KOTHAKOTA RAMA RAO,RAYAGADA vs. ACIT, CENTRAL CIRCLE-1, BHUBANESWAR

Per L.P.Sahu, AM: These are the appeals filed by the assessee against the separate orders of CIT(A)-2, Bhubaneswar, dated 11.09.2018 and 29.08.2018 for assessment years 2013-2014, 2014-2015, 2015-2016 & 2016-2017. 2. Since, similar issues have been raised in all the appeals, therefore, for the sake of convenience and brevity, we shall decide the appeal of the assessee for A.Y.2013-2014 in IT(SS)A No.132/CTK/2018 after taking into consideration the grounds and facts mentioned

2 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 therein and the outcome of the same shall be applied mutatis mutandis

to the other appeals of the assessee also.

3 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 the learned C.I.T(A) as well as before this Hon'ble Tribunal, the Appellant due to lack of knowledge, could not take legal grounds. Since, he himself has filed the appeal, having no knowledge on Income Tax Law, could not take these legal ground. Legal grounds that, the Appellant proposed to take here are as such;

That, it may be respectfully submitted here that, it being juri ictional ground and goes to the root of the case, it needs to be admitted for hearing in the interest of justice. If this legal ground is not admitted and not adjudicated, the Appellant/Assessee will suffer from irreparable loss and injury,

Hence the; PR A YER

Under the facts and in the circumstances stated above, it is therefore respectfully prayed that, this Hon'ble Tribunal shall be graciously pleased to consider the genuine difficulties faced by the Assessee and be further pleased to accept these additional legal ground taken here in the Revised grounds of Appeal for adjudication in the interest of justice.

And for this Act of kindness, the Appellant/Assessee as in duty bound shall ever pray.

deriving an income from interest on capital and remuneration from a partnership firm, namely, M/s Jagannath Mills, Kothapeta, Rayagada. A search and seizure operation u/s.132 of the Income Tax Act, 1961 was conducted against the assessee on and from 12.02.2016. In pursuant to 4 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 the search and seizure operation, the assessee was asked to file return

u/s.153A of the Act. In response to the said notice, the assessee stated

that the return filed u/s.139 of the Act on 31.03.2014 declaring total

income of Rs.2,67,510/- may be treated as return filed. Subsequently,

other statutory notices were issued to the assessee. In response to the said notice, ld. AR of the assessee filed detailed written submissions

which have been incorporated by the AO in his order. The search

u/s.132 of the Act was conducted in case of Shri N. Trinath Rao, Shri

N.Ananda Rao and Shri Jami Ramesh & Group on 12.02.2016. Shri

N.Trinath Rao and Shri N.Ananda Rao both are brothers and qualified

Chartered Accountants and practicising. The assessee Shri Kothakota

Rama Rao was father-in-law of Shri N.Ananda Rao. Shri Jami Ramesh

and Shri Jami Siva Sai are brother-in-laws of Shri N. Trinath Rao.

During the search proceedings in the residential premises of Shri Jami

Siva Sai incriminating documents in the form of loose papers, note

books, diaries etc. were found. The documents which are found and annexured as JRR-45, JRR-37 & JRR-26 which are containing details of amounts advanced by the assessee to Shri Jami Siva Sai was found and the same was confronted to the assessee as per questionnaire dated

5 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Sai of Rs.75 lakhs. Further during the course of post search enquiry, the above documents were also confronted to Jami Siva Sai on 12.04.2016,

wherein he was also failed to offer any convincing explanations. From the statements, the AO noticed that Shri Jami Siva Sai could not furnish

the details of Rs.50 lakhs received from DORB and Rs.25 lakhs received

from Shri Gandhi Thakur Das, Surat. For the sake of convenience, we

are reproducing the questions answers, statements and findings of AO

in this regard, which read as under :-

SI. No. Documents seized Indentified as 01. One diary JRR-45

Page no.84 of JRR-45 shows the details of hand loan amounting to Rs.75,00,000/- given by you to Sri Jami Siva Sai during the financial year 2012-13. The abstract of the seized document JRR-45 Page No. 84 is reproduced below:- K.Rama Rao, Ryd. 26/6/12 By cash(p) 50,00,000 12/11/12 By cash(I) 625000 06/12/12 By cash(p) 25,00,000 75,00,000 The Page No. 90 of JRR-37 shows receipt of interest @1.25% per month on hand loan. Similarly, Page No.86 of JRR-37 shows interest received by you on 12.11.12 is Rs.6,25,000/-. In view of the above, Please explain the source of Rs.75,00,000/- hand loan given to Sri Jami Siva Sai . Further, explain why the income of interest of Rs.6,25,000/- on hand loan will not treated as undisclosed income and added to your total income during the financial year. For the purpose of making compliance to this questionnaire, a notice u/s.142(1) of the Act is enclosed."

6 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 In response to the above questionnaire, the assessee's A.R Shir N. Ananda Rao, F.C.A filed his reply on 25/07/2017. The same has been reproduced below; The assessee has filed the Return of Income for the assessment year 2013-14 on 31-03-2014. The copy of the acknowledgement and the calculation sheet enclosed herewith for your kind perusal. There are no investments made during the year. Your Honour has mentioned in the notice that the assessee had given load to Jami Siva Sai as per the noting of Diary, not-book and rough cash book on 26-06-12 and on 06-12-12 ofRs.50 Lakhs and Rs.25 lakhs respectively. In this regard I am to say that I have not given any loan to Jami Siva Sai and I am not aware of the same transactions. During the investigation also I have told that same fact. There is no receipt of interest to the extent of Rs.6,25,000/- on 12-11-2012. No documents were also obtained from our premises during the search operations. I have no dealings with Jami Siva Sai and I do not know why he has mentioned K. Rama Rao. It may belong to some other person. There are many in the name of K. Rama Rao and hence it cannot be treated as undisclosed income. As such the same cannot be added to the Returned Income.

7 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Please explain the initials(P) and (I) furnish the complete postal address of Sri K. Rama Rao alongwith telephone number.

Ans- As I said earlier, he is not K. Rama Rao and he is Y. Rama Rao and he collected cash of Rs.50,00,000/- from DORB parties. (P) stands for "Party" and (I)stands for "Investment" and the address of Y. Rama Rao has already been submitted above.

Q.88 As you said above, where you have invested Rs.6,25,000/- and source thereof? Ans- The investment of Rs. 6,25,000/- has been made in cashew Home and has been reflected in the books of account. Q.89 I am showing you Page-88 of seized documents identified as JRR-

P.95 Lakhs 12.11.12 6,25,000 OB: 50 21.05.13 5,00,000 6/12/12 25 22.05.13 62,500 23/04/14 20 30.10.13 4,68,750 95 06.02.14 4,68,750 07.07.14 6,37,500 - 9 months pay 30.12.14 4,00,000 Please explain the above.

Arts- As explained above, Rs,50 lakhs was received from DORB customers and Rs.25 Lakhs received from Sri Gandhi Thakur Das, Surat.

Q.90 I am showing you Pages-89 to 91 of seized documents identified as JRR-37 which clearly show payment of interest made by you as detailed below.

5X75X1.25 468750

5monthsX75 LakhsXI.25% = Rs.4,68,750/-. That means you have paid interest of Rs.4,68,750/- @ 1.25% interest on Rs.75,00,000/- of loan availed. Please offer your comments.

Ans. I cannot explain the same."

8 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

From the above facts, the AO was not convinced and added the total

Rs.75 lakhs in the hands of the assessee and completed the assessment

on substantive basis along with the interest of Rs.6,25,000/- and in case of Jami Siva Sai, the same was added on protective basis. However,

in appeal filed by the assessee, the CIT(A) deleted the addition made in the hands of Jami Siva Sai on protective basis holding that the same

amount has been confirmed in the hands of the assessee Kothakota

Rama Rao vide order dated 28.09.2018 in I.T.Appeal No.0414/2017-18. 6. Feeling aggrieved from the addition made by the AO, the assessee

preferred appeal before the CIT(A) along with additional legal ground.

Ld. CIT(A) after considering the submissions of the assessee dismissed

the legal grounds raised by the assessee and decided the appeal of the assessee on merits.

9 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

and also filed his written synopsis as under :-

That, a search and seizure operation u/s.132 of the I.T. Act, 1961 was conducted in the Residential premises of the Assessee on 12.02.2016. consequent to search, Assessment proceeding U/S.153A has been initiated against the Assessee from Assessment years 2010-11 to 2015- 16 and regular Assessment u/s. 143(3) of the Act, has been initiated for Assessment year:2016-17. While completing Assessment, the learned A.O accepted Returned income of the Appellant/Assessee for Assessment years:2010-ll,2011-12 and 2012-13, but made additions for Assessment years:2013-14 to 2016-17. Against the Additions made, for Assessment years:2013-14 to 2016-17, the Appellant preferred Appeals before CIT(A)-2, Bhubaneswar. While adjudicating appeals of the Appellant, the learned CIT(A) deleted additions for Assessment year: 2014-15 and 2015-16, however allowed only relief of Rs.9,73,821.00 for Assessment year: 2016-17. Being aggrieved with additions confirmed by the learned CIT(A), The Appellant knocks door of this Hon'ble Tribunal for justice. The Appellant submits herewith details , for better appreciation of facts;

Asst.year Returned Income Assessed income Addition in dispute Relief by CIT(A) 2010-11 Rs.1,89,771.00 Rs. 1,89,771.00 N I L No Appeal 2011-12 Rs.2,52,115.00 Rs. 2,52,115.00 N I L No Appeal 2012-13 Rs.2,63,040.00 Rs. 2,63,040.00 N I L No Appeal 2013-14 Rs.2,67,510.00 Rs. 83,92,510.00 RS. 81,25,000.00 N I L 2014-15 Rs.2,68,220.00 Rs. 17,68,220.00 Rs. 15,00,000.00 Rs.15,00,000.00 2015-16 Rs.3,19,320.00 Rs. 33,56,820.00 Rs. 30,37,500.00 R.s.30,37,500.00 2016-17 Rs.3,28,800.00 Rs.1,29,55,340.00 Rs.1,26,26,535.00 Rs. 9,73,821.00

That, four Appeals are pending before this Hon'ble Tribunal for adjudication i.e. for Assessment years:2013-14, 2014-15, 2015-16 and 2016-17. Out of four Appeals, for Assessment years: 2014-15 and 2015- 16 additions have been deleted by CIT(A) in absence of any incriminating materials, however dismissed the legal issue. Therefore, for these two Assessment years, Appeals are pending for adjudication of legal issue only. So far as the knowledge of the Assessee goes, Department has not preferred any Appeal against the Relief allowed by CIT(A) for Assessment years: 2013-14 and 2016-17, the Appellant challenged orders passed by forums below both on legal issue as well as on merit.

10 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 That, in addition to legal issues raised in the original grounds of Appeal, the Appellant has filed an application for acceptance and adjudication of other legal issues which goes to the root of the case, therefore prays, before this Hon'ble Tribunal to accept these new legal grounds in addition to another legal ground taken in the Appeal memo for hearing in the interest of justice.

Legal issues:

1D. That law in this issue is well settled by the Hon'ble Bombay High Court in the case of Smt. Shreelekha Damani(Supra) reported in (2019) 307 CTR 218. that while granting approval, if the approving Authority did not have enough time to analyse the issues arising out of the draft Assessment orders, then clearly this was a case in which the Higher Authority had granted the Approval without consideration of relevant issues. Their lordships held that the question of validity of approval goes to the root of the matter and could have been raised at any time and the Tribunal was justified in holding that there was no application of mind on the part of the Authority granting approval and therefore approval was invalid. The Appellant also relies on following judicial pronouncements such as;

1E. That, in view of above judicial pronouncement and settled principles of law, it is respectfully submitted here that since the learned JOT has accorded approval without verifying the Assessment records and seized materials and in a very mechanical and hasty manner, the same is not sustainable in the eye of law, as such impugned Assessment orders being illegal and void are liable to be quashed in the interest of justice.

12 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Legal Ground No. 2

2A. That, for Assessment years: 2013-14 to 2015-16, no addition have been made on the basis of any incriminating material found and seized from the Assessee. However additions have been made on the basis of documents seized from a third party namely Jami Shiva Sai. learned CIT(A) deleted additions on the same set of facts for Assessment year:2014-15 and 2015-16, but confirmed addition for Assessment year:2013-14. Since, issue is similar to all these three years for convenience and better appreciation, the Appellant submits here details in Assessment year: 2013-14 and prays to accept this argument for rest of the two Assessment years .

(Assessment year: 2013-14)

That, during course of search, though certain documents were seized as per panchanama, but during search as well as in post search inquiry, the Appellant explained each of the seized materials and no addition has been made on the basis of documents seized and mentioned in Panchanama to substantiate, the claim. The Appellant wants to draw, kind attention of this Hon'ble Tribunal to Page No.l to 9 (Annexure-1) of the paper Book. The learned A.O made addition of Rs.75,00,000.00 and Rs.6,25,000.00 in the hand of the Assessee treating it as undisclosed income on the basis of document seized from third party namely Shri Shiva Sai Jami, particularly when, the Assessee had no relationship with Sri Shiva Sai Jami and the Documents seized were mentioned in the panchanama recorded in the name of Shiva Sai Jami and in his Pachanama the name of the Assessee is not included. Since, Shri Shiva Sai Jami is a different person and separate search warrant and separate panchanama was drawn in his case, documents seized from his residence cannot be applied against the present Appellant to make addition in a proceeding initiated U/S.153A of the Act, particularly when, he categorically denied that this document had no relation with the present Appellant.

That, law in this aspect is well settled by the Hon'ble ITAT, Delhi Bench in the case of Trilok Chand Chaudhury -vrs- ACIT, Central Circle New Delhi in ITA NO.5870/DEL/2017 that, even if search happens in the case of the Assessee, A.O cannot initiate proceeding U/S.153A, if incriminating material is found during search of other person. Since, facts of the present case is similar to the facts in the case of Trilok Chand Chaudhury. In view of settled principles of law, the Assessment so made U/S.153A and consequential additions so made therein for Assessment years:2013-14, 2014-15 and 2015-16 being not sustainable in the eye of law are liable to be quashed in the interest of justice.

2D. That, when the learned A.O has no incriminating material in his hand for Assessment years: 2013-14 to 2015-16 and no addition has been made on the basis of documents seized, he is not authorised under 13 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 the law to disturb the completed Assessment. Law on this issue is well settled by the Hon'ble ITAT, Delhi-F bench in the case of Smt. Sunita Bhagchandka-vs-ACIT in ITA No.3447/Del/2016 that, when documents seized during search has no revenue implication and does not indicate any undisclosed income, it cannot be construed as incriminating material, so as to attract section 153A of the Act to disturb completed Assessment. Law in this Aspect is well settled by the Hon'ble ITAT, Delhi Bench in the case of DCIT -versus -Dharampal Satyapal Ltd., that, in case of proceeding U/S.153A addition, if any, to be made has to be made strictly on the basis of seized Documents. Since, no incriminating material exists for these three years, no addition can be made. In view of above judicial pronouncements addition of Rs.75,00,000.00 and Rs.6,25,000.00 made for Assessment year:2013-14, treating as undisclosed income and confirmed by learned CIT(A) being not sustainable in the eye of law is liable to be deleted in the interest of justice.

Legal around No.3: 3A. That, the impugned order of Assessments were passed much after the date of limitation. In the case in hand, Assessment orders were to be passed by 31.12.2017. Though, it is mentioned in the face of the Assessment order that, it was passed on 29.12.2017 but actually it were passed much after the date of limitation. If at all, it were passed on 29.12.2017, then what was the reason for which the learned A.O kept it with him for 11 days and despatched it much after the date of limitation i.e. on 08.01.2018 which was served on the Assessee on 15.01.2018. The Authorities below grossly failed to justify with sufficient reason regarding delay in despatch and service of Assessment order. Since, the Authorities below have no reason to justify the delay, it cannot be said that the impugned order of Assessment were passed on 29.12.2017 i.e. within the period of limitation. The impugned action of the Authorities below clearly justifies the fact that, Assessment orders were passed much after the date of limitation, hence are barred by limitation. Law in this aspect is well settled that, if the Authorities below could not explain the delay in service of Assessment order after the date of limitation, the impugned order of Assessment so passed are barred by limitation, hence are not sustainable in the eye of law. (Reference may be drawn to page No.144 and 145 of the paper Book.)- In support of this contention, the Appellant most respectfully relies on following Judicial pronouncements such as; l. C.IT. & D.C.I.T. -versus- BJ.N. Hotels Ltd., in ITA No.239/2009 (Karnatka High Court).

For that, while examining documents seized from Shri Siva Sai Jami, the learned A.O. treated as if, the Appellant/Assessee has given Rs.75,00,000.00 as loan and has earned Rs.6,25,000.00 as interest income, for which, while completing Assessment U/S.153A, the learned A.O made addition of Rs.75,00,000.00, treating it as undisclosed income on substantive basis and further, calculated interest and made addition of Rs.6,25,000.00, treating it as undisclosed income from other sources and taxed accordingly U/S.115BBE of the Act. To make these additions, he took help of documents seized from the premises of Shri Shiva Sai Jami. The learned A.O referred to page No.84 of JRR-26. (Reference may be drawn to Page No.26, Annexure-4 and page No.42, Annexure-5 of the paper Book.) During course of search, post search inquiry as well as during course of Assessment proceeding, Shri Shiva Sai Jami has categorically and repeatedly explained the fact that, the figures mentioned at page 84 of JRR-26 does not relate to the present Appellant Kothakota Rama Rao and has provided details of the persons to whom it represents. It was also explained by him that, he has never taken any loan from the Appellant and no such interest was ever paid to the Appellant. Further, no corresponding evidence to support the findings of the learned A.O was recovered from the Appellant. The Appellant also denied of having any financial transaction with Jami Shiva Sai. When both parties denied of having any financial transaction and when the person who is in possession of seized documents have categorically and repeatedly explained that, the facts mention at page No.84 did not relate to the Appellant and when, there is no proof of any actual financial transaction found either during search or even post search enquiry, the learned A.O should not have made addition and the learned C.I.T.(A) should not have confirmed the addition. The impugned additions being illegal and without any basis is not sustainable, as such needs to be deleted in the interest of justice.

15 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

In view of the above judicial pronouncements, it is respectfully prayed that, the additions so made being not sustainable in the eye of law needs to be deleted in the interest of justice. In addition to the above written submissions, the ld. AR of the assessee

submitted that the AO sent the draft assessment order before the JCIT

for taking approval u/s.153D of the Act of near about 75 cases on 29th

December, 2017 and the ld. JCIT approved the draft assessment order

on the same date, which is impossible and the same implies that the JCIT has not applied his mind properly before giving approval. He also submitted that there was no any incriminating material found during

the course of search. However, the AO has completed the assessment

relying on the documents found in the name of Jami Siva Sai, who is other than searched person, therefore, the entire assessment made

u/s.153A of the Act is not sustainable in the eyes of law.

authorities and filed his written synopsis which reads as under :-

Assessee's first legal ground: It pertains to non-application of mind of Joint CIT, Central Range, Bhubaneshwar while according approval u/s.

16 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 153D of the Income Tax Act. It may be noted that no such ground was taken up by the assessee before the CIT(A). i.) It is clear from the plain language of section 153D that the A.O. is only required to take prior approval of Supervisory officer (Addl./Jt. CIT) before passing of assessment order u/s. 153A r.w.s. 143(3)/144. This requirement has been fulfilled in the present case. ii.) When the words of a Statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of the consequences. It is said that the words themselves best declare the intention of the law giver. (Hon'ble Supreme Court in the case of Union of India v. Tata Chemicals Ltd. (363 ITR 658) (para-22). iii.) The approval granted under section 153D of the Act by the Supervisory officer (Additional/Jt. CIT) is merely an Administrative order and no civil or penalty consequences flow from such an order against the assessee. The approval of Supervisory officer is totally distinct from the assessment order and not required to be communicated. The Approval granted by the Supervisory officer (Additional/Jt. CIT) is not justiciable in law. iv.) Once the supervisory officer is agreeing to the finding of the A.O. then he is not required to record the reasons for so agreeing. It is further submitted that the recording of sanction or approval is not required to be made in a particular manner. What could be challenged before the Tribunal is want of sanction and not the manner of approval. v.) The Judgement by the Hon’ble Mumbai Tribunal relied upon by the assessee in the case of Smt. Shreelekha Damani (88 taxmann.com 383) is distinguishable on facts. In para-10 of the decision (on page-3), it has been mentioned that the Addl. CIT, Central Range-7 had asked the A.O. to submit the draft orders for approval u/s. 153D on or before 24.12.2010. However the draft order was submitted on 31.12.2010 thereby he was left with no time to analyse the issues of draft order on order. With these comments, the draft order was approved as it was submitted. Therefore in said context, it was held by the Hon'ble Mumbai ITAT that the Addl. CIT had not applied his mind while granting approval u/s. 153D. Thus there was disagreement between the A.O. and his supervisory officer. However in the present case, no such comments have been mentioned by the Joint CIT, Central Range, Bhuvaneshwar while according approval on 29.12.2017. In the present case, the Joint CIT, Central Range, Bhuvaneshwar has confirmed & consented to the act of the A.O. and sanctioned the same. vi.) The Judgement of the Hon’ble Cuttack Tribunal relied upon by the assessee in the case of Smt. Geetarani Panda vs. ACIT (IT (SS)A No.01/CTK/2017 dated 05.07.2018 is distinguishable on facts. In para- 11 of the decision (on page-13), it has been mentioned that the Addl. CIT, Central Range-1 had given a reminder to the A.O. to submit the draft orders for approval u/s. 153D on or before 23.03.2015. However the draft order was submitted on 26.03.2015 thereby he was left with no 17 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 time to ensure that all the points in the Appraisal Report, the appellate proceedings, audit inspection etc. had been duly taken into account and the enquiries/investigations required to be made, were actually made by the A.O. In the end, he also mentioned that these cases were never discussed with him. With these comments, the draft order was approved as required under the statute u/s. 153D. Thus there was disagreement between the A.O. and his supervisory officer. Therefore in said context, it was held by the Hon'ble Cuttack ITAT that the Addl. CIT had not applied his mind while granting mechanical approval u/s. 153D (para-25 on page-24). However in the present case, no such comments have been mentioned by the Joint CIT, Central Range, Bhubaneshwar while according approval. Further in the case of Smt. Geetarani Panda, the A.O. was asked to examine the opening cash-in-hand before determining total income of the assessee. This issue has been dealt by the Hon'ble Cuttack Tribunal in para-26 (on page-25) of the appellate order. In said case, the A.O. had not communicated his findings to the Supervisory Officer regarding further enquiries made by him. Therefore approval of the Supervisory Officer u/s. 153D was held to be without application of mind. In view of above facts and circumstances, the first legal ground taken by the AR of the assessee is required to be rejected. Assessee's second legal ground: It has been alleged that no incriminating material was found during the course of search therefore the AO could not have interfered with the completed assessments. It may be noted that no such ground was taken up by the assessee before the CIT(A). i.) Kindly refer to page 15 of paper-book dated 22.07.2019 filed by the AR of the assessee. In reply to question no.14 of statement u/s.132(4) recorded on oath, the assessee had categorically admitted that he has given friendly hand loans as well as taken hand loans which were not recorded in the books of account. Coupled with this statement, one has to analyze the entries found in JRR- 45, JRR-37 & JRR-26 i.e. documents seized from the residence of Shri Jami Siva Sai. Further Shri Jami Siva Sai is a family member of the assessee as well related to him. The relationship between the assessee and Shri Jami Siva Sai has been discussed in para-2 on page-2 of the order of CIT(A). Reliance is placed on the decision of Hon’ble Punjab and Haryana High Court in the case of Rakesh Mahajan Vs. CIT (214 CTR 218) wherein it was held that "it is a well settled law that admission constitutes best piece of evidence because admission is self-harming statement made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming one's own interest unless such a statement is true". ii.) Reliance is placed on the order of Hon'ble Cuttack ITAT in the group case i.e. Smt. N. Roja for AY 2010-11 to AY 2014-15 & AY 2016-17 in IT(SS) A Nos. 101-106/CTK/2018 dated 04.06.2020. On pages 16 & 17 of said order dated 04.06.2020, the Hon'ble Members of ITAT have analyzed clause (vii) of para-37 relating to the decision of 18 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573). From the same, it is clear that the AO can interfere with the completed assessments if there is either an incriminating material found at the time of search or undisclosed income or property is discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. On going through the records, it is palpable that cash loans of Rs.75 lakhs are not recorded in the books of account of the assessee. The sources of such loans have remained unexplained. Further the interest income of Rs.6.25 lakhs had not been recorded in the books of account and was also not offered to tax. Hence the case of assessee clearly falls within the ambit of the observations of the Hon'ble Delhi High Court in para-37 of said decision towards "undisclosed income". iii.) The facts of the case for AY 2014-15 and AY 2015-16 are totally different. Kindly refer to para 5.2 on page 3 of CIT(A)'s order. It is clear that the CIT(A) allowed relief to the assessee since his name did not appear in the seized documents relied upon by the AO. Hence it could not be said that the assessee had given hand loans or received interest income in these assessment years. iv.) It was held by the Hon'ble Delhi High Court in the case of Smt. Dayawanti vs CIT (75 taxmann.com 308) that statements recorded during the search operations could be relied upon to make addition to assessee's income. It was held that where inference drawn in respect of undeclared income were premised on materials found as well as statements recorded by the assessee's son, the addition so made was justified. iv.) The documents seized from the third party can be used against the person to whom these belong as held by Hon'ble Pune ITAT in the case of Dhunjibhoy Stud & Agricultural Farm vs. DCIT (82 ITD 0018) (TM Pune ITAT). In view of above facts and circumstances, the second legal ground taken by the AR of the assessee is required to be rejected. Assessee's third legal ground: It has been argued that the assessment order u/s.153A was passed on 29.12.2017 but it was dispatched on 08.01.2018 and served on the assessee on 15.01.2018. Hence it was barred by limitation of time. i.) This issue has been discussed at length by the CIT(A) in paras 7.2 to 7.9 on pages 6 to 13 of the appellate order for AY 2013-14. Strong reliance is placed on the discussion and findings of CIT(A). ii.) Further the Hon'ble Cuttack ITAT vide order dated 10.06.2013 in the case of Sophia Study Circle vs. ITO in ITA No.286/CTK/2012 has held that the Assessing Officer is required to make the assessment order before the time barring date and not required to serve the order before the time barring date. (Para 6) This decision was not placed before the Hon'ble Juri ictional ITAT during the hearing in the case of M/s. Nidan. Therefore as such, the decision in the case of M/s. Nidan is Per incuriam.

19 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 iii.) The official records do not show that the assessment order was passed by the A.O. beyond the limitation period i.e. 31.12.2017. The legislative intent specified in sections 143(2)/148 and other sections is clear wherein which it is stated that the A.O. should “serve on the assessee" as compared to the language used in section 153(1). The legislature in its wi om has not used the term "shall be served on the assessee" U/s. 153(1) for any assessment order or demand notice. The decision of the Hon'ble Andhra Pradesh High Court in the case of Kodicasu Appalaswamy & Suryanarayana Vs. Commissioner of income Tax (46 ITR 735) is pertinent in which their lordships held that where an order of assessment had been passed within the period of limitation then the date on which order of assessment and demand notice were served, was not relevant. The Hon'ble Gauhati High Court in the case of Ramanand Agarwalla Vs. Commissioner of income- tax (151 ITR 216) held that as per sub-section 1 of section 153 of the Income Tax Act, 1961, the A.O. is required to pass an order of assessment within the limitation period, it does not require that the demand notice and assessment order should also be issued within that limitation period. In the case of K.U. Srinivasa Rao Vs. Commissioner of Wealth-tax (152 ITR 128), the Hon'ble Andhra Pradesh High Court held that an order of assessment was not an administrative order but a quasi-judicial order. Section 17A(1)(a) of the Income Tax Act, 1957, requires that an order of assessment should be made within the prescribed period. It does not further require that it should be communicated within the prescribed period. An order must be deemed to have been made on the date on which it is purported to have been made. Therefore, an assessment order purporting to have been made on 31st March, 1979, but served on the assessee on 20th April, 1979, is deemed to have been passed in the eye of law on 31st March, 1979 and not barred by limitation under section 17A(1)(a). In view of above facts and circumstances, the third legal ground taken by the AR of the assessee is required to be rejected. Assessee's ground relating to addition of Rs.75 lakhs and Rs.6.25 lakhs made for AY 2013-14 i.) This issue has been discussed by the A.O. in para 6 on page 3 of the assessment order. The statement of Shri Jami Siva Sai in relation to seized documents is reproduced by the A.O. in para 4 on pages 4 to 6 of the assessment order. It is clear that Shri Jami Siva Sai failed to explain as to how the entries on JRR-26, JRR-45 and JRR-37 were related to Shri Y. Rama Rao in spite of the fact that name of the assessee was clearly mentioned therein. Further "Ryd" refers to place Rayagada where the assessee was residing. Moreover the initials (P) and (I) stood for principal amount and interest and not party and investment respectively as stated by him. Shri Jami Siva Sai could not furnish any corroborative evidence for his assertion that amount of Rs.50 lakhs were received from DORB customers and Rs.25 lakhs was received from Shri Gandhi Thakur Das, Surat. There was no plausible explanation as to why the names of DORB customers and Shri Gandhi Thakur Das, Surat

20 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 did not appear in seized documents if the version of Shri Jami Siva Sai was correct. The ledger extract of DORB customers and Shri Gandhi Thakur Das were also not produced before the A.O. As regards the question no.90 (page 6 of the assessment order) in relation to working of interest @ 1,25% on 75 lakhs for 5 months (pages 89 to 91 of JRR-37), Shri Jami Siva Sai could not furnish any explanation for the same. He expressed his inability to explain the entries relating to interest working which was paid to the assessee. ii.) This issue was discussed by the CIT(A) in paras 5.5 to 5.7 on pages 4 & 5 of the appellate order. It is clear that these documents were bound books in thick cover and could not be regarded as loose sheets of paper. The assessee was regularly advancing cash loans as evidenced by documents seized from his residence. In AY 2016-17, the assessee had advanced cash loans to Shri B. Ram Prasad (Director of Gandhi Institute of Advanced Computer & Research) amounting to Rs. 31 lakhs as per seized cash receipts. Thus denial by Shri Jami Siva Sai was collusive in nature. iii.) The documents seized from the third party can be used against the person to whom these belong as held by Hon'ble Pune ITAT in the case of Dhunjibhoy Stud & Agricultural Farm vs. DCIT (82 ITD 0018) (TM Pune ITAT). In view of above facts and circumstances, this ground taken by the AR of the assessee is required to be rejected. In addition to the above written synopsis, the ld. DR submitted that during the course of search and seizure proceedings, documents found

indicate clearly that the assessee was engaged in money laundering

business and he has used code words to the name of the borrowers.

During the search and seizure proceedings and post search enquiry, the assessee as well as Jami Siva Sai could not give correct answer in respect of amount of Rs.75 lakhs as noted in the note book/diary. He

also stated that the JCIT has rightly given the approval u/s.153D of the Act and one copy of the seized documents were also kept lying with the JCIT for his study/working purpose, so that he can give directions or approval without any unnecessary delay. He also stated that in the 21 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Income Tax Act u/s.153A/153B of the Act, the time limit for passing the order has been specified within the stipulated date but no service of the order to the assessee, which has clearly been applied by the AO and has passed the order before the end of the time period, therefore, it cannot be said that the order passed by the AO is barred by limitation.

He further submitted that the ld. CIT(A) has rightly dealt with the issue

on legal grounds in which he has included the detailed judgments of the various courts in favour of the revenue which are clearly apply in this case. In support of his contention, ld. DR relied on the following

judgment :-

N.Roja, IT(SS)A Nos.101-106/CTK/2018 i)

Further the ld. DR submitted that the case laws relied on by the ld. AR

of the assessee are not applicable in the present case.

available on record and the orders of the authorities below, we find

that the ld. AR has taken legal grounds that the order passed by the AO

is barred by limitation as prescribed u/s.153D of the Act. This issue has rightly been dealt by the CIT(A), which reads as under :-

22 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 paid of Rs.6,25,000/- on 12.11.2012 is also clearly mentioned. The alphabets 'P' & T refer to principal & interest.

Charging of interest u/s.234A, 234B & 234C of the Income Tax Act, 1961, mandatory, compensatory and consequential in nature. The ground of appeal is dismissed.

a. Shanti Lai Godawat& Others vs. ACIT (2009) 126 TTJ 135 (Tnb.Jodhpur). IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 M/s. Nidan, Berhampur Vs. ACIT, ITA No. 109/CTK-2018 (Trib.

"section 143, read with section 153, of the Income-tax Act, 1961 - Assessment General (Assessment barred by limitation) - Assessment year 2002-03 - Assessing Officer passed assessment order on 31-3-2005 which was received by assessee on 13-4- 2005 - Assessee contended that same was barred by limitation and as such perverse - It was found that representative of assessee, visited office of department and found assessment order was ready to be served upon him - There was also no indication that Assessing Officer revised his assessment order. Further, probability of order being made and ready to be collected by representative of assessee as on 1-04-2005, could not be ruled out Whether, therefore, assessment order could not be treated as barred by limitation Held, yes [Para 9] [In favour of revenue]."

24 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 In the case of Binani Industries Ltd (supra), the important consideration before the Hon'ble High Court was that whether the assessing officer revisited the said order after 31.12.2005. In this case, it is not the contention of the appellant that the assessing officer has revisited the order after 31.12.2016. 7.5 Further, in the following cases, the Hon'ble High Courts have held that the Assessing Officer is required to complete the assessment before the time barring date and he is not required to serve the assessment order before the time barring date. The head notes in these cases are below:

a. Esthuri Aswathiah Vs. Commissioner of Income-tax [1963] 50 ITR 764 (Mysore)

Section 34(3) of the Indian Income-tax Act, 1922 - Assessment - Time limit for completion of- Assessment year 1955-56 - Assessment was made on 29-2-1960 and assessment order served on assessee on 4-4- 1960 - Whether section 34(3) only requires that no order of assessment should be made after expiry of four years from year in which income was first assessable and, therefore, order made within four years would not be time barred under section 34(3) even though it was communicated to assessee after expiry of four years - Held, yes.

b. Ramanand Agarwalla Vs. Commissioner of Income-tax [1984] 17 Taxman 305 (Gauhati)

Section 153(l)(a)(i) of the income-tax act, 1961—Assessment—Time limit for completion of—For assessment year 1963-64, ito made assessment on 16-3-1968—Relevant demand notice dated 20-3-1968 was issued by ito on 30-3-1968 and served on assessee on 13-4-1968— Whether, assessment was completed on 16-3-1968 and as such was not barred by limitation— Held, on fads, yes.

c. India Ferro Alloy Industry (P.) Ltd. Vs. Commissioner of Income-tax [1993] 202ITR 671 (CAL.J

What is required for completion of the assessment is the determination of the tax liability and issue of demand notice but certainly not the service of the same on the assessee. Accordingly, it should, therefore, be taken that the assessment was completed on 15-10-1980. d. Commissioner of Income-tax (Central), Cochin Vs. T.O. Abraham & Co. [2011] 12 taxmann.com 433 (Kerala)

The requirement of section 158BE is satisfied if the department establishes that the block assessment is completed before the last date provided for completion of assessment under section 158BE which in the 25 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 instant case was 31-5-1997. It is the settled position particularly through the decision of the Supreme Court in B. J. Shelat v. State of Gujarat AIR 1978 SC1109 that for validity of the assessment there is no need for the department to serve the assessment order on the assessee before the prescribed period of limitation provided for completion of assessment. The test laid down by the Supreme Court in the above case is that in order to establish that the assessment has been completed within time, the department should have completed the proceeding and dispatched it so that the proceeding is out of the control of the officer issuing it. In the instant case, admittedly, the assessment was approved by the Commissioner by proceedings dated 23-5-1997 as required under section 158BG. The office of the Assessing Officer also dispatched copy of the assessment order along with signed copy of notice of demand. Even though the copy of the assessment order sent to the assessee was not signed by the officer, copy of the assessment order so dispatched along with notice of demand signed by the Assessing Officer on 30-5-1997 was received by the assessee on 2-6-1997. In fact, a modified copy of the assessment order was sent by the Assessing Officer on 2-6-1997 wherein the approval of draft assessment by the Commissioner, which is the requirement of section 158BG, was also stated by the Assessing Officer in the assessment order. The assessment was a very elaborate order and it contained sixty pages. The assessee did not deny the approval of the draft of the assessment order by the Commissioner on 23-5-1997, which was, in fact, done after hearing the assessee on that date. Therefore, there was no dispute on the finalisation of the draft assessment by the Assessing Officer with the approval of the Commissioner on 23-5-1997 which was eight days prior to the last date provided for completion of assessment. Admittedly, the Assessing Officer dispatched the signed notice of demand along with an unsigned copy of the assessment order to the assessee on 30-5-1997, which was received by the assessee on 2-6- 1997. The signed copy of notice of demand was dispatched to the assessee by the department before the last date for completion of assessment and it contained tax demand which was the same amount contained in the signed assessment order dispatched by the Assessing Officer on 2-6-1997. Going by the nature of assessment, which was a voluminous document with full facts and figures, nobody could have a doubt that it could not have been prepared within a period of one or two days after sending notice of demand. The mere fact that the first copy of the assessment order sent to the assessee did not contain the signature of the Assessing Officer did not give rise to a presumption that the original assessment order was not signed by the Assessing Officer. Admittedly, the assessment was made in several copies and one of the copies was sent to the assessee along with copy of demand notice. It may so happen that the dispatch section without noticing the omission would have sent an extra copy of assessment order which was not signed. However, the same did not mean that the original assessment was not signed by the Assessing Officer with reference to which only he prepared the notice of demand which was admittedly signed and dispatched to the assessee within the period of limitation. The additional feature that 26 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 supported the case of the department was that the draft assessment prepared and finalized by the Assessing Officer was approved by the Commissioner after giving a hearing to the assessee on 23-5-1997 and, so much so the assessee could not even contend that a draft assessment was not finalized within the period of limitation. Even though records were produced before the Tribunal and verified by the Tribunal, there was no finding that the assessment order signed on 27-5-1997 was not available on file. It could not also be assumed that the Assessing Officer predated the assessment order because the draft assessment was already approved by the Commissioner on 23-5-1997 after hearing the assessee and there was no case of any deviation-madefrom the approved draft while issidng the final order. Further, the notice of demand which was issued based on the tax determined on the assessment order was dispatched to the assessee on 30-5-1997 well before the last date for completion of the assessment. [Para 5]

The whole purpose of section 292B is not to defeat on technicalities the object of the statute, that is, to assess and collect the tax legitimately due under the Act. The instant case was a case where elaborate evidence was collected in the course of search and the processing of the document took several months before completion of the block assessment. The Accountant Member rightly held that on hyper technicality a proper assessment completed strictly observing the provisions of the Act should not be held invalid. The evidence on record established beyond doubt that a draft assessment was approved by the Commissioner under section 158BG on 23-5-1997 and the assessment was, in fact, .finalized by the Assessing Officer on 27-5-1997 as borne out by the records. The fact that the first copy of the assessment order sent to the assessee on 30-5-1997 along with signed valid notice of demand issued under section 156 did not contain the signature of the Assessing Officer did not invalidate the assessment which was validly completed on 27-5-1997 within the period of limitation provided under section 158BE. Therefore, the appeal was to be allowed by reversing the order of the Tribunal. [Para 6].

"We have considered the rival submissions. At the outset, a perusal of the provisions of section 153 of the Act shows that the word used in the said section 'make'. Similarly, a perusal of the proviso to section 147 of the Act shows that the word used as "no action shall be taken'. Similarly, in the provisions of section 148 of the Act, the words used are 'shall serve on the assessee'. Similarly, in the provisions of section 149 of the Act, the words used are 'issue to the assessee. Thus, each word used in 27 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 each section has a different purpose and different meaning. 'Made' cannot be treated on the same footing as served. The fact that the word used is 'made' in section 153 shows that the assessment order should be made on or before the said date. It does not mean that it should be served. On this ground itself as we find that the decision of the Coordinate Bench has erroneously laid down the law on this issue if the word 'made' is given the meaning served then the section itself would become unworkable and it would make all assessment orders made on the last day illegal. In the circumstances, respectfully following the principles and the ratio laid down by the Hon'ble Madras High Court in the case of CIT Vs. Hi-Tech Aral Ltd. (2010) 321ITR 477, we differ from the decision taken by the Coordinate Bench in the case of Durga Condev Pvt. Ltd. (supra) as also the decision of Shanti Lai Godawat & Ors. Vs. ACIT (2009) 126 TTJ (Jodh) 135. Here, we may specifically mention that in the case of Durga Condev Pvt. Ltd. (supra), though one of us is co signatory in that order still we differ from the said order as there is no bravery in perpetuating an error in law. The fact that the assessment order is dated 31.12.2010 and there is no evidence available to show that this order was not passed on 31.12.2010 makes this order sustainable in law as under the provisions of the General Clauses Act a government document cannot be questioned unless and until substantial evidence has been produced to dislodge the veracity of the same. Under these circumstances, as it is noticed that the assessment order is dated 31.12.2010 and as no evidence has been produced to show or to prove the allegation that the order was back dated, the technical ground raised by the assessee stands rejected."

It appears that, the decision of Hon'ble Juri ictional Tribunal in the case of Sophia Study Circle was not placed before the Hon'ble Tribunal, during the hearing in the case of M/s.Nidan. Therefore, as such, the decision in the case of M/s.Nidan is Per incuriam.

28 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Court in the case of Bimal Kishore Paliwal'Vs. CWT (2017) 87 taxmann.com 40 (SC). The relevant portion of the judgment is reproduced below: "Learned counsel for the appellants has further submitted that in the event there are more than one methods of valuation of an asset of an assessee, the method under which the valuation is in favour of assessee has to be accepted. He has relied on the judgment of this Court in CIT v. Vegetable Products Ltd 1197 3J 88 ITR 192. This Court in paragraph 6 of the judgment has laid down the following: There is no doubt that the acceptance of one or the other interpretation sought to be placed on Section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. This is a well accepted rule of construction recognised by this Court in several of its decisions. Hence all that we have to see is, what is the true effect of he language employed in Section 271(l)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty. " The proposition which was laid down by this Court was that if two reasonable constructions of taxing statute are possible, that construction which favours the assessee must be adopted. The above proposition cannot be read to mean that under two methods of valuation if the value which is favourable to assessee 'Mould be adopted. Here in the present case, the provisions of Section 7 are neither unambiguous nor lead to two constructions. The construction of Section 7 is clear as has already been elaborately considered by this Court in the judgment of this Court in Juggi Lai Kamlapat Bankers (supra)

29 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 used by the legislature so as to achieve the intention of the legislature and produce a rational construction. The intention of the legislature has always been that the assessment order should be made before the time barring date.

not find any interference is called for on the legal grounds decided by the CIT(A). The provision of Section 153D of the Act states regarding

making of the order within the stipulated period. Further from the reading of the provisions of Section 153D of the Act, it is clear that there is no mention about the “service” of the order, however, it is only

mentioned that the order shall be “made”. With regard to “service” it has clearly been defined in the section 143(2) of the Income Tax Act

but in section 153D of the Act nowhere about service of order has been mentioned. The case laws relied on by the ld. AR of the assessee in the case of Dilip Constructions Pvt. Ltd.(supra) is not applicable in the present facts of the case. Accordingly, we dismiss the legal grounds

taken by the assessee.

30 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

SI. No. Documents seized Indentified as 01. One diary JRR-45

These documents were not found in the premises of the assessee. If any additions have been made by the AO on the basis of documents which have been found in the case of other persons during the course of search proceedings, the AO should have recorded the satisfaction note

as prescribed u/s.153C of the Act. Thereafter these documents can be relied on for making additions in the hands of the assessee. This issue

has already been settled by various courts in the case of documents

found of others but in the impugned assessment order, there is no whisper regarding of any satisfaction notes. The CIT(A) has also did not take any cognizance in this regard. The ld. AR of the assessee has relied

on the judgment of the coordinate bench of the Tribunal in the case of 31 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Mr. Trilok Chand Chaudhary, ITA No.5870/Del/2017, order dated

“5.2 Before us, the Ld. counsel of the assessee submitted that for making addition on the basis of any material including document found during the course of search at the premises of the third party, the procedure laid down under section 153C of the Act is to be followed. According to learned counsel in the instant case, said procedure of law has not been followed by the Assessing Officer and, therefore, the addition cannot be legally sustained. The Ld. counsel was asked to file a copy of the Panchnama under which the relevant document containing list of the item was seized, which he filed. The Ld. counsel in support of his contention that no addition could have been made under section 153A of the Act in the case of the assessee in respect of incriminating material found from the course of search at the premise of the third parties, relied on following decisions: · [ITA No.5585/Del/2015](pronounced on 19.03.2019) DCIT Vs. Vikas Jain [ITA No.4075/Del/2014] (pronounced on 19.03.2019) Pavitra Realcon (P) Ltd. Vs. ACIT [2017] 87 taxmann.com 142 (Del. – Trib.) Krishna Kumar Singhania Vs. DCIT [2017] 88 taxmann.com 259 (KolTrib) CIT Vs. Pinaki Misra [2017] 88 taxmann.com 521 (Delhi-HC)

32 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 that addition in dispute has been made in the assessment completed under section 153A of the Act. The assessee raised this issue before the Ld. CIT(A), however, the Ld. CIT(A) rejected the arguments of the assessee observing as under:

“6.3 Another argument of the appellant, if understood correctly, is that in reference to the document under consideration, the AO ought to have initiated proceedings u/s 153C and that in no case this can be considered u/s 153A. This argument has no legs to stand for the simple reason that it is patently absurd. Undisputedly, a search u/s 132 was conducted in the appellant’s case and therefore, the assessment was to be completed u/s 153A and the Ld. AO was under a statutory obligation to consider entire material irrespective of the place from where it was found (i.e. appellant’s own place or some other place). There cannot be two assessment one u/s 153A and other u/s 153C. In short, the argument of the appellant that document seized from the premises of Sh. Ashok Chaudhary cannot be considered u/s 153A is absurd and is accordingly rejected.”

“9. We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and the rival submissions, we find that in these appeals, following two questions arise for our consideration:

33 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 (i) Whether any material found in the search of any other person than the assessee in appeal can be considered in the assessment under 153A of the assessee.

“14. From a reading of the above decisions of Hon'ble Juri ictional High Court, it is evident that completed assessment can be interfered with by the Assessing Officer on the basis of any incriminating material unearthed during the course of search. If in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that year in exercise of power under Section 153 of the Act. Obviously, the reference to the incriminating material in the above decisions of Hon'ble Juri ictional High Court is in regard to incriminating material found as a result of search of the assessee's premises and not of any other assessee. The legislature has provided Section 153C by invoking the same the Revenue can utilize the incriminating material found in the case of search of any other person to the different assessee. Section 153C is reproduced below for ready reference: "Assessment of income of any other person. 153C.[C][Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, -

(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates 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 juri iction 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 [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in subsection (1) of section 153A]:].

Nos.1105&1106/PN/2013, order dated 12.06.2015, wherein the Tribunal in para 24 and 55 observed as under :-

35 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 “24. Referring to the provisions of section 132(4A) he submitted that these papers can be presumed to be true, genuine and correct in the case of the person searched, i.e. Shri Sohan Raj Mehta and he has admitted that the papers belong to him. On the basis of the papers found with some third parties addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party. For the above proposition the Ld. Counsel for the assessee referred to the following decisions : a. Bombay H.C. Lata Mangeshkar [97 ITR 696] b. Straptex (India) P. Ltd. v. DCIT [84 ITD 320 (Mum)] c. CBI v. V. C. Shukla [3 SCC 410 (SC)] d. Prarthana Construction P. Ltd. v. DCIT [118 Taxman 112 (Ahd.)] e. Unique Organizers & Developers P. Ltd. v. DCIT [118 Taxman 147 (Ahd.)] * * * * * * *

pronouncements discussed supra, we are of the view that the AO is not justified in making the addition in the hands of the assessee of Rs.75

lakhs. The AO did not follow the prescribed procedures, which ought to have been followed in cased of documents which was found in the case

of other persons as prescribed u/s.153C of the Act. Therefore, the entire addition made by the AO along with the interest made thereon is not correct. Accordingly, we delete the addition of Rs.75,00,000/- and 36 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 interest charged thereon of Rs.6,25,000/- totaling to Rs.81,25,000/-.

With regard to ground No.4 : since we have deleted the entire addition

made by the AO and decided the appeal of the assessee on merits of the case, therefore, this ground is consequential in nature. Thus, the ground taken by the assessee on merits is allowed.

IT(SS)A No.132/CTK/2018 is partly allowed.

& 2015-2016, wherein the assessee has taken the following legal

grounds of appeal, however, on the merits of the case the CIT(A) has given relief to the assessee :-

37 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 in absence of it, the order of Assessment needs to be quashed in the interest of justice.

grounds raised by the assessee in the appeal for A.Y.2013-2014,

therefore, our observations made in the said appeal shall also apply

mutatis mutandis to these two appeals of the assessee for A.Y.2014-

2015 & 2015-2016 also. Thus, the legal grounds raised by the assessee

in both the appeals are dismissed.

2017 and the grounds raised therein are read as under :-

38 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

Hence the; PRAYER Under the facts and in the circumstances stated above, it is therefore respectfully prayed that, this Hon'ble Tribunal shall be graciously pleased to consider the genuine difficulties faced by the Assessee and be further pleased to accept the additional legal ground taken here for adjudication in the interest of justice. And for this Act of kindness, the Appellant/Assessee as in duty bound shall ever pray.

Since we have already decided the similar and identical legal grounds

raised by the assessee in the appeal for A.Y.2013-2014, therefore, our

observations made in the said appeal shall also apply mutatis mutandis

to this appeal of the assessee for A.Y.2016-2017 also. Thus, the legal

grounds raised by the assessee in this appeal are dismissed.

order, we find that during the course of search and seizure

40 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 proceedings, in case of assessee, some loose sheets containing 81

written pages identified as KRR-01 were seized. Out of which page

Nos.29 to 32 are original cash receipts letter heads for cash transaction

made between Sri K.Rama Rao and Gandhi Institute of Advanced

Computer & Research (GIACR) under the original signature of the Chairman of said institution Sri B Ram Prasad Rao. The details of such transactions are as under :-

Amount in Rs. Rate of interest Identification Date of Cash received transactions by No. of seized documents 22.06.2015 15,00,000 KKR-01, Page 4.5% per Sri B Ram No.29 month Prasad Rao, 23.07.2015 5,00,000 Chairman of KKR-01, Page GIACR No. 30 25.07.2015 5,00,000 KKR-01, Page No. 31 31,08.2015 6,00,000 KKR-01, Page No.32 TOTAL 31,00,000

is a partner of Jagannath Mills and the remuneration and interest on capital is shown in the return of income. The assessee also stated that the said transaction has not been occurred. The assessee and the Chairman Sri B.Ram Prasad Rao have categorically denied that these

transactions have not been occurred and it can be cross verified from the books of accounts. The AO took the view that the documents were 41 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 found in the residence of the assessee. Therefore, it was the responsibility of the assessee to justify with sufficient evidence but he

could not substantiate the same. Therefore, he made the addition in the hands of the assessee.

written submissions at page 12 onwards, which reads as under :-

ASSESSMENT YEAR: 2016-17. Submissions on merit:

42 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 or from the said Institute, both the Authorities below have committed gross error of law by treating it as undisclosed income in the hand of the Appellant on the basis of loose sheets found during search. Further, impugned addition is made without making any further enquiry and without having any corroborative evidence to justify that the Assessee has actually paid.

43 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 sheet were filed while explaining the cash availability. However the learned A.O made addition treating it as unexplained money by holding that since said capital accounts and balance sheets were not filed along with the return of income filed, therefore not acceptable. On appeal, the learned CIT(A) confirmed the addition by holding that capital account and balance sheet were prepared to justify the availability of cash hence not acceptable.

44 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 cash found of Rs.24,75,000.00 belongs to the HUF. Without objecting it and without uttering a single word and without examining the return of HUF, the Authorities below cannot treat it as unexplained income of the Appellant. The Appellant wants to draw kind attention of this Hon'ble Tribunal to Annexure-7 and 8 from page No.lll to 129 of the paper Book. These evidences clearly justifies availability of cash. In view of the above facts, it is most respectfully submitted here that, the impugned addition of R.s.27,36,300.00 being not sustainable in the eye of law is liable to be deleted in the interest of justice. Unexplained Investment:

45 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 of six number weighing 616.4 grams which were disclosed in the capital Account and Balance sheet for Assessment year:2015-16 and has not been disputed by the Authorities below.(Reference to page No. 140 to 142 of paper Book) When purchase slips were recovered during search and formed part of seized materials marked as KRR-11, and relates to Assessment year: 2015-16, the observation of the learned CIT(A) that the Assessee failed to explain source of 616.400 grams is not correct at all. Further, investment made in previous Assessment year cannot be taxed in subsequent Assessment year. The Appellant submits here with detail calculation for better appreciation of fact. Such as;

In addition to the above, ld. AR further submitted that merely the documents found in the hands of the assessee could not be added in the hands of the assessee because the transaction was not occurred and he

further stated that M/s Ravindra Nath Educational Trust was selected

46 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 for scrutiny and order has been completed u/s.143(3) of the Act on 29.12.2017 by the same AO in which there is no any addition in this regard and notice was also issued u/s.153C of the Act on 21.02.2017 to 24. On the other hand, ld. DR relied on the order of authorities below

and submitted that these documents were found in the possession of the assessee, therefore, action should be taken against the assessee.

During the course of search proceedings various documents were found which clearly shows that the assessee was engaged in loan/advance and money lending business, therefore, it can be clearly

established that there was a transaction between the parties in cash. It was also contended by the ld. DR that the impounded document clearly

established that money was received by the Chairman.

available on record and the order of the authorities below, we noted in this regard that there was a document found in which clearly stated

that the money has been received by the Director of GIACR. On perusal

of paper book, we noticed that the receipts have been issued by the Chairman of the Institute of Advance Computer , Rayagada, which is managed by Rabindranath Education Trust, Rayagada and it is also found that the blank cheque issued by the authorised signatory of 47 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 Institute of Advance Computer and Research(ICAR) and on further

perusal of page No.76, 77 & 78, it is clearly stated that the GIACR is managed by Rabindranath Education Trust, Rayagada. The case of Rabindranath Education Trust has been scrutinized u/s.143(3) of the Act in which there is no any addition made by the AO in this regard

which shows that there was no any transaction occurred between the parties. Merely found the documents and if there is no transaction it cannot be said that the assessee has done the transactions outside his

books of accounts or merely found the documents in the name of anybody cannot be said that the transactions have been occurred

unless and until it is not established by confirmation from both the parties. Therefore, this addition made by the AO is deleted and this ground of appeal of the assessee is allowed.

by the AO u/s.69 of the Act as unexplained money.

of Rs.27,36,300/- found from the bedroom of Shri Kothakota Rama Rao

and Rs.37,590/- was found from the room occupied by Smt. G.Leela

Rani, daughter of the assessee. In response to this query, the assessee

submitted that Rs.24.75 lakhs belongs to HUF and Rs.2.60 belongs to individual status of the assessee. In support of the justification of the 48 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 cash, the assessee submitted the statement of affairs of Hindu

Undivided Family(HUF) but the ld. AO did not accept the submissions

and rejected the capital accounts statement of affairs showing the accumulation of cash along with the Income Tax return filed by the assessee of HUF and added to the total income of the assessee of Rs.27,36,300/- which have been confirmed by the CIT(A). Ld. AR

submitted that the cash amount of Rs.24.75 lakhs belongs to HUF and he is filing regularly income tax return. He also referred to the paper

book page No.129 in which he has shown the balance sheet of Kothakota Rama Rao (HUF) and tried to justify the figures shown in the statement of affairs.

and he submitted that there is no any proof of the income shown by the assessee in the statement of affairs as placed in the paper book at page

No.129 and the assessee has failed to substantiate the agriculture

income shown in the income tax return. There is no proof of any land

owned by HUF. Therefore, the income shown in the statement of affairs

are not correct. He also submitted that in the income tax return filed by the assessee there is no any statement of affairs submitted and no cash

balance was mentioned in the income tax return form, therefore,

accumulation of cash showing by the assessee should be rejected.

49 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019

available on record and the orders of authorities below, we find that during the course of search proceedings, there was a cash found in the bedroom of Shri Kothakota Rama Rao and Rs.37,590/- was found from the room occupied by Smt. G.Leela Rani, daughter of the assessee. From the above cash he submitted that the cash of Rs.24.75 lakhs belongs to Kothakota Rama Rao(HUF). In support of this, he submitted a balance

sheet/statement of affairs of Kothakota Rama Rao (HUF), which is placed at paper book page No.129 in which he has shown his

agricultural income along with other incomes, details of which are as under :-

K. RAMA RAO (HUF) BALANCE SHEET Rs.In Lakhs 31.03.09 31.03.10 31.03.1 31.03.12 31.03.13 31.03.14 31.03.15 12.02.2016 31.03.2016 1 1st Year 2nd year 3rd 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year Year LIABILITIES Capital Opening Balance 2.00 5.00 8.10 11.30 14.50 18.25 24.05 30.15

50 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 However, he has not filed any supporting documents for agricultural

income so that the agricultural income can be justified. We also observed that the figures of agricultural income is very zig-zag.

Therefore, as per our considered opinion, this issue should go back to the file of AO for verification of accumulation of cash as stated above

and the assessee is directed to prove the source of income shown as above. The assessee will also cooperate with the AO for above purpose

without seeking any unnecessary adjournments. Needless to say, the assessee shall be provided reasonable opportunity of being heard to substantiate his claims. Thus, this ground of the assessee is allowed for statistical purposes.

in gold ornaments.

SI. No. Total net weight of jewellery Name Value found 1 1003.580 Grams K. Rama Rao 28,84,806 2 272.870 Grams K. Chandrika 7,42,890 3 1632.190 Grams K. Damayanti 44,87,990 4 1581.340 Grams K. Lila Rani 43,79,507 Total 4489.980 Grams 1,24,95,193

51 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 During the course of assessment, it was asked to the assessee to justify

the above gold and jewellery. During the course of search proceedings,

he also stated that these gold ornaments worth of Rs.16,22,000/- in the F.Y.2014-2015 and 2015-2016 was purchased and rest gold were received from inherited or received from relatives on ceremonial

occasions. During the course of assessment, the AO asked to justify the above gold found during the course of search and seizure proceedings.

In this regard, the assessee could not substantiate with supporting

documents but the AO considered the status of the assessee and hailing

from trading community and being a senior citizen and married during

the year 1963 and the special function ceremonies inheritance and custom of Indian traditions. The AO allowed the following gold

jewellery which was total 2050 grams which reads as under :-

Sl.N Name of the Description Quantity of Gold o. Person Jewellery allowed 1 Sri K Rama Rao Since, he has claimed that out of 616 gms 100 grams acquired during the F.Y.2014-15 out of which100 gms is attributable to him and 500 gms belongs to her daughter-in-law. 2 Smt. Chandrika As claimed by the assessee to be 500 gms attributable to the daughter-in-law 500 gms was allowed. 3 Smt. K Damayanti Wife of the assessee which he has claimed 500 gms that he has married in 1963 and she was processing 1632.190 gms but no evidence was furnished. 4 Smt. G Leela Rani Daughter of the assessee and staying 500 gms along with the assessee and her husband was a partner in the firm M/s Jagannath Mills which is managed by the assessee 5 Ms K Nandita Granddaughter of the assessee. Since, she 250 gms was staying with the assessee and unmarried granddaughter considering the trading back ground of the assessee. 6 K. Sridhar Son of the assessee and staying with the 100 gms

52 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 assessee 7 G.Satyanarayan Son-in-law of the assessee who is staying 100 gms with assessee and who is also partner in M/s Jagannath Mills which is managed by the assessee. TOTAL 2050 gms

But he did not allow 616 grams of gold purchased in the financial year

2014-2015 & 2015-2016 and disallowed balance gold jewellery and bullion weighing 2439.80 gms (4489.980 – 2020) valued at Rs.67,90,235/- and added the same to the total income of the assessee.

not accept 616.400 gms of gold jewellery stated to be purchased by him

for want of purchase bills and treated it as unexplained. The CIT(A)

also after considering the submission of the assessee that in case of G.Sindhu and G.Rahul, allowed 350 grams gold, resultantly there was a total unexplained gold jewellery of 2089.98 grams

(1473.580+616.400) valued at Rs.58,16,414/-.

No.2 pages 13 to 70 regarding marriage, date of division of property,

which is placed on record.

below and contested by way of his written submissions which has been reproduced as above. He further submitted that the documents

submitted by way of Paper Book in paper book No.2 page Nos.13 to 17

cannot be relied because it was not produced before the authorities

below. The assessee was unable to produce the copy of purchase bills

of 616.400 grams of gold. The CIT(A) after considering all the detailed

submissions, he has rightly partly allowed the appeal of the assessee.

Therefore, the order of the CIT(A) should be restored.

available on record and the orders of authorities below we find that the CIT(A) has allowed 350 grams of gold ornaments. During the course of search proceedings, total gold were found at 4489.980 grams out of which the authorities below have allowed 2400 grams and remaining

gold 1473.580+616.400 = 2089.980 were disallowed. After going

through the records of the authorities below, we noted from the para 9

54 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 of the assessment order, that the assessee had filed confirmation letter

of the persons whose name as stated above but these confirmations

have not been disregarded by the AO as well as it has not been considered by the CIT(A). Further, we noticed from the AO’s order at page No.8 topside in question No.14, the details of jewellery found in the name has been mentioned. This table has been reproduced as earlier, is also reproduced hereunder for more clarity :-

SI. No. Total net weight of jewellery Name Value found 1 1003.580 Grams K. Rama Rao 28,84,806 2 272.870 Grams K. Chandrika 7,42,890 3 1632.190 Grams K. Damayanti 44,87,990 4 1581.340 Grams K. Lila Rani 43,79,507 Total 4489.980 Grams 1,24,95,193

From the above table it is clear that only 1003.80 grams belongs to the assessee and rest jewellery belongs to the respective names as mentioned above. This fact has not been controverted by any of the authorities below. Therefore, the remaining jewellery should be taxed

in the hands of the respective names/owners. The assessee is required

to explain only 1003.580 grams. Since the assessee is a male person so he is entitled for as per CBDT Instruction No.1916 of 1994 and he is entitled for 100 grams of jewellery. Further, considering the status of the assessee, being a senior citizen of 73 years old, who belongs to well-

established family and looking to the religious functions and marriage

55 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 ceremonies in the family of the assessee, we deem it proper to allow

200 grams gold out of 903.580 (1003.580-100) grams. Now, gold

remained to be explained by the assessee of 703.580 grams, out of which 616.400 grams gold were purchased from the HUF’s fund as claimed by the assessee. Thus, if the assessee would be able to justify

the cash availability in the hands of the HUF before the AO and it would

be able to nullify the observation of the CIT(A) i.e. production of purchase bill, then the assessee will get relief of 616.400 grams or to the extent possible and the rest quantity is hereby disallowed.

Accordingly, we restore this issue to the file of AO to consider the claim

of the assessee as per our above observations. This ground of appeal of the assessee is partly allowed for statistical purposes.

purposes.

Order pronounced in the open court on 31/08/ 2020. (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 31/08/2020 Prakash Kumar Mishra, Sr.P.S.

56 IT(SS)A No.132/CTK/2018 ITA Nos.19&20/CTK/2019 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant-

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack