TMI Blog2021 (11) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Rowland Trexim Pvt. Ltd. respectively have been duly recorded in the books of account based on which return of income was filed and the same can by no stretch of imagination be construed as incriminating material found during the course of search. In this regard, support is drawn to the decision of the Hon ble Delhi High Court in the case of CIT v. RRJ Securities Ltd.[ 2015 (11) TMI 19 - DELHI HIGH COURT] We once again reiterate that the scope and ambit of section 153A of the Act is to restrict to only incriminating material in case of unabated years. Since the assessment for the year under consideration is an unabated one which is undisputed and that we find no existence of any such incriminating material which is the pre-requisite to make assessment u/s.153A of the Act, the consequent additions made by the Revenue are without jurisdiction and will not survive - Decided against revenue. - ITA.NOs. 4041 & 4042/MUM/2019, C.O. No. 73/MUM/2020 [ARISING OUT OF ITA.NO. 4041/MUM/2019 (A.Y. 2011-12)] And C.O.No. 16/MUM/2021 [ARISING OUT OF ITA.NO. 4042/MUM/2019 (A.Y. 2012-13)] - - - Dated:- 16-9-2021 - Shri C.N. Prasad, Hon'ble Judicial Member And Shri S. Rifaur Rahman, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er highlighted the background of search action carried out on the Patni Group on 09.10.2014 wherein statement of various entry providers had been recorded (who had made investments in the group) and they had accepted to have provided accommodation entries to the group in the form of share capital or unsecured loan. The facts that emanate from the search action as recounted by the Assessing Officer are that the Patni group had bought a company namely M/s.Gulmohar Towers Pvt. Ltd. through their group entity namely M/s.Everfine Constructions Pvt. Ltd. at very nominal price. During the search action, it was unearthed that the groups are selling flats/ units from their real estate projects and out of which full consideration is not recorded in the books. This unaccounted income generated through On money and Out of Book Sales have been routed through these shell company based in Kolkata and brought into regular books by way of unsecured loan or advance against booking. It was observed that the total networth of M/s. Gulmohar Towers Pvt. Ltd. was ₹.45,06,49,650/- (including share premium of ₹.42,80,19,650/-) which was raised in F.Y.2007-08 which was later on purchased by Patn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany with huge reserves and surplus at substantially lower price with such huge difference between the price paid and actual price of the company. According to the Assessing Officer, it was very clear that the company was acquired only as a device to take accommodation entry and that the said company was only a shell/ paper company which had been created to route unaccounted funds. He also stated that M/s.Gulmohar Towers Pvt. Ltd. got incorporated for the purposes of business which it never carried and that if there was no business in the company, then why any prudent businessman made investment in the company, or could it be concluded that the company had been formed with the real intention of infusing unaccounted money by creating various layers. Therefore, on perusal of all the facts and in the light of circumstantial evidence, the Assessing Officer alleged that the assessee has introduced its own unaccounted money under the garb of investment and all the receipts are to be added to the total income of the assessee u/s.68 of the Act. Based on the declaration of undisclosed income by Shri Khimji Patel and given the fact that the said investment would have been assessed in M/s.Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s infused by Divine, Rowland and Bhawna for providing unsecured loans and share application money to Lotus Group are examined, then it becomes crystal clear that the transactions made by the Group are mere accommodation entries. Reference was given to various entry operators who have accepted before the Department that they were in the process of providing accommodation entries and only for that purpose they had created shell companies for carrying out such activities. As per the Assessing Officer, it has been revealed that the companies making investments in the said 3 companies were either the operator or director of the companies who had accepted before the Department that they are providing accommodation entries. The Assessing Officer analyzed the financials of the said 3 companies in which share capital along with premium had been received wherein it gets proved that the companies do not have any funds as their accumulated profits are very meagre to the fetch the share application money and that too at a huge premium. 5.4 The Assessing Officer once again referred to the statement of Shri Anand Sharma recorded u/s.133A dated 02.07.2013 who is an alleged entry operator wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own unaccounted money under the garb of unsecured loan and advance against land and accordingly, also made addition of ₹.8,55,00,000/- u/s.68 of the Act in respect of loan obtained from M/s. Rowland Trexim Pvt. Ltd. and disallowed the interest expense thereon of ₹ 3,15,148/- u/s.69C of the Act. 6. The Ld. Counsel for the assessee submits that the assessment u/s.153A of the Act is not based on any incriminating material relating to the assessee found in the course of search. The impugned assessment order has not made any reference of any such incriminating material/ asset belonging to the assessee. The entire assessment order has been framed based on the general modus operandi of Groups acquiring paper companies at nominal value/ infusing unaccounted money in the form of share capital loans through various layers of companies/ entry providers etc., and also statements of various third parties/ entry operators recorded during their survey and that too prior to the date of search i.e. 09.10.2014. He submits that in relation to findings/ evidences collected during the course of search, reference is only made to the statement of Shri Khimji Patel (subsequently retract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minating material, the ld. Counsel placed reliance on certain decisions: (i). CIT v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Del HC) (ii). Pr. CIT v. Best Infrastructure Pvt Ltd [2017] 84 taxmann.com 287 (Del ITAT) (iii). PCIT v. Anand Kumar Jain (HUF) ITA 23/2021 dated 12.02.2021 (Del HC) Further, the Ld. Counsel argued that the case of the assessee had earlier been assessed u/s.143(3) vide order dated 15.01.2014 and placed the copy of assessment order on record. It is submitted that as per the provisions of section 153A of the Act, an assessment is abated, if any assessment or reassessment is pending on the date of initiation of the search. Therefore, in the present case, on the date of search viz. 09.10.2014, the assessment u/s. 143(3) for the year under consideration was already completed and even no notice under section 148 was issued before the initiation of the search. Thus, the regular assessment done had attained finality prior to the date of search. The ld. Counsel made reference to the 2nd proviso to section 153A of the Act and submitted that the said proviso implies that in respect of completed assessments, an assessment shall be made only if incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the assessee has undertaken transactions are non-genuine and have been engaged in the modus operandi of providing accommodation entries. The statements recorded coupled with circumstantial evidence constitute incriminating material which reveals that the said companies are bogus and accordingly, addition made in assessment u/s.153A is justified. 8. We have considered the rival submissions and perused the material placed before us. The moot point for consideration is whether there is any incriminating material found in the course of search to justify the addition made in assessment u/s.153A of the Act. It is the submission of the Ld.Counsel that the assessment us/.153A of the Act for the year under consideration is for an unabated year since it had already been assessed to tax u/s.143(3) vide order dated 15.01.2015 and therefore, addition, if any in assessment u/s.153A ought to be restricted only to incriminating material found in the course of search. He submits that none of the additions made is based on any incriminating material unearthed during the search proceedings but merely based on statements recorded of parties during the course of search on the group or statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith its provisos reveal that it is only the pending assessments as on the date of initiation of search which shall abate. The intention behind the same is only to avoid multiplicity of proceedings for the same assessment year. However, it is to be borne in mind that the object and purpose of a search is to detect undisclosed income. A search can take place only when a concerned officer has information and reason to believe that any person is in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of a search, then the books of account or other documents or valuable assets could be seized. Chapter XIV-B of the Act deals with special procedure for assessment of search cases dealing with undisclosed income as a result of search, the computation thereof and such other provisions. Undisclosed income is defined in section 158B(b) of the Act which includes money, bullion or other valuable assets. As stated earlier, it is only when the concerned officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various group concerns in the form of loans. Similarly, in case of M/s.Rowland Trexim Pvt. Ltd., he has relied upon the statements of Shri Pradeep Poddar, Shri Ashok Agarwal, Shri Ankit Podar, Shri Anand Sharma, Shri Parbat Gothi, Shri Amal Mondal and Shri Birendra Kumar Tiwary. From the above, it appears that the Assessing Officer has simply relied upon various statements recorded during the survey and search actions and has narrated the general modus operandi which usually is discovered out of search actions. The Assessing Officer apart from the statements recorded has failed to produce any corroborative material to justify the addition. No such concrete finding or incriminating material revealing undisclosed income of the assessee per se has been unearthed which is the sine qua non for making additions pursuant to a search and seizure operation. This observation which has also been held by the Hon ble Bombay High Court in the case of All Cargo Global Logistics Ltd. [2015] 374 ITR 645 (Bom.). The Hon ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 answered the question framed by it as under: 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, coming to the issue about statements recorded u/s.132(4) whether they constitute incriminating material or not, we observe that although such statements possess evidentiary value and have relevance as contemplated by the Act, such statements alone cannot on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the Assessing Officer to frame the block assessment. Therefore, we find merit in the arguments of the Ld. Counsel for the assessee that the statements alone cannot constitute incriminating material. It is observed that none of the statements relied upon by the Assessing Officer reveal any form of material viz. undisclosed asset/ documents or parallel books of account belonging to the assessee except general confessions about the various companies operated by them. Even the Ld. DR failed to show any material or evidence unearthed in the course of search to incriminate the assessee. Therefore, such standalone statements in absence of any other corroborative evidence cannot be construed as incriminating material. It is imperative to draw support of the decision of the Hon ble Delhi High Court in the case of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch. 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. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman 300, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lock 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 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 CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306, 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 .. In view of the aforesaid, we do not appreciate the contentions of the Revenue that the statements recorded during the course of search constitute incriminating material for the purpose of assessment u/s.153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A of the Act is to restrict to only incriminating material in case of unabated years. Since the assessment for the year under consideration is an unabated one which is undisputed and that we find no existence of any such incriminating material which is the pre-requisite to make assessment u/s.153A of the Act, the consequent additions made by the Revenue are without jurisdiction and will not survive. As we have decided the issue on the preliminary ground, all other issues raised by both the parties become academic and need not require separate adjudication. 10. In the result, the cross objection filed by the assessee is allowed and the appeal filed by the revenue is dismissed. ITA No.4042/MUM/2019 CO No.16/Mum/2021 A.Y.2012-13 11. The facts of the case for A.Y.2012-13 are identical to A.Y.2011-12 with only one distinguishing feature that no regular assessment was done for A.Y.2012-13 prior to the date of search i.e. 09.10.2014. However, the due date of intimation u/s.143(1) expired on 31.03.2014 and that for issuance of notice u/s.143(2) expired on 30.09.2013 which was much prior to the date of search and therefore, the return of income had attained finality. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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