DCIT 7(3), MUMBAI vs. M/S TRISHUL REALTY INFRA PVT LTD., MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “E” BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA.NOs. 4041 & 4042/MUM/2019 (A.Ys: 2011-12 & 2012-13) Dy. CIT – Central Circle -7(3) v. M/s. Trishul Realty Infra Pvt. Ltd., Room No. 655, 6th Floor Office No. 01, 2nd Floor 3, Patel Bhuvan, Aayakar Bhavan, M.K. Road 29, Dr. N.N Shah Lane Mumbai - 400020 Cheera Bazar, Mumbai -400002 PAN: AADCT0412D (Appellant) (Respondent) C.O. No. 73/MUM/2020 [ARISING OUT OF ITA.NO. 4041/MUM/2019 (A.Y. 2011-12)] & C.O.No. 16/MUM/2021 [ARISING OUT OF ITA.NO. 4042/MUM/2019 (A.Y. 2012-13)] M/s. Trishul Realty Infra Pvt. Ltd., v. Dy. CIT – Central Circle -7(3) Office No. 01, 2nd Floor Room No. 655, 6th Floor 3, Patel Bhuvan, Aayakar Bhavan, M.K. Road 29, Dr. N.N Shah Lane Mumbai - 400020 Cheera Bazar, Mumbai -400002 PAN: AADCT0412D (Appellant) (Respondent) Assessee by : Shri Rushabh Mehta Department by : Shri Sanjeev Kashyap

Date of Hearing : 18.06.2021 Date of Pronouncement : 16.09.2021

2 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., O R D E R PER C.N. PRASAD (JM) 1. These two appeals viz. ITA No.4041/Mum/2019 and 4042/Mum/2019 are filed by the Revenue and the Cross Objections No. 73/Mum/2020 and 16/Mum/2021 are filed by the assessee against the orders of the Commissioner of Income Tax (Appeals)-49, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 20.03.2019 and 28.03.2019 for the Assessment Years 2011-12 and 2012-13 respectively.

ITA No.4041/MUM/2019 & CO No.73/MUM/2020 – A.Y.2011-12

3 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., any incriminating material found during the course of search and that the Ld. CIT(A) failed to appreciate that statements recorded during the course of search and transactions duly recorded in the books of account do not constitute incriminating material.

4 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., 5.1 With respect to M/s.Gulmohar Towers Pvt. Ltd., in the impugned assessment order, the Assessing Officer highlighted the background of search action carried out on the Patni Group on 09.10.2014 wherein statement of various entry providers had been recorded (who had made investments in the group) and they had accepted to have provided accommodation entries to the group in the form of share capital or unsecured loan. The facts that emanate from the search action as recounted by the Assessing Officer are that the Patni group had bought a company namely M/s.Gulmohar Towers Pvt. Ltd. through their group entity namely M/s.Everfine Constructions Pvt. Ltd. at very nominal price. During the search action, it was unearthed that the groups are selling flats/ units from their real estate projects and out of which full consideration is not recorded in the books. This unaccounted income generated through On money and Out of Book Sales have been routed through these shell company based in Kolkata and brought into regular books by way of unsecured loan or advance against booking. It was observed that the total networth of M/s. Gulmohar Towers Pvt. Ltd. was ₹.45,06,49,650/- (including share premium of ₹.42,80,19,650/-) which was raised in F.Y.2007-08 which was later on purchased by Patni group at

5 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., ₹.2,26,30,000/-. In order to verify the genuineness of the transactions entered by the group with M/s.Gulmohar Towers Pvt. Ltd., statement of Shri Khimji Patel (chairman of group) was recorded u/s.131 during course of survey proceedings on 11.10.2014 wherein he was asked to furnish the valuation report of M/s.GulmoharTowers Pvt. Ltd., on the basis of which the valuation of share at ₹.10/- had been arrived at, as it was impossible that a company having share premium of ₹.42,80,19,650/- could be acquired at face value. In his reply, he had stated that no valuation of shares was done at the time of acquisition of shares and had accepted that ₹.42.80 crores were paid in cash to the promoters of the company which was brought back to the group by way of loans over a period of time. In view of the said facts, Shri Khimji Patel had disclosed the same as undisclosed investment of M/s.Everfine Construction Pvt. Ltd. in M/s.Gulmohar Towers Pvt. Ltd. for the period starting from F.Y.2010-11 to F.Y.2013-14. The Assessing Officer also placed reliance of statements of Shri Anand Sharma recorded u/s.133A dated 02.07.2013 who is an alleged entry operator wherein he had explained the complete modus operandi of creating shell companies. Adopting the statement of Shri Anand Sharma, the AO in the impugned assessment order has stated that the same modus

6 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., operandi had been exactly followed by the Patni group to introduce unaccounted funds in the form of accommodation entries. The Assessing Officer also made reference to statement of Shri Vivek Agarwal recorded u/s.131 dated 10.10.2014 wherein he had accepted that the loans received from M/s.Gulmohar Towers Pvt. Ltd. by his wife were mere accommodation entry received in lieu of cash. The fundamentals of M/s.Gulmohar Towers Pvt. Ltd. were analyzed by the Assessing Officer and he made his various observations to that effect in the assessment order. The company is not doing any business activity other than rotation of funds. It only provides financial assistance to Patni group either through unsecured loans or advances against property. The staff strength of the company was unknown & no salary had been paid. The only source of investment was reserves and surplus (securities premium) which had been created from past profits nor money had been borrowed and it was practically not possible to acquire a company with huge reserves and surplus at substantially lower price with such huge difference between the price paid and actual price of the company. According to the Assessing Officer, it was very clear that the company was acquired only as a device to take accommodation entry and that the said company was only a shell/ paper

7 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., company which had been created to route unaccounted funds. He also stated that M/s.Gulmohar Towers Pvt. Ltd. got incorporated for the purposes of business which it never carried and that if there was no business in the company, then why any prudent businessman made investment in the company, or could it be concluded that the company had been formed with the real intention of infusing unaccounted money by creating various layers. Therefore, on perusal of all the facts and in the light of circumstantial evidence, the Assessing Officer alleged that the assessee has introduced its own unaccounted money under the garb of investment and all the receipts are to be added to the total income of the assessee u/s.68 of the Act. Based on the declaration of undisclosed income by Shri Khimji Patel and given the fact that the said investment would have been assessed in M/s.Everfine Construction Pvt. Ltd. on substantive basis, the addition of Rs.30,40,00,000/- was made u/s.68 of the Act on protective basis in the hands of the assessee.

5.2 Similarly, with respect to loan received from M/s.RowlandTrexim Pvt. Ltd., similar background of search of the Lotus group was highlighted by the Assessing Officer wherein it was disclosed that the Lotus group had

8 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., acquired three Kolkata based paper companies viz. Bhawna Computer LLP, Rowland TreximPvt.Ltd. and Divine Tradecom LLP. In order to verify the genuineness of the said companies, the statement of Shri Ashok Agarwal (Chairman of Lotus group) was recorded u/s.131 during the course of survey action on 10.10.2014 wherein he was confronted with the statements of certain alleged entry providers in relation to M/s.RowlandTreximPvt.Ltd. which were denied by him. The Assessing Officer made similar analysis of the financials of the said 3 companies and it was observed that the companies are not doing any business activities except rotating of funds and are only a tool to provide accommodation entries. In relation to M/s.Bhawna Computers P.Ltd, reference was made to statement of Shri Ankit Poddar recorded u/s.133A on 09.10.2014 wherein it was stated by him that he had no knowledge of the business activities of the 3 companies, he only received letters of the said companies and handed over the same to Shri Pradeep Poddar who was the director in those 3 companies. Similarly, even statement of Shri Amal Mondal was recorded during the course of survey on the same date wherein he had conceded that all the investments made by Bhawna are accommodation

9 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., entries. Reference was also made to statement of Shri Mahesh Singhania wherein he had stated that Shri Amal Mondal was his employee.

5.3 Thus, based on the above facts, as per the Assessing Officer, the Lotus group have received huge amount either by way of share capital or unsecured loans/advances form the said 3 companies which were bought by the group in the preceding years. The said companies got incorporated for the purposes which they never carried and that if there was no business in the companies, then why any prudent businessman made investment in the companies, or could it be concluded that the companies had been formed with the real intention of infusing unaccounted money by creating various layers. It was noted that if sources of funds infused by Divine, Rowland and Bhawna for providing unsecured loans and share application money to Lotus Group are examined, then it becomes crystal clear that the transactions made by the Group are mere accommodation entries. Reference was given to various entry operators who have accepted before the Department that they were in the process of providing accommodation entries and only for that purpose they had created shell companies for carrying out such activities. As per the Assessing Officer, it

10 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., has been revealed that the companies making investments in the said 3 companies were either the operator or director of the companies who had accepted before the Department that they are providing accommodation entries. The Assessing Officer analyzed the financials of the said 3 companies in which share capital along with premium had been received wherein it gets proved that the companies do not have any funds as their accumulated profits are very meagre to the fetch the share application money and that too at a huge premium.

5.4 The Assessing Officer once again referred to the statement of Shri Anand Sharma recorded u/s.133A dated 02.07.2013 who is an alleged entry operator wherein he had explained the complete modus operandi of creating shell companies. Adopting the statement of Shri Anand Sharma, the Assessing Officer in the impugned assessment order has stated that the same modus operandi had been exactly followed by the Lotus group to introduce unaccounted funds in the form of accommodation entries. The Assessing Officer also categorically referred to the statement of Shri Pradeep Poddar recorded u/s.131 on 02.12.2014 wherein he had accepted that the 3 companies were used for providing accommodation entries to

11 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., the Lotus group. A police compliant was also filed before the Office in charge, Kolkata on 03.12.2014 for unauthorized detention, harassment and mental torture. Subsequently, the statement was also retracted vide affidavit dated 09.12.2014 and thereafter, the assessee had also produced Shri Pradeep Poddar for confirmation of the retraction affidavit wherein he had appeared on 22.12.2014 in response to summons issued u/s.131 of the Act. The Assessing Officer in the impugned assessment order did not buy any of the versions of Shri Pradeep Poddar mentioned in his police complaint and the retraction affidavit. Further, reference was also made to statement of Shri Parbat Gothi, main person of Kamdhenu Group which hold shares in the Lotus Group. In his statement recorded u/s.131 on 12.10.2014, he had confirmed that certain entities of his group namely M/s.Matashree Enterprises P Ltd, Pitashree Enterprise P Ltd, Pruthvi Builders and Shri Valji Manji Gothi had obtained accommodation entries by way of unsecured loans from M/s.RowlandTrexim Pvt. Ltd. Subsequently, his statement was retracted that it was given under pressure and undue influence from the search party but the same was not accepted by the Assessing Officer.

12 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., 5.5 The Assessing Officer mentioned the fact that the Lotus Group could neither during the search nor in post search establish the genuineness of the transactions and could also not establish the money trail and show that the money received by the Lotus group companies from the said 3 Kolkata companies were genuine. Based on the circumstantial evidences and statements recorded and kept on record, the Assessing Officer was of the view that the assessee has failed miserably to prove the genuineness of the transactions and creditworthiness of the investors and stated that it was clear that the assessee had introduced its own unaccounted money under the garb of unsecured loan and advance against land and accordingly, also made addition of ₹.8,55,00,000/- u/s.68 of the Act in respect of loan obtained from M/s. Rowland Trexim Pvt. Ltd. and disallowed the interest expense thereon of Rs.3,15,148/- u/s.69C of the Act.

13 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., belonging to the assessee. The entire assessment order has been framed based on the general modus operandi of Groups acquiring paper companies at nominal value/ infusing unaccounted money in the form of share capital loans through various layers of companies/ entry providers etc., and also statements of various third parties/ entry operators recorded during their survey and that too prior to the date of search i.e. 09.10.2014. He submits that in relation to findings/ evidences collected during the course of search, reference is only made to the statement of Shri Khimji Patel (subsequently retracted) who had disclosed ₹.42,80,19,650/- as undisclosed investment of M/s.Everfine Construction Pvt. Ltd in M/s.Gulmohar Towers Pvt. Ltd. from which the assessee had received advance during the year under consideration. Further, the Assessing Officer has referred to statements of alleged entry operator/ third party viz. Shri Anand Sharma and Vivek Agarwal which do not have any relevance with the transaction undertaken by the assessee company. Similarly, the Assessing Officer has once again referred to the general findings of the search/ survey in the Lotus/ Kamdhenu/ Patel- Patni Group and also statements of various other third parties recorded during the course of search. There is no specific material whatsoever which has been found in

14 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., the course of search. Therefore, he submits that on a plain reading of the impugned assessment order in its entirety, no specific incriminating material or asset or information in the form of any parallel books of account or unaccounted money etc. has been found against the assessee. Moreover, there has been no mention of the assessee in any of the so- called statements recorded by third parties to be involved in any such scheme of things and also submits that the statement recorded in the course of search/ survey of some other person cannot be considered to be an incriminating material found in the course of search of the assessee. It was highlighted that statement of Shri Anand Sharma was recorded much prior to the date of search. Statement of Khimji Patel, Shri Ankit Poddar and Shri Amal Mondal were recorded during survey u/s.133A of the Act and that of Shri Pradeep Poddar, Shri Ashok Agarwal and Shri Parbat Gothi were recorded in the course of search. The Ld. Counsel argued that recording of statements during search/survey cannot tantamount to material found in the course of search/survey rather these are creation during the search/survey. The Assessing Officer has proceeded to make additions as the assessee was a recipient of certain advances/ loans from companies which have been alleged to be paper companies. The total

15 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., addition made of ₹.38,98,15,150/- is not based on any specific incriminating material relating to the assessee given the fact that no undisclosed cash/ asset/ investment/ income was also found. With respect to the proposition that statement recorded in the course of search do not constitute incriminating material, the ld. Counsel placed reliance on certain decisions: (i). CIT v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Del HC) (ii). Pr. CIT v. Best Infrastructure Pvt Ltd [2017] 84 taxmann.com 287 (Del ITAT) (iii). PCIT v. Anand Kumar Jain (HUF) ITA 23/2021 dated 12.02.2021 (Del HC) Further, the Ld. Counsel argued that the case of the assessee had earlier been assessed u/s.143(3) vide order dated 15.01.2014 and placed the copy of assessment order on record. It is submitted that as per the provisions of section 153A of the Act, an assessment is abated, if any assessment or reassessment is pending on the date of initiation of the search. Therefore, in the present case, on the date of search viz. 09.10.2014, the assessment u/s. 143(3) for the year under consideration was already completed and even no notice under section 148 was issued before the initiation of the search. Thus, the regular assessment done had attained finality prior to the date of search. The ld. Counsel made reference

16 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., to the 2nd proviso to section 153A of the Act and submitted that the said proviso implies that in respect of completed assessments, an assessment shall be made only if incriminating documents, etc. are found in the course of search. The term “assess and reassess” appearing in section 153A(1)(b) consequently means that an assessment shall be made in case of pending assessments whereas reassessments shall be made in respect of completed assessments where incriminating material is found in the course of search. A conjoint reading of section 153A of the Act along with the 2nd proviso signifies that the jurisdiction the Assessing Officer in the course of assessment u/s. 153A for unabated years is restricted to the incriminating material found in the course of search. Accordingly, it was argued that in the present case, since regular assessment was already done prior to the date of search, the assessment made u/s.153A ought to have been restricted only with respect to any incriminating material against the assessee and as such no incriminating material except for general findings and statements of third parties has been found based on which the addition has been made. The addition of advances/ loans has been made which are forming part of the regular books of account of the assessee. It was once again reiterated that no incriminating material in the form of

17 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., parallel books of account, unaccounted money etc. was found to make such addition and that such addition made on transactions duly recorded in the regular books of account is without any jurisdiction u/s.153A of the Act. With respect to assessments for unabated years being made only on incriminating materials, the ld. Counsel placed reliance on the following judicial pronouncements: (i). CIT v. SKS Ispat and Power Ltd. (ITA No. 1874 of 2014 and 58 of 2015) (Bom HC) (ii). CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 (Bom HC) (iii). CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78and (iv). All Cargo Global Logistics Ltd. [2015] 374 ITR 645 (Bom HC).

The Ld. Counsel finally submits that the total addition made of ₹.38,98,15,150/- by the AO is itself without any jurisdiction u/s.153A of the Act in absence of any incriminating material found in the course of search.

18 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., operandi of providing accommodation entries. The statements recorded coupled with circumstantial evidence constitute incriminating material which reveals that the said companies are bogus and accordingly, addition made in assessment u/s.153A is justified.

19 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., material. On the other hand, the Ld. DR submits that the statements along with other findings during the course of search constitute incriminating material to justify the additions made.

20 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., On a bare reading of the aforesaid provision, it is clear that the condition precedent for application of section 153A of the Act is that there should be either a search initiated u/s.132 or requisition of books of account, documents, etc. u/s.132A of the Act. The clear language of the section along with its provisos reveal that it is only the pending assessments as on the date of initiation of search which shall abate. The intention behind the same is only to avoid multiplicity of proceedings for the same assessment year. However, it is to be borne in mind that the object and purpose of a search is to detect undisclosed income. A search can take place only when a concerned officer has information and reason to believe that any person is in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of a search, then the books of account or other documents or valuable assets could be seized. Chapter XIV-B of the Act deals with special procedure for assessment of search cases dealing with undisclosed income as a result of search, the computation thereof and such other provisions. Undisclosed income is defined in section 158B(b) of the

21 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., Act which includes money, bullion or other valuable assets. As stated earlier, it is only when the concerned officer has information about the same and has reason to believe that the said valuable assets have not been or would not be disclosed would give jurisdiction to the officer authorized to conduct a search operation. As defined under section 158B(b) of the Act, it is only when the undisclosed income is detected in a search operation that there would be assessment or reassessment. Therefore, in cases of completed assessments, the power under section 153A of the Act is not expected to be exercised routinely but should be exercised only if the search reveals any incriminating material. If that is not found, then there is no warrant for making any kind of assessment or reassessment under this section. The intent behind search provisions is not to upset or disturb assessments which have already attained finality but only to capture such undisclosed income unearthed from the search to make the assessment or reassessment u/s.153A of the Act. If a search operation does not lead to detection of undisclosed income as defined in chapter XIV-B, then no purpose would be served in reopening the assessment already completed. Therefore, in the present case, the matter boils down to the fact as to whether any incriminating material was found

22 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., belonging to the assessee to make an assessment u/s.153A of the Act since it is an undisputed fact that the present year is an unabated year. The case for the instant year had already been earlier assessed to tax u/s.143(3) vide order dated 15.01.2015, the copy of which has been placed on record before us.

9.1 On a perusal of the impugned assessment order, it is noted that the Assessing Officer has discussed in depth about the search action conducted on Patni and Lotus Group and the general findings therein. He has categorically referred to statements recorded of various parties during the course of survey/ search wherein it has been stated by them that the impugned companies viz. M/s. Gulmohar Towers Pvt. Ltd. & M/s.Rowland Trexim Pvt. Ltd. are merely shell/ paper companies involved in dealing with accommodation entries. In case of M/s. Gulmohar Towers Pvt. Ltd., the Assessing Officer has mainly relied upon the statement recorded of Shri Khimji Patel u/s.133A wherein he had disclosed an undisclosed investment of Rs.42,80,19,650/- of M/s.Everfine Construction Pvt. Ltd. in M/s.Gulmohar Towers Pvt. Ltd. and that the same was brought back to the various group concerns in the form of loans. Similarly, in case of

23 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., M/s.Rowland Trexim Pvt. Ltd., he has relied upon the statements of Shri Pradeep Poddar, Shri Ashok Agarwal, Shri Ankit Podar, Shri Anand Sharma, Shri Parbat Gothi, Shri Amal Mondal and Shri Birendra Kumar Tiwary. From the above, it appears that the Assessing Officer has simply relied upon various statements recorded during the survey and search actions and has narrated the general modus operandi which usually is discovered out of search actions. The Assessing Officer apart from the statements recorded has failed to produce any corroborative material to justify the addition. No such concrete finding or incriminating material revealing undisclosed income of the assessee per se has been unearthed which is the sine qua non for making additions pursuant to a search and seizure operation. This observation which has also been held by the Hon’ble Bombay High Court in the case of All Cargo Global Logistics Ltd. [2015] 374 ITR 645 (Bom.). The Hon’ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 answered the question framed by it as under:

“53…… …….

24 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) In respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.”

In CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi), the Hon’ble Delhi High Court had summarized the legal position of section 153A of the Act of which the relevant part is reproduced below:

“37…. ………. iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be

25 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.”

9.2 Further, coming to the issue about statements recorded u/s.132(4) whether they constitute incriminating material or not, we observe that although such statements possess evidentiary value and have relevance as contemplated by the Act, such statements alone cannot on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the Assessing Officer to frame the block assessment. Therefore, we find merit in the arguments of the Ld. Counsel for the assessee that the statements alone cannot constitute incriminating material. It is observed that none of the statements relied upon by the Assessing Officer reveal any form of material viz. undisclosed asset/ documents or parallel books of account belonging to the assessee except general confessions about the various companies operated by them. Even the Ld. DR failed to show any material or evidence unearthed in the course

26 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., of search to incriminate the assessee. Therefore, such standalone statements in absence of any other corroborative evidence cannot be construed as incriminating material. It is imperative to draw support of the decision of the Hon’ble Delhi High Court in the case of Commissioner of Income-tax v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi). The relevant part of its observations are as below:

“……. 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 21. …… However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of

27 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 22. In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman 300, a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked….. The relevant passage from the aforesaid judgment is quoted below:— "A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department

28 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which

29 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 25. In CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306, a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act…..” In view of the aforesaid, we do not appreciate the contentions of the Revenue that the statements recorded during the course of search constitute incriminating material for the purpose of assessment u/s.153A of the Act.

9.3 It has also been brought to our notice that statement of Shri Anand Sharma was recorded on 08.02.2014 which was much prior to the date of search. Statements of Shri Khimji Patel, Shri Ankit Poddar and Shri Amal Mondal were recorded during survey u/s.133A of the Act which do not have any evidentiary value in the eyes of law as also held by Hon’ble Madras High Court in the case of CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Madras) which has been affirmed by the Hon’ble Supreme Court [2012] 25 taxmann.com 413 (SC). Further, statements of Shri Pradeep Poddar, Shri Ashok Agarwal, Shri Parbat Gothi& Shri Vivek Agarwalwere recorded in the course of searchi.e. they were not “found” in the search

30 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., but “created” during the search. Therefore, each of the statement relied upon by the Assessing Officer itself cannot be relied upon due to the aforesaid facts and accordingly, the question of considering them as incriminating material for the purpose of section 153A of the Act does not arise at all. On the other hand, the Ld. DR could not produce any material to suggest that the assessment made u/s.153A for the year under consideration and the consequent additions were based on any seized material revealing undisclosed income of the assessee. He has simply relied upon the orders of the lower authorities and contended that the findings unearthed during the course of search constitute incriminating material for justifying the assessment u/s.153A of the Act. We are unable to appreciate the above argument since there is nothing even apparent to prove anything incriminating against the assessee except for statements of third parties alone.

9.4 Also, we find merit in the contention of the Ld. Counsel that transactions duly recorded in the regular books of account do not constitute incriminating material. In the instant case, the advance and loan obtained from Gulmohar Towers Pvt. Ltd. & M/s.Rowland Trexim Pvt. Ltd.

31 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., respectively have been duly recorded in the books of account based on which return of income was filed and the same can by no stretch of imagination be construed as incriminating material found during the course of search. In this regard, support is drawn to the decision of the Hon’ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391 (Delhi).

9.5 We once again reiterate that the scope and ambit of section 153A of the Act is to restrict to only incriminating material in case of unabated years. Since the assessment for the year under consideration is an unabated one which is undisputed and that we find no existence of any such incriminating material which is the pre-requisite to make assessment u/s.153A of the Act, the consequent additions made by the Revenue are without jurisdiction and will not survive. As we have decided the issue on the preliminary ground, all other issues raised by both the parties become academic and need not require separate adjudication.

32 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., ITA No.4042/MUM/2019 & CO No.16/Mum/2021 – A.Y.2012-13

Sd/- Sd/- (S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 16/09/2021 Giridhar, Sr.PS

33 ITA.NOs. 4041 & 4042/MUM/2019 C.O. No. 73/MUM/2020 & 16/Mum/2021 M/s. Trishul Realty Infra Pvt. Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.

//True Copy// BY ORDER

(Asstt. Registrar) ITAT, Mum