PARESH K. SHAH,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4), MUMBAI

the validity of the jurisdiction assumed by the A.O for framing the assessment u/s 153C r.w.s 143(3) of the Income-tax Act, 1961 (for short “I-T Act”), therefore, the 2 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah said appeals are being disposed off by way of a consolidated order. For the sake of convenience, first we shall take up the appeal of the assessee for the assessment year 2007-2008 in . The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal :- “1. The authorities below have erred in initiating and completing assessment/ upholding such initiation and completion; under Section 153C in the absence of any incriminating material found or seized, without any factual or legal basis, without mentioning or establishing any relationship between the searched person and the appellant and without making due enquiries.

In the course of search proceedings, cash amounting to Rs.11,00,000/- and silver weighing 11.2 Kg. valuing Rs.7,23,060/-, alongwith certain incriminating documents viz. „loose paper files‟ containing the income-tax and sales tax related documents of third parties, were found and seized from the aforementioned locker No.596 and inventorised as Annexure A/1 to A/4 of Panchanama, dated 20.11.2012. As was discernible from the records of M/s Gold Sukh Safety Vaults Ltd., the authorization in respect of locker was though issued in the name of M/s Patel Ashokkumar Mohanlal Ni Co., however, the locker was found to be allotted in the name of the assessee. In the backdrop of the aforesaid facts the statement of the assessee was recorded u/s. 132(4) of the I-T Act on 20.11.2012. Initially, the assessee in his statement distanced himself from the aforementioned concern viz. M/s Patel Ashokkumar Mohanlal Ni Co. and claimed that he was not aware of any such entity. However, at the same time, the assessee stated that the cash of Rs.11,00,000/- and silver valued at Rs.7,23,060/- that was found and seized from the aforesaid locker No. 596 belonged to him. On the basis of the incriminating material and the valuables found and seized from the locker, proceedings u/s.153C of the I.T Act were initiated in the case of the assessee. In compliance to the notice issued to the assessee u/s.153C r.w.s.153A of the Act, the assessee filed a copy of his „Original‟ 5 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah return of income for the year under consideration viz. A.Y.2007-2008, that was earlier filed by him u/s 139(1) on 31.07.2007.

On the basis of aforesaid details made available by the Sales Tax Department, Government of Maharashtra, it was observed by the A.O that the names of a number of concerns mentioned in the aforesaid list figured in the list of the accommodation entry providers which was provided by the department. In reply to the query raised by the A.O as to why the commission income on the bogus turnover of the aforementioned hawala entries may not be brought to tax in his hands, the assessee, vide his letter dated 09.03.2015 once again tried to distance himself from the 8 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah documents which were found and seized from his locker during the course of the above stated search and seizure proceedings. In sum and substance, the assessee on account of multiple grounds had tried to impress upon he A.O that no adverse inferences on the basis of the documents which were found and seized from locker No.596 during the course of the search proceedings were liable to be drawn in his hands. The assessee in the course of the assessment proceedings tried to persuade the A.O that no estimation of commission income in his hands could be made on the basis of the aforesaid documents for certain reasons viz (i) that, it could not be substantiated that the assessee had any connection with the parties whose documents were seized from his locker No.596; (ii) that, no reference as regards the fate of the notices issued u/s.133(6) of the I-T Act to the aforementioned parties by the department was conveyed to him; (iii) that, as the papers found in the locker No.596 were the photocopies of returns, challans etc., hence, no adverse inferences on the basis of the same could validly be drawn; and (iv) that, the aforesaid seized documents in no way established that the assessee was either a proprietor/partner or director of the concerns therein mentioned. However, the A.O after deliberating on the contentions advanced by the assessee was not persuaded to accept the same. It was noticed by the A.O that the assessee in his reply to a specific Question No.43 that was raised in context of the ownership of the contents lying in the locker no. 596, had in the course of recording of his statement 9 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah u/s.132(4) of the I-T Act, dated 20.11.2012 categorically admitted that the same belonged to him. As such, the A.O held a strong conviction that the assessee by twisting his own words was trying to distance himself from the incriminating documents that were found and seized during the course of the search proceedings from his locker no.

As regards the statement recorded by the assessee u/s.131 of the Act on 04.02.2013 was concerned, wherein, he had tried to impress upon the A.O that he was in no way connected with the documents which were found and seized from his locker No.596, the A.O was of the view that in the backdrop of the substantial time gap, it could safely be concluded that the same was a tutored retraction on his part. In fact, it was observed by the A.O that the assessee in his statement recorded u/s.132(4) of the I-T Act, on being confronted with the „documents‟ which were found and seized from his locker No.596 viz. Annexure-A/1 to A/4, had specifically stated that the same were relating to his business of commission agent of cloth items. Apart from that, the assessee had at no stage during the course of the search proceedings claimed that the documents were not related to him. It was further observed by the A.O that on being confronted with the seized documents, it was specifically stated by the assessee that the detailed explanation in respect of each page of the respective Annexures viz. A/1 to A/4 would thereafter be provided by him. As such, the A.O declined to accept the claim of the assessee that he was in no way connected with the documents which were found and seized from his 10 ITA Nos.83 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah locker No.596 in the course of search proceedings. As regards, the contention of the assessee that the revenue as per the information gathered on the basis of enquiries carried out u/s. 133(6) had failed to establish any nexus between him and the aforementioned parties, it was observed by the A.O that as 90% (approx) of the letters issued to the said parties were returned unserved by the postal authorities, thus, there was no occasion for confronting any such information to the assessee. It was also observed by the A.O that all the efforts to locate the aforementioned parties had also gone in vain. On the basis of his aforesaid deliberations, the A.O was of the view that the claim of the assessee that as he was not the proprietor/partner or director in either of the aforementioned concerns, therefore, no adverse inferences as regards the documents pertaining to the said parties was liable to be drawn in his hands did not merit acceptance.

The Ld. A.R further adverting to the merits of the case, submitted, that the A.O/CIT(A) had whimsically stamped the assessee as an accommodation entry provider. It was submitted by the ld. A.R that as neither any conclusive evidence had surfaced in the course of the search and seizure proceedings which would irrefutably prove that the assessee was engaged in providing accommodation entries, nor the same could be established in the course of assessment proceedings, therefore, the adverse inferences which were drawn by the lower authorities on the 15 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah basis of assumptions, presumptions, surmises and conjectures, could not be sustained and were liable to be vacated. In order to buttress his aforesaid contention, it was contended by the ld. A.R that the lower authorities had lost sight of the fact that the locker No.596 could be operated not only by the assessee, but also by three other persons. Apart there from, it was submitted by him that the key of the locker was also not found from the assessee but was recovered from Shri Ashokkumar Mohanbhai Patel. As regards the „statement‟ of the assessee which was recorded u/s 132(4) during the course of search operation on 20.11.2012, wherein he had owned the contents of the locker, it was submitted by the ld. A.R that the said „statement‟ was thereafter retracted by the assessee on 02.02.2013. The Ld. A.R in order to drive home his contention that no adverse inferences on the basis of the documents found and seized from locker No.596 could validly be drawn in the hands of the assessee, submitted, that a perusal of the so called incriminating documents revealed that the same were merely photocopies of the PAN Cards, VAT details, Aadhaar Cards etc. of certain parties, which could not be pressed into service for drawing adverse inference against the assessee. The Ld. A.R submitted that merely on the basis of the aforementioned standalone documents found in the course of search and seizure proceedings that the A.O had whimsically concluded that of all the companies to whom the said documents pertained were providing accommodation entries at the behest of the assessee. It was further submitted by the ld. A.R, that the 16 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah A.O in the course of the assessment proceedings while seeking the details as regards 45 parties from the Sales Tax Department, Maharashtra, vide his letter dated 22.01.2015, had though specifically enquired as to whether the said companies/firms were genuine or not, but the reply received from the Sales tax department only provided the details as regards the turnovers of 37 concerns, and there was no whisper as regards the genuineness or otherwise of the said entities. In nutshell, it was submitted by ld. A.R that despite the fact that there was no material before the A.O for concluding that the companies were involved in the business of providing accommodation entries, the A.O had most arbitrarily so assumed and had drawn self-suiting adverse inferences in the hands of the assessee on the basis of the seized documents. Further, it was submitted by ld. A.R that even the details filed by the Sales Tax Department was only in context of 37 parties. As regards the remaining 16 parties, it was submitted by ld. A.R that the basis for compilation of the details by the A.O as regards the said parties under the head “List B” remains a mystery till date. It was submitted by ld. A.R that the CIT(A) failing to appreciate the facts of the case in the right perspective, had thus most arbitrarily concluded that the assessee was providing his services as a facilitator in the accommodation entry providing business carried out by the aforementioned concerns.

In order to verify the correct factual position, the ld. AR in the course of hearing of the appeal was directed to substantiate his claim that 17 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah all the 53 parties under consideration were not involved in the business of providing accommodation entries by placing on record the list of non- genuine dealers/parties as were blacklisted by the Sales Tax Department, Govt. of Maharashtra and support the same by way of an “affidavit” under Rule 10 of the Appellate Tribunal Rules, 1963. In compliance, the assessee had subsequently filed copies of two such lists of hawala dealers/non-genuine dealers comprising of 1552 parties and 2393 parties, respectively. Further, the assessee along with an “affidavit” had in reference to 37 parties forming part of the list “A” that was prepared by the AO, therein claimed that names of 13 parties in the said list did not figure in the list of suspicious dealers which were blacklisted by the Sales Tax Department, Govt. of Maharashtra in the month of March, 2013. Apart therefrom, the assessee had also given details as regard the respective turnovers of the said parties. As such, it is the claim of the assessee that as against the aggregate turnover of Rs.1029,22,10,910/- of the aforementioned 37 parties spread over the period A.Y.2007-2008 to A.Y.2013-2014 turnover of Rs.216,31,83,843/- pertained to the aforementioned 13 parties whose names did not figure in the aforementioned list of suspicious dealers.

Per Contra, the ld. Departmental representative (for short „D.R‟) relied on the orders of the lower authorities. Insofar the validity of the jurisdiction assumed by the A.O u/s.153C of the Act was concerned, it was submitted by the ld. D.R that the date of receiving the books of 18 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah accounts or documents or assets seized or requisitioned by the A.O having jurisdiction over such other person, as stated in the „first proviso‟ of sub-section (1) to Section 153C was only in context of the „second proviso‟ to sub-section (1) of Section 153A. In sum and substance, it was the claim of the ld. D.R that it was only in the context of construing the period of six assessment years pending on the date of initiation of search u/s.132 which would stand abated as envisaged in the „second proviso‟ to sub-section (1) of Section 153A, that a reference to the said effect was made in the „first proviso‟ to sub-section (1) of Section 153C. As such, it was vehemently submitted by the ld. D.R that the period of six years referred in the „first proviso‟ to sub-section (1) of Section 153C was only for the purpose of construing the period i.e. the assessment years for which the pending assessments were to stand abated. It was submitted by the ld. D.R, that going by the rule of strict literal interpretation, the „first proviso‟ of sub-section (1) of Sec. 153C has to be construed as such, and no words howsoever meaningful they may so appear, unless specifically provided for, can therein be read into the said statutory provision. On merits, it was submitted by ld. D.R that the assessee in his „statement‟ recorded u/s.132(4) of the I.T Act, had categorically admitted that the documents lying in his locker No.596 belonged to him. It was submitted by ld. D.R that the assessee on being confronted with the said documents had categorically admitted that the same pertained to his business of commission agent of cloth items. The Ld. D.R submitted that though the 19 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah assessee on being confronted with the „documents‟ which were found and seized from his locker No.596 viz. Annexure-A/1 to A/4, had asked for some further time to explain each and every paper of the said seized documents, however, at no stage he had ever claimed that the same did not belong to him. It was submitted by the ld. D.R, that the subsequent „statement‟ of the assessee which was recorded u/s.131 on 02.02.2013 was a clearly tutored retraction on his part. It was further submitted by him that now when the aforesaid incriminating documents pertaining to third parties were found lying in the locker of the assessee, therefore, a very heavy onus was cast upon him to explain as to what was the purpose of keeping the said documents with him. The Ld. D.R in order to buttress his aforesaid contention, took us through the relevant extract of the orders of the lower authorities. Further, it was submitted by the ld. D.R that the CIT(A) had most whimsically without giving any reasoning reduced the commission rate of 3% as adopted by the A.O for estimating the income of the assessee, to an arbitrary rate of 0.05%. It was submitted by ld D.R that the order passed by the CIT(A) may be „set aside‟ and that of the A.O be restored.

We have heard the authorized representatives of both the parties, perused the orders of the lower authorities, material available on record and the judicial pronouncements relied upon by them. We shall first advert to the contention of ld. A.R wherein he has assailed the validity of jurisdiction assumed by the A.O for framing the assessment u/s.153C of 20 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah the I.T Act for the year under consideration i.e. A.Y 2007-2008. We have deliberated at length on the issue under consideration and find substantial force in the contentions advanced by the ld. A.R, that as per the „first proviso‟ of sub-section (1) of Section 153C, the date of initiation of search u/s.132 of the Act for the purpose of framing of an assessment u/s.153C has to be construed as the date of receiving the books of accounts or documents or assets seized or requisitioned by the A.O having jurisdiction over such other person, from the A.O of the searched person. On a careful perusal of the „first proviso‟ to sub-section (1) of Sec. 153C, we find that the same provides 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 section 153A “shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person." As such, in the income tax proceedings u/s.153C, the reference to the date of initiation of the search in the „second proviso‟ to Section 153A, has to be construed as the date on which the A.O receives the books of accounts or documents or assets from the A.O of the searched person. Accordingly, in our considered view, it would mean that six assessment years for which the assessments or reassessments could be made u/s.153C would have to be reckoned with reference to the date of handing over of the books of accounts or documents or assets by the A.O of the searched person, to 21 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah the A.O of the assessee i.e. the person other than the searched person. In sum and substance, in case of an assessee other than the searched person, the period of six assessment years will have to be reckoned from the date on which the books of accounts or documents or assets seized are received by the A.O having jurisdiction over such other person. We find that the aforesaid contention averred by the ld. A.R is also supported by the fact that the legislature in all its wisdom, had vide the Finance Act, 2017 w.e.f. 01.04.2017 came up with an amendment in Section 153C, to the effect that the block period for the person in respect of whom search was conducted, as well as the “other person” would be the same six assessment years immediately preceding the year of search. In our considered view, as the said amendment is prospective in nature, hence, the same would not be applicable to the case of the assessee i.e. for the A.Y 2007-2008. Our aforesaid view is also fortified by the judgment of the Hon‟ble High Court of Delhi in the case of CIT Vs. RRJ Securities Pvt. Ltd., (2016) 380 ITR 612 (Delhi). Apart there from, we find that the aforesaid view was once again affirmed by the Hon‟ble High Court in the case of PCIT Vs. Sarwar Agency (P.) Ltd. [2017] 397 ITR 400 (Delhi), wherein it was observed as under:

In terms of Section 153 A(1) (b) of the Act, the AO shall assess or re- assess the total income of six AYs immediately preceding the AY relevant to the previous year in which the search was conducted. The second proviso to sub-section (1) of Section 153 A of the Act, states that assessment or re- assessment relating to any AY falling within the period of six AYs referred to in the said sub-section pending on the date of initiation of the search under Section 132, would abate.

The case of the Assessee, on the other hand, is that since in the case of the 'other person' the AO issues notice only subsequent to the notices issued under Section 153 A to the searched person, the starting point for computation of the block period would be the date on which, based on the seized documents, notice is issued to the 'other person' under Section 153 C of the Act. Thus in the present case, the six year period prior to AY 2012-13 i.e. AY 2007-08 to AY 2012-13. Thus no notice could be issued under Section 153 C of the Act to reopen the Assessee's assessment for AY 2006-07. Reliance is placed on the decision of this Court in Commissioner of Income– tax-7 v. RRJ Securities Ltd. [2016] 380 ITR 612 (Del) where this very question was examined and answered in favour of the Assessee and against the Revenue.

In RRJ Securities (supra), the Court after noticing the decision in SSP Aviation Ltd. v. Deputy CIT [2012] 346 ITR 177 (Del), held as follows: “21. As discussed hereinbefore, once the AO of the searched person is satisfied that the seized assets/documents belong to another person and the said assets/documents have been transferred to the AO of such other person, the proceedings for assessment/reassessment of income of the other person has to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any 23 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah income that may have remained undisclosed in the relevant assessment years.....

As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee."

Mr. Salil Aggarwal, learned counsel for the Assessee, has drawn the attention of the Court to the recent amendment made in Section 153 C of the Act by the Finance Act, 2017 with effect from 1st April 2017. This amendment in effect states that the block period for the searched person as well as the 'other person' would be the same six AYs immediately preceding the year of search. This amendment is prospective.

Mr. Ashok Manchanda, learned Senior Standing counsel for the Appellant, sought to pursue this Court to reconsider its view in RRJ Securities (supra). The Court declines to do so for more than one reason. First, for reasons best known to it, the Revenue has not challenged the decision of this Court in RRJ Securities (supra) in the Supreme Court. The said decision has been consistently followed by the authorities under this Court as well as by this court. Thirdly, the recent amendment to Section 153 C(1) of the Act states for the first time that for both the searched person and the other person the period of reassessment would be six AYs preceding the year of search. The said amendment is prospective.

Consequently, no substantial question of law arises from the impugned order of the ITAT. The appeal is, accordingly, dismissed.”

We shall now in the backdrop of the aforesaid settled position of law, deliberate on the facts before us. As stated by the ld. A.R, the „satisfaction‟ of the A.O of the assessee i.e the person other than the searched person was recorded on 15.01.2014. As such, the period of six years was to be reckoned from the date of recording of such „satisfaction‟, 24 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, as per the ld. A.R, the case of the assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. As per the facts stated by the ld. A.R before us, we find substantial force in his contention that the year under consideration viz. A.Y 2007-08 does not fall within the period for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, in case the A.O of the searched person and that of the assessee is the same person, then the date of recording of „satisfaction‟ by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of the assessee that the year under consideration vis. A.Y.2007-2008 falls beyond the scope of six assessment years from the aforementioned date of recording of satisfaction or receiving of documents or assets seized or books of accounts by the A.O of the assessee, as the case may be, then the assessment framed by the A.O shall stand vacated. The “Additional

We shall now for the sake of completeness advert to the merits of the case. Admittedly, the locker No.596 with M/s Gold Sukh Safety Vaults Ltd., 65 Vithalwadi, Mumbai-400002, was allotted in the name of the assessee. It is also not disputed that the aforementioned concern viz. M/s Gold Sukh Safety Vaults Ltd. as a matter of practice, was allotting the lockers without complete verification of the KYC details of the joint operators of the lockers. Apart there from, as is discernible from the orders of the lower authorities, the lockers would though be allotted in the name of one person, however, the same could also be operated by three other persons by incorporating their names in the „agreement‟.

We find that the assessee in his „statement‟ which was initially recorded during the course of the search & seizure proceedings u/s.132(4), dated 20.11.2012, had specifically stated that the contents lying in the locker were belonging to him. In fact, a perusal of the assessment order reveals, that the assessee on being confronted with the aforesaid documents viz. Annexure-A/1 to A/4 had specifically admitted that the same were required by him in the course of his business to get orders from the customers to prove the genuinenity of the supplier parties. The fact that the assessee had categorically admitted that the aforesaid seized documents viz Annexure-A/1 to A/4 belonged to him can safely be 26 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah gathered from his „statement‟ which was recorded during the course of the search proceedings u/s.132(4) of the Act on 20.11.2012, the relevant extract of which is reproduced as under :- “Q.50. . I am showing you the loose papers found and seized from your locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages 1 to 145. The same is marked as loose paper folder Annexure. A-1 in the List / Inventory of A/c. Books etc., found /seized dt.20-11-2012. Please confirm that the same have been found and seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 145 have been found from my locker No: 596 maintained with Gold Sukh Safety Vaults Ltd. Kalbadevi. Mumbai. To the best of my knowledge, page number 1 to 145 are photocopies of Income Tax and Sales Tax Return and related documents of those parties for which I have became brokerage, These documents are generally required to get orders from customers to prove the genuinity of the supplier party. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.51 I am showing you the loose papers found and seized from your locker No.596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages.1 to 157. The same is marked as loose paper folder Annexure A-2 in the List / Inventory of A/c. Books etc., found / seized dt.20-11-20 12. Please confirm that the same have been found and seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 157 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai. To the best of my knowledge, page number 1. to 157 are the copies of confirmation along with supporting documents required by purchase parties from various suppliers. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q:52 I am showing you the loose papers found and seized from your locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages 1 to 182. The same is marked as loose paper folder Annexure A-3 in the List I Inventory of 27 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah AIc. Books etc., found I seized dt.20-11-20 12. Please confirm that the same have been found and seized from your locker. Please explain the contents, thereof of each page. Ans. I confirm that the above .referred pages 1 to 182 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults Ltd Kalbadevi, Mumbai. To the best of my knowledge, page num.ber 1 to 182 are copies of payment of VAT by various supplier parties; audit report of various supplier parties. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.53 I am showing you the loose papers found and seized from your locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages 1 to 154. The same is marked as loose paper folder Annexure A-4 in the List / Inventory of A/c. Books etc., found /seized dt. 20-11-2012. Please confirm that the same have been found arid seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 154 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults .Ltd., Kalbadevi Mumbai. To the best of my knowledge, the pages are copies of VAT challans and PAN card photocopies. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.54 In response to Q.No. 52 and Q. No. 53 you have stated that these are photocopies of VAT challans and PAN card copies. You are asked as to why the photocopy of VAT Challans and PAN card copies of other firms/entities are kept in your locker. Ans. These documents are generally required to get orders from customers to prove the genuinenity of the supplier and purchase party.”

On a perusal of the aforesaid specific replies to the queries as regards the seized documents viz Annexure-A/1 to A/4, it can safely or rather inescapably be concluded that the said documents belonged to the assessee. As such, we are not inclined to accept the contention of the ld.A.R that the assessee was in no way connected with the documents 28 ITA Nos.83 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah which were found and seized during the course of search proceedings from his locker No.596 with M/s Gold Sukh Safety Vaults Ltd., 65 Vithalwadi, Mumbai-400002.

We shall now deliberate on the nature of the documents and the contents thereof, and in the backdrop of the same, the maintainability of the view taken by the lower authorities. As is discernible from the orders of the lower authorities, the A.O in the course of assessment proceedings, had vide his letter dated 22.01.2015 sought information from the Jt. Commissioner of Sales Tax, Economic Intelligence Unit, Mumbai, as regards 45 concerns, documents pertaining to whom were recovered from the aforementioned locker No.596 of the assessee. In the said query letter the A.O had categorically requested the Sales Tax Department to furnish the year wise sales/turnover of the said concerns, and had also sought a finding as to whether the same were genuine concerns or not. We find that the Sales Tax Department, Maharashtra, had vide its reply dated 26.02.2012 furnished details as regards the sales/turnover of 37 parties, as regards whom details were available with them. Insofar the remaining 8 parties were concerned, it was stated by the department that as either the information pertaining to them was not available or their registration certificates have been cancelled, therefore, no details as regards the turnover of the said concerns could be furnished. We further find that the A.O on his own, had on the basis of the „seized material‟ is stated to have arrived at the respective turnovers of 16 other parties, which was 29 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah tabulated by him under the head “List B”. On the basis of the aforesaid deliberations, the A.O prepared a consolidated year-wise chart for the period A.Y.2007-2008 to A.Y 2013-2014 of the turnovers of the aforementioned companies and worked out the commission income of the assessee @3% of the aggregate of the turnovers of such companies in the said respective years.

We have perused the order of the A.O and find that the basis for computing the commission income of the assessee @3% of the aggregate of the turnovers of the respective 53 concerns by him, is not backed by any logical basis or reasoning. As is discernible from the order of the A.O, he had justified the adoption of commission rate of 3% on the ground that the same was the rate which was prevailing in the market in such type of transactions. However, the said view so taken by the A.O is shorn of any basis which could have persuaded us to subscribe to the same.

On appeal, the CIT(A) though principally agreed with the A.O that the assessee was involved in the business of providing accommodation entries, but in the totality of the facts he confined the activities of the assessee only to that of a facilitator, and not as the owner of the aforesaid concerns. As observed hereinabove, the CIT(A) after so concluding restricted the income of the assessee to 0.05% of the total turnover of the aforesaid concerns in the aforementioned respective years.

Apart there from, we are of the considered view, that no serious efforts had been put up by the lower authorities for concluding on the basis of any supporting evidence that all the 53 concerns, details/documents of whom were found and seized from the locker No.596 of the assessee during the course of the search & seizure proceedings, were in fact involved in the business of providing accommodation entries. Admittedly, though the entire state of affairs and the documents relating to the aforementioned parties found lying in the locker No.596 of the assessee raises serious doubts as regards the purpose for which the same were retained by him, however, the same on the said standalone basis could not have justified drawing of an assumption that all the said concerns were involved in the business of providing accommodation entries. Our aforesaid view is further fortified from the fact that though the A.O had raised a specific query vide his letter dated 22.01.2015 addressed to the Jt. Commissioner Sales Tax Department, Economic Intelligence Unit, Mumbai, as regards the fact as to whether the 45 parties, details as regards which were sought were genuine or not, however, the said query was returned unanswered by the Sales tax department in its reply dated 26.02.2015 (coply placed on record). As a matter of fact, no material has been placed on our record which could substantiate the very basis for estimation of the commission 33 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah income of the assessee. Rather, a perusal of the orders of the lower authorities does not point out any such evidence which could prove to the hilt that all the aforementioned 53 parties were accommodation entry providers, which, thus, would have justified working out the commission income of the assessee on the respective turnovers of all of the said concerns for the years under consideration. As observed hereinabove, there is merely a general observation of the A.O that the names of various concerns whose documents were found from the locker No.596 of the assessee had figured in the list of accommodation entry providers that was published by the Sales Tax Department, Maharashtra. We may herein observe that the said observation of the A.O is not backed by any „material‟ which could substantiate the said fact. Insofar, the observation drawn by the AO that 90% (approx) of the notices sent to the parties u/s.133(6) of the I-T Act were returned unserved, would though suffice to raise doubts, but the same cannot conclusively lead to drawing of inferences to the effect that all of the said concerns had provided accommodation entries to third parties. In our considered view, the A.O before concluding that all of the aforementioned 53 parties were involved in the business of providing accommodation entries ought to have placed on record certain documentary evidence which would have supported his view that the names of the said parties had figured in the list of the accommodation entry providers.

Before parting, we may herein observe that the assessee had placed on record an “affidavit” under rule 10 of the Appellate Tribunal 36 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah Rules, 1963, along with details of certain parties whose names as claimed by him had figured in the list of the hawala dealers/non-genuine dealers which were blacklisted by the Sales Tax Department, Govt. of Maharashtra. As observed by us hereinabove, the assessee referring to the 37 parties figuring in the “List A” compiled by the AO in the course of assessment proceedings, had claimed that the names of 13 parties having an aggregate turnover of Rs.216,31,83,843/- does not figure in the list of the hawala dealers/non-genuine dealers as hosted by the Sales Tax Department, Govt. of Maharashtra. Accordingly, the assessee has claimed that the turnover of the aforementioned 13 parties may be excluded from the total turnover of 37 parties for the period A.Y.2007- 2008 to 2013-2014 while computing the commission income for the respective years. We have given our thoughtful consideration to the aforesaid material placed on record by the assessee along with an “affidavit” under rule 10 of the Appellate Tribunal Rules, 1963. In our considered view, the aforesaid claim of the assessee requires verification and cannot be accepted on the very face of it. We, thus, in terms of our aforesaid observations, direct the AO to consider the material filed by the assessee before us in the course of the set aside proceedings. Accordingly, the commission income of the assessee as regards the turnover of the parties which on the basis of verifications carried out by the A.O in the course of the „set aside‟ proceedings are found to be engaged in the business of providing accommodation entries or a part of

We may herein observe, that in case the facts averred by the ld. A.R as regards the date of handing over of the documents or books of accounts or assets by the A.O of the searched person to the A.O of the assessee; or the recording of the „satisfaction‟ by the A.O of the assessee in case the A.O of the searched person and the assessee are the same, is found to be in order, then the assessment shall stand quashed and our observations as regards the merits of the case would be rendered as merely academic in nature. Otherwise, the matter on merits shall be restored to the file of the A.O, in terms of our aforesaid observations. With the aforesaid directions, the appeal of the assessee for the assessment year 2007-08 in is allowed.

The assessee has further assailed before us the orders of CIT(A), on the ground, that he has erred in taxing the long term capital gain at normal rates instead of the prescribed rate of 20%. On perusal of the order of CIT(A), we find that the said ground was dismissed by him, as no addition on the said aspect was made by the AO. We find that the ld. A.R in the course of hearing of the appeal has not brought to our notice as to on what basis the aforesaid ground of appeal

The Appellant craves leave to add, to amend and I or to alter any of the grounds of appeal

In the result, appeal of the assessee for A.Y 2007-08 in A.Ys 2008-09 to 2013-14 in to 7379/Mum/2017 are allowed/partly allowed for statistical purposes in terms of our aforesaid observations. The appeals of the revenue in ITA Nos.83 to 89/Mum/2018 are allowed for statistical purposes. Order pronounced in the open court on 28/05/2019 Sd/- Sd/- (N.K.PRADHAN) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 28/05/2019 Prakash Kumar Mishra, Sr.PS 43 ITA Nos.83 to 89/Mum/2018 & ITA Nos.7374 to 7380/Mum/2017 Shri Paresh K.Shah Copy of the Order forwarded to :