TMI Blog2021 (3) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... [ 2017 (8) TMI 250 - DELHI HIGH COURT] has held that statement under section 132(4) in the itself does not constitute incriminating material. As per HARJEEV AGGARWAL [ 2016 (3) TMI 329 - DELHI HIGH COURT] statement of Sh. Mulchand Malu under section 132(4) of the Act alone cannot be considered as incriminating material unless any corroborating incriminating material is found during the course of the search from the premises of the assessee. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Following the finding of the Hon ble Delhi High Court in the case of Kabul Chawal [ 2015 (9) TMI 80 - DELHI HIGH COURT] we, accordingly, uphold the same. The ground No. 1 of the appeal of the Revenue is accordingly dismissed. - ITA No. 4223/Del./2018 ITA No.4225/Del./2018 ITA No.4226/Del./2018 - - - Dated:- 26-3-2021 - SHRI O.P. KANT, ACCOUNTANT MEMBER And SHRI K.N. CHARY, JUDICIAL MEMBER Appellant by : Ms. Aashna Paul, CIT(DR) Respondent by : Shri P.C. Yadav, Adv. ORDER PER O. P. KANT , AM These appeals by Revenue are directed against three separate orders, all dated 22/03/2018, passed by the Learned Commissioner of Income Tax(Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for the year under consideration, the assessee filed original return of income on 30/09/2009, declaring total income as nil. The return was processed under section 143(1) of the Income-tax Act, 1961 (in short the Act ) in order dated 09/02/2011 at an income of ₹ 1,89,72,710/-. Subsequently, a search and seizure action under section 132 of the Act was conducted on 09/10/2014 at various premises of the assessee along with premises of the Directors etc. In view of search action, proceedings under section 153A of the Act were commenced by way of issue of notice dated 15/12/2015. The assessee filed return of income on 17/01/2016 declaring nil income. The assessment under section 153A was completed on 28/12/2016 after making an addition of ₹ 2,47,00,000/- on account of unexplained credit under section 68 of the Act. On further appeal, the Ld. CIT(A) allowed the appeal of the assessee on legal ground following the decision of the Hon ble Delhi High Court in the case of Kabul Chawla, 380 ITR 573. Aggrieved, the Revenue is in appeal raising the grounds as reproduced above. 4. Before us, the parties appeared through Video Conferencing facility and filed paper-book in phy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,00,000/- (xi) M/s. Suruchi Financiers Pvt. Ltd. ₹ 25,00,000/- (xii) M/s. Tarini Enterprises Pvt. Ltd. ₹ 38,00,000/- Total ₹ 2,47,00,000/- 5.2 In post search proceedings, the Income Tax Department carried out surveys under section 133A of the Act at the premises of the few unsecured loan parties and statement of the persons available at those premises were recorded. According to the Assessing Officer, those persons were not aware about the unsecured loan provider parties. Similarly, search action under section 132 of the Act was carried out at the premises of some unsecured loan providers and those entities were not found in existence on the addresses provided. None of the directors/key persons of those companies appeared. The inquiries were also conducted under section 133(6) of the Act in case of few unsecured loan providers. During assessment proceeding, the Assessing Officer also issued Commission to Investigation Directorate, Kolkata for enquiring M/s RK Investment Private Limited and M/s Rajan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operator. The entry operator routes the cash through many bank accounts. The directors are also small person who become directors only to earn bread and butter, they do not know about the company. Actually, all the affairs of these companies are run by the entry operators. Accordingly, apart from the other evidences as discussed in the order, enquiries and findings, the investor companies are hereby declared bogus/paper company which has been used to route the unaccounted cash into the books of accounts of the beneficiary company using layering of bank accounts. 5.17 To find out the source of the amount which has been credited in the books of the assessee company, details of companies which made investments in assessee company and the advances / loan given or taken by the assessee company were got verified through the Inspector of the dapartment. Inspector was deputed to verify the addresses of these companies.However none of the companies were found to be existing at these addresses. This fact was further strengthen by the fact that when summons were sent during post search proceedings to these companies, the summons were either returned back by the postal authorities with Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. I am satisfied that the assessee company has furnished inaccurate particulars of income therefore penalty proceedings u/s 2tl(l)(c) of the I.T. Act is initiated separately. 5.4 Before the Ld. CIT(A), the assessee submitted that there was no reference of any seized material, incriminating or otherwise and therefore the assessment order was not based on seized material but some other extraneous information. The assessee also submitted that statements of persons, namely, Vikas Kumar, Devesh Upadhaya and Sh. Parveen Agrwal have been relied upon by the Assessing Officer, however no opportunity to cross examine those third parties was provided to the assessee. Regarding the statement of Sh. Mool Chand Malu, the assessee submitted that he was neither a director nor employee in the assessee company. It was submitted that Sh. Mool Chand Malu died on 10/04/2017. According to the assessee, it did not agree with the surrender made by Sri Mulchand Malu and therefore there was no question of honouring such surrender. The Assessing Officer also expressed his inability in providing cross examination of Sh. Mukchand Malu in view of his death. After detailed analysis of the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a , 381 ITR 570 (Delhi) (b) Pr. CIT Vs. Kurele Papers Mills Pvt. Ltd. , 380 ITR 571 (Delhi) (c) Pr. CIT Vs. Meeta Gutgutia, 395 ITR 526 (Delhi) I am bound by law as laid down by my jurisdictional High Court as elaborated above. As such, I hold that the addition made by the Assessing Officer, not being based upon any seized material or incriminating material found during the course of search, is not sustainable. 5.7 Regarding the issue whether the statement recorded under section 132(4) of the Act in itself constitute incriminating material, the Ld. CIT(A) relied on the decision of the Hon ble Delhi High Court in the case of CIT Vs Harjeev Aggrawal (supra) and held that statement made by Sri Muklchand Malu had no Nexus with any seized material, the relevant finding of Ld. CIT(A) is reproduced as under: The appellant has pointed out (based upon elaboration of law by Hon ble Delhi High Court) that the statements recorded u/s 132(4) do not themselves constitute incriminating material. I have examined the aforesaid position of law. I find that the additions made by the AO are solely made on the basis of disclosure/ surrender made by Shri Mul Chand Malu u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on the basis of the undisclosed income offered in statement under section 132(4) of the Act, which is an admissible evidence, and therefore, contention of the Ld. CIT(A) that no incriminating material is found in the course of the search, is not correct finding of fact. The Learned DR also relied on the decision of the Hon ble Supreme Court in the case of B Kishore Kumar Vs DCIT reported in (2015) 62 taxmann.com 215 (SC) . 8. On the other hand, Learned Counsel of the assessee relied on the order of the Ld. CIT(A). The learned Counsel submitted that original return of income in the case was filed on 30/09/2009 and no notice under section 143(2) of the Act was issued prior to the date of the search and, therefore, no assessment was pending as on the date of the search. Further, he submitted that Learned CIT(A) has relied on the decision of the Hon ble jurisdictional High Court in the case of Kabul Chawla reported in 380 ITR 573. Regarding statement of Sri Mulchand Malu, the learned Counsel submitted that the assessee is from day one contending that Shri Malu was neither a director nor an employee of the assessee company. He further submitted that statement/surrender by third-pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been disputed by the Revenue also. 9.2 The only dispute is regarding whether there was any incriminating material found during the course of the search. According to the Learned DR statement of Sh. Mulchand Malu recorded under section 132(4) constitute incriminating material and therefore decision of the Kabul Chawla (supra) is not applicable over the facts of the assessee. 9.3 We find that Hon ble Delhi High Court in the case of PCIT Vs Best Infrastructure Private Limited, 397 ITR 82 has held that statement under section 132(4) in the itself does not constitute incriminating material. The relevant finding of the Hon ble High Court is reproduced as under: 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 22. In CIT v. Sri Ramdas Motor Transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.5 In view of the above finding of the Hon ble Delhi High Court statement of Sh. Mulchand Malu under section 132(4) of the Act alone cannot be considered as incriminating material unless any corroborating incriminating material is found during the course of the search from the premises of the assessee. 9.6 As far as the decision in the case of Sh. B Kishore Kumar (supra) is concerned Hon ble Supreme Court has dismissed the SLP filed by the assessee against the decision of Hon ble Madras High Court (decision reported in 52 taxmann.com 449), wherein the Hon ble Court has held that where the assessee himself has stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on the basis of the admission without be scrutinizing documents. The relevant finding of the Hon ble High Court is reproduced as under: 6. With regard to the undisclosed income of ₹ 52,73,920/- supported by printouts, in the sworn statement dated 29.8.2006, the assessee says that he had separate business income which was not included in his income tax returns. Therefore, admission of undisclosed income of ₹ 52,73,920/- is categoric and undisputed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accordingly dismissed. 10. Since no addition could have been made in the case of the assessee, we are not deciding the arguments of the parties on the merit of the addition. The grounds related to merit of the addition are accordingly dismissed as infructuous. 11. In the result, the Appeal of the Revenue is dismissed. ITA No. 4225/Del./2018 for AY : 2011-12 12. In the appeal of the Revenue (ITA No. 4225/Del./2918) for assessment year 2011-12 also original return of income was filed on 30/09/2011 and assessment under section 143(3) was completed on 20/02/2014 and therefore no assessment was pending as on the date of the search i.e. 09/10/2014. As far as facts of incriminating material are concerned, the facts are identical to assessment at 2009-10. 13. Accordingly, following our finding in assessment year 2009- 10, the appeal of the Revenue in assessment year 2011-12 is also dismissed. ITA No. 4226/Del./2018 for AY: 2013-14 14. In ITA no. 4226/Del/2018 for assessment year 2013-14, also identical facts to the case for assessment year 2009-10 are involved. In assessment year 2013-14, the original return of income was filed on 30/09/2013 declaring total i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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