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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
Date of Hearing 06.11.2025 Date of Pronouncement 13.11.2025 ORDER PER SANDEEP GOSAIN, JM:
This appeal has been filed by the assessee challenging the impugned order dated 08.07.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2018- 19. The assessee has raised the following grounds of appeal:
The learnedCIT(A) failed to appreciate that there was no reason to believe that any income has escaped assessment and that the reassessment order passed was illegal and bad in law as: There was no live link between the information received and provided in the reasons recorded with that of the appellant as there was no mention of the appellant in any part of the information received There was non-application of mind by the ld. Assessing Officer as the reopening was done merely on the basis of the information received
2. The learned CIT(A) erred in confirming the addition of Rs. 25,00,000 under section 69A of the Act holding that the loan taken from Aneri Fincap Limited is an accommodation entry even though the appellant had established the nature and scope of the transaction providing the documentary evidences to prove the identity and creditworthiness of the entity and the genuineness of the transaction.
3. The learned CIT(A) erred in confirming the addition based on the information received from the search conducted at the third party and the statement recorded of the third person even though: the appellant was not provided with an opportunity to cross examine the person whose statement was relied upon by the Ld. AO the statement recorded by Shri Rajesh Mehta did not mentionabout any accommodation entry provided to the appellant, the statement of the Rajesh Mehta only speaks about accommodation entries taken for purchase and sale transactions and not loan transactions Shri Rajesh Mehta's statement did not have evidentiary value because he was neither the shareholder nor the director of the company
4. The learned CIT(A) erred in confirming the addition relying on the statement of the third person and merely because no response was received from the directors of the concerned entity, Aneri Fincap Ltd. to the notice issued under section 133(6), thereby ignoring the documentary evidences filed by the appellant.
As per the facts of the present case, the addition of Rs. 25 lakhs was made u/s 69A of the Act on account of bogus accommodation entries availed by the assessee in the shape of unsecured loan from M/s. Aneri Fincap Ltd (in short AFL).
Although, assessee has raised grounds challenging the reopening of the assessment along with challenging the additions made u/s 69A of the Act. But, first of all we deal with the grounds raised by the assessee thereby challenging the addition made u/s 69A of the Act of Rs. 25 lakhs. In this regard it was submitted by Ld. AR that the addition in the present case was made solely on the ground that M/s AFL from whom the assessee had availed loan was a paper company and not doing any genuine business activities and was engaged in providing bogus accommodation entries. It was submitted that in fact the loan availed by the assessee was genuine and all the documentary evidences with regard to the said transactions were made available to the revenue authorities to establish identity, creditworthiness of the AFL and genuineness of the transactions regarding loan transaction of Rs. 25 lakhs.
Apart from this it was submitted that the issue in question is squarely covered by the decisions of the Coordinate Benches of ITAT, wherein loan taken from M/s AFL vide different assessee’s has been treated as genuine in the following cases.
1. ITO Vs. SKA Techinfra Pvt Ltd (ITA No. 4369/Mum/2024) 2. ACIT Vs. Shri Ramesh Kumar Jain (ITA No. 3244/Mum/2022) 3. ACIT Vs. Fancy Devi, 4. CIT Vs. Nikunj Eximp Enterprises (P) Ltd., [2013] 35 taxmann.com 384 (Bom HC)
Satish Sawarmal Saraf., Mumbai. 5. ITO Vs. Gold Finger Establishment (ITA No. 4212/Mum/2015) 6. CIT Vs. MK Brothers [1987] 30 taxman 547 (Gujarat HC) 5. On the other hand, Ld. DR relied upon the orders passed by the revenue authorities.
We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we noticed that it is an undisputed fact that the assessee had availed loan from M/s AFL and in order to prove the said transaction as genuine, the assessee has placed on record documents with regard to the identity of M/s AFL by placing on record PAN Card and Confirmation of Accounts, MOA and AOA as well as registration certificate issued by RBI. These documents clearly establish the identity of M/s AFL. With regard to Credit-worthiness of M/s AFL the assessee had placed on record the ITR filed by M/s AFL for A.Y. 2018-19 wherein an income of Rs. 67,25,587/- is offered to tax. As per the audited financial statements M/s AFL has earned revenue of Rs. 22.16 crores in F.Y. 2017- 18 relevant to A.Y. 2018-19. Further, M/s AFL has a long term non current borrowing of approximately Rs. 913 crores as well as equity of approximately Rs. 5 crores. Furthermore, M/s AFL had fixed deposits of Rs. 8 crores as on 31.03.2018. All these figures go on to show the Financial Strength of AFL These figures are multiple times the amount of loan advanced of Satish Sawarmal Saraf., Mumbai. Rs. 25 lakhs by M/s AFL to the assessee which proves the credit-worthiness of AFL without an iota of doubt. With regard to Genuineness of transaction assessee has placed on record that assessee had obtained a temporary loan from AFL which is a non-banking financial company ("NBFC") regulated by the Reserve Bank of India. The payment is done through banking channels and the loan amount is completely repaid within a period of 113 days. Assessee is a director in Panache Academy and Salon Private Ltd. ('Panache") and some urgent funds were required to meet working capital requirements in Panache and accordingly loan was obtained from AFL by the assessee which was immediately transferred to Panache. AFL is engaged in the business of lending and the same is clearly reflected in the balance sheet of AFL where total loans obtained by AFL is approximately 913 crores and total loans advanced by AFL 7 is approximately 899 crores. In the light of the above, genuineness of the transaction is also established.
Further we have noticed that the issue in question has already been decided by the Coordinate Bench of ITAT, wherein the transaction of loan from M/s AFL were treated as genuine, the details of the same are mentioned below:
& CO M/s. SKA Techifra Pvt Ltd.,
8. Coming to the next addition of Rs.2,00,00,000/- made on account of alleged bogus loan u/s 68 of the Act and the addition of Rs.1,08,000/- being commission @ 0.54% on the bogus loan, we observe that during the reassessment proceedings on perusing the balance sheet, it was found by the AO that the Assessee had shown un- secured loan of Rs.2,00,00,000/- from M/s. Aneri Fincap Pvt. Ltd. During the investigation by the Investigation Wing, such company has been allegedly proved as a paper company meant for providing accommodation entry as admitted in the statement made by Shri Rajesh Mehta, CEO of the company and therefore the AO doubted the receipt of loan of Rs.2,00,00,000/- being free of interest and ultimately added the same on account of unexplained cash credits u/s 68 of the Act. The AO also made the addition of Rs.1,08,000/- being commission @ 0.54% of Rs.2,00,00,000/- and added the same in the income of the Assessee.
9. The Assessee also challenged the said additions before the Ld. Commissioner and has claimed that the Assessee has duly filed the relevant documents before the AO in order to substantiate its claim as filed during the first appeal proceeding, such as: (i) Name, address and PAN of the lender (ii) CIN Master Data of Lender Company; (iii) Confirmation of Lender Company; (iv) ITR Acknowledgement Receipt of the lender; (v) Copy of Audited Financial Statements of the lender company; (vi) Copy of Bank Statement of lender highlighting payments to assessee company through normal banking channel; (vii) Copy of Bank Statement of the assessee company. 9.1 The Assessee, before the Ld. Commissioner also submitted that the entire loans had been received through banking channel by A/c payee cheques /RTGS. The AO was not justified in ignoring the documentary evidences filed, which proves that the Assessee had thoroughly discharged its onus to prove the identity and capacity of the lender and genuineness of transactions. The Assessee further submitted that the statement of Mr. Rajesh Mehta cannot be used against the Assessee Company, as the statement made was general in nature and does not contain the name of the Assessee. The Assessee further submitted that though the Assessee has made prayer before AO to allow the opportunity to cross examine the said parties to confront & controvert its incorrect statement but no such opportunity was given by AO. The lender even has also confirmed that loans have been given to the Assessee out of accounted and disclosed funds and duly shown in its books of accounts. Further the said loans have been repaid in the subsequent year. The Assessee further submitted that the genuineness of loan cannot be doubted merely because party did not respond to notice issued u/s. 133(6), when all the details are furnished to justify identity and creditworthiness of the lender and genuineness of loan transaction. The Assessee in support of its case, has also relied on the following decisions: 1. Labh Chand Bohra vs. ITO 219 CTR 571 (Raj-HC) 2. CIT vs. Mehrotra Brothers 270 ITR 157 (MP-HC) 3. CIT vs. S. Kamaljeet Sing 147 Taxmann 18 (AII-HC) 4. CIT vs. Diamond Products Ltd 21 DTR 9(Del- HC) 9.2 The Ld. Commissioner by considering the aforesaid peculiar fact and circumstances of the case and the submission of the Assessee and the evidences on record, observed and found that the unsecured loan parties duly confirmed the ledger accounts of loan by providing its bank statement, ITR, acknowledgement and therefore the Assessee has discharged its initial onus cast upon it with respect to the creditors. The Ld. Commissioner also considered the fact that the loans were received through banking channel and duly reflected in the balance sheet of the lender as well as of the creditor. The AO simply disbelieved the genuineness of the transaction that a summon u/s 133(6) of the Act was issued but remained un-complied with and during the investigation, M/s. Aneri Fincap Pvt. Ltd. has been proved as a paper company for providing accommodation entry as admitted by Shri Rajesh Mehta CEO of the company. The Ld. Commissioner also analyzed the various relevant judgments concerning the issue, wherein it was held that the Assessee is obliged to explain the source of its credit but not the source of source.
When full particulars inclusive of confirmation with name, address and PAN numbers, copy of the income tax returns, balance sheet, profit & loss account and computation of the total income in respect of the creditors/lenders were furnished and when it has been found the loans were received through cheques and loan accounts were duly reflected in the balance sheet, the AO was not justified in making the addition. The Ld. commissioner also observed that where the Assessee has given names and addresses of the alleged creditors and it was in the knowledge of the Revenue that the said creditors were income tax Assessees and their index numbers were in the file of the Revenue, still the Revenue Department apart from issuing notices u/s 131 of the Act, did not pursue the matter further and also did not examine the source of income of the said alleged creditor to find out whether it was creditworthy or such person who could advance the loans. There was no effort made to pursue the so-called alleged creditor. And therefore, in those circumstances, the Assesses could not do anything further, as held in the case of CIT vs. Odisha Corporation (P) Ltd. 159 ITR 78 (SC), by the Hon'ble Apex Court. 9.3 The Ld. Commissioner further considered the fact that the AO had made the third-party enquiry by issuing notices u/s 133(6) of the Act and on not receiving the reply, drawn the adverse inference, without confronting non-compliance of summon with the Assessee. Various Courts have held that non- compliance to the notices u/s 133(6) or 131 of the Act by itself, is not sufficient to draw an adverse inference, where the establishing identity and Assessee had discharged its creditworthiness of the lenders from whom unsecured loans were taken and genuineness of the transactions. Where the Assessee has discharged its burden cast upon it u/s 168 by filing the relevant documents and repaid the un-secured loan in the subsequent year, then burden shifts to AO to prove otherwise that the said transaction was nothing but undisclosed income of the Assessee. 9.4 The Ld. Commissioner, even otherwise also taken into consideration the judgment of the Hon'ble Apex Court in the case of CIT vs. Lovely Exports Ltd. (2008) 216 CTR 198 wherein it was held that where the Revenue urges that the amount of share application money has been received from bogus shareholders, then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. 9.5 The Revenue Department before us has claimed that mere submission of documents like bank statements or confirmation does not suffice, if the genuineness of the lender is questionable. The Hon'ble Apex Court in the case of CIT Vs. P. Mohanakala (2007) 291 ITR 278 (SC) has held that once the explanation offered by the Assessee qua income is found unsatisfactory, then the same must be treated as income u/s 68 of the Act. 9.6 As we have observed above that the Assessee has explained the identity, creditworthiness of the parties and genuineness of the transactions by filing relevant documents referred to above and the documents have not been doubted by the AO and even otherwise the books of accounts of the Assessee also not rejected u/s 145(3) of the Act and therefore on the said facts and documents, the Assessee has duly discharged its prima-facie onus cast u/s 68 of the Act and thus simply on the basis of that the notice issued to M/s. Aneri Fincap Pvt. Ltd. remained to be complied with, itself is not sufficient to make and sustain the addition specifically in a case where the relevant and basic documents have been produced by the Assessee, in order to discharge its prima-facie onus cast u/s 68 of the Act. 9.7 Summing up the case, we again reiterate that the Assessee in the present case by providing name, address, PAN, copy of IT returns, balance sheet, profit & loss account of the creditors/lenders as well as its confirmation, has been able to justify and establish the identity and creditworthiness of the lender and genuineness of un-secured loan and consequently has discharged its onus cast u/s 68 of the Act and therefore the additions of Rs.2,00,00,000/- as made by the AO u/s 68 of the Act and Rs.1,08,000/- made on account of commission on such amount of Rs.2,00,00,000/-, are un-sustainable and therefore correctly deleted by the Ld. Commissioner. On the aforesaid analyzation we are of the considered view, as the decision of the Ld. Commissioner in deleting the aforesaid additions is not suffered from any perversity, impropriety and/or illegality, thus needs no interference. Consequently, the appeal of the Revenue Department deserves dismissal.
10. Coming to the CO filed by the Assessee, as we have observed above that the Assessee in order to buy peace of mind and cut short the litigations, has not specifically agitated the grounds raised in the CO and therefore the CO is dismissed being not pressed. ACIT Vs. Shri Ramesh Kumar Jain, ITA No. 3244/Mum/2022
Undisputedly search and seizure operation was carried out on the assessee on 13.11.2019. It is also not in dispute that during the course of search proceeding no “incriminating material” was found and seized. It is also not in dispute that the AO based his entire case on the fact that on the basis of search conducted in case of One World Group on 06.11.2019 it has come on record that the assessee has received a loan from M/s. Aneri Fincap Ltd. which is a bogus entity, hence it is an admitted fact that addition in question in this case has been made on the basis of material found during the course of search in the case of third party.
6. In the backdrop of the aforesaid undisputed facts the Ld. CIT(A) deleted the addition on the premise that since no assessment proceedings were pending as on date of search under section 132 of the Act no nexus has been proved between the addition made in the assessment order vis-à-vis incriminating material found and seized on the basis of search operation. The Ld. CIT(A) has duly thrashed the facts of this case on the basis of legal proposition laid down by the Hon’ble Bombay High Court in case of M/s. Continental Warehousing Corporation 374 ITR 645, decision rendered by Mumbai Special Bench in case of All Cargo Global Logistics Ltd. vs. DCIT (2012) 23 taxmann.com 103 (Mum)(SB), also relied upon the case of PCIT vs. Meeta Gutgutia (2018) 96 taxmann.com 468 (SC) and the decision rendered by Hon’ble Delhi High Court in case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) and reached the following conclusion:
6.15 Conclusion-The aforesaid detailed discussion with respect to various judicial decisions clearly laid down the following principles – (i) the assessments which have been concluded u/s 143(3) of the Act and not pending at the time of search proceedings, do not abate. (ii) for this purpose, intimation u/s 143(1) would constitute an assessment, relying on the decision of Hon'ble Bombay High Court in CIT V/S Gurinder Singh Bawa (79 taxmann.com 398) (iii) the proceedings u/s 153A of the Act do not empower the Assessing officer to re-adjudicate the settled issues again, unless fresh incriminating material for the relevant year is found during the course of search proceedings. (iv) the Assessing officer does not have jurisdiction to make additions/disallowances which are not based on relevant incriminating material found during the course of search proceedings. (v) in the case of completed/un-abetted assessments, where no incriminating material is found during the course of search, the assessment u/s 153A of the Act is to be made on originally assessed/returned income and no addition or disallowance can be made de hors the incriminating evidences for the relevant year are recovered during the course of search. (vi) Any admission or confession needs corroboration with evidences. In order to make a genuine and legally sustainable addition on the basis of admission or confession during search action, it is necessary that some incriminating material must have been found to correlate the undisclosed income with such statement. (vii) Any statement recorded under section 132(4) cannot be considered as incriminating material found in the course of search as these are recorded to elicit more information/explanation of the search person on the incriminating documents/gold/jewellery found during search. 6.16 Conclusion- In the present case, additions have been made on account of accommodation entry from sale of penny scrip added u/s 68 of Rs.50,35,000/-, (addition in this case is Rs.5,41,00,000/-) and as unexplained expenditure u/s. 69C due to commission for arranging accommodation entry of unsecured loan of Rs.1,51,050/- As stated above, the AO has not brought on record through the assessment order or through any communication regarding any incriminating document or material found or seized during the Search and Seizure action u/s 132 of the Act, which can be linked /correlated with the impugned additions made. Considering the totality of the facts and circumstances of the issues involve, I am of the considered opinion that these additions cannot survive de hors the incriminating evidences as held in the above binding judicial decisions. The AO is accordingly directed to delete the impugned additions made in the assessment order. Thus, the grounds of appeal no. 1 & 2 are allowed.
20. The appellant has made identical submissions as that made in Appeal No. CITIA)-48, Mumbai/10720/2013-14 for AY 2014-15, as reproduced above/ Other facts and backgrounds of the case remain the same. Since all the grounds Involved in Appeal No. CIT(A)-46, Mumbai/10523/2016-17 for A.Y. 2017- 18 are identical to the one that is discussed above in Appeal No. CITIAH8. Mumbai/10720/2013-14 for A.Y. 2014-15, the undersigned findings for AY. 2014-15 with respect to these grounds would mutatis mutandis apply to this appeal for AY 2017-18 as well.
21. Hence, It is held that in the absence of any incriminating material the additions made ie., (1) Addition on account of unexplained cash credit u/s 68 as loan taken from M/s. AneriFincap Limited of Rs. 5,41,00,000/-10 Addition on account of unexplained expenditure u/s 69C on account of interest of Rs. 1,35,250/- for A.Y. 2017-18 deserved to be deleted.”
7. So perusal of the impugned order passed by the Ld. CIT(A) goes to prove that the AO proceeded to make the addition without establishing any nexus between addition made to that of the incriminating material found/seized on the basis of search operation. Moreover, when assessment under section 143(3) of the Act has already been concluded, thus not pending at the time of search proceedings any addition in the absence of incriminating material is not sustainable in the eyes of law as has been repeatedly held by the Hon’ble Bombay High Court in case of M/s. Continental Warehousing Corporation (supra), Special Bench of the Tribunal in case of All Cargo Global Logistics Ltd. (supra) and the decision rendered by the Hon’ble Delhi High Court in case of Kabul Chawla (supra) and the decision rendered by the Hon’ble Supreme High Court Meeta Gutgutia (supra). When admittedly no incriminating material has been found on the basis of search carried out on the premises of the assessee, rather the AO proceeded to make the addition merely on the basis of an information available on Insight portal indicates that the Assessee is beneficiary of accommodation entry of loan of Rs.5,41,00,000/- from M/s. AneriFincap Limited.
8. Furthermore, it is an admitted fact on record that One World Group entities are not related to the assessee. The AO relied upon the information available on the “Insight portal”. Rather it is incomprehensible as to how the AO has proceeded to make the addition on the basis of information available on the portal which has already been examined by the Revenue Authority and held to be in order while framing assessment under section 143(3) of the Act.
9. In view of what has been discussed above, we are of the considered view that there is no infirmity, illegality or perversity in the impugned order passed by the Ld. CIT(A), hence appeal filed by the Revenue is hereby dismissed.
3. ACIT Vs. Fancy Devi, ITA No. 3245/Mum/2022
7. We heard the rival submissions and perused the material on record. The Ld.DR submitted that the CIT(A) has erred in deleting the additions overlooking the findings of the assessing officer and the judicial decisions. Whereas, the contentions of the Ld. AR are that the AO has erred in issuing notice u/s 153A of the Act and further passing the order u/s 143(3) r.w.s 153A of the Act is bad in law though no incriminating material was found in the course of search and relied on the jurisdictional Honble Bombay High Court decision of M/s. Allcargo Global Logistic Ltd and CIT Vs Continental ware housing corporation (Nhavaseva) Ltd and the Hon’ble Tribunal decisions and emphasized the assessment year falls under category of unabated assessment. We find that the search took place on 13.11.2019 and the assessee has submitted the return of income on 22-03-2018 and time limit for issue of notice U/sec143(2)of the Act is 30-09-2019.
We find that there is no dispute with regard to the facts that the Assessment relating to AY 2018-19, fall under the category of “unabated assessment”. There is also no dispute that the department did not unearth any incriminating material relating to the additions of unexplained cash credits and unexplained expenditure hence the AO, in the absence of any incriminating material relating to the above said additions, could not have made any addition in unabated assessment year. In support of the above said proposition, we rely upon the decision rendered by Hon’ble Bombay High Court in the case of Continental Corporation (Nhava Sheva) Ltd (2015)(58 taxmann.com 78)(Bom) and Gurinder Singh Bawa (2017)(79 taxmann.com 398)(Bom), wherein the Hon’ble Bombay High Court held that the unabated assessments (finalized assessments) cannot be touched by resorting to the provisions of sec.153A of the Act unless some incriminating materials relating to the said assessments, which are contrary to and/or not disclosed during regular assessment proceedings, are found.
Whereas the provisions of sec.153A of the Act provide for issuing of notice u/s 153A of the Act for six assessment years immediately preceding the year of search and thereafter, the AO shall assess or reassess the total income for the above said six years. This section further provides that all pending assessment or re-assessment pending as on the date of search shall abate. Hence the assessments of the assessment years falling within the period of above said six years which are not pending, i.e., which have attained finality shall not abate. Assessments of such assessment years are called “unabated / completed / finalized” assessments. The question as to whether the AO is entitled to interfere with such kinds of unabated/completed/ finalized assessments or not without there being any incriminating material found during the course of search, was examined by the Special bench of Tribunal in the case of All Cargo Logistics Ltd vs. DCIT (2012)(137 ITD 287)(Mum), wherein it was held that the AO could interfere with the unabated/completed/finalized assessments only if the incriminating materials found during the course of search warrant such interference, meaning thereby, if the search action did not bring out any incriminating material, then the AO cannot disturb the completed assessments and he has to simply reiterate the earlier total income in the present assessment order.
10. Further the views expressed by the Special bench has since been upheld by Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra). The relevant observations made by Hon’ble Bombay High Court in the above said case are extracted below:- “31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under : "48. The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other.
Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search.
The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account.
Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1).
The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub- section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.
The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1)(b) and the first proviso ? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.
It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency."
Similarly the findings and views expressed by Hon’ble jurisdictional Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra) was reiterated by the Hon’ble Bombay High Court in yet another case of Gurinder Singh Bawa (2017)(70 taxmann.com 398) as under:- “5. On further appeal before the Tribunal, the assessee interalia challenged the validity of the assessment made under Section 153A of the Act. This on account of the fact that no assessment in respect of the six assessment years were pending so as to have abated. The impugned order accepted the aforesaid submission of the respondent- assessee by interalia placing reliance upon the decision of the Special Bench of the Tribunal in Al-Cargo Global Logistics Ltd. rendered on 6 July 2012. The Tribunal in the impugned order further held that no incriminating material was found during the course of the search. Thus the entire proceedings under Section 153A of the Act were without jurisdiction and therefore the addition made had to be deleted on the aforesaid ground. The impugned order also thereafter considered the issues on merits and on it also held in favour of the respondent-assessee.
1. Mr. Kotangale, the learned Counsel for the revenue very fairly states that the decision of the Special Bench of the Tribunal in Al-Cargo Global Logistics Ltd. was a subject matter of challenge before this Court as a part of the group of appeals disposed of as CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645/58 taxmann.com 78/232 Taxman 270 (Bom.) upholding the view of the Special Bench of the Tribunal in Al- Cargo Global Logistics Ltd. Consequently, 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 regular assessment proceedings. 7. In view of the above, on issue of jurisdiction itself the issue stands concluded against the revenue by the decision of this Court in Continental Warehousing Corpn. (Nhava Sheva) Ltd. (supra). In the appeal before us, the revenue has made no grievance with regard to the impugned order of the Tribunal holding that in law the proceedings under Section 153A of the Act are without jurisdiction. This in view of the fact that no assessments were pending, so as to abate nor any incriminating evidence was found. The grievance of the revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However once it is not disputed by the revenue that the decision of this Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under Section 153A of the Act. The occasion to consider the issues raised on merits in the proposed questions becomes academic. 8. In the above view, the questions as framed in the present facts being academic in nature, do not give rise to any substantial question of law. Thus not be entertained.” 12. The Coordinate bench of the Tribunal has followed the above said binding decisions of jurisdictional High Court in the cases of Smt Anjali Pandit vs. ACIT (ITA No.3028 to 3032/Mum/2011 & others - order dated 17.11.2016) and held as under:- “8. From the propositions in the above mentioned decisions, we find that the case of the assessee is squarely covered by the ratio laid down in the decisions cited supra. We therefore respectfully following the same hold that the AO has not jurisdictional to assess the long term capital gain as income from other sources as the same is not based upon the seized or incriminating materials found during the search proceedings qua the long term capital gain. Similarly the CIT(A) enhancing the assessment is also not based upon any seized or incriminating materials found during the search and therefore the enhancement is also without jurisdiction u/s 153A. Accordingly, the additional grounds no. 1A and 1B raised by the assessee stand allowed in favour of the assessee and AO is directed accordingly.”
We also rely on the decision rendered by Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla 380 ITR 573(Delhi) wherein identical view was expressed. The Hon’ble Delhi High Court has summarized the legal position with regard to the provisions of sec.153A of the Act as under:- “Summary of the legal position 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 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.”
Considering the facts, circumstances, submissions, judicial decisions and the ratio of the recent decision of Honble Supreme court in the Pr.CIT Vs Abhisar Buildwell Pvt Ltd. 2023 Live Law (SC) 346 find that the CIT(A) has dealt on the provisions of law, judicial decisions and deleted the additions as no incriminating material was found in the course of search, We also considered the facts and judicial decisions as discussed above and are of the view that the CIT(A) has passed a reasoned and conclusive order. Accordingly, we do not find any infirmity in the order of the CIT(A) on these
8. Therefore taking into consideration the totality of the facts and circumstances as discussed by us above and also considering that the issue in question is squarely covered by the decision of Coordinate Benches of ITAT, we are also of the view that the assessee has established the identity, creditworthiness of the company and also the genuineness of the transactions with M/s AFL and in this way the assessee has discharged its onus cast u/s 69A of the Act, therefore addition of Rs. 25 lakhs made by AO u/s 69A of the Act is ordered to be deleted.
9. Since we have allow the ground and deleted the additions therefore there is no need to adjudicate other grounds raised by the assessee at this stage and the same are kept open.
In the result, the appeal filed by the assessee stands partly allowed.