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TMI Blog2024 (2) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... 530/Jodh/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in other cases. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 530/Jodh/2023 is taken as a lead case. Based on the above arguments we have also seen that for these appeals grounds are similar, facts are similar, and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds, and arguments from the folder in ITA No. 530/Jodh/2023. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 530/Jodh/2023 on the following grounds; "1. That on the facts and in the circumstances of the case, the order passed by ld. CIT(A) is bad in facts, bad in law, and also flagrant disregarded of law and rules of procedure or in violation of principles of natural justice. 2. That on the facts and in the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuous act on his part. 9. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in abusing his position entered into illegal conspiracy with mala fide intentions thereby causing wrongful loss to the assessee. 11. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 12. The petitioner prays for justice & relief." 5. Succinctly, the fact as culled out from the records is that the assessee has filed the original return of income on 29/09/2013 for the A.Y 2013-14 declaring total income of Rs. 1,57,69,030/-. A search and seizure action u/s 132 of the Income Tax Act, 1961 was carried out at business/residential premises of Soni Group of Jodhpur on 09/04/2018 to which the assessee Smt. Leela Devi belongs wherein several incriminating documents along with cash, jewellery and other valuables were found/seized from the various premises of the group searched. 5.1 The Soni Group is primarily engaged in the business of trading in Agro Commodities on NCDEX platform and also carry out transactions of Future & Options. In addition, the group is also engaged in the finance business by exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment deposed by Shri Bhanwar Lal Soni was far below and that gave the basis for such reference to Valuation Cell. It is nowhere provided u/s 132(9D) of the Income Tax Act, 1961 that there should be some incriminating documents found relevant to property construction during search before making any reference to Valuation Cell. Before the Valuation Officer, the assessee and his family members could not adduce any evidence regarding the period of construction of these two houses, therefore, the Valuation Officer in the Valuation Report took the mean period of construction as 01/04/2012 to 31/03/2013, which is evident from the valuation report received on 05/07/2018. 5.6 In view of this position, the Valuation Officer has taken the period of construction as 01/04/2012 to 31/03/2013. As per the report of the Valuation Officer, the valuation of both the residence has been determined by her as per the following chart:- 5.7 Accordingly the significant difference of cost of investment as declared by the assessee and evaluated by the valuation cell of Rs. 1,15,79,366/- in regard to residential house 164, Polo 2nd, Paota, Jodhpur was there. The assessee was required to state the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Officer should have in possession some incriminating material with him during the course of search. There is as such no pre-requisition laid down in this section that the Investigation Officer (Authorised Officer) can only refer to the Valuation Officer u/s 142A, he should possess some incriminating material or reason to believe in this regard. The so called 'Settled Law stated by the AR in his reply may be relevant for the searches, which were conducted prior to 01/04/2017 before the insertion of this section in the Act. Definitely, during the course of search the grandeur of the residences, quality of construction and its furnishing has made the Investigation Officer to form a belief that the overall cost of construction cited by Shri Bhanwar Lal Soni, the senior most member of the group at Rs. 1.85 Crore for both the residences cumulatively, was far less than the actual investment made by the real owners and that is why he referred to the DVO u/s 142A. His reference has also substantiated his belief as the Valuation Officer estimated the fair market value of both the properties at much higher value than that was disclosed by the real owners in their returns. 5.10 Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant had also relied on the judgment of the Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax Vs Abhisar Build Well Pvt. Ltd. Civil Appeal No. 6580/Del/2021 dated 24/04/2023. The argument raised by the appellant is not valid as the above referred judgment is NOT applicable to the present case. In the present case search was conducted at the residential premises of the appellant i.e. on the property under question. The AO in his remand report had clearly mentioned that during the course of search, statement was recorded and questions related to investment in this property were duly asked and had been replied. The facts relating to expenditure or investment in the property were gathered from various searched premises during the course of search. The AO had reported in his remand report that during the search various incriminating documents have been found and impounded in respect of the purchase of immovable properties and the key person Shri Bhanwar Lal Soni failed to explain investment made in construction of the house property. On account of which to ascertain the cost of investment in the house property, it was referred to the DVO by the authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of appeal. Accordingly, such mention by the appellant in its ground is treated as general in nature, no needing any specific adjudication and is accordingly treated as dispose off. 13. In the result, the appeal is treated as dismissed." 7. In this appeal the ld. AR of the assessee submitted a detailed paper book and the index of the documents / judgement relied upon is extracted here in below : S. No. Particulars Page 01 Copy of letter dated 29/05/2018 in response to notice u/s 139(9D) by Valuation officer. 1 - 2 02 Copy of notice issued u/s 139(9D) by Valuation officer dated 04/05/2018 received on 28/05/2018 3 - 4 03 Copy of corrigendum letter dated 31/05/2018 received on 04/06/2018. 5 - 7 04 Copy of letter dated 11/06/2018 issued u/s 132(9D) of the Act. 8 05 Copy of legal objection filed in response to notice issued dated 11/06/2018 9 - 11 06 Copy of letter dated 13/06/2018 along with reference for valuation of residential house No. 163 & 164, Ridhi Sidhi, polo 2nd, Paota, Jodhpur 12 - 14 07 Copy of reply dated 07/06/2018 in response to notice issued u/s 132(9D) of the Act. 15 - 16 08 Copy of reply dated 14/06/2018 furnishing the complete detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VO merely on a statement. There no data or material suggesting any incriminating material in respect of the building under question. 9. Per contra, the ld. DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). She submitted that the ld. AO has already rectified the valuation of land as the same were purchased and therefore, that aspect of the matter is already rectified. The objections are purely technical in nature and thus rightly been held as non- sustainable. The reference was made based on the statement recorded u/s. 132(4) and prima facie the search team found that value reflected in the books is much more than what is expended and that was in support of the statement the reference to valuation was correct. The assessee was found in possession of various other property purchase and sales deed which was not recorded in the books. As the search is after the amendment in the law i.e. w.e.f. 01.04.2017 section 132(9D) gives such power for valuation and thus there is no such pre-condition valuation linked with incriminating material. Based on these averment the ld. DR suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment. 33. In view of the aforesaid facts and circumstances, we are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the "reasons to believe" was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law. 12. Considering the judgment of the jurisdictional high court as stated above and considering the fact that the year under assessment is a completed assessment and in a search proceeding so far as it relates to the completed assessment only the addition can only be made with any corroborative material found during the search. As it is evidently cleared from the facts recorded and discussed in the orders of the lower authority they have merely based on the outer look and the statement of Shri Bhanwar Lal Soni there is no corroborative material suggest that the assessee has invested the money beyond the cost reflected in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough no incriminating material is found during the search even in respect of completed/unabated assessments. 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. Commissioner Of Income Tax v. Mehndipur Balaji, 2022 SCC OnLine All 444 : (2022) 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under Section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: "15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s otherwise provided in this section, Section 153- B and Section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial. The cost of land incurred and recorded in the books has been duly accepted and reduced from the fair value derived by the valuer in the order passed under section 154 of the Act. The sustained addition is based on the valuation report of the DVO which is also considering the CPWD rates instead of PWD rates. Thus, the addition made towards the alleged difference in cost of construction made in the order of the assessment deserves to be deleted as the addition on cost of construction is based on valuation report which is in the realm of estimations without any nexus to any incriminating documents per se. Hence, in the absence of any incriminating material found, therefore, we see no perceptible reason to confirm the addition and therefore, the same is directed to be deleted. In terms of these observations, the appeal of the assessee in ITA no. 530/Jodh/2023 is allowed. 14. The fact of the case in ITA Nos. 531 to 534-Jodh-2023 is similar to the case in ITA No. 530-Jodh-2023 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 531 to 534/Jodh/2023 is equally similar on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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