DCIT, NEW DELHI vs. SMT. RINKU MAHAJAN, NEW DELHI

Since in all these appeals common grounds have been raised by the Revenue and by the assessee in their cross-objections, therefore, all the above appeals and the cross-objections are being considered together.

The facts of the case are that there was search and seizure operation in this group of cases on 10th February, 2012. During the course of search, statement of Shri Lalit Mahajan i.e., the assessee in appeal No.5590/Del/2015 was recorded, in which, he admitted of cash

However, during the course of assessment proceedings, the assessee filed letter dated 11th March, 2014 in which he denied to have made any investment in cash in Indirapuram Habitat Centre. The Assessing Officer recorded his statement u/s 131 in which also he reiterated the same i.e., denied making any cash investment in Indirapuram Habitat Centre. The Assessing Officer also noted that during the course of search in Aerens Group on 17th August, 2011, the hard disk of the computer was seized and the printout of the file named as ‘D.P. Correction Sheet.xls’ contained details of payments made by the family members of the Mahajan family for booking space in the said property. Therefore, the Assessing Officer, relying upon such excel sheet found during the course of search of Aerens Group and also the statement of Shri Lalit Mahajan during the course of search at Mahajan family, made the addition of `10 crores in the case of various family members as unexplained investment in the acquisition of space in Indirapuram Habitat Centre. On appeal, learned CIT(A) deleted the addition. The Revenue, aggrieved by the order of

At the time of hearing before us, it is stated by the learned counsel for the assessee that during the course of search of the assessee’s premises, no incriminating material was found to prove that any cash payment was made by the assessee for acquisition of space in Indirapuram Habitat Centre. That the addition is made purely on the basis of statement of one of the family members viz., Shri Lalit Mahajan. He submitted that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Harjeev Aggarwal – [2016] 70 taxmann.com 95 (Delhi) and PCIT Vs. Best Infrastructure (India) (P.) Ltd. – [2017] 84 taxman.com 287 (Delhi). He further stated that the Assessing Officer also relied upon some material in the form of excel sheet claimed to have been found from the hard disk of Aerens Group of companies. That in the assessment u/s 153A, only the material found during the course of search of the assessee’s premises can be used against the assessee and not the material found in the case of some other assessee. That for utilizing the material found during the course of some other assessee, there is a specific provision i.e., Section 153C, which has not been invoked in this case and the assessment has been made u/s 153A. Under Section 153A, the Assessing Officer is supposed to make the assessment strictly on the basis of incriminating material found, if any, from the assessee’s premises. He stated that the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla – [2016] 380 ITR 573 (Delhi) still holds good.

The learned counsel further stated that even on merits, the addition made by the Assessing Officer was deleted by the ITAT in the case of Shri Subhash Khattar vide ITA No.902/Del/2015, which is affirmed by the Hon'ble Jurisdictional High Court in ITA No.60/2015 dated 25th July, 2017. Similarly, addition made in the case of Asha Rani Lakhotia was also deleted by the ITAT, Delhi Benches in ITA No.424/Del/2015. He stated that the addition in the case of Subhash Khattar as well as Asha Rani Lakhotia was also made on the basis of same excel sheet found during the course of search at Aerens Group for alleged payment for acquisition of space at Indirapuram Habitat Centre.

Learned DR, on the other hand, stated that during the course of search of Aerens Group who is the builder and developer of Indirapuram Habitat Centre, it was found that in the booking of space in the said complex, huge cash payment was being received by them. An excel sheet was found from the hard disk of their computer which gives in a tabulated form the receipt of payment by cheques and cash. In fact, the search at the assessee’s premises was as a consequence of the material found during the course of search of Aerens Group. Therefore, the material found from the search at Aerens Group has a direct link with the case of the assessee. She further stated that during the course of search at Mahajan family, statement of one of the family members Shri Lalit Mahajan was recorded and he admitted on behalf of all the family members that cash payment to the tune of `10 crores was made for acquisition of space in Indirapuram Habitat Centre. That the statement under Section 132(4) has a legal sanctity and that by itself constitutes an evidence and addition can be made on the basis of assessee’s statement. For this purpose, she also referred to Section 132(4) and explanation thereto. She has also relied upon the following case laws :-

In the rejoinder, it is stated by the learned counsel that when the SLP is dismissed by the Hon'ble Supreme Court without speaking order, Article 141 does not attract. In support of this contention, he relied upon the decision of Hon’ble Apex Court in the case of Kunhayammed and Others Vs. State of Kerala and Another – [2000] 245 ITR 360 (SC). He also stated that the decision of Hon'ble Jurisdictional High Court in the case of Smt. Dayawanti Vs. CIT – 2017] 390 ITR 496 (Delhi) relied upon by the learned DR is stayed by the Hon’ble Apex Court vide order dated 3rd October, 2017.

We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and the rival submissions, we find that in these appeals, following two questions arise for our consideration :-

Now, we consider the arguments of both the sides in the light of the facts of the case. The scope of assessment under Section 153A has been considered by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra). In the above mentioned case, Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:-

In clause (iv) above, their Lordships held “Obviously an assessment has to be made under this Section only on the basis of seized material”. In clause (v), the same is reiterated by holding “In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made”. In clause (vii), it is stated “Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search”.

Similar view was expressed by their Lordships in the case of CIT Vs. RRJ Securities Ltd. – [2016] 380 ITR 612 (Delhi).

In the case of Principal CIT, Delhi-2 Vs. Best Infrastructure (India) (P.) Ltd. – [2017] 397 ITR 82 (Delhi), their Lordships of Jurisdictional High Court reiterated the similar view in paragraph 33 of the order, which reads as under :-

From a reading of the above decisions of Hon'ble Jurisdictional 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 Jurisdictional 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 :-

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 Jurisdictional 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.

Now, coming to question No.2, we find that this issue is also covered by the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) and Best Infrastructure (India) (P.) Ltd. (supra). In the case of Harjeev Aggarwal (supra), Hon'ble Jurisdictional

Thus, Hon'ble Jurisdictional High Court has held “The words “evidence found as a result of search” would not take within its sweep statements recorded during search and seizure operations”. Their Lordships further observed “However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation”. In paragraph 24, their Lordships have mentioned about the prevailing practice of extracting statement by exerting undue influence or coercion by the search party. Though the above decision in the case of Harjeev Aggarwal is with reference to the meaning of undisclosed income u/s 158BB of the Income-tax Act, however, in our opinion, the above observation of Hon'ble Jurisdictional High Court would be squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A.

In the case of Best Infrastructure (India) (P.) Ltd. (supra), Hon'ble Jurisdictional High Court reiterated in paragraph 38 “Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal”.

Learned DR has relied upon several decisions so as to buttress her case that the statement recorded under Section 132(4) has an evidentiary value and the addition can be made under Section 153A on the basis of such statement without there being any incriminating material. The first case relied upon by her is of Hon’ble Madras High Court in the case of B. Kishore Kumar Vs. CIT - 52 taxmann.com 449. She has also stated that the SLP against this decision is dismissed by the Hon’ble Apex Court which is reported in 62 taxmann.com 215. We

The next decision relied upon by the learned DR is of Hon'ble Delhi High Court in the case of Bhagirath Aggarwal (supra). In this case, Hon'ble Jurisdictional High Court held as under :- “Held, dismissing the appeal, that it was the assessee who had admitted and surrendered a sum of Rs.1.75 crores as his undisclosed income. It was incumbent upon him to show that he had made a mistake in making that admission and that the admission was incorrect. He had access to all the documents which had been seized inasmuch as copies had been supplied to him. However, he did not produce anything to establish that the admission was incorrect in any way. Thus, the assessee could not resile from his statements made on November 10, 11, 2005, and November 21, 2005. The statements recorded under section 132(4) were clearly relevant and admissible and they could be used as evidence. In fact, once there was a clear admission, voluntarily made, on the part of the assessee, that would constitute a good piece of evidence for the Revenue.” (emphasis by underlining provided by us)

From the above, it is evident that in this case also, certain documents were seized and copies of which were supplied to the assessee. Thus, admittedly, there was incriminating material in the above case.

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

The identical situation is here. The decision of Hon'ble Delhi High Court in the case of Harjeev Aggarwal (supra) is referred to for consideration by the Larger Bench. Therefore, following the above decision of ITAT, we hold that merely by reference to Larger Bench, it cannot be construed that decision in the case of Harjeev Aggarwal (supra) is overruled. The above decision continues to be binding precedent.

Learned DR has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Smt. Dayawanti (supra). However, we find that Hon’ble Apex Court in the case of Smt. Dayawanti vide order dated 3rd October, 2017 have stayed the operation of this order. Once the operation of the order of Hon'ble Delhi High Court in the case of Smt. Dayawanti (supra) has been stayed by the Hon’ble Apex Court, it cannot be held to be a binding precedent.

Learned DR has also relied upon the following three cases which were relating to survey proceedings :-

As the above decisions were relating to survey proceedings, the same will have no application for interpreting the scope of assessment under Section 153A.

The next decision relied upon by the learned DR is of Hon’ble Gauhati High Court in the case of Greenview Restaurant (supra). We find that the facts in this case are altogether different as assessment was completed under Section 143(3) and not under Section 153A. Therefore, the above decision would not be applicable so far as the scope of assessment under Section 153A is concerned.

In view of the above, we, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) and Best Infrastructure (India) (P.) Ltd. (supra), hold that the statement recorded during the course of search on standalone basis without reference to any other material discovered during the search and seizure operation would not empower the Assessing Officer to make the addition merely because any admission was made by the assessee during the search operation. Admittedly, in this case, during the course of search of assessee’s premises, no incriminating material was found except the statement of one family member viz., Shri Lalit Mahajan. Solely on the basis of the statement of Shri Lalit Mahajan,

However, for the sake of completeness, we have also gone through the statement of Shri Lalit Mahajan which is reproduced by the Assessing Officer in the assessment order and, for ready reference, we reproduce the same herein below:- 4. Subsequently, search was conducted at the corporate office of Mahajan group of Okhla Industrial Area and on 11.02.2012 statement of head of the Mahajan family, Sh. Lalit Mahajan was recorded on oath. He admitted in his statement of making cash investment in the above stated projects of AEZ group. The relevant extracts of his statement are reproduced here below in respect of project at Indirapuram Habitat Centre :-

From the above, it can be seen that with reference to question No.6, he admitted the cash payment of `10 crores by six family

In the result, the appeals of the Revenue are dismissed and the cross-objections of the assessees are allowed.