GUJARAT ENTERPRISE,MUMBAI vs. DCIT, CENTRAL CIRCLE 1, THANE, THANE

8. Proceeding further, the AO noticed that the assessee has taken several loans from the dummy company and such loans are merely accommodation loans taken in lieu of cash payments. Referring to search and seizure proceedings in the case of Shri Uttamchand S. Jain, the AO came to know that Shri Uttamchand S. Jain, is also found to be engaged in the import of diamonds which is made on behalf of the real importers and provides accommodation entries of bogus purchases and bogus unsecured loans to various beneficiaries. 8.1. As the embedded profit in the on-money has been taken @15%, the AO formed a belief that cash paid on accommodation loan is taken as an outflow in cash flow and accordingly prepared the following chart:-

I.T.A. No. 6909/Mum/2024 I.T.A. No. 6908/Mum/2024 I.T.A. No. 6905/Mum/2024 I.T.A. No. 6906/Mum/2024 I.T.A. No. 6965/Mum/2024 I.T.A. No. 6966/Mum/2024 I.T.A. No. 6967/Mum/2024 4 Gujarat Enterprise Entity wise Cash Flow Minimum Peak Balance -6,04,040 Nature of Transaction Closing Balance AY % Inflow Outflow Transaction Amount 2013-14 On Money 10.00.000 15% 1,50,000 2013-14 Accommodation 7,54,040 100% 7,54,040 -6,04.040 2014-15 On Money 1.53,00.000 15% 22.95,000 15,91,874 99.086 Accommodation 100% 2014-15 15.91.874 On Money 15% 2015-16 1,58.00.000 23,70,000 Accommodation 100% 16,422 2015-16 16,422 24,52,664 15% 2016-17 On Money 1,15,00,000 17,25,000 41,77,664 2017-18 On Money 95,00,000 15% 14,25,000 56,02,664 2018-19 On Money 1,78,00,000 15% 26,70,000 82,72,664 2019-20 On Money 5,50,00,000 15% 82,50,000 1,65,22,664 2020-21 On Money 3,05,00,000 15% 45,75,000 2,10,97,664 2021-22 On Money 9,47,73,360 15% 1,42,16,004 3,53,13,668 8.2. Basis above, the addition on account of loan peak balance was made in the impugned Assessment Years.

10. To settle the prolonged litigation, we are of the considered opinion that profit of 11.5% should meet the ends of justice. Therefore, we direct the AO to restrict the addition to the extent of 11.5% on the alleged on-money receipts.

11. Insofar as, the addition on account of loan peak balance made on the basis of the cash-flow extracted elsewhere is concerned, we are of the considered view that the basis of the entire addition is the allegation that the assessee is a beneficiary of accommodation entries. The entire additions are based upon the search action taken in the premises of a third party i.e., Shri Uttamchand S. Jain, which means that no incriminating material was found from the premises of the assessee which means that the ratio laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell P. Ltd. 454 ITR 212 (SC), squarely applies. 11.1. On identical set of facts, the Co-ordinate Bench in the case of Group concern Gujarat Land Developers vs. DCIT in AY 2014-15, order dated 04/04/2025, has held as under:- “9. The entire quarrel revolves around whether the impugned addition is based upon any incriminating material found at the time of search. The case of the revenue is that the on-money received by various entities accepted by Mr. Anil Morarka is in itself incriminating and the accommodation entry in the form of loans recorded in the books of account is nothing but outcome of on-money received by the group.

10. Since the impugned assessment year falls under the category of unabated assessment year, therefore, the ratio laid down by Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. [454 ITR 212], squarely applies. The relevant findings of the Hon’ble Supreme Court read as under:- “9.1. That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to 'undisclosed income' and (i) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/ trigger for invoking the provisions of sections 153A/ 153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment.

Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.”

i. Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. i. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. ii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO vii. Completed assessments can be interfered with by the AO while making the assessment under section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered disclosed or made known tn the course of original assessment." 7.2 Thereafter in the case of Saumya Construction (supra), the Oujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no Jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: n15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers there under is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of I.T.A. No. 6910/Mum/2024 I.T.A. No. 6908/Mum/2024 I.T.A. No. 6905/Mum/2024 I.T.A. No. 6906/Mum/2024 I.T.A. No. 6965/Mum/2024 I.T.A. No. 6966/Mum/2024 I.T.A. No. 6967/Mum/2024 8 the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub- section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding.