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TMI Blog2024 (9) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... edings u/s 153C of the Act (23-38) iii) 30.3.2021 Satisfaction note of the learned Assessing Officer of the appellant Satisfaction note in the case of M/s Pragati Glass (P) Ltd. for dissemination of information for taking action u/s 153C of the Act(41-54) iv) 30.3.2021 Notices issued for assessment year 2014-15 to 2019-20 by learned Assistant Commissioner of Income Tax, Circle61(1), Delhi u/s 153C of the Act v) 12.4.2021 Return of income filed by appellant in response to notice u/s 153C of the Act Sr. No. Assessment year Income declared in 12.4.2021 Return i) 2014-15 26,09,730 ii) 2015-16 18,09,080 iii) 2016-17 23,80,900 iv) 2017-18 26,30,151 v) 2018-19 37,46,910 vi) 2019-20 63,28,050 vi) 7.7.2021 Order u/s 127 passed by learned Pr. Commissioner of Income Tax-12, New Delhi vii) 7.3.2022 Show cause notice issued by learned Assistant Commissioner of Income Tax, Central Circle 17, Delhi viii) 15.3.2022 After the Show cause, notice has been issued u/s 143(2) of the Act ix) 23.3.2022 Approval u/s 153D of the Act vide Common letter F. No. Addl/CIT/C.R.-5/153D/2021-22/1326 for all captioned assessment years x) 24.3.2022 For asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,56,40,904 6,20,47,551 5,96,24,756 1,47,24,813 3,34,21,765 4 It is submitted that learned Assessing Officer in show cause notice dated 7.3.2022 (reproduced in pages 4 to 12 of order of assessment) has relied upon the following: i) documents quoted as "Annexure -A (pg1)"found in the possession of the MD of PGPL at the Airport;(page 3 of order of assessment for assessment year 2014-15) ii) part statement dated 12.5.2019 of Sh. Dinesh S Gupta(pages 3-5 of order of assessment for assessment year 2014-15) and, iii) part statement dated 12.5.2019 of Sh. Hari Om Goel, accountant of the PGPL during the course of survey proceedings conducted at the premises of Pragati Glass (P) Ltd., ONGC Road, Kharach, Bharuch.(pages 6-11 of order of assessment for assessment year 2014-15) It is further submitted that apart thereof, there is one another statement dated 14.5.2019 of Sh. Dinesh S Gupta, when he was confronted with the statements given by Sh. Hari Om Goel, the accountant of PGPL; which has not been relied upon by learned Assessing Officer as is evident from page 11 of order of assessment year 2014-15 which reads as under: "The statement of the accountant Shri Hari Om Goel along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven and assessee failed to furnish any evidence/proof to support his version. In view of the above, it is evident that the assessee has made cash purchase amounting to Rs. 2,49,26,243/- from M/s Pragati Glass Private Limited in the year under consideration for which the assessee has failed to provide any documentary evidence for source of expense. Therefore, the same is added to the income of the assessee as unexplained expenditure under section 69C of the income Tax Act, 1961." 5 At the time of hearing, Ld AR submitted that in respect of Ground 1 of grounds of appeal is the issue of assumption of jurisdiction u/s 153C of the Act and, framing of assessment u/s 153C/143(3) of the Act. 5.1 It is submitted that Assessment Years 2014-15 and 2015-16 is beyond the period of six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted in the case of assessee herein. 5.2 It is submitted that as per proviso to section 153C for taking action u/s 153C the date of search would be substituted by the date of receiving the books of account or documents or the assets allegedly pertaining or information contained therein relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2023 Rakesh Bansal vs. ACIT (pages 260-270 of JPB) v) ITA No. 3095/D/2013 dated 30.5.2024 Esha Securities (P) Ltd. vs. DCIT 6 With regard to Ground 1.1 and 1.3 of grounds of appeal, Ld AR submitted in respect of issue that notice issued u/s 153C of the Act and assessment framed u/s 153C of the Act were without satisfying the statutory preconditions contained in the Act and therefore without jurisdiction and therefore deserves to be quashed as such. 6.1 It is submitted that satisfaction note recorded by the AO of searched person does not satisfy the statutory preconditions u/s 153C of the Act and is therefore illegal, invalid and without jurisdiction; 6.2 It is submitted that learned Assessing Officer of searched person in satisfaction note has stated as under:(page 37 of Paper Book) "4. Based on the details submitted by Pragati Glass Private Limited, Shri Dinesh S Gupta and analysis done, beneficiaries have been identified. As the parties (Chaudhary Trading Company) involved are making part payment in cash for the purchase of goods from the company M/s Pragati Glass Pvt. Ltd. same has to be taxed in their hands. I am satisfied that the incriminating documents found during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. 6.5 It is therefore submitted that it is evident that from perusal of section 153C of the Act, that satisfaction of learned Assessing Officer of searched person in context of documents, seized or requisitioned should be pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A of the Act. It is submitted that it is evident from satisfaction note recorded by learned Assessing Officer of searched person (pages 41-54 of Paper Book for assessment year 2014-15) that he states that incriminating documents found during the search as discussed above relates to the assessee Chaudhary Trading Company (CTC), PAN-ACCPC9165C. It is thus submitted that satisfaction re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus is casted on the revenue to bring on record cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during search which only contained the details of „amounts sent‟ and "amounts received‟. Nowhere the said material even suggested that the amounts were sent by assessee company in illegal route which in turn had surfaced back in the form of share capital and premium under FDI route from Cyprus. Though the presumption u/s 292C of the Act would go in favour of the revenue, it cannot be brushed aside that the said presumption is a rebuttable presumption and assessee had duly discharged its onus on the same. Moreover, the present assessee herein is an assessee proceeded u/s 153C of the Act and hence it is all the more necessary for the revenue to arrive at the satisfaction that income or materials or documents does not belong or pertain to the searched person and indeed belongs to third person (i.e 153C presumption u/s 292C of the Act would apply only to the person proceeded u/s 153A of the Act and not for the assessee u/s 153C of the Act." 7 Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as the condition precedent as stated in section 153C of the Act has not been fulfilled, the notices issued under Section 153C are not in accordance with law. 7.4 Reliance is placed upon following judicial pronouncements: i) 451 ITR 371 (Del)Pr. CIT v. Prominent Real Tech (P) Ltd. (pages 387-391 of JPB) "6. Further, in the present case, the Assessing Officer in the satisfaction note has recorded that the documents found during the search pertained to assessee and therefore it is a fit case for initiation of proceedings under section 153C of the Act. However, the Assessing Officer failed to record as to how the documents found during search reflected any undisclosed income of the assessee. The Assessing Officer, without even demonstrating/or drawing any nexus of the seized documents with the undisclosed income of the assessee, merely on the ground that the seized documents belong to the assessee initiated proceedings under section 153C of the Act, which is against the settled position of law in several decisions of this Court. Some of the relevant cases referred to by the ITAT are as under:- (i) CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391/[2016] 380 ITR 612/282 CTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desk of the jurisdictional AO that it becomes empowered to initiate action under Section 153C of the Act. This is evident from a plain textual reading of that provision and which speaks of the commencement point being the handing over of documents or assets seized or requisitioned to the AO of the "other person" and it in turn proceeding to issue notice to assess or reassess the income of the non-searched entity in accordance with Section 153A. However, the initiation of action under Section 153C is significantly premised upon the AO being satisfied that the books of account or documents and assets seized or requisitioned having "a bearing on the determination of the total income of such other person". This is manifest from the provision employing the expression "if, that Assessing Officer is satisfied.....". It would therefore necessarily follow that the issuance of a notice under Section 153C is clearly not intended to be an inevitable consequence to the receipt of material by the jurisdictional AO. That the AO before commencement of action under Section 153C is also obliged to be satisfied that the material so received would "have a bearing on the determination of the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A. The amendment will take effect from 1st October, 2014." 42. It would also be apposite to notice the Notes on Clause 53 of the Finance Bill, 2014, which sought to amend Section 153C and which is reproduced hereinbelow: "Clause 53 of the Bill seeks to amend section 153C of the Income-tax Act relating to assessment of income of any other person. The existing provisions contained in sub-section (1) of the aforesaid section provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns being applicable to searches undertaken in a particular time period, the principles of abatement being replicated and the search assessment power being available to be invoked for the "relevant assessment year", and which extended the power to be exercised over a ten year block, being simultaneously introduced in those provisions. The Legislature clearly intended both these provisions to form part of a cohesive scheme and to be complementary to each other. However, the aspects of satisfaction and of the material likely to implicate or influence were not added in Section 153A. The fact that any additions that may be ultimately made upon a culmination of assessment under Section 153A being indelibly founded on the material gathered in the course of the search is a separate issue all together. 44. The usage of the expression "have a bearing" would necessarily lead one to conclude that the mere discovery of books, documents or assets would not justify the initiation of proceedings under that provision. Upon receipt of that material, the jurisdictional AO must additionally be satisfied that those are likely to have an impact on "the determination of the total income". The Shorter O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of opinion by the jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the "determination of the total income" and would be of relevancy for the purposes of assessment or reassessment. F. INCRIMINATING MATERIAL- CASCADING EFFECT? 48. In terms of the Second Proviso to Section 153A, all assessment or reassessment proceedings relating to the six AYs' or the "relevant assessment year" pending on the date of search are statutorily envisaged to abate. Abatement is envisioned to be an inevitable consequence of the initiation of action under Section 153A. Neither issuance of notice nor abatement are predicated upon a formation of opinion by the AO of the searched person that the material is likely to impact the total income of that assessee. However, the spectre of abatement insofar as the "other person" is concerned would arise only after the jurisdictional AO has formed the requisite satisfaction of the material having "a bearing on the determination of the total income of such other person" and having formed the opinion that proceedings under Section 153C are liable to be initiated. It would be pertinent to bear in mind that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY pertaining to the search year or for the "relevant assessment year". 51. Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words "have a bearing on the determination of the total income of such other person" as appearing in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs' that could possibly form part of the block of ten years. .... G. CONCLUSIONS 63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determination of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached. 67. On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act shall, so far as may be, applied as if such returns were returns required to be furnished under Section 139 of the Act. Thus, the assessing officer has to, thereafter, proceed with the assessment/reassessment in accordance with the provisions of the Act; that is, accept the return with or without such adjustments as permissible under Section 143(1) of the Act or if the claims made by the assessee are considered as inadmissible and/or it is considered necessary and expedient to subject the returns to further scrutiny, issue the requisite notice under Section 143(2) of the Act and frame the assessment in accordance with the Act." iv) 380 ITR 612 (Del) CIT v. RRJ Securities (pages 33-48 of JPB) "33. The record slip belongs to the Assessee and, therefore, the action of the AO of the searched persons recording that the same belongs to the Assessee cannot be faulted. However, the question then arises is whether the AO of the Assessee was justified in taking further steps for reassessing the income of the Assessee in respect of the assessment years for which the assessments were concluded and in respect of which the seized document had no bearing. In our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edent inserted by the Parliament which also need to be complied before the AO of the other persons (third party, the assessee in this case) before he issues notice to assess or reassess income of such "other persons". By this amendment in section 153C of the Act, the following part of the earlier provision/section has been substituted (pre-amendment) which reads "and that Assessing Office shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A". And this part of Section 153C was substituted by insertion by the Finance (No.2) Act, 2014 with the following amendment w.e.f 1-10-2014 which reads "and that assessing officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person ". [Emphasis given by us] 8. Thus, we note that by the aforesaid amendment brought in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 of JPB) ii) 439 ITR 168 (Bom) Ananta Landmark (P) Ltd. v. DCIT (pages 125-137 of JPB) iii) 459 IR 100 (Bom) Ashok Commercial Enterprises v. ACIT (pages 350-375 of JPB) iv) ITA No. 1973/D/2022 dated 30.11.2023 Decent Realtech (P) Ltd. vs. DCIT (pages 280-305 of JPB) 9 Ground 3 to 3.7 of grounds of appeal is in respect of issue of addition representing alleged cash payment to PGPL by the appellant and erroneously held as unexplained expenditure u/s 69C of the Act. 10 It is submitted that an undated, unverified, loose paper is dumb document (page 3 of Order of assessment for assessment year 2014-15)and could not be relied as such to make addition u/s 69C of the Act. 10.1 It is submitted that only document as relied upon by learned Assessing Officer is admittedly an unsigned, undated, unverified and loose paper is a dumb document. It is submitted that it is not a speaking document; which indicates that appellant has paid any amount in cash as alleged by learned Assessing Officer in order of assessment. It is submitted that mere mentioning of figure and supposedly year, could not in any manner speaks that appellant had actually paid cash to the person from whose premises sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the interest figure. The Tribunal also felt difficulty in gathering the details of fixed deposits for Rs. 27,50,000/-from the seized paper; there was no date or signature therein. On these facts the Tribunal has drawn the conclusion that the addition is without any basis. We are unable to say that the inference is unreasonable or is of such nature that no person, properly instructed on facts and law, would have come to. The Tribunal has properly taken note of the evidence; it has not ignored any relevant piece of evidence. Its conclusion cannot therefore be said to be perverse. We therefore, answer the question (c) in the negative, in favour of the assessee and against the revenue." vii) 165 TTJ 145 (Del-Trib.) ACIT vs. Sharad Chaudhary(pages 171- 183 of JPB) viii) ITA No. 1643/D/2019 Rishi Aggarwal vs. DCIT(pages 190-200 of JPB) 13. It can be seen from the above paper found during the search placed at page 30 of the Paper Book that: It is neither dated nor signed/stamped, there is no head note on the paper which could suggest the purpose for which it was created, the loose paper contained list of many other property transaction which were related neither to the assessee no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any supportive and corroborative material and evidence, a loose paper found during search containing rough notings of proposals/offers could not be a basis for making addition u/s 69 of the Act. 16. It is further observed that the Ld. AO did not consider the need to summon the seller or the person searched, or to record the statement of the author/searched person/seller by giving an opportunity to assessee to cross examine the said person. The AO has not even made any enquiry about the value of the property purchased by the assessee. Considering the above facts and circumstances, we find merit in the Ground Nos. 2, 5 to 10 and, accordingly, we delete the addition of Rs.76,75,000/- made u/s 69 of the Act." 11 It is submitted the third party documents without corroborative evidence in law has no evidentially value. Reliance is placed on the following judgments: i) 394 ITR 220 (SC) Common Cause (A Registered Society) and Others v. UOI (pages following the judgment in the case of CBI v. V.C. Shukla reported in 3 SCC 410 "18. This Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The following ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as "book" for they can be easily detached and replaced. In dealing with the word "book" appearing in Section 34 in Mukundram v. Dayaram1 a decision on which both sides have placed reliance, the Court observed:- "In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book. ... I think the term 'book' in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of paper, in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord along with I.A.No.4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. 23. It is apparent that the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be recorded in the books of the assessee. Apart from the ledger account in Hajir Johri which is not maintained by the assessee, the Ld. AO relied on the statement of Ms. Parul Ahluwalia, Director and former employee of M/s. JBL but in her statement she nowhere identified that the cash transactions related to the assessee and no specific questions were put to her in this regard. Since the Hajir Johri ledger account was neither maintained by the assessee nor was found from him, presumption under section 292C does not apply to the assessee. ..... 9. We have given our careful thought to the submission of the parties and perused the records. The facts are not in dispute. During assessment proceedings the common plea of the assessee in both the AY(s) was that merely entries found in the Hajir Johri ledger of M/s. JBL supposedly in the name of M/s. S.K. Impex, the proprietary concern of the assessee does not tantamount to actual transactions having taken place in the absence of any corroborative evidence such as bills, invoices, challans etc. There is no linking in the order of the Ld. AO/CIT(A) that the alleged cash transactions are substantiated by any supporting evidence as cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted." The ITAT by its judgment dated 16th May, 2014 relied on the selfsame reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show-Cause Notice." iii) 125 ITR 713 (SC) Kishnichand Chellaram vs. CIT iv) 288 ITR 345 (Del.) CIT vs. SMC Share Broker Limited v) 293 ITR 43 (Del) CIT vs. S.M. Aggarwal vi) 295 ITR 105 (Del) CIT vs. Dharam Pal Prem Chand Ltd. vii) 303 ITR 95 (Del) CIT vs. Pradeep Kumar Gupta viii) 322 ITR 396 (Del) CIT vs. Ashwani Gupta ix) 379 ITR 367 (Del) CIT v Sunil Aggarwal x) 382 ITR 639 (Del) Roger Enterprise Ltd vs. CIT xi) 2024 SCC Online Del 4012 PCIT vs. Pavitra Realcon (P) Ltd. (pages 438-451 of JPB-II) 13 THAT STATEMENTS HAS BEEN RECORDED UNDER SECTION 131 OF THE ACT H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under Section 164 Cr.P.C. The evidentiary value of a retracted statement becomes diluted and it loses the strength, to stand on its own. Once the statement is retracted, the Assessing Authority has to garner some support, to the statement for passing an order of assessment. In I.T.A.No.112 of 2003, this Court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society. The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act. This, in turn, is referable to a time-tested right of an individual which is recognised under Article 20(3) of the Constitution of India which mandates no person, accused of any offence, shall be compelled to be a witness against himself. The citing of a statement of an individual as the only evidence, in the penal proceedings initiated against him, is never treated as part of a developed and mature legal system. Section 31 of the Evidence Act, 1872 also assumes significance in this regard. It reads: Admissions not conclusive proof, but, may estop : Admissions are not conclusive proof of the matters admitted, but they may operate as estoppels under the provisions hereinafter contained." Parliament never intended to place the proceedings under the Income Tax Act on a higher pedestal than those under the criminal enactments. Though this Circular was not available when the adjudication vis--vis the respondent was taking place at various stages, it is not difficult to take note of the fact that the Circular has only made manifest, what was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned Judicial pronouncements: i) 328 ITR 384 (Del) CIT vs. Dhingra Metal Works In any event, it is settled law that though an admission is an extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect. ii) ITA 1426/2018 (Del) dated 20.2.2024 PCIT vs. Vir Sen Sindhu (pages 452-458 of JPB-II) iii) 339 ITR 192 (Chennai) M. Narayanan and Bros vs. ACIT 12. In the decision reported in (2006) 287 ITR 209 (P R Metrani V. Commissioner of Income-Tax), dealing with the scope of Section 132(4A), the Supreme Court considered the conclusive character of the statement made in a search operation. The Apex Court held that Section 132 is a complete code by itself. Under Section 132(4), in the case of search, the authorised officer can examine any person who is found to be in possession or control of any books of accounts, documents, money, jewellery or other valuable article and any statement made by such person during the examination may thereafter be used in evidence in any proceedings. Sub section (4A) enables an Assessing Officer to raise a rebuttable presumption that such books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r when amount, which assessee stated to have been deposited in bank, was not found in any bank and, thus, part of alleged admission of assessee was not found correct, Assessing Officer was duty bound to collect more evidence in respect of undisclosed income of assessee - Held, yes - Whether, therefore, Tribunal was justified in deleting addition - Held, yes vii) 107 Taxman 124 (Jpr) Sohan Lal Jain vs. ACIT It is also a well-settled law that an admission by a party is the best evidence of a point in issue and, though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who makes the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not show the correct state of facts. viii) 63 TTJ 236 (Del) Rishabh Kumar Jain v ACIT ix) 68 TTJ 789 (Chd) Karam Chand vs. ACIT Section 132 of the Income-tax Act, 1961 - Search and seizure - Assessment year 1988-89 - Assessee surrendered certain amount in his statement under section 132(4) but, late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jyotichand Bhaichand Saraf & Sons (P) Ltd. vs. DCIT Section 132 of the Income-tax Act, 1961 - Search and Seizure - Whether admission made under section 132(4), though important piece of evidence, is not conclusive - Held, yes - Whether assessee can retract from it showing that it was made under mistaken belief of fact or law - Held, yes [Paras 14 to 20] [In favour of assessee] xii) 103 ITD 1 (Mum) (TM)(SB) Uttamchand P.Jaiin vs. ITO xiii) 52 SOT 62 (Chd) Rajdeep Builders vs. ACIT xiv) ITA No. 1502/D/2013 dated 27.6.2014 G. K. Consultants Ltd. vs. ITO 14.4 Reliance is placed on the following judgments: i) 247 ITR 448 (Bom) CIT vs. Vinod Danchand Ghodawat ii) 185 Taxman 18 (Chd) Jagdish Chander Bajaj vs. ACIT iii) I.T.A. Nos. 4520, 4521, 4522, 4523, 4524& 4525/Del/ 2010 Sh. Prem Arora vs ACIT iv) ITA No(s) 802 TO 806/Chd/2012, dated 27.11.2012 Naresh Kumar Verma vs. ACIT 8. The AO, in the present case made the impugned addition, on the foundation of bare husk of the statement of the appellant, made in the course of search operation, without there being any material for its collaboration. A bare reading of the said deposition of the appellant, reveals that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggest earning of income from job work, by the appellant. Therefore, the AO, being quasi-judicial authority is not competent, to draw inferences in vacuum, without the base of foundational material, evidence and relevant provisions, as has been done, in the present case. The AO is required to act in a judicial manner while framing asst order. v) 339 ITR 192 (Mad) M. Narayanan & Bros. Vs. ACIT, Special Investigation Circle, Salem "13. Thus going by the said decision of the Supreme Court, as well as the law declared in the decision in Pullangode Rubber Produce Co. Ltd's. case (supra) that it is always open to a person, who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so, we hold that the Tribunal is not justified in placing undue emphasis on the confession statements made by the assessee. 14. As rightly pointed out by the learned counsel appearing for the assessee, when the assessee had explained the statement made on the second day of the search with materials, that the amounts offered were the loans taken from the relatives who were already assessed on the said amount; apart from this, even otherwise, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Departmental Representative is distinguishable on facts. In the said case, the disclosure was of Rs. 7 lakhs which was supported by investment in house property, unaccounted cash, unaccounted investment in furniture and unaccounted in gold ornaments, etc., whereas in the case under consideration no such assets or valuables were supported to the disclosure. It is settled position of the law that authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected [S.R. Koshti v. CIT (2005) 193 CTR (Guj) 518]. The ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment or addition. [Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC)]. It is true that an apparent statement must be considered real until it was shown that there were reasons to believe that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment of the undisclosed speculative income in the purchase of gold and jarau jewellery, investment in shares and investment in vaida bazaar and advances given to the parties trading in agricultural field is also not supported by any document. Nothing has been found during the search and no such assets had been recovered. Therefore, such additions made only on the basis of a statement which has been retracted immediately thereafter are not sustainable. The pattern of the questions put to the assessee during the search of the premises shows that whatever recorded in these statements is not true. Only on the basis of presumption that large scale construction was going on at the school building of the trust and hospital of the trust cannot be made a basis for addition. The Assessing Officer should have ascertained the investment by way of referring the case to the DVO if he has any doubt in this regard. No evidence regarding any anonymous donation by the trust was found and seized and nothing has been made out by the Assessing Officer in the assessment. The other assessments u/s 153A of the Act in assessee's case for Assessment Year 2001- 02 to 2006-07 have been made without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Thus, in absence of any material or evidence against the assessee, we do not find any reason as to why the claim of Long Term Capital Gain from sale of such share should be denied. Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer. The aforesaid decision affirmed by the Hon'ble Delhi High Court in the case of Pr. CIT v. Reeshu Goel in ITA No. 173/2021 (Del) dated 14.12.2021 7. This Court is of the view that there is no perversity in any of the findings given by the Tribunal. 8. The Supreme Court in the case of Ram Kumar Aggarwal &Anr. vs. Thawar Das (through LRs), (1999) 7 SCC 303 has reiterated that under Section 100 of the Code of Civil Procedure, the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence. The Supreme Court in Hero Vinoth (Minor) vs. Seshammal, (2006) 5 SCC 545 has also held that "in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question. Both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. v) 37 ITR 288 (SC) Lal Chand Bhagat Ambica Ram v CIT The Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and the Court is entitled to interfere. vi) 91 ITR 8 (SC) CIT v Calcutta Discount Company Ltd. 16 Inconsistent and contradictory conclusions formed by learned Assessing Officer in the order of assessment since once the books of accounts so maintained by the appellant were not rejected by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the initial burden of proof lies on the assessee yet when it files purchase bills and affidavits, the onus shifts to the Revenue. One must not forget that it is Revenue which has powers regarding discovery, inspection, production and calling for evidence as well as survey, search, seizure and requisition of books of accounts." vi) ITA No. 165/2010 dated 04.05.2017 CIT vs. M/s Pashupati Nath Agro Food Products (P) Ltd "In view of the above, the Tribunal formed an opinion where once the account books are expected to be maintained in the prescribed accounting standard, the assessing officer could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts. In view of the above, the controversy as raised above in this appeal stands duly covered by the Tribunal and it cannot be said that any investment was done beyond the books of accounts." 17 It is submitted that section 69C of the Act reads as under: "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the same were financed from out of the savings from the income of the properties which were left by her mother's first husband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the ITO who made an addition of Rs. 32,628 as income from other sources in the asst. yr. 1968-69 and an addition of Rs. 25,902 in the asst. yr. 1969-70. The said orders were affirmed in appeal by the AAC. The Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case it was not possible for the assessee to earn the amount invested in the properties and that by no stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected, s. 69 of the Act conferred only a discretion on the ITO to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the investment as income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above statements, AO proceeded to make additions in the hands of the assessee. The Ld AR has submitted before us with regard to AY 2014-15 and 2015-16 that the assessment orders passed by AO is beyond the period of 6 assessment years immediately preceding AY relevant to the previous year in which search is conducted in the case of the assessee. After considering the submission of the rival parties, in order to initiate the proceedings u/s 153C, as per the provisions of the Act, the preceding assessment year for the other person in whose hand proceedings u/s 153A to be initiated depends upon the receipt of books of account or documents or the assets allegedly pertain to the other person by the AO of the other person. It is fact on record that the AO of the assessee received the seized material only on 10.03.2021. Therefore, the relevant searched AY for the assessee is AY 2021-22. The six years prior to the AY 2021-22 starts from AY 2015-16. Therefore, the relevant period for reassessment would be from AY 2015-16 to AY 2020-21. Therefore, the AY outside the jurisdiction would be AY 2014-15. Hence, the assessment made for AY 2014-15 is outside the jurisdiction . Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year." Respectfully, following the above decisions, we hold that the assessment completed u/s 153C in AY 2014-15 is beyond jurisdiction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the "relevant assessment year". 64. In our considered view, abatement of the six AYs' or the "relevant assessment year" under Section 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year" would not justify a sweeping or indiscriminate invocation of Section 153C. 68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments." 24. Respectfully following the above decision and we observe from the satisfaction rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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