SMT. RENU SEHGAL,JAIPUR vs. DCIT, CENTRAL CIRCLE-3, JAIPUR, JAIPUR

In brief, case of the department as described in the order u/s 154 of the Act is that on 17.12.2017, a search and seizure action u/s 132(1) of the Act was carried out in the case of Adventage Group, Jaipur to which the assessee belongs. Notice u/s 153A of the Act was issued to the assessee on 20.06.2016. Thereupon, the assessee filed return of income for the above said 5 assessment years, declaring her income therein.

Further, it is case of the department that on 27.12.2016, the assessee filed an application before Settlement Commission concerning above said search. Therein, the assessee is stated to have offered incomes from the assessment years 2009-10 to 2015-16 in the manner as :- A.Y. Net total income was per return of Addl. Income offered before Total income income filed u/s 136/153A (Rs.) Settlement Commission (Rs.) 2009-10 3,92,619 2,00,000 5,92,619 2010-11 6,55,470 3,00,000 9,55,470 2011-12 5,61,970 4,00,000 9,61,970 2012-13 10,33,770 5,00,000 15,00,770 2013-14 11,16,150 5,00,000 16,16,150 2014-15 12,30,570 6,00,000 18,30,570 2015-16 8,93,090 10,00,000 18,93,090 Total 58,83,639 35,00,000 93,83,639 To 27/JPR/2025 Smt. Renu Sehgal vs. DCIT 6. However, the above said applications filed by the assessee before Settlement commission were rejected vide order dated 06.01.2017. It was thereafter that assessment u/s 143(3) r.w.s 153A read with section 245 HA was completed on 09.03.2017.

As further mentioned in the orders u/s 154 of the Act, on perusal of the assessment records of the assessee, it was observed that the assessee had filed appeal before Learned CIT(A) against the assessment years i.e. A.Y. 2015-16, vide which addition of Rs. 35,00,000/- had been made on account of additional income disclosed in the above mentioned application submitted before Settlement Commission. While disposing of the appeal, Learned CIT(A) is stated to have restricted the above said addition to Rs. 10,00,000/- only and directed the Assessing Officer to add the balance disclosed income to Rs. 25,00,000/- in the relevant years, as per order dated 01.03.2018. That is how, notice u/s 154 of the Act was issued to the assessee on 30.07.2018 for rectification of mistake.

Rectification was sought to be made in respect of the following mistake of respective Assessment Years:- Assessment Year 2009-10 “ Particulars of mistake proposed to be rectified To 27/JPR/2025 Smt. Renu Sehgal vs. DCIT In this case, the assessment u/s 143(3)/153B(1)(b) was completed on 10.03.2017 at total income of Rs. 3,92,619/-. Thereafter the Hon’ble CIT(A)-4, Jaipur passed the order resulting in increase of income by Rs. 2,00,000/-. Therefore, amount to Rs. 2,00,000/- should not added to your total income for A.Y. 2009-10.”

The above said notice was responded to by the assessee in each matter. The Assessing Officer rejected the written submission put forth by the assessee, in respect of each of the above said notice pertaining to the above mentioned 5 assessment years. In this regard, as regards AY 2009-10, the Assessing Officer observed in para 4.1 of the orders u/s 154 as under:- “4.1. The written submission of the assessee has been duly considered but not found acceptable for the reasons that the assessee gave a generic reply without specifically pointing out that why income of Rs.2,00,000/- offered before the Hon'ble ITSC shouldn't be added to her total income on account of undisclosed income which was offered by the assessee herself in the application filed before Hon'ble ITSC. It is pertinent of the mention that the additional income offered by the assessee was worked out on the basis of loose papers, notings and documents in respect of sale and purchase of properties, payable and receivable etc. seized by the department during the search proceedings on 17.12.14.”

In para 4.3 of the orders u/s 154, the Assessing Officer observed as under:- “4.3 The admission of the assessee was binding on her as the assessee has owned up the share of undisclosed income after complete analysis and incriminating material. Therefore, the assessee cannot be allowed to take a plea that the amount of undisclosed income owned by the assessee is not fully backed by the seized material as it would amount to adopting a modus operandi to avoid tax liability. The same was reaffirmed by the Ld. CIT(A). The case laws cited by the assessee are misplaced and facts and circumstances of the case clearly prove that she has not disclosed her total income found during the search proceedings and also admitted before the ITSC.”

That is how, the Assessing Officer made additions to the total income of the assessee on account of undisclosed income for the 5 assessment years under consideration.

Ld. AR for the appellant has raised only one contention that the order u/s 154 came to be passed by the Assessing Officer relying on the admission stated to have been made by the assessee in her application submitted before Settlement Commission on 27.12.2016 regarding To 27/JPR/2025 Smt. Renu Sehgal vs. DCIT undisclosed income, but, the ACIT could not base on the orders only on the admission of the assessee in the said application submitted before Settlement Commission, without any incriminating material. Ld. AR has further contended that even Learned CIT(A) sustained the additions, while upholding the orders u/s 154 rejecting the same contention raised there in the 5 appeals there.

In support of his contention, Ld. AR has relied on a covered matter i.e. decision by Coordinate Bench, Jaipur on 19.08.2019 in and 708 & 709/JP/2018, in relation to the case of the same assessee-appellant.

On the other hand, Ld. DR for the department had relied on the findings recorded by Learned CIT(A), and the observations made by the ACIT in the 5 years u/s 154 of the Act .

Above cited decision in and 708/JP/2018 pertains to the assessment year 2012-13, and third appeal in ITA No. 709/JP/2018 pertaining to the assessment year 2015-16.

As noticed above, while passing the orders u/s 154 of the Act, ACIT based the same on the admission made by the assessee in her application submitted before Settlement Commission.

In the above cited decision by the Coordinate Bench of ITAT, Jaipur Bench, reliance was placed on decision in the case of Anantanadh Construction & Farms Pvt. Ltd. vs. DCIT, 166 ITD 83 by the Coordinate Bench ITAT, Mumbai wherein it was held that confidential information submitted before the Settlement Commission cannot be the basis of addition in the assessment proceedings in absence of any incriminating material found during the course of search and seizure action.

Admittedly, the application submitted before Settlement Commission was not adjudicated on merits, and rather, the same was found to be not maintainable as the same did not fulfill conditions laid down u/s 245C(1) of the Act.

On the issue involved, the Coordinate Bench, ITAT, Jaipur went on to observe as under:- “There is no quarrel that the material and other information produced by the assessee before the Settlement Commission or any evidence recorded by the Settlement Commission in the proceedings before it can be used by the AO as well as other income tax authority for the purpose of assessment. However, when application filed by the assessee u/s 245C(1) itself fails for want of any material supporting the additional income disclosed then mere disclosure of To 27/JPR/2025 Smt. Renu Sehgal vs. DCIT income in the application u/s 245C(1) cannot be a basis of addition to the income of the assessee. What is provided u/s 245HA(3) is the evidence which may be in the shape of material, information or result of the enquiry held or evidence recorded by Settlement Commission in the course of proceedings. However, in the case in hand, there was no occasion of conducting any proceedings or enquiry or recording any evidence as the application of the assessee was rejected for want of any supporting material. The ld. CIT(A) has also not referred to any incriminating material to disclose the income which was offered by the assessee in the said application filed u/s 245C(1) of the Act but disclosure made in the application itself was considered as an evidence.”

Ultimately, therein Coordinate Bench, ITAT, Jaipur held that in the absence of any material must less incriminating material, no addition could be made only on the basis of income offered in the application u/s 245C(1) of the Act, when the application was rejected by the Settlement Commission.

In the given facts and circumstances of the case and having regard to the decision by the Coordinate Bench, ITAT, Jaipur in and 708 & 709/JP/2018, by which present case of the assessee-appellant is covered, we are in agreement with the contention raised by Ld. AR for the appellant that the ACIT erred in making addition simply on the basis of admission made by the assessee in her application submitted before Settlement Commission, without referring or taking into consideration or discussing any incriminating material therein.