MOHANRAJ,COIMBATORE vs. DCIT, CENTRAL CIRCLE 3, COIMBATORE

O R D E R PER BENCH: These five appeals at the instance of the assessee are directed against five separate orders of CIT(A), Chennai-20, all dated 16.02.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Years are 2014-15 to 2018-19.

3. The CIT (Appeals) - 20, Chennai failed to appreciate that having assessed the appellant in terms of Section 153A of the Act based on the incriminating materials seized during the search in the premises of Mr. O. Arumugasamy and others in contra distinction to the search in the premises of the appellant herein, wherein no incriminating materials were seized for the purpose of making the disputed addition(s) in the search assessment order(s), the consequential search assessment order passed should be reckoned as bad in law.

4. The CIT(Appeals) - 20, Chennai failed to appreciate that having used the disputed search materials seized in the premises at Mr. O. Arumugasamy and others for making the disputed addition and further having not seized any incriminating material in support of the disputed addition in the hands of the searched person, the assessment completed by making additions not arising from the search conducted in the hands of appellant should be reckoned as bad in law.

5. The CIT(Appeals) - 20, Chennai failed to appreciate the law declared by the Supreme Court in the case reported in 454 ITR 212 on the scope of jurisdiction on the scope of jurisdiction under Section 153A of the Act in proper perceptive and as a consequence ought to have appreciated that the search assessment order under consideration was invalid, passed without jurisdiction and not sustainable both on facts and in law.

6. The CIT(Appeals) 20, Chennai failed to appreciate that the finding rendered with respect to framing of assessment under Section 153A of the Act in the absence of incriminating material in to 552//CHNY/2024 contrary to judicial precedents, thereby vitiating the passing of the appellate order.

7. The CIT(Appeals) 20, Chennai failed to appreciate that the findings rendered in para 7.1.3 & 7.1.4 of the impugned order was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

8. The CIT(Appeals) 20, Chennai erred in sustaining the addition of Rs. 1,50,00,000/- being the sum alleged to have been earned as unaccounted interest income for the loan given to Mr. O. Arumugasamy and others as income of the appellant in terms of Section 56 of the Act in the computation of taxable total income without assigning proper reasons and justification.

9. The CIT(Appeals) - 20, Chennai failed to appreciate that the additions made merely based on the 'dairy statement seized during search in the premises of Mr. O. Arumugasamy and others was wholly unjustified and ought to have appreciated that the subsequent affidavit filed on 04.02.2021 was rejected on superfluous reasons, thereby vitiating the action of the First Appellate Authority in confirming the addition made.

10. The CIT(Appeals) - 20, Chennai failed to appreciate that the rejection of the affidavits and the explanation provided by the appellant on the ground that no cross examination was sought for was invalid in view of the filing of the affidavits, clarifying the nature of the transactions under consideration.

11. The CIT(Appeals) - 20, Chennai failed to appreciate that appellant had discharged the onus cast upon in explaining the transaction under consideration by way of affidavits from the person whose statements were relied on and ought to have further appreciated that the action of the First Appellate Authority in not conducting any further enquiry while passing the order impugned is unsustainable in law.

12. The CIT(Appeals) 20, Chennai failed to appreciate that reasons provided in the affidavit for explaining the transactions under consideration was not understood in proper perceptive while rejecting the same on mere suspicion and surmises.

13. The CIT(Appeals) 20, Chennai failed to appreciate that the findings rendered from paras 7.2.4 to 7.2.12 of the impugned order was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. to 552//CHNY/2024

14. The CIT(Appeals) - 20, Chennai failed to appreciate that the entire re-computation forming part of the assessment order was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

16. The Appellant craves leave to file additional grounds/arguments at the time of hearing”

Sl A.Y Date of filing Income Date of Returned Additio nal No. of return originally filing of income income u/s.139(1) returned return in u/s/.153A offered u/s.139(1) response to 153A notice 1 2013-14 04.10.2023 833640 10.10.2019 833640 0 2 2014-15 20.12.2014 1611740 10.10.2019 1611740 0 3 2015-16 06.11.2015 1906460 10.10.2019 1906460 0 4 2016-17 17.10.2016 2324790 10.10.2019 2324790 0 5 2017-18 30.10.2017 8566270 10.10.2019 8566270 0 6 2018-19 27.10.2019 15698640 10.10.2019 15698640 0 to 552//CHNY/2024

5. Aggrieved by the additions made in the assessments completed u/s.153A of the Act vide order dated 16.04.2021 for assessment years 2014-15 to 2018-19, assessee preferred appeals before First Appellate Authority. The CIT(A) dismissed appeals of the assessee. The CIT(A) held that search was conducted in the premises of the assessee and therefore, necessarily assessment u/s.153A of the Act has to be completed. It was further held by the CIT(A) there is nothing wrong in making addition by the AO based on the material found during the course of search in the case of Shri O.Arumugasamy and Senthil group, since seized material clearly mentions name of the assessee stating that he has advanced loans and received interest both through RTGS and also by cash. It was held by the CIT(A), assessee himself has stated that he had advanced loans to Shri O.Arumugasamy and Senthil Kumar which are reflected in his books of accounts (loans through RTGS) and when seized material clearly disclose that there has been cash payments, which has also been confirmed by Shri O.Arumugasamy in his sworn statement given on 26.08.2019, there is no reason why addition made by the AO should not be to 552//CHNY/2024 confirmed. As regards retraction made in an affidavit filed by Shri O.Arumugasamy and Shri Senthil Kumar is concerned, CIT(A) held there has been a gap of more than 16 months from the date of sworn statement recorded during course of search and Shri O.Arumugasamy and Shri Senthil Kumar has not given any reasons for retraction given in the affidavit.

6. Aggrieved by order of the CIT(A) dismissing appeals filed by the assessee for assessment years 2014-15 to 2018-19, assessee has filed present appeals before the Tribunal. The assessee has filed three sets of paper book. In the first set of paper book, the assessee has enclosed panchanama dated 09.03.2019, 17.04.2019 & 22.04.2019, list of books of account found and seized during the search on 06.03.2019 & 17.03.2019, valuation of jewellery found, sworn statements recorded, case laws relied on etc. In the second set of paper book, assessee had enclosed replies to show cause notice’s issued during course of assessment proceedings for AY's 2014-15 to 2018-19; written submissions filed before First Appellate Authority, affidavit of Mr.O.Arumugasamy and Mr.Senthil Kumar retracting their earlier sworn statements. In the third set of paper book, the assessee has filed three Tribunal orders of Chennai in the case of i) M/s.SG Wind Farm Private Ltd. Vs. DCIT in ITA to 552//CHNY/2024 Nos.1227 to 1230/Chny/2024 dated 19.11.2024, ii)Shri Palladam Krishnasamy Ganeshwar Vs.DCIT in to 1225/Chny/2024 dated 19.11.2024 and iii) Smt.Chitradevi Ganeshwar Vs. DCIT in ITA No.1218/Chny/2024 dated 19.11.2024.

7. The Ld.AR submitted insofar as assessment years 2014-15 to 2017-18 are concerned, assessments have been concluded and had attained finality, hence addition can be made on the basis of incriminating materials found during the course of search conducted in assessee’s premises. It was submitted that additions were made in the case of assessee in an assessment completed u/s.153A of Act, relying on material seized in the course of search u/s.132 of Act in the case of Shri O.Arumugasamy which is bad in law. The learned AR relying on the judgement of the Hon’ble Supreme Court in the case of PCIT, Central-3 Vs. Abhisar Buildwell Private Limited (454 ITR 212) (SC) submitted that in absence of any incriminating material found during the course of search in the case of assessee i.e., on 06.03.2019, no addition u/s.153A could be made. The learned AR submitted that on identical facts emanating from same search conducted on Shri O.Arumugasamy and Shri Senthil Kumar group (search conducted on 09.11.2017), additions made in the hands of M/s.SG Wind Farm Private Limited, Mr.P.K.Ganeshwar and to 552//CHNY/2024 Smt.Chitradevi Ganeshwar, have been deleted by the Tribunal in the case of aforementioned assessees (in assessments completed u/s. 153A of the Act) for the reason that there was no incriminating material in the case of said assessees, but utilize the incriminating material / loose sheets found during the course of search in the case of Shri O.Arumugasamy and Shri Senthil Kumar group which is bad in law.

8. As regards for assessment year 2018-19 (abated assessment), it was submitted that immediately after search, sworn statements were recorded from the assessee. It is submitted that assessee had clearly stated in the sworn statement that he advanced loans only through banking channels and no cash payments were made. It was further submitted that sworn statements recorded from Shri O.Arumugasamy and Shri Senthil Kumar were retracted and they have confirmed in affidavits that assessee has advanced loans that are routed only through proper banking channels. Therefore, it was submitted that addition made for assessment years 2014-15 to 2018-19 needs to be deleted.

9. The learned DR, who argued the case, strongly supported orders of AO and CIT(A). The earlier DR’s had filed a written to 552//CHNY/2024 submission vide his letter dated 06.01.2025. The summary of the same reads as follows:-

(i) When the assessee is searched u/s 132 of the IT Act, it is mandatory for the AO to initiate the assessment u/s 153A of the IT Act only by virtue of the search and seizure operation initiated. During the course of the assessment proceedings, the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment year and for the relevant assessment year.

(ii) At the time of initiation of assessment proceeding u/s 153A of the IT Act, any other assessment proceeding pending against the AY falling within the period of six assessment year shall abate.

(iii). A search carried out in the case of the assessee may result into seizure of various books of account or documents of the assessee from various premises subjected to search operation and also may result into seizure of various books of accounts or documents of any other person'. On the basis of the documents and books of accounts of any other person seized, the AO may proceed against that 'other person' u/s 153C of the IT Act after recording the satisfaction.

(iv). The Investigation Unit may conduct consequential search on the 'other person' u/s 132 of the IT Act on the basis of the books of accounts or documents seized in the case of first searched person. The second search may or may to 552//CHNY/2024 not lead to seizure of various other books of accounts or documents apart from the documents already seized in the first search. Invariably the AO has to assess or reassess the total income of the 'other person' by initiating proceeding only u/s 153A of the IT Act. He cannot do parallel assessment u/s 153A of the IT Act on account of search carried out u/s 132 of the IT Act in his case and one more assessment u/s 153C of the IT Act on the basis of documents and books of accounts found and seized in first search. This is not the legislative intention explained by various High Courts and Hon'ble Supreme Court referred supra.

(v). During the course of pendency of assessment initiated u/s 153A of the IT Act or u/s 153C of the IT Act, the AO may receive some other seized material of the assessee found and seized during the course of search and seizure operation carried out in some other case or fresh information of income escaping assessment. Invariably, the AO ought to use such information or the seized material while completing the assessment already pending u/s 153A of the IT Act or u/s 153C of the IT Act. The AO need not initiate one more fresh proceeding either u/s 153C or u/s 147 of the IT Act respectively. It is not envisaged in the statute.

(vi). The decisions of Hon'ble High Court of Allahabad in the case of CIT Vs. Kesarwani Zarda Bhandar, Hon'ble High Court of Kerla in the case of Dr. A. V. Shreekumar Vs. CIT and Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell Pvt. Ltd supra clearly explained the provision of section 153A of the IT Act. It is held categorically that AO to 552//CHNY/2024 has the power to reassess the return of the assessee not only for the undisclosed income, which was found during search operation but also with regard to material that as already available at the time of original assessment.

(vi). If the Grounds of appeal of the appellant is admitted, that will lead to multiple assessments under various sections of the assessee for the same assessment year during same period and that is not the intention of the legislature. The grounds raised by the appellant is against the statute and the law laid down in the decisions referred supra.

A.Y’s 2014-15 to 2017-18: 11. For the aforementioned assessment years, assessee questions issue of assumption of jurisdiction u/s.153A of the Act and making addition in absence of incriminating materials found in direct search conducted at the premises of the assessee on to 552//CHNY/2024 06.03.2019. The disputed additions have been made based on loose sheets / daily statements found during the course of search conducted in the case of Shri O.Arumugasamy and Mrs.Sathamani (cashier of Shri O.Arumugasamy) and statements recorded from them. Pursuant to the search conducted in the premises of Shri O.Arumugasamy, a sworn statement was recorded from the assessee. In reply to the same, assessee confirmed there was only transaction made through banking channel with Shri O.Arumugasamy and the same has been duly reflected in his books of account in the regular course. It is an undisputed fact that addition has been based on material found in the course of search conducted in the premises of Shri O.Arumugasamy on 09.11.2017 and not based on search conducted in the case of assessee on 06.03.2019. Therefore, short issue for consideration is validity of addition made in consequence to assumption of jurisdiction u/s.153A of the Act, in light of dictum laid down by the Hon’ble Apex Court in the case of PCIT, Central-3 Vs. Abhisar Buildwell Private Limited (supra). Further, the undisputed facts are that for assessment years 2014-15 to 2017-18, assessments have attained finality. In other words, for these assessment years assessments were unabated (attained finality). The fact that for to 552//CHNY/2024 assessment years 2014-15 to 2017-18, assessments have attained finality and are unabated assessments is evident from the following dates and events :- S.No. Assessment Date of Due date for year filing of ROI issuance of notice u/s.143(2) Date of search in premises of third party – 09.11.2017 Date of search in premises of assessee – 06.03.2019 1 2014-15 20.12.2014 30.09.2015 2 2015-16 06.11.2015 30.09.2016 3 2016-17 17.10.2016 30.09.2017 4 2017-18 30.10.2017 30.09.2018

12. In view of the admitted position of non-availability of incriminating seized materials in direct search conducted in the premises of the assessee on 06.03.2019, assessment years namely 2014-15 to 2017- 18, no addition can be made in view of the dictum laid down by the Hon'ble Supreme Court in the case of PCIT, Central-3 Vs. Abhisar Buildwell Private Limited (supra). On identical facts, Chennai Bench of this Tribunal in the case of M/s. SG Wind Farm Pvt. Limited Vs. DCIT, (supra) after considering judicial pronouncements on subject deleted the additions made, since addition was based on incriminating material found during the course of search in the case of Shri O.Arumugasamy and not in the case of above mentioned assessee namely M/s.SG Wind Farm P.Ltd. The relevant findings of the co-ordinate Bench of the to 552//CHNY/2024 Tribunal in the case of M/s. SG Wind Farm Pvt. Limited Vs. DCIT, (supra) reads as follows:- “Our findings and Adjudication 5. Upon perusal of factual matrix as enumerated in preceding paragraphs, the undisputed position that emerges is that the impugned addition of undisclosed interest income is based on incriminating material found during an earlier separate / independent search conducted by the department on Shri O. Arumugasamy group on 09-11-2017. No incriminating material, in this regard, has been found during the search conducted on assessee group on 06-03-2019. From tabulation in para 3.9, it could be seen that the assessee had filed return of income for this year on 29-09-2014 which stood attained finality since the date of issuance of notice u/s 143(2) had already expired on 30-09-2015. In other words, the regular assessment proceedings had attained finality and this year was a case of unabated assessment year. In response to notice u/s 153A, the assessee offered same income. Quite clearly, the impugned addition of undisclosed interest income is not based on any incriminating material found during search on the assessee group but the same are based on incriminating material found in another search which has already happened much earlier before the date of search on the assessee.

6. It is the case on behalf of the Revenue that once upon the search under section 132 or requisition under section 132A, the assessment has to be done under section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to to 552//CHNY/2024 pass assessment orders and to assess the 'total income' taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments.

7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. CIT v. Mehndipur Balaji 2022 SCC Online All 444/[2023] 147 taxmann.com 201/ [2022] 447 ITR 517 has taken a contrary view.

7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. 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 AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. to 552//CHNY/2024 vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153A 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. 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under:

"15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment to 552//CHNY/2024 made under section 153A of, the Act is annulled in appeal or any other proceeding.

16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act."

8. For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material.

9. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961.

9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment to 552//CHNY/2024 qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.

10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the to 552//CHNY/2024 assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."

13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.

Approving the decision of Hon’ble Delhi High Court in the case of Kabul Chawal (380 ITR 573) as well as the decision of Hon’ble Gujarat High Court in Saumya Construction (P.) Ltd. (387 ITR 529), it was held that in respect of completed assessments / unabated assessments, no addition could be made by Assessing Officer in the absence of any incriminating material found during course of search under section 132 or requisition made under section 132A.

1. 1. Delay condoned.

2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.

3. Pending application stands disposed of.

10. The facts of the present case would establish that impugned addition of interest income has been made on the basis of incriminating material found during the course of search on a third- party as well as statement recorded therein. In such a case, the proceedings have to be initiated u/s 153C and not u/s 153A which has not been done by Ld. AO. To initiate proceedings u/s 153C, it is mandatory requirement of law that satisfaction should have been recorded by Ld. AO of the searched person as well as the AO of the other person before proceedings u/s 153C. The recording of satisfaction is sine qua non to assume jurisdiction u/s 153C. Without recording of this satisfaction, no addition could have been made in the hands of the assessee. In the present case, no such satisfaction has been shown to us and in fact, the assessment has been framed u/s 153A which could not be sustained in law considering the mandatory provisions of Sec.153C. to 552//CHNY/2024 11. Our aforesaid view is duly supported by the decision of Hon’ble Delhi High Court in the case of PCIT vs. Anand Kumar Jain HUF (ITA Nos.23/2021 & ors. dated 12.02.2021). The Hon’ble Court held that additions on the basis of statement recorded in a separate search action in the case of a third-person are not permissible in Section 153A proceedings. The Hon'ble High Court observed that the statement of third person cannot be construed as an incriminating material belonging to or pertaining to the person other than the person searched. Similar is the view of Bangalore Tribunal in ACIT Vs. P. Shyamaraju & Co. India Pvt. Ltd (ITA Nos.978 to 984/Bang/2014 dated 25-04-2022) as well the decision of Kolkata Tribunal in the case of Krishan Kumar Singhania vs. DCIT (88 Taxmann.com 259).

12. Therefore, considering the aforesaid settled position of law, we would hold that the assessment, for all the years, would be bad-in-law and therefore, the impugned addition could not be sustained on this score only. We order so. In other words, the impugned addition of alleged undisclosed interest income stands deleted. The return of income as filed by the assessee stand restored.”

14. Before concluding, it is to be mentioned that learned CIT DR had sought to argue the validity disputed assessments on the premise of direct search being consequential of search conducted in the premises of Shri O.Arumugasamy. The said contention of the learned DR is incorrect, since direct search was conducted after expiry of nearly two years from the date of first search in the case of Shri O.Arumugasamy. It is also to be noted when the search was conducted in the premises of Shri O.Arumugasamy and consequent to the same, the revenue had failed to initiate proceedings u/s.153C of the Act. The CIT DR has also canvassed based on another Tribunal decision in the case of M/s.SG Wind Farm P.Ltd Vs. DCIT in to 1230/Chny/2024 vide order dated 19.11.2024 that proceedings initiated in the hands of assessee u/s.153A of the Act, despite no incriminating material found in the case of direct search would justify such proceedings as akin to reassessment proceedings u/s.147 of the Act. In this context, we are of the view that reassessment and its conditions are completely different and distinct for the conditions prescribed by the law laid to 552//CHNY/2024 down by the Hon'ble Supreme Court in the case of in the case of PCIT, Central-3 Vs. Abhisar Buildwell Private Limited (supra). Therefore, in light of the undisputed facts that for the assessment years 2014-15 to 2017-18 assessments remain unabated /attained finality and there is no incriminating material found during the course of search conducted in the premises of assessee, the additions made for aforesaid assessment years needs to be deleted and we do so. Since learned AR has not argued any other issues, the other grounds with regard to assessment order ought to have been completed u/s.153C of the Act for making necessary additions is not adjudicated.

ASSESSMENT YEAR 2018-19:- 15. For the assessment year 2018-19, the AO has made addition of Rs.1,50,00,000/- u/s.69 of the Act, as unexplained investment. In the search conducted in the premises of the assessee, there was no incriminating material to disclose that assessee had advanced loan outside books of account to Shri O.Arumugasamy. In the search conducted in the premises of Shri O.Arumugasamy, as mentioned earlier, seized materials, such as loose sheets vide Annexure i)GM/RS/LS/17-18/A 1-39; ii) GM/RS/BA /17-18/A & iii)CBE/132/OA/17-18/A 1-6, were found. According to the AO, to 552//CHNY/2024 these seized loose sheets disclosed payment of loans in cash to Shri O.Arumugasamy. In the sworn statements of Shri O.Arumugasamy and Mrs. R.Santhamani, cashier of Shri O.Arumugasamy, taken immediately after the search u/s. 132 of the Act, it has been mentioned that loans were advanced through banking channels as well as in cash. However, Shri O.Arumugasamy was not fully aware as regards details, since his son Shri A.Senthilkumar had arranged these loans. It is also further evident from sworn statement that assessee is a friend of Shri Senthilkumar S/o. of Shri O.Arumugasamy and Shri O.Arumugasamy knows the assessee only through his son. He has also mentioned in the sworn statement the correct details with regard to interest and amounts that were paid in cash needs to be verified. In the search conducted in the premises of the assessee , the assessee was asked about loose sheets that was seized from premises of search conducted in Shri O.Arumugasamy and Shri A.Senthilkumar group of companies. In response to the same, assessee submitted that all the transactions of advancement of loan by the assessee to Shri O.Arumugasamy and Shri Senthilkumar is accounted through banking channels. The relevant question and answer given [Question No.25 and Answer to 25) is as follows:- “Q 25 - A search was conducted on 09-11-2017 in the case O.Arumugasamy, Shri Senthilkumar and M/s Senthil to 552//CHNY/2024 Paper & boards pvt Ltd. From the premise of office premises of M/s Senthil Group of Companies, registers and folders were seized vide annexure CBE/132/OA/17-18/A1-7. Similarly, from the premises of Smt R.Santhamani, cashier of M/s Senthil Group of companies, incriminating materials in the form of loose sheets were found and seized vide annexure ANN/GM/RS/LS/2017-18/A1 dated 09-11-2017 containing details of cash receipts in demonetized currency notes and particulars of the same cash to various persons. Smt. R.Santhamani in her sworn statement dt 09-11-2017, vide reply to the question nos 6,7,,8 and 9 had deposed that these seized loose sheets are daily statements, containing details of cash receipts and payments made to various persons from whom her managing director Shri O.Arumugasamy had borrowed money. Further accounted loans were indicated as (A/C) next to the name of the person and other loans were unaccounted one. On verification of above mentioned registers and folders it is found that the entries of cash payments/loan repayments are matching with the entries made in the loose sheets which were found at the premises of Smt.R.Santhamani, Cashier as stated above. One of such loan creditors is identified as shri. Mohanraj Shanmugam also known as "Legends Inn Mohan". The relevant seized document vide annexure ANN/GM/RS/LS/2017-18/Al(Loose sheet no. 107 & 110), In the page no.107 dated 26/11/16, "Legend Inn Mohan 14500000" In the page no.110 dated 26/11/16 "Legend Inn Mohan(c/o Prabhu) In the page no.87 dated 30/11/16" Mohan Legend Inn 3766000" Similarly, a register containing unaccounted loan repayment pertains to you, found and seized vide annexure CBE/132/OA/17-18/A-4. Please offer your comment on it. to 552//CHNY/2024 Ans 25 I have transactions with Shri Senthilkumar and O.Arumugasamy. All are accounted and through banking channels only.

17. From the aforesaid retraction affidavit filed by Shri O.Arumugasamy, it is clear that address and details who had advanced cash loan is mentioned. In other words, transaction of advancement of loan by cash does not pertain to assessee, but to Shri B.Saravanan residing at 1/447, Avinashi Road, Neelambur, Coimbatore-641 062. Shri A. Senthilkumar S/o. Shri O.Arumugasamy has also given affidavit, wherein it has been stated as follows:- “8. That M/s Senthil Energy Private Limited have given hand loan to Mr.S.Mohanraj on 31.03.2016 amounting to Rs.1,50,00,000/- and received back the same on 04/04/2016. 9. That Mr.S.Mohanraj is a friend of mine and is known to my father Shri.O.Arumugasamy only through me and all transactions between them were only through me. 10. That Mr.S.Mohanraj has never lent any amount in cash to me or my father or any of our Group concerns at any point of time. All transactions with him were only through Bank. 11. That When I contacted Mr.S.Mohanraj for money, he said he had no amount and mentioned a name of a person. The amounts were given by such person only. I told our accountant that the loans were given by the person mentioned by Mr.S.Mohanraj. The accountant mistook it as if were lent by Mr.S.Mohanraj and entered his name wrongly. I affirm that those transactions do not to 552//CHNY/2024 relate to Mr.S.Mohanraj. All the above transactions were routed only through me. 12. That the entries of loan and interest pertain to B.Saravanan residing at 1/447, Avinashi road, Neelambur, Coimbatore-641062 13. That the statement given by my father stating that amount was received and paid back to Mr.S.Mohanraj is only because of the wrong impression that the amounts were lent by Mr.S.Mohanraj.”

16. To appreciate the contentions raised before us by the learned counsel for the parties it will be necessary at this stage to refer to the material provisions of the Act. Section 3 declares that a fact a relevant to another when it is connected with the other in any of the ways referred to in the provisions of the Act relating to the relevancy of facts; and those provisions are to be found in Section 6 to 55 appearing in Chapter II. Section 5, with which Chapter II opens, expressly provides that evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and the facts declared relevant in the aforesaid section, and of no others. Section 34 of the Act reads as under:-

34. Entries in books of account when relevant - Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability."

20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr. Sibal, in business parlance 'account' means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr. Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under section 34 as they were not regularly kept. It was urged by him that the words 'regularly kept' mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'.

Order pronounced in the open court on 11th March, 2025.