SRI RATHAN BABULAL LATH,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(4), BANGALORE

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against the order of CIT(A) dated 9.12.2019 for the assessment year 2009-10.

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Page 2 of 37 u/s 153A of the Act on 18.10.2016 stating that the return filed originally by the assessee be considered as correct and no change to the same wherein assessee declared income of Rs.13,44,160/-. The assessee also requested the AO to drop the proceedings u/s 153A of the Act, however, the AO framed the assessment u/s 153A of the Act as follows:- “8.1 During the Financial Year: 2008-09 relevant to assessment year: 2009-10 the assessee had given an amount of Rs 60 crores to one Sri Navneet Singhania for investment in two companies based in Kolkata namely, M/s. Sugam Commodeal Pvt. Ltd. and M/s. Chandelier Tracon Pvt. Ltd. for further investment in M/s. Jagathi Publications Pvt. Ltd. through these companies. This fact has been corroborated with the statement of Sri Navneet Singhania discussed above, relevant portion of which has been reproduced above. In that statement Sri Navneet Singhania also mentioned the modus operandi of routing of the fund of Rs. 60 crores. Findings based on the said statement of Sri 'rought to the notice of the assessee during the course Navneet Singhania, were b of instant proceedings, vide this office letter dated: 13.12.2016 reproduced above. The assessee has not contested the statement nor disputed the facts mentioned in the said statement of Sri Navneet_Singhania. Further, independent verification of certain facts mentioned in the statement of Sri Singhania matched as pointed out above. Facts stated by Sri Singhania in his statement also corroborated with the statement of Sri Ratan Lath before CBI authorities discussed above.

8.2 Sri Ratan Lath in his statement before CBI authorities admitted to have paid Rs. 60 crores to Navneet Singhania for investment in two companies based in Kolkata namely, M/s. Sugam Commodeal Pvt. Ltd. and Mis. Chandelier Tracon Pvt. Ltd. for further investment in M/s. Jagathi Publications Pvt. Ltd. through these companies. The details of investors in Sugam Commodeal end Chandelier Tracon Pvt. Ltd. allegedly the source of these companies for onward investment Publication, could not be traced as notices came back un-served as discussed above. This proves the fact stated by Sri Navneet Singhania in his said statement that paper companies have been used for routing funds to Sugam and Chandelier. Sri Ratan Lath has not denied the admission he has made before the CB] authorities in that, he had made payment of Rs_60 crores to_Sri Navneet Singhania. Sri Ratan Lath has not denied having made the statement made by him before CBI authorities nor has denied any of the facts mentioned by him in therein_ Further, the facts mentioned in the statement have been corroborated with the facts mentioned in the statement of Sri Navneet Singhania and also corroborated with the independent verifications 8.3 The assessee has not explained the source of aforesaid investment of 60 crores being his payment to Sri Navneet Singhania, a fact he admitted before SBI authorities, corroborated by statement of Sri Singhania and verified independently as discussed above. He has also not denied or contested the statement he made before the CBI authorities nor the statement of Sri Navneet Singhania made before Income-tax Authorities, relevant portions of which have been reproduced above and also provided to the assessee. 8.4 It is for the assessee to explain the source of aforesaid funds of Rs. 60 crores being payment made by him to Sri Navneet Singhania during FY: 2008-09, relevant to assessment year: 2009-10; which the assessee did not

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Page 3 of 37 explain in the course of instant proceedings also. As already stated above, the assessee vide this office letter dated: 13.12.2016 was asked to explain the source of funds of Rs. 60 crores given by him to Sri Navneet Singhania which became the source of investment of the two companies M/s. Sugam Commodeal Pvt. Ltd. and M/s. Chandelier Tracon Pvt. Ltd. in M/s. Jagathi Publications Pvt. Ltd. during the FY: 2008-09. The assessee did not avail of this opportunity and make any submissions. The assessee did not contest or dispute the averments made in thee said letter issued by this office on 13.12.2016. The assessee also did not seek additional time for filing explanation / submissions in this regard, which would have been allowed, if such a request would have been received from the assessee, within the constraints of time limitation involved in the proceedings. 8.5 In the light of the discussion made above, the aforesaid amount of Rs.60 crores is added to the returned income of the assessee under the provisions of section 69 of the Income-tax Act, 1961 being unexplained investment and therefore the Assessed income of the assessee is the revised income as per order u/ 147 r.w.s. 143(3) of the Income-tax dated 29.1.2016 passed in the case of the assessee for assessment year 2009-10. (Addition: Rs.60,00,00,000/-) (Penalty proceedings u/s 271(1)© of the Income Tax Act, 1961 is initiated for concealment of income.)

2.1 Against this assessee carried this appeal before Ld. CIT(A). The Ld. CIT(A) confirmed the addition by observing as follows:-

“15. Perusal of assessment order shows that appellant during AY 2009-10 had given an amount of Rs. 60 crore to Sh. Navneet Sinhania for investment in two Kolkatta based entities by the name of Mis Sugam Commodeal Pvt Ltd and M/s Chandelier Tracon Pvt ltd. The said amount was meant to be further invested in M/s Jagati Publications Pvt Ltd. The appellant has not contradicted the findings of AO nor disputed it. It may be noted that Shri Navneet Singhania had in his statement mentioned the modus operandi of routing the said amount of Rs. 60 crore. The statements made by Sh. Navneet Singhania were also mad available to the appellant vide AO's office letter dated 13/12/2016. The appellant did not dispute these facts before AO. It may not be out of place to mention that facts stated by Sh. Naveen Singhania were corroborated by appellant in his statement I deposition before CBI authorities. The appellant admitted before CBI that he had paid Rs. 60 crores to Navneet Singhania for investing in the two Kolkatta based companies mentioned in para 14 supra.

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Page 4 of 37 18. During appellate proceedings, the appellant has not filed any explanation with regard to the source of Rs. 60 crores. No evidence whatsoever has been filed by appellant to dispute the finding of AO that source was unexplained. No documentary evidence has been filed by appellant to substantiate his claims.

2.2 Against this assessee is in appeal before us, which we will adjudicate each ground-wise as follows:-

3.1 After hearing both the parties, we are of the view that in view of the retrospective insertion of Explanation (1) to Section 132 of the Act, income tax authorities precluded to dispose any reason for search action u/s 132 of the Act, which reads as follows:-

“Explanation (1) For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.”

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Page 5 of 37 3.2 This explanation was inserted by Finance Act, 2017 with retrospective effect from 1.4.1962. Being so, assessee was precluded from challenging search proceedings conducted at the premises of assessee on 8.9.2016 u/s 132 of the Act. Same view was taken by the Hon’ble Karnataka High Court in the case of Pratibha Jewellery House Vs. CIT reported in 404 ITR 91, wherein held as follows:- “(i) That the decision of this court in the case of C. Ramaiah Reddy (supra), which allowed the Appellate Authority to go into the question of validity of search is a subject-matter of pending appeal before the Supreme Court and therefore, not only the Authorities of the department, but even this Court should await the decision of Supreme Court on the said issue and cannot direct the Appellate Authorities below by way of a writ of mandamus to go into the question of validity of search under section 132 and it would be incongruous and not in difference to the pendency of aforesaid Civil Appeal No. 2734/2013 before the Supreme Court. (ii) That even the law has been amended by insertion of the aforesaid Explanation by Parliament in section 132 by the Finance Act, 2017 with retrospective effect from 1-4-1962. That Explanation also prohibits the Appellate Authorities to go into the reasons recorded by the concerned Income Tax Authority for directing Search against the assessee or tax payer. (iii) That this Amendment came after both, the Tribunal passed the order in the present case on 21-11-2014 as also the Commissioner (Appeals) passed the impugned order on 11-2-2015. Nonetheless, retrospective effect of the said Amendment, will have its effect on the present case as well so long that the said Amendment holds the field. Therefore, the Appellate Authorities of the department cannot be expected to go into the said question. It is only for the Constitutional Courts to examine the vires and validity of such Amendment and for that, a separate writ petition is already said to be pending. However, no such challenge to the Amendment has been made in the present case. [Pail 10]  In these circumstances, the impugned order passed by the Commissioner (Appeals) cannot be faulted and it stands to the reason for the Commissioner (Appeals) to have followed the Chattisgarh High Court's decision and refused to do so.  The assessee-petitioner obviously had an alternative, adequate and efficacious remedy against the said order passed by the Commissioner (Appeals) before the Tribunal again under section 253. There appears to be no justification for cutting short that regular remedy at this stage and to entertain these writ petitions on merits. [Para 13]  Awaiting the final decision from the Supreme Court in Civil Appeal No. 2734/2013 against the decision of Division Bench of this Court in C. Ramaiah Reddy's case (supra) and also in view of fact that the question of validity of Explanation is yet to be examined by the Constitutional

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Page 6 of 37 Courts, the Lower Appellate Authorities of the Income Tax Department cannot be expected to look into these questions of validity of search under section 132 at their own level independently. [Para 13]  The writ petitions being devoid of merit are accordingly dismissed. [Para 14] • If the assessee-petitioner files an appeal before the Income Tax Tribunal within a period of 30 days from today, the same may be entertained. [Para 15]”

3.3 In view of the above discussion, we are of the opinion that there is no merit in the argument of assessee’s counsel. Accordingly, ground No.2 is dismissed.

2.1 Without prejudice to the above, in the absence of seizure of any incriminating material in the search, the invocation of jurisdiction u/s.153A of the Act, is bad in law and consequently, the impugned assessment framed requires to be to be cancelled having regard to the ratio of the decision of the Hon'ble Karnataka High Court in the case of IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 (Karn)

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Page 7 of 37 4.1 Without prejudice to the above, the learned CIT[A] is not justified upholding the assessment made by invoking the jurisdiction u/s.153A of the Act, subsequently, results in assessing the income twice for the very same assessment year and consequently, even for argument's sake this income is liable to be assessed in the hands of the appellant, since such an assessment violates the rule of double taxation and therefore, the income assessed requires to be deleted on merits.

4.1 The crux of the above grounds is with regard to sustaining addition of Rs.60 Crores made on the basis of information collected from CBI authorities.

4.2 Facts of this case are that in this case addition of Rs.60 crores has been made as unexplained investment in M/s. Jagati Publications Pvt. Ltd., Hyderabad on the basis of statement given by assessee and one Mr. Navneet Kumar Singhania before CBI. Originally, this issue was considered by the revenue authorities vide order passed u/s 143(3) r.w.s. 147 of the Act dated 29.1.2016. This was subject matter of appeal before this Tribunal. This Tribunal in the assessee’s own case for the assessment year 2009-10, vide order No.355/Bang/2017 dated 15.6.2018 has deleted the addition by observing as under :-

“12. Having carefully examined the orders of authorities below in the light of rival submissions, we find that the sole basis for making an addition in the hands of the assessee is a statement of the assessee as well as Shri Navneet Kumar Singhania recorded by the CBI. It is a settled position of law that the statement recorded by the CBI or police authorities/investigating authorities cannot be made a sole basis for making additions. Moreover, the statement recorded by the police authorities are not admissible under evidence as per provisions of Section 25 of Indian Evidence Act, 1982 and also in the light of judgment of the Apex Court in the case of Zwinglee Ariel Vs. State of MP (supra). The information or the evidence collected from the CBI can be used by the AO for forming a belief that income chargeable to tax has escaped assessment in the hands of the assessee. But for making addition, some more efforts are to be required on the part of the AO. The stand of Revenue is that the assessee has given 60 crores to Shri Navneet Kumar Singhania for the

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Page 8 of 37 investment in 2 companies, i.e., M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., for acquiring the shares in Jagati Publications Ltd. On the basis of this information, the AO could have re-opened the assessment or make an enquiry in the affairs of both the companies to find out as to whether such amount of Rs.60 crores was ever invested or brought in the books of accounts of this company. If it was brought in those companies, source of the funds could have been examined by the AO but he did not do so. Before us, the copy of balance sheet of the companies of M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were filed and as per the schedule B, it is evident that M/s. Chandelier Tracon Pvt. Ltd., had acquired shares of Rs.31,12,00,000/- of Jagati Publications Ltd., and M/s. Sugam Commodeal Pvt. Ltd., had also acquired 28,58,00,000/- shares at the face value of Rs.10/-. Therefore, the total investment in shares by these companies in Jagati Publications Ltd., comes to Rs.52 crores but not 60 crores as alleged by the Revenue. It is the responsibility of the AO to dig out the truth about the source of investment in Jagati Publications Ltd., by M/s. Chandelier Tracon Pvt. Ltd., and M/s. Sugam Commodeal Pvt. Ltd. It is also an undisputed fact that during assessment year 200910 relevant to financial year 2008-09 the assessee was neither a shareholder nor connected in any manner with these companies and to controvert the stand of the assessee nothing has been brought by the Revenue on record. They were simply harping upon the statement recorded by the CBI without bringing any evidence from any corner. The Revenue has also taken a stand that shares of Jagati Publications Ltd., were finally acquired by the M/s. Avant Garde Fashion Wear Pvt. Ltd., from these two companies. But from perusal of the balance sheets of M/s. Avant Garde Fashion Wear Pvt. Ltd., it is noticed that this company has acquired 16,58,322 shares of Jagati Publications Ltd., @ 360/- per each share for a sum of Rs.59,84,92,020/-meaning thereby the entire shareholding of Jagati Publications Ltd., held by the M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were not acquired by M/s. Avant Garde Fashion Wear Pvt. Ltd., in which the assessee happened to be a Director. Therefore, AO has not brought any material on record to demonstrate that assessee has made the investment in Jagati Publications Ltd., by acquiring its shares during the impugned assessment year. The addition made by the Revenue authorities is only on the basis of the statement recorded by the CBI. It is also evident from the assessment order that the statement was not even confronted to the assessee during the course of assessment proceedings and assessee was also not even allowed to cross-examine Shri Navneet Kumar Singhania. From the careful examination of the assessment order we find that AO has made half- heartedly investigation on receipt of the information from the CBI. Once he got such a sensitive information from the CBI the onus of the AO is more and he should have examined the affair of all the three companies and if he finds anywhere that the substantial cash was introduced, that company should have been put on notice to explain the source of fund. If they failed to explain, the addition could have been made in their hands. But the AO did not make any efforts to investigate all these facts. By simply placing reliance upon the statement recorded by the CBI, he made an addition in the hands of the assessee knowing fully well that the statement recorded by the CBI cannot be held to be a good

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Page 9 of 37 piece of evidence in the court of law unless and until some corroborative independent evidence is collected by making necessary enquiry.

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Page 10 of 37 “Though the assessee was charge-sheeted on allegation of receipt of Rs. 17 lakhs but prosecution resulted into futility as the assessee was discharged of the offences by the Special Judge and the said decision was later on affirmed by the High Court and the Supreme Court on the ground that there was no evidence against the assessee except diary, note book and loose sheet with regard to payment and it was held that evidence of such a nature could not be converted into legal evidence against the assessee. Therefore, the very foundation of initiation of reassessment proceedings disappeared in the instant case and, accordingly, the addition would also not survive. There was no recovery made at the instance or persistence of the assessee. The revenue relied only upon diary and charge-sheet framed by the CBI. The whole case of the revenue would collapse the moment assessee was discharged of the sole allegation of receipt of Rs. 17 lakhs. The abbreviated form allegedly recorded in diaries was not explained by any material. It could resemble to name of other person also who was having similarity in name. Unless it was proved through corroborative evidence that entries were having any nexus with the assessee, addition could not be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appeared that findings of the Assessing Officer were, based on suspicion which could not take place of legal proof.

The Assessing Officer admitted before the Commissioner (Appeals) that the Department had no other evidence except those diaries. Therefore, it was a case of no evidence against the assessee as whatever evidence was available was not considered by the High Court and the Supreme Court to have any evidentiary value. No corresponding entries in the books of account or in the form of accretion in assets were found or proved by the Assessing Officer.

The Assessing Officer never produced 'J' before the assessee for cross examination. The assessee in his reply to the show cause notice before the Assessing Officer specifically requested to produce the persons who had made the statement against the assessee for cross- examination but no person was produced for cross-examination. Therefore, whatever material was collected at the back of the assessee could not be read in evidence against the assessee. It is settled law that if any material is collected by the income-tax authorities at the back of the assessee then opportunity to controvert the same should have been given to the assessee. Therefore, in the instant case, whatever material was collected by the Assessing Officer could not be read in evidence against the assessee. The fact was conceded by the Assessing Officer before the Commissioner (Appeals) that except the copies of the documents recovered by the CBI there was no other material found against the assessee.

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Page 11 of 37

The Supreme Court in its various decisions has held that the evidence is to be judged by considering the surrounding circumstances and by applying the test of human probabilities.

However, in the facts of the instant case, only diaries were recovered which were having only abbreviated forms without further explaining or mentioning anything and, therefore, it was not considered as evidence by the High Court and the Supreme Court. If the test of human probabilities was applied in favour of the assessee, then it could be inferred that 'X might have recorded the entries in abbreviated forms in diary without the knowledge of the assessee. Therefore, under such circumstances, the revenue would not be justified in making any addition against the assessee. Therefore, the revenue had no cogent or sufficient material evidence on record to support the findings of the Assessing Officer and, thus, there was no reason for interfering with order of the Commissioner (Appeals). It was to be accordingly, confirmed.”

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Page 12 of 37 “Section 112 of the Customs Act provides for the liability of penalty on any person who does not omit to do any act which would render such goods liable to confiscation under section 111, or who acquires possession of such goods or is in anyway concerned in the carrying, removing, deposing, keeping, concealing, selling or purchasing, etc., of such goods. As such, the person, liable for imposition of penalty under section 112, may be the person being in any way concerned with the goods which are improperly imported into India from outside. The above provision, in no way; requires the concerned person to be the owner of the goods. Under section 138A of the Customs Act, there is a provision for presuming in any prosecution for an offence under the Customs Act, requiring the culpable mental state on the part of the accused, that such accused had the required culpable mental state though the accused could furnish defence to rebut the said presumption. [Para 18] The contention of the revenue that the Customs Collector having had conducted the inquiry and having marshaled/ascertained the facts and then having passed his order under the Customs Act, the Assessing Officer; for framing assessment under the Act and for that purpose for making an addition under section 69A in the hands of the assessee in respect of the value of gold seized from KNJ by Customs officials, was not required to make any inquiry, seemed to be misplaced/fallacious, reflective of a non- understanding or misunderstanding of the very basic concept of judicial/quasi-judicial adjudication by a judicial or quasi-judicial authority. Although an Assessing Officer; while making an assessment, does not strictly act as a Court of law, but he acts in a quasi-judicial capacity and the proceedings before the Assessing Officer are, in general, in the nature of quasi-judicial, though for specific purpose, the same are 'deemed judicial proceedings' as provided in section 136. An Assessing Officer; being a quasi-judicial authority has to, while framing assessment, discharge his duty/function judicially and in that process, has to apply his own mind independently to the facts of the case, ascertained by him and then draw his own conclusion/ decision by appreciating the evidence/material brought/available on record before him; the Assessing Officer cannot base his conclusion/decision on the finding of any authority under any other Act/law and, thus, adopt the finding/conclusion of that authority. The decision to be drawn by the Assessing Officer has to be his own and independent one. It is clear from the provision of section 143(3) that the Assessing Officer could not base his decision on the findings/conclusions of Customs Collector drawn in his order under the Customs Act. [Para 21] As regards the statement of KNJ: the same too was not recorded by the Assessing Officer during assessment proceedings but was recorded by the Customs officials. The said statement was recorded at the back of the assessee and the assessee had not been allowed an opportunity to cross- examine 'KNJ' as regards the said statement. Besides, whatever be contained in the said statement of KNJ: the same had been retracted by KNJ' as was evident from his letters alleging that the same was recorded

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Page 13 of 37 forcibly and under threat and under influence and that the same was not voluntary. Moreover; 'KNJ; being himself involved in the unlawful transaction of carrying contraband gold, was a tainted witness whose testimony, even otherwise, might not be worth reposing credence therein or placing reliance thereon. As against the said statement of KNJ, there was also the statement of the assessee denying totally his involvement in connection with the said gold transaction. [Para 22] 'KNJ' having been found in possession of gold, prima facie, it was he who was to be treated as owner of the possession (gold) unless this presumptive inference was rebutted by proper/convincing evidence. There being no 'evidence' worth the name, the 'other material ' being the said statement of 'KNJ' and the order of Customs Collector, remained too feeble to entangle assessee as the owner of the said contraband gold, seized by the Customs officials from the possession of 'KNJ: [Para 23] For making an addition under section 69A, apart from ownership of the asset/valuable article, which is deemed to be the income of the assessee for that financial year; it is also a pre-requisite that such asset/valuable article 'is not recorded in the books of accounts' maintained by the assessee (if any). In the instant case, even if the department's factual allegations were assumed to be correct, the stage of recording the said seized gold in the books of account of the assessee could not be said to have arrived yet as the gold was stated to have been seized on the way when KNJ ' as bringing the same and, thus, the valuable article had not yet been brought to the assessee. [Para 24]”

16 .Similarly, in the case of First Global Stockbroking (P.) Ltd., Vs. ACIT 115 TTJ 173, the Tribunal has observed that simply on the basis of the statement of the third person to Enforcement Directorate that he had remitted funds to the assessee from abroad, it could not be held that amount had been remitted by assessee from undisclosed sources; more so, when an opportunity to cross-examine said person was not granted to assessee. In that case, the Enforcement Directorate has received the information that assessee had arranged 1,25,000 dollars, which was remitted to FGM Ltd., through hawala channel. In this connection, the Enforcement Directorate had recorded statement of one AS who in his statement had pointed out that he made the payment on behalf of the assessee. Addition to the assessee’s income had been made on the ground that AS had arranged the remittance of 1,25,000 dollars to FGM Ltd., on behalf of the assessee. Having examined the facts in the light of legal propositions, the Tribunal has held that if some amount is remitted to foreign company by any person how it can lead the authority to believe that amount was remitted only by the assessee. The Department could not find out who contacted AS and how that person was related to the assessee. There should be some more corroboration for putting the assessee under a burden of tax for the income of Rs.61,87,500/-. Simply on the basis of statement of a third person, it could not be held that the amount had been remitted by the assessee from undisclosed sources,

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Page 14 of 37 more so when an opportunity to cross examine said person was not granted to the assessee.

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Page 15 of 37 opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.”

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Page 16 of 37 4.3 The Ld. A.R. submitted that there is no seized material to frame assessment u/s 153A of the Act for this assessment year. Further, it was submitted that the impugned addition made by AO in this assessment year is not based on any incriminating material found in the course of search. According to the Ld. A.R., in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or re-assessment can be made. The word “assess” in section 153A of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word “re-assess” to the concluded assessment proceedings. He submitted that concluded assessment can be entered with by the AO while making the assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search, which are not produced or not already disclosed or made known in the course of original assessment. According to him, the assessment for 2009-10 has already been completed either by lapse of time to issue notice u/s 143(2) of the Act and no incriminating material unearthed u/s 132 of the Act and framing assessment u/s 153A of the Act is unwarranted. For this purpose, he relied on the judgement of Hon’ble jurisdictional High Court in the case of PCIT Vs. Delhi International Airport Ltd. in ITA No.322/2018 vide judgement dated 29.9.2021.

4.4 On the other hand, Ld. D.R. submitted that once the re- assessment is re-opened u/s 153A of the Act, the AO has been given the power to assess or re-assess the total income of 6 assessment years in question in separate assessment orders. The AO is empowered the reopen these proceedings and re-assess the total income, taking note of the undisclosed income, if any, unearthed

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Page 17 of 37 during the search. He has been entrusted with the duty of bringing into tax the total income of an assessee whose case is covered by section 153A of the Act, by even making re-assessment without any fetters. This means that there can be only one assessment in respect of each of those assessment years, in which both the disclosed and undisclosed income would be brought to tax. When once the proceedings are initiated u/s 153A of the Act, the effect is that even in case where the assessment order is passed stands reopened. In the eye of law, there is no order of assessment. Re-open means to deal with or begin with again. It means, the AO shall assess or re- assess the total income of 6 assessment years. Once the assessment is re-opened, the AO can take note of the income disclosed in the earlier return, any undisclosed income found during the search and also any other income, which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. Accordingly, he relied on the judgement of Hon’ble Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT 274 CTR 122. Further, she relied on the judgement of Hon’ble Kerala High Court in the case of E.N. Gopakumar Vs. CIT reported in 390 ITR 131, wherein held that statutes nowhere make it conditional that the department has to unearth some incriminating material to conclude some method against the assessee is events where the assessment is triggered by notice u/s 153A of the Act. This means that even when such notice is triggered following search, the assessment proceedings can be concluded in any manner known to law, including u/s 143(3) of the Act or even u/s 144 of the Act, if not be. Therefore, the assessment proceedings generated by the issuance of a notice u/s 153A of the Act can be concluded against the interest of the assessee including making additions even without any incriminating material being available against the assessee in the

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Page 18 of 37 search u/s 132 of the Act on the basis of which notice was issued u/s 153A of the Act.

4.5 We have heard the rival submissions and perused the materials available on record. In this case, the addition of Rs.60 crores as unexplained investment in M/s. Jagati Publications Ltd., Hyderabad on the basis of statement given by the assessee and one Shri Navneet Kumar Singhania before CBI as we discussed below:- “7.3 It is seen from the statements recorded by Sri Ratan Lath before Sri K. Praveen Kumar, Dy. Supdt. Of Police, CBI, Hyderabad on 12.3.2012 and the statements recorded of Sri Navneet Singhania recorded by the Deputy Commissioner of Income-tax Circle 2(3) Hyderabad on 28.2.2013 u/s 131 of the Income-tax Act 1961, though recorded by two different authorities of different departments, recorded of two different persons in two different places nd time throws out identical facts, as under:

Sl.No. Facts emerging from statement of Facts emerging from the statement 3rd Party Verifications & Sri Ratan Lath before the Sri K. of Sri Navneet Singhania recorded Remarks Praveen Kumar, Dy. Supdt. Of by the Deputy Commissioner of Police, CBI, Hyderabad on Income-tax Circle 2(3) Hyderabad 12.3.2012 on 28.2.2013 u/s 131 The assessee admitted to have given 1. In 2007, Mr. Ratanlal Babulal Lath Modus operandi explained cash of Rs. 60 crores to Sri Navneet called Navneet Singhania over why letters issued u/s Kumar Singhania, for the purpose of telephone and stated that there's a 133(6) of the Income-tax making investments in M/s. Jagathi requirement of transfer of funds by Act, 1961, to the investor Publications Pvt. Ltd., through the taking cash/cheque and issuing companies of Sugam companies M/s. Sugam Commodeal cheques because he had a Commodeal Pvt. Ltd. and Pvt. Ltd. and M/s. Chandelier Tracon requirement for such transfer. Chandelier Tracon Pvt. Ltd. Pvt. Ltd.. by the DDIT (Inv.) Accordingly, he transferred around Rs 60 crores to Sri Navneet discussed in this order came back un served. The Singhania, The bank accounts of M/s. Chandelier Tracon Pvt Ltd and notices would never get served as the investor M/s Sugam at Standard Chartered Bank (N.S. Road), State Bank of companies in Sugam and Chandelier are paper India (D companies used for the purpose of such routing of alhousie Brach) and Axis Bank (N.S. cash. Further, The investment in Jagathi Road) was used. The cash used to be given to certain parties with Publications by M/s. Sugam Commodeal and M/s. whom pending transactions has been shown. Cash was deposited in Chandelier Tracon is accounts of those companies and information in public after rotating the same through domain and the source of inter account cheques of their such investment is from companies, cheques were issued in the receipt of Rs. 60 crores the name of M/s. Chandelier or M/s by Sri Navneet Singhania from Ratan Lath. Sugam. Thereafter, we issued cheques in the name of M/s. Jagati 2 s Publications Pvt Ltd.

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Page 19 of 37 2. Sri Bimal Lohiya is the directors in Mr. Babulal Lath, father of Shri F a c t s a r e c o r r e c t . M r , B a b u la l L a t h M/s. Sugam Commodeal Pvt. Ltd. Ratanlal, was also a director of the w a s a Director in and M/s. Chandelier Tracon Pvt. above referred two companies, M/s Sugam Commodeal from Limited and that apart from the Sugam and M/s Chandlier at the 21.7.2008 to 07.07.2010 commission paid to Sri Singhania relevant point of time. Sri Babulal Lath was also no other amodnt was paid to Sri a Director in Chandelier Singhania Tracon Pvt. Ltd. from 21.7.2008 to 07.7.2010 as found from information in Public Domain. Sri Bimal Lohia is the director in M/s. Sugam Commodeal pvt. Ltd. and M/s. Chandelier Tracon Pvt. As verified from the Ministry of Corporate Affairs website 3. The aforesaid transactions made Admitted by Sri Ratan were only to accommodate the Lath and verified form amounts received through Shri the surrounding facts of Ratanlal Babulal Lath. routing through paper companies and investment in Sugam and Chandelier for ultimate investment in M/s. Jagathi Publications pvt. Ltd. Assessee reiterated in his statement 4. Sri Ratan Lath had given Sri Investigations discussed before Sri K. Praveen Kumar, Dy. Singhania Rs. 60 crores for the and the findings thereof Supdt. of Police, CBI, Hyderabad on purpose and routing of such capital discussed in the order 12.03.2012 that, the entire amount was done through paper companies confirmed the facts invested as share capital in M/s. for investment in Sugam and mentioned in the JagattiT7Publications Ltd amounting Chandelier for ultimate investment statements. It is a matter to Rs. 60 Crores, through M/s. in Jagathi Publications as discussed of record that, M/s. Sugam Commodea! Pvt Ltd and M/s. above. Sugam and Chandelier Chandelier Tracon Pvt. Limited, invested in Jagathi belong to him. Publications during FY: 2008-09 relevant to assessment year: 2009-10. The source of investments in these two companies were paper companies to whom notices u/s 133(6) issued by the DDIT (Inv.) came back un served and is ultimately linked with the fund of Rs. 60 crores provided by Ratan Lath to Navneet Singhania as per the statements not contested / disputed by the assessee. 5. Sri Navneet Singhania in his As per verification from MCA statement has mentioned that, website, it is seen that, Sri Mr. Ratanlal Babulal Lath called Beni Mundhra and Sri Sanjay him and stated that there is Kumar Chaturvedi was some problem and Sri Singhania Director of Chandelier Tracon should own up to companies Pvt. Ltd., Sri Jogendra

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Page 20 of 37 (Sugam and Chandelier). Sri Pradhan and Kamaljit Singh Singhania according to his was director of Sugam statement did not agree and told Sri Commodeal Pvt. Ltd. All thse Lath that the dummy directors directors are seen to have would resign from directorship and resigned corroborating the Sri Lath should manage the illegal statement of Sri Navneet deeds done by him on his own. Singhania. Sri Babulal Accordingly, the dummy directors Gananan Lth (father of Sri by name, Shri Jagan Pradhan, Shri Ragan Lath) was a director in S.K. I Charanjit Singh, Shri both these companies. Chaturvedi, Shri Beni Prasad Mundhra and Smt. Vandana Kar resigned from the directorships of M/s. Sugam and M/s. Chandlier respectively and the papers of said companies were handed over to Shri Ratanlal Babulal Lath.

4.6 The AO is not in possession of documents other than this statement received from the CBI. The contention of the Ld. D.R. is that the addition could be made on the basis of information collected from the CBI since there was a search in case of assessee u/s 132 of the Act on 7.1.2015. For better understanding, we will narrate the methodology of framing assessment u/s 153A of the Act as discussed by Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. Vs. Deputy Commissioner of Income-tax (23 taxmann.com 103) as follows:-

Scenario Scope of Section 153A 1. No return of income is filed by the Since no return has been filed, the entire assessee (whether or not time limit to file income shall be regarded as undisclosed return of income has expired. income.

Consequently, AO would have the authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3).

No requirement to restrict to documents found during the course of search. 2. Return of Income just filed by the Since return filed is even pending to be assessee – return yet to be processed u/s processed, the return would be treated as 143(1) – Time limit for issue of notice u/s pending before the AO. 143(2) not expired.

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Page 21 of 37 Consequently, AO would have authority/jurisdiction to assessee the entire income, similar to jurisdiction in regular assessment u/s 143(3). 3. Return of Income filed by the assessee – Since intimation is not akin to assessment return processed and intimation issued u/s and time limit for notice u/s 143(2) hs not 143(1) – Time limit for issue of notice u/s expired, even though return has been 143(2) not expired. processed, it will be case where return has not attained finality. Consequently, AO would have authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). 4. Return of income filed by the assessee. Return of income of the assessee shall be Intimation passed or not u/s 143(1) and treated as having being accepted and time limit for issue of notice u/s 143(2) has attained finality. AO loses jurisdiction to expired. verify the return of income Since, no assessment would be pending there would be no abatement of any proceedings. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search.

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Page 22 of 37 (a) Assess income that would validly be assessed in the pending proceedings u/s 147, and

4.7 Further, recently jurisdictional High Court considered all the judgements cited by Ld. D.R. in the case of PCIT Vs. Delhi International Airport Pvt. Ltd. Cited (supra) held as under after considering the judgements relied by the Ld. D.R.:- “8. We have carefully considered the rival submissions of the learned counsel for the parties and perused the material on record.

“Assessment in case of search or requisition.

153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 9 but on or before the 31st day of March, 2021, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years :

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

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Page 23 of 37

“10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the “total income” of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total

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Page 24 of 37 income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. ……………………. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the “total income” of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income….”

“5. We agree with the opinion of the Tribunal that additions could not have been made by the Assessing Officer without rejecting the books of account of the assessee, and also without there being any adverse comment made by the Assessing Officer with regard to the books of account that were maintained by the assessee, which were duly audited.

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Page 25 of 37 the concluded assessment, which is not permissible under the law. Merely because search is conducted in the premises of the assessee, would not entitle the Revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assesseee, on the basis of which assessment had been concluded, cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee.”

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Page 26 of 37 materials gathered in the course of proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings.

“14. Essentially, therefore, both the provisions contemplate search and requisition where the assessee is not likely to disclose his income. It appears that the object of both the provisions is to unearth the income which the assessee has not or is not likely to disclose. 15. On a plain reading of Sectioin153A of the Act, it is evident that the trigger point for exercise of powers thereunder 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 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

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Page 27 of 37 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.”

“8. Section 153A of the Act along with Section 153B and 153C replaced the “Post Search Block Assessment Scheme” in respect of any search under Section 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under: …………. 10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act

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Page 28 of 37 have been removed by the non obstante clause under Section 153A of the Act. Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act.

“26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under

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Page 29 of 37 Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO “shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order.”

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Page 30 of 37

“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (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.

ii. 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. iii. 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

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Page 31 of 37 discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.”

Relevant date 4.8 (i) In the present case, the assessee filed original return of assessment year 2009-10 on 19.08.09

(ii) Assessee filed revised return on 22.08.09

(iii) Time limit of issue of notice u/s 143(2) of the Act in case of above revised return is on or before 30.09.10

4.9 The search was took place on 7.1.2015. According to Ld. A.R,, the time limit to issue notice u/s 143(2) of the Act was already lapsed by the time search took place on 7.1.2015. He submitted that as on the date of search, time limit to issue a notice u/s 143(2) of the Act has been already lapsed and this assessment in the assessment year 2009-10 is already said to be concluded and as such, no notice u/s 153A of the Act could be issued to the assessee to frame assessment consequent to the search action u/s 132 of the Act. We have perused the case records where we found inventorize of cash found on 7.1.2015 to the tune of Rs.3,56,620/-. On 8.1.2015, there was inventorize of jewellery found during the course of search as below:-

Gold - 1385.55 gms. Diamonds - 8.46 Ct. Silver - 4.7 Kg. Further, there was a seizure of books of accounts as follows:- 1) Folder containing loose sheets numbered serially from 1 to 89 2) One more seizure folder containing loose sheets – 117 pages 3) Folder containing Annual Report of Jagati Publications Ltd. – 88 pages. 4) Box containing one external Hard disk.

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Page 32 of 37 4.10 There was also statement recorded u/s 132(4) of the Act on 8.1.2015. Thereafter, on 23.1.2015, there was recording of statement by assessee u/s 131(1A) of the Act. The recording of statement u/s 131 of the Act on 29.1.2015. The recording of statement u/s 131 of the Act on 26.2.2015. Further, the recording of statement u/s 131 of the Act on 17.3.2015. On the basis of above documents, the assessment for the assessment year 2009-10 was reopened u/s 153A of the Act and the present assessments were framed by AO on 22.12.2016. The contention of Ld. A.R. is that there were no material to reopen the concluded assessment. In our opinion, this argument of the assessee’s counsel cannot be upheld. Under section 153A of the Act the AO has been given the power to assess or re-assess the total of the assessment year in question including 6 years covering the block period. Consequently, there would be only one assessment order in respect of each 6 assessment years in which total disclosed and undisclosed income would be brought to tax. Even though assessment order has been passed u/s 143(1)(a) of the Act or u/s 143(3) of the Act, the AO would be required to reopen these proceedings and re-assess the total income taking notice of undisclosed income even found during the course of search and seizure operation. The fetter imposed upon the AO u/s 147 & 148 of the Act have been removed by the non-obstante clause u/s 153A of the Act. Being so, we are of the opinion that in cases where the assessment or re-assessment proceedings have already been completed and assessment orders have been passed, or the assessment has been lapsed by operation of law, which were subsisting when the search was made, the AO would be competent to reopen the assessment proceedings already made and determine the total income of the assessee. The AO while exercising the power u/s 153A of the Act would make the assessment and compute the total income of the assessee including undisclosed income,

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Page 33 of 37 notwithstanding the assessee had filed the return before the date of search which stood processed u/s 143(1)(a) of the Act. In other words, assessment can be reopened and addition can be made if undisclosed income is found during the search and seizure operation or any information received with regard to undisclosed income during the course of search action. There should be a live link between the seized material or information found during the course of search with regard to addition made by the AO in assessment framed u/s 153A of the Act. In the present case, we found that there were certain seized materials and information found during the course of search. However, there was no discussion by Ld. CIT(A) in her order and order of Ld. CIT(A) is very cryptic and from which we cannot make out a case whether she has considered all the seized material and information found during the course of search so as to come to her conclusion.

4.11 Further, while deciding the issue the Ld. CIT(A) also required to consider the judgement of Hon’ble jurisdictional High Court in the case of Canara Housing Development Company Vs. Deputy Commissioner of Income-tax cited (supra) wherein observed that once the assessment is reopened, the AO can take note of the income disclosed in the earlier return, which was unearthed during the search and income, which is not the subject matter of the aforesaid two income, in order to find out “what is the total income” of each assessment year and then pass the assessment order. For this purpose we refer para 11 of the judgement in the case of Canara Housing Development Company Vs. Deputy Commissioner of Income-tax cited (supra) wherein held as under:- “11. The Tribunal has proceeded' on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is

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Page 34 of 37 not the subject-matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A, of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the "total income" of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during, search and income which is not the subject-matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject-matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The Commissioner did not have jurisdiction to initiate any proceedings under Section 263 of the Act.”

4.12 In our opinion, the Ld. CIT(A) is required to examine the entire seized material and information found during the course of search and she has to give findings whether addition made by the AO in the assessment order framed u/s 153A of the Act were emanated from the seized material or information collected during the course of search action. With this observation, we remit the entire issue in dispute before us to the file of Ld. CIT(A) to reconsider the entire issue in the light of our observations. Accordingly, issue is remitted to the file of Ld. CIT(A) for passing a speaking order.

4.13 To sum up, the grounds of the appeal are disposed of as follows:-

(a) With regard to Ground No.2.1, the judgement of Hon’ble Karnataka High Court mentioned in the ground in the case of IBC Knowledge Park Ltd. cited (supra) have no application to the facts of

ITA No.157/Bang/2020 Sri Rathan Babulal Lath, Bangalore

Page 35 of 37 the present case, which was delivered in the context of applicability of section 153C of the Act. In the assessee’s case, the assessment was completed u/s 153A of the Act. (b) With regard to Ground No.3, the Tribunal in ITA No.355/Bang/2017 vide order dated 15.6.2018 has deleted the addition made in the course of re-assessment and that decision have no binding on this assessment framed u/s 153A of the Act. Being so, the plea of the assessee cannot be accepted on this reason. (c) With regard to Ground No.4, the issue relating to the merit of the additions is remitted back to the file of Ld. CIT(A) for fresh consideration. (d) With regard to Ground No.4.1, this argument of the assessee’s counsel is devoid of merits. Once the search took place as discussed in paras 4.8 to 4.11 above, the AO is bound to reopen the assessment of 6 years covering the block period. Further, the legal position that emerges on a perusal of section 153A and section 132 of the Act is as under :

(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 in respect of whom search was conducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.

(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise.

(iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to

ITA No.157/Bang/2020 Sri Rathan Babulal Lath, Bangalore

Page 36 of 37 assess and reassess the "total income" of the 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 assessment years in which both the disclosed and the undisclosed income would be brought to tax.

(iv) Although section 153A of the Act does not say that additions should he strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer, 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.

(v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassess- ment can be made. The word "assess" in section 153A of the Act is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to completed assessment proceedings.

(vi) In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A of the Act merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer.

ITA No.157/Bang/2020 Sri Rathan Babulal Lath, Bangalore

Page 37 of 37 (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.

Order pronounced in the open court on 5th Aug 2022

Sd/- Sd/- (Beena Pillai) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 5th Aug, 2022. VG/SPS

Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order

Asst. Registrar, ITAT, Bangalore.