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TMI Blog2025 (3) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... id Assessment Years are being taken up together. 2. We shall take up IT(SS)A No. 147/Ahd/2019 as the lead year and our observations would apply to balance years as well, wherever applicable. 2.1 The brief facts of the present group of cases are that there was a search under Section 132 of the Income Tax Act, 1961, carried out at the premises of Neesa Group on September 8, 2010. Neesa Group was being managed by the assessee, late Shri Sanjay Gupta. A search warrant was authorized for the assessee's premises and a proceedings under Section 153A of the Act were initiated. However, the assessee remained non-compliant to several notices issued by the Department. The assessee later requested that the original return filed under Section 139(1) for the Assessment Year 2005-06 be considered as the return under Section 153A of the Act. Despite several reminders and extensions by the Assessing Officer, the assessee failed to submit necessary documents such as the income computation, profit and loss account, and balance sheet. The Assessing Officer observed that even after nearly one year, compliance to the notice under Section 153A was only made on June 26, 2012. The first notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set by the Department, the assessee failed to provide satisfactory explanations for these discrepancies, reinforcing the non-cooperative nature of the assessee. The Assessing Officer observed that throughout the assessment proceedings, there was lack of cooperation from the assessee in providing necessary documents and explanations required for the completion of assessment. The issues were first raised through issuance of various notices, starting from 25th September 2012, requesting information on cash deposits, loans, land transactions, and shareholding patterns within the group. Despite multiple notices, the assessee failed to provide any details or evidences within the timelines stipulated. Firstly, the assessee was required to explain the source of cash deposits amounting to Rs. 2,46,77,980/-; however, no details were provided even after the expiration of the three-month period granted for compliance. Similar issues arose regarding a loan of Rs. 10,75,000/- from Shri Bhuneshwar Yadav, for which no details were submitted despite repeated reminders. Furthermore, the assessee was asked to provide the sale deed and payment details for a land purchased in Udaipur, yet no response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to make certain additions. The detailed assessment of the assessee's income revealed several adjustments that have led to an increase in the total income. The Assessing Officer identified various unaccounted investments, amounting to Rs. 2,50,000/-. These investments were not disclosed in the financial records of the assessee, and therefore, they were added to the total income as undisclosed income. Additionally, an amount of Rs. 1,92,000/- was treated as undisclosed income, further increasing the income to be assessed. One of the significant additions was related to unexplained credits, which totalled Rs. 98,50,000/-. These credits could not be substantiated during the assessment, and as a result, they were added to the total income. Furthermore, unrecorded investment was found to be Rs. 2,31,055/-. This amount represented investments that were not reflected in the books of accounts and was therefore was added to the income of the assessee. An interest disallowance of Rs. 5,92,835/- was made under Section 36(1), as the interest expenses claimed by the assessee could not be fully justified with proper documentation and the underlying purpose. Moreover, an amount of Rs. 33,525/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of Techno Dot Engineers Private Limited for various assessment years before us. 7. The assessee has taken the following Grounds of Appeal: IT(SS)A No. 147/Ahd/2019 A.Y. 2005-06 "1.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.2,50,000/- on account of undisclosed income. 2.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.1,51,200/- on account of unexplained credits. 3.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.98,50,000/- on account of unrecorded investment. 4.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.2,31,055/- on account of unrecorded investment. 5.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming disallowance of interest amounting to Rs.5,92,835/- u/s 36(1)(iii) of the Income Tax Act,1961. 6.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.33,525/- on account of unaccounted cash. 7.0 The learned Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal aspects which suggest the approval was not given in a thorough manner. It was argued that the JCIT, while granting the approval, merely analyzed the draft assessment orders and did not review the entire case records / documents, thereby supporting the argument that the approval was granted in a mechanical manner. The approval was thus granted without considering the vital case records, indicating a mechanical approach while granting the approval. Reliance was placed by the Counsel for the assessee on legal precedents in which it has been held that the approval under Section 153D is not merely a formality, but requires the prescribed authority to apply their mind to the facts and circumstances of the case. If the approval is granted in a mechanical manner without reviewing relevant materials, the subsequent assessment orders must be quashed. Several court decisions were relied upon, including the cases of PCIT vs. Anuj Bansal (ITA 368/2023), Anuj Bansal vs. ACIT (ITA No.1016/Del/2021), ACIT vs. Serajuddin & Co. (2023), PCIT vs. Siddarth Gupta (2023), Sanjay Duggal vs. ACIT (ITA Nos. 1800-1828/Del/2019), and Vrushali Sanjay Shinde vs. DCIT (2023), amongst others. 12. In response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sake of ready reference: First Stage: From Receipt of Appraisal Report to Filing of Return 14. The Guidelines provide that upon receiving the appraisal report within 60 days of a search operation, the Assessing Officer must become familiar with both the report and the seized material. Once the material is received, the AO, along with the Range Head, should scrutinize the material to determine if notices under sections 153A, 153C, or 148 are required. An "Action Note", detailing these findings and the need for further action such as audits or investigations, must be prepared within 90 days of receiving the seized material. This note should also consider proposals for special audits and centralization of cases, as well as investigate third-party connections and opening of seized hard disks. A copy of this action note is to be sent to the CIT (Central) for supervision. After issuing the necessary statutory notices, the AO must ensure that proper satisfaction is recorded for the application of Sections 153A and 153C, especially as these sections deal with the six financial years preceding the year of the search. In addition, the AO should consider invoking section 281B of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring Works Pvt. Ltd. The assessment order should be detailed and clear, making it understandable even to a layperson. It must consider and address the assessee's replies and evidence, rebutting any arguments or presenting the applicable case law. The order must also explicitly mention the seized materials, detailing where and when they were found, and must include any relevant annexures or scanned copies of critical documents. 17. On going through the contents of the Guidelines, we observe that the Guidelines provide that the assessing officer on receipt of appraisal report, which is expected to be received within 60 days of the search, is required to be acquainted with the appraisal report in the seized material before he takes up the assessments for the Group cases. The guidelines further provide that on receipt of the appraisal report and seized material, both the Assessing Officer and the Range Head should jointly scrutinize the appraisal report and seized material and prepare an "Examination Note" to decide appropriate cases where notices under Section 153A of the Act are required to be issued. Further, the Guidelines provide that the assessments should be taken up group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority on the last date of approval for his /her approval, as the case is typically made out to be before Courts, but both the assessing officer as well as his senior officials, including the Approving Authority are in the knowhow of affairs, right from the date of search. 20. Further, looking into the specific facts of the instant case, on perusal of the letter sent to joint Commissioner for approval of assessment orders in the group cases before us, we observe that the draft assessment orders along with case records were submitted for approval as required under the provisions of Section 153D of the Act. Further, the approving authority, approved the assessment orders and after due approval, it was specifically mentioned that the case records were also returned to the Assessing Officer. Therefore, as observed above, it is not a case where the joint Commissioner came to be aware of the facts of the search and survey operations only when the draft assessment orders were sent for his approval. The fact that approval was granted on the same date itself would not render the approval having been granted in a mechanical manner. The Guidelines further provided a copy of the action no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o complete the assessment. It is not a case of the assessee that there was any denial of justice or opportunity of being heard not having been granted to the assessee or his group concerns. However, despite a large number of opportunities, the assessee consistently kept on evading all notices of hearing and has avoided furnishing of necessary documents/details both before the assessing officer as well as before Ld. CIT(Appeals) and has taken recourse to legal/technical arguments to hinder the assessment/appellate proceedings. While respectfully following the decisions, wherein it has been held that grant of approval cannot be carried out in a mechanical manner, however, in our considered view those decisions would not come to the aid of the assessee in the instant facts for the reason that in some of the cases in which this principle has been upheld, notices have been approved by the Approving Authority for multiple sets of assessees having no relation with each other whatsoever by way of a common order (however, the case of those assessees and the present Group are on a different footing since search was conducted on Neesa Group in which the assessee is the main promotor). Secondl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral assessment years. Assessments for these years were framed under Section 143(3) read with section 153C of the Act. the Counsel for the assessee submitted that in the instant case, the AO directed a special audit under Section 142(2A) of the Act. The report from the special auditor was received, and based on the findings from this report, various additions were made to the income. However, it was pointed out before us that these additions were not based on any "incriminating material" that was found during the search. It was submitted that it is a well-established principle that the assessment under Section 143(3) read with section 153A of the Act must be based solely on "incriminating material" found during the search of the concerned assessee. Reliance was placed on several judgments, including PCIT v. Abhisar Buildwell P. Ltd. (2023) 454 ITR 212 (SC), PCIT v. Saumya Construction (2017) 387 ITR 529 (Guj.), CIT v. Kabul Chawla (2015) 380 ITR 573 (Del.), PCIT v. Kutch Salt and Allied Industries (Tax Appeal 283 of 2023), and PCIT v. Backbone Projects Ltd. (Tax Appeal 88 of 2023). In these decisions it has been held that assessments framed under Section 153A or 153C must not be ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Facility Management Agreement between Technodot Engineers Pvt. Ltd. and Neesa Agritech Pvt. Ltd., signed by Mr. Prakash Dave, the authorized signatory for Technodot Engineers Pvt. Ltd.; page 121 of Annexure A-19, which listed various credit and debit balances in the accounts of Neesa Leisure Ltd. (NLL), DHPL, NIL, NEPL, NTPL, and Shri Sanjay Gupta in the books of Technodot Engineers Pvt. Ltd.; pages 152 to 156 of Annexure A-19, which contained a Development Agreement between Technodot Engineers Pvt. Ltd. and Neelu S. Gupta, signed by Shri Rohit Gupta on behalf of Technodot Engineers Pvt. Ltd.; and pages 89-90 of Annexure A-9, which contained the minutes of a meeting held on 14.08.2010 at the corporate office of Technodot Engineers Pvt. Ltd. Furthermore, a separate search was conducted on 09.09.2010 in the case of Shri Sanjay Gupta. A warrant of authorization under Section 132 of the Act was issued for his premises at B-202, Dhananjay Tower, Ahmedabad. Documents found and seized from this location, relating to M/s. Technodot Engineers Pvt. Ltd., included pages 16-17 of Annexure B-1, which contained the profit and loss account of Technodot Engineers Pvt. Ltd. for the period from 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed data revealed significant differences in balance sheet figures, loans, and creditors compared to the audited accounts. In addition, there were several differences noted between the digital data impounded from various premises, and the accounts presented by the assessee for the relevant assessment years. The Special Auditor pointed out that the assessee had failed to provide certain requested books of account for the assessment years 2005-06 to 2011-12, despite being asked to do so via a notice under Section 142(1) dated 07.11.2012. Furthermore, during the search, the Special Auditor pointed out that the assessee was confronted with an amount of Rs. 7,10,46,010/- appearing in their personal books, allegedly from unsecured loans in the names of the assessee's parents. However, the father of the assessee, Shri Raghunath Prasad Gupta, denied giving any loan. It was later discovered that the funds were linked to cheques issued by Bhuj Mercantile Co-op. Bank, with the sources traced back to businesses owned by Shri Bharat Shah, who admitted to providing accommodation entries for commission income. Additionally, other discrepancies related to personal loans and credit transactions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts towards unsecured loans, while in the statement dated 8 September 2010, the father of the assessee admitted that he had not given any loan to the assessee whatsoever. Further, the special auditors observed that Shri Bharat Shah and others had already the accepted during their statements taken on 29 September 2010 and 10 December 2010 under Section 131 of the Act that they had provided accommodation entries to the assessee for which they had earned commission income and this amount was linked to this commission income. During the course of survey at the premises of the assessee, total cash deposits to the tune of Rs. 2.46 crores were found, for which the special auditors asked the assessee to provide the requisite explanation. Further, from the documents impounded from the office of the assessee, certain details for purchase of land by the group was found at Udaipur. However, the assessee did not provide any documents relating to purchase of the land. Further with regards to sale of flat at Goyal intercity, Ahmedabad from the documents impounded from the office of the assessee, it was observed there were cash receipts of Rs. 10 lakhs which was found, for which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of recommendations of the Special Auditor are liable to be set aside/ vacated, even if the proposed additions are on the basis of incriminating material found during the course of search. This would defeat the very purpose of appointment of Special Auditors in complex search related cases. In the instant case, the appointment of Special Auditor was also appealed by the assessee before the honourable Gujarat High Court, who, looking into the assessee's particular set of facts, dismissed the Writ Petition filed by the assessee. 32. We also observe that no evidence/discussion was carried out before us on merits of the case for any of the several years before us and only a general statement was made that all the additions have been made, without any reference to any incriminating material found during the course of search. However, as pointed out in the preceding paragraphs, even taking into consideration the facts of the lead case before us, certain additions evidently were made on the basis of incriminating material found in the course of search. We are therefore, unable to accept the general proposition/argument that "none" of the additions relating to all the impugned years u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, in interest of justice, even for these two assessment years i.e. Assessment Year 2010-11 and 2011-12, the matter is restored to the file of Ld. CIT(Appeals) for de-novo consideration, so as to enable the assessee one more opportunity to present the necessary supporting documents/evidences in support of its case. The Ld. CIT(Appeals) thereafter, after taking into consideration any evidence sought to be placed by the assessee in support of its case, may take appropriate action accordance with law. The third legal argument of the counsel for the assessee is that once books of accounts were rejected under section 145 (3) of the Act, no addition can be made in respect of items reflected in the books of accounts: 36. The Counsel for the assessee also relied upon several decisions in support of the above proposition. Specifically dealing with the above legal argument of the assessee, we observe that the cases on which reliance has been placed by the counsel for the assessee are distinguishable on facts and hence do not apply to the assessee's particular set of facts. Firstly, at the outset it is observed that none of the cases on which reliance is not be placed relate to search as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years immediately preceding previous year in which the search was carried out. 38. This specific legal argument is only applicable/has been taken with specific reference in the case of Techodot Engineers Pvt. Ltd for assessment year 2006-07 only. 39. The argument taken by the Counsel for the assessee is that in the case of Technodot Engineers Pvt. Ltd., the case records were centralized on November 22, 2012, and notices under Section 153C of the Income Tax Act were issued on December 12, 2012. Consequently, the case records were transferred to the AO in the Financial Year 2012-13 relevant for the Assessment Year 2013-14. In cases where proceedings under Section 153C are initiated, the "date of initiation of search under Section 132 or making requisition under Section 132A" is understood as the "date of receiving books of accounts, documents, or assets seized or requisitioned by the AO having jurisdiction over the person concerned." This interpretation is supported by various judicial precedents, including the decision of the Supreme Court in CIT v. Jasjit Singh (2023) 458 ITR 437, PCIT v. Shalimar Town Planners P Ltd. (2024) 161 taxmann.com 306, and the Ahmedabad Tribunal's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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