TMI Blog2024 (2) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of so assessee submitted that the assessee himself constructed the property which is of family owned and if the rate of State PWD is considered instead of Central PWD then there is no much difference even otherwise and the objections raised by the assessee has not been considered by the lower authority and has made the addition which is nothing but on the presumption and assumption. Such type of addition cannot be made in the post search case as decided by the apex court in the case of Abhisar Buildwell P. Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] Merely the statement cannot be made base to make the addition and the decision of the apex court that in search assessment u/s 153A, AO cannot assess or reassess the total income filed under s. 153A of the Act unless some incriminating material was found during the search. Revenue has not demonstrated the nature of material found in the course of search which led to impugned additions in the absence of any incriminating material. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 circumstances of the case, the ld. CIT(A) grossly erred in representing false, incorrect and illegal facts by holding that the data of investment/expenditure in such property collected during search operation and the statement recorded on these data u/s 132(4) are sufficient to treat as incriminating material collected during the course of search. 3. That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in deliberately and consciously had plagiarizing and representing wrong fact in the appellate order by making arbitrary false allegation and framed the reason for sustained the addition in a hypothetical way by putting the assessee to erroneous harassment and inconvenience. 4. That on the facts and in the circumstances of the case, the Id CIT(A) ought to have deleted the addition made by Id A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 extending cash loans on interest. Notices u/s 153A dated 18/11/2019 for the A.Ys. 2013-14 to 2018-19 were issued, which were served digitally requiring to file the return of income within 30 days of receipt of notice. In compliance to the same, assessee has filed its ITR u/s 153A for A.Y. 2013-14 declaring total income at Rs. 1,57,69,030/- on 30/12/2019. The assessee is proprietor of M/s Soni Industries and engaged in trading in NCDEX, which are of the nature of speculative business and besides of above, he is having rental income interest income from FDRs and Bank accounts. The above transactions are done through the broker company M/s Nine Star Commodities Pvt. Ltd. and the assessee has booked overall profit of Rs. 2,42,69,175/- and booked overall loss of Rs. 79,96,933/-, resulting into gross profit of Rs. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport 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 2 nd , Paota, Jodhpur was there. The assessee was required to state the reason as to why the said differential amount of Rs. 50,44,881/- (Rs. 1,08,42,165/- Rs. 57,97,284/-) should not be considered as the undisclosed income of the assessee Shri Pradeep Soni and his wife Smt. Leela Devi for F.Y. 2012-13, in proportion to their investment declared in their books. In reply to the same the assessee's AR on the ground of legality challenged this valuation on this point that the Valuation Officer has sent letter u/s 132(9D) to make avail her all the details regarding construction, ownership of house and other relevant information from Shri Bhanwar Lal Soni, who is not owner of the any of the two residences. As such, he was not the person entitled to provide any information in this regard to him. In this regard, it is worthwhile to mention that the ADIT(Inv.) was alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 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 Considering this position, the differential amount of valuation in proportion to the overall investment made by the assessee Shri Pradeep Soni during the F.Y. 2012-13 amounting to Rs. 50,44,8011/- is considered as investment made by her in construction of house from unaccounted income and thus, liable to be added to the income of the assessee for A.Y. 2013-14. As such, an addition of Rs. 50,44,881/- u/s 69B of the Income Tax Act, 1961 is made to the total income of the assessee. Subsequently, the assessee had filed rectification u/s 154 in respect of arithmetical mistake as committed by the AO while passing the assessment order and the AO after verification examination of record had rectified the mistake reduced the addition of Rs. 50,44,881/- to Rs. 31,92,011/- and accordingly pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 officer during the course of search proceedings. In the PCIT Vs Abhisar Buildwell P. LTD., the Hon'ble Supreme Court of India has also laid down as under. At the cost of repletion, it is observed that the assessment under Section 153A of the Act is arked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 1534 is to bring under tar the undisclosed income which is found during the course of search or pursuant to search or requisition The AO in his remand report had stated that during the course of search, statement u/s 132(4) was recorded of Shi Bhanwar Lal Son, who was the father of the appellant and he was the key person of the group. In this statement questions were asked related to investment in the construction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2 nd , 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 details of investment made in residential property in specified performa along with supporting bills vouchers. 17 -182 09 Copy of valuation report of registered valuer dated 31/01/2014. 183 - 210 10 Copy of valuation report of Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered. The rate for estimating cost of construction were taken as CPWD instead state PWD rate. If the rate of state PWD is considered then there is no such difference as alleged by the department. The ld. AO has not replied to the objection filed by the assessee in adopting the DVO s value. Both the ld. AO and CIT(A) both has confirmed reference to DVO 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zure operation cannot, by itself trigger the assessment. The relevant part of the observation is reproduced here in below: 32. It may be noted that the statement recorded under Section 132 (4) of the Act can be used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under Section 132 or requisition under Section 132A, the assessment has to be done under Section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to pass assessment orders and to assess the total income taking into consideration other material, though 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Similarly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income was chargeable to tax at a special rate of 60% under section 113 whereas income other than undisclosed income was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation. For the removal of doubts, it is hereby declared that, (i) save as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition and the decision of the apex court that in search assessment under s. 153A, the Assessing Officer cannot assess or reassess the total income filed under s. 153A of the Act unless some incriminating material was found during the search. The Revenue has not demonstrated the nature of material found in the course of search which led to impugned additions in the absence of any incriminating material. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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