HEMENDRA RAMJI VIRA ,MUMBAI vs. DCIT CC-4(1), MUMBAI

The assessee has raised multiple grounds in the memorandum of appeal. However, the core issue arising for consideration, going to the root of the assessment proceedings for this assessment year, is regarding the validity of reopening of assessment u/s 147 of the Act on the basis of a notice issued u/s 148 of the Act on 29/03/2018 after taking approval from the PCIT, 27 Mumbai, when the ld.AO had already ceased to have jurisdiction over the case; in view of an assessment jurisdiction transfer order passed u/s 127(2) of the Act on 17/01/2018 w.e.f. the date of the said order only i.e. 17/01/2018. The assessee has and others Hemendra Ramji Vira contended that thus, the consequent assessment order passed based on the said notice u/s 148 of the Act issued on 29/03/2018 by the ld.AO who was lacking competent jurisdiction for reopening the assessment for this assessment year is unsustainable, bad in law and void ab initio and which must be quashed at the threshold cancelling the entire income- tax demand so raised.

As per admission by the assessee that he did not object to the notice issued u/s 148 of the Act by the ACIT Circle 27(1) Mumbai on 29/03/2018, who was under the territorial jurisdictional PCIT 27 Mumbai then, though the assessment jurisdiction on the assessee had already been transferred by the PCIT 27 Mumbai from the ACIT Circle 27(1) Mumbai, subordinate to him, to the DCIT Central Circle 4(1), Central Range 4 in the charge of the PCIT Central 2 Mumbai vide an assessment jurisdiction transfer order passed u/s 127(2) of the Act on 17/01/2018 with effect from the said very date placed at paper book page no. 8 vol. 1. In regard thereto, the assessee categorically submitted that he was never served with a copy of the assessment jurisdiction transfer order passed on 17/01/2018 u/s 127(2) of the Act in his case by the PCIT-27, Mumbai after the income-tax search u/s 132(1) in his premises on 07/10/2017. Thus, being unaware of the said fact, the notice u/s 148 of the Act issued by the ACIT, Circle- 27(1), Mumbai on 29/03/2018 (post the date of the transfer order u/s 127(2) on 17/01/2018) was complied with by the assessee by filing the return of income on 04/04/2018 through and others Hemendra Ramji Vira the online portal of the income-tax department as is mentioned in para 2 of the assessment order in this appeal. Thereafter, the first notice u/s 143(2) of the Act for completing the reassessment for this assessment year was issued by the AO, Circle 4(1), Mumbai on 20/08/2018 and the first notice u/s 142(1) was also issued by the DCIT Central Circle 4(1) Mumbai as is mentioned in para 2 of the relevant assessment order. The said notice was also responded by the assessee on 06/09/2018 to the DCIT Central Circle 4(1) Mumbai.

Mr Vinod Bindal, the ld. Counsel of the assessee, submitted that though these facts are very much mentioned in the assessment order but herein the ld. AO deliberately avoided to mention at all the vital facts that the assessment jurisdiction over the case of the assessee was transferred to the ld. AO, Central Circle-4(1), Mumbai vide an assessment jurisdiction transfer order u/s 127(2) dated 17/01/2018 by the PCIT 27 Mumbai from the ACIT Circle 27(1) Mumbai and the notice u/s 148 on 29/03/20218 initiating these proceedings was issued by the ACIT Circle 27(1) Mumbai after the said transfer order became effective, since the ld. AO was well aware that the said notice issued on 29/01/2018 was void ab initio but the assessee was not at all aware of the said fact. The ld. DCIT Central Circle 4(1) Mumbai never issued any notice u/s 148 of the Act for the above assessment year. Thus, the reassessment proceedings are the result of the only notice u/s 148 dated 29/03/2018 and others Hemendra Ramji Vira 7. The ld. counsel also submitted that the assessee was under a bonafide belief, in absence of service of the said order u/s 127(2) on him that the assessment jurisdiction over the assessee must have been transferred after issuing the notice u/s 148 as the assessee could not have any reason at all to presume that the said notice was illegally issued without jurisdiction of the case with the said AO Circle 27(1) Mumbai. The assessee was further informed by his then counsel that after an income-tax search on assessees, all their cases are transferred to the Central Circles for assessments of incomes and therefore, the requisite compliances were made before the AO Central Circle under the bonafide belief that the revenue officer must have acted as per law, at least on the jurisdictional issues of issuing notice u/s 148 of the Act, having the authority of assessment of income of the assessee.

The ld. Counsel stated that the above Explanation clearly shows that after transfer of the assessment jurisdiction u/s 127 of the Act from one AO to the another AO, all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction and others Hemendra Ramji Vira in respect of any year stands transferred to the new AO from the earlier AO. Thus, the Explanation has set at rest all such apprehensions in an unambiguously and clearly worded law. THUS, AS PER THE LAW AS ABOVE, THE ERSTWHILE AO (ACIT CIRCLE 27(1)) COULD IN NO MANNER AT ALL TAKE ANY PROCEEDINGS IN THE CASE OF THE ASSESSEE FOR ANY ASSESSMENT YEAR POST 17/01/2018 WHEN THE ASSESSMENT JURISDICTION OVER THE ASSESSEE WAS TRANSFERRED FROM THE ACIT CIRCLE 27(1) MUMBAI BY THE JURISDICTIONAL PCIT 27 MUMBAI TO THE DCIT CENTRAL CIRCLE 4(1) MUMBAI.

Thus, as per the ld. Counsel there could be no controversy at all to appreciate the jurisdiction of a particular ld.AO who could issue the said notice on 29/03/2018 and which was only and only the DCIT Central Circle 4(1) Mumbai and in no manner the ACIT Circle 27(1) Mumbai.

Thus, it is well settled by now by the Hon‘ble Apex Court that any order passed without jurisdiction is invalid. (ii) Bhagyaarna Gems & Jewellery (P.) Ltd[2025] 171 taxmann.com 689 (Raipur -Trib.) [DoD: 31-01-2025]and same is the legal ratio in Mir Zardari Qureshi [2023] 151 taxmann.com 408 (Raipur - Trib.)where the order of the Hon‘ble Apex Court in Kalinga (supra) was also considered and held as below: and others Hemendra Ramji Vira 38. On a careful perusal of Section 124 of the Act, it transpires that the same deals with the issue of "territorial jurisdiction" of an Assessing Officer. Ostensibly, sub-section (1) of Section 124 contemplates vesting with the A.O jurisdiction over a specified area by virtue of any direction or order issued under sub-section (1) and sub-section (2) of Section 120 of the Act. On the other hand, sub-section (2) of Section 124 contemplates the manner in which any controversy as regards the territorial jurisdiction of an A.O is to be resolved. Apropos, sub-section (3) of Section 124 of the Act, the same places an embargo upon an assessee to call in question the jurisdiction of the A.O where he had initially not raised such objection within a period of one month from the date on which he was served with a notice under sub-section (1) of Section 142 or sub-section (2) of Section 143 or Section 148 or sub-section (1) of Section 153A or sub-section (2) of Section 153C. In sum and substance, the obligation cast upon an assessee to call in question the jurisdiction of the A.O as per the mandate of subsection (3) of Section 124 is confined to a case where the assessee objects to the assumption of jurisdiction by the A.O, and not otherwise.

We, thus, in terms of our aforesaid observations are of a firm conviction that as the assessee company had not called in question the jurisdiction assumed by the A.O, based on, viz. (i) territorial area; (ii) persons or classes of persons; (iii) income or classes of income; or (iv) cases or classes of cases, but had rather assailed the validity of the assessment order passed by the ITO-4(1), Raipur in absence of an order of transfer that was statutorily required to have been passed by the CIT-2, Kolkata u/s. 127 of the Act, therefore, it would not be circumscribed by the restriction contemplated under sub-section (3) of Section 124 of the Act. Accordingly, we are of a firm conviction that the judgment of the Hon'ble Supreme Court in the case of Kalinga Institute of Industrial Technology (supra) is distinguishable qua the issue involved in the present case of the assessee company before us. (iii) Bansilal B. Raisoni& Sons vs ACIT [2019] 101 taxmann.com 20 (Bom) “Section 124, read with section 153A, of the Income-tax Act, 1961 - Assessing Officer - Jurisdiction of (Objection to) - Whether time limit for raising objection to jurisdiction of Assessing Officer prescribed under sub-section (3) of section 124 has a relation to Assessing Officer's territorial jurisdiction - Held, yes - Whether, therefore, where assessee contended that since no search was carried out at its premises, notice issued by Assessing Officer under section 153A was without authority of law, in such a case, time limit prescribed under sub-section (3) of section 124 for raising said objection would not apply - Held, yes” and others Hemendra Ramji Vira (iv) Capstone Securities Analysis (P) Ltd vs DCIT (2017) 167 ITD 1 (Pune-Trib) Once transfer of case of assessee was ordered under section 127, Assessing Officer who was vested with jurisdiction by virtue of direction or order issued under sub-section (1) or (2) of section 120 and section 124, stood divested of same and, in such a case, notice issued under section 143(2) by said Assessing Officer after date of transfer, was to be regarded as invalid notice and, consequently, assessment framed under section 143(3) pursuant to notice so issued would be void ab initio.

In response to the same, the Ld. CIT DR primarily relied on the orders of the authorities below without controverting the submissions of the assessee but strongly pleaded that the ld.CIT(A) has given a finding in para 7.9 of his appellate order challenged in this appealthat when the PCIT 27 Mumbai himself approved the issuance of notice u/s 148 of the Act on 29/03/2018, he had consciously bestowed the jurisdiction on the ACIT Circle 27(1) Mumbai for the purpose of issuance of the notice u/s 148 of the Act on 29/03/2018 and therefore, the said notice was issued validly and as per law by the ACIT Circle 27(1) Mumbai having jurisdiction over the assessee as on the said date and the consequent assessment order passed is a legally valid assessment order.

We have heard both the parties and perused the records as well as the judicial pronouncements relied by both the parties. The case of the assessee before is that the assessment jurisdiction over the assessee had specifically been vested with the DCIT CC 4(1), Mumbai w.e.f. 17/01/2018 based on an assessment jurisdiction transfer order passed by the PCIT 27 Mumbai by transferring the same from the ACIT Circle 27(1) Mumbai after the income-tax search having been conducted on the assessee on 07/10/2017, any other assessing authority having jurisdiction whether territory based, activities based or structured based as specified u/s 120(3) including the erstwhile ld.AO ACIT Circle 27(1) Mumbai was completely barred to undertake any proceedings on the assessee as has been explicitly mentioned in the Explanation u/s 127 of the Act. In the Central Circle charges, the cases are transferred irrespective of any other base as above but only when there has been an income-tax search and in that case the jurisdiction criteria are altogether different as has been specified by the Board u/s 120(3) of the Act. We hold that after the transfer of the case u/s 127(2) to the DCIT Central Circle 4(1) Mumbai, the PCIT-27Mumbai on 17/01/2018 also had no legal powers to grant any sanction u/s 151 or to transfer/ deemed transfer the case at all back to his charge. In fact, after transferring the case on 17/01/2018, the PCIT 27 Mumbai also ceased to possess any jurisdiction over the assessee in any manner to pass any order or to give any sanction, which had in fact been with the PCIT Central 2 and others Hemendra Ramji Vira Mumbai as on the said date. The PCIT 27 Mumbai could only have any such jurisdiction if and if only the PCIT Central 2 Mumbai under whom the DCIT Circle 4(1) Mumbai had passed an order u/s 127(2) of the Act transferring back the assessment jurisdiction over the assessee to the ACIT 27(1) Mumbai before 29/03/2018, but admittedly which was not done as no evidence for the same has been placed or pleaded by the ld.CIT DR. It is also a settled law that at the same time, there could be no two assessing officers over an assessee to pass income-tax assessment orders, much less for the same assessment year. Further, on perusal of the reasons recorded and proposal sent to the PCIT 27 Mumbai by the ACIT Circle 27(1) Mumbai, placed at PB page no. 41-42, it is clear that he did not mention therein at all the vital fact that the assessment jurisdiction over the assessee had already been transferred from his charge to the DCIT Central Circle 4(1) Mumbai by the PCIT 27 Mumbai vide an order dated 17/01/2018, rather in para 4 therein, the AO has mentioned that after receipt of the information received from the Investigation Wing, the return of income of the assessee for the AY 2011-12 has been analysed, particularly when he could not possess the said return of income with him as on the said date due to it having been transferred earlier by an order u/s 127(2) on 17/01/2018.

We also take note that the reasons recorded by ACIT, Circle 27(1), Mumbai and the proposal sent to PCIT–27, Mumbai do not disclose the material fact of jurisdictional transfer. It is apparent and others Hemendra Ramji Vira that the reasons were recorded mechanically, without access to the assessment records — which had already been transferred. Thus, the PCIT–27, while granting sanction under section 151, was misled into believing that the case still lay within his jurisdiction.

We reiterate that upon issuance of the transfer order under section 127(2), the PCIT–27 was denuded of all authority in respect of the assessee, including the power to accord sanction under section 151. The records, authority, and jurisdiction all stood vested in the PCIT–Central-2 and the DCIT, Central Circle 4(1), Mumbai.

Jurisdiction under the Income-tax Act is not a matter of administrative convenience or post-facto regularisation; it is a condition precedent, a sine qua non for the lawful exercise of power. When the jurisdiction shifts by operation of a statutory transfer under section 127, all proceedings past, pending, and prospective, shift with it, as made abundantly clear in the Explanation to that section. The officer who has lost jurisdiction becomes a persona non grata to that file; any action initiated by such an officer thereafter is bereft of legal sanctity. Consequently, as the very substratum of the reassessment, the notice under section 148, is void ab initio, the consequential reassessment order dated 30.12.2018 passed by DCIT, Central Circle 4(1), Mumbai must fall with it. A superstructure built upon a non-existent foundation is destined to collapse.

In view of our findings that the reassessment proceedings are fundamentally tainted by want of jurisdiction, we see no necessity to venture into the merits of the additions or other grounds raised

Brief facts are that during the course of the income-tax search on the assessee on 07/10/2017, as is submitted by the ld. Counsel of the assessee and are apparent on record that statements of the assessee Mr. Hemendra Ramji Vira were recorded u/s 132(4) of the Act on 09/10/2017. It is also an admitted fact, that no material or information qua the additions made in all the assessment orders in appeal were found during the course of said search as the ld.AO has also not mentioned any such material having being detected during the said search action on 07/10/2017 in the premises of the assessee as these assessment orders were passed u/s 153A of the Act based only and others Hemendra Ramji Vira on the income-tax search conducted on the assessee on 07/10/2017. Whatever material has been referred to in the assessment order, during the course of search on 07/10/2017, was available with the authorised officer at the relevant time having being procured from extraneous sources in the income- tax searches elsewhere at different times and in none of those search warrants, the name of the assessee was appearing as per panchnamas or information of those searches placed on record. Thus, those searches were independent income-tax searches. The ld.AO‘s main reliance is based on the statements ofthe assessee recorded u/s 132(4) at the time of search which were later on retracted by the assessee on 09/12/2017 by filing an affidavit with the Investigation Unit Mumbai as his statements recorded during the search on him were not based on any incriminating material found in his premises but were based on the statements of third parties recorded elsewhere. Admittedly, the affidavit filed by the assessee on 09/12/2017 was not at all cross examined by the revenue. Thus, the correctness of its contents cannot be doubted at this stage now and the same stands accepted in view of the judgment of the Apex Court in Mehta Parikh & Co. vs CIT (1956) 30 ITR 181 (SC) (LB).

The ld. Counsel also stated that in the entire assessment order, the AO has not mentioned statement of any person except some exit provider who was providing the exit accommodation of the LTCGs in the scrip and who also never named the assessee as a beneficiary but which the AO presumed without any documentary support displayed in the assessment order. In fact, in para 6.1.1 of the assessment order, the AO has mentioned and others Hemendra Ramji Vira that during the year under consideration, the assessee has claimed LTCG on sale of shares of Confidence Finance & Trading Ltd (for the AYs 2013-14 and 2014-15)and claimed the same exempt. Identical findings have been given by the ld.AO in the AY 2015-16 where the scrip was different as Greencrest Financial Services Ltd. Then in para 6.1.2 he has said, under the head ―Facts Relating to Share transactions‖ the huge LTCG exemption claimed of the assessee made u/s10(38) of the Act was found suspicious and thus, detailed investigation of this issue was undertaken. Various tools / data bases available were examined including ITD data, BSE data, money control website, court rulings, internet as well as investigation wing report and findings of the SEBI in ascertaining the correctness of the LTCG claim.

Then in para 6.1.3, the AO goes to rely on some information received from the Investigation Wing about the claim of the assessee to have booked LTCG in Confidence Finance & Trading Ltd. This clearly indicates that the alleged addition is not at all based on any information found during the course of search in the premises of the assessee, otherwise, it would have been worded differently as not ‗information received during the course of assessment proceedings‘ but as ‗during the course of search in the case of the assessee‘. Thus, undisputedly the same is based on some other material not found during the course of search in the premises of the assessee but in some survey later on somewhere else and is clearly beyond the scope of an assessment order passed u/s 153A of the for a completed assessment earlier.

The ld. Counsel also pointed out that on a plain reading of the assessment order, it is clear that the AO did not have any information except some half-baked report received from the Investigation Unit with no head and tail except a long-drawn story as copied in the assessment orders. None of the persons therein, has named the assessee, as nothing such is mentioned. No addition can be made on the basis of any such information in an assessment order passed u/s 153A of the Act.

The assessee also submitted complete details of the said share transactions vide letter dated 20/12/2019 to the ld.AO as has been mentioned by the CIT(A) also in para 7.9 of his appellate order, i.e. copy of the allotment letter, copy of application form seeking preferential allotment, copy of demat cum transaction statement for the relevant period, demat statements, contract notes, broker statements, bank statement, receipt from the broker, shares sold on the recognised stock exchange, no nexus between the brokers or anybody else with the assessee as well as no incriminating material found during the search in his premises to support the allegation of bogus LTCG besides the fact on record that the entire LTCG was very much declared earlier in the returns of income every year by the assessee.

The ld. CIT (DR) in reply, relied on the orders of the lower authorities and vehemently stressed that since the assessee was confronted with the said information, though admittedly not found during the course of search in the premises of the assessee but was sourced by the authorised officer from somewhere else, the said statements recorded u/s 132(4) of the Act become part of the incriminating evidence so as to justify the addition based on the directions of the Hon‘ble Apex Court in Abhisar Buildwell (supra). However, the learned CIT DR could not controvert the facts placed by the ld counsel of the assessee as above but his only strenuous arguments were that since in the statements recorded u/s 132(4) of the Act, the said information was confronted to the assessee, the same amounts to detection of incriminating material during the course of search.

In rejoinder, Mr Bindal the ld. counsel of the assessee stated that on this issue, the judicial pronouncements on and others Hemendra Ramji Vira existence of the law are clear which stipulate that to make any addition u/s 153A of the Act for an already completed assessment, any material relied should have been found during the course of search in the premises of the assessee only and nowhere else. He categorically stated that if anything was found during the course of search in the premises of some other assessee where the name of the assessee did not figure at all in their search warrants, then the course of reassessment available with the Revenue Authorities have been specifically designed in the statute u/s 153C of the Act which is also para-materia and non obstante section as is the section 153A of the Act. These two sections were applicable at the relevant time only in respect of income-tax searches conducted upto 31/03/2021 either in the premises of the assessee or in the premises of someone else allegedly detecting incriminating material in respect of an assessee not searched.

The Ld. Counsel also submitted that if the revenue authorities really wanted to take cognizance of the said material in any manner in the hands of the assessee in completed assessments, then the course of the said reassessment lied elsewhere and not u/s 153A of the Act which in terms of the mandate of the Hon‘ble Apex Court in Abhisar Buildwell (supra) is unambiguously defined as below in para 14 (iv): “14.(iv) 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. Meaning thereby, in respect of completed / unabated assessments, no addition can be and others Hemendra Ramji Vira made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961.”

Mr Bindal the ld. counsel also referred to the decision of the coordinate Bench in the case of Nilesh Bharani vs DCIT in appeal no. ITA/612/Mum/2020 dated 28/02/2023 where the Bench held as below: 91. We have already observed in our earlier paragraphs that the entire procedure to make an assessment or reassessment of income of the alleged escaped income either u/s 148 or section 153C of the Act practically is the same except the jurisdiction and root cause which are different. The legislature has specifically carved out scope of assessment / reassessment of income of a person not searched of such alleged escaped income based on some incriminating information found during a search on some other person searched by taking recourse to the section 153C of the Act. The AO has not been empowered to extend the scope of an assessment/ reassessment u/s 153A read with the section 153C ofthe Actbeyond the alleged incriminating material found during thecourse of search in the case of some other person, because assessment / reassessment in such case is specifically restricted to the income based on the said incriminating information only. Whereas, in the proceedings initiated u/s148 of the Act, the AO may extend the scope of the assessment / reassessment on other amounts also if any information about those is on his record over and above the alleged escaped income as per the reasons recorded. The purpose of restriction of assessment for amount of income by taking recourse to the provisions u/s 153C of the Act to alleged incriminating material and not on suspicion has been upheld by the Hon’ble Supreme Court in the case of Sinhgad Technical Education Society (supra). 92. Accordingly, we hold that any incriminating information of any undisclosed income of the personnot searched which was found during the course of a search having taken place up to 31/03/2021 on someother assessee, can only be taken into consideration for an assessment / reassessment in the hands of and others Hemendra Ramji Vira the said person not searched through the domain of thesection 153C of the Act. Thus, any assessment /reassessment proceedings-initiated u/s 148 of the Actin respect of the said incriminating information foundduring the course of a search up to 31/03/2021 onsome other assessee is illegal and is ab initio as thesame can be considered only by taking recourse to the provisions of the section 153C r.w.s. 153A of the Act. Thus, the assessment of the said amount of LTCG, which was claimed to be exempt u/s 10(38) of the Act by the assessee, made u/s 147 of the Act is beyond the scope of section 147, albeit it can be roped in only u/s 153C. If on overall appreciation of the scheme of assessment / 93. reassessment of income after the income-tax searches on the assessee searched and also for the persons not searched based on detection of some incriminating information during the said searches conducted upto 31/03/2021, the following legal course of action is open for the AOs, which can be summed up, in the following manner: (i) It is mandatory for the AO of the person searched to make an assessment / reassessment of income of the said assessee u/s 153A of the Act for the 6 assessment years prior to the date of search and also for the extended 4 relevant assessment years, subject to fulfillment of the prescribed conditions for the same, on the basis of an income-tax search conducted on him. (ii) However, in the assessment / reassessment orders passed within the scope of section 153A of the Act, the AO cannot consider any undisclosed income detected by way of an incriminating information pertaining / relating to the said assessee, during an income-tax search conducted in the premises of some other assessee(s),even conducted at the same time or income connected matter. In such a case where AO gets any information or material about any assessee from the search of some other person, he can, make assessment of the undisclosed income/ amount emanating from such information or material for the assessment / re assessment vide separate assessment/ reassessment orders to be passed u/s 153A by taking recourse to the provisions of the section 153C of the Act. Because the cause of action for the said incriminating information for different amounts had originated in and others Hemendra Ramji Vira different search(es) in the different premises of other assessees and for the same, the mandatory route legislated u/s 153C of the Act must be followed. (iii) Further, an assessee can also be assessed multiple times u/s 153C r.w.s 153A of the Act, despite having already been assessed u/s 153A of Act on the basis of an income-tax search in his premises, where the incriminating information has been received u/s 153C of the Act by the AOs of the searched person as well as of the person not searched, which information originates in different searches at different times on different persons as well.

Besides the above, necessary reliance was placed on the following legal judicial pronouncements in favour of the assessee: i. PCIT vs Jay Ace Technologies Ltd. (2023) taxmann.com 45 (SC) (DOD-28.07.2023) ii. Atul Bharanivs DCIT– DOD 20.11.2023 iii. Poonam Promoters and Developers Pvt Ltd vs ACIT – ITAT Delhi (DOD- 23.01.2024) iv. Mr. Ritesh Rai vs DCIT – ITAT Chennai – ITA No. 811 & 812/Chny/2022 – (DOD- 19.07.2023) v. PCIT vs Meera Gupta – ITAT Delhi – ITA No. 403/2023 (DOD- 27.07.2023) vi. PCIT vs Kaushik Devjibhai Patel – (2023) 152 taxmann.com 462 (Gujarat) (DOD-04.05.2023) vii. PCIT vs Jay Ambey Aromatics – (2023) 156 taxmann.com 691 (SC) (DOD- 24/11/2023) and others Hemendra Ramji Vira viii. PCIT vs Oxygen Business Park (P)Ltd(2023)157taxmann.com 175(Delhi) (DoD- 08/12/2023) ix. Saksham Commodities Ltd vs ITO (2024) 161 taxmann.com 485(Delhi)confirmed by the Apex Court in SLP no. 51947/2024 vide order dated 16/12/2024. x. PCIT vs Pavitra Realcom Pvt Ltd (2024) 120 CCH 0035 (Delhi HC) xi. Hon‘ble ITAT Mumbai ―D‖ Bench in the case of Rajeshkumar Ramesh chandra Shah vs DCIT in ITA No. 5568 to 5573/Mum/2024 for AYs 2013-14 to 2018-19 DoD-31.01.2025, decision arising from the same search and on the identical facts (as in the case of assessee)has directed the AO to delete the additions in all the years under dispute (para 12 to 14, page no. 8 to 10)

We find that in respect of the addition made for the AYs 2013-14 to 2015-16 by rejecting the LTCG, claimed exempt u/s 10(38) of the Act by the assessee in his returns of income though in the assessment order by the same charge ld.AO, and on the identical set of facts as was in the case of Atul Shamji Bharani vs DCIT, the Coordinate Bench of the ITAT, Mumbai in appeal no. 2022/Mum/2023 vide order dated 09/08/2024for the AY 2013- 14 has held as below:

For the sake of convenience, the provisions of section153C of the Act as it stood at the relevant point of time are reproduced hereunder:-

On perusal of the above provision read with relevant Notes on Clause to the Finance Bill 2015, it is clear that any information or entry found in any document seized pertaining/ relating to a person other than the person searched from the searched premises as was referred u/s 153A of the Act was to be handed over by the investigation wing to the AO of such other person (searched) and then that AO of the searched person shall handover the same to the AO of the person not searched who thereafter was to proceed against such other non-person by issuing a notice u/s 153C of theAct and then to assess / re- assess income of such other not searched person.

Further on perusal of the proviso to section 153C of the Act , it is very clear that the first proviso as it existed then, the deemed date of search for initiation of proceeding u/s153C of the Act in the case of a non-searched person (assessee here) was the date of receiving the documents by the AO of the assessee. It is pertinent to note that the panchanama was finally closed in the hands of the assessee on 31.3.2016 at 8.40 P.M. The case of the assessee got centralised only on 5.9.2016, which means the AO could have and others Hemendra Ramji Vira received any information relating to bogus LTCG based on entry operators statements only on or after 5.9.2016 and certainly not before that date. This is so because absolutely no documents of incriminating nature was found and seized in the premises of the assessee during the course of search on 30.3.2016 which got concluded on 31.3.2016 at 8.40 P.M. Hence even if 5.9.2016 is construed as the date of receipt of information by the AO of the assessee, then that would become the date of search on the assessee in order to proceed on the assessee in terms of section 153C of the Act. This view of ours is fortified by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs RRJ SecuritiesLtd reported in 380 ITR 612 (Del) followed in Pr. CIT vs RajBuildworth (P) Ltd reported in 113 taxmann.com 600 (Delhi) and the SLP of the revenue dismissed by the Hon'ble Apex Court which is reported in 113 taxmann.com 601 (SC). Consequently, the period relevant to the Asst Year 2015-16 herein, when the impugned incriminating material was found in a search of a third person, got shifted from the scope of an assessment u/s 153A of the Act to the provisions of the sections 153C of the Act being one of the six assessment year preceding the date of search in the case of the other person.

Thus, it could be safely concluded that in addition to the assessment order passed u/s 153A of the Act on the basis of an income-tax search conducted on the assessee, the impugned amount assessed in this assessment order as undisclosed / unexplained income, allegedly based on some incriminating material found elsewhere, with respect to the long term capital gain already declared in the return of income filed on 29/11/2015 could not be assessed in the said assessment order passed u/s 153A of the Act but it could be considered for the purpose only and only in a separate assessment order by taking recourse to the mandatory and special non obstante provisions of the section153C of the Act and then to pass a separate assessment order u/s 153A r.w.s. 153C of the Act. Had recourse to section 153C of the Act been adopted by the revenue, then it would be in accordance with the decision of the Hon'ble Supreme Court in the case of ITO vs Vikram SujitkumarBhatia (supra). Hence the consideration of denial of exemption u/s 10(38) of the Act for the long term capital gain on sale of shares of MARL could not be done and others Hemendra Ramji Vira by the revenue legally in the proceedings u/s 153A of the Act on the assessee.”

Therefore, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we are of the considered view that any addition under section68 and section 69C of the Act in the facts of the present case cannot be done by taking recourse to the provisions of section153A of the Act. Accordingly, the additional grounds and ground no. 1 raised by the assessee are allowed.”

The Co-ordinate Bench of the ITAT in the case of wife of the assessee, Mrs Majula H Vira, in ITA 2923/Mum/2023 vide decision dated 09/12/2024 has held that the LTCG earned by the assessee in the scrip of Greencrest Financial Services Ltd for the AY 2015-16 as is the case of the assessee also are genuine and additions made were deleted. Similar, finding has also been arrived at in the same scrip in the case of Sheela Ashok Bafina in dated of decision 08/04/2024.

Further, similarly for the AY 2016-17 to 2018-19,the additions were made by the AO by working out the unexplained cash loan given by the assessee to one Mr Nilesh Bharani relying on some information found in a different search and premises of Mr Nilesh Bharani where the name of the assessee was not there in any panchnama by stating that since Mr Nilesh Bharani had admitted in his statement recorded u/s 132(4), receipt of such cash loan from the assessee outside the declared sources in the return of income of the assessee is to be assessed u/s 153A. The said fact was though initially partly admitted by the assessee without actually quantifying the same, yet lateron also retracted by him through an affidavit filed on 09/12/2019 and Mr Nilesh Bharani later also retracted his statement recorded u/s 132(4) vide his letter addressed to the Investigation Unit on 14/10/2017. The charts of the additions made are given below: and others Hemendra Ramji Vira Para 5.33 for alleged cash loan given in the assessment orders 5.33. In the light of the above discussion, the cash loans given by the assessee to Shri Nilesh Bharani are assessed as undisclosed investment in loans amounting to Rs. 29,34,00,000/- for AY 2012- 13 to 2018-19, u/s 69 of the IT Act as detailed below. Assessment Opening Cash loan Cash Balance year Balance given during loan outstanding the year receive cash loan d back during the year Amt in Rs Amt in Rs Amt in Amt in Rs Rs 2012-13 0000 0000 0000 0000 2013-14 0000 0000 0000 0000 2014-15 0000 0000 0000 0000 2015-16 0000 0000 0000 0000 2016-17 000 2,05,00,000 2,05,00,000 2017-18 2,05,00,000 27,29,00,000 29,34,00,000 2018-19 29,34,00,000 0000 29,34,00,000 Total 29,34,00,000 Para 5.34 for estimated interest earned on the above loans 5.34. Further the interest earned / receivable on cash loan lent by you amounting to Rs. 6,33,67,134/- for AY2012-13 to 2018-19, is to added to the total income of the assessee AY wise as detailed below:

Thus, the additions were made by the ld.AO in the above three AYs only though he has mentioned 7 AYs in the table, which also shows a mechanical approach with no application of mind at all and also estimated the interest income having been earned thereon in cash outside the declared sources of income as per his return of income by the assessee on the said amounts allegedly lent by the assessee to Mr Nilesh Bharani, though there was no such evidence at all in the alleged material relied upon as per the above chart. and others Hemendra Ramji Vira 45. For such additions in respect of the cash loans lent, the learned counsel of the assessee also placed reliance on the decision dated 31/01/2025 of the coordinate bench ofthe ITAT Mumbai in the case of Rajeshkumar Rameshchandra Shah in appeal nos. ITA 5568 to 5573/Mum/2024, followed in Rupal K Mehta in 27/02/2025 for six assessment years where orders were passed u/s 153A besides otherswhere the facts of the alleged cash loans given to Nilesh Bharani were identical based on an income-tax search on Mr Nilesh Bharani as in this case, except to the extent that there the assessee denied any knowledge of any such transactions rather knowledge of Evergreen Enterprises as well but here the assessee on confrontation admitted in his statement u/s 132(4) to have arranged some cash loan transactions through Evergreen Enterprises and estimated the same around Rs 10 crores. The ld. Counsel also submitted that the assessee never admitted to have given any cash loan but only said he arranged loans for various entities of Sunshine group through Evergreen Enterprises.

In respect of these additions, the learned counsel of the assessee again submitted that the search in the premises of the assessee continued for 4 days from 07/10/2017 till 10/10/2017, including the residential and business premises of the assessee when no such records or books of account were found and thus, no material in any manner was also found from the assessee having been made any investment or having earned any interest income. He also said that these questions were and others Hemendra Ramji Vira raised on the assessee on 10/10/2017 when the alleged material/ information had already been found in an independent income- tax search conducted in the premises of Mr Nilesh Bharani since the afternoon of 06/10/2017. The ld. counsel also said that no other material has been referred to in the assessment orders which could suggest any such undisclosed income. He also stated that physical presence of many Revenue Officers as per the Panchnamas for the 4 days (from 07/10/2017 to 10/10/2017) in the premises of the assessee without having found any material needing examination and confrontation with the assessee itself during the said search, demonstrate the clear mental pressure and harassment exerted on the assessee to pressurize him to sign on the dotted lines as recorded by the Revenue Officers on the 4th day of the search in his residence. Admittedly, the statement was also retracted by the assessee at the earliest thereafter on 09/12/2017 by filing an affidavit, not controverted hither to by the revenue through his cross examination proves that the said statement was not at all voluntary and where words were allegedly put in the mouth of the assessee then.

The contention of assessee also finds support from the legal pronouncements in CIT vs Lavanya Land (P) Ltd [2017] 83 taxmann.com 161 (Bombay), Aurum Platz (P) Ltd vs DCIT [2023] 152 taxmann.com 85 (Mumbai), CIT vs. Harjeev Aggarwal (2016)70 taxmann.com 95 (Delhi) and PCIT vs Agson Global (P) Ltd [2022] 134 taxmann.com 256 (Delhi) holding that a and others Hemendra Ramji Vira statement recorded u/s 132(4) of the Act per se not at all evidence, unless it is supported with any material gathered during the course of said search.

Upon a comprehensive consideration of the rival submissions and a meticulous perusal of the material on record, as well as the decisions rendered by the coordinate benches, we find ourselves in respectful agreement with the contention advanced by the learned counsel. The additions sought to be made solely on the basis of an uncorroborated statement of the assessee cannot, in law, be sustained—at least within the contours of assessment under section 153A of the Act. A solitary statement, unbacked by any cogent or credible material unearthed during the search, cannot, by any judicial reckoning, be construed as incriminating material. The absence of corroborative evidence renders such a statement insufficient to invoke or justify additions under the said provision.

It is now a well-settled proposition in jurisprudence, crystallised through the consistent pronouncements of various Hon‘ble High Courts, that an addition cannot rest merely on the foundation of a statement or admission made by the assessee, when such a declaration is unaccompanied by any incriminating and others Hemendra Ramji Vira material discovered during the course of the search. In this regard, instructive guidance may be drawn from the decision of the Hon‘ble Delhi High Court in the case of PCIT vs. Pavitra Realcon Pvt. Ltd. and Others in where the principle was emphatically reiterated. “20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements.

In the case of KailashbenManharlal Chokshi v. CIT', the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: -

Coming to the findings of the ITAT with respect to incriminating material in the case of M/s Pavitra Realcon Pvt. Ltd and M/s Delicate Real Estate Pvt. Ltd, it is seen that the ITAT has explicitly held in paragraph no. 18 that no addition has been made on the basis of any incriminating material found during the course of search. Further, the ITAT relied on the decision of the Supreme Court in the case of CIT v. Sinhgad Technical Education Society and held as follows: - "18. Further, while writing the order, it has come to our notice that the Hon'ble Apex Court in the case of Sinhgad Technical Education Society has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the 19. In view of the above, the additional grounds raised

In Shantilal Savla - to 363/Mum/2025 DoD 22/05/2025 13. We have heard the rival submissions and perused the material available on record. The issue pertaining to the existence of incriminating material for the assumption of jurisdiction by the Ld. AO under section 153A of the Act has been duly challenged by the assessee before the Ld. CIT(A) and the Hon’ble ITAT. The incriminating material relied upon by the revenue was found at the premises of Mr. Nilesh Bharani and M/s Evergreen Enterprises, and the statements of the partners therein were recorded as evidence of undisclosed income. It is an undisputed fact that Mr. Nilesh Bharani is engaged in the business of finance, particularly in cash lending and borrowing, and has earned income in cash. However, based on the statement of the assessee, it is evident that the assessee merely advanced a loan of Rs. 35 lakhs to Mr. Nilesh Bharani through banking channels. The assessee was also subjected to a search under section 132 of the Act on 18/12/2017, but no incriminating documents or material were found at the premises of the assessee. The entire addition in the present case is based solely on presumptions and pertains to third parties involved in the same search proceedings. Factually, the same issue has already been adjudicated in favour of the assessee. We respectfully rely on the decisions of the Coordinate Bench of the ITAT-Mumbai in the cases of Rajeshkumar Rameshchandra Shah vs. DCIT (supra) and Rupal Kashyap Mehta (supra), and observe that the Hon’ble Supreme Court's ruling in Abhisar Buildwell (P.) Ltd. is squarely applicable to the facts of the present case.

RajeshkumarRameshchandra Shah - to 5573/M/2024 12. As could be seen from the above extract, in the cross examination taken on oath, on a specific question asked by the assessee, Shri Nilesh Shamji Bharani denied of having entered into any cash loan transaction with the assessee. Thus, the facts on record reveal that except the so called incriminating material seized from the premises of Shri Nilesh Shamji Bharani and some statements recorded u/s. 132(4) of the Act from individuals related to M/s. Evergreen Enterprises, the A.O. had no other corroborative evidence available with him to establish that the assessee had actually advanced any cash loan to Shri Nilesh Shamji Bharani. Moreover, the assessee from the very beginning had emphatically denied of having any cash loan transaction with Shri Nilesh Shamji Bharani. Even, a couple of days after recording of statements u/s. 132(4) of the Act, the concerned persons including Shri Nilesh Shamji Bharani had retracted their statements. In fact, Shri Nilesh Shamji Bharani had filed an Affidavit before the A.O. in course of assessment proceedings completely denying the fact of cash loan transaction and had explained that the entries appearing in the seized document, in reality, represents the cash given to him by his father.

When the assessee as well as Shri Nilesh Shamji Bharani and other individuals have denied of alleged cash transaction in subsequent events, the duty of the A.O. was to gather more corroborative evidence to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee. However, except the seized material and the statements recorded u/s. 132(4) of the Act from some third-party individuals, the A.O. has absolutely no other evidence on record to corroborate the alleged cash loan transaction of the assessee. Pertinently, though, during the time search and seizure operation was carried out in case of M/s. Evergreen Enterprises and Shri Nilesh Shamji Bharani, a search and seizure operation was also carried out in case of the assessee, however, not a single piece of incriminating material was recovered from the assessee indicating involvement of assessee in the alleged cash loan transaction or any other illegal activity. In fact, it is relevant and others Hemendra Ramji Vira to observe, in the statement recorded u/s. 132(4) of the Act, Shri Jagdish T Ramani, who allegedly was assisting Shri Nilesh Shamji Bharani in his work, had stated that Shri Nilesh Shamji Bharani had instructed him to follow up with the lender, i.e., the assessee, to determine the modality of payment. He had stated that he instructed one of the office boys to collect money from the lender and after the money is collected, it is given to the borrower on execution of a promissory note. He had further stated that after the money is delivered to the borrower and promissory note is obtained, he had instructed the office boy to deliver the promissory note to the lender. It is quite surprising that considering the magnitude of the alleged cash loan transaction appearing in the seized document, not a single piece of incriminating material relating a cash loan transaction was recovered from the assessee during the search and seizure operation conducted on assessee. If the version of Mr. Jagdish T Ramani that the promissory note given by the borrower is delivered to the lender is to be taken on face value, then at least if not all few such promissory notes would have been recovered in course of search and seizure operation carried out in case of the assessee. It is quite improbable that such huge amount of cash loan transaction would not leave any trace of incriminating material /evidence with the assessee. Thus, on cumulative analysis of facts and materials available on record, we are of the opinion that is no conclusive evidence was available with the A.O. to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee.

In view of the aforesaid, we have no hesitation in holding that the additions made on account of unexplained investment on account of alleged cash loan transaction and addition made on account of notional interest thereon being not based on cogent evidence, are unsustainable. Accordingly, we direct the A.O. to delete the additions in all the years under dispute.

Similarly, the Hon‘ble Delhi High Court in the case of PCIT vs. Anand Kumar Jain (HUF) in and other appeals vide judgment and order dated 12/02/2021 had held that statement u/s.132(4) does not construe incriminating and others Hemendra Ramji Vira material for carrying out the assessment u/s.153A of the Act and statement cannot justify the additions made by the ld. AO. Similarly, other judgments which have been referred and relied upon by the ld. Counsel and which are not repeated but underlying principle is that for making the addition within the scope and ambit of Section 153A for unabated assessment years, statement alone cannot be treated as an incriminating material to make an addition. Albeit in case of assessment u/s153A (searched person) wherein the addition for unabated assessment has to be confined on the basis of incriminating material found during the course of search.

The counsel of the assessee also relied on the decisions of the Mumbai Benches of the ITAT on the same set of facts in Bipin Savla – to 6499/Mum/2024, Bharat Girdharlal Rughani – to 1517/M/2023 and Parag Motilal Savla – ITA No. 4220/M/2023 praying for deletion of the additions made including in the assessment years which were pending during the six years period before the date of search.

It is undisputed fact that no material much less incriminating material was found during the course of search from the premises of the assessee in support of the additions, made for the quantum amounts of the alleged cash loans given and the estimated interest thereon in all the AYs as per chart herein above is deleted. We direct accordingly to delete the additions as above.

Since, all the above six appeals have been decided on the above grounds by deleting the additions, other grounds taken by the assessee have become academic and not adjudicated for any of the above assessment years. Thus, all the six appeals as above filed by the assessee have been allowed.

In the result, appeals of the assessee are allowed.