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TMI Blog2024 (10) TMI 1628X X X X Extracts X X X X X X X X Extracts X X X X ..... A(1)(b) read with 143(3) of the Act despite the same is illegal and void-ab initio in the absence of any search initiated under section 132 of the Income Tax Act in the name of the assessee. 3. On the facts and circumstances of the case, the notice issued by the AO and proceedings initiated thereto under section 153C of the Act is bad in law, being barred by limitation and hence the assessment order passed in consequence thereto is liable to be quashed. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and assumption of jurisdiction by AO are illegal and void ab initio. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and the assessment order passed in consequence thereto are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of search. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order has been passed by AO on the basis of surmises and conjectures, without there being any adverse material on record. 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in passing the order without providing adequate opportunity of being heard to the assessee in clear violation of principle of natural justice 13. That the appellant craves leave to add, amend or alter any of the grounds of appeal." 3. In ITA No. 3402/Del/2023 for assessment year 2014-15, the assessee has raised following grounds of appeal: "On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eyes of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 12,86,416/- made by the AO treating the sales/ purchases made by the assessee as not genuine. (ii) That the above addition has been confirmed despite the same has been made on estimated basis by arbitrarily rejecting the explanations and the evidences brought on record by the assessee. (i) Without prejudice to the above, the CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by adding Rs. 6,07,392/- on account of bogus sales/purchases. 4.2 Similarly, in response to notice issued u/s 153C, for A.Y. 2014-15 the assessee filed its return of income on 15.03.2016 at a total income of Rs. 8,21,340/-. The AO completed the assessment vide order dated 30.03.2016 u/s 143(3) of the Act at Rs. 21,07,560/- by adding Rs. 12,86,416/- on account of bogus sales/purchases. 4.3 Aggrieved against the assessment orders passed by the AO the assessee preferred appeals before the learned CIT(Appeals) who vide his impugned consolidated order dated 30.06.2018 for A.Y. 2008-09, 2013-14 & 2014-15, dismissed the appeals and affirmed the orders of the AO. Aggrieved against this now the assessee is in appeal before this Tribunal. 5. First we take up assessee's appeal for A.Y. 2008-09 being ITA No. 3400/Del/2023. In ground No. 3 the assessee has taken legal ground challenging the initiation of proceedings u/s 153C being barred by time, falling beyond the period of six years from the date of recording of satisfaction note. Learned counsel for the assessee submitted that the case of the assessee was opened u/s 153C on account of certain documents found and seized during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153C was recorded. 6. Therefore, the six years of which the assessment proceedings could have been initiated u/s 153C were AYs 2010-11 to AY 2015-16. 7 The above has been summarized as below: Date of Search in case of Sunstar Group (third person) 19.12.2013 Notice issued u/s 153C 20.01.2016 Deemed Search year for the purpose of section 153C AY 2016-17 Period of six years for the purposes of Section 153C AY 2010-11 to AY 2015-16 Assessment year under consideration AY 2008-09 8. Since the assessment year under consideration is AY 2008-09, it falls beyond the period of six years referred to in Section 153C and thus is outside the scope of Section 153C of the Act and thus the AO had no jurisdiction to make an assessment of the assessee's income for the year under consideration. 9. Reliance is placed on the following judicial pronouncements in this regard wherein it has been held that the issuance of notice u/s 153C beyond the period of Six Assessment Years immediately preceding the Assessment year in which satisfaction note is recorded is not in accordance with law. ITAT Delhi in the case of M/S. Marconi Infratech (P.) Ltd. V. ACIT Central Circle - 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous." ITAT Delhi in the case of DCIT Central Circle -20 New Delhi Versus Rajesh Vashisht, 2023 (12) TMI 294 Dated: 29-11-2023, held that- "4. Without going into the merits of the case a perusal of the grounds read with the order of the CIT(A) we find that the first appellate authority has decided the appeal in favour of the assessee following the binding decision of the Hon'ble Delhi High Court in the case of RRJ Securities Limited 380 ITR 612 and subsequent amendment in the section 153C of the Act w.e.f. 01.04.2017. We do not find any merit in the grievance of the revenue. If the revenue is aggrieved by the binding decision of the Hon'ble Jurisdictional High Court of Delhi (supra) the revenue may approach the Hon'ble Supreme Court but in no case the revenue can be aggrieved by the binding decision before this Tribunal." ITAT Delhi in the case of M/S Esha Securities Pvt Ltd. V. The Dy. C.I.T Central Circle - 13 New Delhi and (Vice-Versa), 2024 (7) TMI 638, Dated: 30-5-2024, held that- "16. The law as interpreted by the Hon'ble Supreme Court and the Delhi High Court as above, declares that as per provisions of section 153C of the Act, the commencement date f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RAGUN FINANCE PVT. LTD, 2024 (7) TMI 1414, Dated: 30-5-2024 ITAT Chennai in the case of M/S. KSJ INFRASTRUCTURE PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1 (1), CHENNAI, 2024 (8) TMI 1421, Dated: - 6-3-2024 11. Therefore, in view of the above-mentioned facts and circumstances of the case and the case laws relied upon by the assessee, the initiation of assessment proceedings u/s 153C beyond the period of six Assessment Years immediately preceding the assessment year relevant to the previous year in which satisfaction has been recorded is illegal and liable to be quashed. Ground No. 5-6 Addition on the basis of material which is not regarded as incriminating Where no incriminating material is found during the search proceedings, no addition can be made in respect of completed assessments 12. Your honour, in the present case, search in the case of Sunstar Group has been initiated on 19.12.2013 and notice u/s 153C was issued to the assessee on 20.01.2016 (PB Pg. 8). Thus, the AY 2008-09 stood 'completed as per second proviso to section 153A r.w.s. 153C of the Act. 13. Further, it is submitted that nothing incriminating has been found in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024 (6) TMI 419, Dated: - May 31, 2024 ITAT Delhi in the case of VIDHYA DEVI C/O M/S. RRA TAX INDIA VERSUS DCIT CENTRAL CIRCLE NOIDA, 2024 (2) TMI 1199, Dated: February 22, 2024 17. Thus, in view of the above discussion and precedents laid down by the judgments, it can be concluded that in the absence of any incriminating material in the possession of the AO, the exercise of jurisdiction u/s 153A/153C is not legally sustainable. Hence, the additions made by the AO is not sustainable and bad in law and liable to quashed Ground No. 8 Addition of Rs. 6,07,392/- on account of undisclosed income treating the sales/purchases made by assessee as not genuine. Seized Documents do not pertain to the relevant assessment year 18. Your honour, in the present case, during the course of search on Sunstar Overseas at Bhalgarh, certain document was seized (attached at PB pg. No. 5-7) On the basis of above AO has drawn various misconceptions and allegations. 19. In this regard it is to be submitted that, the 3 documents which were seized from the premises of M/s Sunstar Overseas Ltd, on which hefty reliance had been placed and considered incriminating by the Id. AO, they do not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145(3) relied upon the turnover and GP rate shown in Trading P&L Account, which is contradictory in itself. 23. The AO estimated a GP rate and applied the same on the sales recorded in the books of accounts of the assessee it is beyond the reasonable understanding of the assessee that, how come the AO has placed the reliance on the books of account which he has already has rejected for the calculation of the GP rate and applying the same on the sales as per books of account. 24. Therefore, in view of the above, the actions of the AO are itself contrary to his views and this further supports the contention of the assessee that the addition has merely based on surmises and conjectures and on preconceived notion without applying his mind. 25. The AO has made an addition of Rs. 6,07,392/- by applying the GP rate of 36.48% (declared in its books of accounts) on the total turnover accounted by it in its books of accounts. Your Honor, what is worth noticing here is that as a consequence of the aforesaid action, the Id. AO has made addition of Gross Profit which has already been considered by the assessee for computing its tax liability. Double taxation of the same amount 26. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said statements were never even confronted to the assessee during the course of search proceeding and at is only in the assessment order the Ld. AO has quoted the said statement, and hence the assessee was not aware about how these statements were being used to draw negative inferences against the assessee. 33. It is also pertinent to note that the principles of natural justice form an integral part of procedural fairness and justness, thereby excluding the scope of arbitrariness. In the present case, the assessee was debarred of any opportunity provided to cross examine the statements of such witnesses. The said action of the Id. AO is in sheer violation of principal of natural justice. 34. In case the Id. AO proposes to use the result of any private enquiry made by it against the assessee, he should communicate to the assessee the substance of such information so as to put the assessee in possession of full particulars of the case he is expected to meet, and should further give him sufficient opportunity to meet it 35. Reliance is placed on the following judicial pronouncements wherein it was held that no adverse inference can be drawn against the assessee on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross-examination is sufficient to discard his statement. ..... . 40. Turning to the additions under Section 68 of the Act made on merits for three of the AYs. A perusal of the common impugned order of the ITAT reveals that a very detailed discussion has been undertaken after analysing the seized material. Para 38 of the impugned order is relevant in this context which reads as under 38. .......... On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross examine him. (ii) There is no corroborative evidence in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi 2024 (1) TMI 750. dated:-15-1-2024 39. In view of above judicial pronouncements, the adverse inference drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same is illegal, unjustified and against the principles of natural justice. Ground No. 11: Assessment order has been passed by the AO on the basis of surmises and conjectures Surmises and Conjectures 40. It is further submitted that that Ld.AO has engaged in surmises and conjectures to conclude his findings. He has failed to examine the facts of the case in the light of evidences and explanation provided by the assessee. 41. In this regards it is submitted that Ld.AO cannot engage in surmises and conjectures to conclude his findings This contention of assessee is supported by the following judicial pronouncements- ➤LALCHAND BHAGAT AMBICA RAM VERSUS COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA, 1959 (5) TMI 12-SUPREME COURT, Dated.- May 14, 1959 ➤COMMISSIONER OF INCOME-TAX VERSUS DINESH JAIN HUF, 2012 (10) TMI 158 DELHI HIGH COURT, Dated.- September 28, 2012 ➤SR. VENKATA RATNAM VERSUS COMMISSIONER OF INCOME-TAX, KARNATAKA I AND A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of search conducted on Sunstar Group of cases on 19.12.2013. 3. At the outset, it is an undisputed fact that the Assessment Year under consideration is AY 2014-15. 4. It is now a settled position of law that the period of six years for the purposes of Section 153C has to be construed from the assessment year relevant to the previous year in which satisfaction for issue of notice u/s 153C was recorded. In present case, satisfaction was recorded on 20.01.2016 i.e. AY 2016-17. Consequently, the period of six years of which the assessment proceedings have to be initiated u/s 153C were AYs 2010-11 to AY 2015-16 5. The above has been summarized as below. Date of Search in case of Sunstar Group (third 19.12.2013 person) 19.12.2013 Notice issued u/s 153C of the Act 20.01.2016 Deemed Search year for the purpose of section 153C AY 2016-17 Period of six years for the purposes of Section 153C AY 2010-11 to 2015-16 Assessment year under consideration AY 2014-15 6. In view of the above, the assessment year under consideration is covered under the provisions of section 1530 of the Act and assessment should have been framed under section 153C of the Act after issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein Hon'ble Tribunal under the verbatim same circumstances quashed the Assessment Order holding that assessment for AY 2021-22 has been wrongly framed under section 143(3) of the Act by ignoring the mandatory provision of section 153C of the Act. Relevant extract is being reproduced below as under: - "9. Therefore, in view of the above decision, the date of recording of the satisfaction will be the deemed date for the possession of the seized documents, which is 30.06.2022 in the present case and the date of search and six years period would be reckoned from this date Le. 30.06.2022. Therefore, there is merit in the submission of the assessee that the assessment year relevant for previous year in which search was conducted in the case of the assessee will be AY 2023-24 and the six assessment years immediately preceding the assessment year relevant for the previous year in which search was conducted for initiating proceeding u/s 153C of the Act will be AY 2018-19 to 202223. Therefore, respectfully following the decision of the cited case, it is held that in the present case, the assessment for AY 2021-22 should have been carried out by issuing notice u/s 153C of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer of the assessee on 27.11.2008, the six years falling within the purview of section 153C would be assessment years 2003-04 to assessment year 2008 09. In view of the settled legal position that the date of initiation of search in the case of the third party should be construed with reference to the date of receiving the requisitioned material by the Assessing Officer having jurisdiction over the person to whom such material relates (as propounded by the Delh High Court in the case of Pr Commissioner Of Income Tax vs. Sarwar Agency Pvt. Ltd., reported in [2007] 397 ITR 400 (Delhi)) and duly noting from the records that admittedly and undisputedly no notice u's 1530 was issued in assessee's case for assessment year 2008-09 and only notice u/s 143(2) was issued, it is our considered opinion that the impugned assessment has not been passed in conformity with the provisions of law. We note that the impugned assessment order has been passed u/s 143(3) and no notice u/s 153C has been issued although this year falls within the period of six years when counted from the date of recording of satisfaction note which is deemed date of search. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49, Dated: 28-11-2017 Relevant extract is being reproduced below. - "12. If the ratio of the Hon'ble jurisdictional High Court in the aforesaid case is to be applied on the facts of the present case, then, firstly, reference date has to be reckoned as date of recording of 'satisfaction under section 1530 which is20/11/2009; and secondly, if such a date is taken as date of initiation of the search or requisition for the purpose of second proviso to section 153A(1), that is, for the purpose of abatement of pending assessment proceedings, then the year of search in terms of clause (b) of section 153A(1) would be assessment year 2010-11; and 2008-09 would fall within the category of six assessment years prior to the year of search. In such a situation, assessment for assessment year 2008-09 should have been completed in terms of section 153C read with 153A and not as a regular assessment under section 143(3). The reason being entire concept of abated; unabated as laid down in 2nd proviso to section153A(1) and other issue of limitation as contained section 153 B has to be seen with reference to such reference date which has different consequences. Like for instance in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfied that the books are not correct or incomplete. However, in the case of assessee the ld. AO has failed to record his satisfaction that the books are incomplete or incorrect. AO after rejecting Books of accounts u/s 145(3) relied upon the turnover and GP rate shown in Trading P& Account, which is contradictory in itself. 22. The AO estimated a GP rate and applied the same on the sales recorded in the books of accounts of the assessed it is beyond the reasonable understanding of the assessee that, how come the AO has placed the reliance on the books of account which he has already has rejected for the calculation of the GP rate and applying the same on the sales as per books of account. 23. Therefore, in view of the above, the actions of the AO are itself contrary to to his views and this further supports the contention of the assessee that the addition has merely based on surmises and conjectures and on preconceived notion without applying his mind. 24. The AO has made an addition of Rs, 12,86,416/- by applying the GP rate of 0.24% (declared in its books of accounts) on the total turnover accounted by it in its books of accounts. Your Honor, what is worth noticing her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO has quoted the said statement, and hence the assessee was not aware about how these statements were being used to draw negative inferences against the assessee 30. It is also pertinent to note that the principles of natural justice form an integral part of procedural fairness and justness, thereby excluding the scope of arbitrariness. In the present case, the assessee was debarred of any opportunity provided to cross examine the statements of such witnesses. The said action of the Id, AO is in sheer violation of principal of natural justice 31. In case the Id. AO proposes to use the result of any private enquiry made by it against the assessee, he should communicate to the assessee the substance of such information so as to put the assessee in possession of full particulars of the case he is expected to meet, and should further give him sufficient opportunity to meet it 32. Reliance is placed on the following judicial pronouncements wherein it was held that no adverse inference can be drawn against the assessee on the basis of statement recorded without giving assessee to cross examine the same" The Supreme Court in the case of Andaman Timber Industries v. CCE 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. ...... 40. Turning to the additions under Section 68 of the Act made on merits for three of the AYs. A perusal of the common impugned order of the ITAT reveals that a very detailed discussion has been undertaken after analysing the seized material. Para 38 of the impugned order is relevant in this context which reads as under "38 On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without giving assessee to cross examine the same is illegal, unjustified and against the principles of natural justice. Assessment order has been passed by the AO on the basis of surmises and conjectures. Surmises and Conjectures 37. It is further submitted that that Ld.AO has engaged in surmises and conjectures to conclude his findings. He has failed to examine the facts of the case in the light of evidences and explanation provided by the assessee 38. In this regards it is submitted that Ld.AO cannot engage in surmises and conjectures to conclude his findings This contention of assessee is supported by the following judicial pronouncements- ➤ LALCHAND BHAGAT AMBICA RAM VERSUS COMMISSIONER OF INCOME-TAX BIHAR AND ORISSA, 1959 (5) TMI 12- SUPREME COURT, Dated.- May 14, 1959 ➤ COMMISSIONER OF INCOME-TAX VERSUS DINESH JAIN HUF, 2012 (10) TMI 158 DELHI HIGH COURT, Dated.- September 28, 2012 ➤ SR. VENKATA RATNAM VERSUS COMMISSIONER OF INCOME-TAX, KARNATAKA AND ANOTHER, 1980 (8) TMI 73 - KARNATAKA HIGH COURT, Dated.- August 14, 1980 ➤ ASSTT. COMMISSIONER OF INCOME TAX VERSUS SHRI SHARAD CHAUDHARY 2014 (8) TMI 309-ITAT DELHI, Dated.- July 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer assessed income u/s 143(3) of the Act. The AO has also recorded that the assessment is made u/s 143(3) of the Income Tax Act at column 10 of page one of assessment order. Thus, the assessment order is contrary to law and deserves to be quashed. Moreover, the AO could have rectified the order, if it was a clerical mistake. He did not do so. Be as it may, at this stage before us it is the order stated to have been passed u/s 143(3) of the Act, which is patently illegal. We hold so. 9.2 On merit, we find that Assessing Officer has made addition of Rs. 12,86,416/- treating the sales/purchase made by the assessee as not genuine. It is seen that the Assessing Officer rejecting the books of account maintained by the assessee u/s 145(3) of the Act, made the impugned addition of Rs. 12,86,416/-, inter alia, by observing as under: "3.4 The assessee neither has filed any evidence in response to the query given in the questionnaire nor in response to the show cause letter dated 21.03.2016 in support of his claim of sale/purchase as discussed. In view of the discussion above I am satisfied that the books are not reliable and are hereby rejected u/s 145(3) of the Act, therefore, I ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -3-2024 - ITAT Delhi in the case of M/S. Rswn Ltd. Versus DCIT, Central Circle-31, New Delhi, 2024 (2) TMI 278, dated: 31-1-2024 - ITAT Delhi in the case of Divya Exim Pvt. Ltd. C/O. Kapil Goel, Adv., Renu Jain C/O. Kapil Goel, Adv., Nisha Jain C/O.Kapil Goel, Adv. Versus DCIT Central Circle 25 New Delhi 2024 (1) TMI 750, dated:-15-1-2024 9.5 On the other hand, learned DR supported the orders of authorities below. 9.6 We have heard rival submissions and perused the material available on record. The stand of assessee is that all details in the form of books of accounts, copy invoices, GR, bilties etc. were filed before the Assessing Officer and the AO without pointing out any specific defect therein rejected the books of account u/s 145(3) and made the impugned addition of Rs. Rs. 12,86,416/- by applying the GP rate of 0.24% on the total turnover accounted by the assessee in its books of accounts. We fail to understand the reasoning of AO as at one hand he stated sale/purchase claimed to have been made by M/s Kamal Trading Company amounting to Rs. 54,14,14,119/- as bogus then he proceeds to make addition on the basis of GP disclosed by the assessee without any justification an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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