RAVI BADALIA,KOLKATA vs. DCIT, KOLKATA

आयकर अपील�य अ�धकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA �ी संजय गग�, �या�यक सद�यएवं �ी �गर�श अ�वाल, लेखा सद�य के सम� Before Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member I.T(SS)A. Nos.58/Kol/2023 Assessment Year: 2019-20 Ravi Badalia……………........................................…...……………....Appellant 66/3, Beadon Street, Kolkata-700006. [PAN: ADJPB0934C] vs. DCIT/ACIT, Central Circle-4(1), Kolkata........…............…..…..... Respondent

I.T(SS)A. No.90/Kol/2023 Assessment Years: 2019-20 ACIT, Central Circle-4(1), Kolkata ……............…...……………....Appellant vs. Ravi Badalia........…............................................................…..…..... Respondent 66/3, Beadon Street, Kolkata-700006. [PAN: ADJPB0934C]

I.T(SS)A. Nos.57/Kol/2023 Assessment Year: 2018-19 Ravi Badalia……………........................................…...……………....Appellant 66/3, Beadon Street, Kolkata-700006. [PAN: ADJPB0934C] vs. DCIT/ACIT, Central Circle-4(1), Kolkata........…............…..…..... Respondent

Appearances by: Shri Anil Kochar, Advocate, Aryan Kochar, ARs, appeared on behalf of the appellant. Shri Subhendu Datta, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : October 18, 2023 Date of pronouncing the order : December 15, 2023

आदेश / ORDER संजय गग�, �या�यकसद�य�वारा/ Per Sanjay Garg, Judicial Member: The captioned are three appeals, out of which, two are cross- appeals pertaining to Assessment Year 2019-20 i.e. one by the assessee bearing IT(SS)A No.58/Kol/2023 and other by the revenue bearing IT(SS)A No.90/Kol/2023 against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as ‘CIT(A)’] dated 16.02.2023 and the third appeal is of the assessee relevant to assessment year 2018-19 bearing IT(SS)A No.57/Kol/2023. 2. Since all the three appeals arise out of the assessment proceedings carried out relating to the same search action and facts and issues involved are common, therefore, these appeals have been heard together and are being disposed of by this common order for the sake of convenience. The facts have been taken from assessee’s appeal In IT(SS) No.58/Kol/2023. 3. The brief facts of the case are that a search and seizure operation was carried out u/s 132 of the Income Tax Act (in short the ‘Act’) on 08.08.2019 and on subsequent dates in the cases of the Badalia Group of Kolkata and its directors/associated persons. Apart from the business concern in which the assessee was a director, the assessee and his family members individually were also covered under the search operation. The present cases pertain to the search covering assessee’s residential premises and consequent assessments carried out in the name of assessee in his individual capacity. 3.1 During the search action at the residential premises of the assessee, cash of Rs.79.0 lakhs was found and jewellery of the value of Rs.3.98 lakhs was also found. Out of which cash amount of

Rs.75,00,000/- was seized. However, jewellery was not seized. During the course of assessment proceedings, the assessee was asked to provide explanation in respect of cash and jewellery found. In response, the assessee filed the explanations which were accepted by the Assessing Officer ( in short, “the AO”) and no addition was made on this account. No incriminating document was found at the time of search action during the residential premises of the assessee. 3.2. There was another search action carried out u/s 132 of the Act in the case of Badalia Gems Pvt. Ltd., wherein, the assessee has been a director. No incriminating document was found during the course of search action even in the case of the said Badalia Gems Pvt. Ltd. However, statement of Shri Ravi Badalia , director of Badalia Gems Pvt. Ltd. was recorded u/s 132(4) of the Act on 08.08.2019. In the course of his statement, Shri Ravi Badalia (assessee herein) was confronted with some loose sheets which were brought by the investigation wing with themselves from their office record. The said loose sheets as per the revenue authorities were found and seized during the course of a past search action carried out in the case of third parties i.e. Anil Kasera Group, Uma Shankar Kasera Group and Sanwaria Group of Finance Brokers on 30.11.2018. The name of the assessee was found mentioned, relating to certain cash amount transactions, in the said loose sheets. 3.3. It is pertinent to mention here that no further action was carried out against the assessee either under the provisions of section 153C of the Act or u/s 147 of the Act relating to the said incriminating material/loose sheets found during the past search action carried out on 30.12.2018 in the ‘Kasera Group of cases’ as mentioned above. However, the said loose sheets were brought by the revenue along with them to the business premises of Badalia Gems Pvt. Ltd. and the

director of the company namely Ravi Badalia was confronted with the said looses sheets. During the course of his statement recorded u/s 132(4) of the Act, Shri Ravi Badalia, director of the company, admitted to certain cash loan transactions carried out with Anil Kr. Kasera and stated that he had given the surplus business income earned over the years as cash loans on interest and he also admitted that the aforesaid person namely Anil Kr. Kasera, Rajesh Kasera, Uma Shankar Kasera and Shri Basant Kasera were finance brokers who used to receive surplus business cash from him and further give on credit on interest basis to some other persons and used to earn commission income from those creditors. He further stated regarding the entries of the loose sheets that there may be cases of duplication of entries and he has not gone through the exact figures and he would provide the exact figures within 14 days. Shri Ravi Badalia, however, voluntarily disclosed and surrendered a sum of Rs.40 crores earned over the years by doing out of books sales in cash. 3.4 During the post search assessment proceedings carried out u/s 153A of the Act in the case of assessee Shri Ravi Badalia, he retracted from the disclosure of Rs.40 cores and further stated that he along with his three sons was doing business of dealing in jewellery and ornaments and generated cash income which was further deployed to borrowers through Anil Kasera and Uma Shankar Kasera. It was stated that cash amounts were given to them from F.Y 2010-11 and upto 31.03.2016 totalling to Rs. 15 crores approximately. The assessee further stated that the assessee decided to avail the benefit under Income Declaration Scheme, 2016 announced by the Government of India and asked the Kaseras to get the amount refunded back from the parties to whom cash loans were advanced. However, the Kaseras could get refund of amount of Rs. 8 crores. And out of the said amount,

amount of Rs. 7.99crores was declared by the assessee under IDS. The assessee further stated that from time to time, balance amount of Rs. 7 crore was received back and the last bunch was received in the month of November/December 2017 and that by the end of December 2017, no amount was outstanding from Kaseras and entire financial activities were finished with them. The assessee further stated that assessee was having roughly Rs. 3.30 crore in Specified Bank Notes and upon announcement of the demonetization scheme the said amount was deposited in bank. Thereafter a survey was carried out at the business premise of the assessee by the Investigation wing of the department and amount of Rs. 3.29 crore was declared under PMGKY scheme. The assessee, accordingly, admitted to having undisclosed income of Rs. 3.70 crores only. The assessee further stated that it were only the Kaseras who could provide details and information based upon their notings, which have been found and seized during the course of search from them on 30.11.2018. The assessee further stated that since no incriminating papers/evidences were found or seized during the course of search conducted in the case of the assessee, therefore no addition could be made on the basis of search action in his premises. That, the loose sheets seized from Kaseras could not have been used or relied upon during the course of search at his premises and further that any addition on the basis of loose sheets found from third party, in the absence of any incriminating material found during the course of search at his premises, was not legally valid. 3.5 The Assessing Officer, however, observed that the assessee had failed to furnish the cash flow statement showing generation of cash and its application and failed to furnish any satisfactory explanation with regard to the transactions reflected in the seized documents found during the course of search conducted on 30.11.2018 in the case of

Kasera Group of cases. The Assessing Officer, thereafter, observed that the total transactions mentioned in the loose sheets were of Rs.108.89 crores, however the transaction amounting to Rs.9.25 crores pertained to F.Y 2017-18 relevant to A.Y 2018-19. He accordingly made the addition in respect of rest of the amount of Rs.99.64 crores treating the same as unexplained investment in the hand of the assessee under the provisions of section 69B of the Act. 4. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the CIT(A). Before the ld. CIT(A), the assessee not only has taken the legal ground as to the validity of the impugned additions in an assessment carried out u/s 153A of the Act when no incriminating material was found during the course of search action, but also contested the impugned additions on merits. The assessee also submitted that the A.O. did not give him the proper opportunity to furnish the cash flow statement and other evidences. Assessee furnished the cash flow statement before the CIT(A) and also explained that there were duplication of entries as the figures were repeated in the said slips on account of reinvestment of the same amount and further that certain entries were in the name of some other persons and not the assessee, whereupon, the ld. CIT(A) called upon the remand report from the Assessing Officer. The assessee filed objections to the said remand report which were again sent to the Assessing Officer and second remand report was also called upon by the CIT(A) from the Assessing Officer. After considering both the remand reports sent by the Assessing Officer and the submissions of the assessee, the ld. CIT(A) bifurcated the transaction into four years and calculated the peak credit of each of the assessment year. He worked out the peak credit for A.Y 2016-17 at Rs.50,00,000/-, for A.Y 2017-18 at Rs.1.50 crores, for A.Y 2018-19 at Rs.14.72 crores and for

A.Y under consideration i.e. A.Y 2019-20 at Rs.3.92 crores. The ld. CIT(A) also calculated the interest income for the A.Y 2019-20 at Rs.1.44 crores and computed the total undisclosed income of the assessee for the year under consideration at Rs.53648000/- and confirmed the addition to that extent. 4.1. The assessee also raised legal grounds before the CIT(A) relating to the validity of the statement recorded u/s 132(4) of the Act in the absence of any incriminating material, books of account found from the possession of Shri Ravi Badalia; that the addition could not have been made in the case of Shri Ravi Badalia in his individual capacity on the basis of his statement recorded in the capacity of director during the search action at the business premises of Badalia Gems Pvt. Ltd.; that the statement recorded u/s 132(4) can only be linked to the provisions of section 132 wherein from the same emanates and not with regard to search and seizure having been conducted upon other party. However, the ld. CIT(A) held that as per the Explanation to section 132(4) of the Act, that the person being examined, can be examined not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purpose of any investigation connected with any proceedings under the Act. He held that the documents seized from Kasera Group were relevant to the assessee, therefore, the search party was justified in confronting the assessee with the said documents. He further held that even all the assessments pertaining to the assessee on the date of search, had not been completed. He observed that ‘had the assessment been completed on the date of search, the case of the assessee would have been covered by various judicial pronouncements including the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawala(2016) 380 ITR 573 (Del), that have stipulated that in case of

all the assessments having been completed for any assessment year, as on the date of search, any additions that are made, would have to be based upon incriminating material found during that search’. He held that since the assessment for the year under consideration was not completed in the case of the assessee on the date of search, therefore, the Assessing Officer was justified in taking into consideration the documents found during the course of search action in the case of third party i.e. Kaseria Group of cases. In respect of the objection of the assessee, that without gathering any corroborating evidence from the third party from where the impugned seized documents were found, these documents could not have been used against the assessee, the ld. CIT(A), though, in this respect held that there was a merit in the contention of the assessee and that while it was necessary to make corroborative enquires by the Assessing Officer in respect of impugned seized documents and regarding the contents of the statement given by the assessee, however, the lack of such enquiry would not vitiate the assessment in which these documents or statements have been used as evidence. So far as the contention that the alleged loose sheets, since were neither hand written by the assessee nor recovered from the assessee and that the assessee could not have been asked to explain in this respect, the ld. CIT(A) rejected the said contention also and held that the assessee had owned up some of the transactions written in the loose sheets and that there was no evidences that the statement recorded of Shri Ravi Badalia during the search action was under any threat or coercion. Another objection taken by the assessee was that the alleged documents were found during the course of search action in the case of

Kasera Group of cases and the same could have been used against the assessee only by way of initiating proceedings and serving notice u/s 153C of the Act. That, however, in this case, no proceedings u/s 153C of the Act was carried out. The ld. CIT(A), in this respect, held that it was true that there was provision for issue of notice u/s 153C of the Act in case of any incriminating document is found in a search action relating to third party. He, however, held that there was no embargo upon the issuance of notice u/s 153A to the third party, if subsequently, a search is duly conducted u/s 132 upon the third party. He held that there was nothing in the Act to show that if the notice u/s 153C is not issued then a notice u/s 153A cannot be issued. The ld. CIT(A) accordingly dismissed the legal grounds taken by the assessee and confirmed the addition to the extent of Rs.5,36,48,000/- and partly allowed the appeal of the assessee. 5. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us agitating against the confirmation of addition of Rs.5,36,48,000/- and whereas, the revenue has come in appeal agitating the action of the CIT(A) in deleting the rest of the addition made by the Assessing Officer. 5.2. Since the assessee in his appeal has taken the legal grounds hitting at the very jurisdiction/validity of the assessment framed by the Assessing Officer u/s 153A of the Act, therefore, we, firstly, proceed to adjudicate the appeal of the assessee for A.Y 2019-20 in IT(SS) No.58/Kol/2023. 6. IT(SS) No.58/Kol/2023 – The assessee in this appeal has taken the following grounds of appeal:

“1. For that the orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant. 2. For that the Ld. CIT (A) ought to have held that the assessment framed u/s 153A of the Act is bad-in-law and on facts. 3. For that the Ld. CIT (A) ought to have held that the authorized officer could not go beyond the seized papers u/s 132 in the case of an assessee for recording statement u/s 132(4) of the Act. 4. For that the Ld. CIT (A) erred in holding that the appellant was liable to explain the contents of the loose sheets shown to him though not seized u/s 132 from him and that income could be deduced with reference to those sheets. 5. For that the Ld. CIT (A) ought to have accepted the contention of the appellant that u/s 153A income of the appellant could not be determined on the basis of loose sheets which were not found in the course of search in the case of the appellant. 6. For that the authorized officer conducing the search in the case of the appellant exceeded his jurisdiction u/s 132 (4) by requiring the appellant to explain Xerox copies of sheets which were in possession of the revenue as a result of search u/s 132 in Kasera Group. 7. For that the appellant could have been examined and statement could be recorded u/s 132(4) only with reference to papers and documents and relevant evidences etc. seized from the premises of the appellant in the course of search u/s 132 of the Act. 8. For that for the purpose of determination of income u/s 153A relying upon the statement recorded by the authorized officer of the appellant in relation to seized papers u/s 132 in the case of Kasera Group was totally irrelevant and of no consequences. 9. For that the Ld. CIT (A) erred in not accepting the contention of the appellant that in the case of an assessment being framed u/s 153A of the Act, undisclosed income that could be determined should be with reference to the seized papers and documents u/s 132 of the Act from the appellant only. 10.For that in view of the fact that no incriminating paper or document was found or seized from the appellant no undisclosed income could have been determined u/s 153A of the Act. 11.For that the Ld. CIT (A) ought to have accepted the contention of the appellant that the provisions contained in section 153A are to determine undisclosed income with reference to the incriminating paper and document found in the course of search u/s 132 in the case of the appellant and the A.0. could not proceed to refer to seized material u/s132 in the case of any other assessee for use in the case of the appellant. 12.For that the Ld. CIT (A) erred in confirming the assessment framed by the A.O. who assumed jurisdiction u/s 153A which was entirely wrong and uncalled for as the A.O. had jurisdiction only to refer to the seized papers and document in the course of search in the case of the appellant and not beyond that as has been done by the A.O. in the case of the appellant. 13. For that in view of the fact that no incriminating paper and document was found and seized in the course of search u/s 132 in the case of the appellant, proceedings initiated u/s 153A of the Act ought to have been dropped. 14.For that the Ld. CIT (A) erred in not holding that the proceeding u/s153A to consider seized papers of a third party is without any jurisdiction and completion of relevant procedures thereof the consequent assessment so framed is bad-in-law, liable to be annulled and/or quashed. 15.For that the Ld. CIT (A) ought to have held that statement recorded u/s132(4) can only be linked to respective search proceedings conducted u/s 132 wherein from the same emanates and not with regard to search& seizure having been conducted u/s 132 of the Act. 16.For that the Ld. CIT (A) ought to have held that in the absence of any incriminating evidence having been found out and seized by search party in course of search u/s 132 at the appellant's premises, no valid proceeding could have been initiated to assess any undisclosed income u/s 153A of the Act. 17.For that the Ld. CIT (A) erred in not holding that the search party exceeded its jurisdiction bestowed upon it u/s 132 to investigate the documents etc. alleged to have been found out and seized from a third party premises and to record the statement of the appellant u/s 132(4) in this regard. 18.For that the Ld. CIT A) erred in not holding that the search party could not have required the appellant to make a statement u/s 132(4) in respect of books of accounts and documents which have not been found to be in his possession or control and the authorized officer having done so vitiates the entire provision of law which renders the assessment bad- in-law, liable to be annulled and quashed. 19.For that the Ld. CIT (A) erred in not holding that the Ld. A.0. could not have asked the appellant to explain the seized documents etc. found from a third party premises which were never written or noted by the appellant which prior to the date of search at the appellant's premises.

20.For that the Ld. CIT (A) erred in not holding that the scribbling’s and marks in code etc. having been written on the paper by a third party and produced to the appellant by the DDI whose premises has been searched earlier could not have been deciphered by the appellant and the search party having done so in the statement recorded u/s 132(4) has vitiated the entire search proceeding and consequent assessments thereto which results in assessment to be annulled. 21.For that the Ld. A.O. having miserably failed to make inquiry before making assessment in spite of having issued notice u/s 142(1) of the Act the Ld. CIT (A) ought to have cancelled the assessment. 22.For that the Ld. CIT (A) erred in not holding that the statement of the appellant recorded u/s 132(4) pertaining to papers which were earlier seized u/s 132 from some other party could not have been relied upon and considered against the appellant. 23.For that the Ld. CIT (A) ought to have held that the search party exceeded its jurisdiction bestowed upon it u/s 132(4) in questioning the appellant In respect of some papers upon which the appellant had no Control or not in possession in the course of search in his own case. 24.For that the Ld. CIT (A) ought to have held that the alleged documents of the Brokers having not been seized w/s 132 of the Act from the premises of the appellant but shown to the appellant in course of recording statement u/s 132(4) no reliance could have been placed to the questions and replies pertaining to those papers w/s 132(4) of the Act. 25.For that the Ld. CIT (A) ought to have accepted the contention of the appellant that there being no seizure of any incriminating paper/document u/s 132 of the Act from the appellant, no undisclosed income could be computed. 26.For that the Ld. CIT (A) failed to consider and interpret the provisions of Sec. 153A of the Act and wrongly determined undisclosed income of the appellant who was subjected to search u/s 132 of the Act atRs.5,36,48,000/- which was worked out by the Ld. CIT (A) with reference to some loose sheets which were seized u/s 132 of the Act in the case of Kasera Group and Ors. 27.For that the Ld. CIT (A) erred in working out income of the appellant atRs.5,36,48,000/- by examining the seized papers w/s 132 of the Actfrom Kasera Group on 30.11.2018.

28.For that without prejudice to the legality of the assessment framed, the Ld. CIT (A) erred in determining the undisclosed income at Rs.5,36,48,000/- on the alleged grounds. 29.For that without prejudice to the above the appellant contends that the amount of Rs.1.44.48,000/- on the ground of interest element was totally unjustified as it is part of the credits which have been found out by the Ld. CIT (A) with reference to the remand reports. 30.For that the Ld. Addl. Commissioner of Income Tax erred in granting approval u/s 153D without properly appreciating the facts of the case and in a mechanical manner. 31.For that the Ld. Addl. CIT erred in not granting protection to the appellant against arbitrary and creating baseless tax liability on the appellant which renders the assessment bad-in-law, liable to be quashed. 32.For that the Ld. Addl. CIT erred in granting approval without properly appreciating the alleged incriminating material, seized documents, inquiries made by the Inv. Wing and by the A.O., if any, during assessment proceeding which renders the assessment bad-in-law liable to be quashed. 33.For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.”

Search and seizure. 132. (1) Where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal

Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that—

(a) any person to whom a summons under sub-section (1) of section-37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section-131 of this Act, or a notice under sub-section (4) of section-22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section-142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property),

then,—

(A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or

(B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer,

(the officer so authorised in all cases being hereinafter referred to as the authorised officer) to—

(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;

(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;

(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;

(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section-2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;

(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:

Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;

(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;

(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing :

Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, but such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section-120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue :

Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):

Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:

Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.

[Explanation.—For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.]

(1A) Where any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by

the Principal Director General or Director General or Principal Director or Director or any other Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub- section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, notwithstanding anything contained in section-120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.

[Explanation.—For the removal of doubts, it is hereby declared that the reason to suspect, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.]

(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition.

(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section.

Explanation.—For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).

(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any

statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed—

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true ; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

………xxx……..

………xxxxx…..

Explanation 2.—In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.

8.1. The provisions of clause (a) & (b) of section 132(1) are not applicable in the case in hand as these are related to failure of an assessee to respond to summons or to produce books of account etc.. A perusal of above reproduced provisions of section 132(1) (c), which are applicable in this case, would show that the competent authority must have information in its possession on the basis of which he has reason to believe that such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed then the competent/authorised authority may enter and search such premises where he has reason to suspect that such books of account, other documents, money, bullion, jewellery, or other valuable article or thing is kept. In exercise of his powers, he may break open any box, locker Almirah etc., search any person about whom he suspects of secreting his person, books of account, other documents, money, bullion, jewellery or other valuable article or thing; may require any person to produce who is in possession of books of accounts etc. in electronic record; seize such books of account, other document, money, bullion, jewellery or other valuable article. He will put identification marks on the seized books of account, other document and also make inventory of the money, bullion, jewellery or other valuable article so seized. Such power of seizure cannot be exercised in case of stock in trade. 8.2. It may be pointed be pointed out here that section 132 of the Act is a comprehensive provision. The exercise of power under the search and seizure provision, having serious consequences on the searched person, requires caution and strict compliance. It provides for the circumstances under which the warrant of authorization has to be issued. The section also contains the procedure for search action and

seizure. Though it may not be connected or relevant for the issue under consideration, we deem it fit to point out that there seems to be an anomaly created with regard to the provisions of section 132(1)(c) when these provisions are compared or read with the other subsequent clauses/provisions of the section. Section 132(1)(c) prescribes the conditions in which the warrant for authorization for search can be issued which are that the competent authority must have information in its possession on the basis of which he has reason to believe that such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed. There is no mention of “books of accounts” and “other documents” in section 132(1)(c) which would mean that the warrant of authorization can be issued for search or seizure of money, bullion, jewellery or other valuable article which may constitute undisclosed income of the searched person but not for search or inspection or/and seizure of books of accounts or other documents. However, the subsequent provisions/part of section 132(1) repeatedly states of the power to the competent/authorized authority to search for and seize ‘such books of accounts or/and other documents’. The word “such” prefixed before the term “ books of account” would mean as referred to in earlier part of the provision whereas, there is no such reference found about books of accounts or other documents in the earlier part of the provision. However, at this stage, since the above anomaly is not relevant for the adjudication of the issue before us, therefore leaving the above anomaly aside, to be decided in any appropriate case, we proceed to discuss the remaining relevant part of the provisions of section 132 of the Act. 8.3. Now coming to the provisions of section 132(4), the authorised officer may, during the course of the search or seizure, examine on oath

any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any such statement recorded of him may be used in evidence in any proceeding under the Act. Explanation to the said subsection says that the examination may not merely be in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. Further Explanation 2 to the section states that the word "proceeding" means any proceeding in respect of any year, under the Act, which may be pending on the date of authorisation of search or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. 8.4. As per the provisions of section 132(4), for subjecting a person to examination, such person must be found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. The money, bullion, jewellery or other valuable article or thing as referred to in subsection (4), ( hereinafter referred to as “assets”), are those which have been mentioned in clause (c) of subsection (1) to section 132, which means that the said assets must represent undisclosed income of the assessee. Though, as discussed above, section 132(1)(c) does not speak of “ books of account” or “other documents”, however, looking into the manner in which these words mentioned in the subsequent parts of the section and being used in conjunction with words money, bullion, jewellery or other valuable article or thing , hence, giving the reasonable interpretation in the same line as given in respect of assets found during the search action, what is deciphered is that the statement of such person can be

recorded who is found to be in possession or control of such books of account or other documents which represent the undisclosed income. Though, the Explanation to section 132(4) provides that the examination of any person under subsection(4) may not merely be restricted to books of accounts, other documents or assets found during the search action and it may be in respect of all other matters relevant for the purpose of investigation connected with any proceedings under the Act, however, for getting authority to subject a person to examination, such person must be found in possession or control of such books of account, other documents or assets as referred to in sub-section (4). Vide explanation-2, the definition and scope of word “proceedings” referred to in the section has been extended to even future proceedings that may commence. Such a wide and extended scope, in our view, may lead to vagueness as, in our view, an officer can not foresee any future proceedings that may arise for putting questions/examining a person during the course of an ongoing search action. In all reasonableness, in our view, the concerned person may be examined for the purpose of assessment proceedings that may commence pursuant/ related to such search action. However, the triggering point will remain the same i.e. such person must be found in possession or control of some incriminating material representing undisclosed income. 8.5. In the case of “ CIT v. Sri Ramdas Motor Transport Ltd.” Reported in (1999) 238 ITR 177 (AP), Hon’ble Andhra Pradesh High Court, while deliberating upon the provisions of Section 132(4) of the Act has held in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant part of the sais order is reproduced below:

“A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value.” 8.5.1. Hon’ble Delhi High Court in the case of “ CIT vs Harjeev Aggarwal” reported in 241 Taxman 199(Delhi) has held in para 21 of the judgement as follows: “ 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken.” 8.5.2. This position has been reiterated by Hon’ble Delhi High Court in the case of “Pr. CIT Vs. Best Infrastructure(India) Pvt. Ltd.”, 397 ITR 182 (Delhi.), by observing in para 38 of the said order that

statements recorded under Section 132(4) of the Act of the Act do not by themselves sconstitute incriminating material as has been explained by this Court in Harjeev Aggarwal (Supra). 8.6. In the case in hand, the assessee was not found in possession or control of any books of account or other document or any assets as mentioned under the provisions of section 132(4) of the Act. Even no incriminating material was found during the search action at the residential premises of the assessee. Even the statement of the assessee has not been recorded during the search action carried out in his case in individual capacity at his residential premises. As per the record, the statement of his wife, namely Chitra Badalia, who was also covered in the search action, was recorded, but nothing adverse was found recorded in her statement. The statement of assessee Ravi Badalia was recorded u/s 132(4) during the search action at the business premises of Badalia Gems Pvt. Ltd., however, even there, he was not found in possession or control of any books of account, other documents or assets relevant to the assessment of his income. Even no incriminating material either in the shape of books of accounts/ other documents or in the form of assets representing his any undisclosed income was found during the course of search. Such a statement of his, having recorded in contravention of the statutory provisions and without the mandate of the law, would not have any evidentiary value and cannot be made basis for the impugned additions. Even the admission, if any, made during such an statement, which is recorded against the mandate of the statute, cannot be relied upon. The impugned additions are liable to be set aside on this score.

B. Whether the loose sheet recovered in an unconnected earlier search action from the premises of third party can be brought in and used to confront the assessee during the course of search action: the validity of assessment thereof:- 9. The Ld. Counsel for the assessee has submitted that the search party has exceeded its jurisdiction to bring in the copies of the documents which were found and seized from the premises of Kasera Group. It has been contended that they were not empowered and authorized under the Act to bring in any sort of documents, evidences etc. in the premises being searched u/s 132 of the Act. The Ld. Counsel in this respect has relied upon the Central Board of Direct Taxes (CBDT) instructions/ Tax Payers’ Charter, depicting the “Rights of the person to be searched” , copy of which was also served upon the assessee at the time of search as so mandatorily required by the CBDT. Rights of the person searched 1. To see the warrant of authorization duly signed and sealed by the issuing authority. 2. To verify the identity of each member of the search party. 3. To have at least two respectable and independent residents of the locality as witnesses. 4. To make personal search of all members of the search party before the start of the search and on conclusion of the search. 5. To insist on personal search of ladies being taken only by a lady, with strict regard to decency. 6. To have a copy of the panchanama together with all the annexures. 7. To put his own seals on the poackages containing the seized assets. 8. Woman having the occupancy of any apartment etc. to be searched has a right to withdraw before the search party enters, if, according to custom, she does not appear in public. 9. To call a medical practitioner in case of emergency. 10. To allow the children to go to school, after checking their bags.

11. To inspect the seals placed on various receptacles, sealed in course of search and subsequently at the time of reopening of the seals. 12. To have the facility of having meals, etc., at the normal time. 13. To have a copy of any statement that is used against him by the Department. 14. To have inspection of the seized books of account, etc., or to take extracts therefrom in the presence of any of the authorized officers or any other person empowered by him. 15. To make an application objecting to the approval given by the Commissioner of Income-tax for retention of books and documents beyond 180 days from the date of the seizure.

9.1 The Ld. Counsel, relying upon the above reproduced instructions, instruction no.4 in particular, copy of which has been placed on file, has submitted that these instructions clearly restrict the search party to proceed only on the basis of documents, evidences, assets etc. found at the premises and not to be outsourced from outside or external sources which has been done in this case. He has submitted that even nothing of sort was found out from searched premises which could have established link of the assessee or the company with the Kasera Group. That there is no provision under the Law which enables the search party to bring the documents, evidences etc. having been found and seized from a third party on a date much prior to the date on which the search is being conducted. The Ld. Counsel, therefore, has submitted that in that view of the matter, the search party has exceeded their jurisdiction in bringing the outside material alongwith them. He in this respect has also relied upon the search warrant of authorization issued u/s 132 r.w.r.112(1) of the Income Tax Rules- in Form 45, to submit that Form 45 specifically mentions in column (a) to (h) the duties of the authorized officer, which lacks to bring in the papers, documents, evidences etc. from external or outside sources to confront the searched party. For the sake of ready reference, the extract of Form No.45 r.w.r.

112 being Warrant of Authorisation u/s 132 r.w.r. 112(1) is reproduced hereunder: -

FORMNO.45 [See rule112] Warrant of authorization under section 132 of the Income-tax Act, 1961, and rule 112(1) of the Income tax Rules, 1962 To The Deputy Director, The Deputy Commissioner, The Assistant Director, The Assistant Commissioner, The Income-tax Officer,

Whereas information has been laid before me and on the consideration thereof I have reason to believe that- a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Incometax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, was issued by the Deputy Commissioner/the Assistant Commissioner/the Income-tax Officer, to________________________________[name of the person] on [date] to produce, or cause to be produced, books of account or other documents specified in the relevant summons or notice and he has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice; a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, has been issued by the Deputy Commissioner/the Assistant Commissioner/the Income-tax Officer ,____________________ to _______________________________________[name of the person] on ________________[date] to produce, or cause to be produced, books of account or other documents specified in the relevant summons or notice and he will not produce or cause to be produced, such books of account or other documents as required by such summons or notice ; if a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub- section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to _______________________________________ . [name of the person] to produce, or cause to be produced, books of account or other documents which will be useful for, or relevant to, proceedings under the Indian Income-tax Act, 1922, or under the Income-tax Act, 1961, he would not produce, or cause to be produced, such books of account or other documents as required by such summons or notice ; Sarvashri/Shri/Shrimati ___________________________________are/is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961 ; And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found in (specify particulars of the building/place/ vessel/vehicle/aircraft) which is within the area of my jurisdiction ; And whereas I have reason to believe that any delay in getting an authorisation under sub-section (1) of section 132 from the Chief Commissioner or Commissioner having jurisdiction over Sarvashri/Shri/Shrimati________________________________________ may be prejudicial to the interests of the revenue ; This is to authorise and require________________________________________________________you [name of the Deputy Director or of the Deputy Commissioner or of the Assistant Director or of the Assistant Commissioner or the Income-tax Officer] __ (a) to enter and search the said building/place/vessel/vehicle/aircraft ; (b) to search any person who has got out of, or is about to get into, or is in, the building/place/vessel/vehicle/aircraft if you have reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing ; (c) to place identification marks on such books of account and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks; (d) to examine such books of account and documents and make, or cause to be made, copies or extracts from such books of account and documents ; (e) to seize any such books of account, documents, money, bullion, jewellery or other valuable article or thing found as a result of such search and take possession thereof ; (f) to make a note or an inventory of any such money, bullion, jewellery, or other valuable article or thing ; (g) to convey such books of account, documents, money, bullion, jewellery, or other valuable article or thing to the office of the Deputy Commissioner of Income-tax or any other authority not below the rank of the Income-tax Officer employed in the execution of the Income-tax Act, 1961 ; and (h) to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961 and the rules relating thereto. You may requisition the services of any police officer or any officer of the Central Government, or of both, to assist you for all or any of the purposes specified in sub-section (1) of section 132 of the Income-tax Act, 1961.

Director-GeneralorDirector (SEAL)ChiefCommissionerorCommissionerofIncome- taxDeputyDirectorDeputyCom missionerofIncome-tax 9.2 We find force in the above submissions of the Ld. Counsel for the assessee. The search party has not been empowered either under the

Act or under the Rules to bring any document, article, or any other thing along with them to the premises to be searched under the warrant of authorization. Rather a right has been given to the person whose premises has to be searched to have personal search of all the members of the search party before the start of the search and even after the conclusion of the search. Even in the Performa warrant of authorisation in Form 45, no such powers have been given to the search party to bring the outside material to the searched premises. In our view, the search party was not justified, rather, has acted in defilement of their jurisdiction to bring the seized material in the case of Kasera Group lying in their office record, to the premises of M/s Badalia Gems Pvt. Ltd in separate and subsequent search action carried out u/s 132 of the Act and confront the assessee on the said material especially when no incriminating material was found in relating to the search action in the case of the assessee carried out his residential premises and even no incriminating material was found during the search action carried out in the case of M/s Badalia Gems Pvt. Ltd. at their business premises. Under the circumstances, the search conducted by the search party is vitiated and no reliance can be placed on the search and seizure reported or even statement recorded of any person during such a vitiated search action, as it fails the mandate of law. C. Whether the Assessing Officer was justified to rely upon the material seized during the search in case of third party without adhering to the provisions of section 153C of the Act: 10. We note that the loose sheets were found during course of a past search action in the case of third party namely Kasera Group. It was not in dispute that there were no documents that were seized from the premises of the assessee. The statutory course prescribed under such

a scenario was to proceed on the assessee under the provisions of section 153C of the Act by recording satisfaction to that effect by the Assessing Officer of the searched person and then by way of transfer of those materials to the Assessing Officer having jurisdiction over the assessee. This is the mandate provided in section 153C and was the only legal recourse available to the department to proceed on the assessee herein. The provisions of section 153C, for the sake of ready reference, are reproduced as under: “Assessment of income of any other person. 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A:

Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :

Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect

of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.

(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.”

10.1. A perusal of the above provisions would reveal that section 153C starts with a non-obstante clause which covers the provisions of section 139, 147, 148, 149, 151 and 153 of the Income Tax Act. The purpose of the said non-obstante clause is that in case of a conflict between the provisions of section 153C and the other sections as mentioned above, the special provisions of section 153C will prevail over the other general provisions of the Act. Even otherwise, it is settled law that when a special law/provision is enacted, that will prevail over the general provisions of the law/statute. As per the special provisions u/s 153C of the Act, in case of any incriminating material is found during the course of a search action which is relating

to a person other than the searched person, then the procedure as laid down u/s 153C of the Act is to be followed for making assessment/reassessment of such other person. In that case, if the Assessing Officer of the searched person is satisfied that the assets/material found during the search action relates to other person, then the Assessing officer of the searched person is supposed to handover/send that material to the Assessing Officer having jurisdiction over such other person and further that the jurisdictional Assessing Officer of the said other person will have to record a satisfaction that such material has a bearing on the determination of income of such other person and the six assessment years preceding the date of receipt of such material/books of account gets reopened and the Assessing Officer of such other person is required to make assessment in accordance with the provisions of section 153C of the Act. It is not open to the Assessing Officer of such other person to use that material in a subsequent assessment carried out u/s 153A of the Act in case of such other person unless the proceedings u/s 153C are pending against such other person on the date of search. Reliance in this respect can be placed on the decisions of the co-ordinate Delhi Bench of the Tribunal in the case of “DCIT vs Shivali Mahajan ITA No.5585/Del/2015 dated 19.03.2019; Trilok Chand Choudhry vs ACIT (ITA NO.5870/Del/2017) dated 20.08.2019; and of the Hon’ble Delhi High Court in the case of PCIT (Central) vs. Anand Kumar Jain ITA 23/2021 vide order dated 12.02.2021.

10.2 The another crucial point herein is that u/s 153B of the Act, the limitation for completing such assessment/reassessment u/s 153C of the Act has been prescribed. The relevant part of section 153B is reproduced as under:

“153B. Time limit for completion of assessment under section 153A.— (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment, — (a) in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty- one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed: Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: [Provided further that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2018,— (i) the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words “twenty-one months”, the words “eighteen months” had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of eighteen months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided also that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on or after the 1st day of April, 2019,—

(i) the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twelve months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:”

10.3 A perusal of the above referred to provisions of section 153B would reveal that in case incriminating material is found relating to a person other than the searched person, the limitation period for making the assessment of such other person has been prescribed.

Now, the moot question before us is that in a case where some alleged incriminating material was found in a search action relating to the other person (assessee herein), however, the concerned Assessing Officer/Income Tax Authorities did not proceed under the provisions of section 153C of the Act, which is a special provision relating to the assessment of income in search cases and the limitation as prescribed under the provisions of section 153B of the Act expires and the Assessing Officer is precluded from proceeding against such other person (assessee herein) on account of bar of limitation, whether in a subsequent search action carried out u/s 153A of the Act in the case of such other person, that material of earlier search action as referred to above, can be relied upon, especially when no incriminating material/assets are found in the said search action carried out u/s 153A of the Act in the case of that other person? The answer, in our view, will be ‘No’. Holding contrary to the above observation, in our

view, will give the Assessing Officer unbridled rights to consider and make assessment relying upon such material for a long period i.e. 6 to 10 years. Such an interpretation will be against the spirit of the provisions of the Act and will make the provisions of section 153C r.w.s. 153B as otiose. In our view, the special provisions of sections 153A, 153C and 153D of the Act prevail over the general provisions and if the Assessing Officer/Income Tax Authorities have failed to proceed upon an assessee under such provisions in respect of search cases and the limitation to proceed in such cases against an assessee has expired, then the search material, in our view, cannot be used in any other assessment proceedings as holding to the contrary will make the provisions of section 153C r.w.s. 153B as otiose and redundant.

10.4 In the case in hand, it is the case of revenue, itself, that the loose sheets, in question, relied upon by the revenue, were brought by the search party along with them recovered in a search action carried out u/s 132 of the Act in the case of Kasera Group. No incriminating material whatsoever was found during the course of search action in the case of the assessee. The alleged incriminating material found in the case of a past search action in the case of third party i.e. Kasera Group was not acted upon and no proceedings u/s 153C of the Act were initiated or even contemplated and then, in our view, the Assessing Officer cannot make basis of such dead material in the subsequent assessment proceedings carried out in the case of the assessee u/s 153A of the Act to make the impugned additions, when the limitation to proceed u/s 153C on the basis of said looses sheets/incriminating material has already expired in terms of the provisions of section 153B of the Act. Moreover, no incriminating material was found during the search action in the case of the

assessee. The assessee was not found in possession or control of any incriminating material or books of accounts. Under the circumstances, as per the provisions of section 132 of the Act read with provisions of section 153B of the Act, firstly the search party exceeded its jurisdiction in recording of statement of the assessee u/s 132(4) of the Income Tax Act, secondly by bringing the documents from its record and thereby confronting the assessee in respect of the said document during the recording of the statement would not infuse life in such dead documents. The assessee succeeds on this legal ground.

D) Abated vs Non-abated Assessment:- 10. The next question before us is as to whether the proposition that no addition can be made in case no incriminating material is found during the course of search action in case of unabated (not pending) assessments for the relevant assessment year would be applicable in this case?

The Hon’ble Supreme Court in the case of “Principal Commissioner of Income-tax, Central vs. Abhisar Buildwell (P.) Ltd.” Reported in [2023] 149 taxmann.com 399 (SC) has deliberated upon the provisions of section 153A of the Act and has held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. There is no word mentioned as “ completed assessment” under the relevant provisions. What has been mentioned is that pending assessments on the date of search shall abate. The 2nd Proviso to section 153A of the Act reads as under:

“Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub- section, pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

Therefore, it is duly evident from above that only those assessments or reassessments shall abate which are pending on the date of initiation of search u/s 132. The term ‘pending’ means something/some action which has commenced but not concluded.

10.5 The another view on this issue is that the pending assessment would mean those assessments for which time period for issue of notice u/s 143(2) has not lapsed. It is pertinent to note here that that the 2nd proviso to sections 153A talks of both “assessment” and “reassessment”. Hence, if the criterion of non-lapsing of the statutory time period for issuance of notice u/s 143(2) as on the date of search action is to be adopted to construe as to whether the assessment is pending, then adopting the same criterion for reassessment, if the time period for issue of notice u/s 148 of the Act for the purpose of reassessment has not lapsed, the reassessment would be deemed to be pending on the date of search. Such a statutory time period for issuance of notice u/s 148 of the Act ranges from 6 to 10 years under the relevant provisions of the Act, for initiating re-assessment proceedings. In that event, if such an interpretation is given effect to, none of the six to ten assessment years on the date of search would ever be considered as unabated or completed. In our view, different interpretation of the term “pending” cannot be given in relation to “assessment” and “reassessment”. Since, the word ‘pending’ has been used in context to both ‘assessment’ and ‘reassessment’, therefore, it has to be read in the

same context for ‘assessment’ and ‘reassessment’. Under the circumstances, in our view, the word pending would mean those assessments or reassessments, which have been initiated but not concluded on the date of search. If no assessment or reassessment has been initiated by issuing the notice u/s 143(2) or u/s 148 of the Act, as the case may be, then the same cannot be said to be pending on the date of search.

10.6 The co-ordinate Delhi Bench of the Tribunal in the case of Deputy Commissioner of Income-tax, Central Circle-I, New Delhi vs. Aggarwal Entertainment (P.) Ltd. [2016] 72 taxmann.com 340 (Delhi - Trib.), in para 10 & 11 of the order has held as under:

“ …….It is assessee's claim that the addition of Rs. 50 lacs was not tenable as the regular return had been filed and the same had been accepted u/s 143 (1) of the Act and that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However the assessment in respect of a return processed u/s 143(1) is not pending because the AO is not required to do anything further about such a return. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. 11. It is seen on facts that as the return for the year had been processed u/s 143 (1) the assessment was not pending and as no material was found during the search, the addition has been rightly deleted by the Ld. CIT (A).” 10.7. The Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. reported in [2023] 149 taxmann.com 399 in para 11 of the said judgment has observed as under:

“Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.”

10.8. In the case in hand, neither any assessment proceedings u/s 153C of the Act were initiated nor pending on the date of search. Even no other assessment proceedings were initiated, hence not pending on the date of search. Since, no assessment was pending on the date of search, therefore, no assessment stood abated on the date of the said search. Since, no assessment stood abated, hence the assessment year under consideration would fall within the scope of unabated assessment year. Therefore, as per law laid down by the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (supra) the Assessing officer was not justified to make the

impugned additions in the absence of any incriminating material found during the course of the search action.

Kolkata, the 15th December, 2023. Sd/- Sd/- [�गर�श अ�वाल /Girish Agrawal] [संजय गग�/Sanjay Garg] लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member Dated: 15.12.2023. RS

Copy of the order forwarded to: 1. Ravi Badalia 2. DCIT/ACIT, Central Circle-4(1), Kolkata 3.CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches