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TMI Blog2025 (5) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer [AO] without being in possession of any incriminating material having a bearing on the income of the Assessee for the previous year relevant to AY 2018-19. The Assessee also contends that the impugned assessment order is based purportedly on a statement of one Mr. Rakesh Jain, which was recorded under Section 132 (4) of the Act during the course of the search conducted under Section 132 of the Act. However, the Assessee was afforded an opportunity to cross-examine Mr. Rakesh Jain. Apart from the other grounds, the Assessee also disputes the additions made in the impugned assessment order on merits. 3. Concededly, the Assessee has an efficacious remedy of statutory appeal against the impugned assessment order and therefore Mr. Sinha, the learned counsel appearing for the Assessee has confined the present petition assailing the impugned notice on the solitary ground that it is without jurisdiction as it was issued without any incriminating material being found during the search conducted under Section 132 of the Act. Factual Context 4. The Assessee is a consultant / facilitator for setting up the amusement parks, indoor entertainment centres, malls and other entertainmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO made an addition of Rs. 43,85,50,300/- under Section 69A of the Act and accordingly issued a notice of demand under Section 156 of the Act raising the demand of Rs. 61,90,78,037/-. Analysis and Conclusion 8. It is contended on behalf of the Assessee that the impugned assessment order is higher-pitched on the unfounded assumption that the Assessee is an investor in RED Mall. He contends that the statement of Mr. Rakesh Jain, which forms the basis of the impugned assessment order is to the effect that the shops / spaces had been sold through the Assessee and not that the Assessee was an investor in the real estate project. It is contended that there was no material with the AO, which even remotely suggested that the Assessee is an investor in RED Mall. 9. There is no cavil that the only document, which was found during the course of the search, which the AO of the searched person considers to be incriminating document is the excel sheet containing certain information. It is material to note that the said excel sheet does mention certain figures in the columns under the heading "Dx" and "Cx" as well as names of few persons. According to the AO, the heading "Dx" concerns t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 4,505,685,992.06 1,764,463,820.00 6,270,149,812.06" The relevant extract of Mr Jain's Statement Ans: I acknowledge and admit that the above shown documents is found from the whatsapp record of my mobile phone which I received from Shri Prahlad Agarwal on 17.03.2017 and forwarded the same. Page 2: Statement of Rakesh Jain U/s 132 (4) of the Income Tax Act. to Shri Devendra Kumar Gupta. This Documents is the latest balance Sheet of M/s Celebration City Projects Pvt. Ltd. as on 17.03.2017. The term 'Dx' represent the figures as it appears in books of accounts and term 'Cx' represents the figures of cash received from the customers/investors which has not been recorded in the books of accounts. In the above sheets the abbreviated terms represent the following: 1. RED: It represents money received from the customers to which shop/space has been sold through Mr. Rakesh Babbar or Rakesh Babbar himself. 2. GP: It represent to money received from myself and my group of companies. GP stands from Green Park. 3. Deepak Agrawal: The figures mentioned against Shri Deepak Agrawal represent the amounts he spent in constructing this mall. 4. SJA: It stands for Sanjeev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting the explanation of Mr. Rakesh Jain in respect of the excel sheet, the same could not in any event be considered as incriminating material having a bearing on the assessment of the Assessee's income for the previous year relevant to AY 2018-19. 12. In Commissioner of Income-tax v. Kabul Chawla: 2015 SCC OnLine Del 11555, the Divison Bench of this court (to which One of us - Vibhu Bakhru, J. is a member) had considered the question whether proceedings under Section 153A of the Act could be instituted in absence of any incriminating material unearthed during the search and had summarized the law as under: "Summary of the legal position 37. On a conspectus of Section 153-A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under Section 132 of the Act, notice under Section 153-A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. (ii) Assessments and reassessments pending on the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Abhisar Buildwell (P) Ltd.: (2024) 2 SCC 433, the Supreme Court had considered the following question: "Whether the jurisdiction of the AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132-A or not i.e. whether any addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act or not." And, after referring to various decisions answered the said question in the affirmative. 15. The Supreme Court had also affirmed the view expressed by this court in Commissioner of Income-tax v. Kabul Chawla (supra) as well as of the Gujarat High Court in Principal Commissioner of Income-tax v. Saumya Construction (P) Ltd. (supra). We consider it apposite to refer to the following extract of the said decision. The same is set out below: "28. For the reasons stated herein below, we are in complete agreement with the view taken by the Delhi High Court in Kabul Chawla and the Gujarat High Court in Saumya Construction (P) Ltd., taking the view that no addition can be made in respect of completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be to initiate the reassessment proceedings under Sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under Section 153-A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under Sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 34. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153-A of the Act is linked with the search and requisition under Sections 132 and 132-A of the Act. The object of Section 153-A is to bring under tax the undisclosed income whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition preferred by the Revenue are hereby dismissed. No costs." 16. The aforesaid decision was rendered in the context of Section 153A of the Act. However, the said decision would be equally applicable to initiation of assessment / reassessment under Section 153C of the Act. In Commissioner of Income-tax v. Sinhgad Technical Education Society: (2017) 397 ITR 344, the Supreme Court accepted that the AO would have no jurisdiction to initiate proceedings under Section 153C of the Act absent any incriminating material found in case of a search conducted under Section 132 of the Act or requisition made under Section 132A of the Act. The relevant extract of the said decision is set out below: "17. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153-C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof. Section 153C enables and empowers the jurisdictional Assessing Officer to assess or reassess the six assessment years or the "relevant assessment year". The Act thus sanctions and confers an authority upon the Assessing Officer to exercise the power placed in his hands for up to a maximum of ten assessment years. Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasise is that merely because section 153C confers jurisdiction upon the Assessing Officer to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular assessment year forming part of the six assessment years immediately preceding the assessment year pertaining to the search year or for the "relevant assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under section 153C. Here too, the Assessing Officer would have to firstly identify the assessment years to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of assessment years falling within the block of six assessment years or for that matter all years forming part of the block of ten assessment years, appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to section 153A as well as section 153C ex abundanti cautela. Which however takes us back to what had been observed earlier, namely, the existence of the power being mere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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