KAILASH CHAND MAHESHWARI,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, , JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR

Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k
BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA Nos. 1463 to 1465/JP/2024
fu/kZkj.k o"kZ@Assessment Years : 2015-16 to 2017-18
Central Circle-02,
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AKQPM5593A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S. L. Poddar, Adv.
jktLo dh vksj ls@ Revenue by : Shri Rajesh Ojha, CIT-DR lquokbZ dh rkjh[k@ Date of Hearing

: 11/03/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/05/2025

vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

These three appeals are filed by the assessee aggrieved from the order of Commissioner of Income Tax (Appeal), Jaipur-4 [ for short CIT(A)]
for the assessment years 2015-16 & 2016-17 dated 20.11.2024 for A. Y.
2017-18 dated 27.11.2024. That order was passed by ld. CIT(A) because the assessee challenged the order of assessment all dated 14.12.2018
passed u/s. 144 r.w.s. 153A & 143(3) r.w.s 153A of the Income Tax Act,
1961 [ for short Act ] by DCIT, Central Circle – 2, Jaipur [ for short AO ].
3. First, we take up the appeal of the assessee in ITA no. 1463/JP/2024
for assessment year 2015-16 where in the assessee has raised the following grounds of appeal;
1. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the action of the Learned 1 Assessing Officer in the passing the order u/s 144/153A of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed.
2. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 94,77,000/- u/s 68 of the Income Tax Act,
1961 on account of alleged explained cash deposits in the bank accounts by not considering the submission of the assessee that the cash was deposited in the bank out of earlier withdrawals and regular source of income.
3. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 2,00,000/- u/s 68 of the Income Tax Act,
1961 by not accepting the agriculture income shown by the assessee in his return of income.
4. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 87,84,862/- u/s 69C of the Income Tax Act,
1961 on account of alleged unexplained expenditure of interest paid to Shri
Chandra Prakash Agarwal on alleged cash loan obtained of Rs. 20,00,00,000/-.
5. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 51,22,569/- u/s 69C of the Income Tax Act,
1961 on account of alleged unexplained expenditure of interest paid to Shri
Chandra Mohan Badaya on alleged cash loan obtained of Rs. 2,28,87,000/-
6. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax
7. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 5,47,150/- u/s 57(iii) of the Income Tax Act,
1961 on account of disallowance of interest expenditure.
8. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 17,02,666/-on account of undisclosed brokerage income on assumption basis.
9. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 10,00,000/- on account of marriage expenses of his niece Sonam during the year under consideration without any material or evidence found during the course of search.
10. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

The Assessee primarily derives its income from House property,
Business and Other sources. The proceedings of assessment of income were commenced by issue of notice u/s 143(2) of the Act on 05-11-2018, and notice u/s 142(1) dated 05-11-2018 was also issued to the assessee and information and details pertaining to the case relevant to assessment of his income were called by means of a questionnaire. The Information furnished by the assessee was examined and placed on record by the ld.
AO at the same time ld. AO also noted that the assessee remained non- cooperative in the assessment proceeding and that is why ld. AO also issued a final opportunity vide notice dated 05.12.2018 asking the assessee as to why the assessment should not be completed as per provision of section 144 of the Act. Ultimately ld. AO proceeded for completing the assessment to the best of his judgement.
75,84,500/- and Rs. 18,92,500/- respectively totaling to Rs. 94,77,000/-.
Since the assessee failed to justify source of the deposit of the said cash, the cash deposited so made was considered as unexplained cash credit as per provision of section 68 of the Act for an amount of Rs. 94,77,000/-.

In this ground of appeal the appellant has raised the issue that no incriminating material was unearthed during the course of search and seizure action of the appellant and thus no addition could have been made in the assessment order under appeal.

In the assessment order for the AY 2015-16, it is mentioned by the learned AO that the assessee failed to furnish return of income u/s 139(1) of the I.T. Act. For the AY
2015-16 the due date to file ITR was in the FY 2015-16. The appellant has submitted that no assessment proceedings were pending on the date of search and the case falls under the 'unabated' category. On the issue, in the remand report, the Id. AO has stated that ".... time for issuing the notice u/s 143(2) not lapsed on the date of the search for year under consideration." In case if the ITR was filed by the appellant by the due date i.e. in FY 2015-16, the scrutiny notice could have been issued on or before 30.09.2016. Regarding the issue of abatement, the appellant has not stated anything in the rejoinder report against the remand report. Accordingly, this year of the appellant falls under the "abated"
category.
Regarding the belated return, before the year 2017 amendment in section 139(4) of the Act whereby the sub-section was substituted by the Finance Act, 2016, w.e.f.
1-4-2017, the belated ITR u/s 139(4) of the Act could be filed on or before
31.03.2017. The search action took place on 28.07.2016. However no ITR was filed by the appellant till the date of search and seizure action. Thus on the date of search the time to file the return of income was still pending.

In view of the above discussion, the assessment for this year of the appellant falls under the "abated" category.

It is a settled law that in case of abated category years the additions can be macle in the assessment on all the issues whether any incriminating material from the search and seizure action is available or not. Hence this issue whether the incriminating material for the search and seizure action on the assessee appellant is available or not, is not required to be examined.

In view of the above discussion this ground of appeal is hereby dismissed.

Ground No. 2
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 94,77,000/- u/s 68 of the Income Tax Act, 1961 on account of alleged explained cash deposits in the bank accounts.

Finding of ld. CIT(A):
5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

As noted by the Id. AO the assessee was asked to furnish return of income u/s 153A of the IT. Act vide notice dated 06-03-2017 but no compliance was made by the assessee. Thereafter vide notice u/s 142(1) dated 18-09-2017 the assessee was asked to furnish the return which was not complied by the assessee.
Thereafter the assessee was issued show cause notice on 20-06-2018 for non filing return as why to prosecution proceedings u/s 276CC of the IT. Act should not be initiated but again the assessee did not complied on the given date i.e. 03-07-
2018. Thereafter the assessee was also issue show cause notice to complete the assessment u/s 144 of the IT. Act on dated 15-10-2018 fixing the dated on 23-10-
2018. But no compliance was made on the date and prosecution u/s 276CC of the Act, was launched against the assessee on 01-10-2018 for not filing return u/s 153A of the Act (AY 2012-13 & 2015-16) and late filing of return u/s 153A (AY
2011-12, 2013-14, 2014-15 & 2016-17). Thereafter, the assessee was again given several opportunities on various dates on which no compliance was done.

As also noted by the Id. AO the assessee has never co-operate during the assessment proceedings hence he was given final opportunity on dated 05-12-
2018 in which it was proposed to complete the assessment u/s 144 of the IT. Act.
In compliance of the same the assessee submitted only part written submission on dated 06-12-2018 in the office dak. Wherein also no reply in respect of a show caused notice dated 15-10-2018 and seized query dated 05-11-2018 was made which clearly shows that the assessee intentionally/willfully avoiding the assessment proceedings and does not have any explanation in respect of show cause notice dated 15-10-2018 and seized query letter dated 05-11-2018 and other queries which may arises during the course of proceedings.

As noted by the Id. AO the appellant did not also appear in the post search inquiries in response to the summons issued on 10.11.2016, 23.11.2016,
05.12.2016, 16.12.2016, 28.12.2016, 24.01.2017. The Id. AO has also noted that the assessee was again given a opportunity to furnish the explanation on show cause notice and seized query vide notice dated
10-12-2018 and proposed to complete assessment proceedings u/s 144 of the Act but on the given dated 12-12-2018 no reply was submitted.
• the purpose for which the cash was withdrawn from the bank account

• why the cash could not utilised for the purpose for which it was withdrawn

• location of the bank branches where the cash was withdrawn and where the cash was deposited along with the reasons for the distance in such branches

• if the cash is being regularly withdrawn and deposited back then why such exercise is being undertaken in a bona fide manner and whether the same is a mere colourable device cover to hide the real tax evasion practices

However the appellant has not shown the above reasoning and the bona fide.

Also, the appellant has not highlighted any specific instances where the cash was withdrawn from the bank account and the same was deposited back in the bank account.

Further the claim of the appellant is also found to be factually incorrect as from the perusal of the bank statement of the simple basis (from the statement of April 2014
of the UCO Bank) () it is seen that withdrawals have been done through cheque
/RTGS as against the deposit of cash in the bank account. Further it is seen that the cash withdrawn from bank account is not deposited back in the bank account and on future dates very small amounts of cash have been deposited showing that the cash withdrawn had already been spent/utilized.

Further, the "self" entries do not appear to be of cash withdrawal as in the bank statement of UCO Bank, on 02-05-14, there is an entry of "TO CASH showing withdrawal of Rs. 10,000. Thus UCO Bank used "TO CASH" to show cash withdrawn. And such entries are very few.

Further, not accepting but treating 'self as cash withdrawal for theoretical purposes,
"self" (withdrawn / transfer out from bank) of Rs. 2 lakhs is shown on 18 April and Rs. 3 lakhs is shown on 22 April and Rs. 5 lakhs is shown on 01 May and as against these, the cash deposits on subsequent dates are Rs. 46,150 on 2 May.
Further, Rs. 3000 are shown as withdrawn as "TO CASH on 14.05.14. These two entries of deposit of small amount on 02 May and further withdrawal of another small amount on 14 May show that all earlier cash withdrawals were already used/spent.
(i) It is to be noted that each entry must be separately explained by assessee to prove the genuineness of the transaction, While explaining the various credits and investments, it is possible that the assessee may be successful in explaining some of them, but that does not by itself mean that the entire investments has to be considered as explained. The Assessing Officer has to apply his mind in each and every individual entry when an explanation is offered by the assessee as observed by the Hon'ble Rajasthan High Court in the case of CIT v. RS. Rathore [1995] 212
ITR 390 (Raj.).

(ii) The Assessing Officer is not required to show the source of the money deposited in the bank account. There can be several possibilities. Such details are only in the possession of the assessee and onus lies on her. Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source CIT v. M.Ganapathi
Mudaliar [1964] 53 ITR 623 (SC), A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR
807 (SC).

(iii) The explanation of the assesse is to be seen in totality and as a whole and the same can either be found satisfactory or not satisfactory as a whole. The story or the explanation of the assessee cannot be modified to allow relief. It is possible that a single material fact or single material part of the explanation may render the entire explanation dis-believable or unsatisfactory. That is to be seen as per the facts and circumstances of the case and of the explanation. Explanation is to be examined for the availability of such exact amount of physical cash/money with the assesse which was deposited in bank in demonetization period.

(iv) TheHon'ble Supreme Court in the case of Sreelekha Banerjee v. CIT [1963] 49
ITR 112 has observed as under:

"The case involving the encashment of high denomination notes are quite numerous. In some of them, the explanation tendered by the taxpayer has been accepted, and in some, it has been rejected. The manner in which evidence brought on behalf of the taxpayer should be viewed, has, of course, depended on the facts of each case. In those cases in which the assessee proved that he had on the relevant date a large sum of money sufficient to cover the number of notes encas hed, this court and the High Courts, in the absence of something which showed that the explanation was inherently improbable, accepted the explanation that the assessee held the amount or part of it in high denomination notes. In other words, in such cases, the assessee was held, prima facie, to have discharged the burden which was upon him. Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the department
In this case, Hon'ble Supreme Court further held as under:-

"If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income.
The department is not at this stage required to prove anything. It can ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the department cannot act unreasonably and reject that explanation to hold that it was income. II. however, the explanation is unconvincing and one which deserves to be rejected, the department can reject and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee. There is thus, prima facie, evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words 'an undisclosed source' show that the disclosure must come from the assessee and not from the department."
(emphasis supplied)

It is further observed in this case by the Hon'ble Supreme Court as under:-

In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head-office. The Income-tax Office found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong. Indeed, the assessee himself corrected it before the Appellate Assistant
The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the department was justified in holding it to be the assessable income of the assessee from some undisclosed course, In this conclusion, the High Court was justified, regard being had to the principles we have explained above."
(Emphasis Supplied)

Some of the important factual-legal relevant questions emerging from the above judgement are as under:-

Question of justification of keeping large sums on hand whereas the facility of withdrawing cash was available at the time and place it was required,

The above is from the observation "failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried on, there were banks with which he had accounts"

Question of justification of withdrawing further sums when the earlier withdrawn sums were claimed by the assessee to be available in hand.

The above is from the observation "on the same day when the high denomination notes were encashed, a sum of Rs. 45,000 was drawn by cheque. The next remittance immediately afterwards was of Rs. 16,000 to Bokaro, but Rs. 17,000
(v) It is observed by the Hon'ble ITAT in the case of Renu T Tharani vs Dy
Commissioner of Income Tax in ITA No. 2333/Mum/2018 as under "These evidences and statements cannot always be accepted at the face value without application of mind about their reliability. A conscious call is to be taken, in a fair and objective but a realistic, manner about reliability of such evidence. As observed by Hon'ble Supreme Court, in the case of CIT Vs Durga Prasad More
((1971) 82 ITR 540 (SC)]. "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". As Hon'ble Supreme Court has observed, in this case, "it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make selfserving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority. this Tribunal cannot be superficial in its assessment of genuineness of a transaction, and our call is to be taken not only in the light of the face value of the documents sighted by the assessee but also in the light of all the surrounding circumstances, preponderance of human probabilities and ground realties. There may be difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidences. Hon'ble Supreme Court has, in the case of Durga
Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts ab ove makes the job of the Tribunal even more onerous and demanding and in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, statements and letters and examining them, in a pedantic manner, with the blinkers on. The same has been the approach adopted by Hon'ble Supreme Court, in the case of Sumati Dayal Vs CIT [(1995) 214 ITR 801 (SC)]. wherein Their
Lordships have, inter alia, disapproved acceptance of a claim of winning the appellant claims to have won in horse races a total amount of Rs. 3,11,831 on 13
occasions out of which 10 winnings were from Jackpots and 3 were from Treble
Kailash Chand Maheshwari vs. DCIT events by Chairman of the Income Tax Settlement Commission, and observed that "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities". Their Lordships further observed that "Similarly the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence"..

In view of the above discussion the claim of the appellant is to be adjudicated as per the principles of human probabilities. The onus is on the assessee to prove that the funds deposited in his bank account are from the sources claimed by the assessee. All these transactions has to be linked and proved. The onus in this regard is on the assesse which has not been discharged.

(vi) Hon'ble Madras High Court in the case of Durai Murugan Kathir Anand v
Additional
Commissioner of Income-tax
[2022]
136
taxmann.com
70
(Madras)/[2022] 443 ITR 423 (Madras)[25-02-2022] has observed as under:

Extract from headnotes

Section 69A, read with sections 144A and 153A, of the Income-tax Act, 1961
Unexplained moneys (Cash)-Assessment year 2019-20-Pursuant to cash seized at premises of employee of a trust where assessee was a trustee, a show cause notice was issued to assessee for addition of seized cash to assessee's total income as undisclosed income - Cash had been recovered on packet with markings of municipal ward from where assessee was contesting elections -
Assessee filed an application seeking that directions be issued for completion of assessment under section 153A considering that cash recovered did not belong to assessee and a party worker 'S' had given a voluntary statement that cash belonged to him and had filed an application before ITSC for settlement and addition would result in double taxation in hands of assessee and person who claimed ownership of seized cash - However, said application was rejected and order under section 153A was passed making addition to assessee's total income under section 69A- It was found that one 'S' had given statement that cash
Kailash Chand Maheshwari vs. DCIT belonged to him for distribution to voters, however, statement of 'S' did not satisfy test of preponderance of probability, as, 'S' had not + produced any records to substantiate that cash belonged to him and also, he was a man of insufficient means - Further, show cause notice also indicated that 'S' had not filed any income tax returns to justify his version - Moreover, documents pertaining to college/trust of assessee found along with seized cash indicated that cash belonged to assessee which was not disclosed by assessee in his regular return - Whether therefore, since preponderance of probabilities indicated that seized cash was undisclosed income of assessee, additions under section 69A to assessee's income were justified - Held, yes [Paras 49 to 54]

Relevant paras are extracted below:-

"49. The statement of Mr.S.Srinivasan claiming that the cash belonged to him does not satisfy the test of preponderance of probability that the cash indeed belongs to him. Mr.S.Srinivasan has not produced any records to substantiate that the cash belonged to him. The show cause notice also indicates that Mr.S.Srinivasan has not filed any income tax returns to justify his version. Mr. Srinivasan has also not given any satisfactory explanation to substantiate his claim. On the other hand, there is a preponderance of probability that the cash belonged to the petitioner,

In the above case a third person made a sworn statement and owned up the cash found in the premises of petitioner. Such third person also filed an application before the Settlement Commission. However such sworn statement was rejected by the Hon'ble High Court. The matter was decided as per Preponderance of Probability

(vii) Judgement in the case of Vivek N. Jajodia v. Income-tax Officer, 16(2)(2).
Mumbai[2011] 10 ITR(T) 581 (Mumbai)/[2010] 123 ITD 136 (Mumbai)/[2010] 134
TTJ 806 (Mumbai)[23-01-2009]

The relevant para of the judgement are extracted here under as relied upon:-

"8. The learned D.R. in reply submitted that there is preponderance of probability against the assessee as the gifts are not customary. There are no mutual gifts given by the assessee to the foreign persons. The basic responsibility of providing evidences for proving the gift as genuine has not been established.......

"It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."
14. In CIT v. P. Mohankala [2007] 291 ITR 278 1 (SC), the assessee had received foreign gifts from one common donor. The payments were made by instruments issued by foreign banks and credited to the respective account of the assessee by negotiation through a bank in India. Most of the cheques, in that case, sent from abroad were drawn on the Citibank, NA Singapore. The Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts, which were credited in the account books of the assessee as their income applying section 68 of the Income-tax Act. The Hon'ble Supreme Court held that in cases where the explanation offered by the, assessee about the nature and source of the sums found credited in his books is not satisfactory, there is prima facie evidence against the assessee, viz., the receipt of money and that the burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was receipt of an income nature. The Hon'ble Court further observed: 'May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence'.

(viii) In the case of Konathala Nooku Naidu v. Income-tax Officer, Ward-1
[2024]
160
taxmann.com
758
(Visakhapatnam
Trib)[18-03-2024]
[TA
No.269/V2/2023], Hon'ble ITAT upheld the addition and found the explanation as unacceptable when the source of cash deposited in the bank on 13-11-2016 was stated to be the loan which was further withdrawn in cash on 29-09-2016 in view of the fact that the assessee has not properly explained as to why the loan was availed by the assessee and for what purpose he has withdrawn the amount on 29-
09-2016 and deposited the same after one and half months.

"6. Insofar as the loan of Rs. 2,60,000/- is concerned, the contention of the assessee is that he has availed a loan and withdrawn the amount and redeposited the same in his bank account. On perusal of this transaction of the assessee, I find
Kailash Chand Maheshwari vs. DCIT that the assessee has availed a loan on 26/9/2016 and withdrawn the same on 29/9/2016. But, the assessce has deposited the said amount on 13/11/2016. The assessee has not properly explained as to why the loan was availed by the assessee and for what purpose he has withdrawn the amount on 29/11/2016 and deposited the same after one and half months Therefore, the contention of the assessee is not tenable. Hence, I am of the view that the assessee has not properly explained the source for the cash deposit of Rs. 2,60,000/- and thus I sustain the addition to this extent.”

(ix) In the case of Kailash Swaroop Agarwal vs Commissioner of Income Tax,
Ajmer in D.B. Income Tax Appeal No. 175/2012 in order dated 03/10/2017 the addition on account of unexplained cash deposits was upheld by the Hon'ble
Rajasthan High Court. As noted in the order of Hon'ble Tribunal as referred in the order of Hon'ble High Court, the explanation of the assessee was rejected by the Hon'ble Tribunal in the following paras:-

"5.2 Corning to the impugned addition of Rs. 14.70 lacs, we observe the assessee's explanation as fantastic by all counts, bordering on the bizarre. Firstly, the need to raise funds, which constitutes the essence of the assessee's explanation, is itself not understood.

(x) The claim of the appellant is not supported by preponderance of probability in his favour. In such situation, onus is on the appellant to prove that what is improbable has happened. The dictionary meaning of the word "preponderance" is superiority in weight, power, importance, or strength. Under the preponderance standard, the burden of proof is met when the party with the burden convinces the fact finder that there is a greater than 50% chance that the claim is true. This preponderance is based on the more convincing evidence and its probable truth or accuracy.

(xi) According to section 3 of the Evidence Act, a fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that the prudent man ought, under the Kailash Chand Maheshwari vs. DCIT circumstances of the particular case, to act upon the supposition that it exists.
Section 114 of the Evidence Act provides that the Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the particular case. The aforesaid provisions are nothing but recognition of board principles of common law governing the issue under consideration.

(xii) As per the judgement of Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968, unexplained credit (or stock) (or money) cannot be presumed to be business income. Onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assessee is required to prove the same.

Thus, it can not be said that the Id. AO has not identified any other source of the income of the assessee and thus the unexplained credit/investment in stock/money is from business income. This can not be held in view of the ratio of the judgement of Hon'ble Supreme Court as discussed above and as discussed in subsequent paragraphs.

Further, in the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-
1977] that even after the items (stock in trade) were "introduced in the books of account of its business", the assessee was still required to "to prove satisfactorily the nature and source of these assets" and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee".

There is no presumption in favor of business income. Onus to prove is on (xiii) The Hon'ble Supreme Court in the case of Commissioner of Income-tax v.
Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:

"There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC). Whether in a given case the Income-tax
Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case.
………………
The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax
Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed".

As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922) Method of accounting System of accounting Assessment year 1946-47- Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes".

As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble
Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.

(xiv) In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR
938 (SC)[08-03-1977] it is held by the Hon'ble Supreme Court as under:-

"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v.
Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that:

"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."
To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source, vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72
ITR 194 (SC). Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue. could legitimately hold that these assets represented the undisclosed income of the assessee..."

(emphasis supplied)

In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963]
50 ITR 1 (SC)[08-02-1963] it is held by the Hon'ble Supreme Court as under:-

"It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income: see A. Govindarajulu Mudaliar v.
Commissioner of Income-tax [1958] 34 ITR 807 (SC)".

As per judgements of Hon'ble Supreme Court in the case of CIT v. M.Ganapathi
Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR
807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source.

(xv) Referring to the above judgements of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32
(2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib) as under-

"3.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497
(Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v. P. Mohankala
[2007] 291 ITR 278/161 Taxman 169. A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is wellsettled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in CIT v. M. Ganpati Mudaliar [1964] 53 ITR 623 (SC)A.
Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC) and also CIT v. Durga
Prasad More [1969] 72 ITR 807 (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in CIT v.
Daulat Ram Rawatmal [1973] 87 ITR 349 (SC) further throws light on the issue. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR
820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assesseeCIT v. R.S.
Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High
Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213
held that transaction by cheques may not be always sacrosanct……….”

(Emphasis Supplied)

(xvi) It was held by the Hon'ble Supreme Court in the case of Sumati Dayal v.
Commissioner of Income-tax [1995] 80 Taxman 89 (SC)/ [1995] 214 ITR 801
(SC)/[1995] 125 CTR 124 (SC)[28-03-1995] as under.-

In view of the above discussion the explanation of the appellant regarding the source of the cash deposited in the bank account is rejected and the same does not at all explain the source of the cash deposited in the bank account. Since the source of the cash deposited in the bank account is unknown and unexplained, the same is also alternatively taxable under section 69A of the Act.

The appellant has also contended that the cash deposited in the bank account is not taxable under section 68 of the Act as no books of accounts were maintained by the appellant and that the bank pass book or bank statement cannot be considered as books of accounts.

There are judicial precedents as per which addition under section 68 of the Act can be made w.r.t. cash deposit in bank account. Hon'ble ITAT Delhi Bench in the case of Jagdish Prasad Sharma v. ITO [IT Appeal No. 104 (Delhi) of 2015, dated 13-1-
2020), following the later decision of the Bombay High Court in Arunkumar J.
Muchhala v. CIT [2017] 85 taxmann.com 306/250 Taxman 362/399 ITR 256
(Bom.), has held that bank passbook is also the books of the assessee within the meaning of section 2(12A) and, therefore, addition u/s 68 can also be made, irrespective of whether credit entries are made in the books of account of the assessee or not.

In view of the above discussion this ground of appeal is dismissed in above terms.

Ground No. 3
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 2,00,000/- u/s 68 of the Income Tax Act, 1961 by not accepting the agriculture income shown by the assessee in his return of income.
Finding of ld. CIT(A):
6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

It has been discussed in the earlier ground of appeal in detail that the appellant did not comply with the statutory notices during the course of search enquiries and during the assessment proceedings and even the return of income was not filed by the appellant. The assessment order had to be passed as per the best judgement.

As per the facts as noted in the assessment order, the appellant has claimed and agricultural income of 2 lakhs in each of the assessment year. The learned AO has observed in the assessment order that assessee has furnished copy of Girdawari report for Vikram sumvat 2067 to 2071 but failed to produced any evidence in respect of expenditure incurred on agricultural activities like labour wages, seeds, fertilizers, electricity. He also failed to furnish any documentary evidence of sale of agricultural product including the detail of crop sold and where and to whom the same was sold. It is worthwhile to mentioned here that assessee has claimed agricultural income of Rs. 2,00,000/- in each year ie. AY 2011-12 to 2017-18 which is not possible at any stage of imagination that the assessee earned same income i.e. Rs. 2,00,000/- in each year i.e. AY 2011-12 to 2017-18 in the agricultural activity which is famous for its uncertainty. This clearly shows that agricultural income has been claimed after thought and no such agricultural product were sold in market and income was earned on the same. The same is undisclosed income of the assessee which the assessee has shown under guise of agricultural income.
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 87,84,862/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra
Prakash Agarwal on alleged cash loan obtained of Rs. 20,00,00,000/-.

Finding of ld. CIT(A):
7.2
I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

It has been discussed in the adjudication of ground no 2 of appeal in detail that the appellant did not comply with the statutory notices during the course of search enquiries and during the assessment proceedings and even the return of income was not filed by the appellant. The assessment order had to be passed as per the best judgement.

It is noted by the learned AO in the assessment order that a search action u/s 132(1) of the IT. Act was conducted at residential cum business premises of Shri
Chandra Prakash Agarwal, at 1756, Telipada, SMS Highway, Chobra Rasta, Jaipur wherein various incriminating documents found and seized wherein some pages were found and seized as Annexure-A, Exhibit 12, Page No. 1, 2, 4 & 6 and 10. These Papers contain details of work out of interest received against cash loan given by Shri Chandra Prakash Agarwal to K.B i.e. Shri Kailash Chand
Maheshwari. It is worthwhile to mention here that Shri Kailash Chand Maheshwari also known as KB i.e. Shri Kailash Chand Bilwa.

It is also noted by the Id. AO that, it is found that the assessee has received cash loan in cash from Shri Chandra Prakash Agarwal during AY 2015-16 and AY 2016-
17 and paid interest thereon. Show cause notice was issued to the appellant in this regard however the same remained not complied. It is held in the assessment order that the assessee received loan of Rs. 20,00,00,000/-during AY 2015-16 in cash during the year and paid interest thereon to the extent to Rs.87,84,862/- for AY 2015-16 which is unexplained expenditure u/s 69C of the IT. Act.
In the appeal the appellant has inter-alia challenged the addition on the ground that since the addition has been made on the basis of material from the search and seizure action on other person, the addition could have been made only in an assessment order under section 153C of the Act. However this contention of the appellant is not applicable to the facts of the case of the present appeal. Further,
по factual statement and affidavit has been made by the appellant that such transaction of taking loan did not take place. It is a case of silent acceptance of the facts.

Firstly the section 153C of the Act is with reference to the assumption of juri iction for initiation of proceedings when it is in comparison to section 147 of the Act. With reference to section 153A of the Act, it is a settled law that in case of abated assessments additions with reference to all sources of information/evidences
(whether from the search action of the assessee, or from the search action on other person, or any other information) can be done and such additions can be done even when no addition is being done on the basis of incriminating material from the search on the assessee.

Further the reference to section 143(3) of the Act, i.e., if the assessment proceedings under this section are pending in that case additions with reference to all sources of information and evidences can be done including regarding the information from the search on other person.

Similar is the scenario with respect to assessments proceedings under section 147
of the Act in case the addition has been done on the issue on which the assessment was reopened (and which issue is not from the search on other person) in that case additions can be done with respect to all other issues as well including on material from search action on other person.

The judgements referred by the appellant are in the different contexts and in different facts where the assessment proceedings were initiated on the basis of material from the search on another person and the procedure of section 153C was not done.

The concept of single assessment order for each of years for assessing 'total income" has also been upheld by the Hon'ble Rajasthan High Court in Shyam
Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161
taxmann.com 255 (Rajasthan)[19-03-2024] (Para 29).

It has been upheld by the honourable Supreme Court in the case of Abhisar
Buildwell (supra) that in case of abated assessments; and in case of unabated/completed cases where there is addition is done on incriminating material from the search on the assesse; in both the cases the "total income" can be determined by the assessing authority including all the issues even if not emanating from the search action on the assessee.
Copy of statement recorded u/s 132(4) of the assessee was not furnished (iii)
Cross-examination not allowed of Shri Chandra Prakash Agarwal (iv) Cross examination not allowed of the assessee.

However the appellant has not placed on record any letter request made to the assessing authority with reference to the above issues during the assessment proceedings. Conversely, as per the facts of the case it is the appellant was not complied with the several statutory notices and the assessment had to be made as per the best judgement. Applying the principles of judgement in the case of GKN
Drivesharfts (India) Ltd. [2003] 259 ITR 19, the assessee is eligible to raise the request for copy of documents and statements etc. after the compliance of the notices issued by the assessing authority. And also as per the judgement the assessee is required to make a request to the assessing authority to get the document desired. However in the present case neither the appellant complied with the statutory notices issued by the assessing authority nor the requests have been made to the assessing authority asking for the information and documents and the cross examination. Even in the present appeal proceedings the appellant has not made a request to the assessing authority for such documents. Also no request for the cross examination has been made in the present appeal and only a technical rejection ground has been taken to claim the relief from the addition made in the assessment order. This shows non bona fide of the appellant.

The Supreme Court in the case of Dharampal Satyapal Ltd v. Deputy
Commissioner of Central Excise [2015] 58 taxmann.com 90/51 GST 197 following the earlier decisions in the cases of R.C. Tobacco (supra) and Escort Farms Ltd.
(supra) reiterated the principle that "though rules of natural justice are to be followed for doing substantial justice, yet, at the same time, it would be of no use if it amounts to completing a mereritual of hearing without possibility of any change in the decision of the case on merit". This rule is applicable to the present case as the appellant was not responsive and non-compliant to the statutory notices during the assessment proceedings and in the post search enquiries and no request with reference to the issues raised by the appellant in the appeal was made by the appellant during the assessment proceedings.

In the case which arose before the Allahabad High Court in Trimurti Fragrances
(P.) Ltd. v. CIT[2006] 153 Taxman 598/283 ITR 547 (All.) the facts were that the assessee-company and others (firms/individuals) belonged to one group engaged in manufacturing and selling Gutkha and all were operating from Kanpur and assessed at Kanpur. The assessee had one sales promotion office in Delhi and Kailash Chand Maheshwari vs. DCIT one of directors of the assessee had his factory and residence at Delhi and consequent to search and seizure operations conducted at both Kanpur and Delhi at sites belonging to the group, the Commissioner of Income-tax, Kanpur issued notice under section 127(2)(a) of the Act to the assessee in connection with centralization of case from Kanpur to New Delhi. In reply to such notice the assessee took plea of inconvenience but, however, the Commissioner of Income- tax transferred the case of the assessee from Kanpur to New Delhi for coordinated investigation. The assessee's case was that no reasonable opportunity of hearing was given before passing the orders. The High Court, after referring to the decision of the Supreme Court in the case of Canara Bank v. Debasis Das [2003] 4 SCC
557(hereinafter referred to as Debasis Das] reiterated the accepted basic principle of adherence to principles of natural justice vis-à-vis useless formality theory and held that, on facts, it could be said that assessee was given reasonable opportunity to place its case and therefore, there was sufficient compliance of principles of natural justice and order of transfer could not be said to be arbitrary.

Several notices were issued to the appellant during the assessment proceedings however the same were not complied with and even the show cause notices were not replied with during the assessment proceedings and no request for the documents and cross examination etc. were made during the assessment proceedings and this shows that no prejudice was caused to the appellant otherwise the requests would have been made during the assessment stage itself.
Further even during the appeal proceedings the appellant has not made such requests and has only raised a technical objection issue against the additions.

Importantly, the appellant has not shown factually that the alleged documents and the alleged opportunities were not received by him as the appellant has not placed on record all the notices and correspondence issued during the assessment proceedings and before that, which even was requested by the notices issued during the appellate proceedings.

It is held by the Hon'ble Supreme Court in the case of Indure (P.) Ltd. vs. Principal
Commissioner of Income-tax [2022] 142 taxmann.com 67 (SC)[01-08-2022] as under:-

It is held by the Hon'ble Rajasthan High Court in the case of Goenka Jewellers vs.
Commissioner of Income-tax
I,
Jaipur
[2018]
100
taxmann.com
517
(Rajasthan)[30-10-2018] as under:-
10 As regards the argument of the appellant for not providing him opportunity of cross- examine Shri Praveen Jain, in the first place, the Assessing Officer himself required the appellant to produce representative of the concerned parties along with their books of account and he failed to produce them. Secondly, rno such prayer was ever made by the appellant before the Assessing Officer to summon Shri Praveen Jain for his cross- examination. We may at this juncture usefully refer to the observations of the Supreme
Court in Chairman, Board of Mining Examination & Chief Inspector of Mines v. Ramjee,
[1977] 2 SCC 256 wherein concept of naturaljustice was succinctly summarized in the following terms:

"xxxxxxxxxx Naturaljustice is no unrulyhorse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of naturaljustice can be complained of.
Unnatural expansion of naturaljustice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical (sic) nor fanatical but should be flexible yet firm in this juri iction. No man shall be hit below the belt-that is the conscience of the matter."

"34. If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing
Officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in he proceeding, the said party would be precluded from raising such issue at a latter stage of the proceeding. Therefore the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law."

In view of the above discussion, Natural justice is no unrulyhorse, no lurking land mine, nor a judicial cure-all. It was incumbent upon the assessee to make such prayer before the Assessing Officer during the assessment proceeding and now in appellate stage the appellant is precluded from raising such issue.
Accordingly, this ground of the appellant is hereby dismissed.”

Ground No. 5
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 51,22,569/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra Mohan
Badaya on alleged cash loan obtained of Rs. 2,28,87,000/- (correct amount is Rs.
3,61,24,000/- out of which amount of Rs. 2,28,87,000/- has been repaid.

Finding of ld. CIT(A):
8.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order
Kailash Chand Maheshwari vs. DCIT for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

It has been discussed in the adjudication of ground no.2 of appeal in detail that the appellant did not comply with the statutory notices during the course of search enquiries and during the assessment proceedings and even the return of income was not filed by the appellant. The assessment order had to be passed as per the best judgement.

It is noted by the learned AO in the assessment order that a search action was conducted on 29.07.2016 at residential premises of Shri Chandra Mohan Badaiya
(Chandra Prakash Agarwal Group) at A-178, Surya Nagar, Taroo Ki Koot, Tonk
Road, Jaipur. During the search back up of data available in mobile phone of Shri
Chandra Mohan Badaiya were taken and the same was seized as Exhibit-4 of Annexure. It is also evedent that the assessee has received cash loan of Rs.
36124000/- from Shri Chandra Mohan Badaiya during the AY 2015-16 and repaid of Rs. 2,28,87,000/- during the year itself alongwith interest of Rs. 5111569/-. The unaccounted / unexplained interest payment has been added as unexplained expenditure u/s 69C by the Id. AO.

In the appeal the appellant has inter-alia challenged the addition on the ground that since the addition has been made on the basis of material from the search and seizure action on other person, the addition could have been made only in an assessment order under section 153C of the Act. However this contention of the appellant is not applicable to the facts of the case of the present appeal. Further, no factual statement and affidavit has been made by the appellant that such transaction of taking loan did not take place. It is a case of silent acceptance of the facts.

In this ground of appeal the appellant has raised the legal grounds that the procedure of section 153C was not followed and that there is breach of principles of natural justice and these grounds are very similar to the grounds raised and adjudicated above in the ground number 4. of the appeal.

The findings and adjudication in this order in ground number 4 of the appeal will squarely applying to the present ground of appeal and the same is not repeated here for the sake of brevity and accordingly this ground of appeal is hereby dismissed.”

Ground No. 6
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax Act, 1961 on the basis of post dated cheques found from the third party.

Finding of ld. CIT(A):
9.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

It has been discussed in the adjudication of ground no.2 of appeal in detail that the appellant did not comply with the statutory notices during the course of search enquiries and during the assessment proceedings and even the return of income was not filed by the appellant. The assessment order had to be passed as per the best judgement.

As noted by the Id. AO, a survey proceedings u/s 133A of the I. T. Act, 1961
conducted on 30.07.2016 at the business premises of 'Shri Ram Enterprises' at 881, Panchgali, Shokhiyon Ka Rasta, Kishanpole Bazar, Jaipur and image of data of 'DELL Laptop' was taken in a Hard Disk. An excel worksheet in the name of KAILASH BILWA was found wherein details of PDCs (Post Dated Cheques) with its number and amount are entered in the name of 'KAILASH BILWA' with date
21/04/2014. The assessee was asked vide notice dated 15-10-2018 to explain the nature of transactions and to provide complete details of parties to whom these transactions pertains also ensure to produce these parties for verification. Failing to the same he was asked to show cause as to why the same should not be treated as his undisclosed income but no reply on the same was furnished by the assessee although he was given ample opportunity as discussed above.
Further even though it is the claim of the appellant that the books of accounts were maintained and that the addition cannot be done under section 68 of the Act, however it is a settled law that correct income is to be determined and that the appellate authorities are required to rectify the errors of the lower authorities to arrive at the correct income. In Kapurchand Shrimal v. CIT [1981] 131 ITR 451/7
Taxman 6. the Supreme Court has held as under:-

“…….It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction. It is well-known that an appellate authority has the juri iction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute......" (p. 460)

Thus the unaccounted income of the appellant is hereby held to be taxable as unexplained money under section 69A of the Act and also alternatively as unexplained investment under section 69 of the Act.

Accordingly, this ground of appeal is hereby dismissed.

Ground No. 7
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 5,47,150/- u/s 57(iii) of the Income Tax Act, 1961 on account of disallowance of interest expenditure.

Finding of ld. CIT(A):
10.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
On the issue of merits of addition in this ground, it is held by the Hon'ble ITAT in the case of RRPR Holding (P.) Ltd. v. Deputy Commissioner of Income-tax [2023]
152 taxmann.com 537 (Delhi - Trib.)/[2023] 201 ITD 781 (Delhi Trib.) [22-06-2023]
as under:-

"19. Before the Tribunal, the Id. counsel has merely reiterated its contentions placed before the lower authorities without showing any nexus between the interest earned and corresponding interest expenditure as observed. The Revenue on the other hand has clearly recorded a finding of fact that the interest expenditure has not given rise to the corresponding interest income. The interest income has arisen independently out of fixed deposits fixed with bank, the source of which in turn is sale of investments. The interest expenditure on the other hand has been incurred on borrowers utilized for investment in acquisition of shares of NDTV Ltd. Thus, apparently the assessee has failed to discharge the onus which lays upon it to show that incurring of expenditure has resulted in corresponding income taxable under the head 'income from other sources. In the absence of any live nexus between the expenditure and the corresponding income, the Revenue
Authorities have rightly disallowed the claim of interest expenses having regard to the narrower scope of deductions eligible under section 57 (iii) of the Act. We thus decline to interfere with the action of the Assessing Officer and the First Appellate Authority."
The onus is on the appellant to show one-to-one matching and prove that the interest expenditure for the borrowed funds have been used wholly and exclusively only for the purpose of making investments which have yielded interest income which has been offered to tax under the head income from other sources. The appellant was required to file a day-to-day fund flow statement regarding the taking of interest-bearing funds and their utilisation, The appellant has not discharged this onus. The appellant has also alleged typographical error in the figures mentioned in the assessment order. However the appellant has not placed on record material to verify the correctness of the claim of the appellant. As such the same is hereby rejected.

In view of the above discussion this ground of appeal is hereby dismissed.

Ground No. 8
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 17,02,666/- on account of undisclosed brokerage income on assumption basis.

Finding of ld. CIT(A):
11.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The Id. AO has noted in the assessment order that a survey u/s 133A of the I.T.
Act, 1961 conducted at shop no. 106-107, 1st or, Balaji Tower VI, Plot no. 4. Airport Plaza, Durgapura, Tonk Road, Jaipur occupied by Shri Kailash Chand
Maheshwari, Shir Kailash Chand Gupta, Shri Radhey Shyam Khandelwal and Shri
Manoj Gupta and used by these persons as a office for the business of property dealing under name and style M/s Kubar Properties and Developers. During the survey various documents were found which were impounded and inventorized as Annexure-B, Exhibit-4, page no. 1 to 59. These papers are allotment letters of a residential scheme of Rajhans Co-operative Housing Society Ltd under name and style Shiva Pradise, Nemodia Moad, Tonk Road, Jaipur. During the course of survey statement of Shri Kailash Chand Maheshwari was recorded u/s 133A of the I.T. Act on 30-07-2016 wherein in reply of question no. 13 he admitted that all these deals were completed through him only and he received "on money" on these transactions @ Rs. 250 per sq. yard from the parties which is his undisclosed income. Further, at question no. 10 he admitted that he received brokerage/commission @ 20 per sq. yard on the allotment of land in aforesaid residential scheme.
In the appeal the appellant has contended that in his statement, the assessee has not deposed that he was the recipient of the on-money. He has simply stated that deals of sale of plots including boundary wall was made @ Rs. 700 per Sq.yd and the payment was to be made at the ration 70: 30, i.e. 70% of the amount was to be paid by cheque and 30% was to be paid in cash. In his reply to question No. 10, the assessee further stated that he was to get only Rs. 20 per Sq.yd as brokerage.
The reply of the assessee is categorical and very specific. In his statement, he has nowhere stated that he got the on-money amount. In view of this, the addition of Rs. 15,76,542/- is totally uncalled for. In fact otherwise also the on-money was a part of the sale amount and would naturally go to the seller and not to be broker.
The assessee was only a broker and he was entitled only for brokerage.

However the contention of the appellant is not verifiable from the material placed on record by the appellant as even the statement which is referred by the appellant has not been placed on record.

In the case of Commissioner of Income-tax v. Md. Warasat Hussain [1987] 35
Taxman 227 (Patna)/[1988] 171 ITR 405 (Patna)/[1988] 67 CTR 75 (Patna) [10-09-
1987] it was held by Hon'ble Patna High Court as under:-

"This was a matter with the special knowledge of the assessee. The Tribunal could not be expected to produce the sale deed. The learned counsel for the assessee
No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v. CTO [1985] 154 ITR
148 (SC)."

The assessment order has been made as per the best judgement is the appellant did not participate in the assessment proceedings and did not comply with the statutory notices issued during the assessment proceedings and in the present appeal no additional evidences have been filed and no justification has been filed for not complying with the several statutory notices during the assessment proceedings. Regarding the issue involved in the ground of appeal the appellant has disputed the facts of the confirmation of the income and the basic issue that the brokerage income was earned by the appellant is undisputed. However the appellant has not substantiated the working of the brokerage with documents and evidences and as such the appellant has made by the learned AO on the incriminating evidences found during the search and survey action is hereby upheld and accordingly the addition made is hereby upheld. In this ground of appeal is hereby dismissed.

Ground No. 9
Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of Rs. 10,00,000/- on account of marriage expenses of his niece Sonam during the year under consideration without any material or evidence found during the course of search.

Finding of ld. CIT(A):

The appellant has also contended that the addition cannot be made solely on the basis of statement under section 132(4) of the Act and that no cross examination was allowed to the appellant. However this contention of the appellant does not merit any consideration as the statement relied upon by the assessing authority in the assessment order is of the statement of the appellant himself and there is no retraction by the appellant till date. Further in such a scenario the question of cross examination also does not arise. Also the issue of cross examination and the principle of natural justice has been discussed in detail in the earlier ground of appeal where this contention of the appellant has been rejected and the same is referred to and not repeated here for the sake of brevity.

Commissioner of Income-tax v. Hotel Meriya [2010] 195 Taxman 459. (Kerala)/[2011] 332 ITR 537 (Kerala) [26-05-2010]

"What is evidence? We shall examine it first. Evidence is defined in section 3 of the Evidence Act as follows:

"Evidence":- "Evidence" means and includes (1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry, such statements are called oral evidence:

(2) all documents including electronic records produced for the inspection of the Court, such documents are called documentary evidence."

The 'Court' mentioned above in the definition of evidence would include all persons, except arbitrators, legally authorised to take evidence as defined under section 3. In section 3,
Court is defined as follows:

"Court" - "Court" includes all Judges and Magistrates, and all persons, except arbitrators, legally authorised to take evidence."

A reading of section 131 of the Income-tax Act would show that the Assessing
Civil Procedure, 1908 in respect of (a) discovery and inspection, (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath and (c) compelling the production of books of account and other documents. It is not disputed that the Assessing Officer recorded the statement of the partner of the respondent as well as the employees in exercise of the powers vested by him under section 131 of the Income-tax Act. The documents were also seized in exercise of such powers. In the above circumstance, the statement of the partner and the employees recorded by the Assessing Officer as well as the documents seized would come within the purview of the evidence under section 158BB of the Income-tax Act read with section 3 of the Evidence Act and section 131 of Income-tax Act. Therefore, such evidence would be admissible for the purpose of block assessment".
…………..
…………….

"9. It appears that the Tribunal had arrived at a conclusion that the statements recorded by the Assessing Officer under section 132(4) of the Income-tax Act has only very limited application without applying the mind. Explanation to section 132(4) of Income-tax Act would make it very clear that the evidence so collected would be relevant for all purposes of any investigation connected with any proceeding under the Income-tax Act. We find that a reading of section 132(4) with Explanation would be relevant. Hence we quote the same for easy reference:

"Section 132(4): The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

Explanation For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act."

Going by the above provision along with its Explanation we find that the statement of the partner and employees recorded and documents collected are relevant and admissible in respect of all matters for the purpose of any investigation connected with any proceedings under the Income-tax Act. Hence, we are of the opinion that the statements so recorded and documents collected by the Assessing Officer cannot be brushed aside as done by the appellate Tribunal stating that it is having only very limited application. We answer the question in favour of the appellant."

Pr. CIT v. Shri Roshan Lal Sancheti [IT Appeal No 47 of 2018, dated 30-10-2018].
Hon'ble Rajasthan High Court
'This court in CIT, Bikaner v. Ravi Mathur, supra, which judgment has been relied by the ITAT in the present case, after considering catena of previous decisions, held that the statements recorded under section 132(4) of the IT Act have great evidentiary value and they cannot be discarded summarily and cryptic manner, by simply observing that the assessee retracted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. We deem it appropriate to reproduce para 15 of the said judgment, which reads thus,

"15. In our view, the statements recorded under section 132(4) have great evidentiary value and it cannot be discarded as in the instant case ITA No. 720/JP/2017 M/s Bannalal
Jat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer by the Tribunal in a summary or in a cryptic manner, Statements recorded under section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9-11-1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly sworn affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by extemal agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore.
Once a statement is recorded under section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time and in the instant case we notice that the AO in the Assessment Order observes:-

"Regarding the amount of Rs. 44.285 lakhs, it is now contended that the statement u/s 132(4) was not correct and these amounts are in ITA No. 720/JP/2017 M/s Bannalal Jat
Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer thousands, not lakhs i.e. it is now attempted to retract from the statements made at the time of S & S operations."

Therefore, what we gather from the Assessment Order and on perusal of the above finding that the retraction was at the stage when the assessment proceedings were being finalized i.e. almost after a gap of more than an year. Such a so-called retraction in our view is no retraction in law and is simply a self-serving statement without any material."
CIT, Bikaner vs. Shri Ravi Mathur (D.B. Income-tax Appeal No. 67/2002), Hon'ble
Rajasthan High Court

"Once a statement is recorded u/s 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time.... such a so- called retraction in our view is no retraction in law and is simply a self -serving statement without any material".

In view of the above discussion, the learned AO has rightly relied upon the statement of the appellant. Since the appellant has not explained the sources from where the expenditure was done by the appellant, the addition made in the assessment order in this regard is hereby upheld.

Accordingly this ground of appeal is hereby dismissed.

Ground No. 10
The assessee craves your indulgence to add am end or alter all or any grounds of appeal before or at the time of hearing.

Finding of ld. CIT(A):

Income Tax Department on the members of Chandra Prakash Agarwal Group on 28-07-2016 of which the Assessee is one of the members covered u/s 132. In response to notice under section 153A of the Act dated 06.03.2017 return was filed on 23.10.2018 declaring total income at Rs. 11,93,430/-. Copy of acknowledgement of return along with computation is available on Paper Book
Page No. 1-5. The Learned Assessing Officer completed the assessment u/s 144/153A of the Income Tax Act, 1961 on 14.12.2018 determining total income at Rs. 3,80,16,677/- inter-alia making the following additions –
(i) addition of Rs. 94,77,000/- u/s 68 of the Income Tax Act, 1961 on account of alleged unexplained cash deposits in the bank accounts.
(ii)
Addition of Rs. 2,00,000/- u/s 68 of the Income Tax Act, 1961 by not accepting the agriculture income shown by the assessee in his return of income.
(iii) addition of Rs. 87,84,862/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra Prakash Agarwal on alleged cash loan obtained of Rs. 20,00,00,000/-.
(iv) addition of Rs. 51,11,569/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra Mohan Badaya on alleged cash loan obtained of Rs. 2,28,87,000/-.
(v) addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax Act, 1961 on the basis of post dated cheques found from third party.
(vi) addition of Rs. 5,47,150/- u/s 57(iii) of the Income Tax Act, 1961 on account of disallowance of interest expenditure.
(vii) addition of Rs. 17,02,666/- on account of undisclosed brokerage income and on- money on sale of plots of Rajhans Cooperative Housing Society.
(viii) addition of Rs. 10,00,000/- on account of marriage expenses of his niece Sonam during the year under consideration without any material or evidence found during the course of search.
Aggrieved with the order of the Learned Assessing Officer the assessee preferred appeal before the Learned CIT(A) who has dismissed the appeal without considering the submission of the assessee. A copy of written submission made before the Learned CIT(A) is available on paper book page no. 18 to 124. Aggrieved with the order of the Learned CIT(A) the assessee has preferred appeal before your honor. With this background the individual grounds of appeal are taken as under: -

Ground no. 1 :–
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in the passing the order u/s Kailash Chand Maheshwari vs. DCIT

144/153A of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed.
1. Facts of the case: -
A search u/s 132 was conducted at the business and residential premises of the assessee on 28.07.2016. However no incriminating documents or loose papers or any material was found. No surrender of undisclosed income was made pertaining to the year under consideration in the hands of the assessee. Even in the assessment order there is no reference to any seized paper/incriminating material relating to the year under consideration seized from the possession of the assessee or from the business or residential premises of the assessee. Additions have not been made on the basis of any seized paper from the assessee which relate to the year under consideration. The sum and substance of the submission is that during the course of search no incriminating material was found from the residence of the assessee which related to the year under consideration and which indicated any suppressed or undisclosed income.
It is further submitted that in this case as on the date of search, i.e. 28/07/2016, no assessment was pending for the assessment year 2015-16. For assessment year
2015-16 return has been filed only in compliance of notice u/s 153A on 23.10.2018
declaring income of Rs. 11,93,430/-. Copy of the same is available on paper book cited supra.NO notice u/s 148/142(1) was issued as such, there was no pendency of any assessment proceedings for assessment year 2015-16. The assessee had not filed any return of income u/s 139(1), which fact is also verifiable from para 4 of the assessment order. In this para, the Learned Assessing Officer has mentioned that "it is worthwhile to mention here that the assessee failed to furnish return of income u/s 139(1) of the IT Act." These facts establish that as on the date of search on 28/7/2016, no assessment was pending, as such, none abated so far as assessment year 2015-16 is concerned. In view of this, as per settled position of law up to the stage of Apex Court, additions were required only with reference to incriminating material found and seized during the course of search. Since no incriminating material was found and seized during the course of search, hence no additions were warranted in the case of the assessee. The Learned Assessing
Officer has erred in making the following additions without reference to any seized material.
(i) Addition of Rs. 94,77,000/- u/s 68 of the Income Tax Act, 1961 on account of alleged unexplained cash deposits in the bank accounts.
(ii) Addition of Rs. 2,00,000/- u/s 68 of the Income Tax Act, 1961 by not accepting the agriculture income shown by the assessee in his return of income.
(iii)
Addition of Rs. 87,84,862/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra
Prakash Agarwal on alleged cash loan obtained of Rs. 20,00,00,000/- as per papers found and seized during the course of search in the case of Chandra
Addition of Rs. 51,11,569/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra Mohan
Badaya on alleged cash loan obtained of Rs. 2,28,87,000/- on the basis of Exhibit 4
of Annexure AS found and seized during the course of search from the residence of Shri Chandra Mohan Badaya.
(v) Addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax Act, 1961 on the basis of post dated cheques found during the course of survey u/s 133A at the business premises of M/s Shrei Ram Enterprises, 881, Panchgali, Sonkhiyon Ka Rasta,
Kishanpole Bazar, Jaipur.
(vi)
Addition of Rs. 5,47,150/- u/s 57(iii) of the Income Tax Act, 1961 on account of disallowance of interest expenditure.
(vii)
Addition of Rs. 17,02,666/- on account of undisclosed brokerage income and on-money on sale of plots of Rajhans Cooperative Housing Society on the basis of papers impounded during the course of survey u/s 133A at Kuber
Properties and Developers.
(viii)
Addition of Rs. 10,00,000/- on account of marriage expenses of his niece
Sonam during the year under consideration without any material or evidence found during the course of search simply on the basis of statement u/s 132(4).
It is submitted that during the course of search, no incriminating material was found either with reference to the deposits in bank or with reference to the agricultural income or with reference to other additions. In view of this, by making additions on these grounds, the Learned Assessing Officer travelled beyond his juri iction. The Hon'ble Supreme Court in their latest decision in the case of PCIT Central-3 Vs.
Abhisar Buildwell P. Ltd (454 ITR 212) dated 24/04/2023, has held as under :-
".. in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961."
In view of the aforesaid decision, it is clear that in case of unabated assessment, no addition can be made by the Learned Assessing Officer in the absence of any incriminating material found during the course of search. In the case of the assessee, assessment for the ASSESSMENT YEAR 2015-16 was not pending, as such, it was unabated and hence, other additions were possible only if additions were made on the basis of incriminating material found during search. Since no incriminating material was found and none has been referred to in the assessment order, the Learned Assessing Officer was precluded in making any other additions with reference to the deposits in bank and agricultural income etc. The additions made by the Learned Assessing Officer deserve to be deleted.
However, the submissions made before the Learned CIT(A) have gone unappreciated. The Learned CIT(A) has on the other hand acted on hypothetical
Kailash Chand Maheshwari vs. DCIT basis. In para 4.5 it has been observed by the Learned CIT(A) that the time to file the return of income was still pending as on the date of search i.e. on 28.07.2016. It is the case of the Learned CIT(A) that in view of this position the assessment for the assessment year 2015-16 stood abated ,the revenue was competent in making addition on any issue including those not related to incriminating material. In other words the Learned CIT(A) has justified the additions made by the Learned
Assessing Officer which are not related to any incriminating material found during search. The finding of the Learned CIT(A) is unlawful, erroneous and unjust.
It is submitted that it is purely on the presumption basis the Learned CIT(A) has observed that assessment for the assessment year 2015-16 stood abated. It is submitted that when no assessment proceedings were pending how could the assessment for assessment year 2015-16 can be termed as abated. The relevant provisions of section 153A regarding abatment are quoted below –
Assessment in case of search or requisition.
153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 but on or before the 31st day of March, 2021, the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years :
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years :
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate :
Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases 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
Kailash Chand Maheshwari vs. DCIT year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years:
Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless—
(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.—For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.
Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.
Explanation.—For the removal of doubts, it is hereby declared that,—
(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.
The perusal of the aforesaid provisions very clearly lay down that if on the date of initiation of search assessment or re-assessment relating to any assessment year is pending then the same shall ablate in the proceedings u/s 153A. In this case no assessment or re-assessment was pending. The action of the Learned CIT(A) is therefore most unjustified and unsupported by any judicial decision. In view of this the Hon'ble ITAT is requested to delete all additions not related to search material.
2. It is further submitted that the Learned Assessing Officer has also erred in making addition of Rs. 87,84,862/- on the basis of papers found and seized during the course of search in the case of Shri Chandra Prakash Agarwal. For considering incriminating material found and seized from other person, the assessment was required following the procedure laid down u/s 153C. The material seized from other persons could not have been considered u/s 153A. Therefore, the addition made of Rs. 87,84,862/- on the basis of papers found and seized from the residence of Shri Chandra Prakash Agarwal are most unjustified and deserve to be deleted.
Similarly, addition of Rs. 51,11,569/- has been made on the basis of material found and seized during the course of search at the residence of Shri Chandra
Mohan Badaya. For considering incriminating material found and seized from other person, the assessment was required to be completed following the procedure laid down u/s 153C. The same could not have been considered u/s 153A.
The Learned. Assessing Officer has also erred in making addition fo Rs.
1,00,00,000/- on the basis of survey u/s 133A in the case of Shri Ram Enterprises.
The material is not seized as a result of search in the case of the assessee. Hence, the same was outside the purview of Sec. 153A. Similar is the position of addition of Rs.1702666/- made on the basis of survey u/s 133A at Kuber Properties and Developers. The material seized during the course of survey cannot be considered u/s 153A when there is no addition on the basis of seized material found and seized from the assessee.
The Learned Assessing Officer has also made other additions which are also not based on incriminating material found during the course of search in the case of the assessee, hence, the same also deserve to be deleted. The assessee repeats and reiterates that no incriminating material was found during the course of search in the case of the assessee. This assertion of the assessee remains uncontroverted by the revenue both at the level of the Learned Assessing Officer as well as at the stage of the Learned CIT(A) and hence, no additions could have been made in the case of the assessee with reference to any other material found during survey u/s 133A or found during the course of search in the case of other persons.
The position regarding addition on account of deposits in the bank of Rs.
94,77,000/- is no different. No paper was found or seized pertaining to deposits in bank, hence these also go outside the purview of section 153A.

(v) SATISH KUMAR vs. INCOME TAX OFFICER IN THE ITAT JALANDHAR (2019)
175 DTR 0121 (Asr)(Trib), (2019) 198 TTJ 0114 (Asr)
A bank statement cannot be considered to be a 'book' maintained by assessee for any PY, as understood for purpose of s. 68. In view of the ratio of the aforesaid decisions it is established beyond doubt that bank pass book is not books of accounts so far as provisions of section 68 are concerned. In view of this addition made in respect of bank deposits invoking provision of section 68 are unlawful and deserve to be deleted.
2. Deposits in bank account are fully explained -
During the course of assessment proceedings the Learned Assessing Officer has observed that the assessee deposited cash of Rs. 94,77,000/- in his bank accounts during the year under consideration and he has not produced any explanation regarding the cash deposits. Hence an addition of Rs. 94,77,000/- has been made by the learned AO. The relevant para 7.2 of the assessment order appearing on Page 4-5 is reproduced below :-
"On perusal of the information available in ITS data and bank statement called u/s 133(6) of IT Act, vide letter dated 02/08/2018, it is found that the assessee has deposited huge cash on regular basis in his saving bank accounts maintained in UCO Bank, Rajat Path, Mansarovar, Jaipur and ICICI Bank, Gopalpura Byepass,
Jaipur, the details of the same is summarized as under :-
S.No AY
Cash deposited in UCO Bank account,
Rajat Path,
Mansarovar
Jaipur
Cash deposited in ICICI
Bank,
Gopalpur a Byepass
Total
1
2011-12
42,20,000
--
42,20,000
2
2012-13
27,69,000
--
27,69,000
3
2013-14
46,30,500
--
46,30,500
4
2014-15
9413000
3580000
1,23,93,000
5
2015-16
7584000
1892500
94,77,000
6
2016-17
3773000
1717000
54,90,000

Since the assessee has not submitted any details/document in compliance to various statutory notices issued as discussed above which clearly shows that assessee has nothing to explain. Therefore the cash deposited in the above bank accounts during various years remains unexplained cash credit in the hands of the assessee. Accordingly, unexplained cash credit during the year amounting to Rs.94,77,000/- is added back to the total income of the assessee u/s 68 of the IT Act and taxed at the rate of 30% as per provisions u/s 115BBE."
In this regard it is submitted that the assessee is a senior citizen suffering with various types of diseases. The assessment was completed u/s 144 of the Income
Tax Act, 1961. The assesse could not submit his explanation due to his health problem. Copy of bank statements was there in the possession of AO and he could
Kailash Chand Maheshwari vs. DCIT verify the contention of the assesse that the withdrawal were made from the same bank account which were deposited in the same bank account. This submission was not considered by the learned Assessing Officer. The assesse has submitted copy of bank statement which is also available on paper book page no. 6-17. It is clear from the bank statement that the assesse has deposited cash out of earlier withdrawals made from the same account. The bank account was also available with the Learned AO. Before making addition he has not considered the earlier cash withdrawal from the same bank. The Learned Assessing Officer should have given benefit of additions made on the same ground in the earlier years. The case of the assessee is that the bank deposits continued to revolve around and around. The amount was withdrawn in cash and same was re-deposited in the bank account.
The cash deposits made in this account were not unexplained but re-deposits out of the previous withdrawals. The A.O. has not considered the fact of withdrawal of cash from the same account and has merely made the addition on the basis of entries of deposit of cash. Further, before making the addition the Learned
Assessing Officer has not provided the working of deposits in cash of Rs.
75,84,000/- in UCO Bank and Rs. 18,92,500/- in ICICI Bank. The cash deposits in bank account do not tally with the version of the Learned Assessing Officer.
Further, the Learned Assessing Officer has not given any reason in not giving the benefit of withdrawals from the same account and just before few days of the re- deposit. The Learned Assessing Officer has made addition as if he was head-bent in making the additions. The additions made are totally uncalled for and deserve to be deleted both on the grounds of law as well as on facts. The assessee is a real estate dealer and broker, therefore, he has to keep cash in hand always to grab the property transaction as a broker. But immediate after maturing deal or failure he again redeposited the same amount in bank account. Therefore, the amount deposited in bank account is fully explained and the addition made by the AO deserves to be deleted.
It is further submitted that the assessee is doing business of brokerage of sale and purchase of properties. In connection with his business sometimes money is received on behalf of the buyer and the same is transferred to the seller. The assessee is not concerned in any way except earning brokering of such transaction.
This can be illustrated as under: -
UCO Bank A/c No. 07930110002445
The assessee earned only commission which is maximum 2% of the transaction.
The assessee has already disclosed income from brokerage in the partnership firm
Brandavan Colonizers where the assessee has 10% share. From this firm assessee has earned remuneration of Rs. 4,00,000/- and interest income of Rs. 4,43,206/- and also exempt income as profit from firm of Rs. 42,662/-. However, assessee offers 2% of Rs. 94,77,000/- (bank deposits) as brokerage from sale and purchase and property. This results in income of Rs. 1,89,540/-. The assessee is surrendering this income as a matter of purchase of peace and to avoid costly litigation with the mighty department. The Hon'ble Tribunal is requested to kindly accept the same and restrict the addition to Rs. 1,89,540/- as against Rs. 94,77,000/-. To support the submission of the assessee the following case is quoted-
3. Application of provisions of section 69A –
On page 39 para 13 of the appellate order the Learned CIT(A) has observed in a passing manner that cash deposited in the bank accounts are alternately taxable u/s 69A of the Income Tax Act, 1961. In this regard it is submitted that the action of the Learned CIT(A) is not in accordance with law. The Learned CIT(A) is not competent to change the sections applied by the Learned Assessing Officer and it could not have been done without providing an opportunity to the assessee for putting his defense in the matter.
4. Case laws quoted by the Learned CIT(A) –
The Learned CIT(A) has quoted a number of decisions of various courts which have made the appellate order bulky and clumsy. Most of the decisions are irrelevant and not applicable to the facts of the case of the assessee. The details of such cases are as under –
Sr.
No.
Citation
Remarks
1
CIT v. RS. Rathore[1995] 212
ITR 390 (Raj.).
The case does not pertain to deposits in the bank
2
CIT v. M.Ganapathi Mudaliar
[1964] 53 ITR 623 (SC), A.
Govindarajulu Mudaliar v. CIT
[1958] 34 ITR 807 (SC).
Commissioner of Income Tax in ITA No. 2333/Mum/2018
The case does not pertain to deposits in the bank.
5
Durai Murugan Kathir Anand v.
Additional
Commissioner of Income-tax
[2022]
136
taxmann.com
70
(Madras)/[2022] 443 ITR 423
(Madras)[25-02-2022]
The case does not pertain to deposits in the bank. It is a case of recovery of cash at home during election.
Additions were made us/ 69A not section 68. 6
Vivek N. Jajodia v. Income-tax
Officer,
16(2)(2),
Mumbai[2011] 10 ITR(T) 581
(Mumbai)/[2010] 123 ITD 136
(Mumbai)/[2010] 134 TTJ 806
(Mumbai)[23-01-2009]
It is regarding gift received by the assessee from foreign persons. The case does not pertain to deposits in the bank.
7
Konathala Nooku Naidu v.
Income-tax
Officer,
Ward-1
[2024] 160 taxmann.com 758
(Visakhapatnam - Trib.)[18-03-
2024] [I.T.A. No.269/Viz/2023],
Appeal No. 175 / 2012 in order dated 03/10/2017
It relates to deposits in bank in a distant place and hence these were rejected.
9
Commissioner of Income-tax v.
Devi
Prasad
Vishwanath
[1969] 72 ITR 194 (SC)[01-08-
1968
It does not relates to deposits in cash in bank.
10
Roshan
Di
Hatti v.
Commissioner of Income-tax
[1977] 107 ITR 938 (SC)[08-
03- 1977]
It does not relates to deposits in cash in bank.
11
Commissioner of Income-tax v.
[1969] 72 ITR 194 (SC)[01-08-
1968]
bank.
12
Navin
Shantilal
Mehta v.
Income-tax Officer, Ward-32
(2) (4), Mumbai [2018] 90
taxmann.com 16 (Mumbai -
Trib.)
It does not relates to deposits in cash in bank.
13
Sumati Dayal v. Commissioner of Income-tax
[1995]
80
Taxman 89 (SC)/[1995] 214
ITR 801 (SC)/[1995] 125 CTR
124 (SC)[28-03- 1995] a It is in respect of settlement commission which was seized with the issue of winning of lottery.
It does not relates to deposits in cash in bank.

It is submitted that the Learned CIT(A) in his zeal has quoted many cases again and again. This shows the bent of mind of the Learned CIT(A) that he was stubborn in upholding the additions in the case of the assessee. The case laws quoted by him are not applicable even distantly. The Learned CIT(A) has failed to consider the background of the assessee that he was a broker doing business of sale and purchase of property. In view of the above facts the Hon'ble ITAT is humbly requested to restrict the addition to Rs. 189540/- as against Rs. 94,77,000/-.
Ground No. 3 -
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 2,00,000/- u/s 68 of the Income Tax Act, 1961 by not accepting the agriculture income shown by the assessee in his return of income.
In this regard assessee considers it suffice to quote the submissions made before the Learned CIT(A) which is as under: -
"The Learned Assessing Officer has made addition treating the agricultural income shown by the assessee as unexplained income u/s 68 of the IT Act. In this regard, it is submitted that the Learned Assessing Officer has erred in applying the provisions of Sec. 68. The provisions of Sec. 68 are applicable only in a case where the credit entries are found in the books of account maintained by the assessee. In the case of the assessee, no books of accounts were maintained for the year under consideration. As such, the question of making addition invoking the provisions of Sec. 68 did not arise. The provisions of Sec. 68 are quoted below :-
”Cash credits.
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and Kailash Chand Maheshwari vs. DCIT source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:
It is submitted that the Hon'ble Supreme Court of India has held as under in the case of CIT Vs. P. Mohanakala (2007) 291 ITR 278 that the provisions of Sec. 68
stipulates as under and shall be applicable on fulfilling the following conditions :-
(i)
There has to be a credit entry in the books of accounts of the assessee ;
(ii)
The books of account have to be of the previous year ;
(iii)
No explanation is submitted or explanation furnished is not found satisfactory.

In the case of the assessee, the provisions of Sec. 68 are not applicable because for the relevant assessment year, no books of account were maintained by the assessee. In view of this, there were no credit entries in the books of accounts which could have been considered by the Learned Assessing Officer. It is also relevant to add that in the para 7.3 of the assessment order, which is related to addition u/s 68 in respect of agricultural income, the Learned Assessing Officer has also not referred that the credit entries in the books of accounts of the assessee were unexplained. The Learned Assessing Officer is directly referring to the return of income of the assessee.
In view of the aforesaid submissions, the Learned Assessing Officer erred in making the addition invoking the provisions of Section 68. The same deserves to be deleted.
Agricultural income is fully justified
The assessee is owner of 60 bigha irrigated land. The assessee has shown agriculture income of Rs. 2,00,000/- for the year under consideration. The same is extremely reasonable. It works out to Rs. 3000 and odd per bigha per annum. But the learned AO has not accepted the agriculture income by stating that assessee furnished copy of Girdawari report of vikram sumvat 2067 to 2071 but failed to produced any evidence in respect of expenditure incurred on agricultural activities like labour wages, seeds, fertilizers, electricity. The Learned Assessing Officer has further mentioned that the assessee also failed to furnish any documentary evidence of sale of agricultural product including the detail of crop sold and where and to whom the same was sold.
It is submitted that action of the Learned Assessing Officer is most unjustified in rejecting the agricultural income. The addition has been made on the basis of assumption, presumption and conjectures. Once the assessee had furnished khasra girdawari, it was incumbent up on the Learned Assessing Officer to have caused field inquiries to ascertain whether the agricultural land was yielding income or not. In the absence of any inquiry, the Learned Assessing Officer was precluded in treating the agricultural income as non-agricultural income. In fact, the income disclosed at Rs. 2 lac against 60 bighas of agricultural land is too meagre. In this Kailash Chand Maheshwari vs. DCIT regard it is submitted that in Girdawari report it has specifically been mentioned by the patwari that assessee grown wheat, jao, sarso, til etc. The assessee is living in a village and he has not maintained any record/bills for purchase of seeds, fertilizers etc. In 60 bigha irrigated land the assesse has shown very normal income which deserves to be accepted and addition made by learned AO on this account deserves to be deleted."
The Learned CIT(A) failed to appreciate the submission of the assessee in as much as provisions of section 68 are not applicable as no books of accounts are maintained by the assessee. The income from agriculture has been disclosed by the assessee in computation only. The receipt of Agriculture income is from 60
bighas of agriculture land. The income disclosed by the assessee is rather on lower side. The same should have been accepted by the Learned CIT(A) without a murmur. The Hon'ble ITAT is requested to delete the additions.
Ground No. 4 -
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 87,84,862/- u/s 69C of the Income Tax Act, 1961 on account of alleged unexplained expenditure of interest paid to Shri Chandra
Prakash Agarwal on alleged cash loan obtained of Rs. 20,00,00,000/-.
In the above regard it is submitted that during the course of appellate proceedings the assessee has made the detailed submission, copy of which is available on paper book page cited surpa. The major issues raised before the Learned CIT(A) in respect of the above addition are briefly mentioned as under –
(i) The addition has been made with reference to documents and papers found and seized as per Annexure-A exhibit-12 from the residence of Shri Chandra Prakash
Agarwal where a search had taken place on 28.07.2016. The addition is not based on any incriminating material or paper found and seized from the possession of the assessee. Obviously the incriminating material seized from Shri Chandra Prakash
Agarwal required to be considered u/s 153C. The same could not have been considered u/s 153A. In support of this citations were also quoted. The Learned
Agarwal pertained and belonged to the assessee and it had a bearing on the determination of the income of the assessee. Only after recording such satisfaction notice u/s 153A or 153C could have been issued. Such satisfaction is not available on record. The Learned CIT(A) has not appreciated the submission of the assessee. In the circumstances the assessment proceedings deserve to be quashed.
(iv)
It was also submitted before the Learned CIT(A) that in the case of the assessee a great prejudice was caused by not affording opportunities to the assessee in so far as in considering the seized material found from Shri Chandra
Prakash Agarwal. No copies of the documents found and seized from Shri Chandra
Prakash Agarwal were furnished to the assessee. Statement recorded u/s 132(4) of Shri Chandra Prakash Agarwal was not furnished to the assesseee. Further cross examination of Shri Chandra Prakash Agarwal was also not afforded. All this has caused a great prejudice to the assessee. The addition is exclusively based on paper found and seized from Shri Chandra Prakash Agarwal and also on his statement. The assessee could not furnishs a cogent defense in the absence of documents seized from Shri Chandra Prakash Agarwal having not being furnished to the assessee and cross examination of Shri Chandra Prakash Agarwal being not allowed. The Learned CIT(A) has simply stated that principles of natural justice always do not require affording opportunity to the assessee. The case laws quoted by him are totally not applicable to the facts of the case. It is a case of proven facts where great prejudice has been caused on account of violation of principles of natural justice. The assessee has quoted a number of decisions which the Learned
CIT(A) has not appreciated. It is submitted that the Learned CIT(A) failed to be pragmatic and real. His order is most formal rather than practical. He has avoided the crucial issues and the order passed by him smacks prejudice. The assessee further quotes latest decisions in favor of the assessee regarding principles of natural justice –

(i) PRINCIPAL COMMISSIONER OF INCOME TAX & ORS. vs. DSG PAPERS
PVT. LTD. & ORS. HIGH COURT OF PUNJAB & HARYANA ITA-38-2023 (O&M),
ITA-1-2023 (O&M), ITA-8-2023 (O&M), ITA-11-2023 (O&M), ITA-281-2022 (O&M)
Nov 9, 2023 (2024) 461 ITR 0004 (P&H),
10. The Apex Court in the said case while allowing the appeal had noticed that the Tribunal had rejected the plea of cross-examination that the statement of the dealer would not bring out any material which would not be in possession of the assessee.
The Apex Court went on to hold that by not allowing the cross-examination of 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 as it amounted to violation of principles of natural justice by which the assessee was adversely affected. The argument whether the cross-examination would be relevant was also rejected, on the ground that it is not for the Tribunal to have guess work regarding the purpose of the cross-examination of the dealers and what was to come from it and thus, the appeals were allowed. Apart from that it was Kailash Chand Maheshwari vs. DCIT also noticed that to discredit the testimony the opportunity of cross-examination was necessary. Accordingly, it was observed 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."
11. The Division Bench of the Delhi High Court in the case of Rajesh Kumar (supra) also has taken a similar view under the provisions of 1961 Act wherein the statements of one Maheshwari had been recorded wherein he had denied that he had nothing to do with the bank account from which the cheques were issued to the assessee. Resultantly, the order of the Tribunal had been upheld on the ground that the said person had not been cross-examined and no opportunity was granted by the Assessing Officer and there was violation of principles of natural justice.
12. Facts herein are similar as noticed above. A perusal of the order of Commissioner of Income Tax would go on to show the Commissioner had noticed that the Assessing Officer without bringing any record or evidence had made the addition on the basis of the statement of the third party which could not be considered as conclusive evidence. It is in such circumstances, we are of the considered opinion that the Tribunal has rightly interfered in the orders passed by the authorities below. Therefore, no question of law arises. Needless to say that the tax effect is also below the requisite limit, as per the circular of the Revenue.
(ii) T. Takano vs. Securities and Exchange Board of India & Anr (Civil Appeal Nos.
487-488 of 2022) Judgment dated 18.02.2022
A quasi-judicial authority has a duty to disclose the material that has been relied upon at the stage of adjudication; and (ii) An ipse dixit of the authority that it has not relied on certain material would not exempt it of its liability to disclose such material if it is relevant to and has a nexus to the action that is taken by the authority. In all Kailash Chand Maheshwari vs. DCIT reasonable probability, such material would have influenced the decision reached by the authority.
In view of the aforesaid facts the addition required to be deleted. The submission made in this regard before the Learned CIT(A) is also quoted below -

"The addition has been made by the Learned Assessing Officer observing as under in Para 7.4(A) on page 6 of the assessment order :-
"A search action u/s 132(1) of the IT Act was conducted at residential-cum- business premises of Shri Chandra Prakash Agarwal at 1756, Telipada, SMS
Highway, Choura Rasta, Jaipur, wherein some pages were found and seized as Annexure-A, Exhibit12. Page No.1, 2, 4 & 6 and 10. These papers contain details of work out of interest received against cash loan given by Shri Chandra Prakash
Agarwal to K.B. i.e. Shri Kailash Chand Maheshwari".
It is the case of the Learned Assessing Officer that assessee had obtained loan of Rs. 20,00,00,000/- in cash from Shri Chandra Prakash Agarwal. The amount of loan has been worked out on the basis of pages 1,2 4, 6, & 10 found and seized as per Annexure A, Exhibit 12 from the residence of Shri Chandra Prakash Agarwal,
1756, Telipada, SMS Highway, Choura Rasta, Jaipur on 28/07/2016. The Learned
Assessing Officer has observed that on this loan of Rs. 20,00,00,000/-, the assessee paid interest of Rs 87,84,862/- in cash, which has remained unexplained with reference to Sec. 69C. The addition made by the Learned Assessing Officer is unlawful, illegal and against the principles of equity and justice. The same is assailed as under :-
(a)
Procedure as per Sec. 153 C not followed
At the outset, it is submitted that the addition made by the Learned Assessing
Officer of Rs. 87,84,862/- on the basis of documents found and seized from the residence of Shri Chandra Prakash Agarwal is beyond the juri iction of Sec. 153A.
It is submitted that the incriminating material and documents found and seized from the residence of Shri Chandra Prakash Agarwal required to be considered as per provisions of Sec. 153C. The provisions of Sec. 153C are quoted below :-
153C. (1) 19[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 Kailash Chand Maheshwari vs. DCIT

Assessing Officer having juri iction over such other person] 20[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 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 juri iction 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 except in cases where any assessment or reassessment has abated.
The perusal of the aforesaid provisions of Sec. 153C stipulate as under :-
(i) Where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; 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 juri iction over such other person]
The above provisions lay down that it is only on the satisfaction of the Assessing
Officer of the searched person that the seized material or information pertains to some other person other than the searched person, the same shall be forwarded to the Assessing Officer of such other person. In this case, Chandra Prakash
Agarwal is the searched person. Therefore, the Assessing Officer of Shri Chandra
Prakash Agarwal was required to record his satisfaction that the seized documents from his residence contained information relating to the assessee. No such satisfaction is mentioned in the assessment proceedings by the Learned Assessing
Officer and, hence the violation of provisions of Sec. 153C. The Courts have held that recording of satisfaction of the Assessing Officer of the searched person is a statutory obligation and not a paper formality. In the absence of recording of satisfaction of the Assessing Officer of the searched person, the information could not have been handed over to the Assessing Officer of the such other person. The following case laws are quoted in support:-
(i) PR. COMMISSIONER OF INCOME TAX & ORS. vs. NIKKI DRUGS &
HEMICALS PVT. LTD. & ORS.HIGH COURT OF DELHI 386 ITR
0680 (Delhi), (2016) 236 TAXMAN 0305 (Delhi)
The Hon'bleCourt held that the first step for initiation of proceedings under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, he is required to transfer the assets or documents, which he believes belongs to the assessee, to the assessing officer having juri iction over that assessee. The assessing officer of the assessee on receipt of such asset or document seized would have juri iction to commence proceedings under Section 153C of the Act. The assessing officer has, thereafter, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the Assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act.
It is settled that recording of such satisfaction is sine qua non for commencing any proceedings under Section 153C of the Act. Thus, the decision of the ITAT in this regard cannot be faulted. It was sought to be contended that the assessing officer of the searched persons had, in fact, recorded the necessary satisfaction note.
However, the learned counsel for the Revenue could not confirm whether such note was prepared prior to the initiation of the proceedings under section 153C of the Act. The Assessee’s contention that despite its request such note had not been disclosed during the assessment proceedings has also not been controverted. In the circumstances, the categorical finding of the ITAT that it was an admitted fact that the assessing officer of the searched persons had not recorded a satisfaction note, cannot be interfered with.

(ii) Commissioner of Income Tax v. Gopi Apartments: Allahabad High Court (2014)
365 ITR 411 (All.)
The Hon'ble Court held that that even in cases where the assessing officer of the person searched and the assessee who is sought to be assessed under Section 153C is the same, the assessing officer is required to record his satisfaction that the assets/ documents seized belong to a person (the assessee) other than the searched person.
(iii)
The Hon'ble Court held that where the Assessing Officer of the searched person has not recorded any satisfaction before transferring case records to the Assessing
The Hon'ble Court held that "On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be “satisfied” that inter alia any document seized or requisitioned “belongs to” a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having juri iction over such other person (other than the searched person).
Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person.
The second step is – after such satisfaction is arrived at – that the document is handed over to the Assessing Officer of the person to whom the said document
“belongs”. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person.
It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or “satisfaction” that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of “satisfaction”.

(v) PCIT Vs. NS Software(firm)(2018) Delhi High Court 93 taxmann.com 21/255
The Hon'ble Court held that recording of satisfaction was sine qua non for commencing any proceedings u/s 153C—AO had not explained steps taken by him to determine that seized material belonged to Assessee Firm—Satisfaction note was prepared in standard mechanical format and it did not provide any details about books of accounts which allegedly belonged to Assessee Firm—AO’s note nowhere reflected whether any document seized, on application of his mind, disclosed that it belonged to assessee and if so, its prima facie nature—Whilst AO of searched party
Kailash Chand Maheshwari vs. DCIT and individual u/s 153C might be same, nevertheless at stage of sending notice u/s 153C, AO had to record specific reason or reasons why material seized from other person had nexus to assesse, to whom notice under that provision was addressed—Failure of AO to record specific satisfaction as to how recovered material belonged to assessee in note that preceded notice issued under it, vitiated assessments—Since satisfaction in terms of Section 153C(1) was clearly inadequate, assessment completed for these years was also invalid—Revenue’s appeal dismissed.
(vi)
The Hon'ble Court held that it is evident that when no satisfaction was recorded then the requirement of Section 153C was not satisfied. Therefore, High Court have no reason to interfere with the impugned order passed by the Tribunal, who has not sustained the proceedings under Section 153C of the Act, for the reason that there was no satisfaction at any stage.
(II)The provisions further stipulate that the Assessing Officer of the such other person shall proceed on receipt of incriminating material/information from the Assessing Officer of the searched person in accordance with the provisions of Sec.
153C only if the Assessing Officer of the such other person 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. In this case, the other person is the assessee. Therefore, the Assessing Officer of the assessee was required to record a finding that the material and information received from the Assessing Officer of the searched person has a bearing on the determination of the income of the assessee. Recording of such satisfaction is not available in the case of the assessee. In view of this, the entire proceedings of considering the seized material found and seized in the case of search of Shri Chandra Prakash Agarwal in the case of the assessee is unlawful, illegal and unjustified. The case laws cited above are applicable on this issue also.
(iii)
The aforesaid provisions of Sec. 153C very clearly stipulate that in the case of search if incriminating material or information is found relating to other person, then action is required as per procedure laid down u/s 153C. The assessment proceedings area required to be initiated with the issuance of notice u/s 153C and not notice u/s 153A. In the case of the assessee, the material found was in the case of search of Shri Chandra Prakash Agarwal, as such, the material found relating to the assessee could be used in the case of the assessee following the procedure laid down under section 153 C as discussed above. Search material and information found and seized in the case of Chandra Prakash Agarwal relating to the assessee could not be used in the hands of the assessee u/s 153A. Therefore, the addition made in the case of the assessee of Rs. 87,84,862/- on the basis of material/information emanated out of search in the case of Shri Chandra Prakash
Agarwal is totally misplaced. No such addition could have been made u/s 153 A.
The Learned Assessing Officer was required to follow the procedure laid down u/s Kailash Chand Maheshwari vs. DCIT

153C, which has not been done. In support, the following case-laws are quoted below :-

(i) Trilok Chand Chaudhary Vs. ACIT ITA No.5870/Del/2017 ITAT, Delhi Bench G,
New Delhi Date of order : 20/09/2019

The Hon'ble Tribunal has held as under :-

"The Act has provided separate provisions for making assessment in case of material found in the course of the search from the premises of the assessee as well as the material found in the course of search at the premises of the third party.
The Assessing Officer is required to follow the procedure laid down in the Act for making the assessment and he cannot devise his own procedure for shortcut methods. In our considered opinion, when the case of the assessee is covered under the provision of section 153 of the Act and if reliance is placed on the incriminating material found during the course of search of third-party, then provision of section 153C of the Act would be applicable and have to be adhered to.
Thus, in the instant case, the Assessing Officer was required to first complete the proceedings under section 153A in hand, which were initiated by way of notice dated 30/06/2014 and thereafter, he was at liberty to take action under section 153C of the Act for bringing the material found from the premise of Sh. Ashok
Chaudhri to tax in the hands of the assessee."
(i) Lalit Mahajan, Shivali Mahajan Vs. DCIT ITA
No.5585&5586/Del/2015
ITAT
Bench C, New Delhi Date of order : 19/03/2019

"From a reading of the above decisions of Hon'ble Juri ictional High Court, it is evident that completed assessment can be interfered with by the Assessing Officer on the basis of any incriminating material unearthed during the course of search. If in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that year in exercise of power under Section 153 of the Act. Obviously, the reference to the incriminating material in the above decisions of Hon'ble Juri ictional High Court is in regard to incriminating material found as a result of search of the assessee's premises and not of any other assessee. The legislature has provided Section 153C by invoking the same the Revenue can utilize the incriminating material found in the case of search of any other person to the different assessee. Section 153C is reproduced below for ready reference :- "Assessment of income of any other person. 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,
13 ITA-5585/Del/2015 & 11 others a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or Kailash Chand Maheshwari vs. DCIT requisitioned shall be handed over to the Shri Lalit Mahajan, New Delhi vs Dcit,
New
Delhi on 19
March,
2019
Indian
Kanoon
- http://indiankanoon.org/doc/126126799/ 10 Assessing Officer having juri iction 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]:]."
15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We, respectfully following the above decisions of Hon'ble Juri ictional High Court, hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person. "

(ii)
Krishna Kumar Singhania Vs. DCIT IT(SS)A No.105/Kol ITAT, C Bench,
Kolkata
Date of order : 06/12/2017

"Para 10. 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 ld AO on this seized document. The seized document used by the ld AO for making www.taxguru.in 10 IT(SS)A Nos.109 & 110 /Kol/2017 IT(SS)A No.105/ Kol/2017 IT (SS)A No.104/Kol/2017 IT(SS)A Nos. 111& 112/Kol/2017
IT(SS) A Nos. 107 & 108 /Kol /2017 IT(SS)A No. 106/Kol/2017 Krishna Kumar
Singhania, Ajay Kumar Singhania, Kasak Singhania, Nirmala Devi Singhania,Vijay
Kumar Singhania, Ruchi Singhania Asst. Years: 2009-10 & 2012-13 10 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 Kailash Chand Maheshwari vs. DCIT person on whom presumption is drawn , has got every right to state that the said documents does not belong to him / them . The ld 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 vs Pinaki Misra and Sangeeta Misra reported in (2017) 392 ITR 347 (Del) dated 3.3.2017, 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."

(iii)
PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) & ORS. vs.
ANAND KUMAR JAIN (HUF) & ORS. HIGH COURT OF DELHI 201 DTR 0200
(Del), (2021) 320 CTR 0656 (Del), (2021) 432 ITR 0384 (Delhi),Date or order :
12/02/2021

The Hon'ble Court held as under :-
"As per mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then only legal recourse available to department was to proceed in terms of Section 153C by handing over same to AO who has juri iction over such person—Here, assessment has been framed under section 153A on basis of alleged incriminating material (being statement recorded under 132(4)— Assessee had no opportunity to cross-examine said witness, but that apart, mandatory procedure under section 153C has not been followed—On this count alone, there is no perversity in view taken by ITAT.

CONCLUSION

In view of the aforesaid discussion and case-laws, it is obvious that the addition made by the Learned Assessing Officer of Rs. 87,84,862/- is unlawful as the procedure u/s 153C has not been followed. The addition, therefore, deserves to be deleted.

(b)
Principles of natural justice violated
It is further submitted that the Learned Assessing Officer has made the addition of Rs. 87,84,862/- in violation of the principles of equity and justice inasmuch as Kailash Chand Maheshwari vs. DCIT

(i)
Copy of papers seized from the residence of Chandra Prakash Agarwal were not furnished
(ii)
Copy of statement recorded u/s 132(4) of the assessee was not furnished
(iii) Cross-examination not allowed of Shri Chandra Prakash Agarwal
(iv) Cross examination not allowed of the assessee
The above violations of the principles of natural justice vitiate the assessment proceedings. It is settled principle of law that material/statement gathered by the Learned Assessing Officer have to be disclosed to the assessee before the same are put to use in the assessment proceedings. In this case, the Learned Assessing
Officer did not provide copies of the seized papers from the residence of Shri
Chandra Prakash Agarwal. The assessee was also not allowed cross-examination of Shri Chandra Prakash Agarwal. In view of this, it is submitted that the addition deserves to be deleted. The assessee reiterates that the main plea of the assessee is that the material found and seized in the case of search of Shri Chandra Prakash
Agarwal could not be put to use in assessment u/s 153A and the ld Assessing
Officer was under statutory obligation to follow the mandate of the provisions of Sec. 153C.
Regarding the violation of principles of natural justice, the following case-laws are quoted in support :-

(1)
(Hon’ble Madras High Court)
The Hon’ble High Court observed that when the assessee was not given proper opportunity to submit their reply and there is violation of principles of natural justice and, therefore, assessment orders are quashed.
(2)Addl. ITO Vs. Ponkunnam Traders (1976) 0366 102 ITR 0366 (Hon’ble Kerala
High Court)
The Hon’ble High Court held that the ITO should have given an opportunity to the assessee as to what materials he proposed to use against it to make the best judgment assessment. The assessment made without giving opportunity was bad in law.
(3)Commissioner of Income tax Vs, Shamlal (1981) 127 ITR 0816 (Hon’ble P&H
High Court)
The Hon’ble High Court affirmed the action of the ITAT in annulling the assessment made in violation of principles of natural justice.
(4)
The Hon’ble Supreme Court held that an assessee should be asked to show-cause as to why he should not be visited with higher tax before sucy levy. He must be given an opportunity of meeting those grounds. This is a requirement of the principles of natural justice.
(5)AK Kraipuk Vs. Union of India (1969) 2 SCC 262 (Hon’ble Supreme Court)

The Hon’ble Supreme has observed that the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. The said rules are means to an end and not an end in themselves and though it is not possible to make an exhaustive cataqlogue of such rules however it can be readily said that there was two basic maxims of natural justice namely "audi alteram partem" and "nemo judex" in re sua".

(6) Tin Box Company Vs. Commissioner of Income- tax (2001) 249 ITR 216

The Hon’ble Supreme Court observed that the assessment should not have been completed without providing reasonable opportunity to the assessee. The Hon’ble
The Apex Court has observed that not allowing cross examination is a serious flaw and makes the order nullity. The Hon'ble Court held that “not allowing the assessee to cross examine the witness 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 in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected.

(8)COMMISSIONER OF INCOME TAX vs. BIJU PATNAIK HIGH COURT OF ORISSA 190 ITR 0396

Although answers can be recorded either in favour of the Department or against it, ultimately each answer would again become inconclusive on account of the final findings of fact of the Tribunal that ITO has not given reasonable opportunity to the assessee to rebut the statements recorded ex parte under s. 131 of the Act and to furnish explanation to some of the materials. It is true that Tribunal has not given due weight to the relevant and admissible evidence while recording the findings of fact. However, the findings of the Tribunal on such fact are also vulnerable as they may require reconsideration. If answers in respect of each of the questions are Kailash Chand Maheshwari vs. DCIT indicated in the absence of reasonable opportunity being afforded to the assessee, they would be of academic interest inasmuch as the answers against the assessee would become vulnerable on account of the need to undo the absence or reasonable opportunity. A clear and conclusive finding binding on the parties can be given only after reasonable opportunity is given to the assessee as found by the Tribunal. No answer should be given in advisory juri iction which would not finally decide the issue since final finding can be arrived at only after giving reasonable opportunity to the assessee and explanation given by the assessee would have material bearing on the finding. It is necessary that the Assessing Officer gives opportunity to the assessee. Tribunal has not considered the evidence in its proper perspective while rendering the decision in appeal and accordingly, the findings of the Tribunal are vitiated in law. As the final fact-finding forum, the Tribunal has to consider the same again. Since Tribunal has recorded a finding that reasonable opportunity has not been given to the assessee to give rebuttal evidence and explanation, this can effectively be done by the Assessing Officer. The reference applications are disposed of as above leaving it to the Tribunal to pass consequential orders.

(9)PRAKASH CHAND NAHTA vs. COMMISSIONER OF INCOME TAX (HIGH
COURT OF MADHYA PRADESH) (2008) 301 ITR 0134 :

Assessment—Validity—Opportunity of being heard vis-a-vis statements of third party—Unaccounted silver ornaments and utensils were found and seized during the search at the assessee’s premises—Assessee explained that the said silver items were purchased from one R & Co.—AO made addition to the income of the assessee after recording the statement of M, proprietor of R & Co., behind the back of the assessee—Not justified—AO has heavily relied upon the statement of M and has ignored the subsequent affidavit filed by M which is in variance of his original statement—Since the statement of M was used against the assessee and an affidavit was filed controverting the same, it was obligatory on the part of the AO to allow the prayer of assessee for cross-examination of M—AO having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee—Therefore, the assessment order is vitiated

(10)
Opportunity of being heard—During search of one R, key of bank locker along with two packets containing six promissory notes were recovered—Out of those six promissory notes, one was in the sum of Rs. 8,78,358 executed by one K in the capacity of partner of firm DCI—In his statement recorded during search, R stated that the key of locker and the two envelopes were handed over to him by the Kailash Chand Maheshwari vs. DCIT assessee—K also admitted in his statement recorded on the same day at 2.00 AM midnight that he had executed the pronote and signed it on behalf of DCI after obtaining a sum of Rs. 8,78,358—Later, K filed an affidavit that his statement was recorded at late hours in the night under coercion and pressure—Subsequently, K along with two other partners of DCI, made a voluntary disclosure of a sum of Rs.
11 lacs including the amount of Rs. 8,78,358 and same was assessed in the hands of the three partners—Relying on the statement of R and the retracted statement of K, AO made addition of Rs. 8,78,358 under s. 68 in the hands of assessee also and the same was confirmed by CIT(A) and Tribunal—Not justified—Apparently, there was a violation of principles of natural justice as the statement of one of the important witnesses, namely, R on which heavy reliance was placed by the AO is neither referred to in the assessment order nor copy thereof was given to the assessee nor the assessee was given an opportunity of cross-examining the said
R—Authorities could not be absolved from doing so on the ground that the facts stated by R were admitted by the assessee—K had not only retracted his earlier statement but also made a voluntary disclosure, along with two other partners of DCI, in the sum of Rs. 11 lacs which included the amount of pronote of Rs.
8,78,358—Legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, is that if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice—
Assessee showing a gross profit rate of 5.2%—Revenue being of the opinion that assessee inflated purchases, called in evidence one S from whom assessee made purchases and applied G.P. rate of 30%—S denied having made any sales to assessee in the face of earlier affidavits confirming such sales—Statement of S not furnished to assessee nor opportunity to cross-examine him given—Cross examination is sine qua non of the due process of taking evidence and no adverse inference can be drawn against a party unless that party is put on notice of the case made out against him—Matter remanded for cross-examination of S with opportunity to assessee to furnish evidence to rebut the evidence of S

(12)
KALRA GLUE FACTORY. vs. SALES TAX TRIBUNAL & ORS.
(SUPREME COURT OF INDIA) 167 ITR 0498

Statement which was not tested by cross examination is not good evidence.
Ground No. 5 -
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 51,22,569/- u/s 69C of the Income Tax Act, 1961 on Kailash Chand Maheshwari vs. DCIT account of alleged unexplained expenditure of interest paid to Shri Chandra Mohan
Badaya on alleged cash loan obtained of Rs. 2,28,87,000/-.
In the above regard it is submitted that during the course of appellate proceedings the assessee has made the detailed submission, copy of which is available on paper book page cited surpa. The major issues raised before the Learned CIT(A) in respect of the above addition are briefly mentioned as under –
(i) The addition has been made with reference to documents and papers found and seized as per Annexure-AS exhibit-4 from the residence of Shri Chandra Mohan
Badaya where a search had taken place on 29.07.2016 at his residence 178, Surya
Nagar, Taron ki Koot, Tonk Road, Jaipur. The addition is not based on any incriminating material or paper found and seized from the possession of the assessee. Obviously the incriminating material seized from Shri Chandra Mohan
Badaya required to be considered u/s 153C. The same could not have been considered u/s 153A. In support of this citations were also quoted. The Learned
CIT(A) has just brushed aside the submission of the assessee without controverting the same.
(ii) It is submitted that as per provisions of section 153C the Learned Assessing
Officer of the searched person was required to record his satisfaction that the material seized from the possession of Shri Chandra Prakash Agarwal belonged or pertained or the information therein pertained to the assessee and only then such material was required to be forwarded to the Assessing Officer of the assessee. In this case the Assessing Officer of the assessee and that of Shri Chandra Mohan
Badaya happen to be the same. But even then a satisfaction was statutory requirement on the part of the Learned Assessing Officer. But there is no satisfaction is available on record. In view of this the entire assessment proceeding stand vitiated.
(iii)
It was also submitted before the Learned CIT(A) that the Assessing Officer of the assessee was also required to record his satisfaction that the incriminating material or the information contained therein seized from Shri Chandra Mohan
Badaya pertained and belonged to the assessee and it had a bearing on the determination of the income of the assessee. Only after recording such satisfaction notice u/s 153A or 153C could have been issued. Such satisfaction is not available on record. The Learned CIT(A) has not appreciated the submission of the assessee. In the circumstances the assessment proceedings deserves to be quashed.

(iv)
It was also submitted before the Learned CIT(A) that in the case of the assessee a great prejudice was caused by not affording opportunities to the assessee in so far as in considering the seized material found from Shri Chandra
Mohan Badaya. No copies of the documents found and seized from Shri Chandra
Mohan Badaya were furnished to the assessee. Statement recorded u/s 132(4) of Shri Chandra Mohan Badaya was not furnished to the assesseee. Further cross examination of Shri Chandra Mohan Badaya was also not afforded. All this has caused a great prejudice to the assessee. The addition is exclusively based on Kailash Chand Maheshwari vs. DCIT paper found and seized from Shri Chandra Mohan Badaya and also on his statement. The assessee could not furnished a cogent defense in the absence of documents seized from Shri Chandra Mohan Badaya having not being furnished to the assessee and cross examination of Shri Chandra Mohan Badaya being not allowed. The Learned CIT(A) has simply stated that principles of natural justice always do not require affording opportunity to the assessee. The case laws quoted by him are totally not applicable to the facts of the case. It is a case of proven facts where great prejudice has been caused on account of violation of principles of natural justice. The assessee has quoted a number of decisions which the Learned
CIT(A) has not appreciated. It is submitted that the Learned CIT(A) failed to be pragmatic and real. His order is most formal rather than practical. He has avoided the crucial issues and the order passed by him smacks prejudice. The assessee further quotes latest decisions in favor of the assessee regarding principles of natural justice –

(i) PRINCIPAL COMMISSIONER OF INCOME TAX & ORS. vs. DSG PAPERS
PVT. LTD. & ORS.HIGH COURT OF PUNJAB & HARYANA ITA-38-2023 (O&M),
ITA-1-2023 (O&M), ITA-8-2023 (O&M), ITA-11-2023 (O&M), ITA-281-2022 (O&M)
Nov 9, 2023 (2024) 461 ITR 0004 (P&H),
10. The Apex Court in the said case while allowing the appeal had noticed that the Tribunal had rejected the plea of cross-examination that the statement of the dealer would not bring out any material which would not be in possession of the assessee.
The Apex Court went on to hold that by not allowing the cross-examination of 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 as it amounted to violation of principles of natural justice by which the assessee was adversely affected. The argument whether the cross-examination would be relevant was also rejected, on the ground that it is not for the Tribunal to have guess work regarding the purpose of the cross-examination of the dealers and what was to come from it and thus, the appeals were allowed. Apart from that it was also noticed that to discredit the testimony the opportunity of cross-examination was necessary. Accordingly, it was observed 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 Kailash Chand Maheshwari vs. DCIT 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."
11. The Division Bench of the Delhi High Court in the case of Rajesh Kumar (supra) also has taken a similar view under the provisions of 1961 Act wherein the statements of one Maheshwari had been recorded wherein he had denied that he had nothing to do with the bank account from which the cheques were issued to the assessee. Resultantly, the order of the Tribunal had been upheld on the ground that the said person had not been cross-examined and no opportunity was granted by the Assessing Officer and there was violation of principles of natural justice.
12. Facts herein are similar as noticed above. A perusal of the order of Commissioner of Income Tax would go on to show the Commissioner had noticed that the Assessing Officer without bringing any record or evidence had made the addition on the basis of the statement of the third party which could not be considered as conclusive evidence. It is in such circumstances, we are of the considered opinion that the Tribunal has rightly interfered in the orders passed by the authorities below. Therefore, no question of law arises. Needless to say that the tax effect is also below the requisite limit, as per the circular of the Revenue.
(ii) T. Takano vs. Securities and Exchange Board of India & Anr (Civil Appeal Nos.
487-488 of 2022) Judgment dated 18.02.2022
A quasi-judicial authority has a duty to disclose the material that has been relied upon at the stage of adjudication; and (ii) An ipse dixit of the authority that it has not relied on certain material would not exempt it of its liability to disclose such material if it is relevant to and has a nexus to the action that is taken by the authority. In all reasonable probability, such material would have influenced the decision reached by the authority.
In view of the aforesaid facts the addition required to be deleted. The submission made in this regard before the Learned CIT(A) is also quoted below -
"The addition has been made by the Learned Assessing Officer observing as under in Para 7.4(B) on page 10 of the assessment order. The same is scanned below :-
3,61,24,000/- in cash from Shri Chandra Prakash Agarwal. The amount of loan has been worked out on the basis of Exhibit 4 of Annexure AS, which was a pen-drive prepared by computer specialist from the mobile phone data of Shri Chandra
Prakash Badaya during the course of search conducted at his residence A-178,
Surya Nagar, Taron Ki koont, Tonk Road, Jaipur on 29/07/2016. The Learned Assessing Officer has observed that against this loan of Rs.
3,61,24,000/-, the assessee repaid principal amount of Rs.2,28,87,000/- and interest of Rs 51,11,569/- . The Learned Assessing Officer has stated that the payment of interest in cash has remained unexplained with reference to Sec. 69C.
The addition made by the Learned Assessing Officer is unlawful, illegal and against the principles of equity and justice. The same is assailed as under :-
(a)Procedure as per Sec. 153 C not followed
(I) At the outset, it is submitted that the addition made by the Learned Assessing
Officer of Rs.51,11,569/- on the basis of material found and seized from the residence of Shri Chandra Mohan Badaya is beyond the juri iction of Sec. 153A. It is submitted that the incriminating material and documents found and seized from the residence of Shri Chandra Mohan Badaya required to be considered as per provisions of Sec. 153C. The provisions of Sec. 153C are quoted below :-
153C. (1) 19[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,
Kailash Chand Maheshwari vs. DCIT 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 juri iction over such other person] 20[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 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 juri iction 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 except in cases where any assessment or reassessment has abated.
The perusal of the aforesaid provisions of Sec. 153C stipulate as under :-
(i) Where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; 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 juri iction over such other person]
The above provisions lay down that it is only on the satisfaction of the Assessing Officer of the searched person that the seized material or information pertains to some other person other than the searched person shall be forwarded to the Assessing Officer of such other person. In this case, Chandra Mohan Badaya is the searched person. Therefore, the Assessing Officer of Shri Chandra Mohan
Badaya was required to record his satisfaction that the seized documents from his residence contained information relating to the assessee. No such satisfaction is mentioned in the assessment proceedings by the Learned Assessing Officer and, hence the violation of provisions of Sec. 153C. The Courts have held that recording of satisfaction of the Assessing Officer of the searched person is a statutory obligation and not a paper formality. In the absence of recording of satisfaction of the Assessing Officer of the searched person, the information could not have been Kailash Chand Maheshwari vs. DCIT handed over to the Assessing Officer of the such other person. The following case laws are quoted in support :-
(i) PR. COMMISSIONER OF INCOME TAX & ORS. vs. NIKKI DRUGS &
CHEMICALS PVT. LTD. & ORS.HIGH COURT OF DELHI 386 ITR
0680 (Delhi), (2016) 236 TAXMAN 0305 (Delhi)
The Hon'ble Court held that the first step for initiation of proceedings under Section 153C of the Act is for the assessing officer of the searched person to be satisfied that the assets or documents seized do not belong to the searched person but to the assessee sought to be assessed under Section 153C of the Act. Once the assessing officer of the searched person is so satisfied, he is required to transfer the assets or documents, which he believes belongs to the assessee, to the assessing officer having juri iction over that assessee. The assessing officer of the assessee on receipt of such asset or document seized would have juri iction to commence proceedings under Section 153C of the Act. The assessing officer has, thereafter, to apply his mind as to whether the assets and documents received have a bearing on the determination of the total income of the Assessee and if he is so satisfied that the same have a bearing on the determination of the income of the assessee, he has to issue notice and assess or reassess the income of the assessee in accordance with the provisions of Section 153A of the Act.
It is settled that recording of such satisfaction is sine qua non for commencing any proceedings under Section 153C of the Act. Thus, the decision of the ITAT in this regard cannot be faulted. It was sought to be contended that the assessing officer of the searched persons had, in fact, recorded the necessary satisfaction note.
However, the learned counsel for the Revenue could not confirm whether such note was prepared prior to the initiation of the proceedings under section 153C of the Act. The Assessee’s contention that despite its request such note had not been disclosed during the assessment proceedings has also not been controverted. In the circumstances, the categorical finding of the ITAT that it was an admitted fact that the assessing officer of the searched persons had not recorded a satisfaction note, cannot be interfered with.

(II) Commissioner of Income Tax v. Gopi Apartments: Allahabad High Court (2014)
365 ITR 411 (All.)
The Hon'ble Court held that that even in cases where the assessing officer of the person searched and the assessee who is sought to be assessed under Section 153C is the same, the assessing officer is required to record his satisfaction that the assets/ documents seized belong to a person (the assessee) other than the searched person.
(iii)
The Hon'ble Court held that where the Assessing Officer of the searched person has not recorded any satisfaction before transferring case records to the Assessing
The Hon'ble Court held that "On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be “satisfied” that inter alia any document seized or requisitioned “belongs to” a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having juri iction over such other person (other than the searched person).
Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person.
The second step is – after such satisfaction is arrived at – that the document is handed over to the Assessing Officer of the person to whom the said document
“belongs”. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person.
It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or “satisfaction” that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of “satisfaction”.

(v)
21/255
The Hon'ble Court held that recording of satisfaction was sine qua non for commencing any proceedings u/s 153C—AO had not explained steps taken by him to determine that seized material belonged to Assessee Firm—Satisfaction note
Kailash Chand Maheshwari vs. DCIT was prepared in standard mechanical format and it did not provide any details about books of accounts which allegedly belonged to Assessee Firm—AO’s note nowhere reflected whether any document seized, on application of his mind, disclosed that it belonged to assessee and if so, its prima facie nature—Whilst AO of searched party and individual u/s 153C might be same, nevertheless at stage of sending notice u/s 153C, AO had to record specific reason or reasons why material seized from other person had nexus to assesse, to whom notice under that provision was addressed—Failure of AO to record specific satisfaction as to how recovered material belonged to assessee in note that preceded notice issued under it, vitiated assessments—Since satisfaction in terms of Section 153C(1) was clearly inadequate, assessment completed for these years was also invalid—Revenue’s appeal dismissed.
(vi)
The Hon'ble Court held that it is evident that when no satisfaction was recorded then the requirement of Section 153C was not satisfied. Therefore, High Court have no reason to interfere with the impugned order passed by the Tribunal, who has not sustained the proceedings under Section 153C of the Act, for the reason that there was no satisfaction at any stage.
(II) The provisions further stipulate that the Assessing Officer of the such other person shall proceed on receipt of incriminating material/information from the Assessing Officer of the searched person in accordance with the provisions of Sec.
153C only if the Assessing Officer of the such other person 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. In this case, the other person is the assessee. Therefore, the Assessing Officer of the assessee was required to record a finding that the material and information received from the Assessing Officer of the searched person has a bearing on the determination of the income of the assessee. Recording of such satisfaction is not available in the case of the assessee. In view of this, the entire proceedings of considering the seized material found and seized in the case of search of Shri Chandra Mohan Badaya in the case of the assessee is unlawful, illegal and unjustified. The case laws cited above are applicable on this issue also.
The aforesaid provisions of Sec. 153C very clearly stipulate that in the case of search if incriminating material or information is found relating to other person, then action is required as per procedure laid down u/s 153C. The assessment proceedings are required to be initiated with the issuance of notice u/s 153C and not notice u/s 153A. In the case of the assessee, the material found was in the case of search of Shri Chandra Mohan Badaya, as such, the material found relating to the assessee could be used in the case of the assessee only after following the procedure laid down under section 153 C as discussed above. Search material and information found and seized in the case of Chandra Mohan Badaya relating to the assessee could not be used in the hands of the assessee u/s 153A. Therefore, the Kailash Chand Maheshwari vs. DCIT addition made in the case of the assessee of Rs.51,11,569/- on the basis of material/information emanated out of search in the case of Shri Chandra Mohan
Badaya is totally misplaced. No such addition could have been made u/s 153 A.
The Learned Assessing Officer was required to follow the procedure laid down u/s 153C, which has not been done. In support, the following case-laws are quoted below :-
(i) Trilok Chand Chaudhary Vs. ACIT ITA No.5870/Del/2017 ITAT, Delhi Bench G,
New Delhi Date of order : 20/09/2019
The Hon'ble Tribunal has held as under :-
"The Act has provided separate provisions for making assessment in case of material found in the course of the search from the premises of the assessee as well as the material found in the course of search at the premises of the third party.
The Assessing Officer is required to follow the procedure laid down in the Act for making the assessment and he cannot devise his own procedure for shortcut methods. In our considered opinion, when the case of the assessee is covered under the provision of section 153 of the Act and if reliance is placed on the incriminating material found during the course of search of third-party, then provision of section 153C of the Act would be applicable and have to be adhered to.
Thus, in the instant case, the Assessing Officer was required to first complete the proceedings under section 153A in hand, which were initiated by way of notice dated 30/06/2014 and thereafter, he was at liberty to take action under section 153C of the Act for bringing the material found from the premise of Sh. Ashok
Chaudhri to tax in the hands of the assessee."
(ii) Lalit Mahajan, Shivali Mahajan Vs. DCIT ITA No.5585&5586/Del/2015 ITAT
Bench C, New Delhi Date of order : 19/03/2019
"From a reading of the above decisions of Hon'ble Juri ictional High Court, it is evident that completed assessment can be interfered with by the Assessing Officer on the basis of any incriminating material unearthed during the course of search. If in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that year in exercise of power under Section 153 of the Act. Obviously, the reference to the incriminating material in the above decisions of Hon'ble Juri ictional High Court is in regard to incriminating material found as a result of search of the assessee's premises and not of any other assessee. The legislature has provided Section 153C by invoking the same the Revenue can utilize the incriminating material found in the case of search of any other person to the different assessee. Section 153C is reproduced below for ready reference :- "Assessment of income of any other person. 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,
13 ITA-5585/Del/2015 & 11 others 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 Shri Lalit Mahajan, New Delhi vs Dcit,
- http://indiankanoon.org/doc/126126799/ 10 Assessing Officer having juri iction 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]:]."
15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We, respectfully following the above decisions of Hon'ble Juri ictional High Court, hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person. "

(iii)Krishna Kumar Singhania Vs. DCIT IT(SS)A No.105/Kol ITAT, C Bench, Kolkata
Date of order : 06/12/2017
"Para 10. 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 ld AO on this seized document. The seized document used by the ld AO for making www.taxguru.in 10 IT(SS)A Nos.109 & 110 /Kol/2017 IT(SS)A No.105/ Kol/2017 IT (SS)A No.104/Kol/2017 IT(SS)A Nos. 111& 112/Kol/2017
IT(SS) A Nos. 107 & 108 /Kol /2017 IT(SS)A No. 106/Kol/2017 Krishna Kumar
Singhania, Ajay Kumar Singhania, Kasak Singhania, Nirmala Devi Singhania,Vijay
Kumar Singhania, Ruchi Singhania Asst. Years: 2009-10 & 2012-13 10 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 ld AO if he is satisfied with such explanation , has got recourse to proceed on such other person (i.e the person to Kailash Chand Maheshwari vs. DCIT 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 vs Pinaki Misra and Sangeeta Misra reported in (2017) 392 ITR 347 (Del) dated 3.3.2017, 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."

(iv)
PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) & ORS. vs.
ANAND KUMAR JAIN (HUF) & ORS. HIGH COURT OF DELHI 201 DTR 0200
(Del), (2021) 320 CTR 0656 (Del), (2021) 432 ITR 0384 (Delhi), Date or order :
12/02/2021

The Hon'ble Court held as under :-

"As per mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then only legal recourse available to department was to proceed in terms of Section 153C by handing over same to AO who has juri iction over such person—Here, assessment has been framed under section 153A on basis of alleged incriminating material (being statement recorded under 132(4)— Assessee had no opportunity to cross-examine said witness, but that apart, mandatory procedure under section 153C has not been followed—On this count alone, there is no perversity in view taken by ITAT.

CONCLUSION

In view of the aforesaid discussion and case-laws, it is obvious that the addition made by the Learned Assessing Officer of Rs. 51,11,569/- is unlawful as the procedure u/s 153C has not been followed. The addition, therefore, deserves to be deleted.
(b) Principles of natural justice violated

It is further submitted that the Learned Assessing Officer has made the addition of Rs. 51,11,569/- in violation of the principles of equity and justice inasmuch as the assessee was not provided print-outs and working alleged to have been taken from Kailash Chand Maheshwari vs. DCIT the mobile phone of Shri Chandra Mohan Badaya. No details were furnished as how and on what basis alleged loan of Rs. 3,61,24,000/- was worked out. Similarly, the assessee was also not provided the working of alleged payment of interest of Rs. 51,11,569/-. In view of this the Learned Assessing Officer has violated the principles of equity and justice and, therefore, the assessment proceedings stand vitiated. The additions deserve to be deleted. It is settled principle of law that the material gathered at the back of the assessee could not be used against him unless the same was provided to him for defence. The case laws quoted in support of ground No. 4 are equally applicable to this ground also."
Ground No. 6 –
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax Act, 1961 on the basis of post dated cheques found from the third party.
In the above regard it is submitted that the addition has been made purely on assumption and presumption. For Postdated cheques of Rs. 25,00,000/- each found noted on a worksheet without the name of issuing person or the person in whose favour the same were issued. Copies of cheques were not found. Only details of cheques were found noted. The fate of these cheques remained unknown and the Learned Assessing Officer did not cause any enquiries whether the cheques were encashed or not. But the Learned Assessing Officer made the additions on presumption that assessee was in receipt of the amount of Rs. 1,00,00,000/- of the cheques. The addition is totally baseless.
Further it was also submitted that the above worksheet as reproduced in the assessment order was downloaded from laptop found during survey conducted at the business premise of Shree Ram Enterprises at , 881, Panchgali, Sonkhiyon Ka
Rasta, Kishanpole Rasta, Jaipur on 30.07.2016. it is submitted that the Learned
Assessing Officer even has not mentioned as who was the owner of Shreeram
Enterprises. Further it was pleaded before the Learned Assessing Officer that such additions could have not been made in the case of the assessee as no additions were made on account of any incriminating material found during the course of search. It was also submitted before the Learned Assessing Officer that in the case of the assessee such addition was possible only if the assessment was pending in the case of the assessee as on the date of search and accordingly abated. In the case of the assessee no assessment was pending as on the date of search and as such none abated. In view of this additions other than those based on incriminating material were possible if additions were made on the basis of incriminating material found in the search of the assessee. It is the submission of the assessee that in the case of the assessee during the course of search nothing was found and seized. No addition has been made with reference to incriminating material found/seized during the course of search in the case of the assessee. In view of this other additions were not possible. This is so according to the decision of the Hon'ble Supreme
Officer. The Learned CIT(A) has wrongly treated the post dated cheques as transactions. The Learned CIT(A) has alternately held that the amount mentioned in the post dated cheques unexplained u/s 69A. The moot point is that the assessee has not received any amount of these cheques, therefore, the post dated cheques did not deserve to be considered in the hands of the assessee. On top of all the revenue has failed to bring on record the name of the person who had issued the cheques and what had ultimately happened to these post dated cheques. The addition has been made and sustained purely on suspicion. It is settled principle of law that suspicion however strong cannot take place of evidence. In view of the aforesaid facts the Hon'ble ITAT is humbly requested to delete the addition sustained by the Learned CIT(A).
The submission made before the Learned CIT(A) are quoted as under: -
"The Learned Assessing Officer has made the addition of Rs. 1,00,00,000/- on the basis of data of Dell Laptop which was found and impounded as Exhibit-4 of Annexure A on 30/07/2016 during the course of survey conducted at the business premises of M/s Shree Ram Enterprises, 881, Panchgali, Sonkhiyon Ka Rasta,
Kishanpole Rasta, Jaipur. It is the case of the Learned Assessing Officer that the assessee was in receipt of Rs. 1,00,00,000/- as per the following cheques, details of which were found in the hard-disc of Dell Laptop :-
Cheque No.
PDC
293597
2500000
293598
2500000
293599
2500000
293600
2500000

The Learned Assessing Officer has made the addition on the presumption that the above amount was receipt in the hands of the assessee, which remained unexplained. The action of the Learned Assessing Officer is atrocious. The same is assailed as under :-
(i) No other addition possible u/s 153A
The Learned Assessing Officer has not brought on record as to whom the business premises of M/s Shree Ram Enterprises at 881, Panchgali, Sonkhiyon Ka Rasta,
Kishanpole Bazar, Jaipur belonged. It is also not on record that the owner of M/s
Shree Ram Enterprises was examined with reference to the post-dated cheques noted above, which were found from the hard disc of Dell Laptop. In the absence of this, the Learned Assessing Officer was precluded in considering the amount of cheques of Rs. 1 crore in the hands of the assessee. It is submitted that the assessment in the case of the assessee has been completed u/s 153A. However, no addition has been made with reference to any incriminating material found and seized during the course of search from the residence of the assessee. Therefore, as per settled position of law upto the stage of the Supreme Court, no other addition could have been made in the case of the assessee including the addition of Rs.1,00,00,000/-. The assessee seeks support from the decision of the Hon'ble
Supreme Court in the case of PCIT Vs. Abhisar Buildwell Pvt Ltd (454 ITR 212) order dated 24/04/2023. In this case, the Hon'ble Supreme Court has held that in a case where search has been conducted if additions are not made on the basis of search material, then no other additions would be possible u/s 153A in cases of unabated/completed assessments. In view of this, the additions made in the case of the assessee deserve to be deleted.

(ii) No conclusive evidence of receipt of cheque amount
It is submitted that the addition has been made by the Learned Assessing Officer on the basis of the aforesaid cheques. The Learned Assessing Officer has not conducted any inquiry as in whose favour the cheques were issued. It is also not known as who had issued the cheques. The Learned Assessing Officer has also not ascertained the fate of these cheques whether these were presented for encashment and if so in whose account the money went. In absence of all these details, the Learned Assessing Officer was not competent to make the addition presuming that the amount of cheques of Rs. 1,00,00,000/- was a receipt in the hands of the assessee. The addition has been made totally under confusion. The same, therefore, deserves to be deleted.
(iii)
Provisions of Sec. 68 not applicable
It is submitted that the Learned Assessing Officer has made the addition of Rs.
1,0,00,000/- holding that the receipt was undisclosed income of the assessee under section 68 of the IT Act, 1961. It is submitted that the provisions of Sec., 68 are not applicable even distantly. The provisions of Sec. 68 are quoted below :-
Cash credits.
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:
35[Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,—
(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Regarding the applicability of these provisions, the Hon'ble Supreme Court has laid down the following parameters in their decision in the case of CIT Vs. P Mohankala
(291 ITR 278).
(a)There has to be a credit entry in the books of account ;
(b)The books of accounts have to be of the assessee of the previous year
(c) The assessee fails to furnish an explanation or the explanation furnished is not found to be satisfactory.
It is only on satisfying the above parameters that the provisions of Sec. 68 can be made applicable. So far as the facts are concerned, the amount of cheques is not a credit entry in the books of account of the assessee. Therefore, the Learned
Assessing Officer was not justified to invoke the provisions of Sec. 68. In view of this, the addition made u/s 68 are unlawful, illegal and unjust. The same deserves to be deleted."
Ground No. 7-
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 5,47,150/- u/s 57(iii) of the Income Tax Act, 1961 on account of disallowance of interest expenditure.
It is submitted that before the Learned CIT(A) it was pleaded that the addition made by the Learned Assessing Officer on account of disallowance of interest was not justified. It was submitted that during the course of search nothing was found and seized from the possession of the assessee. No additions have been made with reference to any incriminating material. In view of this and as held by the Hon'ble
Supreme Court in case of Abhisar Builders as quoted above, other additions are not warranted in a case where additions are not made on the basis of incriminating material found during search.
Alternately, it was argued that assessee had disclosed income from interest under the head income from other sources from parties of Rs. 7,31,195/- besides this interest income was also disclosed from firm Vrandavan Colonizers of Rs.
4,43,206/-. Assessee had obtained loans for making investment in firm for making investment in firm as well for business purposes. Hence the claim of interest of Rs.
4,57,150/- was well in order and deserved to be allowed. The Learned CIT(A) has not appreciated the submissions of the assessee and simply upheld the addition made by the Learned Assessing Officer. For the sake of convenience the submissions made before Learned CIT(A) are quoted below:-
"The Learned Assessing Officer has made addition of Rs. 5,47,150/-, being interest payment, which has been disallowed on the ground that there was no evidence on record that interest was paid or not. The Learned Assessing Officer has further observed that it is also not record whether the payment of interest was for the purposes of earning income.
It is submitted that the assessee had obtained loan from various persons for earning interest income by advancing to others. The Learned Assessing Officer has assessed the interest income of Rs. 7,51,443/-.
It is submitted that in the computation of income furnished along with the return of income filed on 23/10/2018, the assessee has disclosed receipt of interest income of Rs. 7,31,195/- and against this, interest expenditure was claimed at Rs.
4,57,150/-. The Learned Assessing Officer has adopted the figures of payment of interest wrongly of Rs. 5,47,150/- as against Rs. 4,57,150/-. Thus, the disallowance was to be only of Rs. 4,57,150/- and not of Rs. 5,47,150/-. There appears to be a typing error. It is further submitted that no such addition was permissible while completing assessment u/s 153A as no addition has been made on the basis of incriminating material. Therefore, as per settled position of law upto the stage of the Supreme Court, no other addition could have been made in the case of the assessee including the addition of Rs.5,47,150/-. The assessee seeks support from the decision of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell
Pvt Ltd (454 ITR 212) order dated 24/04/2023. In this case, the Hon'ble Supreme
Court has held that in a case where search has been conducted if additions are not made on the basis of search material, then no other additions would be possible u/s 153A in cases of unabated/completed assessments. In view of this, the additions made in the case of the assessee deserve to be deleted.
Ground No. 8 –
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 17,02,666/- on account of undisclosed brokerage income on assumption basis.
The above addition has been made on the basis of records found and seized during the course of survey u/s 133A at Kuber Properties and Developers shop 106-107, I st floor, Balaji Tower, Airport Plaza, Durgapura, Tonk Road, Jaipur. A number of allotment letter were found belonging to Rajhans Cooperative Housing Society in respect of residential scheme "Shiva Paradise", Nimodia Mod, Tonk Road, Jaipur.
Statement of the assessee was recorded with reference to these papers. The statement of the assessee has been reproduced on page 17 & 18 of the assessment order. The assessee deposed that the scheme of "Shiva Paradise",
Nimodia Mod, Tonk Road, Jaipur was developed by Rajhans Cooperative Housing
Society. The allotment letters found were unsigned and were to be delivered to the society. It was further stated by the assessee that the sale of plots pertaining to these allotments letters was conducted by him and he received brokerage @ 20/- per yard. During the course of statements the assessee further revealed that in the sale of plots the society received 70% of sale proceeds by cheques and remaining
Kailash Chand Maheshwari vs. DCIT was received in cash. However the Learned Assessing Officer has treated the complete sale of plots holding the assessee as owner and the 30% of cash which was received by the society has been added in the income of the assessee in addition to brokerage @ 20 per yard. Common sense would dictate that if the plots were owned by the assessee there was no occasion for charging brokerage and vice versa if brokerage has been charged there was no question of receiving the on money on sale proceeds. The Learned Assessing Officer has not brought any material on record to establish that assessee was the owner of the plots sold by Rajhand Cooperative housing Society. In the circumstances the addition to the extent of Rs. 15,76,542/- calculated @ 30% of total sale proceeds has wrongly been added in the hands of the assessee. The same deserves to be deleted. The Learned CIT(A) has erred in sustaining the addition wrongly made by the Learned
Assessing Officer. Traveling through the entire appellate order a clear message is received that the Learned CIT(A) turned a deaf ear to the submissions of the assessee. Not a single plea however strong has been accepted by the Learned
CIT(A). The platform of appeal is for giving a patient and sympathetic hearing to the submissions of the assesse and not a washout the same.

For the sake of convenience the submission made before the Learned CIT(A) is quoted below -
"The Learned Assessing Officer has made the addition of Rs. 17,02,666/- with reference to papers found and impounded during the course of survey u/s 133A conducted on Kuber Properties and Developers shop 106-107, I st floor, Balaji
Tower, Airport Plaza, Durgapura, Tonk Road, Jaipur. During the course of survey, certain pages 1-59 of Exhibit 4 Annexure B were impounded. These were allotment letters of residential scheme "Shiva Paradise", Nimodia Mod, Tonk Road, Jaipur.
The allotment letters were issued by M/s Rajhans Housing Co-operative Society
Ltd. Statement of the assessee was recorded on 30/07/2016 with reference to these papers. It was stated by him that Shri Radhey Shyam Khandelwal, one of the persons who was working from this office, was associated with this Society. The assessee admitted that (answer to question No. 6) he was working as a broker for selling the plots of the Rajhans Co-operative Housing Society and in view of his services, he was getting brokerage @ Rs. 20 per Sq. yard. The statement of the assessee has been reproduced by the Learned Assessing Officer on page 11 of the assessment order. In his statement, the assessee also deposed that the sale transactions of plots were in the ratio of 70 : 30. In other words, 30% of the consideration of sale was passed on in cash. However, assessee was not concerned with the consideration of sale as he was getting a fixed brokerage of Rs.
20/- per yard. His brokerage was not related with the quantum of amount of sale, but it was related with the quantum of yards. However, the Learned Assessing
Officer has considered the 30% of consideration in the hands of the assessee and has made addition of Rs.15,76,542/- on sale of 6306.17 yards comprising 53 plots.
The Learned Assessing Officer has wrongly assessed the quantum of alleged "on- money" of Rs. 15,76,542/- in the hands of the assessee. In his statement, the assessee has not deposed that he was the recipient of the on-money. He has simply stated that deals of sale of plots including boundary wall was made @ Rs.
700 per Sq.yd and the payment was to be made at the ration 70 : 30, i.e. 70% of the amount was to be paid by cheque and 30% was to be paid in cash. In his reply to question No. 10, the assessee further stated that he was to get only Rs. 20 per
Sq.yd as brokerage. The reply of the assessee is categorical and very specific. In his statement, he has nowhere stated that he got the on-money amount. In view of this, the addition of Rs. 15,76,542/- is totally uncalled for. In fact otherwise also the on-money was a part of the sale amount and would naturally go to the seller and not to be broker. The assessee was only a broker and he was entitled only for brokerage. In these facts and circumstances, the addition of Rs. 15,76,542/- deserves to be deleted.
It is further submitted that by making the addition the Learned Assessing Officer has violated the principles of equity and justice. He has not provided the copy of pages pertaining to Rajhans Cooperative Housing Society. Copy of statement was also not provided. Therefore, the addition is totally unjustified.
Ground No. 9 -
Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 10,00,000/- on account of marriage expenses of his niece Sonam during the year under consideration without any material or evidence found during the course of search.
It is submitted that the addition has been made exclusively on the basis of statement recorded u/s 132(4) on 29.07.2016. During the course of statement it was deposed by the assessee that the incurred expenditure on marriage of Sonam daughter of his brother. The marriage was celebrated at a place Shreeram Paradise and total expenditure was stated at Rs. 10 Lakhs. It is on this basis only that addition has been made treating the expenditure as unexplained. The addition was assailed before the Learned CIT(A) by making a detailed written submission. But the same was not appreciated and the Learned CIT(A) has upheld the additions. It is submitted that the addition made is unlawful on the on the following counts –
(i) Addition has been exclusively made on the basis of statement only. It is settled position of law that no addition can be made purely on the basis of statement recorded u/s 132(4) unless the same is substantiated or supporting by some documentary evidence or incriminating material. In this case no incriminating material was found at all and not the least pertaining to expenditure on marriages.
Therefore the addition is without any basis.
(ii) The Learned Assessing Officer on his part has not brought any material on record regarding the expenditure incurred on marriage. Even no enquiry was conducted from the marriage place namely Shreeram Paradise. In view of this the addition made is totally uncalled for.
(iii)
It is further submitted that it is a case where additions have not been made with reference to any incriminating material as such the Learned Assessing Officer was precluded in making any other addition. In view of these submission the Hon'ble ITAT is requested to delete the additions.
For the sake of convenience the submission made before the Learned CIT(A) is quoted below -
"It is submitted that the addition has been discussed by the Learned Assessing
Officer in para 7.8 appearing on page 19 and 20 of the assessment order. The addition has been made on the ground that the assessee incurred expenditure of Rs. 10 lacs in the marriage of Sonam, who was his niece. The addition has been made with reference to the statement recorded of the assessee under section 132(4). The addition is totally uncalled for and misplaced. The same is assailed as under :-
(a)No incriminating material found during search in respect of the expenditure on marriage.
It is submitted that in this case no assessment was pending and none abated.
Hence additions were strictly required to be made on the basis of search material only. While completing assessment under section 153A, no addition has been made with respect to any incriminating material found during search. Therefore, as per settled position of law up to the stage of the Supreme Court, no other addition could have been made in the case of the assessee including the addition of Rs.10,00,000/-. The assessee seeks support from the decision of the Hon'ble
Supreme Court in the case of PCIT Vs. Abhisar Buildwell Pvt Ltd (454 ITR 212) order dated 24/04/2023. In this case, the Hon'ble Supreme Court has held that in a case where search has been conducted if additions are not made on the basis of search material, then no other additions would be possible u/s 153A in cases of unabated /completed assessments. In view of this, the additions made in the case of the assessee deserve to be deleted.
(b)
Addition cannot be made on the basis of standalone statement u/s 132(4).

The Learned Assessing Officer has reproduced the statement of the assessee, relevant question No is 22, wherein the assessee deposed that he incurred expenditure in the marriage of daughter of his younger brother namely, Sonam and the expenditure incurred was Rs. 10 lacs. It is solely on the basis of this statement that addition has been made, which is unwarranted and uncalled for. It is settled position of law that statement recorded u/s 132(4) is not incriminating material found during search. Addition cannot be made only and only on the basis of statement recorded u/s 132(4). Addition is possible only when such statement recorded u/s 132(4) is substantiated by other incriminating material or documents found during search. In the case of the assessee, no document, no incriminating material was found relating to the expenditure on marriage of Sonam. Therefore, the Learned
Assessing Officer was precluded in making such addition. The following case-laws are quoted in support :-
(1)PRINCIPAL COMMISSIONER OF INCOME TAX & ORS. vs. BEST
INFRASTRUCTURE (INDIA) PVT. LTD. & ORS. HIGH COURT OF DELHI (2017)
159 DTR 0257 (Del), (2017) 397 ITR 0082 (Delhi)
The Hon'ble Court held that statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal.

(2)COMMISSIONER OF INCOME TAX vs. HARJEEV AGGARWAL High Court of Delhi
(2016) 290 CTR 0263 (Del), (2016) 241 TAXMAN 0199 (Delhi)

The Hon'ble Court held that if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment.
The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/ material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded.

(3)PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) & ORS. vs.
ANAND KUMAR JAIN (HUF) & ORS. HIGH COURT OF DELHI (2021) 320 CTR
0656 (Del), (2021) 432 ITR 0384 (Delhi),

Assessment has been framed under section 153A, consequent to the search action.
The scope and ambit of section 153A is well defined. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of P, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4). However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment.
(4)COMMISSIONER OF INCOME TAX vs. JAGDISH NARAIN RATAN KUMAR
HIGH COURT OF RAJASTHAN (2015) 373 ITR 0394 (Raj), (2015) 234 TAXMAN
0039 (Rajasthan)

The Hon'ble Court held that the statements made during search, must be correlated with the records, which are found, and if there is any ambiguity, the explanation given by the assessee should be taken into consideration, before making the Kailash Chand Maheshwari vs. DCIT assessment. The legal position with regard to the undisclosed income from the diaries, does not need any elaboration, however, if the material found during the search, does not tally with the statement records, and that the statement is made subject to the material, which has been seized, a conscious effort should be made to consider the effect of the statement and to make an appropriate assessment by correlating the statements with due material.
(c) No cross-examination allowed
It is further submitted that statement of the assessee has been used by the Learned
Assessing Officer without allowing an opportunity of cross-examination. This has violated the principles of equity and natural justice. Therefore, the addition made by the Learned Assessing Officer deserves to be deleted on this ground also.
Ground No. 10 -
The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.
Not pressed.
Your Honor is requested to decide the appeal in favour of the assessee by considering the above submission and oblige.

Record reveals that holding of agricultural land by the assessee was not in dispute the only dispute which the ld. AO raised in the assessment proceeding that the assessee failed to furnish documentrary evidence of sale of agricultural produces, he also noted that the assessee for all the year fro 2011-12 to 2017-18 offered income of Rs. 2,00,000/- and agricultural activity prone to uncertainty how the same income be offered for all the years. Ld. CIT(A) has taken a view that only Girdawari report will not serve the purpose to support the claim of the assessee of having earned the agricultural income. Before us the ld. AR of the assessee submitted that holding of land by the assessee for 60 Bigha irrigated land is not under dispute. The copy of the Girdarvari report filed were not disputed by the ld.
CIT(A) in fact he has submitted that Girdarvari report is not sufficient to support the agricultural income of the assessee. But in fact the ld. CIT(A) or that of the ld. AO should have made further inquiry by exercising the power vested u/s 133(6) of the Act to verify the contention of the assessee. If we consider the holding of 60 bigha holding the net income of Rs. 3333 for bigha cannot be disbelieved and it cannot be termed as unexplained money or unexplained credit and therefore, the we direct the ld. AO to delete that Kailash Chand Maheshwari vs. DCIT addition. Based on that observation ground no. 3 raised by the assessee is allowed.

The brief facts related to the dispute are that in the search operation at residential cum business premises of Shri Chandra Prakash Agarwal, [
third party ] at 1756, Telipada, SMS Highway, Choura Rasta, Jaipur wherein various incriminating documents found and seized wherein some pages were found and seized as Annexure-A, Exhibit 12, Page No. 1, 2, 4
& 6 and 10. These Papers contain details of work out of interest received against cash loan given by Shri Chandra Prakash Agarwal to K.B i.e. Shri
Kailash Chand Maheshwari. It is worthwhile to mention here that Shri
Kailash Chand Maheshwari also known as KG i.e. Shri Kailash Chand
Bilwa which is evident from the statement of Shri Kailash Chand
Maheshwari recorded u/s 132(4) of the Act on 29-07-2016. The total as worked out from those pages comes to Rs. 20,00,00,000/- as cash loan and Rs. 87,84,862/- was worked out as interest expenditure and Kailash Chand Maheshwari vs. DCIT accordingly the same was considered as income in accordance with the provision of section 69C of the Act.

When the issue raised before the ld. CIT(A) he hold a view that the ratio as laid down by the apex court in the case of Abhisar Buildwell will not apply as this year was not abated and therefore, the ld. AO can make the addition. As regards the contention of the assessee that he was not given
Copy of papers seized from the residence of Chandra Prakash Agarwal,
Copy of statement recorded u/s 132(4) of that assessee and Cross- examination was not allowed of Shri Chandra Prakash Agarwal he hold that the assessee has not made any request to ld. AO to supply those records therefore, he hold that “it was incumbent upon the assessee to make such prayer before the assessing officer during the assessment proceeding and now in appellate stage the appellant is precluded from raising such issue”.
Thus, it is clear that ld. CIT(A) has not considered the submission of the assessee on its merits of the dispute.

The record reveals that the ld. AO has not made any addition of loan accepted for Rs. 20 cr. Record also shows that in the search there is no record of assets or investment based on these loans were found and there is no finding for utilization of this amount by the assessee for his own
Kailash Chand Maheshwari vs. DCIT purpose and that is why the ld. AO has not made any addition in the hands of the assessee for receipt of loan or that of the investment made. Not only that those records were not found from the premises of the assessee but was found from the premises of Shri Chandra Prakash Agarwal. The ld. AO or that of the ld. CIT(A) did not bring on record that based on these records what was the questions were raised from where these records were found and what was explanation furnished. The bench also noted that even these page were not confronted with the assessee during the search or post search proceeding. In the absence of that finding making addition only of the interest alleged to have been paid by the assessee cannot be held as unexplained expenditure in the hands of the assessee. Alternatively, even if these loans were routed with the assessee there is no finding that the loans and interest there upon were re-paid by the assessee from his undisclosed source. Thus, when there is no evidence as to where this investment was made and how that was repaid merely making the addition of interest there is merely a guess work and any addition cannot be made merely on the guess work. While making the assessment of income of the assessee there must be something more than bare suspicion to support the assessment which is clearly missing at the stage of the ld. AO and that of with the ld.
CIT(A). While dealing with the appeal against the written submission so Kailash Chand Maheshwari vs. DCIT filed by the assessee, ld. AO through ld. DR did not controvert the facts placed on record. Based on these observations we see no reason to sustain the addition of Rs. 87,84,862/- in the hands of the assessee. Thus, ground no. 4 raised by the assessee is allowed.
14. Vide ground no. 5 the assessee challenges addition of Rs.
51,22,569/- in the hands of the assessee being the amount of alleged unexplained expenditure of interest paid to Shri Chandra Mohan Baday on alleged cash loan obtained for Rs. 2,28,87,000/-. The facts and contention raised in this ground are similar to that of ground no. 4 raised by the assessee and therefore, it is not imperative to repeat those facts and finding and therefore, the decision taken by us vide dealing with the ground no. 4 shall apply mutatis mutandis to the ground no. 5 raised by the assessee. Thus, ground no. 5 raised by the assessee also allowed.
15. Ground no. 6 raised by the assessee challenges the addition of Rs.
1,00,00,000/- made in the hands of the assessee based on the post-dated cheque found recorded in record found from third party. As is evident from the record that there was a survey conducted u/s. 133A of the Act on 30.07.2016 at the business premises of “Shri Ram Enterprises” images of “Dell Laptop” was taken. From the working copy of Hard disc an excel file in Kailash Chand Maheshwari vs. DCIT the name of Raju Bhai Shab 13092014.xls file from deleted data base found. In that one work sheet in the name of Kailash Bilwa was found wherein details of Post-dated cheques (PDC) with its number and amount are entered in the name of Kailash Bilwa. Ld. AO noted from that the same were for payment of land / plot and thus based on those working of images assessee was asked to explain the nature of transactions and to provide complete details of parties to whom these transactions pertain also ensure to produce these parties. As there was noncompliance form the assessee ld. AO held that the receipt of Rs. 1 cr. as his undisclosed income as per provision of section 68 of the Act. When the matter carried before the ld.
CIT(A) he noted that based on the set of fact no addition can be made in the hands of the assessee as per provision of section 68 of the Act but he held that “Thus the unaccounted income of the appellant is hereby held to be taxable as unexplained money under section 69A of the Act and also alternatively as unexplained investment u/s. 69 of the Act”. As is evident that there is no speaking reasons as to why the addition is sustainable as per provision of section 69A or that of section 69 of the Act.

Though there was non-compliance on the part of the assessee but at the same time the assessing authority should determine the correct income based on the evidence. The definition of assessment has not been Kailash Chand Maheshwari vs. DCIT provided with the Act but the perusal of the term within the scope of the Act makes it obvious that it implies an investigation and ascertainment of the correctness of the returns and accounts filed by the Assessee. Essentially the assessment would evidently mean determination of the quantum of taxable turnover and the quantum of taxable amount payable by the taxpayer. This assessment is based on returns and accounts furnished by an Assessee in support thereof but on an estimate made by the assessing authority which may, of course, be based inter alia on the accounts and documents furnished by the Assessee. The expression of assessment has a wide scope within the purposes of the Act whether the said assessment made are correct or not. Therefore, any assessment made would not essentially mean an assessment correctly or properly but would signify all assessments made or purported to have been made under the Act.
Basically, assessment is an estimation for an amount assessed while paying Income Tax. It is a compulsory contribution that is required for the support of a civilized society enjoyed by a citizen. In a best judgment assessment, the assessing officer should really make the assessment on his best judgement i.e. he must not act dishonestly or vindictively or capriciously while performing even for best judgement. Here in this case bench noted that the premises of the assessee was searched there are no Kailash Chand Maheshwari vs. DCIT question-and-answer confronting on the material even in the search or that of the post search proceeding. Simply at the time of assessment ld. AO noted that there was material found from the survey conducted at third party where in postdated cheque of Rs. 25,00,000/- each found on a worksheet where in the name of issuing person or the person in whose favour the same were issued. Even the copies of the cheque were not confronted or found. Ld. AO has not made any independent efforts to verify with the bank of the assessee or that of the person in whose case this information was found to be recorded. Even the ld. AO made the addition u/s 68 without giving reasons as to why section 68 will apply and when the matter carried before the ld.CIT(A) he was also not sure that the addition is to be sustained u/s. 69A or 69 of the Act. Thus, it shows that there is reasoning while making the addition or sustaining the same by ld. CIT(A).
Even the bench noted that no enquiry whatsoever was conducted and without conducting that preliminary enquiry no addition can be made even in the best judgment order. In the light of the discussion so recorded we see no reason to sustain that addition and thereby direct the ld. AO to delete the same. Thus ground no. 6 raised by the assessee is allowed.
16. Ground no. 7 deals with the addition of Rs. 5,47,150/- made under section 57(iii) of the Act on account of disallowance of interest expenditure.
The brief facts of the disputed addition is that the assessee has shown interest from parties under the heard income from other sources and claimed interest expenditure on the same. For the year under consideration ld. AO noted that the against the interest income of Rs. 7,51,443/- interest expenses of Rs. 5,47,150/- was claimed. In the assessment proceeding the assessee has not made any compliance with the notices issued and therefore, genuineness of claim was not verified and therefore, the addition of that amount of Rs. 5,47,150/- claimed was disallowed. When the matter carried before the ld. CIT(A) he noted that the assessee has not filed the fund flow statement regarding the taking of interest bearing funds and their utilisation and thus since this onus was not discharged by the assessee the addition was sustained.

On this issue the ld. AR of the assessee contended that no additions have been made with reference to any incriminating material. Alternately, it was argued that assessee had disclosed income from interest under the head income from other sources from parties of Rs. 7,31,195/- besides this interest income was also disclosed from firm Vrandavan Colonizers of Rs.
4,43,206/-. Assessee had obtained loans for making investment in firm for making investment in firm as well for business purposes. Hence the claim of interest of Rs. 4,57,150/- was well in order and deserved to be allowed.
We found force in the argument and therefore, allow the alternative plea of the assessee that the interest income from the firm Vrandavan Colonizers income of Rs. 4,43,206/- is required to be adjusted against the disallowance of Rs. 4,57,150/- and thereby since that income short by Rs.
13,944/- is sustained in the hands of the assessee in the absence of any details and therefore, ground no. 7 raised by the assessee is partly allowed.

The bench noted that ld. AO made the addition of Rs. 10,00,000/- on account of marriage expenses of his niece Sonam during the year under consideration without any material or evidence found while search but the addition is merely based on the statement recorded u/s 132(4) on 29.07.2016. In that statement the assessee stated that expenditure on Kailash Chand Maheshwari vs. DCIT marriage of Sonam daughter of his brother was celebrated at a place
Shreeram Paradise and total expenditure was stated at Rs. 10 Lakhs.
Merely that was the basis only that addition has been made treating the expenditure as unexplained. When the matter carried to ld. CIT(A) he upheld the additions. But he has not considered the contention of the assessee that (i) Addition has been exclusively made on the basis of statement only. It is settled position of law that no addition can be made purely on the basis of statement recorded u/s 132(4) unless the same is substantiated or supporting by some documentary evidence or incriminating material. In this case no incriminating material was found at all and not the least pertaining to expenditure on marriages. Therefore the addition is without any basis. (ii) The Learned Assessing Officer on his part has not brought any material on record regarding the expenditure incurred on marriage. Even no enquiry was conducted from the marriage place namely Shreeram Paradise. In view of this the addition made is totally uncalled for. (iii) It is further submitted that it is a case where additions have not been made with reference to any incriminating material as such the Learned Assessing Officer was precluded in making any other addition. As the addition is merely based on the surmises and conjecture and merely a guess work no addition is required to be sustained. Addition is possible
Kailash Chand Maheshwari vs. DCIT only when such statement recorded u/s 132(4) is substantiated by other incriminating material or documents found during search. In the case of the assessee, no document, no incriminating material was found relating to the expenditure on marriage of Sonam. Therefore, the Learned Assessing
Officer was precluded in making such an addition and that too without bringing any cogent material for making the addition, merely the guess work cannot be used to make the addition. As serviced before us the judicial precedent on the issue which are;
(1)
PRINCIPAL COMMISSIONER OF INCOME TAX & ORS. vs.
BEST INFRASTRUCTURE (INDIA) PVT. LTD. & ORS.
HIGH
COURT
OF DELHI
(2017)
159
DTR
0257
(Del), (2017) 397 ITR 0082 (Delhi)

The Hon'ble Court held that statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev
The Hon'ble Court held that if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search.
A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/ material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found
(3)PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) & ORS. vs.
ANAND KUMAR JAIN (HUF) & ORS. HIGH COURT OF DELHI (2021) 320 CTR
0656 (Del), (2021) 432 ITR 0384 (Delhi),

Assessment has been framed under section 153A, consequent to the search action. The scope and ambit of section 153A is well defined. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of P, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4). However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment.
(4)COMMISSIONER OF INCOME TAX vs. JAGDISH NARAIN RATAN KUMAR
HIGH COURT OF RAJASTHAN (2015) 373 ITR 0394 (Raj), (2015) 234 TAXMAN
0039 (Rajasthan)

The Hon'ble Court held that the statements made during search, must be correlated with the records, which are found, and if there is any ambiguity, the explanation given by the assessee should be taken into consideration, before making the assessment. The legal position with regard to the undisclosed income from the diaries, does not need any elaboration, however, if the material found during the search, does not tally with the statement records, and that the statement is made subject to the material, which has been seized, a conscious effort should be made to consider the effect of the statement and to make an appropriate assessment by correlating the statements with due material.

Thus, it is matter of fact except the statemen no other material advanced to support the addition and therefore, respectfully following the above cited binding precedent we direct the ld. AO to delete that addition of Rs.
10,00,000/- and thereby the ground no. 9 raised by the assessee is allowed.
20. Resultantly the appeal filed by the assessee in ITA no. 1463/JP/2024
stands partly allowed.
21. Vide ITA No. 1464/JP/2024 for A.Y 2016-17 the assessee has raised the following grounds of appeal;
1. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the action of the Learned 1 Assessing Officer in the passing the order u/s 144/153A of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed.

Ground no. 8 being consequential in nature, does not require any finding.
Ground no. 1 challenging the impugned order on technical aspects of the matter becomes academic as we have decided the appeal of the assessee on merits. Ground no. 9 being general does not require any finding.

Order pronounced in the open court on 20/05/2025. Kailash Chand Maheshwari vs. DCIT ¼ Mk0 ,l- lhrky{eh ½
¼ jkBksM deys'k t;UrHkkbZ ½
(Dr. S. Seethalakshmi)
(Rathod Kamlesh Jayantbhai)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 20/05/2025
*Ganesh Kumar, Sr. PS
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. The Appellant- Kailash Chand Maheshwari, Jaipur
2. izR;FkhZ@ The Respondent- DCIT, Central Circle-02, Jaipur
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत
6. xkMZ QkbZy@ Guard File (ITA Nos. 1463 to 1465/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत