LEGAL HEIRS OF LATE SHREEVALLABH DAMANI,MUMBAI vs. ACIT CEN CIR 11, MUMBAI

Per Joginder Singh (Judicial Member) This bunch of four appeals is by the assessee against the impugned orders all dated 04/08/2010 of the Ld. First Appellate Authority, Mumbai. The assessee has also filed application under Rule 11 of the appellate Tribunal Rules, 1963, for admission of additional ground, which is as under:

3 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 and this ground has been raised for the first time before this Tribunal therefore, may not be admitted.

2.1 We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing hereunder the relevant portion from the aforesaid order from Hon'ble Apex Court in the case of NTPC Ltd vs. CIT (supra) for ready reference and analysis.

Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal.

4 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. During the assessment year 1978-79, the assessee had deposited its funds which were not immediately required on short-term deposits with banks. Interest received on such deposits during the previous year relevant to the assessment year 1978-79 amounted to Rs. 22,84,994. This was offered by the assessee for assessment and the assessment was completed on that basis. Before the Commissioner of Income-tax (Appeals), a number of grounds were taken by the assessee challenging the assessment. However, the inclusion of this amount of Rs. 22,84,994 was neither challenged by the assessee nor considered by the Commissioner of Income-tax (Appeals). From the order of the Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Tribunal. The inclusion of the said amount of Rs. 22,84,994 was not objected to even in the grounds of appeal as originally filed before the Tribunal. However, by a forwarding letter dated July 16, 1983, the following additional grounds were sought to be raised by the assessee: (1) that the sum of Rs. 22,84,994 deducted from "Statement of expenditure during construction" could not be included in the total income; (2) that on admission (erroneous), no income (the sum of Rs. 22,84,994) could be included in the total income; and (3) that the authorities below had erred and failed in their duty in not adjudicating the facts and evidence on record and mechanically included Rs. 22,84,994 in the total income. The assessee contended that it learnt that the interest earned before the setting up of business was not taxable as income and it went to reduce the capital cost of the plant and hence included the above three grounds in its grounds of appeal. However, the Tribunal declined to entertain the three additional grounds. The Tribunal directly referred to the Supreme Court the question whether where, on the facts found by the income- tax authorities, a question of law arose (although not raised

5 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 before the authorities) which bore on the tax liability of the assessee the Tribunal had jurisdiction to examine the same: Held, that the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the income-tax authorities and having a bearing on the tax liability of the assessee.

2.2 In the aforesaid order the Hon'ble Apex Court has clearly held that the Tribunal has jurisdiction to examine a question of law, which arose from the facts as found by the Income Tax Authorities and having a bearing on the tax liability of the assessee and a legal question can be raised. This decision was followed by the Special Bench of the Tribunal at Mumbai in the case of Al Cargo Global Logistics Limited vs. DCIT (supra) wherein it was held as under:

“Further the Hon'ble Apex Court in very clear terms has held that the Tribunal will have discretion to allow or not to allow a new ground to be raised, but where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, it fails to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The position of the assessee in the case at hand is similar to the position of NTPC, as both of them are appellants. Therefore, on the basis of the decision, it abundantly clear that if the pure question of law arises for which facts are on record of the authorities below, such a 6 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 question should be allowed to be raised, if it is necessary to do so to assess the correct tax liability”

Considering the totality of fact and the aforesaid decisions, the legal ground raised by the assessee is allowed.

7 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 would fall under the word ‘and such other material or information as are available with the Assessing Officer and relatable to such evidence’ The crux of the argument by the learned CIT-DR is that the assessment under section. 153A has been made on incriminating material therefore, such assessment must be upheld. Alternatively, without prejudice to the above, the learned CIT-DR contended that whether or not the addition was made based on incriminating material and no discussion has been made in the assessment order/impugned order therefore, the matter should be remanded to the file of the learned CIT(A). Our attention was invited to the decision of the Special Bench (137 ITD 287). The learned CIT-DR further contended that the assessee has not furnished the details of abetment for the appeals under consideration. This argument of the learned DR was strongly contended that necessary details were filed for which our attention was invited to the document filed by the assessee as ‘assessment status’. The learned CIT-DR also filed written submissions which are kept on record and are being considered for coming to a fair conclusion. Reliance was also 8 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 placed upon the decision from Hon'ble Bombay High Court in CIT vs. Shyam R Pawar (2015) 54 taxman.com 108 (Bom). The assessee has also filed rejoinder to the written submissions filed by the learned CIT-DR. Both are kept on record and considered.

Sr Particulars A.Y 2002-03 A.Y.2003-04 No. ITA Number 7282/Mum/2010 7283/Mum/2010 1 Date of search 17/01/2007 17/01/2007 2 Original 31.03.2003 31.03.2005 Return of Income was filed on 3 Income 31.03.2004 31.03.2006 declared in the original return was accepted u/s. 143(1) on (One Year from the end of the F.Y. in which return

9 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 was made 4 Due date for 31.03.2004 31.03.2006 issue of notice u/s143(2) for framing assessment u/s 143(3). (twelve months from the end of the month in which the return is furnished) 5 Status of Not Not Pending/Concluded Pending/Concluded Assessment on the date of Search In the light of the above factual matrix, now we shall analyze the facts. It is noted that statement of Sujal C Shah was recorded during the course of survey under section 133A of the Act, on oath under section 131 of the Act, at the premises of M/s DPS Shares and Securities Pvt Ltd. The contention of the learned CIT-DR is that evidence/material was collected during survey and further the statement can be utilized for making block assessment and placed reliance upon the decision from Hon'ble Apex Court in the case of CIT vs. S Ajit

10 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Kumar (supra). In view of this claim, we are reproducing the relevant portion from the decision from Hon'ble Apex Court as contained in para 15 of the order:

“15. The power of survey has been provided under section 133A of the I T Act. Therefore, any material or evidence found/collected in a survey which has been simultaneously made at premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under section 158BB read with section 158BH of the IT Act. The same would fall under the words ‘and such other materials or information as are available with the Assessing Officer and relatable to such evidence’ occurring in section 158BB of the Act. In the present case, the AO was justified in taking the adverse material collected or found during the survey or any other method while making the Block Assessment.” 4.1 We note that the ratio in the aforesaid case emanated from the decision from Hon'ble Madras High Court taken in (2008) 300 ITR 152 (Mad), wherein the facts are different because survey was conducted in the case of M/s Elegant Construction & Interiors Ltd., in connection to the search conducted in case of the assessee, wherein during search, incriminating material was found showing cash payment received by M/s. Elegant Constructions & Interior Ltd. from the assessee. In that context the Hon'ble Apex Court observed/held that “material or evidence found/collected in a survey which has been simultaneously made at the premises

11 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 of connected person can be utilized while making the block assessment” whereas, survey was conducted in the case of Sujal C Shah, which was not in connection with the present assessee. This observation is fortified from the fact that the statement recorded during survey proceeding {pg 21 to 24 of the assessment order), from Mr Sujal C Shah, wherein almost 23 questions were asked and not a single question was asked with respect to the present assessee. Further, the said statement was not based on any material found, impounded during survey proceedings, consequently, the survey carried upon Mr Sujal Shah and the consequent recording of statement cannot be stated in connection with the present assessee. Thus, such statement cannot be equated with incriminating material found during the course of search/survey. It is further noted that in the facts before Hon'ble Apex Court in the case of S Ajit Kumar, the department conducted search proceedings in the case of the assessee wherein evidences were found showing understatement of real income of the assessee relating to block period. On the date of search, simultaneous survey was 12 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 conducted upon M/s Elegant Constructions & Interior Ltd, who constructed the residence of the assessee. During survey upon M/s. Elegant Construction & Interior Ltd., books of account were found reflecting cash payments as well as cheque payments made by the assessee to M/s Elegant Constructions & Interior Ltd for construction of a bungalow of the assessee. The cash was not reflected in the books of assessee and mainly cheque payments were reflected. It is not worthy that the statement of one of the Director of M/s Elegant Constructions & Interior Ltd was based upon the material found during the course of survey and on that basis Hon'ble Apex Court observed/held that any material or evidence found/collected can be utilized while making the block assessment whereas in the case of the assessee no such incriminating material was found during survey proceedings in the case of Shri Sujal C Shah or it can be said that the statement of Shri Sujal C Shah nowhere states that any incriminating material pertains to the assessee was found or collected during survey proceedings. Further no incriminating material was found during search proceedings in the case of 13 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 the assessee. This observation of ours and assertions made by the learned counsel for the assessee is fortified from the fact that the learned Assessing Officer has not relied upon any such material claimed to be found/seized from the premises of the assessee while framing the assessment. Therefore the decision in the case of S Ajit Kumar, relied upon by learned CIT-DR may not help the Revenue. It is further noticed that the said judgment was rendered in the light of the words contained in section 158BB of the Act itself, which is reproduced hereunder for ready reference and analysis:

158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, 80[in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer81 and relatable to such evidence], as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,— (a) where assessments under section 143 or section 144 or section 147 have been concluded 82[prior to the date of commencement of the search or the date of requisition], on the basis of such assessments; (b) where returns of income have been filed under section 139 83[or in response to a notice issued under sub-section (1) of section 142 or section 148] but assessments have not 14 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 been made till the date of search or requisition, on the basis of the income disclosed in such returns; 84[(c) where the due date for filing a return of income has expired, but no return of income has been filed,— (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation81 of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);] (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. Explanation.—For the purposes of determination of undisclosed income,— (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of 85[this

15 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Act] without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub- section (2) of section 32: 86[Provided that in computing deductions under Chapter VI- A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32;] 87[(b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called 88[to any partner not being a working partner] : Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;] (c) assessment under section 143 includes determination of income under sub-section (1) or sub-section (1B) of section 143. (2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this 16 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Chapter, but may be carried forward for being set off in the regular assessments. If the aforesaid provision of the Act is analysed it clearly states that undisclosed income for the block period will be made on the basis of “evidence found as a result of search or requisition of books of accounts or other document and such other material or information as are available with the Assessing Officer and relatable to such evidence.”. In para 15 of the order in the case of S Ajit Kumar the Hon'ble Apex Court clearly mentions about “any material or evidence found/collected” whereas in the case of the assessee the addition has been made merely on the basis of the statement which cannot be equated with “any incriminating material /evidence found and collected” because such statement is not supported by such incriminating material/evidence found and collected as appearing in section 158BB of the Act. It is further noted that the said decision was rendered in context of assessment framed under section 158BC of the Act which falls under Chapter XIV-B of the Act. As is evident from the provisions of section 158BB of the Act, the said section was incorporated as to how the undisclosed income of the block

17 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 period is to be calculated. It is further noticed that Chapter XIV-B of the Act comprises of sections 158B to 158BH of the Act and has been made operative for search etc., made after 31.05.2003, meaning thereby the assessments of searches conducted after 31.05.2003 has to be done under the provisions of section 153A of the Act, which falls under complete chapter i.e. XIV of the Act. The provision of section 153A of the Act is materially different from the provision under section 153BC r.w.s 158BB of the Act in as much as section 153 of the Act do not contain any provision dealing with calculation of undisclosed income. Therefore, the decision rendered by Hon'ble apex Court in the light of provisions of section 158BC r.w.s. 158BB of the Act cannot be applied in the case of the present assessee being assessment framed under section 153A of the Act.

18 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 “Q1 Please identify yourself. Please also confirm that an oath has been administered on you and the consequences of giving a false statement is explained to you.

Ans: I am Sujal Chandrakant Shah, S/o. Mr. Chandrakant K.Shah. In confirm that an oath has been administered on me and the consequences of giving a false statement has been explained to me.

0.2. What are your sources of income? Ans: Stock brokerage.

Q.3. Please explain it in detail.

Ans: As my card is suspended by BSE, I have taken NSE terminal-ship from one of the NSE Broker, who charges me 1.5% brokerage, in return, I charge my various clients 3.0%.

Q.4. Please give the name of the broker for whom you are doing trading business . Ans: Excel Mercantile Private Ltd. He is a NSE Broker.

Q.5 Since when you have started this brokerage business?

Ans: I started this in June,2000. Before that I used to trade on my terminal for various clients.

Q.6. Other than the so called brokerage business done by you, have you ever undertook any other type of business in shares in any other manner. If so, please describe in details.

Ans: Apart from this for the year 2003-04 and 2004-05, we had issued offmarket purchase bills in the year 05-06.

Q.7. To whom for and in what scrips you had been indulging in off-market operations?

Ans: Mr. Naresh Jain & Naresh Seboo having office at Blue Moon Chambers, N.M. Road, Fort, Mumbai-400 001. On knowing that we were in financial crunch and to facilitate our market obligation i.e. Pay-in of BSE, approached us and 19 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 asked that they would be helpful to us financially, provided we give accommodation of bills to their clients.

0.8. Who gives the name of clients and how they came into contact with you? .

Ans: We have no direct contact with the beneficiaries. Mr.Naresh Jain & Naresh Saboo used to give the name of beneficiaries with addresses to us and as desired by them,. we used to give. off market bills/accommodation bills.

0.9. Please state whether these bills were genuine?

Ans: . These transactions were not on the BSE terminal, and hence were not genuine.

Q10. Please explain the modus operandi adopted by you, for the above offmarket/non genuine transaction and in what way the beneficiaries are benefited?

Ans: As stated above, this transaction were only accommodation bills, given by us in the name of ultimate beneficiaries, as required by Shri Naresh Saboo and Shri. Naresh Jain. We have never handed over these bills to the beneficiaries directly. In fact, we won't be able to recognize the beneficiaries, to whom we have issued the bills. We are not in a position even to give the distinctive numbers of the shares, as in reality, no transaction was done or; the BSE floor.

Q.11.Whether the shares were listed on the BSE?

Ans: These shares were not traded on the floor on BSE, as these shares were not listed on BSE. In the year 2003-04 and 2004· 05(F. Y.), this companies were not listed in BSE. But the said companies were listed in BSE in 2005-06. I want to further clarify that when we issued the purchase bill at that time, the company was not listed in BSE.

Q 12 Please the name of the companies, for which you have issued boqus bills,on the instructions of Mr. Naresh Jain and Naresh Saboo or any other person.

20 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Ans: We have: issued the bogus bills on the instructions of Mr. Naresh Jain and Naresh Saboo in only one company, which is M/s. ROBISON WORLDWISE LTD. Apart from this, I have Issued some bills in M/s. FASTTRACT ENTERTAINMENT LTD., as per the directions from Mr.Sirish C.Shah, having address at Meghdoot Apts., Fourth floor, Marine Drive, Mumbai.

Q.13. What is the quantum of shares of M/s. Robinson Worldwide Ltd and M/s. Fasttract Entertainment Ltd. for which you have issued bogus purchase bills.

Ans: As this matter is old, I don't exactly remember the quantum, but as per my memory, in M/s. Robinson Worldwide Ltd around 40 lac shares, and in Fasttract Entertainment around 8-10 lac shares.

Q.14. Have you maintained any register for the above operation?

Ans: We have maintained the details in computer. I am submitting herewith a hard and soft copy of the documents/data for your perusal.

Q.15. Had you been accepting or paying cash regarding the above transactions from anybody? .

Ans: I have not accepted or paid any cash regarding the whole operation from anybody, except for. the commission @' one paise per share, in cash from Shri. Naresh Seboo qnd the same Amount of one paise per share was received by us from Mr. Sirish C. Shah S/o. Mr. Chandulal Shah.

Q.16. from the data furnished by you, it is seen that you have given quantity of shares and rate only. However, no information is available about the sales. Please explain the same.

Ans: As stated earlier, my work was limited to the extent of issuing of purchase bill as per the requirement of. Shri. Naresh Saboo to the ultimate beneficiaries, who are known only to Shri. Naresh Seboo. I am not aware, at what rate

21 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 and when the ultimate beneficiaries have sold these shares. Hence these data are not available with me.

Q.23. I once again draw your attention to the statement, given above by you that you have issued bogus purchase bills and in very few cases, sales bi!ls also especially as per the requirements of Shri Naresh Saboo and Naresh Jain, you have further stated that you hnve not been issued the bills directlv to the beneficiaries and even you are not knowing them, the bills have been handed over directly to Shri Naresh Saboo and Shri. Naresh Jain only. Moreover, you have not accepted or paid/given any cash. Du you confirm the same? Ans: Yes I do confirm what I have stated above.

5.1 If the aforesaid statement rendered by Shri Sujal C Shah, recorded under oath, under section 131 of the I T Act, during course of survey under section 133A of the Act, at the premises of M/s. DPS Shares & Securities Pvt Ltd., is analysed, in reply to question no.7 with respect to whom for and in what scripts you have been indulging in off market operation, he replied that Mr. Naresh Jain and Mr Naresh Saboo, who are having office at Blue Moon Chambers. In reply to question no.10 with respect to modus operandi adopted by him it was replied that as requested by Shri Naresh Saboo & Mr. Naresh Jain such accommodation bills were transacted and were never handed directly to the beneficiaries. It has been further tendered that Shri Sujal C Shah was unable to 22 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 recognize the beneficiaries to whom bills were issued. In reply to question no.12 to name the companies for which bogus bills were issued it has been replied that these were issued on the instructions of Shri Naresh Jain and Shri Naresh Saboo. It is noted that in the statement the name of the present assessee has no where been mentioned. In reply to question no.14 with respect to maintenance of any register for such operation it was tendered that the details are in the computer and hard/soft copy of the documents were submitted. In reply to question no.15, whether he was accepting or paying cash with respect to the transactions it was specifically replied that he has not accepted or paid any cash for the whole operation from anybody except the commission from Shri C Shah. The reply in the statement clearly states that the present assessee has not been named by Shri Sujal C Shah. In view of this factual matrix, we find merit in the contention of the learned counsel for the assessee that addition cannot be made unless and until it is corroborated with material. Admittedly statement is a good piece of evidence but at the same time it

23 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 has to be corroborated/linked to the incriminating material otherwise mere statement cannot stand on its legs.

5.2 Another argument advanced by the learned counsel for the assessee is with respect to value of the statement recorded during survey. Our attention was invited to the provision of section 133A of the Act. The learned CIT-DR contended that the learned Assessing Officer has all the power to record the statement. The learned counsel for the assessee in reply contended that the Act does not authorize to record the sworn statement during survey proceedings. Reliance was placed upon certain decisions like Paul Mathews & Sons vs. CIT (129 taxman 416) (Ker), Madras High Court in CIT vs. S Khader Khan Son (300 ITR 157) (Mad), Pune Tribunal in Anil Nandkishore Goyal (ITA No.1256/P/2012 order dated 19.04.2013), the ratio laid down in All Cargo Global Logistics Limited by the Special Bench.

5.3 We have considered the rival submissions and perused the material available on record. There is no dispute to the fact that the statement of Shri Sujal C Shah was recorded under section 133A of the Act, on oath, therefore, it is our bounded

24 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 duty to examine the provision of section 133A(3) of the Act, which is reproduced hereunder:

"133A. (J) Notwithstanding anything in any other provision, an Income-tax Officer or any Inspector of Income-tax authorised by him in this behalf may enter— (a) any place within the limits of the area assigned to him, or (b) any place occupied by any person in respect of whom the Income-tax Officer exercise‘s jurisdiction, at which a business or profession is carried on, whether such ‘ place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in the carrying on of, such business or profession to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and on the inspection of such accounts or documents he may, if he so deems necessary, place marks of identification thereon or cause to be made extracts therefrom: Provided that the Income-tax Officer or such Inspector of Income-tax may enter any place referred to in this section only during such hours as the place is open for the conduct of the business or profession: Provided further that while acting under, this section the Income-tax Officer or such Inspector of Income-tax shall not remove or cause to be removed from the place which :he has entered any books of account or other documents. (2) If a person who under sub-section (2) is required to afford facility to the Income-tax Officer or the Inspector of Income-tax to inspect books of account or other documents either refuses or evades to do so, the Income-tax Officer shall have all the powers under sub-sections (1) and (2) of section 131 for enforcing compliance of the requirement made."

25 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 If the aforesaid provision of the Act is analysed section 133A(3)(iii) empowers the learned Assessing Officer to record the statement but this statement is not under oath. Now question arises whether such statement binds the assessee which is not corroborated by material. This issue can be analyzed with the help of various judicial decisions. One such decision is from Hon'ble Kerala High Court in the case of Paul Mathews & Sons (129 taxman 416)(Ker), wherein the Hon'ble High Court observed/held as under:

"Sec. 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Sec. 133A however, enables the IT authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn in statement. The IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas s. 133A does not empower any ITO to examine any person on oath. Thus, in contra distinction, to the power under s. 133A, s. 132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act, On the other hand, whatever statement recorded under s. 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument of the counsel for the appellant that the statement, elicited during the survey operation has no evidentiary value and the ITO was well aware of this. "

26 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 5.4 Likewise Hon'ble Madras High Court in case of CIT v S.Khader Khan Son (300 ITR 157) observed/held as under:-

"In the instant case, there was a survey operation conducted under s. 133A in the appellant's premises and a statement was recorded from one of the partners. Assuming there were discrepancies and irregularities in the books of accounts maintained by the appellant, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under s. 133A shall not have any evidentiary value, as rightly held by the CIT(A) and the Tribunal, since such statement was not attached to the provisions of s.133A. It could not be said solely on the basis of the statement given by one of the partners of the appellant firm that the disclosed income was assessable as lawful income of the appellant. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the appellant, it could not be said that the Revenue had lost lawful tax payable by the appellant.

…. A power to examine a person on oath is specifically conferred on the authorities only under s. 132(4) in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas s. 133A does not empower any ITO to examine any person on oath. Thus, in contradistinction to the power unders.133A s.132(4) enables the authorized offer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded On the other hand, whatever statement recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. CIT [2003] 263 ITR 101.

27 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 It is noteworthy that Special Leave Petition was filed in the case of S Khader Khan and sons (supra) against the decision of Hon'ble Madras High Court in the aforesaid case, before the Hon'ble Apex Court wherein, vide order dated 20.09.2012 (252 ITR 480) (Supreme Court), wherein the decision of Hon'ble Madras High Court was affirmed. Thus, it can be the statement recorded during the course of survey proceedings does not have any evidentiary value unless and until such statement is corroborated with material facts.

5.5. Before us the learned CIT-DR strongly contended that the statement of Shri Sujal Shah of M/s. DPS Shares and Securities Pvt. Ltd. which has been recorded during the course of survey proceedings is to be considered as an incriminating material. As we have discussed earlier that the statements recorded during the course of survey proceedings under section 133A(3)(iii) of the Act do not hold any evidentiary value. The statement of Shri Sujal Shah is in general context and does not specifically implicate the assessee inasmuch as no direct question w.r.t. the assessee has been asked to Shri Sujal Shah. As is clear from the perusal of the statement of 28 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 Shri Sujal Shah, that the said statement of a third party was not backed by any evidence which was either found or impounded during the course of survey proceedings.

Therefore, the said statement cannot be considered to be an incriminating material in the case of the assessee. In view of this observation, it can be concluded that a statement recorded during the course of search proceeding, without any further corroborating documentary evidence, cannot be said to be material found during the course of search proceedings. In the case of the assessee, neither any incriminating material has been found during the course of search proceedings nor has any statement been recorded thereon. Further, even in the case of Shri Sujal Shah, the statement cannot be stated to be material found during the course of search, since it is devoid of any corroborating documentary material found either during the course of search or survey proceedings. Our view is supported by the ratio laid down by the Pune Bench of the Tribunal in the case of Anil Nandkishore Goyal in IT A No 1256/P/2012 dated 19.04.2013 (Annexure - 4), wherein it has been categorically held as under:

29 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 “Facts : A search was conducted in the residential and business premises of the Peety Group. Prior to the search, the returns of income for the A. Y. 2000-01 to 2005-06 had already been filed u/s 139(1) of the Act, accompanied by requisite documents and processing u/s. 143(1) of the Act stood completed. During the course of search no incriminating evidences were found to draw any adverse conclusion in respect of the transactions in shares and the computation of income in respect thereof. The transactions in shares were duly accounted in the regular books of account for the years in which the purchases/sales were made. The assessee during the course of assessment proceedings provided details and documents relating to purchase and sale of shares. The assessment in the case of assessee was finalized by the Assessing Officer by completely ignoring the documentary evidences. The only evidence relied upon by the Assessing Officer was the statement of Shri Surendra Peety recorded in the course of search offering the long term capital gains as undisclosed income. There was nothing on record to suggest that any incriminating document or material was found as a result of search.

"14.13.4. The statements recorded during the course of search could not be said to be evidence "found as a result of search", though the same may be "obtained during the search". In case an addition is intended to be made as the undisclosed income on the basis of such statements, it has to be first proved that these statements are relatable to "such evidence." The only evidence relied upon by the Assessing Officer is the statement of Sri Surendra S Peety recorded in the course of search. There is nothing on record to suggest that any incriminating document or material was discovered as a result of search. Above statement was made without having the benefit of referring to any document in certain state of mind and was made on the assertion of the department that they have evidence against the assessee by way of some statements of brokers which were not made available to the assessee. Therefore, the respondent could not be held liable on the basis of a mere statement which was made under exceptional circumstance as mentioned above. As such, the validity of such statement, which is in no manner related to any evidence or 30 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 materials found in the course of search in assessee's premises, is in itself not justified.

14.14. On the basis of the above factual discussion, not much reliance should be placed on statements made by the assessee during the course of search because no corresponding seized material was found in the course of search to justify the additions in question. The verbal statement of the assessee without any connection with the other materials found during the search cannot be considered to be materials found during the search. Relevant income tax returns for the past years were filed prior to the search in the normal course suo moto disclosing the particulars of subject additions which stood accepted u/s 143(1) of the Act. Assessment as contemplated u/s 153A is not a de novo assessment and additions made therein, has to be necessarily restricted to undisclosed income unearthed during search. There is nothing on record to suggest that any corroborative evidence was found to justify the addition in question. "

5.6. Another argument advanced by the learned CIT(DR) is that the assessee has placed reliance on the order of Hon'ble ITAT Special Bench Mumbai in the case of All Cargo Global Logistics Ltd., for admission of the additional ground. The fact that the addition was not made based on incriminating material has not been discussed in the assessment order or the order of the CIT(A) and these facts need to be ascertained.

Since the facts are not on record, therefore, the learned CIT(DR) contended that the matter may be restored back to the file of the CIT(A), is concerned, we note that the submission has been made only with respect to additional

31 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 ground therefore, nothing concrete was pointed out from the facts, which are not on record. Even otherwise, in our humble opinion, on the material facts which are necessary for adjudicating the additional ground i.e. date on which search has been conducted, the date of filing of original return of income and whether any incriminating material has been found or seized during the course of search are already a part of the record. The Revenue has not brought out any new facts before the Hon'ble Tribunal, therefore, no useful purpose will be served in setting aside the assessment to the file of the learned CIT(A).

5.7. The learned CIT(DR) also contended that in the case of the All Cargo Global Logistics Ltd., the Special Bench of Mumbai Tribunal has held that in the assessments which have not abated, in addition to the income that has already been assessed, the assessment u/s. 153 A of the Act will be made on the basis of incriminating material, which would also constitute the books of accounts or other documents found in the course of search but not produced in the course of original assessment. Therefore the books of accounts not produced

32 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 during the course of original assessment would constitute incriminating material. For this proposition the learned CIT(DR) relied upon para 58 of the aforesaid order in the case of All Cargo Global Logistics Ltd., wherein it has been held as under:

"Thus, question raised before the Special Bench No. 1 is answered as under: a. In assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately b. In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means — books of account, other documents, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search "

5.8 If the aforesaid observation from the order of the Special Bench is analyzed, it can be said that the decision rendered by the Tribunal has to be looked into in consonance to the reasoning given in the judgment. In the para 50 to 54 of the aforesaid order, the Tribunal has narrated the provisions of section 132 and 153 A of the Act. It has gone into the question of scope of assessment or reassessment of total income u/s. 33 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 153A of the Act. With respect to the same, it has relied on the provisions of section 132(1) of the Act, the relevant provisions are reproduced hereunder :

"132. (1) Where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that—

(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to -whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property)."

34 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 If the aforesaid provision of section 132 is analyzed, it lays down the circumstances under which prescribed authority can issue a warrant of authorization for conducting search and seizure operation against an assessee. That search and seizure operation is to be conducted in consequence to information received based on which the officer has a reason to believe that: a) Omission or failure of any person who has been served with a notice u/s 131(1) of the Act to produce books of accounts or other documents. b) Possibility of non-production by any person of any books of accounts or other documents which will be useful or relevant to any proceeding under the Income tax Act. c) Possession by any person of any money, bullion, jewellery or other valuable article or thing representing either wholly or partly income or property which has not been or would not be disclosed.

Thus, the search and seizure operation is conducted to unearth money, bullion, jewellery or other valuable articles or thing, books of accounts and other documents not disclosed or not likely to be disclosed by a person. It, therefore, follows that it is not every article or thing or every piece of information found during the course of search that can be called "evidence found as a result of 35 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 search". It is only that which has not been or would not have been disclosed alone constitutes evidence found as a result of search. If any money, bullion, jewellery or other valuable article or thing or any income is required to be disclosed for the purposes of I T Act in any return of income but not disclosed, the same would constitute basis for "undisclosed income". Therefore, the conclusion drawn by the order of Tribunal, Mumbai is in purview of search conducted u/s. 132(1) of the Act and should be read in light of the provisions of section 132(1) of the Act.

5.9. If the provision of the Act and the factual matrix, which is available on record in the case of the assessee is analyzed firstly, there was no omission or failure to produce books of accounts or other documents in compliance to notice u/s. 131 of the Act. Secondly, it cannot be said that there was no possibility for non-production of books of accounts or documents since the transactions in questions were already a part of the regular books of accounts of the assessee and disclosed before the Department. The Department has not seized the regular books of accounts inasmuch as no reference

36 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 has been made to any 'seized material' by the Assessing Officer while framing the assessment order u/s. 153A of the Act for the A. Y. 2002-03 and A. Y. 2003-04. If the assertion of the learned CIT(DR) is taken to be correct it will create chaos inasmuch as the cases even where the assessment has been completed u/s. 143(3) of the Act, will lead to additions to be made of regular items which have already been disclosed in the Return of Income, but in connection to which the Assessing Officer has chosen not to call for any material/document during the course of regular assessment, even in absence of any incriminating material found with respect to the said items. Thus, this argument of the learned CIT(DR) cannot be accepted.

5.10 Another argument raised by learned CIT(DR) that the assessee did not furnish the details of the outcome of appeals in A.Y. 2001-02 and A. Y. 2004-05. These appeals are not before us and even the details of abatement for the captioned appeals which are relevant to adjudicate on the relevance of incriminating material for assessment u/s 153A of the Act has not been furnished before us. The learned counsel

37 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 pointed out that the long term capital gains resulting in addition under section 68 of the Act was not present in the assessment years 2001-02 and 2004-05.

5.11. During hearing the learned CIT(DR) also contended that the bills of purchase of Robinson Worldwide were only accommodation entry, is concerned, we have already dealt with the same in earlier paras of this order as is explained in the written submission filed by the assessee on 21.03.2017.

Another argument taken by the learned CIT(DR) that the assessee has not been able to prove from whom it had received physical delivery of shares of M/s. Robinson worldwide and Rashel Agro or the date on which it had received the physical delivery of shares is concerned, the assessee has already explained in Para 26 Page No 39 of the written submission filed on 21.03.2017. So far as the statement of Shri Sujal C Shah of M/s. DPS Shares & Securities Ltd. is concerned, we have already dealt with this issue in earlier paras of this order.

So far as the Trade files of M/s. DPS Shares & Securities Ltd. were obtained from Bombay Stock Exchange, on analysis of which it was found that transactions therein do not tally with 38 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 contract notes is concerned it has already been explained by the assessee at pages 34-35 of the written submission filed on 21.03.2017. Thus, the fact that certain transactions relating to the said shares in respect to the speculation gains were reflected in the Trade Files goes on to show that transactions of the assessee were genuine. Further, the gains from the speculation transaction were offered to tax by the assessee in the Return filed but it. The Assessing Officer even while passing the order u/s. 153 A of the Act has not found/disturbed the speculation income which was offered in the return. Therefore, having not disturbed the speculation income on the one hand and at the same time doubting the purchase of those shares against which the speculation income was offered itself shows the double standards of the Assessing Officer and accordingly, there is no basis for such arguments. It is observed that the assessee is only concerned with the contract notes provided by the brokers, therefore, the assessee cannot be held responsible for the fact that the broker may have entered into off market transaction or not reported the transactions to the BSE. This proposition of 39 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 ours is supported by the decision in the case of ACIT vs.

Kamal Kumar S. Agrawal (Indl.) & Ors. reported at (2010) 41 DTK (Nag)(Trib) 105 (Page No. 732-768 of the Paper-book). So far as the contention of the learned CIT(DR) that the purchasers of scrip, M/s. Robinson Worldwide were not traceable as has been stated by the Assessing Officer in the assessment order also, the contention of the assessee is that the sale of the shares of M/s. Robinson Worldwide has taken place on the stock exchange and in dematerialized format. The sale of the said shares has not been denied by the Assessing Officer. The fact that the Assessing Officer has made a list of parties who have subsequently purchased these shares, itself shows that the sale of the aforesaid shares had in fact taken place.

5.12 So far as the contention of the learned CIT(DR) that full copy of the order in the case of wife of the assessee (Smt.

Saroj Damani) and pages 24 to 29 are missing, is concerned, the assessee has already annexed the order as Annexure - 5.

The learned CIT(DR) also made reference to the details/documents in the case of Smt. Saroj Damani. The 40 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 learned counsel for the assessee explained that the assessee had submitted similar details/documents, which were brought to our notice and are summarized as under:

Sr. Particulars Para No. Reference of submissions dated 21.03.2017 1 Shares of M/s. Robinson Worldwide Trade Para 37 Limited for which the appellant has submitted the purchase bills & ledger account of the purchase broker. 2 The appellant had earned speculation profit Para 40 which was used for the purchase of shares of M/s. Robinson Worldwide Trade Limited. 3 Shares were issued in physical format which Para37 got transferred in appellant's name on 14.06.2003 and 20.04.2004. The said fact can be ascertained from the letter received by the appellant from M/s. Robinson Worldwide Trade Limited. 4 The shares of the appellant were Para 37 consolidated and the appellant was issued Jumbo share certificate. Thereafter, the said shares were dematerialized to de-mat account of the appellant held with HDFC Bank. Such demated shares were sold through M/s. AKD Securities Pvt. Ltd. as can be seen from the sale bills submitted by the appellant and demat account statement. Further, the sale proceeds of the shares had been received in the HDFC bank account of the appellant. 5 The speculation profit earned and used for Para 40 purchase of the shares of the M/s. Robinson World wide has been accepted by the Department while passing order u/s. 153A r.w.s. 143(3) of the Act for A. Y. 2004-05 and A. Y. 2005-06. 6 The response to letter u/s. 133(6) of the Act Para 34

41 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 by M/s. DPS Shares & Securities Ltd. pertained to one Smt. Pratiksha Shah and not the appellant. 7 Nowhere specifically stated in the Para 42 directors/brokers statements that they have issued accommodation entries to the appellant. 8 During the course of cross-examination Para 43 proceedings, the purchase documents which have been stated to be accommodation bills pertain to Shri Brijesh D. Shah and which do not belong to the appellant. 9 The director of M/s. DPS Shares & Para 39 Securities Pvt. Ltd., Shri Pratik Shah was a tainted party and his credibility and reliability was questionable. Reliance was placed on the order of Hon'ble Mumbai Tribunal in the case of Bhagvandas Gordhandas. 10 The appellant had provided the Revenue Para 38 with voluminous documents and the Assessing Officer has not found any fault with the same.

So far as the cross-examination of Shri Sujal C Shah was not conducted in the case of the wife of the assessee i.e. Smt.

Saroj Damani is concerned, it was explained that even in the case of the assessee, no cross - examination of Shri Sujal Shah was provided. Similarly, as in the case of the assessee's wife, Smt. Saroj Damani, none of the statement had any reference in the case of the assessee. Another argument raised by the learned CIT(DR) that the facts in the case of the assessee's wife are different from the facts of the present assessee is 42 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 concerned, it was explained that the decision of the Tribunal in the case of Saroj Damani relied on the order of Hon'ble Bombay High Court in the case of Shyam R. Pawar reported at 229 Taxman 256, wherein it was held that the Demat account and contract note showed credit/details of share transactions and Revenue had stopped enquiry at particular point and did not carry it forward to discharge basic onus, the transactions in shares were rightly held to be genuine. We find that in the case of Smt. Saroj Damani (wife of the assessee), the Tribunal vide order dated 17.05.2017 (ITA No. 7286, 7287 & 7288/Mum/2010 for A.Ys. 2004-05 to 2006-07) deliberated upon the issue with respect to additions of the amounts of sale proceeds of shares declared as Long term capital gain and treated as unexplained cash credit under section 68 of the Act and further the addition of unexplained money used for payment of commission for obtaining Long term capital gain, the Tribunal following the decision of the Tribunal in the case of Late Smt. Kanchanben J Shah vs. Income Tax Officer (ITA NO.6544/Mum/2011 order dated 18.02.2016) and decision from Hon'ble Bombay High Court in CIT vs. Shyam R Pawar

43 Legal Heirs of Late Shreevallabh Damani to 7285/Mum/2010 (2015) 229 Taxman 256 (Bom), decided in favour of the assessee (wife of the assessee). Thus, in the light of the foregoing discussion and the cases cited in earlier paras of this order, the appeals of the present assessee are allowed.

This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 31/05/2018.