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

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ITA 550/CHNY/2024Status: DisposedITAT Chennai11 March 2025AY 2016-1737 pages

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Income Tax Appellate Tribunal, B BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 26.02.2025Pronounced: 11.03.2025

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.

The common issue is raised in these appeals, hence, they were heard together and are being disposed off by this consolidated order. Identical grounds are raised except for variation in figures.

to 552//CHNY/2024 The ground relating to assessment year 2018-19 is reproduced below:- “1. The order of the CIT(Appeals) 20, Chennai dated 16.02.2024 vide DIN & Order No. ITBA/APL/S/250/2023-24/1061041843(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.

2. The CIT(Appeals) 20, Chennai erred in confirming the validity of framing of the assessment under Section 153A of the Act in the absence of seized material during the course of the search made in hands of the appellant and further erred in confirming the addition made in the search assessment order passed in terms of Section 153A of the Act without assigning proper reasons and justification.

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.

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.

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."

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."

11.

As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, 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 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. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. to 552//CHNY/2024

14.

In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition to 552//CHNY/2024 preferred by the Revenue are hereby dismissed. No costs. Civil Appeal Nos.7738-7739/2021, 7736-7737/2021, 7732-7735/2021 and 7740-7743/2021 15. Insofar as the aforesaid Civil Appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 6-9-2016 passed in 269/2014, 15/2015, TANVI 16/2015, 268/2014 and 17/2015, as also, against the order dated 21-9-2017 passed in the review applications. It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under section 143(1)(a) or 143(3) of the Act, 1961 and to reassess the total income taking notice of undisclosed income even found during the search and seizure operation. 15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was available at the time of original assessment does not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs.

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 a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence, still, the statement made therein shall not along be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfil the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed. to 552//CHNY/2024 18. "Book" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed:- " In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book…I think the term "book" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of S.34."