TMI Blog2021 (9) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... we constrain to hold that there is no incriminating material found during the course of search based on which the return income for the respective year can be disturbed. Only statement of 3rd party could not have been used for making an addition in the hands of the assessee in case of search in absence of any corroborative material. The learned departmental representative also could not produce any material other than the statement of Mr Malu for making the above addition. Assessment Year 2013-14 assessee has sought the cross examination of the persons whose statement are used by the ld AO. Naturally the persons is passed away and therefore, the cross examination could not be given. Even in that case also no fault can be found with the assessee and therefore, the statement recorded of that person could not have been used for making any addition in the hands of the assessee when the assessee has sought cross-examination of that person. The statement alone cannot be said to be any incriminating material based on which any addition can be made in the hands of the 3rd parties. Therefore on the solitary ground of appeals of the assessee are deserves to be allowed. As there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, in sustaining the action of AO in completion of proceedings u/s 153(A), of the IT Act, solely on the basis Unverified/ unratified/unsubstantiated/unconfirmed statement of Shri Mul Chand Malu. 3 That on the facts and circumstances of the case, the learned Ld. CIT (A) has erred, both on facts and in law, in sustaining the assessment by the Ld. AO and in making additions of Rs.l,32,00,000/- on account of share capital and share premium, ignoring the facts and circumstances of the case. 4 That on the facts and circumstances of the case, the learned Ld. CIT (A) has erred, both on facts and in law, in sustaining the assessment by the Ld. AO and in making addition of ₹ 1,32,00,000/- despite the fact that the assessee has discharged the onus cast upon it under section 68 of the Income-tax Act. 5 That on the facts and circumstances of the case, the learned Ld. CIT (A) has erred, both on facts and in law, in sustaining the assessment by the Ld. AO and in making addition of ₹ 1,32,00,000/- despite the fact that no incriminating documents were found during the course of search. 6 On the facts and in the circumstances of the case Ld. CIT (A) has er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross- examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A). 7 That the impugned assessment order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 6. Brief facts of the case for assessment year 2013-14 shows that the original return of income declared loss of ₹ 13,41,315/- was filed by the company on 31.10.2013. No assessment was framed u/s 143(3) of the Act. A search took place u/s 132 of the Act on 09.04.2014 at Kuber Group of companies wherever certain documents pertaining to the assessee was found. Therefore, a satisfaction note was recorded in case of Mr. Mulchand Malu that documents pertaining to the assessee were found and same were handed over to the ld AO of the assessee. Based on this satisfaction note, notice u/s 153C of the Act was issued on 28.09.2016. 7. Assessee filed return declaring a loss of ₹ 42,50,821/- on 16.12.2016. The ld AO found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(2) of the Act on 30.09.2014. The search took place on 09.10.2014. He submitted that the assessee challenged the order of the ld AO before the ld CIT(A) stating that there is no incriminating documents found during the course of search and further orders for both the assessment years not pending as on the date of search the addition cannot be made. It was further stated that statement of 3rd party cannot be relied upon and such statement alone cannot be treated as incriminating material. He submitted that the ld CIT(A) did not agree with the contentions of the assessee and pass an order dismissing the appeal. He submitted that no incriminating documents or material was found during the course of search. He therefore, submitted that in case of concluded assessment, which is not pending on the date search, no addition could be made. He further stated that the statement of 3rd party could not be relied upon for framing assessment u/s 153C. He relied upon the decision of the Hon'ble Delhi High Court in case of Anand Kumar Jain. He further stated that even otherwise statement alone cannot be treated as incriminating material based on which the addition cannot be made. For this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as processed u/s 143(1) on 09.12.2013. The prescribed period for issuing the notice u/s 143(1) of the Act was expiring on 30.09.2013. On 09.10.2014 search took place in case of Kuber Group of cases where the assessee is one of the group companies. The search also took place at premises of Shri Mulchand Malu and Shri Vikash Malu where documents pertaining to the assessee were found. The satisfaction note was recorded by the ld AO of Mulchand Malu stating that documents pertaining to the assessee were found from his premises, which were handed over to the ld AO of the assessee who recorded the satisfaction and issue notice u/s 153C of the Act on 28.09.2016. The assessee filed return of income declaring a loss of ₹ 2,47,566/- and thereafter the ld AO proceeded to make an assessment. In paragraph, 6 of the assessment order the ld AO described statement recorded u/s 132(4) of the Act on 15.12.2014 of Shri Mulchand malu who has offered the declared undisclosed income of Kuber Group of companies. Undoubtedly Mr. Malu in answer to question No. 64 disclosed certain income of the group. Statement of Mr. Mulchand Malu was also recorded on oath u/s 131 of the Act on 02.01.2015 where he o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016. In view of this, we constrain to hold that there is no incriminating material found during the course of search based on which the return income for the respective year can be disturbed. Such is the mandate of the decision of the Hon ble Supreme Court in case of Shinghad Technical Education Society 397 ITR 344 and also of the Hon'ble Delhi High Court in case of CIT Vs Kabul Chawla 380 ITR 573. The Hon'ble Delhi High Court in its recent decision in case of Anand Kumar Jain has categorically held in that case that (i) that the statement of PKJ recorded under section 132(4) alone could not justify the additions made by the Assessing Officer. Even if the Department s contention that the failure to cross-examine the witness did not prejudice the assessee, apart from the statement of PKJ the Department had failed to produce any corroborative material to justify the additions. On the contrary during the course of the search, in the statement made by the assessee, he had denied having known PKJ. Since there was insufficient material to support the additions, the Tribunal had deleted them. This finding of fact, based on evidence did not call for interference, as evidence c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of Shri Mulchand Malu. The fact of the case for Assessment Year 2013-14 is also identical. Therefore, for Assessment Year 2013-14 also the addition has been made on the basis of statement of Mulchand Malu only no other incriminating documents were either placed in the assessment order and no such evidences were further placed in the remand report before the ld CIT(A). In view of this, we do not find any reason to uphold the orders of the lower authorities. Even otherwise, in both the cases, the assessee has sought the cross examination of the persons whose statement are used by the ld AO. Naturally the persons is passed away and therefore, the cross examination could not be given. Even in that case also no fault can be found with the assessee and therefore, the statement recorded of that person could not have been used for making any addition in the hands of the assessee when the assessee has sought cross-examination of that person. 15. The statement alone cannot be said to be any incriminating material based on which any addition can be made in the hands of the 3rd parties. Therefore on the solitary ground of appeals of the assessee are deserves to be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 9.4 The relevant paragraph of the decision of the Hon ble Hon ble Delhi High Court in the case of Harjeev Agrawal (supra) also reproduced as under: 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be based on the statement recorded. 22. In CIT v. Sri Ramdas Motor Transport Ltd.: (1999) 238 ITR 177 (AP), a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below: A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 25. In Commissioner of Income Tax v. Naresh Kumar Aggarwal: (2014) 3699 ITR 171 (T AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. The relevant extract from the said judgement is quoted below: 17. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax returns. Therefore, admission of undisclosed income of ₹ 52,73,920/- is categoric and undisputed. The assessee in the sworn statement made on 10.10.2006, stated that outstanding loans to the tune of ₹ 25 Lakhs to 30 Lakhs are to be recovered with interest at the rate of 18%. This is a clear admission. This amount has also been calculated and added as undisclosed income. When there is a clear and categoric admission of the undisclosed income by the assessee himself, in our considered opinion,, there is no necessity to scrutinize the documents. The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assessee that the admission made by him was incorrect or there is mistake. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence for the Revenue. 7. The learned counsel for the assessee relied upon a decision of the Delhi High Court in C1T v. Girish Chaudhary, [2008] 296 1TR 619/163 Taxman 608 to plead that loose sheets of papers should not be taken as a basis for determining undi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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