DCIT, CENTRAL CIRCLE 8(4), MUMBAI, MUMBAI vs. AACHMAN VANIJYA PRIVATE LIMITED, KOLKATA

by the assessee during appellate 2. proceedings 2.1. It has been directed vide above referred letter to submit comments on the legal ground for AY 2011-12 to 2015-16 that no addition can be made in absence of incriminating material in these years. With respect to the legal ground raised by the assessee, it is submitted that a search and seizure action u/s 132 was conducted on Janil Shah Group by DDIT(Inv.), Unit 6(1), Mumbai on 22.03.2018. During the course of search action various statement taken during search on Janil Shah Group wherein incriminating material was gathered in the form of information which suggests that the assessee company is a shell company on which addition has been made in block assessment order. It is also emphasized that the assessee has never raised the issue of incriminating material during the course of assessment proceedings. 2.2. Reliance is placed on the decision of Hon’ble Supreme Court in the case of P.R. Metrani v. CIT [2006] 287 ITR 209/157 Taxman 325 (SC) has explained the scope of section 132. It has been explained by the Hon’ble Supreme Court that the books of accounts, documents, money, bullion, jewellery or other valuable article or thing and any statements recorded of the persons searched may be used as evidence for any proceedings under the Act. The relevant portion of the order of the Hon’ble Supreme Court is reproduced as under: “18. Section 132 is a Code in itself. It provides for the conditions upon which and the circumstances in which the warrants of authorization can be issued. Sub-section (2) authorizes the authorized officer to 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 for which the search is conducted. Under sub-section (4) the authorized officer can during the course of 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 persons during such examination may thereafter be used in evidence in any proceeding under the Act. to 827/Mum/2025 C.O. No. 69 to 72/Mum/2025

4. Therefore, if the search and seizure action reveals certain entities involved in questionable or dubious transactions, and it is observed that either some of the searched parties or other third parties have engaged in similar transactions with these entities, such information would be considered incriminating. 2.3. Further, reliance is also placed upon decision in the case of Nau Nidh Overseas (P.) Ltd. [2017] 88 taxmann.com 665 (Delhi), in a search conducted prior to 1.6.2015, when the director of the company also admitted that part of the cash belonged to another party, the Delhi High Court has observed that:

12. Like in Super Malls (P.) Ltd. (supra), the AO considered the totality of the statement to conclude – undoubtedly facially, that the cash seized belonged to the third party, i.e. the assessee in the present case. Such statement also constitutes as material because it is made in the course of the search under Section 132 (4) and is also in consonance with the ruling of this Court in Smt. Dayawanti (supra).

13. For the above reasons, these appeals have to succeed. The question of law framed is accordingly answered in favour of the Revenue. The impugned order of the ITAT is, therefore, set aside. The ITAT is now directed to hear the assessee’s appeal on its merits. Hence, incriminating material also includes information or finding of a concerted investigation which evidences that the assessee has not correctly shown its income in the return filed by it. Therefore, it is requested to reject assessee’s ground mentioned in point no. 2 of your letter.” [Emphasis supplied]” 7.2. The report of the AO highlights the statement recorded in the course of search on Janil Shah Group basis which, the AO contended that these statements are to be considered as incriminating material found during the course of search. In his report, the AO referred to various statements recorded during the course of search at Janil Shah Group. After considering the remand report, the ld. CIT(A) was of the opinion that the AO has not discussed any findings of the searched or incriminating material found during the course of search. The ld. CIT(A) further observed that there is nothing adverse in the statement recorded during the course of search which can be considered as an to 827/Mum/2025 C.O. No. 69 to 72/Mum/2025 5 incriminating material. The ld. CIT(A) concluded by holding that the additions made u/s 56(2)(vii) of the Act is not based on any search findings and in respect of other additions, the ld. CIT(A) took a similar view that the additions made by the AO are not based on any incriminating material found during the course of search conducted on the assessee. The ld. CIT(A) further observed that the assessment orders are not passed u/s 153C of the Act or u/s 148 of the Act. As per the observation of the ld. CIT(A) at para 21 of his order, it is clear that the impugned assessment orders framed u/s 153A of the Act are devoid of any incriminating material found/seized during the course of search conducted in the assessee’s own case. Drawing support from various judicial decisions, the ld. CIT(A) concluded by holding that the revenue has to follow the procedure laid down under the provisions of Section 153C of the Act in a situation where the documents were found from premises of a third party irrespective of the fact that the third party was also subjected to search. The ld. CIT(A) ultimately held that all the impugned additions/disallowances made in the assessment order passed u/s 143(3) r.w.s. 153A of the Act, has to be deleted. Basis the findings given in AY 2012-13, the ld. CIT(A) deleted the addtions made in AY 2013-14, 2014-15 & 2015-16.

Therefore, the intention of the legislation seems to be that in a case of search, only pending assessment or reassessment proceedings shall abate and the Assessing Officer would assume jurisdiction to assess or reassess the "total income" for the entire six-year period or block assessment period. The intention does not seem to be to reopen completed or unabated assessments, unless any incriminating material is found with respect to the concerned assessment year falling within the six years preceding the search. Therefore, on a true interpretation of section 153A of the Act, in case of a search under section 132 or requisition under section 132A during which any incriminating material is found, even in a case of unabated or completed assessment, the Assessing Officer would have 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, where during the search no incriminating material is found, in the case of a completed or unabated assessment, the only remedy available to the Department would be to initiate reassessment proceedings under section 147 or section 148 of the Act, subject to fulfilment of the conditions mentioned in those sections, as in such a situation, the Department cannot be left with no remedy.

If, even in a case of search where no incriminating material is found during the course of search, and the assessment is unabated or completed, the Assessing Officer were to assess or reassess the income or total income taking into consideration the other material, there would be two assessment orders, which shall not be permissible under the law. The second proviso to section 153A and sub-section (2) of section 153A would then be redundant. Rewriting provisions is not permissible under the law.

Thus in a case of search under section 132 or requisition under section 132A, the Assessing Officer assumes jurisdiction for assessment under section 153A; all pending assessments or reassessments shall stand abated. In case any incriminating material is found or unearthed, even in case of unabated or completed assessments, the Assessing Officer would assume the jurisdiction to assess or reassess the "total income" taking into consideration the incriminating material unearthed during the search and the other material available with the Assessing Officer including the income declared in the returns; and in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments or unabated assessments, meaning thereby, in respect of completed or unabated assessments, no addition can be made by the Assessing Officer in the absence of any incriminating material having been found during the course of search under section 132 or to 827/Mum/2025 C.O. No. 69 to 72/Mum/2025 8 requisition under section 132A of the Act. However, completed or unabated assessments can be reopened by the Assessing Officer in exercise of powers under section 147 or 148 of the Act, subject to fulfilment of the conditions as envisaged or mentioned under section 147 or 148 of the Act and those powers are saved.”

20. In our view, a plain reading of s. 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result of search' would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to s. \132(4) of the Act. However, such statements on a stand alone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation.

(emphasis, italicized in print, supplied)

36.4. 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 made by the AO in absence of any incriminating material found during the course of search under s. 132. or requisition under s. 132A of the 1961 Act. However, the completed/unabated assessments can be reopened by the AO in exercise of powers under ss. 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under ss. 147/148 of the Act and those powers are saved.

(emphasis, italicized in print, supplied)

(iv) Although s. 153A 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 the seized material." (emphasis, italicised in print, supplied)”