K. G. KRISHNA,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(4), BANGALORE

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

These appeals by assessee are directed against the different orders of CIT(A) for the assessment years 2007-08 to 2012-13 dated 22.11.2019. The issue in all these appeals are common in nature, hence, these are clubbed together heard together and disposed of by this common order for the sake of convenience.

1.1 There was a delay of 34 days in filing the appeals for the assessment year 2007-08 to 2012-13. The assessee explained the

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delay by way of petition accompanied with affidavit for filing the appeals belatedly. It was explained that the assessee was totally occupied with the post search proceedings due to which the appeal orders received for assessment years 2007-08 to 2012-13 were completely lost of sight and the appeals could not be filed in time. It is only when the auditor of the assessee was contemplating to avail the benefit of scheme “Vivad Se Vishwas, 2020”, enquired about the status of the appeals with the assessee, it was learnt that appeal orders were already passed and time limit for filing appeal in all these assessment years before the Tribunal which has also been lapsed. Thereafter, the assessee was advised to file appeals against the first appellate orders by assessee’s auditors, consequently appeals were filed by delay of 34 days in all these assessment years and prayed to condone the delay.

1.2 We have heard both the parties on the issue of condonation of delay. In our opinion, the reasons explained by the assessee for delay in filing the appeals is found to be good and sufficient and accordingly we condone this short delay of 34 days and admit the appeals for adjudication.

2.1 Main grounds for AY 2007-08 in ITA No.307/Bang/2020:-

“1.The learned Commissioner of Income-tax (Appeals) has erred in partially confirming the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against

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the principles of natural justice and void-ab-initio was required to be quashed in toto instead of being confirmed. 2. In any case, the learned Commissioner of Income-tax (Appeals) has erred in rejecting the contention of the appellant that the application of section 153A of the Act lacked jurisdiction. The order passed by the Assessing officer is bad in law especially in the absence of satisfaction to be recorded before the issue of notice u/s 153A of the Act and such order is liable to be quashed. 3. In any case and without prejudice, the learned Commissioner of Income-tax (Appeals)has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted.

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2.2 Main grounds for assessment year 2008-09 in ITA No.308/Bang/2020:-

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application of section 153A of the Act lacked jurisdiction. The order passed by the Assessing officer is bad in law especially in the absence of satisfaction to be recorded before the issue of notice u/s 153A of the Act and such order is liable to be quashed.

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7.1 The learned CIT(A) has erred in confirming the action of the assessing officer in assessing the capital, gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain and same is to be accepted without any variation.

7.2 The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer amounting to Rs.1,65,336/- on account of cost of acquisition and cost of improvement in the absence of supporting evidence. The cost of acquisition and cost of improvement claimed is duly supported with documentary evidence and same is to accepted and the disallowance made is to be deleted.

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various additions made in the hands of the appellant be deleted and the interest levied is also to be deleted.”

2.3 Main grounds for assessment year 2009-10 in ITA No.309/Bang/2020:-

In any case and without prejudice, the learned 3. Commissioner of Income-tax (Appeals)has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted.

The learned CIT(A) has erred in confirming the action of 4. the assessing officer in adding a sum of Rs. 78,97,764/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as well as genuineness of the transaction. All the advances were duly confirmed by the creditors and received through banking channels. The conclusion of authorities below being wholly erroneous both on facts and law is to be rejected and the addition made is to be deleted.

5.1 The learned CIT(A) has erred in confirming the disallowance made by the Assessing officer to the extent of 50 percent of the expenditure debited to the profit and loss account amounting to Rs. 4,75,530/- on the ground that the appellant did not justify the expenditure claimed. The conclusion of

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authorities below being wholly erroneous, without any basis and purely adhoc in nature is to be rejected and the disallowance as made/sustained is to be deleted.

5.2 The learned CIT(A) has also erred in confirming the disallowance made by the Assessing officer amounting to Rs. 2,21,781/- being the loss on sale of Asset. On proper appreciation of facts, the disallowance as made/confirmed is contrary to facts and law applicable is to be deleted.

6.1 The learned CIT(A) has erred in confirming the action of the assessing officer in assessing the capital gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the 1w applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain under the head Short Term Capital Gain and same is to be accepted without any variation.

6.2 The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer amounting to Rs.66,47,430/- on account of cost of acquisition, selling expense and cost of improvement in the absence of supporting evidence. The cost of acquisition, selling expense and cost of improvement claimed is duly supported with documentary evidence and same is to accepted and the disallowance made is to be deleted.

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2.4 Main grounds for assessment year 2010-11 in ITA No.310/Bang/2020:-

4 The learned CIT(A) has erred in confirming the action of the assessing officer in adding a sum of Rs. 86,64,768/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as well as genuineness of the transaction. All the advances were duly confirmed by the creditors and received through banking channels. The conclusion of authorities below being wholly erroneous both on facts and law is to be rejected and the addition made is to be deleted.

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6.1 The learned CIT(A) has erred in confirming the action of the assessing officer in assessing the capital gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain under the head Long Term Capital Gain and same is to be accepted without any variation.

6.2 The-learned CIT(A) has erred in confirming the re- computation of profit as done by the Assessing officer amounting to Rs. 30,75,670/- on account of sale of land as against the Long term Capital Gain offered by the appellant amounting to Rs. 9,94,700/- and assessing the same under the head Business by i) disallowing the entire cost of improvement claimed by the appellant totalling to Rs. 15,84,240/- being interest on loan and Development expenses ii) disallowing the commission paid on sale of land iii) Denying the benefit of indexation on cost of acquisition. The action of the authorities below being wholly erroneous both on facts and law is to be negated and the Long term capital gain as offered by the appellant is to be accepted.

6.3 In any case, the CIT(A) has erred in confirming the action of Assessing officer in assessing the profit on sale of land amounting to Rs. 30,75,670/- under the head Business without reducing the Long term Capital Gain offered by the appellant. This action of authorities below amounts to double addition and same is to be deleted.

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6.4 In any case, the re computation of profit on sale of land as done/confirmed by the authorities below is erroneous and excessive.

The learned CIT(A) has erred in confirming the addition 7. .made by the Assessing Officer on account of unexplained cash credit amounting to Rs. 36,00,000/- u/s 68 of the Act On proper appreciation of facts and the law applicable, the addition made is wholly erroneous both on facts and law is to be deleted.

2.5 Main grounds for assessment year 2011-12 in ITA No.311/Bang/2020:-

“1. The learned Commissioner of Income-tax (Appeals) has erred in partially confirming the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against the principles of natural justice and void-ab- initio was required to be quashed in toto instead of being confirmed.

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appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted.

7.2 The learned CIT(A) has erred in confirming the re- computation of profit as done by the Assessing officer amounting to Rs. 1,61,82,436/- on account of sale of land as against the Long

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term Capital Gain offered by the appellant amounting to Rs. 13,68,000/- and assessing the same under the head Business by i) disallowing the entire cost of improvement claimed by the appellant totalling to Rs. 1,38,53,487/- being interest on loan and Development expenses ii) disallowing the commission paid on sale of land iii) Denying the benefit of indexation on cost of acquisition. The action of the authorities below being wholly erroneous both on facts and law is to be negated and the Long term capital gain as offered by the appellant is to be accepted.

The appellant denies the liability to pay interest u/s 234A 8. and 234B of the Act. The interest levied being wholly erroneous is to be deleted.

2.6 Main grounds for assessment year 2012-13 in ITA No.312/Bang/2020:-

“The learned Commissioner of Income-tax (Appeals) has 1. erred in partially confirming the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against the principles of natural justice and void-ab- initio was required to be quashed in toto instead of being confirmed.

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The learned CIT(A) has erred in confirming the action of 4. the assessing officer in adding a sum of Rs. 1,70,00,000/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as well as genuineness of the transaction. All the advances were duly confirmed by the creditors and received through banking channels. The conclusion of authorities below being wholly erroneous both on facts and law is to be rejected and the addition made is to be deleted.

The learned CIT(A) has erred in confirming the 5. disallowance made by the Assessing officer to the extent of 50 percent of the expenditure debited to the profit and loss account amounting to Rs.5,55,000/- on the ground that the appellant did not justify the expenditure claimed. The conclusion of authorities below being wholly erroneous, without any basis and purely adhoc in nature is to be rejected and the disallowance as made/sustained is to be deleted.

The learned CIT(A) has erred in confirming the action of 6. the assessing officer in adding a sum of Rs. 83,00,000/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not proved the cash deposits made in the bank accounts. On proper appreciation of facts and law applicable, the cash deposits are duly explainable. The addition as made/ confirmed is wholly erroneous is to be deleted.

Me appellant denies the liability to pay interest u/s 234A 7. and 234B of the Act. The interest Ivied being wholly erroneous is to be deleted.

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various additions made in the hands of the appellant be deleted and the interest levied is also to be deleted.”

Additional ground:-

“In any case the authorities below have erred in making/confirming the additions to income of the appellant. The additions as made/confirmed are not sustainable in law especially in the absence of incriminating material. Such additions made/confirmed are bad in law and additions made are to be deleted in entirety.”

3.1 We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide.

4.1 Additional evidences For assessment year 2007-08 in ITA No.307/Bang/2020:-

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Si. Particulars Page No. No. 1. Copy of Cash book for the period 01/04/2006 to 31/03/2007. 145 - 159

Copy of ledger extract of land at keragalli village 3. 168

Copy of First Information Report. 8. 199 - 203

4.2 Additional evidences for assessment year 2008-09 in ITA No.308/Bang/2020:-

SI. Particulars Page No. No. 1. Copy of Cash book for the period 01/04/2007 to 31/03/2008. 102-111 2. Copy of Ledger extracts of relevant expenditure debited to profit 112-124 and Loss Account for the year

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138-142 6. Ledger extract of A N Nanjaiah along with relevant bank account extract and confirmation letter 143-147 Ledger extract of N C Mahesh along with confirmation of 7. transactions. 148 8. Copy of letter dated 12.01.2015 filed with Assessing officer by N C Mahesh 149-152 9. Memorandum of understanding dated 18.04.2007

4.3 Additional evidences for assessment year 2009-10 in ITA No.309/Bang/2020:- Particulars Page No. SI. No. 1. Copy of Cash book for the period 01/04/2008 to 31/03/2009. 415-426 2. Copy of Ledger extracts of relevant expenditure debited to profit 427-443 and Loss Account for the year

444 Copy of Journal Voucher 3.

568 5. Ledger extract commission on Gollahalli Sites

Copy of Journal voucher and ledger extract of Land at 6. Bhugathahalli Village 569-571

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4.4 Additional evidences for assessment year 2010-11 in ITA No.310/Bang/2020:-

Si. Particulars Page No. No. 1. Copy of Cash book for the period 01/04/2009 to 31/03/2010. 411-429 2. Copy of Ledger extracts of relevant expenditure debited to profit and Loss Account for the year 430-448

Ledger extract of Narsimhamurthy K N along with relevant Bank 3. 449-459 extract for acceptance loan and repayment thereof.

467-468 6. Ledger extract of Sites at Oorkere

4.5 Additional evidences for assessment year 2011-12 in ITA No.311/Bang/2020:-

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Si. Particulars Page No. No. 1. Copy of Cash book for the period 01/04/2010 to 31/03/2011. 851-865 Copy of Ledger extracts of relevant expenditure debited to profit 2. 866-874 and Loss Account for the year Copy of ledger extract A N Nanjaiaya along with relevant bank 3. 875-878 extract for receipt and repayment of loan along with copy of bank statement 879-881 4. Ledger extract of Oorkere sites

4.6 Additional evidences for assessment year 2012-13 in ITA No.312/Bang/2020:- Page No. Si. Particulars No. 1. Copy of Cash book for the period 01/04/2011 to 31/03/2012. 172 — 180

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assessment or at the time of first appellate authority. In these circumstances, assessee has no remedy except to file these additional evidences before this Tribunal. In our opinion, the action of the assessee is bonafide as the assessee was prevented by sufficient cause in not filing these documents during the course of assessment as well as first appellate stage. Being so, in our considered view, in the given facts and circumstances of the case, it is appropriate to admit these additional evidences for adjudication in the interest of justice. Accordingly, these additional evidences are admitted for the purpose of adjudication.

6.1 This ground is agitated by assessee in main ground No.2 read with additional ground herein above.

6.2 Facts of the issue are that assessee is an individual engaged in business of real estate. There was a search action u/s 132 of the Act on 5.11.2012 in the group case of Shri K.G. Krishna. During the course of search, the residence of Shri K.G. Krishna, located at “Jai Krishna Nilaya, No.1680/55, 5th Cross, 10th Main, 2nd Block, Mysore Bank colony, Banshankari, Bengaluru 560 050” was searched. According to the AO, consequent to the search operation carried out by the Income tax authorities, various incriminating documents were also found and seized in the said residence of the assessee. The assessment for assessment years 2007-08 to 2012-

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13 (6 years) has been framed. Now the contention of the Ld. A.R. is that there is only seized material relating to the assessment years 2007-08 were found during the course of search action in the case of the assessee. There were no seized materials for the assessment years 2009-10, 2010-11 & 2011-12. In the case of assessment years 2008-09, no incriminating materials found in the course of search of assessee’s premises. However, on the basis of materials found at the search, in the case of N.C. Mahesh were used to make an addition of Rs.3,55,00,250/- in the assessment year 2008-09. According to the Ld. A.R., this assessment for assessment year 2008-09 ought to have been completed u/s 153C of the Act instead of 153A of the Act. With regard to the assessment year 2012-13, it was submitted that originally assessee has not filed return of income and there is a time limit to file a return of income for the assessment year 2012-13 on the date of search I.e. 5.11.2012. As such, the framing of assessment in all these assessment years except assessment year 2007-08 were invalid. Ld. A.R. relied on the following judgements:-

1) “DCIT Vs. Aggrawal Entertainment Pvt. Ltd. 72 Taxmann.com 340, wherein it was held as follows:- 2) "21. Turning to the fact of the case we find that undisputedly no incriminating material was found during the course of search and these averments in this regard were not disputed by the Revenue. Isis also a fact that original assessment was completed as return of income was filed on 19.01.2003and the return was processed under section 143(1) of the Act. Thereafter, notice under section 153Aof the Act was issued on 18.06.2014. Since the time for issuing of notice under section 143(2) of the Act against the original return has been expired it is deemed that the assessment was concluded and by issuing notice under section 153A, the Revenue intent to reopen the concluded assessment without

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having any incriminating material found during the course of search. In the absence of any incriminating material, proceedings under section 153A cannot be initiated and the concluded assessment cannot he reopened. Therefore, we have no hesitation in holding that proceeding initiated under section 153A are not valid and we accordingly find ourselves in agreement with the order of the CIT(A) and rightly knock down the assessment completed under section 153A of the Act. We therefore confirm his order."

2) PCIT Vs. Arvind Joshi & Co., Gujarat High Court in which it was held as under:-

“In the opinion of this court considering the fact that it is settled legal position that in case of unabated assessment under section 153A(1)(b) of the Act, unless such assessment is based upon incriminating documents seized/impounded during the course of search, no addition can be made, no infirmity can be found in the impugned order passed by the Tribunal in upholding the order passed by the Commissioner (Appeals). In the absence of any legal infirmity in the impugned order, the same does not give rise to any question of law, much less, a substantial question of law, warranting interference.”

3) Om Prakash Gupta Vs. ACIT ITA Nos.277 to 281/Indore/2017 dated in which it was held as under:-

"The Hon'ble High Court of Gujarat in the case of PCIT Vs. Desai Construction (supra) confirmed the view taken by the Tribunal upholding the contention of the assessee that as no incriminating material was found during the course of search which could have enabled the Assessing Officer to re-examine its claim for deduction u/s 801B which was part of the assessment prior to the search and such assessment unabated. Similarly Hon'ble High Court of Bombay in the case of Continental Warehousing Corporation and All Cargo Global Logistics Ltd (Supra) confirmed the view taken -by the

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Special Bench of 1.T.A.T. Mumbai Bench decided in favour of assessee dismissing the revenue's appeal holding that there was no incriminating material found during the course of search, the Tribunal was right in holding the power conferred u/s 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision". 10. Similar view was also taken by the Hon'ble High Court of Delhi in the case of Kabul Chawla (2015) 61 taxmann 412.

4) In the case of Delhi International Airport Vs. Deputy Commissioner of Income-tax decided by Bangalore bench of ITAT in ITA No.592 to 594/Bang/2017 in which it was held as under:- “Assessment framed u/s 153A of the Act in the absence of incriminating material is bad in law in the case of unabated and completed assessments.”

6.3 Ld. D.R. submitted that in view of the judgement of Hon’ble Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT (274 CTR 122)(Kar), wherein it was held that

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once the assessment is validly reopened, AO has to take into account all the 3 types of income to complete the assessment or reassessment, as the case may be. The 3 types of income are:

1) Income disclosed in the return of income 2) Undisclosed income during the search 3) Any other income which is not disclosed in the earlier return and not unearthed during the search.

6.4 According to the Ld. D.R., there is an incriminating material found during the search u/s 153A of the Act and all the 3 types of income has to be assessed by the AO in view of the judgement of Hon’ble Karnataka High Court cited (supra) and the condition precedent for application of section 153A of the Act is completely fulfilled. Accordingly, the assessment was framed u/s 153A of the Act in all these 6 assessment years which has to be upheld.

Assessment year 2007-08:-

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Sl.No. Addition Details made by AO (in lacs) 1 Unexplained opening capital 33.29 2. Agricultural income declared by the assessee treated as 12.60 taxable income 3. Disallowance of expenditure claimed by assessee 5.67 disallowed on adhoc basis 4. Capital gain treated as business Income 1.60 5. Unexplained investment 200 253 Total

8.2. However, in this case there was a seized material to the addition made in respect of unexplained investment of Rs.2 crores which has been discussed by the AO in para 7 of the assessment order, wherein during the course of search operation one agreement of sale entered between assessee and Shri R. Sundar Raj for purchase of property situated at survey No.8, Khatriguppa village, measuring 10320 sq.ft. Was found and seized. As per this agreement, the total consideration was Rs.2 crores and it was paid in cash. The agreement was confronted to the assessee by the search team and statement was recorded u/s 131(1A) of the Act on 22.12.2012. The assessee has categorically stated in his statement that this agreement was not acted upon. No cash has been paid. However, an agreement was entered with Shri R. Sundar Raj on 18.5.2006 and another agreement was entered on 6.6.2006 with the same person in respect of same scheduled property and assessee paid Rs.1.5 crores only by cheque drawn on Indian Bank account and this amount was financed to the assessee by KCS Investment Consultancy Pvt. Ltd. According to the Ld. A.R., the assessment cannot be framed on the basis of agreement dated 8.5.2006, which is only a dummy document and which is not acted upon. More so, on said date Shri R. Sundar Raj is not at all owner of the said property. Actually, he bought that property from Shri

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Bhavani Housing Co-operative Society vide sale deed dated 19.5.2006 only. Therefore, by no stretch of imagination first agreement of sale could have been entered into on 18.5.2006 when Shri R. Sundar Raj was not even owner of the site on this day. In any case, Mrs. Sundar Raj never was owner of the said site No.8. This is the reason as to why the first purported agreement dated 18.5.2006, the history of the acquisition of the property is not mentioned in the preamble to the agreement, whereas mentioning of such history is must in all said agreements of sale. Thus, it was submitted that the transaction with Shri R. Sundar Raj is under any litigation and same has been contested by the assessee in the court of law with regard to title of property and for defrauding the assessee and also paid an amount of Rs.1,50,02,990/- by way of cheque which is evident from the additional evidence filed by the assessee at page 191 of the paper book relating to the assessment year 2007-08.

Findings:-

Assessment year 2007-08:-

8.3. The scope of provisions of section 153A of the Act could be summarized as follows as per the order of the Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. Vs. Deputy Commissioner of Income-tax (23 taxmann.com 103):-

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

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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 Since return filed is even the assessee – return yet to be pending to be processed, the processed u/s 143(1) – Time return would be treated as limit for issue of notice u/s pending before the AO. 143(2) not expired. 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 Since intimation is not akin to assessee – return processed and assessment and time limit for intimation issued u/s 143(1) – notice u/s 143(2) hs not expired, Time limit for issue of notice u/s 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 Return of income of the assessee assessee. Intimation passed or shall be treated as having being not u/s 143(1) and time limit for accepted and attained finality. issue of notice u/s 143(2) has AO loses jurisdiction to verify the expired. 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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Accordingly the scope of assessment under section 153A would cover the pending return filed as well and would not be restricted to incriminating material found during the course of search. 6. Assessment u/s 143(3) Since regular assessment completed. proceedings have been completed & are not pending, there would be no abatement of proceedings.

AO loses jurisdiction to review the completed assessment. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 7. Proceedings u/s 147 pending Pending where: assessment/reassessment (a) Assessment originally proceedings u/s 147 would completed u/s 143(3) abate and would OR converge/merge in proceedings (b) No assessment earlier u/s 153A. completed u/s 143(3) Accordingly, the powers of the AO, in both the cases, shall extent to: (a) Assess income that would validly be assessed in the pending proceedings u/s 147, and

In the light of above, we will examine the facts of present case. In the case in hand, there was seized material found during the course

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of search action which were marked as A/KGK/1 to 5 and A/KGK- 1/1. Out of this, one sale agreement entered by the assessee with Shri R. Sundar Raj was found. On this basis, an addition of Rs.2 crores has been made. In case of assessment u/s 153A of the Act, the completed assessment can be tinkered if there is incriminating material found during the search. Therefore, in the present assessment year there are incriminating material in the form of above agreement to reopen the concluded assessment u/s 153A of the Act. Therefore, AO is justified in invoking the provisions of section 153A of the Act to open the completed assessment and the sufficiency of seized material to reopen the assessment cannot be challenged by assessee at this stage and he may question the additions made on the basis of seized material separately. Accordingly, framing assessment u/s 153A of the Act is upheld in the assessment year 2007-08. This legal ground is dismissed in this AY 2007-08.

Assessment year 2008-09:-

Sl.No. Details Addition made by AO (in lacs) 1 Agricultural income 12 2. Disallowance of expenditure debited in the 2.74 P&L account on adhoc basis 3. Treatment of capital gain as business income 1.65 4. Unexplained cash credit u/s 68 of the Act 236 5. Disallowance of unexplained expenditure 380 Total 632.73

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9.1. Ld. A.R. submitted that the above addition of Rs.380 lakhs is based on the seized material found during the course of search action in the case of N.C. Mahesh and no material found during the search action in the case of assessee. Being so, the assessment cannot be framed u/s 153A of the Act.

Findings:- 9.2. In this assessment year there is a seized material found and seized during the course of search action u/s 132 of the Act in the case of N.C. Mahesh which is marked as A/NCM/2, which is a loose slip, which shows various payments made by assessee to N.C. Mahesh. Thus, AO relied on the seized material procured during the course of search in the case of N.C. Mahesh for making addition of Rs.3,80,00,250/-. In this assessment year AO inter-alia framed the assessment as follows:-

9.3 The contention of the Ld. A.R. is that all the above additions except addition of Rs.3,80,00,250/- is based on no seized material. The addition of Rs.3,80,00,250/- is only based on the seized

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material which was procured not in the course of search operation of in assessee’s case. 9.4 On the other hand, it was the seized material in the form of loose slips procured from the search in the case of assessee’s close relative N.C. Mahesh. Further contention of A.R. is that in the case of assessee, there was search u/s 132 of the Act on 5.11.12 relevant to this assessment years 2008-09 no seized material unearthed from the possession of the assessee during the course of search action. As such the assessment in this case cannot be framed u/s 153A of the Act and assessment not to be framed u/s 153C of the Act as the seized material procured is from the search in the case of other person i.e. N.C. Mahesh. According to Ld. A.R., since in the present case the assessment was framed u/s 153A of the Act, which is bad in law, same to be quashed. In this case after search, notice u/s 153A of the Act, was issued and the assessment was framed there under by the AO during the same period. There was search in the case of N.C. Mahesh and in that case a loose slip A/NCM/2 was found and seized. On that basis, the addition of Rs.3,80,00,250/- was made. As per second proviso to section 153C of the Act, the assessment proceedings pending u/s 153A of the Act in the case of assessee before AO would abate on the date of receipt of the seized material from the AO of Shri N.C. Mahesh and fresh proceedings u/s 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information/materials, the AO did not assume jurisdiction u/s 153C of the Act, but rather chose to use the said materials/information for making addition in the impugned orders of assessment concluded u/s 153A of the Act. This has been clearly mentioned by the AO in the assessment order in para 5 in

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pages 6 & 7 of the assessment order. In our opinion, the argument of assesseé’s counsel has no legs to stand on the reason that section 153C of the Act starts with non-absentee clause as follows:

“153C(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A”.

9.5 Being so, the assessment in this case was to be completed u/s 153A of the Act and the AO was under a statutory obligation to consider entire material irrespective of the place from where it was found whether assessee’s own place or some other place. There cannot be two assessments in case of searched party, one u/s 153A of the Act and another u/s 153C of the Act. At this point, it is appropriate draw support from judgement of jurisdictional High Court in the case of Canara Housing Development Company Vs. DCIT (274 CTR 122), wherein held as follows:-

“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

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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 Lhe 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 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-j 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

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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.”

9.6 Further, jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. In ITA No.322/2018 vide judgement dated 29.9.2021, wherein it was held as under:- “30. Thus, it is clear that the Assessing Office: while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that. the finalized assessments are contrary to the material unearthed during the, course of 153A proceedings, as held by the Co- ordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra. "54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing

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Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person as observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. But, at the same time, such can be at three stages: one, at the stage when. the re- assessment is initiated, the second, at the stage during the course of reassessment and third, at u stage where the reassessment is altered by a different assessment in respect of searched person or in respect of third party. In this regard, reference may be made to the decision of Apex Court in case of M/ s. Calcutta Knitwear (supra) and based on the said decision, the CJ3DT has also issued circular dated 31.12.2015 vide No.24/ 2015.The relevant extract of the circular for ready reference can be extracted as under: “…………………..”” As regards the pending assessments are concerned only one assessment shall be made separately for each assessment year on the basis of the income unearthed during search and any other material existing or brought on the record of the Assessing Officer. Even in the absence of any incriminating material abated „Assessment or reassessment could be done. The returns filed under Section 139 of the Act gets replaced by the returns filed under Section. 15:3A[I] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction. For the reasons aforesaid, substantial question of law in ITA Ncs.322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No.1 in ITA Nos.380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos.1 and 2 in ITA No.381/2018 are answered in favour of the assessee and against the Revenue.

Substantial question of Law No.2 in ITA Nos.380/2018, 383/2018 to 385/2018 is squarely covered by the ruling of the coordinate Bench of this 'Court in ITA No.352/2018 and connecter? matters (DI) 25.05.2021) wherein the said substantial question of law has been answered ir favour of the assessee and against the Revenue.

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Substantial question of law No.2 in ITA No.382/2018 and substantial question of law No.3 in ITA Nos.380/2018, 383/2018 to 385/2018 does not arise for our consideration since the same are not pressed by the Revenue.

Appeals stand disposed of accordingly.”

9.7 Being so, it cannot be said that Hon’ble High Court has distinguished the judgement in the case of Canara Housing Development Company (supra) in the above judgement and the ratio laid down in the case of Canara Housing Development Company still holds good. The assessment can be made u/s 153A of the Act in respect of each of the six assessment years, in which both the disclosed and undisclosed income would be brought to tax. U/s 153A of the Act, assessing officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during search. After such reopening of the assessment, the AO is empowered to assess or reassess the total income of the six years. The condition precedent for application of section 153A of the Act is there should be a search u/s 132 of the Act. Initiation of proceedings u/s 153A of the Act is not dependent on any undisclosed income being unearthed during search. The proviso to the aforesaid section makes it clear that AO shall asses 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 sub-section of section 153A of the Act on the date of initiation of the search u/s 132 of the Act, the said proceedings shall abate. If such proceedings are already concluded by the AO, by initiation of proceedings u/s 153A of the Act, the legal effect is that assessment gets reopened. The block

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assessment roped in, only the undisclosed income, and the regular assessment proceedings were preserved; resulting in multiple assessments. U/s 153A of the Act, however, the AO has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. When, once the proceedings are initiated under the 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. Reopen 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 the 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 fresh assessment order. Therefore, it cannot be said that, there could be two assessments in case of the same assessee, one u/s 153A of the Act and another u/s 153C of the Act. 9.8 In our opinion, there can be only one assessment order in respect of each of six assessment years in which both disclosed and the undisclosed income would be brought to tax as held by jurisdictional high court in the case of Canara Housing Development Company cited (supra). 9.9 This ground of appeal of the assessee is dismissed in AY 2008-09. Assessment year 2009-10:-

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Addition Sl.No. Details made by AO (in lacs) 1 Disallowance of expenditure charged to P&L 6.97 Account on adhoc basis 2. Treatment of capital gain as business income 66.47 3. Unexplained investment 20 4. Unexplained cash credit 78.97 5. Total 172.42

10.1. The Ld. A.R. submitted that in this assessment year there is no seized material whatsoever. The AO is only considering the income disclosed in the return of income filed by assessee before search as additional income which cannot be possible without any seized material. She submitted that had it been there in seized material to show the above income as an additional income, the AO should have made an addition. According to her in the assessment year in 2009-10, there is no seized material of whatsoever to frame the assessment. Further, she submitted that the assessee has filed the original return of income on 9.5.2011. Time limit to issue notice u/s 143(2) of the Act was 30.9.2012. The case was not selected for scrutiny and there was no assessment u/s 143(3) of the Act. The assessment was already concluded for this assessment year and in view of the judgment of jurisdictional High Court in the case of Delhi International Airport cited (supra), the AO cannot frame the assessment without an iota of seized material in the present assessment year 2009-10. Accordingly, she prayed that assessment order to be quashed on this reason alone.

10.2. The Ld. D.R. relied on the order of the Ld. CIT(A).

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Findings:- 10.3. In assessment year 2009-10, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in this case filed original return of income on 9.5.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 6 assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A of the Act will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The argument of the Ld. Counsel is that in this assessment year, notice to issue u/s 143(2) was already lapsed as on the date of search, no assessment could be made without basis of incriminating material found during the course of search. We find force in the argument of Ld. Counsel for the assessee in this assessment year 2009-10, the addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the

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department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. Further, Hon’ble Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. Vs. CIT (382 ITR 346) had held that “unless material seized during the course of search which suggest undisclosed income and are incriminating in nature, jurisdiction u/s 153C of the Act cannot be assumed. Further, in the case of Principal CIT Vs. Delhi International Airport Pvt. Ltd. in ITA No.322/2018 vide judgement dated 29.9.2021, the jurisdictional High Court followed the earlier judgement in the case of IBC Knowledge Park Pvt. Ltd. (supra). It is relevant to refer para 10 of the above judgement in the case of Delhi International Airport Pvt. Ltd. (supra) which reads as follows:-

“30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143(3) of the Act, ordinarily cannot disturb the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Coordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd. supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good…………………..” 10.4 The judgment of the Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla reported in (2016) 380 ITR 573 (Delhi) had summarized the legal position as regards assessment u/s 153A of the Act, as follows:-

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"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 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six A Ys immediately preceding the previous year relevant to the A Y 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 afresh 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 153A 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 A Y on the

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basis of the findings of the search and any ether material existing or brought on the record of the AD. vi. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 10.5 The Hon’ble jurisdictional High Court in the case of Pr.CIT v. M/s.Delhi International Airport Pvt. Ltd. (supra) had also referred to the judgment of the Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla (380 ITR 573) (Refer para 20 of the Karnataka High Court judgment). From the above judicial pronouncements, cited supra, it is clear that the assessments which are not pending and hence does not abate, the addition can be made only on the basis of incriminating material found during the course of search.

10.6 Therefore, as mentioned in the judgement of jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. (supra), it is clear that, in case of persons searched, the assessment for those assessment years where the assessments are concluded as on the date of search, cannot be disturbed unless incriminating material pertain to such assessment year is found and seized during the course of search. Hence, in our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2009-10 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of

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income. Accordingly, we quash the assessment for the assessment year 2009-10.

Assessment year 2010-11:-

Sl.No. Details Addition made by AO (in lacs) 1 Disallowance of expenditure debited to P&L account on 8.5 adhoc basis 2. Treatment of capital gain as business income 30.75 3. Unexplained cash credit 36 4. Unexplained cash credit 86.64 5. Total 161.91 11.1. The Ld. A.R. submitted that the assessee has filed original return for the assessment year 2010-11 on 1.9.2011 and the notice u/s 143(2) of the Act could have been issued on or before 30.9.2012. The case was not selected for scrutiny and no notice u/s 143(2) of the Act was issued. No assessment was framed. According to her this is a concluded assessment and submitted that concluded assessment cannot be reopened without any seized material since in the assessment year under consideration, there is no seized material to reopen the concluded assessment. Accordingly, she prayed that assessment order in this case to be quashed.

11.2. The Ld. D.R. relied on the order of the lower authorities. Findings:- 11.3. In assessment year 2010-11, the additions made by AO not based on any seized material found during the course of search

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action in the case of assessee. The assessee in this case filed original return of income on 1.9.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 6 assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A of the Act will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The argument of the Ld. Counsel is that in this assessment year, notice to issue u/s 143(2) was already lapsed as on the date of search, no assessment could be made without basis of incriminating material found during the course of search. We find force in the argument of Ld. Counsel for the assessee in this assessment year 2010-11, the addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed

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by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2010-11 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. Accordingly, as discussed in assessment year 2009-10 on this issue, we quash the assessment for the assessment year 2010- 11 on similar lines.

Assessment year 2011-12:- 12. With regard to assessment year 2011-12, addition made by the AO is as under: Sl.No. Details Addition made by AO (in lacs) 1 Agricultural income declared by the assessee 41.23 treated as taxable income 2. Adhoc disallowance of expenditure debited to 5.45 the P&L account 3. Capital gain treated as business income 161.82 4. Unexplained cash credit 5 5. Total 213.5

12.1. The Ld. A.R. submitted that in this assessment year assessee filed original return on 15.12.2011. Time limit of issue of notice u/s 143(2) of the Act was on or before 30.9.2012. The case was not selected for scrutiny. No assessment order was framed u/s 143(3) of the Act. The assessments were already concluded by the operation of law being these are concluded assessments, which

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cannot be reopened without any iota of seized material. She submitted that in this assessment year 2011-12, there was no seized material during the course of search action. In the case of assessee no assessment could be framed u/s 153A of the Act in the absence of seized material in the case of concluded assessment.

12.2. The Ld. D.R. relied on the order of the lower authorities.

Findings:- 12.3. In assessment year 2011-12, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in this case filed original return of income on 15.12.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 6 assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A of the Act will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed

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income or property discovered in the course of search. The argument of the Ld. Counsel is that in this assessment year, notice to issue u/s 143(2) was already lapsed as on the date of search, no assessment could be made without basis of incriminating material found during the course of search. We find force in the argument of Ld. Counsel for the assessee in this assessment year 2011-12, the addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2011-12 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. Accordingly, as discussed in assessment year 2009-10 on this issue, we quash the assessment for the assessment year 2011- 12 on similar lines.

Assessment year 2012-13:-

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issue of notice u/s 153A of the Act. Being so, the assessment order to be quashed. Findings:- 13.1. In this assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid.

13.2. Conclusion on legal issue:- The assessment for the assessment years 2009-10, 2010-11 and 2011-12 has been quashed on the basis that there was no seized material to frame assessment u/s 153A r.w.s. 143(3) of the Act as these assessments were not pending as on the date of assessment and these are already concluded assessments, which cannot be reopened without any seized materials.

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15.1 The assessee shown opening balance in this assessment year at Rs.59,41,764/- in the balance sheet as on 1.4.2006. Income for the assessment year 2004-05, 2005-06 & 2006-07 are Rs.16.3 lakhs, Rs.44.39 lakhs and Rs.4.89 lakhs respectively, which total works out at Rs.26.12 lakhs. The assessee was asked to explain the opening balance vide letter dated 5.1.2015. According to the AO, assessee not explained the accumulation of opening capital. Accordingly, he considered an amount of Rs.26.12 lakhs which has been explained by the assessee and balance Rs.33.29 lakhs has not been explained by the assessee. Accordingly, he made addition of Rs.33.29 lakhs. The Ld. CIT(A) confirmed the same. Against this assessee is in appeal before us.

15.2. We have heard the rival submissions and perused the materials available on record. In this case, the addition was made only on the reason that opening capital has not been explained by the assessee in the relevant assessment year. In our opinion, AO cannot make any addition on the basis of carry forward opening balance. In case had he any doubt, he could have questioned only in the earlier assessment year prior to assessment year 2007-08 not in the assessment year 2007-08. Accordingly, addition made by AO is deleted.

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16.1 In these assessment years, assessee declared agricultural income and AO made addition towards agricultural income in these assessment years as follows:- Assessment Agricultural Agricultural year income income treated declared by as non- the assessee agricultural (in lacs) income by the AO (in lacs) 2007-08 14.60 12.60 2008-09 14.06 12 2009-10 6.21 -- 2010-11 7.74 -- 2011-12 47.23 41.23 2012-13 6.38 --

16.2. We have heard the rival submissions and perused the materials available on record. In assessment year 2011-12, assessment is already concluded and there is no seized material which shows the agricultural income as non-agricultural income. Being so, addition cannot be made.

16.3 In assessment years 2007-08 & 2008-09 though there was seized material relating to some other particular additions, there is no seized material with regard to showing the agricultural income as non-agricultural income in these two assessment years.

16.4 The AO not brought any material to suggest that the income declared by the assessee as an agricultural income is earned from any other unknown sources. The AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that

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income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties. In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi Vs. ACIT in ITA No.5652 to 5654/Del/2017 dated 17.3.2022, it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of search. Since the decision of the assessment officer to treat the agricultural income as income from other sources which is not based on incriminating material seized during the course of search action, no addition or disallowance could be made. Accordingly, addition is deleted in these two assessment years 2007-08 & 2008-09.

17.1 These findings in AY 2009-10, 2010-11 & 2011-12 is without prejudice to our findings on legal issue.

17.2 The AO disallowed the expenditure debited to the P&L account in all these assessment years on adhoc basis. The assessee has claimed various expenditure like accounting charges, bank charges, office maintenance, professional charges, rent, salary, etc. by debiting all these expenditure to the P&L account. The AO asked to furnish evidence for those expenditure. The assessee expressed his inability to furnish any other evidences.

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Since the assessee has involved in real estate business, some of the expenditure is inevitable in the opinion of AO. However, he disallowed 50% of the expenditure claimed by assessee in these assessment years as not incurred for the purpose of business. The assessee has filed before us various additional evidences in the form of cash book, ledger extracts relevant to expenditure debited to the P&L account in all these assessment years explaining that assessee has actually incurred this expenditure and the AO have no iota of evidence to disbelieve that the assessee has not incurred any expenditure which are debited to the P&L account.

17.3. We have heard the rival submissions and perused the materials available on record. The assessee claimed the expenditure and disallowed by the AO is as follows:-

Ground No. Page Nos. Assessment Expenditure Adhoc • years debited to Profit disallowance of of additional and Loss account 50% (net of evidence net of depreciation) depreciation 2007-08 11,34,062.00 5,67,031.00 6 160 - 167

2008-09 5,48,188.00 - 2,74,094.00 6 112 — 124 4,75,528.00 5.1 427 — 443 2009-10 951,057.00 * 2010-11 17,00,000.00 8,50,000.00 5 430 — 448 866 -878 10,90,000.00 5,45,000.00 6 2011-12 181 — 196 2012-13 11,10,000.00 5,55,000.00 5

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17.4. We have carefully gone through the cash book for these assessment years and also ledger extracts filed by the assessee before us. Admittedly, these are the regular books of accounts maintained by assessee produced before the AO and only after going through the P&L account, the AO disallowed these expenditures debited to the P&L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals.

18.1 These findings in AY 2009-10, 2010-11 & 2011-12 is without prejudice to our findings on legal issue.

For the Assessment year 2007-08: 19. The assessee along with one Mr. Kempegowda purchased an agricultural land from Shri R. Subbu Krishna on 24.8.2005 for a total consideration of Rs.8 lakhs. The assessee’s share of cost of property along with stamp duty and registration was Rs.4,40,930/-. The assessee filed a copy of sale deed, which is placed at additional evidence paper book at page Nos.169 to 179. Subsequently, the assessee executed a relinquished deed on 6.3.2006, thereby he released his share of property to Shri Kempegowda for a

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consideration of Rs.6 lakhs. The assessee also filed copy of release deed which is placed at additional evidence paper book page 180. The assessee treated this property as a capital asset in his hands and computed the capital gain on entering into release deed/relinquished deed. The AO however, treated it as business transaction and determined the business income from this transaction as against the income shown by assessee under head “Capital gain”. Against this, assessee is in appeal before us.

19.1 We have heard the rival submissions and perused the materials available on record. In this case, admittedly assessee treated the purchase of agricultural land as capital asset and on relinquishment of the same in favour of Shri Kempegowda, the income resulted was treated as Capital gain. However, the AO without any material came to conclusion of the assessee holding the property as stock in trade and arrived at business income instead of capital gain disclosed by the assessee. If there was no material in the hands of AO to consider as this transaction as adventure in the nature of trade, we are of the opinion that the land was held by assessee as capital asset for investment, the income generated from this transaction on entering into a relinquished deed, the income has to be considered as short term capital gain and not as business income. This view of ours is supported by the order of the coordinate bench of Hyderabad in the case of M/s. SSPLL Ltd. Vs. PCIT in ITA No.976/Hyd/2012 dated 5.4.2013, wherein it was held as under and hence, this ground of assessee is allowed:- 32. We have to see the intention of the assessee at the time of acquiring the asset. The intention of he assessee herein is to construct a building for setting up of its corporate office and it was always a fixed asset and not a stock-in-trade. Even if the assessee is in the business of real estate, the property acquired by the

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assessee for the purpose of setting up of a corporate office cannot be construed as a trading asset. The profit realised by sale of current assets in the line of trading is income from business. On the other hand, if the assessee sells a capital asset as an investor it is income from capital gain. The dominant or even the sole intention to resell is a relevant factor and raises a strong presumption but by itself is not conclusive proof of trading. The intention to resell would, in conjunction with the conduct of the assessee and other circumstances, point to the business character of the transaction. Profit made by sale of capital asset always income from capital gain. One has to see whether the asset held by the assessee as an investment or as a trading asset. Realisation of capital asset is always income from capital gain.

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"relinquishment" denotes that relinquishment should be only in the case of capital asset with reference to the word "transfer" has been defined. The right of the assessee over the landed property which was part and parcel of the business undertaking of the assessee is a capital asset. The moment assessee losses the right attached to a part of the business undertaking of the assessee there is relinquishment of right over the said property. The relinquishment of assets or extinguishment of any right in it which may not amount to a sale can also be considered as a transfer. Therefore, on this we do not agree with the findings of the CIT(A) that there is no transfer u/s. 45 of the Act and the assessee has done only business transaction. Accordingly, we reverse the findings of the CIT(A) on this issue and hold that the income accrued to the assessee out of relinquishment of right over the property is to be chargeable u/s. 45 of the Act and computation of capital gain has to be done in accordance with section 48 of the IT Act. Accordingly, we direct the Assessing Officer to compute the income under the head capital gain on relinquishment of right over the impugned landed property.”

19.2 Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us.

For assessment year 2008-09:- 20. In this assessment year assessee sold two pieces of land and on sale of said land, assessee offered income at Rs.4,23,065/- and Rs.14,664/- and offered it as short-term capital gain. However, the AO treated the income as business income as the assessee is in real estate business. The contention of the Ld. A.R. is that this property was treated by assessee as a capital asset and held this property under administrative portfolio and not trading portfolio, the property held under investment to be considered as a capital asset and the sale of the same to be treated as capital gain.

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20.1 We have heard the rival submissions and perused the materials available on record. In this case, the assessee purchased the first property on 27.2.2007 and the sale deed in March, 2007. Another property was purchased by assessee on 13.2.2006 and sold in this assessment year under consideration. Income treated as short term capital gain. The Ld. CIT(A) confirmed the same by placing reliance on his earlier order for assessment year 2007-08. As discussed in the earlier para relating to assessment year 2007- 08, the income generated from sale of this property to be considered as short-term capital gain and all the expenditure relating to these transactions to be allowed in terms of section 49 of the Act. If the assessee has treated this property as capital asset not as a stock in trade, which is relating to investment portfolio and not trading portfolio, the income generated from the transaction to be treated as business income. Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us.

For the assessment year 2009-10:

21.1 In case of another property situated at Gollahalli whereas the assessee has sold 21 sites for a total consideration of Rs.92,11,500/-The assessee computed the short term capital gain of Rs.25,64,072/-. The AO treated it as business income. The

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income generated is treated as business income. The assessee filed additional evidence in pages 445 to 568 for this assessment year producing the ledger account of development expenses and copy of vouchers and prayed that the issue may be remitted. Without prejudice to our finding on legal issue for the purpose of completion of the proceedings, we remit this issue to the file of AO for fresh consideration relating to both transactions as discussed in earlier para in this order in earlier assessment years under consideration.

For the assessment year 2010-11:-

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capital gain and all expenditure relating to the acquisition and improvement of the property to be allowed in terms of section 49 of the Act. Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us.

For assessment year 2011-12:-

24.1 These findings in AY 2009-10 is without prejudice to our findings on legal issue.

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For the assessment year 2007-08: 25. During the course of search, copy of purported agreement of sale entered between the assessee and Shri R. Sundar Raj for purchase of a property situated at Khatriguppe village measuring about 10320 sq.ft. Was found and seized. Copy of purchase deed placed at paper book pages 129 to 136 of assessee’s paper book is as per this agreement a sum of Rs.2 crores was paid in cash. The assessee was examined on this issue by the searched team. On statement recorded on oath on 22.12.2012 the assessee stated that the above agreement was not put into action and this was revised vide fresh agreement dated 6.6.2006, as per which a sum of Rs.1,50,02,990/- was paid by assessee through banking channel to Sbri R. Sundar Raj and his nominees. This agreement was also placed by assessee in assessee’s paper book pages 121 to 128. The assessee categorically denied the sale deed dated 18.5.2006. However, the AO made an addition of Rs.2 crores on invoking provisions of section 292C of the Act by observing that whatever documents/books of accounts/money/bullion found in the course of search shall be belonging to the assessee and contains all those evidences can be used for the purpose of assessment. According to the AO, there is a seized document showing the payment of Rs.2 crores by cash. Accordingly, he made addition of Rs.2 crores representing the undisclosed income of the assessee. Against this assessee is in appeal before us.

25.1. We have heard the rival submissions and perused the materials available on record. As per the seized material, there was an agreement dated 18.5.2006 wherein assessee alleged to be purchased a property bearing survey No.8, Khatriguppe village

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measuring 10320 sq.ft. Of land. As per this agreement, the assessee has paid Rs.2 crores in cash to R. Sundar Raj. The statement was recorded from the assessee by searched team u/s 131(1A) of the Act on 22.12.2012. For clarify, we reproduce the statement recorded from the assessee as follows:- “7. Unexplained Investment:

During the course of search and seizure operation one agreement of sale entered between the assessee and Sri. R Sunder Raj for purchase of a property situated at sy.no.8, Kathriguppe village measuring _10320 s.ft. was found and seized. This document is enclosed as annexure -1. As per the agreement, the total consideration was Rs.2.00 crore and it was paid in cash. The assessee was confronted by DDIT (Inv).Sri K.G. Krishna vide statement recorded u/s 131( I A) on 22.12.2012 has replied as under: "Q.5 Please refer to your answer to question No.21 of the sworn statement u/s.132(4) recorded during the course of search proceedings uis.132 of the Income tax Act, 1961 on 05/11/2012 wherein you have stated that you have paid Rs.1.50 crores to Shri. R. Sundar Raj. Please state whether you have disclosed this amount to tax. Ans. I have entered into an agreement dated 18/05/2006 with Shri.R.Sunderqj for purchase of property located at Sy.No.17/12 and -17/14 in the layout formed by M/s.Bhavani Housing Co-op. Society Ltd., Khatriguppe Village, Banashankari, Bangalore. Though this agreement speaks of payment of Rs.2.00 crores in cash as sale consideration, it got revised at a later stage as I refused to pay the consideration in cash to the seller Shri. R. Sunderaj. The amount paid :o Shri. R. Sunderaj is Rs.1.50 crores only by way of cheque through my Indian Bank account. This amount was given by M/s. KCS Investment Consultancy Pvt.Ltd." It is stated that the above agreement got renewed at the later stage. However, he has failed to produce a copy of the same. The DDIT (Inv) has also confronted this document with the seller viz., Sri. R. Sunder Raja and he has replied as under:

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"Q.12 I am showing you page Nos.68 to 71 marked as A/KGK/5 which was seized during the course of search proceedings u/s.I32 of the Income tax Act, 1961 from the residence of Shri.K G Krishna, "Jayakrishna Nilaya", No.1680/55, 5111 A Cross, 10'h Main, 2nd Block, Mysore Bank Colony, Banashankari, Bangalore 560050 on 05/11/2012. Please go through the same and explain. Ans.I would like to mention that I was promised a land by Shri.K GKrishna through Al/s.Bhavani Housing Co-operative Society ltd., at Khatriguppe Village. But till date I have got no land from the said society. However, once again Shri.K G Krishna has created this document. I have not received any amount either by way of cash or cheque from Shri.K G Krishna except for the loan amount of Rs. 50.00 lakhs as mentioned above.

Though it is alleged that the above document was a forged document the intention behind creation of such documents is not explained. However, the agreement was duly signed by both the parties and it was mentioned that the cash portion of Rs.2.00 crores had been paid at the time of entering into the agreement. Therefore, both Shri.K G Krishna and Shri. R. Sunderaj have indulged in this unaccounted cash transaction and therefore the cash portion of Rs.2.00 crores should be taxed in the form of unexplained investment in the hands Sri K.G. Krishna. It is to be mentioned here that Sri. K G Krishna has replied that a sum of Rs.1.50 crore was paid through cheque and it was given by M/s. KCS Investment Consultancy Pvt. Ltd., whereas Sri. R Sunder Raj has denied even the cheque payment. Per contra the document found and seized has revealed a fact that the entire sum was paid through cash. As per section 292C of the IT Act the AO can presume that whatever document/books of account/money/bullion found in the course of search shall be belonging to the assessee and the contents on those evidences can be used for the purpose of assessment. In the present case part of the transactions were accepted by the assessee. Hence it is presumed that the seized document has reflected the true and correct transaction and accordingly. Rs.2,00,00,000/- is added as unexplained investment.”

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25.2. On that basis, AO drew conclusion that in view of provision of section 292C of the Act, he drew the presumption that assessee paid Rs.2 crores with regard to the property and addition was made. However, there was another agreement dated 6.6.20067 wherein assessee has paid Rs.1,50,02,990/- to R. Sundar Raj by way of banking channels. Assessee filed a copy of ledger account before us. The contention of the Ld. A.R. is that Shri R. Sundar Raj was absolute owner of the property on 18.5.2006. However, R. Sundar Raj has purchased this property from Shri Bhavani Housing Co-operative Society Ltd. Only on 19.5.2006. Further, being so by any stretch of imagination on the date of agreement i.e. 18.5.2006 Smt. R. Sundar Raj cannot sell the property. The Actual owner of the property was Shri R. Sundar raj and not Smt. R. Sundar Raj. More so, Shri R. Sundar Raj has actually purchased this property only on 19.5.2006 from Shri Bhavani Housing Co- operative Society Ltd. Further, in agreement entered by Smt. R. Sundar Raj on 18.5.2006 shows that the total consideration was Rs.2,29,62,000/- out of which assessee has paid Rs.2 crores by cash on the date of agreement itself and balance amount of Rs.2,96,20,000/- to be paid. Further, clause (3) of this alleged agreement shows that the vacant possession of property will be handed over to the assessee on payment of Rs.29.62 lakhs. However, clause (4) of this agreement, wherein mentioned that the vendor has received the entire sale consideration. So there is a contradiction to paras 3 & 4. Being so, the said agreement cannot be relied upon. Further, it was also brought to our knowledge that even the sale deed dated 19.5.2006 was not resulted in execution of absolute sale deed and there was a litigation between assessee and R. Sundar Raj and same has been pending before the court.

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Further, assessee filed a FIR against R. Sundar Raj which is placed in paper book at page 192 to 203 relating to this assessment year. Accordingly, he submitted that any stretch of imagination the agreement dated 18.5.2006 found during the course of search cannot be considered as a valid agreement. Admittedly, during the course of search action the searched team unearthed the agreement dated 18.5.2006 entered by the assessee with Smt. R. Sundar Raj, S/o Late Ramaswamy, aged about 51 years residing at 1228, 4th Main, 5th Cross, Chandra Layout, Bengaluru 560040 for sale of property bearing no.8 situated at 17/12, 17/4 & 17/14 and other survey numbers in the layout formed by Bhavani Housing Co- operative Society Ltd., Khatriguppe village, Banashankari, 3rd Stage, Bangalore North Taluk, Bangalore, East to West 80 Ft., North to South 129 Ft. As per this, total consideration was Rs.2,29,62,000/-. Out of this, assessee said to be paid Rs.2 crores by way of cash and balance to be paid at Rs.29.62 lakhs, which is mentioned in the clause (3) of this agreement. However, clause (4) shows that assessee paid entire sale consideration and the other party has received entire sale consideration.

25.3. The sale agreement dated 6.6.2006 shows that Shri R. Sundar Raj, S/o Late Shri Ramaswamy, 50 years residing at 1228, 4th Main, 6th Cross, 1st Stage, 3rd Phase, Chandra Layout, Bangalore 560 040. As per this sale agreement, the total consideration at Rs.1,50,02,990/- and the entire sale consideration has been paid by way of banking channels. It is also brought to our notice that Shri R. Sundar Raj was member of Shri Bhavani Housing Co- operative Society Ltd. And the sale deed in his favour has been registered in respect of this alleged property on 19.5.2006 bearing

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document No.948/2006-07 in the sub registrar office Basavanagudi, Bangalore. Thus, the Ld. A.R. submitted that if the payment has been made of Rs.2 crores on 18.5.2006, there was no necessity of paying an amount of Rs.1,50,02,990/- to the vendor once again on 6.6.2006. As such, the earlier agreement dated 18.5.2006 is not a valid agreement. It is a dummy document which cannot be considered for making any addition by AO in this assessment year under consideration. In our opinion, these facts to be looked into by the AO and assessee not satisfactorily explained these inconsistencies before the lower authorities. In view of this, we remit this issue to the file of the AO to consider all the additional evidences namely ledger extract and advance paid for site to R. Sundar Raj for the assessment year 2006-07 placed at additional evidence paper book page No.191 and copy of application filed for lodging criminal complaint against R. Sundar Raj & others vide additional evidence paper book page Nos.192 to 198 and a copy of first information report vide page No.199. are as follows:-

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25.4. In our opinion, the AO has to consider these documents in proper perspective and decide the issue afresh. This point has to be considered by the AO. The issue remitted to the AO for fresh consideration.

26.1. We have heard the rival submissions and perused the materials available on record. The assessee has taken this plea before lower authorities that the payment is accounted in his books of accounts. However, Ld. CIT(A) sustained the addition. In our opinion, there is no necessity of making such addition when the transaction is duly reflected in the books of accounts as shown in the ledger extract in page no.170 of the paper book. Accordingly, we delete this addition.

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27.1 In this assessment year assessee challenged the addition of Rs.2,36,34,000/- made u/s 68 of the Act as unexplained credit. The AO made addition u/s 68 of the Act in respect of following credits:- Vikram Jain 1,03,50,000/- Manchaiah 50,00,000/- B.M. Kumar 25,00,000/- A.N. Nanjaiah 57,84,000/- Total 2,36,34,000/-

27.2. According to the above, credits were not explained satisfactorily before him. As such, the transactions cannot be considered as a genuine one and made addition u/s 68 of the Act. Before Ld. CIT(A), assessee took a plea that transactions are through banking channels and have been confirmed by the respective creditors and cannot be considered as unexplained u/s 68 of the Act. The Ld. CIT(A) observed that the assessee has not filed PAN of these transactions, not established the identity and creditworthiness of the creditors as well as genuineness of the transaction. The transactions are claimed to have been made through banking channels which even if drew, does not by itself establish the genuineness of these transactions. In view of this, the Ld. CIT(A) confirmed the additions. Against this, assessee is in appeal before us.

27.3 We have heard the rival submissions and perused the materials available on record. The assessee has filed the additional evidences in following form:-

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28.1 This ground is with regard to the unexplained credit of Rs.78,97,764/-. This ground is adjudicated herein without prejudice to annulling the assessment for assessment year 2009-10 in earlier para.

28.2. The assessee has shown following amounts as outstanding in the balance sheet:- 1. Baldev 23,00,000/- 2. Chandra Sekhar 4,00,000/- 3. Narasimha Murthy 75,00,000/-

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28.3. The AO asked the assessee to explain the nature of sources of these advances. The assessee explained the receipt of money from Shri Baldev and repaid him on 2.4.2011. In case of Chandra Sekhar, confirmation was submitted. However, in the remaining cases, no details were given. Being so, the AO considered the following credits as unexplained credits u/s 68 of the Act. 1. Narasimha Murthy 75,00,000/- 2. Shanta Sridhar 3,97,764/- Total 78,97,764/-

28.4. On appeal, assessee explained that a sum of Rs.75 lakhs from Narasimha Murthy is received through banking channel and in case of Smt. Shanta Sridhar a sum of Rs.3,97,764/- which was received through bank account and repaid the entire amount in subsequent assessment years. He also submitted before Ld. CIT(A) that total amount of advance received from Smt. Shanta Sridhar was Rs.20,64,768/- and the same was repaid on 29.3.2012 for which cheque No.6544 drawn on Vysya Co-operative Bank, APMC yard branch, Bengaluru, which was paid by K.M. Jayalakshmi on behalf of the present assessee. However, Ld. CIT(A) not agreed with the submission of the assessee and sustained addition of Rs.78,97,764/-. Against this assessee is in appeal before us. Before us the assessee submitted that the ledger extract along with bank statement for receipt of loans and advances for purchase of property from Narasimha Murthy and Shanta Sridhar, which is placed at regular paper book page nos.97 to 118. Further, it was

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submitted that Shanta Sridhar had entered into an agreement on 28.7.2008 with the assessee for the purchase of sites at Urukere and paid an advance towards purchase of property. The assessee also drew our attention to the sale agreement entered on 28.7.2008 with Smt. Shanta Sridhar Murthy, which is placed on record in page nos.105 to 118. The assessee also drew our attention to the details of repayment of loans and advances along with statements which are placed at page nos.578 to 589 of the additional evidence filed before us, which is in the following form:- 1. Ledger extract of Shanta Sridhar Murthy in support of repayment made - page nos.578 to 583 2. Ledger extract of Narasimha Murthy in support of repayment made -pages 584 to 589

28.5. The Ld. D.R. relied on the order of lower authorities.

28.6. We have heard the rival submissions and perused the materials available on record. The assessee has filed the additional evidences as discussed above which the AO has no occasion to examine it. Hence, the issue in dispute is remitted to the AO for fresh consideration after giving an opportunity of hearing to the assessee.

29.1 The assessee challenged addition of Rs.82,66,804/- as unexplained credit u/s 68 of the Act. This issue is remitted to the

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AO to examine the same afresh in the light of additional evidence, which is without prejudice to our findings on legal issue.

For assessment year 2012-13 in ITA No.312/Bang/2020.

31.1. The assessee deposited cash to the extent of Rs.36 lakhs to the bank account, which was not satisfactorily explained before the lower authorities. Hence, it was treated as unexplained credits. Without prejudice annulling of assessment of legal issue in the assessment year 2010-11, we are inclined to remit this issue to the file of AO for fresh consideration since there is no much discussion in the order of the lower authorities on this issue and there was no proper enquiry by the AO on this issue. Similar is with regard to addition of Rs.5 lakhs in assessment year 2011-12.

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32.1. The assessee deposited Rs.83 lakhs into his bank account for which no satisfactory explanation is given. Hence, it is treated as unexplained income of the assessee. After hearing both the parties, we are of the opinion that this issue was not properly examined of the addition and proper enquiry has not been made. Hence, the issue may be remitted to the file of AO. We accede to the request of the assessee’s counsel. Accordingly, this issue remitted to the AO to decide afresh after making proper enquiry and giving opportunity of hearing to the assessee.

33.1. During the course of search and seizure operation in case of Shri N.C. Mahesh, a loose sheet was found and seized marked as A/NCM/2, which reads as follows:

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33.2. The searched team enquired with Shri N.C. Mahesh and asked him to explain the transaction. In his sworn statement, he replied that the name written therein as “Krishnappa” refer to Shri K.G. Krishna, present assessee. Accordingly, Shri K.G. Krishna asked to explain the investment of Rs.4,80,00,250/-. The present assessee has filed the written submission before the authorities on 17.3.2015, wherein he denied the cash payment. The reply is as follows:-

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33.3. As per this reply, the advance payment given in cheque of Rs.50 lakhs and another payment of Rs.50 lakhs (Rs.25 lakhs each on 7.6.2007) has been admitted by both the persons and a confirmation also given. The remaining cash portion was denied by the assessee. According to the AO, the transaction mentioned in the loose sheet is self-explanatory as AC-25-37 guntas was purchased @ Rs.18.5 lakhs totalling of Rs.4,79,61,250/- by paying the stamp duty of Rs.39,000/-. The total cost was worked out at Rs.4,80,00,250/- in the next page date, extent rate, total consideration, payment and balance price are mentioned clearly. The entire amount has been funded by Shri K.G. Krishna and Shri N.C. Mahesh knows the transaction as he is also involved in it. But to whom the payment was made was not explained by both of them. As far as the assessment is concerned, according to the AO, this amount of Rs.4,80,00,250/- was investment made by assessee and assessee shown only Rs.1 crore out of it by way of banking channel and the balance amount of Rs.3,80,00,250/- as not disclosed to the department. Hence, AO invoked the provisions of section 292C of the Act and made addition of Rs.3,80,00,250/- as income of the assessee. On appeal, Ld. CIT(A) observed that the onus lies on the assessee to disclose the transaction referred to in the seized material. The contents of the seized material is explicit and gives no room for ambiguity the fact that assessee does not want to reveal anything about the transaction only gives one impression that he has good reason to hide as implications/consequences would be more than what the material reveals. Be it as it may, one has to confine oneself to the seized material and not speculate on aspect not known. Accordingly, he observed that the assessee has disclosed Rs.125 lakhs out of the payment shown in the seized

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material at Rs.4,80,00,250/-. Accordingly, he deleted another Rs.25 lakhs out of addition made by AO at Rs.3,80,00,250/- and sustained addition of Rs.3,55,00,250/-. Against this assessee is in appeal before us.

33.4. The Ld. A.R. submitted that on close perusal of noting/loose slips seized from Shri N.C. Mahesh as recorded at internal page No.7 of the assessment order shows the top lines as below:- “Land registration to Krishnappa” It is therefore, a noting from same transaction with the same Krishnappa and not with the present assessee whose name is K.G. Krishna. In the order at page No.9 of the assessment order, it was stated that before the investigation authority, Shri N.C. Mahesh supposed to have been stated that the name Krishnappa refers to K.G. Krishna. However, no extracts of any such statement is recorded in the assessment order nor any copy of such statement is given to the assessee. A perusal of internal page No.7 of the assessment order shows that so called purported slip, it can be seen that the date mentioned in the end slip is 19.4.2008. The assessee had given confirmation which is appearing at internal page No.10 of the assessment order. As per this confirmation after 31.3.2008, the assessee had paid total of Rs.1,60,00,000/- all through banking channels. If so called purported slip at page No.7 of the assessment order were to refer to the assessee, then atleast, the cheque payment of Rs.1.6 crores at page No.10 should have been appeared in page No.7. Such banking payments not appearing in such slip would itself clearly shows that the slip at page No.7 does not belong to the assessee. Further, the confirmation referred by Shri N.C. Mahesh has not been doubted by

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the AO nor have they called Shri N.C. Mahesh called Shri N.C. Mahesh for cross examination. This slip at page No.7 itself looks dubious in as much as for a so-called transaction of Rs.4,79,61,250/-, wherein the stamp duty mentioned at Rs.39,000/-. Further, though in the slip, there is mentioned of cheque and DD payment of Rs.3,01,50,000/- at the end of the slip, it is mentioned as cash payment from Krishnappa is Rs.3,01,50,000/-. In any case, the assessee has not made any payment in cash to Shri N.C. Mahesh and he also confirmed the transaction with the assessee as appearing in page No.10 of the assessment order. According to the Ld. A.R., the Ld. CIT(A) would have deleted entire addition instead of sustaining any addition of Rs.3,55,00,250/- as against the addition made by the AO at Rs.3,80,00,250/-. He also drew our attention to the additional evidence filed before us at page Nos.143 to 147, which includes ledger extracts of Shri N.C. Mahesh along with confirmation of transactions.

33.5. On the other hand, Ld. D.R. relied on the order of the Ld. CIT(A).

33.6 We have heard both the parties and perused the materials available on record. Since the assessee filed the additional evidences, we remit this issue to the file of AO to decide the same in the light of the additional evidences after considering the arguments of the assessee. The AO should also take note that addition cannot be made only on the basis of noting on loose slips unless it is substantiated or corroborated by any material evidence in support of such notings in the loose slips or notings in diary. The suspicion

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in the minds of the revenue authorities that the assessee made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations.

33.7 For brevity, we enclose herewith the ground-wise chart with result of each appeal as Annexure -1.

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

Bangalore, Dated 24th June, 2022. VG/SPS

ANNEXURE-I 2012-13 PAS Y Y Y Y ITA Nos.307 to 312/Bang/2020 Shri K.G. Krishna, Bangalore Additional 197-207 evidence page no. QUASHED 2011-12 Y Y Y Y Y Additional 879-891 875-878 evidence page no. QUASHED GROUND WISE CHART FOR ALL ASSESSMENT YEARS IN CASE OF K.G. KRISHNA 2010-11 Y Y Y Y Y 467-471 Additional evidence page no. 449-466 QUASHED 2009-10 Y Y Y Y Y 445-568 578-589 Additional evidence page no. PARTLY ALLOWED FOR STATISTICAL PURPOSES - PAS 2008-09 PAS Y Y Y Y Y Y

Additional 160-167 125-142 143-158 evidence page no. 2007-08 PAS Y Y Y Y Y Y Additional 180-189 191-203 evidence page no. 5 Unexplained Investment Capital Gain as Business assessment u/s 153A of ground : Assumption of jurisdiction u/s 153A of ASSESSMENT YEARS incriminating material Unexplained Opening Ground No.1 in main the Act is bad in law read with additional P/L A/c Expenditure 2 Agricultural Income Unexplained Cash Unexplained Cash RESULT Credits U/s 68 Unexplained to frame the Expenditure ground: No Disallowed the Act Income Capital Credits Issues 1 3 4 6 7 8 Sl.no. 9

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Copy to:

Asst. Registrar, ITAT, Bangalore.