RUPAL KASHYAP MEHTA,MUMBAI vs. DCIT, CC-4(1), MUMBAI

Further, as is mentioned in the relevant para 5.22 of the assessment orders for the AYs 2014-15 to 2018-19, the husband of the assessee was asked as below:

The Ld. Counsel of the assessee submitted that all these questions and answers relevant to the additions made in the hands of the assessee in the respective AYs clearly demonstrate and confirm the contention of the assessee that no such evidence much less incriminating the assessee in any manner was found during the course of search in the premises of the assessee searched u/s 132 of the Act and therefore, by following the judgment of the Apex Court in PCIT vs Abhisar Buildwell (P) Ltd [2023] 149 taxmann.com 399 (SC), no addition at all could be made in any assessment order passed u/s 153A of the Act.

The ld. CIT (DR) 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 Officers 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 as above but her only strenuous arguments were that since in the statements recorded u/s 132(4) of the Act, the said

In rebuttal Mr Bindal the ld. counsel of the assessee stated that on this issue, the judicial pronouncements on existence of the law are clear which stipulate that to make any addition u/s 153A of the Act, 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, 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 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.

If the Revenue really wanted to take cognizance of the said material in any manner in the hands of the assessee, 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):

Mr Bindal 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 of the Act beyond the alleged incriminating material found during the Mrs. Rupal Kashyap Mehta course 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/s 148 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).

Accordingly, we hold that any incriminating information of any undisclosed income of the person not searched which was found during the course of a search having taken place up to 31/03/2021 on some other assessee, can only be taken into consideration for an assessment / reassessment in the hands of the said person not searched through the domain of the section 153C of the Act. Thus, any assessment / reassessment proceedings-initiated u/s 148 of the Act in respect of the said incriminating information found during the course of a search up to 31/03/2021 on some other assessee is illegal and is ab initio as the same can be considered only by taking recourse to the Mrs. Rupal Kashyap Mehta 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 / 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. However, in the assessment / reassessment orders (ii) 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 in Mrs. Rupal Kashyap Mehta some 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 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 same, necessary reliance was placed on the following legal judicial pronouncements: i. PCIT vs Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC) (DOD- 24.04.2023)

We find that In respect of the addition made for the AY 2012-13 by rejecting the LTCG, claimed exempt u/s 10(38) of the Act by the assessee in her return of income though in the assessment order by the same charge 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: 39. We have considered the submissions of both sides and perused the material available on record. In the present case, undisputedly the addition is made under section 68 and section 69C of the Act on account of alleged accommodation entries of bogus long-term capital gain. From the perusal of the assessment order, it is discernible that the said addition is not based on any material or document found during the course of search/survey action under section 132/133A of the Act conducted at the residential premises of the assessee. It is further evident that the AO has placed reliance upon the findings of the Investigation Wing, Kolkata, wherein the scrip M/s Shree Nath Commercial & Finance Ltd. was included in the list of 84 companies whose share prices were manipulated by a syndicate of entry operators. The AO from pages 4-12 of the assessment order discussed the findings of the Investigation Wing, Kolkata, wherein the modus operandi of providing bogus accommodation entry, players on the scheme, role of the operator, role of the promoters of the penny stock companies, role of shareholders and exit providers has been discussed. fluctuation, the history of the company, and the financials of the scrip M/s D.B. (International) Stock Brokers Ltd. From pages 18-27, the AO has analysed the statements of the Mrs. Rupal Kashyap Mehta entry providers in the scrip of M/s D.B. (International) Stock Brokers Ltd. It is pertinent to note that these statements were recorded under section 132(4) of the Act on 13/06/2014 during the course of the search action at their premises. Thus, it is worth noting that none of the statements were pursuant to search/survey action under section 132/133A of the Act conducted at the residential premises of the assessee on 06/10/2017 and are much prior to the search in the case of the assessee. From the perusal of the statements, it is further pertinent to note that though the entry operator has agreed that they have arranged investments in the shares in M/s D.B. (International) Stock Brokers Ltd. on behalf of some of the beneficiaries, however there is no allegation against the assessee. Similarly, from pages 27-36, the AO analysed the financials and price fluctuation in the scrip M/s Shree Nath Commercial & Finance Ltd. Identical to M/s D.B. (International) Stock Brokers Ltd., the statement of entry operators relied upon by the AO, who admitted to have provided accommodation entry in M/s Shree Nath Commercial & Finance Ltd., were recorded in the year 2015, i.e. much prior to the search/survey conducted at the residential premises of the assessee. Therefore, from afore- noted factual position, it is evident that the entire addition is based on the information received during the search carried out in case of some other persons. Further, from para-7.10 of the assessment order, it is also evident that the statement of the assessee was also recorded under section 132(4) of the Act pursuant to the information received during the search carried out in case of some other persons. In view of the aforesaid peculiar factual matrix of the present case, it is the plea of the assessee that the assessment should have been done under section 153C of the Act instead of the assessment order being passed under section 153A of the Act.

We find that a similar controversy came up for consideration before the coordinate bench of the Tribunal in Anoop Kumar Gupta v/s ACIT, in ITA no. 454/Del./2020, for the assessment Mrs. Rupal Kashyap Mehta year 2015-16, wherein despite the large no. of incriminating documents being found and impounded during the search, no addition was made by the AO in the assessment proceedings, as the AO was convinced with the explanation given by the taxpayer for those documents. However, in another search based on any independent warrant of authorisation, certain incriminating documents were found. Accordingly, the issue arose that whether the taxpayer needs to be questioned based on those incriminating documents only by taking recourse to section 153C of the Act and not under section 153A of the Act irrespective of the fact whether the assessment is abated or not. The coordinate bench of the Tribunal while deciding this issue in favour of the assessee, vide order dated 05/10/2023, held that any addition on the basis of some incriminating material found elsewhere could not be assessed in the assessment order passed under section 153A of the Act, but it could be considered only in a separate assessment order by taking recourse to the mandatory and special non obstante provisions of section 153C of the Act and then to pass a separate assessment order under section 153A r/w section 153C of the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows:- "23. It is pertinent to note that though the ld. AO had stated that large number of incriminating documents were found and impounded during the search, we find that ultimately no addition was made based on the same by the ld. AO in the assessment proceedings, as the ld. AO was convinced with the explanations given by the assessee for those documents. The fact of assessee claiming exemption u/s 10(38) of the Act for sale of shares of MARL was duly disclosed in the return of income filed on 29.11.2015 prior to the search itself. No document whatsoever was found and seized from the premises of the assessee during his search representing any incriminating document qua the issue of claim of exemption u/s 10(38) of the Act. The only document which Mrs. Rupal Kashyap Mehta fall within the ambit of incriminating nature is the forged signature of Shri Koteshwar Rao in the documents pertaining to allotment of preferential shares submitted to Ministry of Corporate Affairs (MCA), which was also not seized from the premises of the assessee. The investigation wing of Income Tax Department had gathered those informations from MCA and had confronted Shri Koteshwar Rao during the course of search. Shri Koteshwar Rao denied having affixed his signature thereon as he had resigned from the post of Director of MARL in the year 2012. However, from the statements recorded by the investigation wing of income tax department from various persons involved , it is evident that the signature of Shri Koteshwar Rao was indeed forged in the documents pertaining to allotment of preference shares to various persons including the assessee and his family members. At this juncture, it would be relevant to note that both Shri Koteshwar Rao as well as the assessee in their individual sworn statements had categorically denied having known each other. Hence it becomes evident that assessee was never involved in any of the forgery acts that had been carried out in the allotment of preference shares of MARL. But we find that the assessee was confronted by the revenue with those very same forged signed documents in order to draw adverse inference on the claim of exemption u/s 10(38) of the Act on the assessee. Hence the said forged signed documents become incriminating documents found during the course of search of third parties (which include MARL and Shri Koteshwar Rao). Accordingly, if at all the assessee need to be questioned based on those incriminating documents, as per the scheme of provisions of Chapter XIV (sections 153A to 153C) of the Act , it could be done only by taking recourse to section 153C of the Act and not u/s 153A of the Act irrespective of the fact whether the assessment is abated or not. This is so because , the provisions of Sections 153A and 153C of the Act are special provisions starting with non-obstante clause thereon which Mrs. Rupal Kashyap Mehta had been introduced in the statute only for the limited purpose of framing assessments pursuant to search actions carried out and information / materials surfaced therein.

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/s 153C 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 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 Securities Ltd reported in 380 ITR 612 (Del) followed in Pr. CIT vs Raj Buildworth (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.

Therefore, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we are of the considered view that any addition under section 68 and section 69C of the Act in the facts of the present case cannot be done by taking recourse to the provisions of section 153A of the Act. Accordingly, the additional grounds and ground no. 1 raised by the assessee are allowed.

Thus, respectfully following the above findings and directions of coordinate bench of the ITAT which applies squarely on the facts of the present case also, the addition of Rs 1,26,85,229/- made in respect of an already declared LTCG, Mrs. Rupal Kashyap Mehta claimed exempt u/s 10(38) of the Act in the original return of income in the assessment order passed u/s 153A of the Act for the AY 2012-13 is hereby deleted as it is beyond the scope of assessment u/s 153A as not based on any seized or incriminating material.

Consequently, the addition of Rs 3,80,557/- made u/s 69C of the Act alleging unexplained expenditure incurred to earn the said LTCG is also deleted.

Further, similarly for the AY 2014-15 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. The said fact was not admitted by the assessee and which was also retracted by Mr Nilesh Bharani later vide his letter addressed to the Investigation Unit on 14/10/2017 when the husband of the assessee also retracted his statement recorded on 10/10/2017 as mentioned in foregoing paragraphs separately. The charts of the additions made are given below:

Thus, the additions were made by the AO in the above five AYs and also estimated the interest income having been earned thereon in cash outside the declared sources of income in her 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 in the alleged material relied upon as per the above chart.

For such additions in respect of the cash loans lent, the learned counsel of the assessee also placed reliance on the Mrs. Rupal Kashyap Mehta decision dated 31/01/2025 of the coordinate bench ofthe ITAT Mumbai in the case of Rajesh kumar Rameshchandra Shah in appeal nos. ITA 5568 to 5573/Mum/2024 where the facts 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 but here Mr Kashyap K Mehta, the husband of the assessee on confrontation admitted to have undertaken some transactions in cash with Nilesh Bharani / Evergreen Enterprises but also in the same breath categorically stated that he is not aware of the quantum and would respond in 3 days thereafter, after looking into his records.

In respect of these additions, the learned counsel of the assessee submitted that the search in the premises of the assessee continued for 6 days from 06/10/2017 till 11/10/2017, including the residential and business premises of the assessee as well as other associates when no such records or books of account were found and 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 raised on the husband of the assessee on the 5th day of the search, i.e., 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 in the afternoon of 06/10/2017. The ld. counsel also said that no other material has been referred to in the assessment orders which Mrs. Rupal Kashyap Mehta could suggest any such undisclosed income. He also stated that physical presence of many Revenue Officers as per the Panchnamas for the 6 days (from 06/10/2017 to 11/10/2017) 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 to the husband of the assessee to pressurise him to sign on the dotted lines as recorded by the Revenue Officers on the 5th day of the search in their residence. Admittedly, the statement was also retracted by the assessee at the earliest thereafter on 23/10/2017 proves that the said statement was not at all voluntary and where words were allegedly put in the mouth of the husband of the assessee.

The ld. Counsel also stated that no question at all, which must have been asked, as a corollary to the answer given by the husband of the assessee, as to where those records which were not available with him at that time, were kept to surface the truth. He stated that the Revenue Officers were duty bound to take consequent action u/s 132 r.w.s. 133A to find the said record and if the assessee was not forthcoming with such information, he could have been confronted about it then and there only and not later. However, the same was also not done later including on 03/11/2017 when another panchnama was drawn to vacate the prohibited order in continuation to the search proceedings undertaken on 06/10/2017 in the premises of the assessee and admittedly by the said date Mr Kashyap K Mrs. Rupal Kashyap Mehta Mehta, the husband of the assessee, had already retracted his earlier statement dated 10/10/2017 vide letter dated 23/10/2017, a fact not denied by the Revenue. The learned counsel of the assessee also drew the attention of the bench to the said statement of the husband of the assessee, which interestingly was not signed at all on any page by the Authorised Officer Mr Ashwini Prasad, the then DDIT, Unit 5(4), Mumbai, as is placed on PB page no. 19-33 with annexures thereto from PB page no. 34-57 dated 20/01/2025. He also drew the attention of the bench to the copy of the statement of the husband of the assessee to Q. No. 31 on Page no.10 and 32 of the PB showing that the said statement was resumed on 07/10/2017 at 12:00 pm with Q. No. 21 and closed on 07/10/2017 at 10:00 pm at Q. No. 33 as per Page 18 of the PB, being another statement recorded by Mr Raghav Gupta, DDIT Investigation. Thereafter, another statement dated 10/10/2017 allegedly recorded by Mr Ashwani Prasad u/s 132(4), though not signed by him nor his any stamp is there, commenced with Q. No. 1. and which does not mention time of its commencement on 10/10/2017 nor mentions time of closure on 10/10/2017.

The ld. Counsel also demonstrated that Q. Nos. 30 and 31 were practically the last questions in the entire said proceedings wherein the statement had total 36 questions and Q. No. 32 to Q. No. 36 were just confirmatory questions about the seizure and return devices and cash etc. The entire statement has been typed in a chronological manner of different issues and not in a Mrs. Rupal Kashyap Mehta manner the information found or is found and confronted. Such types of statements are typed after assimilating the alleged information in one serial form and then typed. This in entirety shows that the statement of the husband of the assessee relied by the Revenue is not a legal statement u/s 132(4) of the Act as was not tendered under the normal circumstances, was also not authenticated by the authorised officer before whom it was allegedly recorded so the Revenue is completely barred to take cognizance of the same against anybody including the deponent Kashyap K Mehta nor the assessee.

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 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.

After considering the rival submissions and on perusal of the facts on record and the decisions of the coordinate bench as mentioned above, we agree with the contention of the Ld. Counsel that the additions made on an uncorroborated statement of the husband of the assessee cannot be sustained at least within the scope of assessment under section 153A as the Mrs. Rupal Kashyap Mehta statement is not corroborated with any other material found from the search and statement per se cannot be reckoned as incriminating material.

In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment.

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 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 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 incriminating material and here in this case this statement is not of the assessee but of her husband and here it is not a case of assessment u/s.153C that any material or document found from search of other person has been made the basis for addition. Albeit in case of assessment u/s.153A (searched person) wherein the addition for unabated

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 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.

In the result, all the appeals filed by the assessee are allowed.