ANAND JAIN HUF,NEW DELHI vs. DCIT, CENTRAL CIRCLE- 25, NEW DELHI

PER SH. H.S. SIDHU, J.M. The aforementioned different Assessees have filed these 11 appeals against the exactly similar orders passed by the Ld. CIT(A), New Delhi in respect of the different assessment years. In these cases the assessment orders were passed by the same Assessing Officer u/s. 153A/143(3) of the Income Tax Act, 1961 (in short “Act”). Since the issue involved in all these appeals are identical and common, therefore, we have heard all the appeals of different assesses together being related to assessee and his family members and these appeals are being disposed of by this common order for the sake of convenience by dealing with the facts of ITA No. 5949/Del/2018 (AY 2013-14) and the decision thereof will apply mutatis mutandis to all other appeals. The grounds of ITA No. 5949/Del/2018 (AY 2013-14) read as under:- Jurisdictional Assail 1. “That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT (A) dated 18/07/2018 are bad in law in as much as while passing the impugned orders material/statement found/taken from/during search at one Pradeep Kumar Jindal are applied against the assessee u/s 153A whereas admittedly from assessee’s own search u/s 132 no document much less any incriminating document was found where law does not allow use of such document/statement etc.

not found from assessee’s search u/s 153A (refer AO order para 1.3, CIT-A order para 7 & 7.1), thereby vitiating the entire exercise being against the mandate of law. 1.1 That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as while passing the impugned orders material/statement found/taken from/during search at one Pradeep Kumar Jindal are applied against the assessee u/s 153A (refer AO order para 13, CIT-A order para 7 & 7.1) which could have been only imported in assessee’s case as per procedure prescribed u/s 153C which is not at all followed in extant case as otherwise also revenue itself in cases of company whose shares are transacted by assessee (here Focus Industrial Resources Limited) have itself applied section 153C and there also in cases of those companies in satisfaction note recorded u/s 153C, no reference is made to subject allegations extracted from search proceedings on Pradeep Kumar Jindal which shows present action in assessee’s case is discriminatory and suffers from non application of mind. 2. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as while passing the impugned orders it has not been appreciated that present year is not abated u/s 153A and, therefore, sans incriminating material unearthed from assessee’s own search u/s 132, no addition u/s 153A is permissible ergo we pray for deletion of additions made. 3. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as purported transfer order passed u/s 127 dated 21.09.2017 is itself invalid and not passed in accordance with law ergo we pray for quashing for entire proceedings applying doctrine of sublato fundamento cadit opus. Cross examination Angle 4. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as reliance on statement of Pradeep Kumar Jindal is absolutely bad as there is no cross examination offered of Mr. Jindal and contrary version given in impugned orders is totally perverse and deserves to be reversed and ergo we pray for deletion of additions made. Independent corroboration missing 5. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as reliance on statement of Pradeep Kumar Jindal is absolutely bad as there is no independent/valid rational connect in form of any tangible material found from stated

search on Pradeep Kumar Jindal in absence of which we pray for deletion of additions made. Assessee’s own deposition ignored 6. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as assessee’s own statement u/s 132(4)/131(IA) are aborted from unknown reasons which supports assessee’s stand and position taken on impugned transactions which are stated to be genuine and free from any taint.

Merits of the cases: assessee’s version on facts glossed over like rip van winkleism 7. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as both the authorities have not objectively considered and appreciated copious evidence filed by assessee where reference may be made to point no. 6.2 to 6.7 at pae 3/4 of CIT(A) order ergo we pray for deletion of additions made. 7.1 That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the action of Ld. AO in making addition of Rs. 155,06,771/- and Rs. 200,00,000/- without appreciating that burden to prove that transaction is bogus/sham has remained un-discharged from side of Revenue. 7.2 That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the action of Ld. AO in making addition of Rs. 930,406/- and Rs. 300,000/- on a/c of alleged commission u/s 69C which is plainly perverse and invalid. 7.3 That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the action of Ld. AO by relying on a decision of Delhi High Court in case of Dayawanti which is hitherto stayed on its operative effect by Apex Court as on date of order passed by CIT(A) showing gross non application of mind. 7.4 That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the action of Ld. AO on basis of extraneous reasoning which has nothing to do with core issue required to be adjudicated. 8. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the appeal.”

Humble Prayer :- i) To quash the impugned order being coram non judice and passed in excess of jurisdiction conferred by the Act applying doctrine of sublato fundamento cadit opus;

ii) To delete all the additions made by the AO as sustained by Ld. CIT(A) being made in glaring non consideration of impeccable evidence filed by assessee; iii) To restore returned income. iv) Any other appropriate relief.

assessee denied to have such entries and expressed his ignorance of even knowing Sh. Pradeep Kumar Jindal. In this case Sh. Pradeep Kumar Jindal had admitted in his statement dated 18.11.2015 recorded u/s 132(4) of the Act that during search at his residence that his front companies had provided accommodation entries to Sajan Kumar Jain group companies and all his family members through intermediary role of Sh. Sudhir Chaudhary, Chartered Accountant. Sh. Sudhir Chaudhary, CA is authorized representative of Sajan Kumar Jain Group companies and all his family members. Consequently, the assessee and his group companies requested for cross examination of the other party Sh. Pradeep Kumar Jindal during the course of assessment proceedings vide their letter dated 12.12.2017. On their request summons were issued to both the parties on 13.12.2017 and hearing was fixed for 15.12.2017 for making cross examination. In response to summons Sh. Pradeep Kumar Jindal attended for his cross examination, but the assessee and his AR filed Application for adjournment for atleast one week. Since it was time barred assessment and further time could not be allowed and accordingly, the AO rejected their application vide office letter dated 18.12.2017. In this case AO found that the assessee and his family members have received accommodation entries in the Form of Exempt Long Term Capital Gain from front company of Sh. Pradeep Kumar Jindal namely M/s Instant Travel & Tours Pvt. Ltd. which later amalgamated with M/s Focus Industrial Resources Limited listed on Bombay Stock Exchange (BSE). The details of exempt Long Term Capital Gain accrued from trading of shares of Focus Industrial Resources Limited – a front company of Sh. Pradeep Kumar Jindal by the assessee which are as under:- Date of No. of Price of Total amount Date of No. Price of Total Capital purchase of shares share as of purchase sale of of share amount Gain/ shares on date of shares shares as on of sale Loss purchase date of sale 16.7.2010 1,035,536 20.3.2013 16,54,307 15,506,771

2.2 The AO vide his questionnaire dated 16.10.2017 asked the assessee to explain the said exempt long term capital gain amounting to Rs. 1,55,06,771/- for the year under consideration with reference to his books and accounts and was also asked why the entire capital gain should not be added to his income under consideration. In response to the same, assessee filed his reply dated 27.11.2017 denying the allegation leveled by the AO and submitted that this capital gain had arisen to the assessee during the year under consideration against the sale of listed shares at Bombay Stock Exchange, a recognized Stock Exchange. Assessee further submitted that he had purchased 14,400 shares of M/s Instant Travels and Tours @ Rs. 139/- per share and paid Rs. 20,00,000/- through bank account, copy of the bank statement showing the details of payment made for purchase of these shares with payment receipt and confirmation was attached. Subsequently, these shares were dematerialized by the company and transferred in the DMAT account of the assessee and assessee has also attached the details of these shares in DMAT Form with the reply, which the AO has reproduced at page no. 5 of the assessment order, which read as under:- “The assessee had also submitted as under:- "After that, with the order of Hon 'able Delhi High Court, the said Company M/s Instant Travels Tours (P) Ltd was amalgamated with M/S Focus Industrial Resources Ltd and 5,64,480 share of M/s Focus Industrial Resources Ltd were exchanged against the 14400 shares of M/s Instant Travels Tours (P) Ltd under the scheme of Amalgamation by the Hon’ble Delhi High Court. Copy of Demat Account showing the exchange of shares of M/S Focus Industrial Resources Ltd and the Copy of order of Hon'ble

Delhi High Court showing the scheme of Amalgamation are enclosed herewith. Subsequently, the assessee company has received 11,28,960 Bonus shares of M/S Focus Industrial Resources Ltd in its demat account which can be verified from the relevant demat account enclosed herewith: The said Company MIS Focus Industrial Resources Ltd was listed at Bombay Stock exchange a recognised Stock Exchange. Even as on date, the said Company has been listed at Bombay stock exchange, the supporting evidences are enclosed. After the listing of shares at a Recognised Stock Exchange, the Assessee was free to sell her share in the open market through a recognised stock broker. Accordingly, the Assessee has sold some part of investment through recognised stock broker M/S ISE Securities & Services Ltd SEBI RE(JN,NO JNB011077733 at Bombay stock Exchange in open market during the year relevant to Asstt year 2014-15 and the year under consideration i.e. 2015-16. Here, it is not necessary to explain, how the shares are traded at recognised Stock exchange through a recognised stock broker. Now we are submitting a statement showing the sale of shares during the year under consideration and copy of Demat account reflecting the quantity of shares sold along with copy of trade invoices showing the details of quantity traded with order No, order time, Trade No, Trade time Quantity sold, brokerage

charged, service tax charged STT (Securities Transaction Tax) charged and the net due to the Assessee with complete details of Registered address, Telephone Number, email address Settlement Number, settlement date with statement of account of assessee with the broker reflecting the details of amount due to the Assessee on account of sale of shares with the details of payments made to the assessee against sale of shares from time to time. Your goodself can confirm and verify these transactions from the broker also. Under section 10(38) of the Income Tax act, any gain arising on the sale of shares holding for more than 12 months and the transaction are done at Recognised stock exchange and STT is paid on every transaction will be exempt from tax. In the case of assessee also, the shares were purchased during the year 2010 and sold during the year under consideration at Bombay stock exchange and STT had been paid. Hence, the gain arisen on the sale of these shares has been rightly claimed 'as 'exempt under section 10(38) of the Act in the return filed. At page Number 31, your goodself, have asked to explain purchase and redemption of 14400 shares of M/s Instant Travels and Tour (P) Ltd., by the scheme of Amalgamation and Bonus shares 11,28,960 of M/s Focus Industrial Resources Ltd with documentary evidences, in this regard, we respectfully submitted that we

have already submitted above the required information with documentary evidences." At page No 39 your good self have explain why this commission paid in cash with reference to your books of account, in this regard respectfully submitted that the Assessee has not paid any commission in cash to any person against the sale of aforesaid shares. Since all these shares have been sold at Bombay Stock Exchange through Recognised Stock broker and the payments have been remitted through Stock Exchange after deduction of Brokerage, STT etc. as per the applicable terms of the Stock Exchange from the bank account of the assessee your goodself can verify whether any cash has been withdrawn to pay the commission in cash.” 2.3 The AO has examined the reply filed by the assessee with reference to the search / seized documents and statements recorded of various persons under oath and held that assessee was informed that Sh. Pradeep Kumar Jindal in his statement recorded u/s. 132(4) of the I.T. Act had admitted that he was engaged in the business of providing accommodation entries and for this purpose he had been managing and controlling a web of 33 paper companies, therefore, which accommodation entries were provided in the form of capital gain / short term capital gain. The AO has reproduced the relevant portion of the statement at page no. 6-13 of the assessment order. In view of the said statement of Sh. Pradeep Kumar Jindal the AO is of the view that it stands established that the assessee is also one of the beneficiaries and had received Long Term Capital Gain from trading of shares of M/s Focus Industrial Resources (listed at Bombay Stock Exchange) which is a front company of Sh. Pradeep Kumar Jindal solely used for providing accommodation entries.

2.4 The AO also examined the DMAT statement provided by the assessee and found that shares of non-listed front companies of Mr. Pradeep Kumar Jindal were allotted in first place namely M/s Instant Travels and Tours Pvt. Ltd. Subsequently, this non-listed company was merged to the listed company namely M/s Focus Industrial Resources Ltd. and large number of shares were allotted to the beneficiaries by this scheme of amalgamation. After examining the reply filed by the assessee alongwith other documentary evidences, the AO is of the view that it is established that the exempt long term capital gain accrued to the beneficiaries of Sajan Kumar Jain and his family members to be mere accommodation entries in lieu of cash. AO is also of the view that Sh. Pradeep Kumar Jindal in his statement u/s. 132(4) of the Act had vehemently admitted that he was engaged in the business of providing accommodation entries and for this purpose he had been managing and controlling the 33 paper companies for the purpose of accommodation entries in lieu of cash receipts and these companies were not doing any business and all the Directors of these paper companies are dummy who also in their statements recorded u/s. 132(4) of the Act vehemently deposed that they were only signing the documents and they were not aware of the business activities of these companies. These 33 fronts companies of Sh. Pradeep Kumar Jindal also include the name of company namely M/s Instant Travels and Tours Pvt. Ltd. from which the assessee has purchased shares and also the company M/s Focus Industrial Resources Ltd. in which M/s Instant Travels and Tours Private Limited got amalgamated. The AO is of the view that assessee had taken exempt long term capital gain accommodation entries from Sh. Pradeep Kumar Jindal. This version of the assessee is on the basis of the investigation made by the Investigation Wing by issuing the summons, out of 78 entities who had taken accommodation entries from Sh. Pradeep Kumar Jindal, 34 entities had paid tax on account of accommodation entries taken by them from Sh. Pradeep Kumar Jindal. The list of these companies is mentioned at page no. 22 & 23 of the

assessment order. Keeping in view of the aforesaid facts and circumstances, explained by the AO, the AO has rejected the claim regarding exempt long term capital gain (LTCG) from Sh. Pradeep Kumar Jindal and made the addition of Rs. 1,55,06,771/- as bogus long term capital gain claimed u/s. 10(38) of the I.T. Act and disallowed the same by adding back to the total income of the assessee vide order dated 29.12.2017 and also added the commission amounting to Rs. 9,30,406/- on account of unexplained expenditure u/s. 69C of the Act, on bogus LTCG received through accommodation entries at the income of the assessee and also added Rs. 2,00,00,000/- and Rs. 3,00,000/- on account of Commission, details of which AO has mentioned in the assessment order. The AO had discussed the additions at page no. 15-19 of the assessment order and completed the assessment at Rs. 6,13,28,387/- u/s. 153A r.w.s. 143(3) of the Act vide order dated 29.12.2017. Aggrieved by the assessment order dated 29.12.2017 passed u/s. 153A/143(3) of the Act, the assessee filed the appeal before the Ld. CIT(A), who vide his impugned order dated 18.7.2018 has dismissed the appeal of the Assessee and upheld the Assessment order dated 29.12.2017 passed by the Assessing Officer for the assessment year 2013-14. Against the impugned order dated 18.7.2018 passed by the Ld. CIT(A)-29, New Delhi, assessee is in appeal before the Tribunal. 3. At the time of hearing, Ld. Counsel for the assessee has only argued on legal issue relating to validity of assessment framed by the Assessing Officer u/s. 153A of the I.T. Act, 1961 which is in contravention of the provisions of section 153C of the I.T. Act where no incriminating material was found from the search operation conducted at the assessee’s premises u/s. 132 of the Act and no admission was made by the assessee u/s. 132(4) of the Act was subject transaction and on this issue of violation of principle of natural justice, the assessee is not provided with back material relied upon by the AO as well as Ld. CIT(A) in their impugned orders namely the statement of Sh. Pradeep Kumar

Jindal and the material found from search; lack of cross examination of Sh. Pradeep Kumar Jindal whose statement is major basis for making the additions in dispute in the assessment order. Ld. Counsel for the assessee further stated that the orders passed by the Assessing Officer dated 29.12.2017 which was upheld by the Ld. CIT(A) vide order dated 18.7.2018 are bad in law, because no incriminating material / documents was found from assessee’s own premises during search & seizure operation u/s 132 of the Act. Therefore, the applicability of section 133A of the I.T. Act is not applicable in the case of the assessee. Secondly, the addition in dispute has been made by the revenue authority in the case of the assessee only on the basis of statement of Sh. Pradeep Kumar Jindal which has not been supplied to the assessee in spite of the request made by the assessee to the revenue authority. Ld. Counsel for the assessee also argued that if this Bench perused the assessment proceedings, there is no proceedings recorded by the AO regarding summoning Sh. Pradeep Kumar Jindal for cross examination on the request of the assessee and also not informed regarding the cross examination of Sh. Pradeep Kumar Jindal. Therefore, denying the cross examination of Sh. Pradeep Kumar Jindal is in violation of the Hon’ble Supreme Court of India decision in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II-281 CTR 241. Finally, Ld. Counsel for the assessee stated that in support of his his legal arguments as well as merits which he has not arguing now and is ready to argue after the decision of the legal issue, he has attached all the evidences in the shape of Paper Book. He also draw our attention towards the statement on oath of Sh. Pradeep Kumar Jindal on 17.8.2013 which enclosed at page no. 5-29 of the Paper Book and statement of Sh. Pradeep Kumar Jindal dated 18.11.2013. Ld. Counsel for the assessee relied upon the following case laws on the legal issues:- i) ITAT, Delhi ‘C’ Bench order dated 19.3.2019 in ITA No. 5585/De;/2015 (AY 2006-06) DCIT vs. Smt. Shivali Mahajan & Cross Objection No. 447/Del/2015 Smt.

Shivali Mahajan vs. DCIT and 05 Other Revenue’s Appeals and Assessee’s cross objections. ii) Hon’ble Delhi High Court decision dated 25.7.2017 in the case of Pr. CIT vs. Subhash Khattar passed in ITA No. 60/2017. iii) ITAT, ‘E’ Bench Mumbai decision in the case of Sh. Surendera L. Hiranandani vs. Pr. CIT in ITA Nos. 3226- 3232/M/2017 (Ayrs. 2008-09 to 2014-15) vide order dated 14.2.2018 iv) ITAT ‘C’ Bench, Chennai decision in the case of ACIT vs. M/s GR Thangamaligai & Sons & 02 Ors. In ITA No. 53-66/Chny/2019 (Ayrs. 2007-08 to 2012-13) vide order dated 28.6.2019. v) ITAT, ‘C’ Bench, Bangalore decision dated 28.6.2019 in the case of M/s VSL Mining Company Pvt. Ltd. Vs. DCIT in ITA No. 1854/Bang/2013 (AY 2008-09) and ACIT vs. M/s VSL Mining Company Pvt. Ltd. In ITA No. 204/Bang/2014 (AY 2008-09). vi) ITAT, ‘G’ Bench Delhi decision dated 13.6.2019 in the case of Urmila Devi Charitable Trust vs. CIT(E) passed in ITA 4136/Del/2017 (AY 2011-12). 4. On the other Ld. CIT(DR) relied upon the orders of the authorities below and stated that during the year under consideration, assessee and his family members purchased the shares of M/s Instant Travel and Tours Pvt. Ltd. which later amalgamated with M/s Focus Industrial Resources Ltd. (listed on BSE). He submitted that shares purchased on 16.7.2010 for Rs. 10,35,536 were sold on 20.03.2013 for Rs. 1,65,42,307 declaring LTCG of Rs. 1,55,06,771 which was claimed exempt u/s 10(38) of IT Act. A search was conducted in the case of Pradeep Kumar Jindal, who in his statement u/s 132(4) admitted that he was engaged in providing accommodation entries, managing and controlling a web of 33 paper companies including M/s Instant Travel

and Tours Pvt Ltd. He stated that these companies were not doing any investment and finance business but only providing entries to different beneficiaries. Ld. CIT(DR) further stated that the Statement on oath recorded u/s 132(4) of Sh Pawan Arya was recorded on 02.06.2016 in which he admitted that he had utilized services of Sh. Sudhir Chaurdhary, CA, for arranging accommodation entries from Sh Pradeep Kumar Jindal and offered it to tax. Sh. Sudhir Chaurdhary, CA, has represented the assessee before AO as well as Ld. CIT(A). Ld. CIT(DR) stated that on the basis of the detailed report of the Investigation Wing regarding modus operandi of accommodation entries provided by Pradeep Kumar Jindal, various documentary evidences as well as statement of Pradeep Kumar Jindal, the addition in dispute in the case of the assessee has been made. He further stated that assessee has requested for cross examination of Sh. Pradeep Kumar Jindal which has been provided to him, but he did not avail the same, therefore, the question of violation of any right does not arise. He further stated that AO has made the addition after examining the seized materials found during the search and statement recorded of various persons under oath under Section 132(4) of the I.T. Act, in which they have admitted that the assessee was engaged in the business of providing accommodation entries for the purpose of managing and controlling a web of 33 paper companies for the purpose of providing accommodation entries in lieu of cash receipt and the companies were not in business. All the Directors of these paper companies are dummy who also in their statements recorded u/s. 132(4) of the Act vehemently deposed that they were only signing the documents and that they were not aware of the business activities of these companies. He further submitted that AO has held that assessee has taken accommodation entries of LTCG from the companies of Sh. Pradeep Kumar Jinal amounting to Rs. 1,55,06,771/- which is bogus, therefore, the exempt LTCG was disallowed by the AO and upheld by the Ld. CIT(A) is valid under the law, after giving adequate opportunity to the assessee. Hence, the appeal of the

assessee may be dismissed. In support of his contention, he cited various decisions mentioned in his Written Submissions filed in the Court at the time of hearing which includes: i) Udit Kalra vs. ITO 2019-TIOL-751-HC-DEL-IT. ii) Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain vs. PCIT (ITA No. 18/2018 Bombay High Court (Nagpur Bench.). iii) Pooja Ajmani vs. ITO (2009) 106 Taxmann.com 65 (Delhi-Trib.) iv) Abhimanyu Soin Vs. ACIT 2018-TIOL-833-ITAT-CHD v) Anip Rastogi vs. ITO (ITA No. 3809/Del/2018). vi) Smt. MK Rajeshwari vs. ITO (ITA No. 1723/Bang./2018) vii) Chandan Guta vs CIT (2015) 54 taxmann.com 10 (Punjab & Haryana) (2015) 229 Taxman 173. viii) Balbir Chand Maini vs. CIT (2011) 12 taxmann.com 276 (Punjab and Haryana). ix) Usha Chandresh Shah vs. ITO (2014-TIOL-1459-ITAT- Mum) x) Ratnakar M. Pujari vs. ITO (2016-TIOL-1746-ITAT- Mum). xi) Arvind M Kariya vs. ACIT (ITA No. 7024/Mum/2010). xii) ITAT, Mumbai in the case of ITO vs. Shamim M. Bharwani (2016) 69 Taxmann.com 65). 4.1 Ld. CIT(DR) further submitted that following decisions may kindly be considered with regard to validity of proceedings u/s. 153A of the Act. i) EN Gopalkumar vs. CIT (2016) 75 taxmann.com 215 (Kerala). ii) CIT vs. Raj Kumaer Arora (2014) 52 taxmann.com 172 (Allahabad)

iii) CIT vs. Kesarwani Zarda Bhandar Sahson All. (ITA No. 270 of 2014) (Allahabad). iv) Dr. AV Sreekumar vs. CIT (2018) 90 taxmann.com 355 (Kerala) v) Hon’ble Delhi High Court decision dated 12.3.2018 in the case of Vinod Kumar Gupta vs. DCIT 2018-TIOL-580-HC-Del-IT). 4.2 He further placed reliance on the following judgments to show that additions can be made u/s. 153A on the basis of incriminating statements: - i) Video Master vs. JCIT 66 taxmann.com 361 (SC). ii) B. Kishore Kumar vs. CIT 62 taxmann.com 215. iii) Bhagirath Aggarwal vs. CIT 31 taxmann.com 274 iv) CIT vs. MS Aggarwal (2018) 93 taxmann.com 247 (Delhi) v) Smt. Dayawanti vs. CIT 29016) 75 taxmann.com 308 (Delhi). vi) M/s Peeble Investment and Finance Ltd. Vs. ITO (2017-TIOL-238-SC-IT) M/s Peeble Investment and Finance Ltd. Vs. ITO (2017-TIOL-188-HC-MUM-IT) vii) Raj Hans Towers P Ltd. Vs. CIT 56 taxmann.com 67 viii) PCIT vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Delhi). 5. We have heard both the parties and perused the records especially the orders of the revenue authorities below and the written submissions filed by the Ld. CIT(DR) and the case laws relied upon by both the parties, as aforesaid. We find that Ld. Counsel for the assessee has draw our attention towards the relevant portion of the judgement /

decision of the Hon’ble Supreme Court of India, Hon’ble High Courts and various Benches of the Tribunal on the legal issue on which he argued. Ld. Counsel for the assessee further submitted that admittedly from assessee’s own premises during search u/s. 132 of the Act no incriminating material was found and no adverse statement is there on record of the assessee u/s. 132(4) of the I.T. Act and it is an admitted fact before us that mere basis of un-confronted statement of Sh. Pradeep Kumar Jindal recorded u/s. 132(4) of the Act in his own separate search action and on the basis of unconfronted material for the said search u/s. 132(4), which in our considered opinion, cannot be made as a sole basis for making the additions u/s. 153A of the I.T. Act without recourse of mandatory and exclusive provisions under the Act like u/s 153C of the Act which specifically covered the extant situation. On this legal issue, we had gone through the decision relied upon by the Ld. Counsel for the assessee. In our opinion, the decision of the Hon’ble Supreme Court of India, Hon’ble High Courts and the various Benches of the Tribunal are directly applicable in the present case wherein they have adjudicated and decided the similar issue in favour of the assessee by accepting the similar arguments of the Ld. Counsel for the assessee. For the sake of convenience, the relevant portion of the decisions of the Hon’ble Supreme Court of India, Hon’ble High Courts and the various Benches of the Tribunal on the legal issue are reproduced as under:- (A) Hon’ble Supreme Court of India decision in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II-281 CTR 241 has held as under:- “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. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be

the subject matter of cross- examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” (B) ITAT, Delhi ‘C’ Bench order dated 19.3.2019 in ITA No. 5585/De;/2015 (AY 2006-06) DCIT vs. Smt. Shivali Mahajan & Cross Objection No. 447/Del/2015 Smt. Shivali Mahajan vs. DCIT and 05 Other Revenue’s Appeals and Assessee’s cross objections. 9. We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and the rival submissions, we find that in these appeals, following two questions arise for our consideration :-

(i) Whether any material found in the search of any other person than the assessee in appeal can be considered in the assessment under Section 153A of the assessee.

(ii) Whether the addition can be made only on the basis of statement given by the assessee during the course of search. 10. Now, we consider the arguments of both the sides in the light of the facts of the case. The scope of assessment under Section 153A has been considered by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra). In the above mentioned case, Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:- “Summary of the legal position.

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 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each 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.

Conclusion

“33. At this stage, it requires to be noticed that the decision of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) took note inter alia of the decision of the Bombay High Court in Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom), wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and 153C of the Act. The decisions of this Court in CIT v. Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012] 254 CTR 392 (Del) were extensively discussed in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra). The Court in Commissioner of Income Tax (Central- III) v. Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search "is a separate and distinct assessment." It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition

or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated."

153C. [(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

(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 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue 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 153A]:].”

“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.

seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation”. In paragraph 24, their Lordships have mentioned about the prevailing practice of extracting statement by exerting undue influence or coercion by the search party. Though the above decision in the case of Harjeev Aggarwal is with reference to the meaning of undisclosed income u/s 158BB of the Income-tax Act, however, in our opinion, the above observation of Hon'ble Jurisdictional High Court would be squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A.

in the case before the Hon’ble Madras High Court, the incriminating material was found and seized and statement was based on such incriminating material. Therefore, the above decision would not be applicable to answer the question whether addition can be made under Section 153A solely on the basis of statement.

We have asked both the parties to express their views whether after the decision of Hon'ble Delhi High Court in the case of M.S. Aggarwal (supra), the earlier decision of Harjeev Aggarwal (supra) still remains as a binding precedent. Learned DR stated that when Hon'ble Delhi High Court itself have expressed the view that the decision in the case of Harjeev Aggarwal (supra) needs to be reconsidered and reappraised, it cannot be considered as a binding precedent so long as this issue is not settled by the Larger Bench. The learned counsel for the assessee stated that the decision of Hon'ble Delhi High Court in the case of Harjeev Aggarwal (supra) continues to be binding precedent until it is reversed by the Hon'ble Supreme Court or a contrary view is given by the Larger Bench. In support of his contention, he relied upon the order of the ITAT, Delhi Bench ‘I-1’ in the case of Cairn India Ltd. Vs. DCIT in ITA No.1459/Del/2016, wherein similar situation arose and ITAT held as under :-

"46. The ld.DR relied on the judgment in the case of Dynamic Orthopedics P.Ltd. vs. CIT (2010) 321 ITR 300 (SC) to contend that the provisions of section 205 of the Companies Act stand incorporated into section 115J of the Act. He read some observations of the Hon’ble Apex Court in Dynamic Orthopaedics (SC)(supra) expressing disagreement with the ratio laid down in the case of Malayala Manorama (supra). We are in full agreement with the ld.DR to the extent that the Hon'ble Supreme Court did record its respectful dissent with Malayala Manorama (SC)(supra) to the effect that depreciation need not be computed as per Schedule XIV of the Companies Act in computing profits for the purpose of section 115J. However, what is significant to note is that the Hon'ble Supreme Court made these observations while directing the Registry to place the civil appeal before the Hon’ble Chief Justice of India for appropriate directions as the matter needs reconsideration by a larger bench. In other words, this is simply a referral order for consideration of the issue by a larger bench and not an enunciation of law by the Apex

Court. The ld.AR placed on record a report pointing out that the above appeal referred to a larger bench in Dynamic Orthopaedics is still pending before the Hon'ble Supreme Court. The position, which therefore, emerges is that the decision in the case of Malayala Manorama (SC)(supra) cannot be construed as overruled. It still holds the field as a binding precedent.”

(ii) Raj Hans Towers (P) Ltd. Vs. CIT – 56.taxmann.com 67.

(iii) PCIT Vs. Avinash Kumar Setia – [2017] 81 taxmann.com 476 (Delhi).

Greenview Restaurant (supra). We find that the facts in this case are altogether different as assessment was completed under Section 143(3) and not under Section 153A. Therefore, the above decision would not be applicable so far as the scope of assessment under Section 153A is concerned.

“Que.6 Please give details of consideration paid for booking of 20,000 sq.ft space in Indirapuram Habitant Centre as stated by you. Please also state when these spaces were booked.

Ans. The details in respect of booking of spaces in Indirapuram Habitant Centre is as under:

S.No. Name of Area/Unit Amount paid Amount paid Investor No. in cheque in cash 1 Smt. Rinku 2000 sq.ft 30,80,000 99,92,000 Mahajan 2 Sh. Nitin 3500 sq.ft 53,90,000 1,75,26,000 Mahajan 3 Smt. Shivali 2000 sq.ft 30,80,000 99,92,000 Mahajan 4 Sh. Jatin 3500 sq.ft 53,90,000 1,75,26,000 Mahajan 5 Smt. Anila 4500 sq.ft 69,30,000 2,24,82,000 Mahajan 6 Sh. Lalit 4500 sq.ft 69,30,000 2,24,82,000 Mahajan Total 3,08,00,000 10,00,00,000

(C) Hon’ble Delhi High Court decision dated 25.7.2017 in the case of Pr. CIT vs. Subhash Khattar passed in ITA No. 60/2017. “2. While admitting the appeal on 7'h February, 2017, this Court framed the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section J 53A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law? " 3. The facts leading to the filing of the present appeal are that a search took place on 1 th August, 2011 in the corporate office of AEZ Group at 301-303, Bakshi House, Nehru Place, New Delhi during which a hard disc was found and seized from which, a print out of a file named "D.P. Correction Sheet.xls" was taken. This sheet contained details of Sales Status lndirapuram Habitant Centre and at serial o. 32 of the said sheet, the name of the Assessee appeared. According to the Revenue, the Assessee had invested a sum of Rs. 20 crores. Therefore, on 10lh February, 2012, a search operation was undertaken under Section 132 of the Act in the case of the Assessee. There is no dispute that this search did not result in the discovery of any incriminating material qua the Assessee. 4. The case of the Revenue is that on 21st February, 2012 a letter was written to the AO by the Authorized Representative of the Assessee inter alia stating that: "To the best of our assessee knowledge and records, the assessee have not made any cash payment in the project of M/s Aerens Group. However to avoid any litigation/duress and to buy peace of mind the assessee state that the payment to Mis Aerens group payment have been made as reflected in the books of accounts Paper shown." 5. Thereafter, on 29th October, 2013, a notice was issued to the Assessee under Section 153A of the Act. In compliance thereof, the Assessee filed the return of income which he had originally filed and which had

already been scrutinized by the AO under Section 143 (3) of the Act for the A Y in question i.e. A Y 2006-07. By the assessment order dated 27th March, 2014, the AO came to the conclusion that the Asses ee had failed to explain the nature and the source of the investment made in cash and, consequently, added the sum of Rs.3 .21 Crores to the Return Income. 6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 2ih November, 2014. A further appeal was filed by the Assessee before the IT A T. The ITAT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in the absence of any incriminating material found during the search on the premise of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court 111 Commissioner of Income Tax v. Kabul Chawla, [2016J 380 ITR 573. 7. A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153A of the Act was misconceived since the so-called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not under Section 153A. This goes to the root of the matter. 8. Consequently, the impugned order of the ITAT calls for no interference of this Court. The question framed by this Court on 7th February, 2017 is answered in negative, that is, in favour of the Assessee and against the Revenue. 9. The appeal is accordingly dismissed.”

(D) ITAT ‘C’ Bench, Chennai decision in the case of ACIT vs. M/s GR Thangamaligai & Sons & 02 Ors. In ITA No. 53-66/Chny/2019 (Ayrs. 2007- 08 to 2012-13) vide order dated 28.6.2019.

“10. We heard the rival submissions and perused the material on record. The short issue involved in the present appeal revolves around the findings of the Assessing Officer that the purchases made by the Respondent - assessee from Shri. Bhanwarlal M Jain & Group are bogus. Admittedly, the Assessing Officer had come to a conclusion that the purchases made from Shri. Bhanwarlal M Jain & Group are bogus not based on the incriminating material found during the search and seizure operation conducted in Respondent – assessee but based on the statement recorded from Shri. Bhanwarlal M Jain during the course of search and seizure operation of that group and the statements recorded from the Director of said group. In the backdrop of these facts, the question that may arise is whether is Assessing Officer justified in making an addition on account of alleged bogus purchases in the assessment made pursuant to notice issue u/s.153A of the Act. It is settled preposition of law that third party statements recorded during the course of search action shall not constitute incriminating materials for the purpose of making addition in the hands of assessee other than the searched person that to without affording cross examination of the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Raj Pal Bhatia, 333 ITR 315 held that statement was not the document which was found during search. In fact this was the document which came to the created during the search as the statement was recorded at the time of search. Therefore, it cannot be said that the statement was seized during the search and thus, would not qualify the expression ’’document’’ having been seized during the search. Even the statement recorded from the director of Pravin K. Jain Group and Shri. Bhanwarlal M. Jain & Group is not consequent upon any material found during the course of search of the Respondent- assessee.

(E) ITAT, ‘C’ Bench, Bangalore decision dated 28.6.2019 in the case of M/s VSL Mining Company Pvt. Ltd. Vs. DCIT in ITA No. 1854/Bang/2013 (AY 2008-09) and ACIT vs. M/s VSL Mining Company Pvt. Ltd. In ITA No. 204/Bang/2014 (AY 2008-09).

7.6.1 We have carefully considered the legal arguments / contentions put forth by both parties. The facts not in dispute are that the substantive and protective additions were made in the case on hand on the basis of material found and seized from the premises of Shri. Manoj Kumar Jain. It is also amply clear that the AO did not invoke the provisions of

Section 153C of the Act on receipt of the material; but rather chose to take cognizance of these materials (i.e., seized in the case of Shri. Manoj Kumar Jain) in the course of pending assessment proceedings under section 143(3) of the Act for Assessment Year 2008-09 that were before him. It is therefore clearly established that the AO has used seized material / documents found in the course of search conducted in the case of a third party (i.e., search of Shri. Manoj Kumar Jain) for making the additions in the hands of the assessee, although, on protective and substantive basis; which was later on modified as substantive by the CIT(A). 7.6.2 The provisions of Section 153C of the Act enjoins upon the AO of the person searched; that on being satisfied that books of account seized or requisitioned belongs to or pertain to some other persons, to handover the books of account to the AO having jurisdiction over such other person. Thereafter, the second AO, on being satisfied that the books of account and documents received have a bearing on the determination of the total income of the other person, should assume jurisdiction under section 153C of the Act. After assuming jurisdiction under section 153C of the Act, the AO proceeds to carry out an assessment in terms of section 153A r.w.s. 143(3) of the Act. In this regard, it is relevant to extract section 153 of the Act hereunder:-

“153C(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

(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 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having

jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue 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 17[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 153A :

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 132A in the second proviso to sub-section (1) of section 153A 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.”

7.6.3 From the above, it is seen that the jurisdictional conditions and circumstances prescribed by the legislature for assumption of jurisdiction and taking action under section 153C of the Act is different when compared to a regular assessment. The jurisdiction to make an assessment under section 153C of the Act arises when satisfaction is reached that the materials found in the course of search of some other person have a bearing on the determination of the income of the assessee. Further, in the first proviso to section 153C of the Act, it is provided that the reference to the date of search in the second proviso to section 153A of the Act; dealing with abatement of pending proceedings on the date of search; shall for the purpose of the persons proceeded under section 153C of the Act be construed as the date on which the seized materials are received by the AO.

7.6.4 In the case on hand, we find that there was a search under section 132 of the Act in the case of

the assessee on 26.10.2007. After the regular assessments proceedings under section 143(3) of the Act were taken up by the assessee and during the pendency thereof; the AO received material / information from the AO of Shri. Manoj Kumar Jain. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 153A of the Act in the case of the assessee before the AO would abate on the date the AO received the seized material from the AO of Shri. Manoj Kumar Jain and fresh proceedings under section 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information / materials, the AO did not assume jurisdiction under section 153C of the Act, but rather chose to use the said materials / information for making additions in the impugned order of assessment for Assessment Year 2008-09 concluded under section 143(3) of the Act. The AO has discussed these additions in the order of assessment under the caption “Unaccounted Transactions with Shri. Manoj Kumar Jain”. The AO noted that the assessment proceedings in the case of Shri. Manoj Kumar Jain were ‘being concluded at Central Circle-1, Belgaum’. Thereafter, he has gone on to set-out the issues in the case of Shri. Manoj Kumar Jain, relevant to the assessee in the case on hand. But no satisfaction, it appears, has been recorded that these materials have a bearing on the determination of income. Thus, the AO has not followed the procedure laid down in section 153C of the Act for taking cognizance of the material found / seized in the case of Shri Manoj Kumar Jain and making an assessment with reference to those materials in the case on hand.

7.6.5 The Kolkata Bench of ITAT in the case of Krishna Kumar Singhania (168 ITD 217) has considered the provisions of sections 153A and 153C of the Act and after examining the different scope of these two sections, at para 10 of its order, has held as under:-

“We have heard the rival submissions. We find that it is not in dispute that there were no documents that were seized from the premises of the assessee

except loose sheets vide seized document reference KKS / 1 comprising of 8 pages , for which satisfactory explanation has been given by the assessee and no addition was made by the Id AO on this seized document. The seized document used by the Id AO for making the addition in section 153A assessment is CG/1 to 11 and CG/HD/1 which were seized only from the office premises of Cygnus group of companies in which assessee is a director. In this regard, it would be pertinent to note that as per section 292C of the Act, there is a presumption that the documents , assets, books of accounts etc found at the time of search in the premises of a person is always presumed to be belonging to him / them unless proved otherwise. This goes to prove that the presumption derived is a rebuttable presumption. Then in such a scenario, the person on whom presumption is drawn , has got every right to state that the said documents does not belong to him / them . The Id AO if he is satisfied with such explanation , has got recourse to proceed on such other person (i.e the person to whom the said documents actually belong to) in terms of section 153C of the Act by recording satisfaction to that effect by way of transfer of those materials to the AO assessing the such other person. This is the mandate provided in section 153C of the Act. In the instant case, if at all, the seized documents referred to in CG/1 to 11 and CG/HD/1 is stated to be belonging to assessee herein, then the only legal recourse available to the department is to proceed on the assessee herein in terms of section 153C of the Act. In this regard, we would like to place reliance on the recent decision of the Hon'ble Delhi High Court in the case of CIT v. Pinaki Misra & Sangeeta Misra [(2017) 148 DTR 219 (Delhi)] = [TS-5161-HC-2017(DELHI)-0] wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. Hence we hold that the said materials cannot be used in section 153A of the Act against the assessee. This opinion is given without going into the merits and veracity of the said seized documents implicating the assessee herein.”

7.6.6 The Hon’ble Bombay High Court in the case of HDFC Bank (supra) has also considered a similar question of law in the context of the erstwhile provisions of section 158BD of the Act. The provisions of section 158BD is the pre-cursor to the present provisions of section 153C of the Act; as the said provisions were required to be invoked for framing an assessment in the case of a person who was not searched, but materials indicating undisclosed income was found in the course of search conducted by the Department. In the aforesaid case of HDFC Bank (supra), Revenue sought to take cognizance of the search material and disallow depreciation in regular assessment proceedings and the provisions of section 158BD of the Act was not invoked. The Hon’ble Bombay High Court held that the scope of a regular assessment and the scope of assessment under section 158BD of the Act are different as they stand on different footings and has gone on to uphold the action of the Tribunal in holding that the provisions of section 158BD of the Act ought to have been invoked to make any disallowance of depreciation based on material found in the course of search conducted by the Department in the case of some other person. This judgment also supports the contention of the assessee that no addition could be made in the assessments framed under section 153A of the Act, based on materials found and seized from some other person, unless provisions of section 153C are invoked.

7.6.7 Taking into account the aforesaid factual and legal matrix, we are of the considered view that the AO could not have taken cognizance of the seized documents and other material found and seized in the course of search conducted in the premises / case of Shri. Manoj Kumar Jain, while framing the order of assessment under section 143(3) of the Act in the case on hand. As a matter of fact, the ongoing assessment proceedings under section 143(3) of the Act would abate on receipt of these seized materials as per the second proviso to section 153C of the Act. We are of the view that in the event the AO wanted to take cognizance of the seized materials, he ought to have invoked the provisions section 153C of the Act after recording

his satisfaction based on material sent by the AO of Shri. Manoj Kumar Jain. This jurisdictional pre- condition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side-stepped / brushed aside and additions be made in proceedings pending under section 143(3) of the Act as the scope of assessments framed under sections 143(3) and 153C of the Act are quite different. In that view of the matter, we hold that the protective additions made by the AO in the impugned order of assessment for Assessment Year 2008-09 dated 31.12.2009, are contrary to the provisions of the Act and are therefore to be deleted. Similarly, the addition sustained by the CIT(A) of Rs.6,45,000/- on substantive basis as profit from trading in iron- ore based on the material found and seized in the search conducted in the case of Shri. Manoj Kumar Jain is also hereby deleted. It is accordingly ordered. Consequently, the additional grounds raised by the assessee are allowed.”

(F) ITAT, ‘G’ Bench Delhi decision dated 13.6.2019 in the case of Urmila Devi Charitable Trust vs. CIT(E) passed in ITA 4136/Del/2017 (AY 2011-12).

“8. We have carefully considered the arguments of both the sides and perused the material placed before us. Section 12AA of the Act reads as under:- “12AA. (1) The [Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) [or clause (ab)] of sub- section (1)] of section 12A, shall–

(a) call for such documents or information from the trust or institution as he things necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he – (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the [Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the [Principal Commissioner or] Commissioner and the [Principal Commissioner or] Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.]

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) [or clause (ab)] of sub-section (1)] of section 12A.]

[(3) Where a trust or an institution has been granted registration under clause (b) of sub- section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)]] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution :

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] [(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.].” 9. From a plain reading of the above Section, it is evident that the Principal Commissioner or Commissioner registers the trust or institution under sub-section (1) and he has been given the power under sub-section (3) to cancel the registration granted under sub-section (1). However, under sub-section (3), he can cancel the registration granted under sub-section (1) only when he is satisfied –

a. that the activities of such trust or institution are not genuine; and b. the activities of such trust or institution are not being carried out in accordance with the objects of the trust or institution. 10. In the case under appeal before us, the CIT has cancelled the registration granted under Section 12AA(1) on the alleged ground that the trust had received the donation of `85 lakhs from HHBRF in lieu of cash. The above finding of the

CIT(Exemptions) is based upon the report received from CIT(Exemptions), Kolkata. On the basis of above, the CIT(Exemptions), Lucknow has held that the activities of the society cannot be said to be carried out in accordance with the objects of the society. At the same time, he further drew the inference that no genuine activities are being carried out by the assessee. The learned counsel for the assessee has stated before us that the assessee has repeatedly requested for the supply of any material in the possession of the Department on the basis of which the allegation has been made against the assessee. However, no such material was supplied to the assessee. Therefore, no adverse inference can be drawn against the assessee in this regard. Learned DR, on the other hand, stated that the exact charge against the assessee i.e., it has received a donation from HHBRF in lieu of cash has been mentioned in the show cause notice itself. We find that in the order under Section 12AA(3), the CIT(Exemptions) has reproduced the assessee’s written submission from page 3 to 6 of his order. Paragraph 7 & 8 of such letter read as under :- “7. The assessee has already requested your honour vide letter dated 29/02/2016 as under:

“If the Income Tax Department is in possession of any material on the basis of which impugned allegation has been made, please provide the copy of the same to us so that proper reply can be filed.

If there is any statement by any person alleging the involvement of cash, copy of the same may also kindly be provided. If so, an opportunity for cross examination of the concerned person may kindly be given.”

an interim reply only. It is again requested that the impugned information/documents may kindly be supplied to the assessee at the earliest so that a final reply can be filed.”

“9. As per the detailed report of the Ld.CIT(Exemption) Kolkata and the Assessing Officer and Joint Commissioner of Income-tax (Exemption), Ghaziabad, M/s Herbicure Healthcare Bio-Herbal Research Foundation has admitted that this amount was paid by cheque to the assessee after payment of equal amount in cash and commission through brokers. Thus total amount of Rs.85,00,000/- has been received by cheque from M/s Herbicure Healthcare Bio-Herbal Research Foundation by the assessee after paying cash of Rs.85,00,000/- plus 5 to 10% of this amount also in cash as commission.”

Healthcare Bio-Herbal Research Foundation have clearly demonstrated that the assessee trust has paid cash and commission to get donation in cheques from M/s Herbicure Healthcare Bio-Herbal Research Foundation. It has been clearly indicated in the statement and report send by the Ld. CIT(E), Kolkata that the assessee has paid cash in addition to commission to manage this donation by cheque from M/s Herbicure Healthcare Bio-Herbal Research Foundation. The assessee is apparently running a business and is generating huge amount of cash. This cash has been used to obtain or manage the donation from M/s Herbicure Healthcare Bio-Herbal Research Foundation by way of cheque after paying cash and commission to M/s Herbicure Healthcare Bio-Herbal Research Foundation.”

“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. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That

apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.

We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”

supplying the copy to the assessee and also the said statement without allowing cross-examination to the assessee. As was pleaded before the Tribunal in the case of M/s Andaman Timber Industries (supra), in this case before us also, it is pleaded that the cross- examination of such witness was not essential because he is the person from whom the assessee received the donation and therefore, he is the witness of the assessee and not of the Revenue. We find that in the aforesaid case before the Hon’ble Apex Court, the Tribunal had accepted the request of the Revenue which was deprecated by the Hon’ble Apex Court. Hon’ble Apex Court came to the conclusion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action. Identical is the situation in the appeal before us. If the material collected behind the back of the assessee and the statement recorded behind the back of the assessee is discredited or ignored, there was no material with the Department on the basis of which it could justify its action. Therefore, in our opinion, the above decision of Hon’ble Apex Court would be squarely applicable.

different. In the aforesaid case, a piece of land belonging to the assessee society was sold to a private builder. The builder built flats on the said land. Subsequently, the assessee society purchased two farm houses constructed by the same builder. The Chairman of the assessee society alongwith his family members used to visit farm houses on weekend and no permission from any prescribed authority had been obtained for operating any educational institution on the property purchased. The Chief Commissioner, therefore, took a view that there was nothing on record to show that the assessee society intended to carry out any educational activities on the land purchased and accordingly rejected the assessee’s claim seeking exemption under Section 10(23C). Thus, clearly, the facts of the assessee’s case are altogether different than the facts before the Hon’ble Punjab & Haryana High Court in the aforementioned case.

lakhs from HHBRF in lieu of cash. Further, merely because the genuineness of one donation in one year is doubted, it cannot be a ground to draw the inference that the activities of the assessee society are not being carried out in accordance with the objects of the society or that no genuine activities are being carried out by the assessee. That if the genuineness of a donation in one year is doubted, the addition, if any, can be made in the assessment of the relevant assessment year in accordance with law. However, that, by itself, would not be sufficient to withdraw the registration under Section 12AA(3). If the genuineness of a donation is doubted, at the most, it can be a ground to examine deep into the activities of the society so as to ascertain whether the activities of the society are being carried out in accordance with the objects of the society. However, a conclusion cannot be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by the assessee merely because the genuineness of one donation in one year is doubted.

“51. Clearly, the act of cancellation of registration has serious civil consequences. In absence of any legislative intent expressed to suggest that the legislature had empowered the Commissioner to cancel the assessee’s

registration under Section 12-A of the Act with retrospective effect, such power could not be deemed to exist or arise or be exercised to unsettle closed/part transactions especially because in this case the ground for cancellation has not arisen out of allegation of fraud, collusion or misrepresentation. 52. Therefore, we are of the view that the cancellation of the assessee’s registration under Section 12-A of the Act, if at all, could be done only prospectively and not retrospectively as had been done by the Commissioner in this case. Thus, question no.1 is answered in the negative that is in favour of the assessee and against the revenue.” 18. In view of the above, we, respectfully following the decision of Hon’ble Apex Court in the case of M/s Andaman Timber Industries (supra) as well as of Hon'ble Jurisdictional High Court in the case of Agra Development Authority (supra), cancel the order passed under Section 12AA(3) dated 22nd April, 2016 cancelling the registration with effect from 1st April, 2010.

5.1 As regards the arguments advanced by the Ld. CIT(DR) are concerned, the same are not applicable in the present case because keeping in view of the assessment order passed by the AO, we have not seen from the proceedings of the AO regarding providing any statement of Sh. Pradeep Kumar Jindal to the assessee and providing opportunity of cross examination of Sh. Pradeep Kumar Jindal to the assessee meaning thereby the Revenue Authorities have not provided the statement of Sh. Pradeep Kumar Jindal to the assessee and also did not provide the opportunity of cross examination of Sh. Pradeep Kumar Jindal, on which basis the addition has been made and the provisions of Section 153A of the Act have been wrongly applied in the case of the

assessee. Therefore, we do not find any cogency in the arguments advanced by the Ld. CIT(DR) and the case laws cited by him in support of his contention are not applicable here. 6. Keeping in view facts and circumstances of the case as explained above and respectfully following the precedents, as aforesaid, the additions in dispute are deleted by accepting the appeal of the assessee. 7. In the result, all the appeals of the different assesses are allowed. Order pronounced on 30.07.2019 Sd/- Sd/-

(B.R.R. KUMAR) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 30/07/2019 *Kavita/SRB Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, NEW DELHI