9911796707
TMI Blog2024 (8) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... . "The ld. CIT(A) erred in passing the order in the manner he did. 2. The ld. CIT(A) further erred in confirming the addition u/s 68 of the Income Tax Act, 1961 without appreciating the submission of the appellant. 3. The ld. CIT(A) further erred in confirming the order of assessing officer by merely relying on sworn statement of the partner without any incriminating material having being found. 4. The ld. CIT(A) further erred in not appreciating that return in response to notice u/s 148 was filed only on 4.1.2019 and hence the assessment was time barred. 5. The ld. CIT(A) further erred in assessing the income u/s 68 of the Act." 2.1 At the time of hearing, the assessee has not pressed ground No.4. Thus, the only ground remained for our consideration is with regard to sustaining addition u/s 68 of the Income Tax Act, 1961 (in short "The Act") at Rs. 87.25 lakhs on the basis of sworn statement recorded u/s 132(4) of the Act on 30.10.2017 without any corroborative materials. 3. Facts of the case are that the assessment order has been passed u/s 143(3) r.w.s. 153C of the Act. During the course of search proceedings at the residence of Mr. Mohammed Ibrahim, documents belongin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish the date-wise cash flow statements of the concerned partners whom the appellant firm was now claiming that they had introduced cash, source particulars etc. It was also proposed to assess the cash payment of Rs. 102.25 lakh made by the appellant to Mr. P B Ahammed, as per the disclosure made by Mr. Mohammed Ibrahim in the sworn statements recorded on three different occasions, that too in a gap of about two months: While the appellant filed objections against the above proposal, however, it failed to produce the partners who had claimed to have made the cash investments. Further, the cash flow or books etc also had not been furnished. Only plain confirmation letters had been furnished by the appellant firm in respect of some of the partners. The AO mentioned that despite specifically calling for, the appellant firm had failed to produce the partners who have claimed to have made cash payments. Further, other evidences- called for were also not furnished. Therefore, another notice dtd. 28/11/2019 was issued to the appellant to produce the partners who were stated to have admitted introducing cash for JDA payments individually and also to comply with the terms of the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rahim, who had signed the JDA on behalf of the firm, had voluntarily admitted in the sworn statement recorded u/s 132(4), u/s. 131 and also u/s. 132(4) again three different occasions that the cash payment of Rs. 102.25 Lakhs was the undisclosed income of the assesses and disclosed the same. 5. On appeal, the ld. CIT(A) observed that the only argument of the appellant during this proceeding is that Rs. 1,02,25,000/- paid in cash was not the undisclosed income of the appellant and addition cannot be made u/s 68 of the Act. It was the submission of the appellant that the cash payment made to Mr. PB Ahammed had been duly accounted for by the appellant as the payments were received from the partners of the appellant firm. It was the case of the appellant that by demonstrating the nature and source of the credit in the hands of the firm, the initial onus has been discharged and the burden shifts on to the department. Relying upon the Judgment of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd., 216 CTR 1 95, the appellant pleaded that the additions may be deleted. 5.1 It is the case of the AO that in spite of specially requiring to produce the partners who c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements from some of the partners with regard to cash payments were furnished on 16.11.2019 and 28.11.2019. Neither the partners who contributed the above payments were produced before the AO nor any reasons for the failure to do so was accorded. On the perusal of the list of persons who alleged to have contributed to the cash payments, it is noticed that the cash payments were in the range of Rs. 2,00,000/- to Rs. 15,00,000/- except in the case of Mr. Yousuf Subbayakatta from whom no confirmation was filed. It is also interesting to note that Rs. 3,00,000/- was shown to have been paid in cash by Mr. Mohammed Ibrahim, the Managing Partner, who had all along not disclosed this alleged fact. 5.3 If the appellant's claim was the gospel truth, it is incomprehensible as to why the appellant waited for more than 2 years to disclose this fact and that too at the far end of the assessment period. The delay can only be perceived as an attempt by the appellant to escape from the taxation of the admitted undisclosed investments in the hands of the appellant and to dodge the proceedings. It is also a fact that the appellant had not produced the persons who contributed to the cash payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 lakhs, Rs. 3.50 Lakhs and Rs. 27.82 Lakhs were reflected on the names of Mr. Imran, Mr. Abdul Ansar and Mr. Hidayathulla. 5.7 During assessment proceedings, the appellant was specifically required to substantiate the genuineness of the liability claimed by proving the identity, genuineness and creditworthiness of the credits shown. However, the details and evidences were not furnished in spite of specific direction of the AO. 5.8 Considering the failure on the part of the appellant to substantiate the nature and source of Rs. 5 Lakhs for the A/Y 2017-18 and amount totaling to Rs. 31,32,000/- for the A/Y 2018- 19 credited in the books of accounts during the above years as unsecured loans, Rs. 5 Lakh and Rs. 31,32,000/- were added as unexplained cash credits u/s. 68 of the Act for A/Y 2017-18 and 2018-19 respectively. 5.9 No explanation was offered by the appellant in respect of the above additions during this proceeding despite several notices and opportunities provided. Therefore, the additions made i.e. Rs. 5 Lakh and Rs. 3 1,32,000/-for A/Y 2017-18 and 2018-19 respectively were sustained by CIT(A). In view of the above, all the grounds of appeal for A. Y. 2017-18 and 2018 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. 6.5 She submitted that the ld. AO was wrong in placing reliance on the judgment of Honorable Madras High Court in the case of B. Kishore Kumar vs. DCIT (supra) because the facts of that particular case are clearly different and distinguishable from the facts in this particular case of the assessee firm. The well settled position of law is that while the revenue can use a statement recorded u/s 132(4) as a piece of evidence but the statement itself cannot be conclusive evidence. The revenue ought to corroborate the admission contained in the statement with independent evidence. 7. On the other hand, ld. D.R. submitted that statement recorded u/s 132(4) and 131 of the Act which is not retracted by assessee and this is important evidence and it can be basis for initiation of proceedings u/s 153C of the Act. For this purpose, she relied on the judgement of Hon'ble Supreme Court in the case of Roshanlal Sanchiti Vs. CCIT 292 Taxman 549 (SC). 7.1 Further, she relied on the judgement of Hon'ble Supreme Court in the case of Video Master Vs. JCIT (378 ITR 374), wherein held that "it is not possible to say that this is the case of no evidence at all in as much evidence in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the loose papers found during the search. We are not impressed by this reason at all. The papers are not denied or disputed by the assessee. The CIT (Appeals) has found that the partners of the assessee firm had admitted to the practice of suppressing the profits. The papers themselves show two different rates, one higher and the other lower and on comparison with the sale bills it has been found that the sale bills show the lower rate and these findings have not been denied by the assessee. The Tribunal, therefore, erred in looking for some other corroboration to substantiate the contents of the loose papers, overlooking that the loose papers needed no further corroboration and the sale bills compared with the seized papers themselves corroborated the suppression of income. Fourthly, the Tribunal has relied on the observations of the CIT (Appeals) that no serious consideration can be given to the loose papers and has held that this shows that there is "nothing more in Revenue s kitty apart from those said loose papers pertaining to November, 2005 (financial year 2005-06) to support suppression of sales receipts on the part of the assessee firm". The Tribunal, with respect, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held as follows: 10. "In the statement of Shri Sandeep Runwal the list is attached wherein Shri Sandeep Runwal has given the details of cash received on sale of flats at various projects of the Runwal Group with names of the customers and the exact amount. The name of the assessee is at Sl.No.21 for the Flat No. 501 at Runwal Elegante which shows the cash receipt by Runwal Group of Rs..82,13,261/-. The contention of the counsel that it is merely an estimation defies all commercial logic because an estimated figure is always a complete figure. But the figure mentioned hereinabove is so accurate that it cannot considered as an estimated figure. Most important fact is that the recipient i.e., seller has admitted of having received a cash component of the transaction. Therefore, it is reasonable to conclude that the payee must have made the said payment. The undisputed fact is that the assessee has in fact purchased the flat from Runwal Group. When the purchase is not in dispute, the payment is not dispute then in all probability the cash component is also correct. The seller has admitted of having received on-money which is the income of the seller and no prudent business man woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of PCIT Vs Best Infrastructure Private Limited, 397 ITR 82 has held that statement under section 132(4) in the itself does not constitute incriminating material. The relevant finding of the Hon'ble High Court is reproduced as under: "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure 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." 8.3 As per section 31 of Indian Evidence Act, 187 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely." From the above Circular, it is amply clear that the CBDT has emphasized on its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/under influence. Keeping in view the guidelines issued by the CBDT from time to time regarding statements obtained during search and survey operations, it is undisputedly clear that the lower authorities have not collected an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment, 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." (ii) In the case of Dr. E.G. Memorial Trust v. CIT (Exemption), Kolkata2017 (11) TMI 1586 ITAT Kolkata, the Tribunal held as under: - "6. We have carefully considered the entire gamut of facts, rival contentions raised by the parties before us and also the material referred to during the course of hearing. In the instant case originally Id. CIT(Bx) cancelled the registration certificate u/s. 12A of the Act vide order dated 22-2-2016. Against the order of Ld, CIT(Ex) assessee preferred an appeal who directed the Revenue to provide an opportunity of cross-examination to assessee. Accordingly, appeal was allowed for statistical purpose." (iii) In the case of CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon'ble Supreme Court has held that: -"Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee." "16.4 We have duly considered the contention of the assessee and also perused the documentary evidences produced by the assessee. On perusing the facts, it is apparent that the addition is made based on the general practice of cash payments made outside the books of accounts in the case of immovable property transactions. The AO was of the opinion that there are ample instances that cash payments are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant inadmissible material. Reliance can be placed in this regard on the following decisions: (i) Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC) (ii) Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) (iii) CIT vs. Maharajadhiraja Kameshwar Singh of Darbhanga (1933) 1 ITR 94 (PC) (iv) Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) (v) Umacharan Shaw & Bros vs. CIT (1959) 37 ITR 271 (SC) (vi) Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151 (SC) 8.11. Further, the Hon'ble Delhi High Court in the case of CIT vs. Dinesh Jain (HUF), 352 ITR 629 after referring to the decision of the Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) held that no addition can be made taking into account notorious practice prevalent in the similar trade. The relevant findings vide para 14 and 15 are as under: ".......... 14. In Lalchand Bhagat Ambica Ram Vs. Commissioner of Income Tax, Bihar and Orissa (1959) 37 ITR 288, the Supreme Court disapproved the practice of making additions in the assessments on mere suspicion and surmise or by taking note of the notorious practices prevailing in trade circles. At page 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d - Rs. 2,50,000/- Total: - Rs. 52,25,000/- 8.16 Thus, the only issue relating to addition of Rs. 52.25 lakhs made u/s 68 of the Act is remitted to the file of ld. AO for fresh consideration. 8.17 There was another addition of Rs. 5 lakhs made by ld. AO u/s 68 of the Act, which is said to be received from Mr. Imran in the assessment year 2017-18. 8.18. The ld. A.R. submitted that placing reliance on the seized material is not proper and all the additions on the basis of the above loose slips should be deleted in the assessment year 2015-16 since; (i) there is no documentary evidence either to support the statements of Mr. R. Ravish or of the parents of the students; and ii) the seized material is in the form of various loose sheets, scribblings, and jottings having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, search action not resulted in recovery of any undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. 8.19 As discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re clubbed together, heard together and disposed of by this common order for the sake of convenience. The assessee in ITA No.168/Bang/2024 has raised following grounds of appeal: "1. The learned CIT(A), erred in passing the Order in the manner he did. 2. That the assessment made without jurisdiction and hence proceeding under section 153C is void ab initio. 3. The learned CIT(A) failed to appreciate that in absence of any incriminating material the assumption of jurisdiction under section 153 C is wholly illegal and liable to be quashed. 4. The learned CIT(A) further failed to appreciate that the Assessing Officer failed to provide an opportunity of cross examination which is against the principle of natural justice. 5. The learned CIT(A) failed to appreciate that the statement taken at the time of survey cannot be considered for making addiction u/s 153 C of the act. 6. The learned Assessing Officer is not justified in law in taxing Rs. 3,58,14,436/- which was declared in the oath statement and same has been later retracted by not declaring the same in the return of income filed and additions made are purely on assumptions and presumptions. 7. The learned Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences regarding payments in cash and cheque made to the assessee were found and impounded. Sworn statements were recorded from Mr. Ibrahim Kaleel and Mr. Mohammed Ibrahim on various dates, who admitted to the contract receipts in cash and cheque as detailed in the seized materials. 14.1 During the course of the search in the case of Mr. Ibrahim Kaleel at his residence, incriminating materials inventoried as A/IK/03 have been seized. Page No: 83 to 91 contain the details of cash vouchers received, which were signed by Mr. Ibrahim Kaleef, Managing Partner, M/S. MKH Infrastructure as the contract receipts in respect of the Tabesco project. The relevant portion of the sworn statement of Mr. Ibrahim Kaleel is as follows: "Q.38. I am showing you the document marked as Annexure A/IW03, Page Nos.83 to 91, w ich were found and seized during the course of search u/s 132 of the Income Tax Act at your residence at Door No. 20-6-363/1 Manar, 2 Cross Kandak, Mangalore. Please explain the contents. Ans: These are the vouchers towards payment of construction expenses (contract amount) to MKH Infrastructure by Tabesco Hindustan Infrastructure for the project Tabasco Hindustan. Mr. Basheer Mali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 2,90,30,600/-, of which Rs. 2,00,30,600/- had been paid as CASH and Rs. 90,00,000/- in cheque marked 'TOTAL PAID WHITE'. These entries correspond and correlate to the entries made in the seized book from the residence of Mr. Ibrahim Kaleel: A/1K/9. 14.5 Mr. Mohammed Ibrahim, the MD of M/S Tabasco Hindustan Infra Developers Pvt Ltd had admitted in the sworn statement recorded u/s. 132(4) on 31/8/2017 that out of the total payment of Rs. 2,90,30,600/- made to M/S. MKH Infrastructure for the construction contract till the date of search, Rs. 2,00,30,600/- has been paid as cash. Mr. Mohammed Ibrahim had again confirmed the cash payment of Rs. 2,00,30,600/- in the statement recorded u/s. 131 on 5/9/2017 as well. 14.6 The receipt of the contract payments in cash has also been admitted categorically by Mr. Ibrahim Kaleel in his statement on oath. Considering Il of the above facts, on the basis of the evidences seized u/s. 132 and also impounded u/s. 133A as stated above in detail, it is evident the total cash received by the assessee towards the construction contract amount to Rs. 2,00,30,600/- out of the total receipt of Rs. 2,90,30,600/- up to the da e of search. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132(4) of the Act, addition was made. According to the ld. AO in spite of issuing several chances the assessee has not furnished any evidence either to explain the source of the cash or to prove that the transactions are already booked in the accounts. Thus, he made an addition of Rs. 28 lakhs in the assessment year 2017-18. Now the contention of the ld. A.R. is that the addition is based only on the loose slips based on statement recorded u/s 132(4) of the Act and unsubstantiated loose slips and there was no corroborative material to sustain the addition. Admittedly, seized material A/THI/8 page 7 impounded from the office of the assessee during the course of search u/s 133A f the Act contains the total cash payment of Rs. 2,00,30,600/-. The statement recorded on 30.8.2017 from Mrs. Jansi Dinu who is working as a office secretary stated that these entries made in impounded material A/THI/8 relating to cash payments. Her statement has been confronted to Mr. Md. Ibrahim, MD of the assessee company. He has also confirmed the same. However, while filing the return of income, they have not offered it for taxation on the reason that these are based on statement recorded u/s 132(4) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply made on the basis of uncorroborated notings in the loose papers found during the search because addition on account of alleged payment made simply on the basis of uncorroborated noting and scribbling on loose sheets made by some person have no evidentiary value and is unsustainable and bad in law. 15.6 The Hon'ble Supreme Court in Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC) observed with regard to evidentiary value that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents found during the course of search did not belong to him. 15.8 Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false. Unless the burden of proving that the materials and cash belong to the assessee, is discharged those materials can neither be seized under section 132 nor relied upon to make assessment under section 153A. Therefore, the seizure of such material is illegal. The AO cannot rely upon such material whose seizure is illegal and the hence, assessment is void ab initio. Therefore, addition made on account of such seized material is not sustainable, 15.9 The Hon'ble Supreme Court in Andaman Timber Industries v. Commissioner of Central Excise, 281 CTR 241 (SC) held as follows: - "Not allowing the assessee to cross-examine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to assessee, thus, denying opportunity of cross examination to assessee, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by assessee was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]" 15.12. The Hon'ble High Court of Karnataka in Kothari Metals v. ITO, 377 ITR 581 (Karn) held as under: - "Held, allowing the appeal, that the non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provisions have no help to the department. Therefore, in these cases addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting's in the absence of any corroborative material and this material cannot be considered as transactions carried on by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. We place reliance on the following judgements in support of our above findings: (i) CIT vs D.K.Gupta 174 Taxman 476 (Delhi) (ii) Ashwini Kumar vs ITO 39 ITD 183 (Delhi) (iii) S.P.Goyal vs DCIT (Mum) (TM) 82 ITD 85 (MUM) (iv) D.A.Patel vs DCIT 72 ITD 340 (Mum) (v) Amarjeet Singh Bakshi (HUF) vs ACIT 86 ITD 13 (Delhi) (TM) (vi) Nagarjuna Construction Co Ltd vs DCIT 23 Taxman.com 239 (vii) CIT vs C.L.Khatri 174 Taxman 652 (viii) T.S.Venkatesan vs ACIT 74 ITD 298 (ix) CIT vs Atam Valves Pvt Ltd 184 Taxman 6 (P&H) 15.16 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made at Rs. 1,90,30,600/- for unaccounted investment in the construction, which is based on the seized material A/THI/8 page 7, which shows the payment to MKH Infrastructure. 16.2 As discussed in earlier para of this order in ITA No.167/Bang/2024 for assessment year 2017-18, this addition is deleted. 17. Next addition of Rs. 59 lakhs as an unexplained expenditure u/s 69C of the Act. In page 24 to 26 of seized material marked as A/THI/8 found during the course of search action at the premises of the assessee shown the payment to MKH Infrastructure of Rs. 59 lakhs. This also based on the statement recorded u/s 132(4) of the Act from Mr. Ibrahim, MD of the assessee and uncorroborated loose slips. As discussed in earlier para of this order in ITA No.167/Bang/2024 for assessment year 2017-18, this addition is also deleted as it is based on statement recorded u/s 132(4) of the Act and unsubstantiated loose slips. 18. Next addition is Rs. 1,10,90,104/- towards unaccounted cash receipts in respect of sale proceeds of shops and flats. According to the ld. AO, seized material pages 10, 20, 21 A/THI/8 shows the unaccounted receipt of the cash towards sale of the flats. Similarly, pages 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue proceeded to issue notice under Section 143(2) of the Act on the pretext of the statements of the Directors of the respondent-assessee companies recorded under Section 132(4) of the Act and material seized from the search conducted on Jain group of companies. The assessment order was also passed under Section 143(3) read with Section 153C of the Act making additions under Section 68 of the Act. 20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. 21. In the case of Kailashben Manharlal Chokshi v. CIT, the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: - 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. [Emphasis supplied] 23. In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment. 24. Coming to the findings of the ITAT with respect to incriminating material in the case of M/s Pavitra Realcon Pvt. Ltd and M/s Delicate Real Estate Pvt. Ltd, it is seen that the ITAT has explicitly held in paragraph no. 18 that no addition has been made on the basis of any incriminating material found during the course of search. Further, the ITAT relied on the decision of the Supreme Court in the case of CIT v. Sinhgad Technical Education Society and held as follows: - "18. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material." [Emphasis supplied] 27. Recently, this Court, in the case of Saksham Commodities Limited v. Income Tax Officer, Ward 22(1), Delhi & Anr, while relying upon the decision of the Supreme Court in Abhisar Buildwell (supra) and this Court's decision in the case of CIT v. RRJ Securities Ltd., upheld the position of law that the AO would not be justified to assess income in case no incriminating material is found during the search. The relevant paragraph is reproduced herein below: - "54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that absent incriminating material, the AO would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under Section 153C. Here too, the AO would have to firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g over of the books of accounts, documents or assets seized to the jurisdictional AO of the non-searched person. The relevant paragraphs of the said decision are extracted herein below: - "K. SUMMARY OF CONCLUSIONS 119. We thus record our conclusions as follows: A. Prior to the insertion of Sections 153A, 153B and 153C, an assessment in respect of search cases was regulated by Chapter XIVB of the Act, comprising of Sections 158B to 158BI and which embodied the concept of a block assessment. A block assessment in search cases undertaken in terms of the provisions placed in Chapter XIVB was ordained to be undertaken simultaneously and parallelly to a regular assessment. Contrary to the scheme underlying Chapter XIVB, Sections 153A, 153B and 153C contemplate a merger of regular assessments with those that may be triggered by a search. On a search being undertaken in terms of Section 153A, the jurisdictional AO is enabled to initiate an assessment or reassessment, as the case may be, in respect of the six AYs' immediately preceding the AY relevant to the year of search as also in respect of the "relevant assessment year", an expression which stands defined by Explanation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the "relevant assessment year" is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. The reckoning of the six AYs' would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 23 has held as under: - "23. Now, coming to Design Infracon (P) Ltd., we find from the material available on record that there is brazen violation of principles of natural justice inasmuch as neither the statement of Mr. Jain recorded at the time of search nor his cross-examination was provided to the assessee by both the lower authorities despite specific and repeated requests made by the assessee in this regard. The Hon'ble Supreme Court in the case of M/s Andaman Timber Indusgies vs. CCE reported in 281 CTR 241 has held that not giving opportunity of cross-examination makes the entire proceedings invalid and nullity. The Co-ordinate Bench of the Tribunal in the case of Best City Infrastructure Ltd. (supra) has also held that not providing opportunity of cross-examination makes the addition invalid. It has come to our notice that the Hon'ble Delhi High Court recently has upheld the said decision as reported in 397 ITR 82." 31. On this aspect, it is beneficial to refer to the decision of the Supreme Court in the case of Andaman Timber Industries v. CCE, wherein, it was held that not providing the opportunity of cross- examination to the assessee amounts to gross v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to act on material which may not be accepted as evidence in a court of law", but that does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice. It is, however, necessary to remember that the rules of natural justice are not a constant: they are not absolute and rigid rules having universal application. It was pointed out by this Court in Suresh Koshy George v. University of Kerala [AIR 1969 SC 198 : (1969) 1 SCR 317 : (1969) 1 SCJ 543] that "the rules of natural justice are not embodied rules" and in the same case this Court approved the following observations from the judgment of Tucker, L.J. in Russel v. Duke of Norfolk [(1949) 1 All ER 109] :"There are, in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth. Accordingly, I do not derive much assistance from the definitions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. Pending applications, if any, are also disposed of." 18.2 The ratio that emerges from the aforesaid decisions is that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. 18.3 In view of the above discussion, we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4) of the Act supported by the unsubstantiated loose slips. Accordingly, the addition is deleted though we are not agreed with the order of the ld. CIT(A) on deletion of addition. Accordingly, the addition is deleted. 18.4 In the result, appeal of the assessee in ITA No.168/Bang/2024 is partly allowed. ITA Nos.174 & 175/Bang/2024 for the AYs 2017-18 & 2018-19 MKH Infrastructure: 19. In these appeals, the assessee not pressed ground nos.1 & 2. Accordingly, these grounds are dismissed as not pressed. 20. Next issue for our consideration is ground nos.3 to 8 wherein assessee challenged the addition of Rs. 10 lakhs made for the assessment year 2017-18 & Rs. 2,07,80,040/- in assessment year 2018-19 on the basis of statement recorded u/s 132(4) of the Act. 21. Facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mine for quite a few years. Under this partnership. we had taken up a construction agreement with Tabasco Hindustan Infra Dev. Pvt. Ltd. Q. 36. Please explain your relationship with Tabasco Hindustan Pvt. Ltd. Explain in detail the business involvement in the same. Ans: Tabasco Hindustan Infra Dev. Pvt. Ltd. was formed by Mr. Mohammed Ibrahim and Mr. Basheer. Considering the close relationship, I had with Mr. Mohammed Ibrahim, they had handled over the construction contract to MKH Infrastructure according to the Agreement between the two on 16th November, 2016 for a total cost of Rs. 41,88,34,000/-. However, this has been nullified by both parties as an item wise approach was proposed. The contract was to construct the structural part of the Residential cum Commercial project Tabasco Inn." 21.4 In these cases, the addition is made towards receipt of cash of Rs. 10 lakhs in AY 2017-18 and Rs. 1,90,30,600/- from M/s. Tabesco Hindustan Infra Developers Pvt. Ltd. Since we have already considered the statement recorded u/s 132(4) of the Act in the case of Tabesco Hindusthan Infra Developers Pvt. Ltd. in ITA No.167 & 168/Bang/2024, for the assessment years 2017-18 & 2018-19 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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