POOJASHISH INFRASTRUCTURES PVT. LTD.,KOTA vs. DEPUTY COMMISSIONER OF INCOME TAX, KOTA

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE ‘A’ JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1120/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2010-11 cuke Poojashish Infrastructures Pvt. The Deputy Vs. Ltd., Plot No. 6 and 7, Commissioner of Income Multimetals Campus, Kansua Tax, Central Circle, Room No. 212, 2nd Floor, Road, Large Industrial Area, Kota C.R. Building, Rawat Bhata Road, Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCP5387R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by :Shri Vijay Goyal & Shri Gulshan Agarwal (CA) jktLo dh vksj ls@ Revenue by : Shri Varindar Mehta (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 16/01/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/04/2019 vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M.

This is an appeal filed by the assessee against the order of ld. CIT(A)- 2, Udaipur dated 21.08.2018 wherein the assessee has taken the following grounds of appeal:-

“1. On the facts and in the circumstances of the case and in law, the order passed u/s 153A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota view of SLPs admitted in various cases. The ld. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.

a) solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee.

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota b) giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.)-Kolkatta.

c) holding that the assessee has not adduced any evidence to rebut the adverse factual finding made by the AO in the assessment order though detailed paper book for relevant AY and common paper books have been submitted, and

d) holding that incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DCIT (Inv.) Kolkatta.

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota in not allowing the benefit of telescoping, recycling and rotation of funds.”

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota found during the course of search and seizure action. Therefore, the AO is not empowered to make any addition to the total income of the assessee. It was submitted that the provisions of section 153A cannot be applied in respect of the assessment year which has already been completed unless some incriminating material/information comes into the possession or knowledge of the Assessing Officer during the course of search proceedings. It was submitted that since the assessment for the assessment year under consideration was not pending as on the date of search and there is no incriminating material found or seized during the course of search, the AO is bound to reassess the total income as it was assessed on the original return of income. In support of his contentions, the ld. AR has relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Kabul Chawla reported in 380 ITR 573 and submitted that the Hon’ble High Court in that case as held that in case of completed assessment not abated by virtue of search u/s 132 of the Act, in absence of any incriminating material, the completed assessment can only be reiterated and therefore no addition could have been made to income already assessed. The ld AR has further placed reliance on the decision of the Hon’ble Rajasthan High Court in case of Jai Steel (India) vs. ACIT (2013) 219 Taxman 223 and submitted that the Hon’ble Jurisdictional High Court has held that the requirement of assessment or reassessment under section 153A has to be read in the context of section 132 or 132A of the IT Act, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined purpose of making assessment of total income under section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The assessment or reassessment proceedings which have already been completed and assessment orders have been passed determining the assessee’s total income and, such orders are subsisting at the time when search or requisition 5

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota is made, there is no question of any abated assessment since no proceedings were pending and, therefore, the addition to the income that has already been assessed will be made on the basis of incriminating material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the ld. A/R has submitted that the AO has made the additions in the assessment under section 153A whereby the completed assessment has been disturbed without even referring to any incriminating material found or seized during the course of search and seizure under section 132 of the Act. The only basis of addition is the statement of third party recorded in the search of the third party that has no connection with the search proceedings of the assessee and, therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act.

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota sufficient material disclosing the undisclosed and unexplained cash credit introduced by the assessee in the garb of unsecured loans and share capital. Once the insurmountable evidences unearthed by the Investigation Wing Kolkata which is the basis of the additions made by the AO, the assessee was required to discharge its onus by producing the contrary evidence or by producing alleged creditors for verification. The ld. CIT D/R has further submitted that the information received from the Investigation Wing Kolkata is also the incriminating material found during the search and pertains to the assessee disclosing undisclosed income. Therefore, it is not a case of reassessment framed by the AO under section 153A without any incriminating material. The AO even conducted further investigation during the course of assessment proceedings through the Investigation Wing Kolkata and, therefore, the addition is fully based on the evidence in the possession of the AO. As per the provisions of section 132 read with section 153A of the IT Act, the AO has to assess or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefore cover not only the income emanating from the declared source or any material omission before AO but from all sources including undisclosed ones or based on unplaced material before the AO. The ld. CIT D/R has thus submitted that the decisions in the case of Kabul Chawla (supra) were challenged before the Hon’ble Supreme Court and the Hon’ble Supreme Court has admitted the SLP for examination of the issue. Hence the issue is still pending adjudication before the Hon’ble Supreme Court. He has relied upon the orders of the authorities below. Further, the ld DR fairly submitted that the facts and circumstances of the case are exactly identical to that of M/s Kota Dal Mills cases and is covered by the decision of the Tribunal in case of M/s Kota Dal Mills vs DCIT (supra).

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota not pending on the date of search on 02.07.2015 and not got abated by virtue of search under section 132 on the date of search. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment year which have already been completed, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The matter has been examined in detail by the Tribunal in case of M/s Kota Dal Mill vs DCIT (supra) and the relevant findings are reproduced as under: “6. We have considered the rival submissions as well as the relevant material on

record. Undisputedly, the assessments for the assessment years 2010-11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the

assessment years orders under section 143(3) were passed and in other cases the

assessment was completed under section 143(1) of the Act. Thus the assessments

for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of

the assessee as per the provisions of section 153A in respect of these four

assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in

respect of these four assessment years would be in the nature of reassessment and

not in the nature of assessment as in the cases of the remaining two assessment

years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of

law that the assessment or reassessment under section 153A in respect of the

assessment years which have already been completed and assessment orders have

been passed determining the assessee’s total income, the addition to the income

that has already been assessed can be made only on the basis of incriminating 8

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota material. In the absence of any incriminating material the completed assessment

can only be reiterated. The provisions of section 132 read with section 153A of the

Act stipulate two types of situations – one where the assessment of any

assessment year falling within six assessment years is pending on the date of

initiation of search under section 132 or making of requisition under section 132A

of the Act. Therefore, the assessment under section 153A in respect of those

assessment years which stand abated due to the reason of pending on the date of

initiation of search or requisition shall be the original/first assessment. In the

second category where the assessment or reassessment has already been

completed on the date of initiation of search or making of requisition as the case

may be, the assessment under section 153A would be in the nature of

reassessment. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla

while analyzing the provisions of section 153A read with section 132 of the Act has

observed in para 37 and 38 as under :-

“37. On a conspectus of Section 153A(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 of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". 9

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”

Thus the Hon’ble High Court has held that in the absence of any incriminating

material, the completed assessment can be reiterated and the abated assessment

or reassessment can be made. The Hon’ble High Court has also referred the term

used in section 153A as “assess” which is relatable to abated proceedings and the

word “reassess” related to completed assessment proceedings. Therefore, the

completed assessments can be interfered with by the AO while making the

assessment under section 153A only on the basis of some incriminating material

unearthed during the course of search or requisition of document or undisclosed

income or property discovered in the course of search which were not produced or

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota not already disclosed or made known in the course of original assessment. The

Hon’ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele

Paper Mills (supra) in para 1 to 3 as under :-

“1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination.”

The SLP filed by the revenue against the said decision of Hon’ble Delhi High Court was dismissed by the Hon’ble Supreme Court vide order dated 7th December, 2015.

In a subsequent decision, the Hon’ble Delhi High Court in the case of Principal CIT

vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under :-

“55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these 11

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re-open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with." 12

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;

(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and

(c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made."

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(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 of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota

material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub- section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** **

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla(supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa(supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.”

The Hon’ble Delhi High Court has concurred with the view as taken in case of Kabul

Chawla (supra) as well as the decision of Hon’ble Jurisdictional High Court in the

case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition

made by the AO in the proceedings under section 153A in respect of the

assessment year which was already completed on the date of search, the Hon’ble

High Court has held that in the absence of any material which was subsequently

unearthed during the search and was not already available to the AO, the additions

made by the AO on account of security deposits were rightly deleted by the ld. CIT

(A). The relevant observations of the Hon’ble High Court in case of Principal CIT

vs. Meeta Gutgutia (supra) are in para 53 as under :-

“53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A).”

Thus the essential corollary of these decisions is that no addition can be made in

the proceedings under section 153A in respect of the assessments which were

completed prior to the date of search except based on some incriminating material

unearthed during the search which was not already available to the AO. It is

pertinent to note that the SLP filed by the revenue against the decision of Hon’ble

Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the

decision of Hon’ble Jurisdictional High Court in case of M/s. Jai Steel India vs. ACIT

(supra) wherein the Hon’ble High Court has held in para 23 to 30 as under :-

“23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:— "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total 21

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub- Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is 22

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under:— "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or 23

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made.”

In the case in hand, the transactions of unsecured loans as well as introduction of

capital by the partners were duly recorded in the books of account and available

with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or

seized to disclose any undisclosed income on account of unsecured loans or

partners’ capital received by the assessee firm. The AO has proposed to make the

addition on account of unsecured loans and partners’ capital under section 68

being unexplained cash credit solely on the basis of the information received from

Investigation Wing Kolkata. It is pertinent to note that the said information was

available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015. Therefore, even the sole basis of

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota assessments framed under section 153A of the Act is the information received from

Investigation Wing Kolkata and statement of one Shri Anand Sharma, who is stated

to be an entry operator and managed various concerns/companies including

M/s.Royal Crystal Dealers, one of the loan creditors of the assessee. Except the

said statement and report of the Investigation Wing Kolkata, the AO has neither

referred to or was having in possession of any material to indicate that the

unsecured loans shown in the books of accounts as well as partners’ capital

received by the assessee are nothing but assessee’s own unaccounted and

undisclosed income routed back in the garb of unsecured loans and partners’

capital. There is no dispute that these transactions of unsecured loans and

partners’ capital contribution are duly recorded in the books of accounts and

disclosed in the return of income which were already completed as the

assessments for these four assessment years were not pending on the date of

search, therefore, it is manifest from the record that during the course of search

and seizure under section 132 of the Act in the case of the assessee no material

much less the incriminating material was unearthed or any undisclosed income

which was not disclosed in the books of accounts was detected or found. The only

incriminating material which was referred by the AO is pages 21 to 26 of Annexure

AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his

family members. The said long term capital gain was disclosed by Shri Rajendra

Agarwal in his statement under section 132(4) and, therefore, it was surrendered

and offered to tax by Shri Rajendra Agarwal and his family members in the year of

search. The AO himself has not made any addition in the hand of the assessee on

account of long term capital gain which was found during the course of search and 25

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota seizure. Thus, except the material disclosing the long term capital gain in the hand

of Shri Rajendra Agarwal, no other incriminating material either found or referred

or is the basis of the addition made by the AO while framing the assessment under

section 153A of the Act for the assessment years 2010-11 to 13-14. It is

appropriate to refer relevant part of the assessment order in para 12 pages 48 to

50, para 19 page 83 and para 22 page 86 as under :-

“ 12. Submissions made on behalf of the assessee firm have been duly considered. However, even the very elaborate and case laws loaded submissions of the assessee are totally off the mark. Against the self-speaking facts of the very nature of the activities of the so called partner’s providing huge partner’s capital in the most uninterested manner and providing huge unsecured loans without any collateral or other security, the emphasis of the assessee firm in its submissions has been on seeking protection under various judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances;

a. The department has very sound basis to treat, the receipts of unsecured loan and partner’s capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not based on any presumption, assumption, guess or bare suspicion. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source as

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota enumerated the Hon’ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC).

Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT (1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT (1977) 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68.

b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evide4nces to show that the unsecured loan and partner’s capital are assessee’s own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner’s capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wherein the details of year-wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during 27

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota search action has been accepted to be bogus by all family members in their respective statements.”

“19. In view of above facts of the case and in the light of above judicial decision, it is established that genuineness of the transaction has not been proved. Section 68 of the I.T. Act provides for charging to income tax on any sum credited in the books of the assessee maintained for any previous year if the assessee offers no explanation about the nature and source thereof or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. It places no duty upon the Assessing Officer to point to the source from which the money was received by the assessee. Where an assessee fails to prove satisfactorily the source and the nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender’s identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner’s capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circumstances, I am left with no option than to tax the entire unexplained credits by way of partner’s capital and Unsecured loans received from the persons mentioned in para 5 above as unexplained cash credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective assessment years.”

“ 22. After examination of the information and details placed on record and discussion with the assessee, the total income of the assessee is computed as under :-

Returned income as per ITR u/s 153A of Rs. 2,82,83,460/-

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota the Act. Additions | Unexplained cash credits u/s Rs. 67,20,14,999/- | 68 of the Act in the form of | unsecured loan and partner’s | capital Assessed income Rs. 70,02,98,459/- R/o Rs. 70,02,98,459/-

The total income of the assessee in the status of Firm for Assessment Year 2010-11 relevant to Previous Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately.”

The entire finding of the AO is based on the information received from the

Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A)

though has not disputed the legal proposition on this issue, however, the

contention of the assessee was turned down merely on the ground that the SLPs

filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global

Logistics (supra) etc. have been admitted for decision by the Hon’ble Supreme

Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at

pages 35 and 36 are as under :-

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota “3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis supplied by me). (The decisive words used in the provisions are to 'assessee or reassess the total income'). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. 3.2.3 The concept of ‘assess or reassess’ and ‘shall abate’ as contemplated u/s 153A is under hot judicial debate. I find that legally, this issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., and SLP has been filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court has granted leave vide order dated 12.10.2015 as reported in 64 taxmann.com 34 (S.C.). Similarly, in the case of Kabul Chawla SLP has also been filed.

3.2.4 In view of SLPs admitted in case of Kabul Chawla, M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., (supra), assessee’s contention cannot be accepted. Moreover, in any case, the additions are to be adjudicated on merits 30

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota as per relevant ground of appeal, the issue raised in this ground for present remains for academic discussion only. Accordingly, issue raised in ground no. 12 is dismissed.”

Therefore, neither in the assessment order nor in the order of the ld. CIT (A) there

is any mention or finding that the additions have been made by the AO on the

basis of any incriminating material found during the course of search and seizure in

the case of the assessee. The AO has solely relied upon the report of the

Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by

the Investigation Wing during the survey under section 133A of the Act. Therefore,

even if the information/report of the Investigation Wing Kolkata is considered as a

relevant evidence, the same cannot be regarded as incriminating material

unearthed during the course of search and seizure under section 132 of the IT Act

in case of the assessee. The requirement for making the addition under section

153A in the assessment years where the assessment was not pending on the date

of search and the proceedings are in the nature of reassessment is essentially the

incriminating material disclosing undisclosed income which was not disclosed by the

assessee. In the case in hand, the AO himself has not claimed any incriminating

material found during the search and seizure in the case of the assessee.

Accordingly, in the facts and circumstances of the case and in view of the binding

precedents on this issue in which the SLP filed by the revenue was also dismissed

by the Hon’ble Supreme Court, the additions made by the AO while passing the

assessment orders under section 153A for the assessment years 2010-11 to 13-14

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota are not sustainable and accordingly the same are liable to be deleted. We order

accordingly.”

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota “Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata.

We find that the report of the DDIT (Inv.) Kolkata is also based on the statements

of various persons recorded during their investigation and the statement of Shri

Anand Sharma was also sent along with the report of the AO. The ld. CIT (A) has

confirmed the addition because of the reason that the statement of Shri Anand

Sharma was very much in the possession of the AO who has admitted in his

statement that M/s. Jalsagar Commerce Pvt. Ltd. was engaged in the activity of

providing accommodation entry. However, we find that M/s. Jalsagar Commerce

Pvt. Ltd is not managed or controlled by Shri Anand Sharma, rather the company

M/s. Royal Crystal Dealers Pvt. Ltd. was stated to have been owned by Shri Anand Sharma and in his statement dated 6th February, 2014 Shri Anand Sharma has

stated to have been providing entries from M/s. Royal Crystal Dealers Pvt. Ltd. to

M/s. Jalsagar Commerce Pvt. Ltd. Therefore, there is no allegation or any

admission in the statement of Shri Anand Sharma that he has provided bogus loan

entry to the assessee or any group concerns of the assessee. Since the name of

M/s. Jalsagar Commerce was crepted in his statement, the AO has presumed that

the loan provided by M/s. Jalsagar Commerce Pvt Ltd is nothing but the bogus

accommodation entry provided by Shri Anand Sharma through M/s. Royal Crystal

Dealers Pvt. Ltd. The AO has tried to establish the nexus of the loan received by

the assessee through the statement of Shri Anand Sharma where he has purported

to have provided the alleged entry. Since there is no direct allegation or admission

of providing loan by Shri Anand Sharma to the assessee through M/s.Royal Crystal

Dealers Pvt. Ltd., then even if there is a possibility of bogus accommodation entry

routed through another intermediary company M/s.Jalsagar Commerce Pvt. Ltd., it 33

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota requires a definite link of the transactions from M/s.Royal Crystal Dealers Pvt. Ltd.

to M/s.Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the

chain of transactions and flow of money from one entity to another entity and

finally to the assessee has not been established, then the addition made merely on

suspicion, how so strong it may be, is not sustainable. On the contrary, when the

assessee produced all the relevant record which contains their financial statements,

bank accounts statement of loan creditor, return of income, assessment orders

framed under section 143(3), confirmation of the loan creditor, then a proper

examination could have very well established the link, if any, in providing the

accommodation entry from one entity to another and finally to the assessee.

However, no such link was found in the documents and financial statements of

these companies, rather in the bank account statement of loan creditor M/s.

Jalsagar Commerce Pvt. Ltd. there was no suspicious transaction of receiving any

entry or any deposit of an equal amount prior to giving the loan to the assessee.

The assessee has paid interest to the creditor, which was duly accepted by the AO

as business expenditure. Undisputedly, the assessee has produced the income-tax

record of the loan creditor, bank statement, financial statements including Balance

Sheet, copy of ROC master data showing the status of loan creditor company as

“active”, confirmation of loan given to the assessee. Further, the AO issued

summons and also got the summons served through DDIT Kolkata under section

131 of the IT Act which were duly responded by the loan creditor. Except the

statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata,

the AO has not brought on record any other material to controvert or disprove the

documentary evidence produced by the assessee. It is pertinent to note that the 34

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota loan creditor was assessed to tax and the AO completed the assessment under

section 143 (3) for various assessment years which are relevant for the assessment

year under consideration. The AO in case of loan creditor has not disturbed the

transactions of loan given by this company to the assessee. From the financial

statements of the loan creditor it is apparent that the loan creditor was having

sufficient funds to advance the loan amount to the assessee and once the said

financial statements were not disturbed, then the creditworthiness of the loan

creditor cannot be doubted when it was accepted in the assessment order passed

under section 143(3) of the IT Act. We further note that the AO insisted the

assessee to produce the directors of the loan provider company. The assesee

produced the affidavit, and the notices issued by the AO under section 131 and

133(6) of the Act were duly complied with by the creditor. The statement of the

Director of M/s. Royal Crystal Dealers Pvt. Ltd. was also recorded by the AO

wherein the Director has confirmed the transaction of loan. There are various

reports of the DDIT Kolkata which are placed at pages 406 to 422 of the paper

book. We find that all these reports are based on the statements recorded during

the investigation but no documentary evidence was either gathered or has been

referred in these reports. Therefore, even if these reports are to be taken into

consideration, these are nothing but narration of the statements of various persons

taken during the investigation. It is well settled principle as well as the directions

of the CBDT issued under the Circulars that during the course of investigation, the

department should concentrate and focus on collecting documentary evidence

disclosing undisclosed income instead of obtaining the statement and then support

of their claim merely on the basis of the statement. Therefore, the statements 35

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota

recorded by the DDIT Kolkata are also not based on any documentary evidence so

as to have an evidentiary value for sustaining the additions made by the AO. The

entire report of the Investigation Wing is based on statements recorded during

survey and search. Once the assessee has produced the documentary evidence

and particularly the financial statements of the loan creditors, their bank account

statement, then in the absence of any discrepancy or fault in these financial

statements or in the bank account statement to reflect that the transactions in

question are nothing but bogus accommodation entries, the addition made by the

AO is not sustainable as it is merely on the basis of surmises and conjectures and

not on any tangible material disclosing the non-genuineness of the transactions.

The AO has not disputed the transactions routed through banking channel having

sufficient funds which is also supported by the financial statements and further the

assessments of the loan creditor were completed under section 143(3). The details

of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and

repayment of loan amount as well as closing balance are as under :-

Name of Company AY Opening Loan taken Interest Interest Loan repayment/ Closing Balance during the credited in credited in TDS/transfer in balance year loan a/c interest partner capital during the Paid during the year year /payable a/c Jalsagar Commerce 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Private Ltd Jalsagar Commerce 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Private Ltd Jalsagar Commerce 12-13 53,05,000 78,95,00,000 1,07,08,434 96,37,591 31,72,80,655 47,85,95,188 Private Ltd Jalsagar Commerce 13-14 47,85,95,188 2,76,31,50,000 0 0 2,97,53,40,000 26,64,05,188 Private Ltd Jalsagar Commerce 14-15 26,64,05,188 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Private Ltd Jalsagar Commerce 15-16 0 1,34,89,00,000 49,00,600 44,10,540 1,34,93,90,060 0 Private Ltd Jalsagar Commerce 16-17 0 87,11,00,000 1,67,23,178 1,50,50,86 87,27,72,318 0 Private Ltd 0 36

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota

All these details were before the AO as all these assessment years were passed by

the AO pursuant to the search and seizure action under section 132 of the IT Act.

Thus it is clear that for the assessment year 2015-16 there was Nil balance on

account of loan taken from M/s. Jalsagar Commerce Pvt. Ltd. and the entire loan

was already repaid by the assessee. We further note that it is not the case of repayment of loan after the search action on 2nd July, 2015 but there is a regular

repayment of loan for each year as it is evident from the details reproduced above.

Therefore, the transactions of taking loan and repayment cannot be treated as

bogus once the assessee has been regularly repaying the loan amount and small

balance was there at the end of the year. Once there was no balance at the end of

the year on the loan account, then the addition cannot be made by treating the

loan taken and repaid as bogus transaction. Apart from these facts, the assessee

has also made the payment of interest which was also subjected to TDS. This

shows the genuineness of the transactions and all these transactions have taken

place prior to the date of search and duly recorded in the books of accounts and

also subjected to assessment under section 143(3) for some of the assessment

years. Therefore, even as per the evidence produced by the assessee, the alleged

suspicion of the AO was got dispelled and in the absence of any contrary evidence

except the statement which is not even a conclusive proof of transaction of bogus

entry to the assessee, the additions made by the AO are not sustainable.”

ITA No. 1120/JP/2018 Poojashish Infrastructures Pvt. Ltd., Kota Vs.The DCIT, Kota Following the above decision, the addition made u/s 68 towards share application money and unsecured loan from M/s Jalsagar Commerce Pvt ltd is hereby directed to be deleted. In the result, appeal of the assessee is allowed.

Pronounced in the Open Court on 08/04/2019.

Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 08/04/2019 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Poojashish Infrastructures Pvt. Ltd., Kota 2. izR;FkhZ@ The Respondent- The DCIT, Central Circle, Kota 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 1120/JP/2018} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत