessment under section 153A can be justified. 9. As regards the contention of the ld. D.R., that the process of assessment of total income under section 153A can neither be restricted nor have a different connotation, we find that the same is contrary to the law laid down by the various judicial pronouncements discussed above in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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