SADHU RAM GUPTA,DHURI, SANGRUR vs. ITO, WARD-1, MALERKOTLA, PUNJAB

The ld. A.O. has observed that a search u/s 132 of the Income Tax Act was conducted in the case of Homeland Group of Cases on 26.02.2020. The Dy. Director of Income Tax (Investigation)-II, Ludhiana put information on the insight portal of Income Tax exhibiting the fact that assessee has purchased a flat No. 42 in Tower No. 5 at Project of Homeland Heights, Sector 70, Mohali for a consideration of Rs.1,19,23,000/-. According to the AO, the assessee has &874/CHD/2025 A.Y.2017-18 and 2020-21 3 made a payment of Rs.92,34,000/- including cash of Rs.87,34,000/- during financial year 2016-17 relevant for assessment year 2017-18. Similarly, he observed that assessee has paid a sum of Rs.1 lac on 30.01.2020 for office space. Somehow, this booking was cancelled by the assessee and an amount of Rs.1 lac was received through Account Payee Cheque on 05.11.2021.

The ld. DR on the other hand, relied upon the orders of Revenue Authorities.

We have duly considered the rival contentions and gone through the record carefully. We take the first proposition involved in assessment year 2017-18, whether the assessment u/s 147 is legally sustainable or not. In other words, whether the AO ought to have passed the assessment order u/s 153C or 147 read with Section 143(3).

Section 153(C) of the Income Tax Act after its amendment by Finance Act, 2015 has a direct bearing on the controversy, therefore, we deem it appropriate to take note of this Section, which read as under : 153C. Assessment of income of any other person.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or &874/CHD/2025 A.Y.2017-18 and 2020-21 8 (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153-A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153-A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153-A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132-A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess &874/CHD/2025 A.Y.2017-18 and 2020-21 9 total income of such other person of such assessment year in the manner provided in section 153-A."

A bare perusal of this Section would reveal that it starts with a non obstante clause “not withstanding anything contained in Section” meaning thereby this Section has an over-riding effect over other Sections namely; 139, 147, 148, 149 etc. This Section contemplates that where AO of the searched person is satisfied that ; a) Any money, bullion, jewellery, other valuable article or thing seized or requisitioned belong to or b) Any books of account, document seized or requisitioned pertains or pertains to or any information contained therein relates to a person other than the person referred in Section 153A, then AO of the searched person would record his satisfaction and transmit those materials to the AO of such other person qua whom these materials have been found during the course of search.

Before embarking on an enquiry further, we deem it appropriate to take note of the judgement of Hon'ble Supreme Court in the case of ITO Vs Vikram Sujitkumar Bhatia reported in 149 taxman.com 123. The basic reason for taking cognizance of this judgement at this stage is the assessment year involved herein is assessment year 2017- 18 and we are taking cognizance of Section 153C as &874/CHD/2025 A.Y.2017-18 and 2020-21 11 amended by Finance Act, 2015. In this judgement, Hon'ble Supreme Court had an occasion to consider whether this amended Section will be applicable with retrospective effect or not. The question formulated by the Hon'ble Supreme Court in this judgement read as under : “Whether amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to search conducted under Section 132 of the Income Tax Act, 1961 before 01.06.2015 i.e. the date of amendment ?

Therefore, we are of the view that once material collected during the course of search is being used against the assessee, then assessment order ought to have been passed u/s 153C and not u/s 147 of the Act. Accordingly, we quash assessment in A.Y. 2017-18.

As far as the addition on merit is concerned, we find that identical situation has been considered by us and there is no disparity on the information considered by the AO in these appeals vis-à-vis we have discussed in the order passed in assessment year 853/CHD/2024. The relevant part of the order of the ITAT reads as under : “3. The brief facts of the case are that assessee has filed his return of income on 27.02.2017 declaring total income of Rs.13,45,430/-. The AO has reopened the assessment on the ground that assessee alongwith his wife had purchased Flat No. 133, Tower No. 2, 13th Floor, Homeland Heights Apartment, Sector 70, SAS Nagar, Mohali (Punjab). A search was conducted at the premises of Homeland Buildwell Pvt. Ltd. wherein two laptops of two employees were recovered. The first laptop was of one Shri Monu who &874/CHD/2025 A.Y.2017-18 and 2020-21 13 was working as a Customer Relationship Manager of M/s A.B Alcobev Pvt. Ltd. and the other laptop was of Shri Sanjiv Garg. Shri Monu was earlier working with developer from whom assessee has purchased the flats. According to the Revenue, certain pages were deleted in the laptop of Shri Monu which was retrieved by the Revenue wherein the Revenue could lay hand on certain details wherein it was noted by Shri Monu that how cost of construction of these flats have been recouped from the alleged buyers. In other words, case of the Revenue is that assessee has paid over and above the amounts stated in the Sale Deed. With the help of that evidence, the addition of Rs.30 lacs has been made in the hands of the assessee.

The ld. Counsel for the assessee while impugning the orders of the Revenue Authorities has emphasized that except a bald allegation in the shape of discovery of some sheet from one Monu, who was not even under employment of developer at the relevant time, was made as a basis of this addition. The Department did not supply either the statement of Monu, the alleged incriminating material to the assessee nor allowed any cross-examination of the alleged witness. The AO himself has not cross verified any of the details, he just relied on the information of the alleged Investigation Wing.

On the last date of hearing, nothing was brought on record by the Revenue except an Appraisal Report prepared by Investigation Wing which was transmitted to the concerned Assessing Officers. In other words, it is just an opinion of some officer who has conducted the investigation. The basic evidence or the basic document was never transmitted to the AO.

On due consideration of the facts and circumstances, we find that only evidence alleged to be possessed by the Revenue is some details unearthed from the computer of Shri Monu whose erstwhile employer was the developer from whom assessee has purchased the flat. We observe that the authenticity of such details in laptop of a third person will always remain doubtful without sufficient corroborative evidence. There is no direct evidence possessed by the revenue. The concerned employee has already left the job of &874/CHD/2025 A.Y.2017-18 and 2020-21 15 the developer. The AO has neither supplied the alleged copies of those documents recovered from the laptop of Shri Monu nor he has put Shri Monu for cross-examination of the assessee. It is not established on the record whether assessee has made any payment to Shri Monu. Only a chart prepared by an employee was recovered but that cannot be the evidence, solely on whose basis addition can be made. At this stage, we deem it appropriate to make reference to the judgement of Hon'ble Supreme Court in the case of Andaman Timber Industries Vs Commissioner of Central Excise 281 CTR 241 (S.C.) wherein the Hon'ble Supreme Court has propounded that if a witness was not put for cross-examination, then statement recorded against a person from his back will not be used in evidence. Para 6 of the judgement reads as under : “6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice' because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”

In the light of above, if we examine the facts of the present appeals, then it would reveal that as far as assessment year 2020-21 is concerned, the assessee has cancelled the booking. If a transaction has not been materialized, then how &874/CHD/2025 A.Y.2017-18 and 2020-21 16 it can be assumed that the assessee must have made the payment in cash whose source is unexplained. Immediately after payment of booking amount, the transaction was cancelled by the assessee and he has received the money back through Account Payee Cheque. In such circumstances, we are of the view that AO has unnecessarily made hypothetical calculations. As observed in re-assessment order for A.Y. 2017-18, we are of the view that ld. CIT (Appeals) has failed to appreciate the controversy in right perspective. The observation of the CIT (Appeals) that Shri Amit Gupta and other persons have made disclosures during their statement recorded u/s 132(4) of the Income Tax Act, we are of the view that presumption of truth in an admission made u/s 132(4) could only be drawn qua the deponent. It cannot bind any third person if some material is being admitted as true by the deponent of the statement, then it will be construed as true admission qua him and his declaration cannot bind a third person. Therefore, this reference by the ld. CIT (Appeals) is contrary to the principle of law. Similarly, all information referred by the AO as well as by the CIT (Appeals) are available in the computers of third person, how their entries recorded &874/CHD/2025 A.Y.2017-18 and 2020-21 17 by them could be binding upon the assessee and could be construed as true qua the assessee. Therefore, there is nothing with the Revenue to suggest that assessee has made payment of cash for purchase of a flat in assessment year 2017-18 and for booking of an office space relevant to assessment year 2020-21. We allow both the appeals and delete the additions.

In the result, both the appeals are allowed.