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TMI Blog2023 (3) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... he competent authority under Sec. 132 of the Act, in the residence of Smt. Adlene Kagoo, who is stated to be a trusted employee of one Mr. P. Dayanand Pai, on 12.4.2011. Mr. P. Dayanand pai, is the key person of Dayanand Pai Group of Companies. In the course of search of Adlene Kagoo certain Compact Discs(CD), pen drives and other electronic records were found besides loose papers. They were all seized. Among the seized document, what is relevant and important for the present appeal are the print out taken from the Seized CD in the form of a ledger and this is referred to as "Dummy (Tally Training Environment) {DTEE}. The data contained in DTEE contained day to day receipts and payments transactions-cash, bank and journal entries allegedly maintained by Smt. Adlene Kagoo on instructions from Mr. P. Dayanand Pai. 4. Based on the documents found in the search conducted in the case of Smt. Adlene Kagoo, the AO proceeded to make assessment for all the Assessment Years. Based DTTE, the AO made some additions. We shall first deal with the additions made in AY 2006-07 to 2009-10 that are challenged in the appeals ITA No. 67 to 70/Bang/2017. According to the Revenue, the DTEE contained de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts paid towards transactions at Pages 39 &4 Total amounts paid towards transactions at Page 2 & 33 Total 2006-07 25000000 52500000. 77500000 6. In so far as the additions made in Assessment Year 2007-08 is concerned, on the basis of similar observations and placing reliance on DTTE page 2 and 4, the AO made an addition of Rs. 5,10,00,000/- as cash payments not reflected in the books of account on the same basis on which addition was made in AY 2006-07. Besides the above, the made an addition of Rs. 18,73,29,601/- on the basis of documents seized in the course of search in the case of Smt. Adlene Kagoo. The relevant observations of the AO were as follows: II. Interest charged : Further, the assessee has raised certain amounts as interest from M/s. Dayanand Pai. The documents show that the assessee had made computations at 14%, 18% and 24%. However an analysis of the relevant pages, namely, 10, 11, 12, 13, 14, 15, 16, 45, 46, 47 of the documents show that he has charged interest at 18%. The working of the interest actually charged by the assessee is at Page 45, based on 18% interest. Rest of the documents are supportive documents for the same. Based on the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/-. Thus the discussion is limited to the aforementioned credits only. All the documents found in the premises of Ms. Adlene Kagoo consistently show the figures as above for the purpose of computation of interest. The Assessee was required to explain the entries. Bu the reply filed by the Assessee is vague. As staged, all the pages showing the computations of interest namely, 45, 44, 43, show the advances at the same figures. Pages 47, 32, 15, 13, 10, being computation sheets for interest confirm to the entries in pages 45, 44, 43. Thus, the chain of documentation establishes that the entries in these sheets that are in the hand writing of Mrs. Adlene Kagoo are true and are nothing but the accounting maintained by M/S. Dayanand Paid in respect of actual transactions that the two business partners have entered into. In other words, the assessee had advanced these amounts to M/S. Dayanand Paid, which is evidenced by the documents. This brings to the inescapable conclusion that the contents of these documents are correct. Addition AY 2007-08 Rs. 13,08,00,000/- Thus the total additions are as under:- AY DTTE DTTE Inerest income Principal Total 2007-08 51000000 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kagoo is not valid in the law on the facts and circumstances of the case. iii. The learned CIT(A) failed to appreciate that the assessment order passed under Section 153A r.w.s 143(3) of the Act is without Jurisdiction and the lower authority without prejudice ought to have issued notice under Section 153C of the Act after complying with the mandatory conditions on the facts and circumstances of the case. iv. The CIT(A) failed to appreciate that there being no incriminating materials found/seized in the course of search in the case of the Appellant or/and there being no external evidence found, the proceedings initiated and the subsequent order u/s. 153A is opposed to law and accordingly liable to be cancelled. 10. In so far as ground No. 5(i) to (iii) raised by the assessee is concerned, we have already seen that the present proceedings were initiated under section 153A of the Act on the basis of search conducted in H.M. Constructions and group of cases on 30.06.2011. It is also clear from the discussion in the Order of Assessment based on which the impugned additions have been made that the basis of the addition is the document found in the course of search of in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (Bom). 12. The learned DR supported the impugned orders of assessment for Assessment Years 2006-07 to 2009-10 and submitted that the AO was fully justified in taking cognizance of the material found/seized in the course of search action in the case of Smt. Adlene Kagoo. It was submitted that the provisions of section 153C of the Act need not be invoked when assessment proceedings under section 153A of the Act are pending in the case of the assessee. It was also contended that there was no bar for making assessment by taking cognizance of material found/seized in the case of Smt. Adlene Kagoo. 13. We have carefully considered the rival submissions. The facts are not in dispute that the impugned additions were made in the case of the Assessee on hand on the basis of material found and seized from the premises of Smt. Adlene Kagoo. It is also amply clear that the AO did not invoke the provisions of Section 153C of the Act on receipt of the material; but rather chose to take cognizance of those materials in the course of pending assessment proceedings under section 153A of the Act for Assessment Years 2006-07 to 2009-10 that were before him. It is therefore clearly established that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 132A, as the case may be, shall abate 15. The provisions of Section 153C of the Act enjoins upon the AO of the person searched; that on being satisfied that books of account seized or requisitioned belongs to or pertain to some other persons, to handover the books of account to the AO having jurisdiction over such other person. Thereafter, the second AO, on being satisfied that the books of account and documents received have a bearing on the determination of the total income of the other person, should assume jurisdiction under section 153C of the Act. After assuming jurisdiction under section 153C of the Act, the AO proceeds to carry out an assessment in terms of section 153A r.w.s. 143(3) of the Act. In this regard, it is relevant to extract section 153C of the Act hereunder:- "153C(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 132 of the Act in the case of the assessee on 30.6.2011. No incriminating materials were found during the said search. It is not in dispute that none of the additions made in the aforesaid assessment years is based on material seized and found in the course of search conducted in the case of the assessee on 30.6.2011. After the search, notices under section 153A of the Act were issued on 30.11.2011 and thereafter assessments were framed by the AO. The material based on which the impugned additions were made by the AO were material found in the course of search of Smt. Adlene Kagoo on 12.4.2011. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 153A of the Act in the case of the assessee before the AO would abate on the date the AO receives the seized material from the AO of Smt. Adlene Kagoo and fresh proceedings under section 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information/materials, the AO did not assume jurisdiction under section 153C of the Act, but rather chose to use the said materials/information for making additions in the impugned orders of assessment con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of section 153C of the Act. In this regard, we would like to place reliance on the recent decision of the Hon'ble Delhi High Court in the case of CIT v. Pinaki Misra & Sangeeta Misra [ (2017) 148 DTR 219 (Delhi)] : [TS-5161-HC-2017(DELHI)-0] wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. Hence we hold that the said materials cannot be used in section 153A of the Act against the assessee. This opinion is given without going into the merits and veracity of the said seized documents implicating the assessee herein." 18. The Hon'ble Bombay High Court in the case of HDFC Bank (supra) has also considered a similar question of law in the context of the erstwhile provisions of section 158BD of the Act. The provisions of section 158BD is the pre-cursor to the present provisions of section 153C of the Act; as the said provisions were required to be invoked for framing an assessment in the case of a person who was not searched, but materials indicating undisclosed income was found in the course of search conducted by the Department. In the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO in the impugned orders of assessment for Assessment Years 2006-07 to 2009-10 cannot be sustained as they are contrary to the provisions of the Act and are therefore to be deleted. Hence, those additions to the extent sustained by the CIT(A) are hereby deleted. Consequently, Ground No. 5 (i) to (iii) are allowed. In view of the aforesaid conclusions, we refrain from adjudication the other grounds raised by the Assessee in the grounds of appeal as well as by way of additional grounds of appeal, as they become academic. These grounds are left open without adjudication. 20. In so far as the appeal in ITA Nos. 71 and 72/Bang/2017 for AY 2010-11 & 2011-12 are concerned, grounds raised in these appeals are only with regard to the validity of the search conducted in the case of the assessee under section 132 of the Act. Though identical ground No. 5 as raised in the Assessment Years 2006-07 to 2009-10 have been raised by the assessee, there is no addition that remains that is challenged in these appeals. Apart from the above, the income returned by the assessee in these 2 years have been accepted by the AO in the Order of Assessment framed under section 153A of the Act. Hence, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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