ACIT, CC-2, JAIPUR, JAIPUR vs. MAHENDRA SINGH RATNAWAT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 30 & 31/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2015-16 & 2016-17 cuke The Asstt. Commissioner of Sh. Mahendra Singh Ratnawat Income-tax, Vs. 53, Golimar Garden, Sahkar Central Circle-2, Marg, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFBPR 0768 Q vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA. No. 322 & 323/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2012-13 & 2013-14 cuke The Asstt. Commissioner of Smt. Ratan Kanwar Ratnawat Income-tax, Vs. 116, Lav Kush Nagar-1, Tonk Road, Jaipur. Central Circle-2, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACBPK 4523 H vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri Sanjay Dhariwal (CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma (C.A.) & Shri R.K. Bhatra (C.A.) a lquokbZ dh rkjh[k@ Date of Hearing 06/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 18/10/2022 vkns'k@ ORDER

2 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

PER: DR. S. SEETHALAKSHMI, J.M.

These bunch of four appeals filed by the Revenue against

two different assessee’s are directed from the separate orders of

the learned Commissioner of Income Tax (Appeals)-4, Jaipur

[hereinafter referred to as “CIT(A)”] which in turn arise from the

separate orders passed by the DY. Commissioner of Income Tax,

Jaipur u/s 143 r.w.s. 153A of the Income Tax Act, 1961 (in short

“Act”) as detailed here in below:-

Sl.N Appeal No. Name of assessee A.Y. CIT(A) Order o. dt. 1. ITA No. 30/JP/2022 Shri Mahendra Singh Ratnawat 2015-16 24.11.2021 2. ITA No. 31/JP/2022 Shri Mahendra Singh Ratnawat 2016-17 24.11.2021 3. ITA No. 322/JP/2021 Smt. Ratan Kanwar Ratnawat 2012-13 25.10.2021 4. ITA No. 323/JP/2021 Smt. Ratan Kanwar Ratnawat 2013-14 25.10.2021

years are almost identical except the difference in figure of

additions disputed, are common, all these appeals were heard

together with the agreement of both the parties and are being

disposed off by this consolidated order.

pertaining to pertaining to Shri Mahendra Singh Ratnawat in ITA

3 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

No. 30/JP/2022 for A. Y. 2015-16 may be taken as a lead case for

discussion as the issues involved in the lead case are common

and inextricably interlinked or in fact interwoven and the facts and

circumstances of other cases are exactly identical except the

difference in the amount in other assessee and assessment year.

The ld. AR did not raise any specific objection against taking that

case as a lead case. Therefore, for the purpose of the present

discussions, the case of ITA No. 30/JPR/2022 is taken as a lead

case. Based on the above arguments we have also seen that for

three appeals grounds are and for A.Y. 2016-17 in Mahendra

Singh Ratnawat grounds are different, facts are similar and

arguments were similar and therefore, were heard together and

are disposed by taking lead case facts, grounds and arguments

from the folder in ITA No. 30/JPR/2022.

31/JPR/2022 for A.Y. 2016-17 the revenue has raised following

grounds of appeals:-

ITA No. 30/JPR/2022

“01. The ld. CIT(A) has erred in law in holding that no additions can be made in the proceedings under section 153A of the Income Tax Act, 1961 in respect of the assessments which were completed prior to the

4 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

date of search, except based on same incriminating material unearthed during the search which was not already available to the Assessing Officer. While granting relief to the assessee, the Ld CIT(A) has failed to take note of the position that Hon’ble Supreme Court of India has admitted SLP against this proposition in the following matters-

(i) Principle Commissioner of Income Tax v. Gahoi Food (P) Ltd. 117 taxmann.com 118 (SC) 272 Taxman 521 (SC) dated 24.01.2020

(ii) Principle Commissioner of Income Tax Central-4 v. Dhananjay International Ltd.114 taxmann.com 351 (SC) 270 taxman 15(SC) dated 16.09.2020

ITA No. 31/JPR/2022

“1. The ld. CIT(A) has erred in law and on facts in granting relief to the taxpayers on several counts.

5 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

the assessee derives his income from salary, business and other

sources. The assessee filed his original return of income u/s

139(1) of the Act, on 30.09.2015 for the assessment year 2015-16

declaring a total income of Rs. 1,67,70,610/-. The assessee

belongs to Kiran Fine Jewellers Group, on whose premises a

search and seizure u/s 132 on/or survey action u/s 133A of the Act

was carried out on 02.08.2017. Pursuant to this, AO issued a

notice u/s 153A of the Act to the assessee in compliance of which

assessee filed his return of income of Rs. 1,67,70,610/-. Finally,

AO Completed the assessment u/s 143(3) r.w.s. 153A of the Act

vide order dated 26.12.2019 at a total income of Rs.

23,89,84,760/- by making the following addition/ disallowance:

(i) addition of Rs. 22,16,60,000/- u/s 68 treating the unsecured loan

from M/s Gemini Commerce Pvt Ltd. as non genuine loan.

(ii) addition of Rs. 5,54,150/- on account of alleged commission

paid u/s 69C of the Act.

appeal before the CIT(A) who has deleted the addition made by

6 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

the AO. The relevant findings of the ld. CIT(A) are reiterated here

in below:

“(xiii) Thus the essential corollary of these decisions and also the decision relied upon by the appellant is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO.

xiv) The present appeal concerns AY 2015-16. On the date of the search, the said assessment already stood completed u/s 143(3) of the Act, as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of loan obtained from M/s Gemini Commerce Pvt. Ltd. is without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2015-16 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if any, found as a result of search. It is observed that the addition is neither based on any single loose paper found/seized as also admitted by the AO in her remand report nor on any statement recorded during the course of search conducted in the case of the appellant which can be considered as incriminating as is evident from the order of the AO. Further the reference made by the AO to the statement of Shri Arpit Khandelwal cannot be considered as incriminating in view of the fact that Shri Arpit Khandelwal has never stated that M/s. Gemini Commerce Pvt. Ltd. is a shell company and providing only accommodation entries. In fact no such question was ever put to him. On the contrary the fact being that the appellant has filed all documentary evidences with reference to the loan advanced by the company to the appellant and also the fact being that the genuineness of the company M/s. Gemini Commerce Pvt. Ltd. has also been accepted in the past by the A.O. and also by the Hon'ble ITAT Jaipur in other cases. Therefore in view of the aforesaid discussion and respectfully following the binding decision of the Hon'ble Jurisdictional High Court, decision of various other High Courts and the decision of Hon’ble Supreme Court as discussed supra, it is observed that the aforesaid addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable, not being based on any incriminating document/ evidence found in the course of the search and hence is not liable to be sustained. Accordingly, the Ground of Appeal No. 1 is treated as allowed.

7 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

7.1 The submissions of the appellant as per the statement of facts enclosed with Form No. 35 and reiterated during the appellate proceedings are summarized as under:

The ground No. (3) of appeal relates to objecting the action of Ld. AO in making the addition of Rs. 554150/- u/s 69C of the I T Act, 1961 by holding that the appellant has allegedly paid commission at the rate of 0.25 percent on above said unsecured loan.

The addition of Rs. 554150/- made u/s 69C for alleged commission is wrong in law. The addition u/s 69C of the Act can be made if expenditure is actually incurred and evidence of incurring such expenditure is available on record. No addition u/s 69C can be made notionally alleging expenses would have been made. There is no material or evidence of paying any commission by assessee nor there is any evidence to whom the same was paid and hence addition u/s 69C is wrong and bad in law. The assessee contends that unsecured loan(s) transactions are genuine transaction and no commission etc. was paid. The addition is thus wrong and deserves to be deleted. 7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

(i) The fact remains that the AO has made an addition of Rs. 5,54,150/- being commission paid @ 0.25% on acquiring the accommodation entries at Rs. 22,16,60,000/-. Before me, the appellant has contended that the unsecured loans transactions are genuine transactions and no commission etc. was paid and that there is no material or evidence of paying any commission by assessee nor there is any evidence to whom the same was paid and hence addition u/s 69C is wrong and bad in law I have duly considered the submission of the appellant and after considering the factual matrix of the case, it is held that since the assessee has got full relief in Ground of Appeal No. 1, therefore no separate

8 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

adjudication is required on this Ground of Appeal. Accordingly, the Ground No. 3 is treated as disposed off.

therefore, marched the present appeal on the grounds stated here

in above. To support the grounds the ld. DR filed his written

submission on 20.04.202 & 23.08.2022 which are reproduced as

under:-

Submission dated 20.04.2022 “In this case, the ld. CIT(A) has deleted the additions made by the AO on the legal ground that since no incriminating material was found as a result of search action u/s 132 of the Act, therefore, the additions made by the AO in the assessment order is without authority of law. The ld. CIT(A) has not decided the matter on merit. 1.1 It is submitted that as per provisions of section 153A, the AO has to issue notices u/s 153A(1) of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was Conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore, in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found during the course of search. 2.1 Further, even otherwise, if a return of income was filed u/s 139 of the Act, which was processed u/s 143(1)(a) of the Act and no assessment order was passed u/s 143(3)/144, the AO can made addition to the total income of the assessee in pursuance to notice issued u/s 153A even in the absence of incriminating material as the said processing/intimation u/s 143(1)(a) is not an assessment order as held by the Hon'ble Apex Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) and subsequently reiterated in Dy. CIT v. Zuari Estate Development & Investment Co. Ltd. [2015] 63 taxmann.com 177/[2016] 236 Taxman 1 (SC). 2.2 As per 2nd proviso to section 153A, assessment proceedings pending on the date of search shall abate. Further, in view of the provisions of section 153A(2), only the abated assessment

9 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

proceedings could be revived if the assessment made u/s 153A(1) is annulled. It would be appropriate to reproduce the provisions of section 153A(2) of the Act as under: (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: 3 Thus, in view of the above, it is submitted that if no scrutiny assessment u/s 143(3)/144 of the Act was made earlier, then the AO is duty bound to assess the total income of the assessee, whether it is based on incriminating material found during the course of search or on the basis of information available on record or comes to his notice during the assessment proceedings. Otherwise, in the case of assessee, in whose case a search was conducted and there was no assessments u/s 143(3) or 144 in respect of six assessment years for which notice u/s 153A have to be issued, there would be no assessment order and the revenue would not get any opportunity to assess such income, which could not be the intention of the legislature. 4 Judicial Pronouncements relied upon: (i) It would be appropriate to reproduce the head note in the case of CIT Vs ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala) as under: "Section 153A, read with section 132 and 132A of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 200203 to 2006-07 - Whether where there was a disclosure made by giving a statement during course of search, Assessing Officer, by virtue of power conferred on him under section 153A was competent to issue notice under said provision and require assessee firm to furnish returns as provided thereunder Held, yes - Whether neither under section 132 nor under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material which was unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A - Held, yes [Para 21][Matter remanded/In favour of revenue] (ii) The head note in the case of E.N. Gopakumar Vs CIT [2016] 75 taxmann.com 215 (Kerala) is as under: "Section 153A, read with section 132, of the Income-tax Act, 1961 - Search & seizure - Assessment in case of (Scope of) - Whether for issuance of a notice under section 153A(1)(a), it is not necessary that search on which it was founded should have necessarily yielded any

10 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A (1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a) - Held, yes [Paras 7 and 8] [In favour of revenue] " (iii) In the case of CIT Vs MGF Automobiles Ltd. [2016] 72 taxmann.com 240 (SC), the SLP filed by the department has been admitted. The head note is as under: Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Conditions precedent) - Assessment years 2004-05 and 2005-06 Pursuant to High Court's order company CML was amalgamated with assessee-company from 1-4-2003 - In returns of income, assessee set offlosses of company CML against its income - Thereafter a search,took place in assessee's premises and certain incriminating material was seized, which was stated to be destroyed in a fire that took place at premises of revenue - Consequent to search, Assessing Officer framed assessments disallowing set off of losses of company CML and made additions - High Court by impugned order held that since Assessing Officer proceeded to frame assessments under section 153A relying on some information not unearthed during search, assessment orders so passed were not sustainable in law - Whether Special Leave Petition filed against impugned order was to be granted - Held, yes [Para 2] [In favour of revenue] (iv) The head note in the case of CIT Vs Dr. P. Sasikumar [2016] 73 taxmann.com 173 (Kerala) is as under: "I Section 153A, read with sections 132 and 132A, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Submission of returns for six years) - Assessment years 2002-03 to 2008-09 - Whether any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A - Held, yes Whether once search is initiated under section 132 or a requisition is made under section 132A, Assessing Officer is empowered to issue notice to person searched requiring him to furnish return of income in respect of each of following six assessment years as referred to in clause (b) of section 153A(1) - Held, yes Whether once aforesaid notice is issued, assessee has to furnish all details with respect to each assessment year since same is treated as a return filed under section 139 - Held, yes - Whether even if no documents are unearthed, nor any statement was made by assessee during course of search under section 132 or any material is received for afore specified period of six years, assessee is bound to file a return - Held,

11 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

yes - Whether abatement of assessment or reassessment pending on date of initiation of search within period of six assessment years specified under section 153A will also not absolve assessee from his liability to submit returns as provided under section 153A(1)(a) - Held, yes [Paras 5 & 6] [In favour of revenue] (v) The head note in the case of Canara Housing Development Co. Vs DCIT [2014] 49 taxmann.com 98 (Karnataka) is as under: "Section 153A, read with section 263, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of search or requisition (Conditions precedent) Assessment year 2008-09 - Whether once proceedings under section 153A is initiated, pursuant to search, order of assessment in respect of six years stands reopened and, therefore, in absence of any valid assessment order in existence, revisional proceedings under section 263 cannot be initiated in such a case - Held, yes [Paras 10 and 111 [In favour of assessee] Section 153A, read with section 132, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of search or requisition (Conditions precedent) Assessment year 2008-09 - Whether condition precedent for application of section 153A is that there should be a search under section 132, however, initiation of proceedings is not dependent on any undisclosed income being unearthed during such search - Held, yes [Para 10]" ( vi) The head note in the case of CIT Vs Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) is as under: "Section 153A, read with section 143 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment year 2000- 01 - Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment Held, yes [Para 11] [In favour of revenue/Matter remanded] (vii) The head note in the case of B. Kishore Kumar Vs DCIT [2014] 52 taxmann.com 449 (Madras) is as under: "Section 69A, read with sections 143, 153, 153A of the Income-tax Act, 1961 - Unexplained moneys (Admission in sworn statement) - Assessment years 2001- 02 to 2007-08 - Assessing Officer made additions as undisclosed income on basis of sworn statements of assessee during search and seizure - Assessee made out an issue that submissions of certain materials by him were not considered by Assessing Officer - However assessee himself stated in sworn statement that he had separate business income which was not included in his returns and outstanding loans were to be recovered with interest, hence that was a clear admission and there was no necessity to scrutinize documents - Whether therefore Assessing Officer was justified in bringing to tax undisclosed income Held, yes [Paras 5,6 & 7] [In favour of revenue]

12 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

It may be mentioned that the SLP filed by the assessee has been dismissed by the Hon'ble Apex Court as reported in [2015] 62 taxmann.com 215 (SC). (viii) The SLP filed by the department in the case of PCIT Vs Best Infrastructure (India) (P.) Ltd. 120181 94 taxmann.com 115 (SC) has been admitted. The head note is as under: "II. Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (General) - Assessment years 2005-06 to 2009-10 - High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer on said basis were not justified - Whether SLP against said impugned order was to be allowed - Held, yes [Para 1] [In favour of revenue] " (IX) The head note in the case of DR. A. V. Sreekumar Vs CIT [2018] 90 taxmann.com 355 (Kerala) is as under: "Section 153A, read with sections 132 and 143 of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 19992000 and 2000-2001 - Search was conducted at premises of assessee on basis of two documents received before search by Department through a Tax Evasion Petition allegedly filed by one of brokers involved in transaction pursuant to which notices under sections 153A and 143 were issued and assessment orders were passed for respective years making additions - Assessee contended that documents relied on to make additions, being not one seized in search conducted, proceedings under section 153A read with section 143 were non-est - However it was pursuant to search and enquiry conducted thereafter that it was revealed that assessee had rental income from a flat purchased at Bangalore which had been sold - Further, suppressed account maintained by assessee in which there was unaccounted consideration from purchaser also was unearthed and exact amount of income escaped from assessment was supported by ample evidence Whether therefore, no ground could be taken that other material which were already available with Department could not be relied on in proceedings Held, yes [Paras 13, 21 and 22] [In favour of revenue] " (X) The ld AR has placed reliance on the case of PCIT Vs Meeta Gutgutia [2018] 96 taxmann.com 468 (SC). It may be mentioned that vide above judgement dated 02.07.2018, the SLP filed by the department was dismissed. However, vide order dated 16.09.2019 in the case of PCIT Vs Devi Dass Garg [2020] 114 taxmann.com 552

13 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

(SC), the Hon'ble Apex Court has admitted the SLP filed by the department. The head note is reproduced as under: "Section 132, read with section 153A of the Income-tax Act, 1961 - Search and seizure - General (Scope of) - In course of appellate proceedings, Tribunal deleted addition made by Assessing Officer in course of scrutiny assessment primarily on ground that no fresh material was discovered during search and seizure proceedings under section 132 to justify addition under section 153A - High Court confirmed order passed by Tribunal - Whether, on facts, SLP filed against said order of High Court was to be granted - Held, yes [Para 2] [In favour of revenue]" (X-A) On the same date, Hon'ble Apex Court has also admitted SLP on the same issue in the case of PCIT Vs Dhananj ay International Ltd [2020] 114 taxmann.com 351 (SC) (XI) Similarly, vide order dated 24.01.2020 in the case of PCIT vs. Gahoi Foods (P.) Ltd. [2020] 117 taxmann.com 118 (SC), the Hon'ble Apex Court has admitted SLP filed by the department. The head note is as under: "Section 153A, read with section 132 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Assessment years 2005-06 to 2011-12 - Assessee-company was engaged in production of 'Gutka' - Assessing Officer, mainly relying upon Notification No. 30/2008-Central Excise (NT), dated 1-7-2008 came to conclusion that assessee was engaged in unaccounted production and sale of 'Gutka' - He thus made addition to assessee's income - Tribunal opined that Assessing Officer while making assessment under section 153A could make addition only on basis of some incriminating material unearthed during course of search or requisition of documents - Tribunal further concluded that since no incriminating documents during course of search were found, impugned addition made by Assessing Officer was not sustainable - High Court upheld Tribunal's order - Whether, on facts, SLP filed against order of High Court was to be granted - Held, yes [Para 2] [In favour of revenue]" (XII) It is therefore humbly submitted that the issue has not been conclusively decided by the Hon'ble Apex Court in the case of Meeta Gugutia (Supra) as relied upon by the ld. AR, otherwise, these SLPs should not have been admitted by the Hon'ble Apex Court. (XIII) In the case of Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 48 taxmann.com 347 (Kerala), it was held that: In the case of CIT v. Hotel Meriya [20101 195 Taxman 459 (Ker.) it was held that none of the provisions under Chapter XIV-B mandates, for making block assessment there shall be evidence regarding the concealment of income for every year for the block period. Though technically one is not concerned with the block assessment, based on the information as stated above for six previous assessment years,

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under section 153A the Department can assess or reassess in accordance with the procedure contemplated. Therefore, there is no prohibition or embargo on the Department to consider this information for assessment or reassessments contemplated under section 153A. There is also no requirement under section 153A and other provisions requiring the Department to collect information and evidence for each and every year for six previous years under section 153A. Therefore, the argument of assessee that the information gathered either during pre-search enquiry or during the course of search cannot be made use so far as the six previous assessment years, is unsustainable. (XIV) In the case of CIT v. Orma Marble Palace (P.) Ltd. [2019] 110 taxmann.com 435 (Kerala), it has been held. that: ] "23. We have already found that there is lack of material insofar as the prior years of the block period, but the same has been held to be inconsequential, in so far as the A.0 being conferred with the power to make assessment in the best of his judgment. The AO was perfectly justified in carrying out an assessment on the best of judgment, making estimations on the basis of the materials recovered. As has been found in Hotel Meriya, it cannot be assumed that a dealer who practises suppression would retain the materials disclosing suppression, for long years; in the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment." XV In Orma Marble Palace P. Ltd. V. CIT [2019] 110 taxmann.com 436 (SC), SLP filed by the assessee has been dismissed. 5 Without prejudice to the above, it is submitted that a search action was conducted in the case of directors of Gemini Commerce Pvt Ltd and statement of director Sh Arpit Khandelwal was recorded u/s 132(4) of the Act. In the said statement Sh. Arpit Khandelwal has admitted that he was even not aware about the full name of the company and all transactions were done on the directions of Sh. Harsh Agrawal. It is to be noted that in the case of Kabul Chawla or any other case following the same ratio decidendi, it has never been held that incriminating material should be found from the premises of the assessee itself These judgements only talk about the ' incriminating material' which was not available at the time of original assessment. The statement of the director of the party from with

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transactions have been done is definitely an incriminating material, if such statement recorded during the course of search. If this is not admitted as incriminating material' then all the transactions done by the syndicate of the taxpayers in collusion with one another in a systematic manner to evade the taxes would not be within the purview of scrutiny by the Income-tax Department and will defeat the purpose of search action itself. Reliance is placed on the judgement of Hon'ble Delhi Tribunal in the case of MGF Automobiles Ltd v ACIT in ITA Nos 4212 & 4213/DEL/2011dated 28.06.2013, wherein the hon'ble co- ordinate Bench has observed that in their view if during the course of search some statement is recorded u/s 132(4) and, in that statement certain facts are recorded from the interpretation of which Assessing Officer could conclude that there was some undisclosed income, then the statement can be considered as incriminating material. In view of the above judicial pronouncements, it is humbly submitted that appeal of the department may please be allowed and these cases may be set aside to the file of the ld. CIT(A) for deciding appeal on merits.”

Submission dated 23.08.2022

“In continuation of my submissions dated 20.04.2022, it is submitted that there was 'incriminating material' in this case also. The AO in her remand report has observed that there was no incriminating material as per her construction of phase 'incriminating material', as there was no seized documents or books of account which could be considered as 'incriminating material'. The definition of incriminating material cannot be confined to only tangible material. This is a purely legal issue, which cannot be decided on the basis of the observation of the AO, she gave her finding only on the basis of her understanding. Hence, much importance should not be given to the report of the AO, as this is purely a legal issue to be decided by the Hon'ble Bench. The Hon'ble Rajasthan High Court in the following cases has held that statement u/s 132(4) has strong evidentiary value even in the cases wherein it has been retracted after unreasonable time period and without cogent reasons- 1. CIT, Bikaner v Ravi Mathur, 2017(1) WLC (Raj) 387 2. PCIT (Central) v Roshan Lal Sancheti, 306 CTR 0140 (Raj) 3. Bannalal Jat Constructions (P) Ltd v ACIT, 106 taxmann.com 127(Raj) In the case of Bannalal Jat Constructions, the Hon'ble Supreme Court has also dismissed the SLP of the assessee. 2. With the above background, it is submitted that purchases were made in this case from Gemini Commerce Pvt Ltd. The name of Gemini is mentioned in the list of shell companies received from the

16 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

Serious Fraud Investigation Office (SFIO). During the course of search operation, simultaneous search operation was also conducted in the case of Sh. Arpit Khandelwal who was Director in Gemini Commerce Pvt. Ltd. His statement u/s 132(4) was recorded on 05.08.2017 and therein he admitted that it is a paper company. Sh Khandelwal stated that he was just a dummy director and Sh Harsh Agrawal made him the dummy director. He even could not tell the full name of the company. The statement of Sh Khandelwal is placed at page no. 1-11 of the DPB. Further, statement of Sh Harsh Agrawal was also recorded u/s 131 on 05.08.2017 simultaneously with search operation in the assessee group. Sh Harsh Agrawal who was controlling many shell companies, Gemini Commerce Pvt Ltd being one of such companies. The statement of Sh Harsh Agrawal is placed at page no. 12-19 of the DPB. Sh Harsh Agrawal also could not tell anything about actual business of Gemini Commerce Pvt Ltd. The Hon'ble Madras High Court in the case of B. Kishore Kumar v DCIT, 52 taxmann.com 449 has held that- "When there is a clear and categoric admission of the undisclosed income by the assessee himself, in our considered opinion, there is no necessity to scrutinize the documents. The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assessee that the admission made by him was incorrect or there is mistake. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence for the Revenue." The Hon'ble Supreme Court has dismissed the SLP of the assessee against the above judgement in 62 taxmann.com 215. 3. Further, physical inquiries were also conducted in the case of Gemini Commerce Pvt Ltd simultaneously in post- search proceedings. However, the entity was not found during the course of inquiries and there was a grocery shop on the given address. It was also found that there was no office of any company at the given address. The Inspector also took a picture of the premises. The report of the Inspector is mentioned at page-7 of the assessment order. 4. It is very important to now discuss what is the definition of incriminating material. Incriminating material can be: • A document, content of a document; • An asset; • Entry in the books of accounts; • Statement given on oath by the assessee or by any other person during search proceedings or any other connected search operation; • Absence of any book being found during search;

17 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors • Absence of any fact claimed earlier but came to notice during the course of search; • Absence of office/business premises of the assessee or counter- party as claimed during the returns filed or any other documents; • Documents or material seized from a different person and not from the assessee.

• The Hon'ble Kolkata Tribunal in the case of Mani Square Ltd. V Assistant Commissioner of Income Tax, CC-3(2), Kolkata, 118 taxmann.com 452 has held that-

"18. Before we proceed to examine the contents of the seized documents referred to by the AO, it is first relevant to understand as to the meaning of the expression "incriminating material" or evidence. There can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary lbr the AO to establish that the information, document or material, whether tangible or intangible, is of such nature which incriminates or militates against the person from whom it is found. Some common forms of incriminating material, inter alia, are for instance, where the search action u/s. 132 of the Act reveals information (oral or documented) that the assets found from the possession of the assessee in- form of land. building, jewellery, deposits or other valuable assets etc, do not corroborate with his returned income (which includes earlier Ars return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the hooks of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible which suggests or leads to an inference that the assessee is conducting transactions outside the regular hooks of account which are not disclosed to the Department. Incriminating material may also comprise of document or evidence found in search which demonstrates or proves that what is apparent is not real or what is real is not apparent . In other words, let us assume that an assessee has recorded transactions in his hooks or other documents maintained in the ordinary course of business, then it is discovered in the search certain material or evidence in such an event then, in order to hold the discovered material or evidence to be incriminating in nature, only when the discovered/seized material/evidence/document should affect the veracity of the entries made in the books of the assessee and thus lead to the conclusion that the entries made regularly/maintained kV the assessee do not represent true and correct state of affairs. Rather the evidence unearthed or found in the course of search would go on to show that the real transaction of the assessee was something different than what was recorded in the

18 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the hooks of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regularly maintained or the returns filed with the authorities from lime to time is not true etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should he of such nature which would prima facie show that the real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. Thus, it is clear from the above observations of the co-ordinate Bench that not only tangible, but intangible material can also be incriminating material. In this case not only the Director accepted that supplier company was a paper entity, but thereafter there was corroborating evidence gathered during the simultaneous physical inquiries at Kolkata, wherein it was gathered that the entity was non-existent and there was a grocery shop. Furthermore, the categorisation of the supplier company by the apex fraud investigation agency of the country SFIO as 'shell company' is in itself an incriminating material. The Hon’ble Supreme Court in the case of CIT v S. Ajit Kumar, 93 taxmann.com 294 has held that:

The power of survey has been provided under section133A.Therefore, any material or evidence found/collected in a survey which has been simultaneously made at the premises of a connected person can be utilized while making the block assessment in respect of an assessee under section 158BB, read with section 158B; 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. In the present case, the Assessing Officer was justified in taking the adverse material collected or found during the survey or any other method while making the block assessment. [Para 15] It is to be noted that in the provisions related to block assessment, there was specific requirement to assess undisclosed income on the basis of the evidence found during the course of search or relatable material. In that scenario also, the Hon'ble Supreme Court held that findings of simultaneous survey operation can be used in the search assessment. The assessment under section 153A of the Act is a better case scenario, where there is no such requirement in the Act.

19 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

Therefore, the finding of the Hon'ble Supreme Court will be applicable with more force in such cases. Thus, it is clear from the above discussion that there was incriminating material in this case and the Hon'ble Bench should not sway away by the observation of the AO in the remand report and should decide the legal issue in correct perspective, as the observation of the AO on a legal issue is her interpretation. The appellate authorities should not decide a legal issue only on the basis of the interpretation of the AO. This may lead to dangerous consequences. Suppose in a case, the AO interprets some provision in a manner which is straight away wrong and defeats the purpose of the provision, then the Hon'ble Bench cannot take a stand that, as the AO has interpreted in such manner, therefore, they cannot interfere in the matter. The duty of the appellate authority is to interpret the provisions of the Act and judicial pronouncements in correct perspective. Therefore, the Hon'ble Bench is requested to set-aside the order of ld. CIT(A) and confirm the additions made by the AO.”

20 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors • Principal Commissioner of Income-Taxv. Gahoi Foods (P.) Ltd. (2020) 117 taxmann.com 118 (SC) • Sunny Jacob Jewellers And Wedding Centre vs. Deputy Commissioner of Income-Tax (2014) 48 taxmann.com 347 (Kerala) • Orma Marble Palace P. Ltd. v. Commissioner of Income-Tax-1 (2019) 110 taxmann.com 436 (SC) MGF Automobiles ltd. v ACIT ITA No. 4212 & 4213/DEL/2011 dated 28.06.2013 (Del-ITAT)

Decision relied upon in the submission dated 23.08.2022 • CIT vs. Ravi Mathur, 2017 (1) WLC (Raj) 387 • PCIT v Roshan lal Sancheti 306 CTR 140 (Raj) • Bannalal Jat Constructions (P.) Ltd. vs. ACIT 106 taxmann.com 128 (Sc) • B. Kishore Kumar v. DCIT 52 taxmann.com 449 ( Madras)] • B. Kishore Kumar vs. DCIT 62 taxmann.com 2015 (SC) • Mani Square Ltd. v ACIT 118 taxmann.com 452 • CIT vs. s. Ajit Kumar 93 taxmann.com 294.

course of hearing submitted that during the year under

consideration the assessee has accepted unsecured loan to the

extent of Rs. 22,16,60,000/- . In the search carried out in the

Kiran Fine Jewellers group the assessee is also covered. The

information related to Gemini Commerce Private Limited, lender

company was examined and it is found that the company is one

of the company out of 16794 companies which has been

declared as a shell company by the Serious Fraud Investigation

21 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors Office [ SFIO ] which is a fraud investigating agency in India.

The list is mostly comprised of real estate, finance and

entertainment companies. He further submitted that the ld. AO

has already on perusal of the Balance Sheet and Profit & Loss

Account of the said lender company found that the company is

not involved in any business activity. The lender company is

showing its income mainly from interest, dividend , commission

and capital gains only. Despite this the company has advanced

substantial amount of loan to the assessee. These companies

are showing high share premium and are almost exclusively

utilizing all this capital for extending loans and advances or

investing in unlisted company equality and these are the paper

companies indulge in accommodative transactions. A search

u/s. 132(1) of the act was conducted at the residence of one of

the directors of M/s. Gemini Commerce Private Limited Shri

Arpit Khandelwal on 05.08.2019 as member of search group of

M/s. Kiran Fine Group. Statement of Shri Arpit Khandelwal was

recorded u/s. 132(4) of the Act wherein he categorically

admitted that he was not aware about the full name of the

company. He is only dummy director in M/s. Gemini Commerce

22 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors Private Limited and he has done all this as per the directions of

Shri Hash Agarwal. This fact establish that the lender company

is shell company which provide accommodation entry in the

guise of unsecured loans. The inspector of the department

asked to make the report on the company at the address and

the inspector has reported that at the address a small grocerary

item shop, where no sign board of the company and on making

enquiry from the local people. Even the letter issued u/s. 133(6)

dated 16.12.2019 was not replied this further strengthen the fact

that the company is only a suit case company. Thus, based

upon this fact the addition of Rs. 22,16,60,000/- made u/s. 68 of

the Act is duly supported by the facts placed on record. The ld.

CIT(A) has not decided the appeal on merits but has only

decided the appeal on technical ground and considering the

merits of the case he should have considered the merits of the

case. The ld. CIT(A) has relied upon the remand report where in

the contention of the ld. AO contradict to the finding recorded in

the assessment order. There is a judgment of the Kerala High

Court against the assessee. In the decision of the Kabul

Chawala or in the Jai Stell decision relied upon there is not

23 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

reference as to what constitute the incriminating material. The

enquiry conducted by the AO in the assessment proceeding

thus be an incriminating material which is based on the SFIO

report, statement of assessee and director and the physical

enquiry based on the financial statement be considered on

merits of the case. The ld. DR further relying on the judgment of

Rajasthan High Court in the case of Banalal Jat Construction P.

Ltd. and Roshan Lal Sancheti submitted that the statement of

Shri Arpit Khandelwal is not retracted and his version is required

to be considered. Based on these arguments he supported the

order of the ld. AO and prayed that the order of the ld. CIT(A) be

set a side and order of the AO be upheld.

has reiterated its arguments as advanced before CIT(A) and

supported the findings recorded in the order of the ld. CIT(A).

The ld. AR in addition also submitted his written submission

which is reproduced here in below:-

“The case laws relied upon by the Department in the written submissions dated 19.04.2022 are on some different issues and are distinguishable from the facts of the assessee's case. The assessee submits facts of every case as follows :-

24 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

In all these cases, the Hon'ble High Court has decided the validity of notice issued under section 153A of the IT Act, 1961 for 6 years and the Hon’ble Court held that for issuing the notice under section 153A there is no requirement of any incriminating material with the Department. It is also held by the Hon’ble Court that once the notice is issued under section 153A, the AO may conduct enquiry on merits of the case without reference to any incriminating material and the matter was referred back to the Hon’ble Tribunal for reconsideration. In this regard it is also submitted that all the judgments are mainly based on judgment of ST. Francis Clay Decor Tiles - (2016)(Kerala HC) and the issue decided in one judgment is followed in other judgments. 5. CIT vs. MGF Automobiles Ltd. - (2016)(Delhi HC) In this case the Hon'ble Delhi High Court decided the issue that in the absence of incriminating material no addition can be made in case of completed assessment and/or abated assessment. The Hon’ble Supreme Court has only granted SLP against the said order. 6. Canara Housing Development Co. vs. DCIT — (2014)(Kar. HC) In this case the Hon’ble Karnataka High Court held that initiation of proceedings are not dependent on any undisclosed income being unearthed during search. In this case the Hon’ble Court has decided the issue on the same footings as decided by Hon’ble Kerala High Court. 7. CIT vs. Raj Kumar Arora- (2014) (Allahabad HC) The issue decided by the Hon'ble High Court is based on Anil Kumar Bhatia's case as discussed in the order of Hon’ble Delhi High Court. 8. Kishore Kumar vfs. DCIT- (2014)(Madras HC) The Hon'ble High court in this case decided the issue regarding sworn in statement and the initiation of proceedings were on account of some seized incriminating material unearthed/found during the course of search. Thus the facts of this case are distinguishable from the assessee's case. 9. PCIT vs. Best Infrastructure (India) Pvt. Ltd. - 2018)( SC) In this case Hon’ble Delhi High Court in the year 2017 given a finding that without any incriminating material no addition can be made in case of unabated assessment. Further, the issue involved in this case was different and the Hon’ble Supreme Court has only granted SLP against the said order because there was some different issue in this case. 10. Dr. A.V. Sreekumar vs.CIT- (2018)(Kerala HC)

25 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

In this case incriminating material was found and seized during the course of search and accordingly the facts of the case are distinguishable from the assessee's case. 11. PCIT vs. Gahoi Foods P. Ltd. - (2020)(Supreme Court) In this case the Hon'ble M.P. High Court has held that in the absence of incriminating document no addition can be made in the unabated or completed assessment. The Hon'ble Supreme Court has only granted SLP. 12. Orma Marble Palace P. Ltd. vs.CIT - (2019)(Supreme Court) In this case additions have been made on the basis of incriminating document in the assessment completed under section 158BB of the IT Act 1961. Thus the facts of this case are distinguishable from the facts of the assessee's case. 13. MGF Automobiles Ltd. vs. ACIT - (ITAT Delhi Bench 'E) The ld. D/R has submitted a copy of the order for the reason that any statement recorded under section 132(4) of the Act, is an incriminating document. Although the Hon'ble ITAT has decided the issue that in case of no incriminating material, no addition can be made in case of completed assessment. 2(i) In this regard it is submitted that now it is a settled position of law that merely a statement without any supporting corroborative material has no legal evidentiary value. The submissions are supported by the Hon'ble Jurisdictional High Court judgment in case of PCIT vs. Mantri Share Brokers Pvt. Ltd. The SLP filed by the revenue against the said judgment, has been dismissed by the Hon'ble Supreme Court vide SLP No. 1646 of 2018. 2(ii) The assessee has submitted number of case laws decided in favour of the assessee after 2016 by the Hon'ble Supreme Court, Hon'ble High Courts including jurisdictional High Court and Hon'ble ITAT including jurisdictional ITAT Jaipur Bench. It is prayed that the issue decided in the said judgments may kindly be considered. In this regard, the assessee also submits and place on record that in the latest judgment of June 2022 the Hon'ble ITAT Jaipur Bench has decided the issue in favour of the assessee in the case of ACIT Vs. Glorious Build Home Pvt. Ltd. (ITA NO. 437/JP/20I9) A copy of the said order is enclosed herewith. Further the Ld. AO has herself admitted in writing that there was no incriminating documents in appellant's case.” In support, reliance was placed on the following decisions: • PCIT vs. Vimal Kumar Rathi 115 taxmann.com 220 (SC) • PCIT vs. Meeta Gutgutia 96 taxmann.com 468 (SC) • Jai Steel (India), Jodhpur vs. ACIT 36 taxmann.com 523 (Raj)

26 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors • CIT vs. Kabul Chawla 61 taxmann.com 412 (Delhi HC) • M/s Vijayeta Buildcon Pvt. Ltd. vs. ACIT ITA No. 980/JP/2018 dated 27.10.2020 • CIT vs. Deepak Kumar Agarwal 86 taxmann.com 3 (Bombay) • M/s Bitthal Das Parwal HUF • Mangilal Agarwal vs. ACIT 163 Taxman 399 (Raj) • CIT vs. Jai Kumar Bakliwal 45 taxmann.com 203 ( Raj. HC) • ITO vs. Smt. Ratan Kanwar ITA No. 334/JP/2014 dated 16.06.2017

the assessee submitted that in the case of Smt. Ratan Kanwar

the transaction is already reflected in the regular books of

account and the assessment proceeding were not pending when

the search was conducted. Thus, the addition can only be made

with respective incriminating material which is not there and the

AO disturbed the completed assessment without placing on

record any incriminating material found at the time of search no

addition cannot be made on the completed assessment. The

provision of law and Indian Constitution does not confer power

on the assessing officer to review his own order which are

completed. The purpose of the search as held in various cases

laws that the addition can only be made on the completed

assessment with respect to the incriminating material and the ld.

AO and DR while argument in this appeal failed to establish that

27 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors the whether any incriminating document is found or not. The Ld.

AO after taken into consideration the facts of the M/s Gemini

Commerce Pvt. Ltd. and the statement of Shri Arpit Khandelwal

given in writing that no incriminating document(s) were found

during the course of search neither in physical record seized nor

in digital data lying seized. The said finding of non-incriminating

document(s) was confirmed by the Add. CIT and Principal CIT,

Jaipur. Thus, the arguments of Ld. CIT(DR) that a statement of

Shri Arpit Khandelwal, is an incriminating document is without

jurisdiction. Not only that No question was asked from Arpit

Khandelwal regarding assessee Shri Mahendra Singh Ratnawat.

In the statement of the assessee not a single question was

asked/raised regarding Gemini Commerce Pvt. Ltd. and/or

statement of Shri Arpit Khandelwal. Shri Arpit Khandelwal

referred the name of Shri Harsh Agarwal, and Shri Harsh

Agarwal stated that he is advancing loan to M/s Gemini

Commerce Pvt. Ltd. which prove that M/s Gemini Commerce

Pvt. Ltd. is an existing company. All the cash laws were relied

upon by Ld. CIT (DR) are altogether on different facts. In all the

said cases there were incriminating documents and or

28 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors unexplained amounts found during the course of search and

later on the concerned persons retracted. The ld. AR of the

assessee drawn attention to the ledger of the Gemini Commerce

Private Limited appearing in the books of the assessee from

there he submitted that Rs. 22,16,60,000/- is accepted on

various dates and Rs. 18,79,00,000/- was repaid on various

dated therefore, even on merits the amount is derived purely on

arbitrary and has considered the amount already repaid by the

assessee for the year under consideration itself. Thus, in the

case of assessee there was neither incriminating document nor

unexplained amount was found no addition can be made. Not

only that for A.Y. 2016-17 the ld. CIT(A) has decided the appeal

of the assessee on merits also as the said assessment was an

abated assessment this it self shows that there are no merits in

arguments of the revenue. Thus, relying on the judgement of

Rajasthan High Court in the case of Mantri Share Brokers P.

Ltd. where in the court has held that “merely on the statement

that too also was taken in view of threat given in question no. 36

as narrated by Mr. Gupta and the same sought to have been

relied upon there is no other material either in the form of cash,

29 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

bullion, jewellery or documents in any other form which can

come to the conclusion that the statement made was supported

by some documentary evidence.” The SLP in this case is also

dismissed by the Supreme Court and thus the finding of the

jurisdictional High Court becomes final so far as the fact that

merely the addition based on the statement will not survive and

therefore, the order of the ld. CIT(A) is reasoned order be

sustained. At last the ld. AR of the assessee for his arguments

on incriminating material relied upon the remand report

submitted through JCIT dated 12-11.2021 where in the ld. AO

specifically accepted that in this case there is no incriminating

material found during the course of search. The same is

extracted here in below:

“To, The Commissioner of Income Tax (Appeal)-4, Jaipur. Submitted through: The Jt. CIT, Central Range, Jaipur Sub:- Calling Remand Report in the case of Shri Mahendra Singh Ratnawat (PAN: AFBPR0768Q) for AY 2015—regarding- Respected Mandam,

30 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

Kindly refer to your office letter no. 227 dated 09.11.2021 calling for remand report in the case of Shri Mahendra Singh Ratnawat for AY 2015-16.

As requested, issue-wise comments are as follows:

a) In this case no incriminating documents were found during the course of search proceedings. Seized digital record has also been operated/examined and nothing adverse has been found. Without prejudice to the above, it is mentioned that during the course of search, statement of one of the directors of M/s Gemini Commerce Pvt. Ltd. (lender Company in the instant case), namely Shri Arpit Khandelwal was recorded u/s 132(4) wherein he admitted that M/s Gemini is a shell company providing only accommodation entries to various persons in the guise of unsecured loans.

b) As per para 7.4 of the assessment order, search u/s 132 of the I.T. Act was conducted at the residence of one of the directors of M/s Gemini Commerce Pvt. Ltd. It was not conducted on the company M/s Gemini Commerce Pvt. Ltd. but on one of its directors, namely Shri Arpit Khandelwal. And search on the director Shri Arpit Khandelwal was conducted on 05.08.2017 and that was the day when his statement was recorded. The mention of search on him on 05.08.2019 in the Assessment Order is apparently a typographical error. With regard to the reference to incriminating material it is mentioned that the comments offered in para (a) may be referred to.”

It is beyond doubt the assessee has taken unsecured loans from

M/s Gemini Commerce Pvt. Ltd. (reference para 7.2 of the

Assessment Order) and this is also beyond doubt that M/s

31 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors Gemini Commerce Pvt. Ltd. was a shell company (reference

para 7.3, 7.4, 7.5 & 7.6 of the Assessment Order).”

material available on record and also gone through the findings

of the lower authorities recorded in their respective orders. We

have also gone through the various judicial ruling placed before

us by both the parties to drive home to their contentions. The

main grounds of the appeal raised by the revenue in this appeal

that SLP is admitted is admitted in Gahoi Foods P Ltd and in

case of Dhananjay International Ltd. wherein the addition was

made based on the statement recorded at the time of search

and the second ground raised by the revenue is that the

ld.CIT(A) should have decided the case on merits instead on

technical ground. The bench noted that in A.Y. 2016-17 even on

merits having similar set of fact the appeal of the assessee was

allowed and the addition was deleted. We have also noted that

there is no incriminating material unearth in the search proceeding

to substantiate the addition as made in the assessment order even

in the appellate proceeding this fact is confirmed by the ld. AO in

his remand report. Not only that even though the assessee filed

32 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors the confirmation, bank statement, ITR, Balance Sheet of these

companies and AO failed to point out any error on these evidences

filed by the assessee and the addition was made on the total

amount taken on various dates and was also repaid on various

dates. He has in his order merely without any corroborative

evidence concluded that this company is shell company engaged

in providing bogus accommodation entries in the shape of

unsecured loans and the assessee has made shame transactions

with this shell company under grab of unsecured loan to introduced

the unaccounted income which is held unexplained cash credit u/s.

68 of the Act. The ld.AO has even not appreciated the fact that the

assessee has entered into so many transaction and the total of the

same cannot be added as income of the assessee even on

ignoring all the arguments. This shows the causal approach taken

by the ld. AO while completing the assessment of search cases. It

is held by various courts and Tribunals that when the assessee

has primarily discharged the initial onus casted upon them in terms

of section 68 by providing details to establish genuineness of

transaction, identity and creditworthiness of depositors then the

assessee is not expected to prove the source of credits in his

33 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors books of account but not the source of source. The ld. DR has also

not controverted the arguments of the ld. AR of the assessee that

out of the total addition of Rs. 22,16,60,000/-, Rs. 18,79,00,000/- is

repaid and Rs. 3,14,00,000/- is comprising of opening balance thus

effectively there is not money which is in real terms accepted by

the assessee in the year under consideration. We found from the

records that assessee have filed the copy of accounts,

confirmation, bank statement and ITR of the loan creditors and the

same is not disputed by the AO. The DR also did not controvert

these basic facts. Thus, as held in the case Dy. CIT v. Rohini

Builders [2003] 127 Taxman 523/[2002] 256 ITR 360 (Guj.), the

Hon'ble Gujarat High Court held that when the assessee has

primarily discharged the initial onus laid on him in terms of section

68 by providing details to establish genuineness of transaction,

identity and creditworthiness of depositors then the assessee is not

expected to prove genuineness of cash deposited in bank account

of those creditors because under the law the assessee can be

asked to prove the source of credits in his books of account but not

the source of source. The assessee had furnished all the

documentary evidences supporting identity, creditworthiness and

34 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors genuineness of transactions of the loan creditor in question.

However, ld. AO without considering the explanation/ evidences

adduced by the assessee and without carrying out any further

enquiries in support of confirmation of loan. The ld. AO in his order

stated that the arguments of the assessee that the creditor

company is filling return and active at ROC record have no

substance as in the various enquiry and investigation it has been

found that the company does not exist and no business activity is

carried out and based on these fact he concluded that the

company is mere paper company and providing accommodation

entry. This finding itself suggested the AO own his own nothing

appreciated that has been placed on record and no cross

verification were conducted merely relying the statement of Shri

Arpit Khandelwal. The ld. AO has not appreciated the arguments of

the ld. AR of the assessee that loan from M/s. Gemini Commerce

Private Limited has been accepted as genuine in the cash of Harsh

Share Portfolio Private Limited as principle of res judicata is not

applicable under the income tax proceedings. The cross

examination request of the assessee to verify the version of Shri

Arpit Khandewal was not granted. Thus, based on the SFIO

35 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors investigation the ld. AO categorized these various transaction of

loan with M/s. Gemini Commerce P Ltd. as sham transaction and

added the whole amount taken by the assessee in the year under

consideration u/s. 68 of the Act. But on perusal of provision it is

evident that assessing officer can very well make addition u/s 68

but for that two circumstances/condition must be satisfied i.e.: • assessee does not offer any explanation about nature and

source of such credit or • explanation offered by assessee is not upto the

satisfaction of AO.

In other words, whenever assessee tenders explanation, before

rejecting the same AO has to record dissatisfaction as to why the

explanation furnished by assessee is not acceptable and while

doing so documents/ explanation furnished cannot be rejected

arbitrarily and summarily without commenting upon it. But the ld.

AO did not examine the evidence and did not bring anything

controvert the evidence filed by the assessee but based on some

report of SFIO additions were made.

36 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 13. In the instant case, assessee has not only offered

explanation regarding nature and source of credits but also

substantiated the same with documentary evidences in the shape

of ITRs, Confirmations and bank statements. Further, Ld. AO has

not pointed out any discrepancy in the details furnished, rather has

made addition solely on the basis of some investigations carried

out in some other unrelated/ unknown parties, and it was alleged

that the loans taken by assessee are bogus and accordingly

addition was made u/s 68 of the Act. Apart from above

investigation of some unknown parties there was no material

available with the Ld. AO or referred to by him in the assessment

order found as a result of search or gathered during the course of

assessment proceedings in support of the impugned addition

made by him. It is also a matter of fact that no report of the alleged

investigation carried out in other cases were supplied to the

assessee.

assessee that as on the date of search, the time limit for service

of notice u/s. 143(2) was not available for A.Y. 2015-16 and thus

37 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors the assessment for that year was not pending on the date of

search. In search no incriminating material was found, this fact

is not only appreciated by the ld. CIT(A) but also confirmed by

the ld.AO in his remand report in the proceeding before the ld.

CIT(A) even the ld. DR did not controvert the report of the ld. AO

in the remand proceedings but has merely stated that the

statement recorded can be considered as incriminating material.

Based on these facts the ld. AR of the assessee vehemently

argued that the assessment already completed can only be

done qua incriminating material and thus the law did not permit

to again relook the assessment already completed. To support

this contention he relied on the various judgements high courts

and Supreme Courts amongst them same are of the

jurisdictional high court also. In this case the search was carried

out on 02.08.2017 and on that the assessment for AY 2015-16

in the case of the assessee was not pending and even the time

limit for issue notice u/s. 143(2) was also passed. Thus, based

on these set of facts the assessing officer would reassess the

total income of the assessee as per the provisions of section 153A

in respect of assessment year 2015-16. As the assessee objected

38 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors to the proposed addition on the ground that during the search no

incriminating material indicating any undisclosed income for the

year under consideration was found, which is also apparently clear

from the assessment order itself and from the order of the ld.

CIT(A) when he called for the remand report before deciding the

appeal of the assessee. Thus, the revenue cannot take a plea that

they have not received fair change to represent their verdict before

CIT(A). The ld. AO in the remand report categorically confirmed

that in this case there is no incriminating material found in the

course of search. Based on this fact non disputed fact the ld. AR of

the assessee contended that since there is no incriminating

material found during the course of search and seizure action, the

ld. AO is not empowered to make any addition in the total income

of the assessee. It is a settled position of law that there cannot be

a review under the garb of reassessment proceeding under section

153A of the Act. Therefore, the proposed reassessment

proceedings are absolutely in abuse of process of law, illegal and

bad in law. The provisions of section 153A cannot be applied in

respect of assessment which has already been completed unless

some incriminating material/information comes into the

39 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors possession/knowledge of the AO during the course of search

proceedings. Since the assessment for the assessment year 2015-

16 was not pending as on the date of search and there is no

incriminating material found or seized during the course of search,

then the AO is bound to reassess the total income as it was

assessed on the original return of income. Though the AO is

legally bound to assess or reassess the total income of six years

immediately preceding to the year of search, however, the

assessments which are pending on the date of search gets abated

and the assessments which were not pending on the date of

search had attained the finality. Therefore, the addition over and

above the assessed income cannot be made de hors the

incriminating material found at the time of search while completing

the assessment under section 153A of the Act. If there is no

incriminating material then the original assessment made can be

reiterated and no further addition is called for and an addition can

only be made on the basis of undisclosed income derived from

material/documents seized as a result of search. The completed

assessment can be interfered or disturbed by the AO while making

the assessment under section 153A only on the basis of some

40 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors incriminating material unearthed during the course of search and

requisition of income disclosing undisclosed income not already

disclosed or made known in the course of original assessment.

Therefore, in the absence of any incriminating material found or

seized during the course of search and seizure proceedings, the

additions made by the AO during the course of reassessment

under section 153A of the Act are without jurisdiction and liable to

be deleted and it is nothing but a review by the same rank of officer

and the same is not permitted under the law. After appreciating

such facts, ld. CIT(A) accepted the contentions of the assessee

and held that no addition could be made as no incriminating

material was found with respect to the unsecured loan by alleging

the same as non-genuine and taken from the shell company. We

have gone through the grounds of appeal raised by the revenue

and it appears that the revenue has not challenged the findings of

the ld. CIT(A) on the very legal ground decided by ld. CIT(A)

against the revenue. Thus, it is clear that this legal aspect of the

decision is not challenged by the revenue before us. Thus, it is

undisputed that when there is no incriminating material was found

41 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors no addition could be made in the order passed u/s. 153A of the

r.w.s. 143(3) of the Act.

Act stipulate two types of situations - one where the assessment of

any assessment year falling within six assessment years is

pending on the date of initiation of search under section 132 or

making of requisition under section 132A of the Act. Therefore, the

assessment under section 153A in respect of those assessment

years which stand abated due to the reason of pending on the date

of initiation of search or requisition shall be the original/first

assessment. In the second category where the assessment or

reassessment has already been completed on the date of initiation

of search or making of requisition as the case may be, the

assessment under section 153A would be in the nature of

reassessment. The Hon'ble Delhi High Court in the case of CIT vs.

Kabul Chawla while analyzing the provisions of section 153A read

with section 132 of the Act has observed in para 37 and 38 as

under :

42 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYS will have to be computed by the AOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. I other words there will be only one assessment order in respect of each of the six AYS "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made. separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not

43 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYS, 2002-03, 2005-06 and 2006- 07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed."

any incriminating material, the completed assessment can be

reiterated and the abated assessment or reassessment can be

made. The Hon'ble High Court has also referred the term used in

section 153A as "assess" which is relatable to abated proceedings

and the word "reassess" related to completed assessment

proceedings. Therefore, the completed assessments can be

interfered with by the AO while making the assessment under

section 153A only on the basis of some incriminating material

unearthed during the course of search or requisition of document

or undisclosed income or property discovered in the course of

search which were not produced or not already disclosed or made

known in the course of original assessment. This view is

supported by the decision of Hon'ble Jurisdictional High Court in

44 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the

issue of addition made by the AO in the proceedings under section

153A in respect of the assessment year which was already

completed on the date of search, the Hon'ble High Court has held

that in the absence of any material which was subsequently

unearthed during the search and was not already available to the

AO, the additions made by the AO on account of security deposits

were rightly deleted by the Id. CIT (A). The relevant observations

of the Hon'ble High Court in case of Principal CIT vs. Meeta

Gutgutia (supra) are in para 53 as under :

"53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)."

45 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

addition can be made in the proceedings under section 153A in

respect of the assessments which were completed prior to the date

of search except based on some incriminating material unearthed

during the search which was not already available to the AO. It is

pertinent to note that the SLP filed by the revenue against the

decision of Hon'ble Delhi High Court in case of Principal CIT vs.

Meeta Gutgutia was dismissed vide order dated 2nd July, 2018.

There are series of decisions on this issue including the decision of

Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs.

ACIT (supra) wherein the Hon'ble High Court has held in para 23

to 30 as under :

"23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the

46 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.

47 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of hose six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total Income and such orders subsistig at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the tal income. In such a case, to reiterate, there is no question

48 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied)

49 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.

The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore.

50 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

issue, accepted the Contention of the assessee and allowed the

appeal of the assessee. The relevant part of the finding of the Ld.

CIT (A) are as under:

The present appeal concerns AY 2015-16. On the date of the search, the said assessment already stood completed u/s 143(3) of the Act, as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of loan obtained from M/s Gemini Commerce Pvt. Ltd. is without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2015-16 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if any, found as a result of search. It is observed that the addition is neither based on any single loose paper found/seized as also admitted by the AO in her remand report nor on any statement recorded during the course of search conducted in the case of the appellant which can be considered as incriminating as is evident from the order of the AO. Further the reference made by the AO to the statement of Shri Arpit Khandelwal cannot be considered as incriminating in view of the fact that Shri Arpit Khandelwal has

51 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors

never stated that M/s. Gemini Commerce Pvt. Ltd. is a shell company and providing only accommodation entries. In fact no such question was ever put to him. On the contrary the fact being that the appellant has filed all documentary evidences with reference to the loan advanced by the company to the appellant and also the fact being that the genuineness of the company M/s. Gemini Commerce Pvt. Ltd. has also been accepted in the past by the A.O. and also by the Hon'ble ITAT Jaipur in other cases. Therefore in view of the aforesaid discussion and respectfully following the binding decision of the Hon'ble Jurisdictional High Court, decision of various other High Courts and the decision of Hon’ble Supreme Court as discussed supra, it is observed that the aforesaid addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable, not being based on any incriminating document/ evidence found in the course of the search and hence is not liable to be sustained. Accordingly, the Ground of Appeal No. 1 is treated as allowed.

there is no mention, reference or finding that the additions have

been made by the AO on the basis of any incriminating material

found during the course of search and seizure in the case of the

assessee but in the remand proceeding the ld. CIT(A) has

specifically raised the issue in remand proceeding AO categorically

confirmed that “In this case no incriminating documents were found

during the course of search proceedings. Seized digital record has

also been operated/examined and nothing adverse has been

found.”

52 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 20. Whereas the ld. DR argued that as per provision of section

153A AO has to issue notice u/s. 153A for all the six years

immediately preceding the assessment year relevant to the

previous year in which search was Conducted. Further as per

provisions of section 153A(1)(b), the AO has to assess or reassess

the total income of such years. Therefore, in pursuance to these

notices issued u/s 153A(1), the AO has to assess or reassess the

total income for the relevant assessment years. Further, there is no

mention in the section that these assessments should be based on

incriminating material found during the course of search. Further,

even otherwise, if a return of income was filed u/s 139 of the Act,

which was processed u/s 143(1)(a) of the Act and no assessment

order was passed u/s 143(3)/144, the AO can made addition to the

total income of the assessee in pursuance to notice issued u/s

153A even in the absence of incriminating material as the said

processing/intimation u/s 143(1)(a) is not an assessment order as

held by the Hon'ble Apex Court in the case of ACIT Vs Rajesh

Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) and

subsequently reiterated in Dy. CIT v. Zuari Estate Development &

Investment Co. Ltd. [2015] 63 taxmann.com 177/[2016] 236

53 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors Taxman 1 (SC). Thus, in view of the above, it is submitted that if

no scrutiny assessment u/s 143(3)/144 of the Act was made

earlier, then the AO is duty bound to assess the total income of the

assessee, whether it is based on incriminating material found

during the course of search or on the basis of information available

on record or comes to his notice during the assessment

proceedings. Otherwise, in the case of assessee, in whose case a

search was conducted and there was no assessments u/s 143(3)

or 144 in respect of six assessment years for which notice u/s

153A have to be issued, there would be no assessment order and

the revenue would not get any opportunity to assess such income,

which could not be the intention of the legislature. The ld. DR

further submitted that the definition of incriminating material cannot

be confined to only tangible materials and argued that the case is

purely legal issue which was not be decided on the basis of the

observation of the AO, she gave her finding only on the basis of

her understanding. The ld. DR relied upon the statement of Sh.

Arpit Khandelwal on 05.08.2017 and Sh. Harsh Agrawal

05.08.2017, the ld. DR submit that assessee has taken unsecured

loan from Gemini Commerce Pvt. Ltd. whereas Gemini Commerce

54 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors Pvt. Ltd., is mentioned in the list of shell company received from

the Serious Fraud Investigation Office (SFIO) and submitted that

during the course of search operation was conducted in the case

of Sh. Arpit Khandelwal who was Director of Gemini Commerce

Pvt. Ltd. His statement U/s 132(4) was recorded on 05.08.2017

and therein he admitted that it is a paper company and he was

just a dummy director and Sh. Harsh Agarwal made him as dummy

director. The ld. DR submits that does not even know full name of

the company and Arpit Khandenwal submits that Harsh Agrawal

only was controlling many shell companies, Gemini Commerce

Pvt. Ltd. being one of such companies. The statement of Arpit

Khandenwal is submitted by the ld. DR in the paper book from

page no. 1 to 11 from page 10 in question 11 was raised that

whether you are director and partner of the company, the answer

given that he does not remember the name of the company.

Further in question no. 13 in paper book at page no. 11 & 12 has

been taken into record as crucial document. Simultaneously the

statement of Harsh Agrawal has been recorded from page 17 to 24

at page 19 of paper book in question Nos. 5,6,8 and 10 were

brought to our notice by the ld. DR from the above question and

55 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors answer coming to the conclusion that this company are shell from

the statement of Arpit Khandelwal and Harsh Agrawal. It is clear

that these paper company and where the both of them could not

tell anything about actual business of the Gemini Commerce Pvt.

Ltd.. He submits that the nature of evidence or information

gathered during the search should be of such nature that it should

not be merely raise doubt or suspicion but should be of such

nature which would prima facie show that the real and true nature

of transaction between the parties for the definition of incriminating

material. Further, ld. DR has placed on the following judgment in

the case of Mani Square Ltd. vs. ACIT reported in 118

taxmann.com 452 (Kolkata Trib.). On the other hand the ld. AR for

the assessee submits that the assessments were completed that

the ld. AO and Pr.CIT has accepted the submissions made by the

assessee and all the books of account were there for perusal,

returns were filed and entire records was verified by the AO and ld.

PCIT also. The ld. AR for the assessee submits that the

evidentiary value should be supported with the Corroborative

evidence, where the ld. DR cannot only relied upon the statements

of Arpit Khandenwal and Harsh Agrawal as there is no

56 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors corroborative evidence and the ld. DR contentions is full and

totally incorrect During the assessment proceedings the ld. AO has

passed a detailed order and recorded the submission made by the

assessee and the AO has made the findings which is contrary and

has applied his power only on presumption as passed the order.

During the course of entire proceedings, we come across that the

AO has not recorded in finding that there is no incriminating

material available or found during course of search proceeding not

only that he has not rebutted the evidence filed by the assesee. In

the present case considering the findings and circumstances

evidence, the AO in remand report it is observed that there is no

incriminating documents found during the course of search has

also been accepted by the CIT (A). The Assessing Officer

observed that Gemini Commerce Pvt. Ltd. is the shell providing

accommodation to various persons and in view of the statement of

Arpit Khandenwal recorded u/s 132(4) of the Act the assessee

contended that no question was asked regarding the list and

advances made by Gemini Commerce Pvt. Ltd. to the assessee

and that Arpit Khandenwal in his statement as never stated that

Gemini Commerce Pvt. Ltd. is a shell company and providing only

57 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors accommodation entries to various persons in the case to guise

unsecured loans. The statement of Arpit Khandenwal if found

correct then no question was asked to Arpit Khandenwal in his

statement regarding providing entry to various persons in cash of

loans and he never even admitted that Gemini Commerce Pvt.

Ltd. is shell company. We are of the opinion that on the basis of

the statement of Arpit Khandelwal and Harsh Agrawal the AO has

no jurisdiction to make the additions and that in the proceedings

u/s 153A of the Act when the assessment was not pending. The

Assessing Officer failed to note that merely on the statement

without any corroborative evidence to a conclusion that the AO to

make the addition which is not sustainable in law.

has accepted that the assessments were completed and books of

account were verified, returns were filed, the entire record are

persuaded by the AO and the ld. CIT(A) when there is no

incriminating material found then the statements recorded during

the assessment proceedings has no evidentiary value when it is

not supported with corroborative evidences. The ld. AR for the

58 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors assessee has made the submissions which are supported by the

Hon’ble Jurisdictional High Court judgmentas reported in his

submission and in the case of CIT vs. M/s Mantri Share Brokers

(P) Ltd. in D.B. Income Tax Appeals No. 502/2011 vide order

dated 05.09.2017. Subsequently the SLP filed by the Revenue

against the said judgment has been dismissed by the Hon’ble

Supreme Court vide SLP No. 1646 of 2018. Whereas, the ld. DR

has supported his submissions by the Hon’ble Supreme Court in

the case of Bannalal Jat Constructions (P) Ltd. Vs. ACIT reported

in (2019) taxmann.com 128 and in jurisdictional High Court

decision in the case of Pr.CIT vs. Roshan Lal Sancheti in D.B.

Income Tax Appeal No. 47/2018 dated 30.10.2018. We have noted

that the facts of the case law relied upon by the ld. DR are on the

facts difference with the case of the assessee.

in respect of the unsecured loan taken by the assessee no

incriminating documents were found in the search proceedings and

the finding of the ld. CIT(A) on this very fact is not challenged

before us in any of the grounds raised by the revenue. The

59 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors requirement that the incriminating material to have the co-relation

to the particular addition sought to be made is a logic that will hold

good not only for Section 153 C of the Act but in relation to Section

153A of the Act as well. Consequently, in our considered view we

do not find any error having been committed by the ld. CIT(A) in

accepting the plea of the Assessee that there is no incriminating

document which was seized in the course of search relating to the

addition sought to be made on account of the unsecured loan

accepted and reflected in the return of income filed by the

assessee. Therefore, the jurisdictional requirement of Section

153A of the Act was not satisfied. In view of the above and for

the reasons stated above and considering the binding

decisions of various High Courts and findings of the apex

court on the decision cited here in above, we see no reason to

interfere with the impugned judgment and order passed by

the learned CIT(A).

I.T.A No(s). 322 & 323/JP/ 2021 (Assessment Year: 2012-13 & 2013-14)

remain the same as were involved in the aforementioned appeal in

60 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors ITA No. 30/JPR/2022, therefore, our order therein passed shall

apply mutatis mutandis for the purpose of disposal of the captioned

appeals.

for assessment year 2016-17 the arguments on facts were almost

similar and since the this year assessment was not completed the

same was decided by the ld. CIT(A) on merits and we have also

decided in 14 & 15 above and based on these findings in our

considered view we do not find any error having been committed

by the ld. CIT(A) in accepting the plea of the Assessee and thus

the appeal of the revenue in terms of these observation stands

dismissed in ITA no. 31/JPR/2022.

In the result, the appeals of the Revenue are dismissed and

upholding the order of the ld. CIT(A) in all the four years.

Order pronounced in the open Court on 18/10/2022.

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (Dr. S. Seethalakshmi) (RATHOD KAMLESH JAYANTBHAI) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18/10/2022. *Santosh

61 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- ACIT, Central Circle-2, Jaipur. 2. izR;FkhZ@ The Respondent- Sh. Mahendra Singh Ratnawat, Jaipur. Smt. Ratan Kanwar Ratnawat, Jaipur vk;dj vk;qDr@ CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. 6. xkMZ QkbZy@ Guard File { ITA No. 30 & 31/JP/2022 and ITA No. 322 & 323JP/2021} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत