SH. POORAN MAL KANWAT ,JAIPUR vs. DCIT, CENTRAL CIRCLE-2, JAIPUR, JAIPUR

& 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR 4. It may be mentioned here that both the assessment orders came to be passed after a search and seizure action under section 132 of the Act and survey action under section 133A of the Act. Said actions were conducted on 02.08.2017 by the Department on the members of Kiran Fine Jewellers Group, including the assessee. The actions are stated to have led to discovery of certain sale agreements in respect of purchase and sale of immovable properties.

As regards assessment for the assessment year 2013-14, appellant has challenged the impugned order and the impunged assessment on the following grounds:

A.Y. 2013-14 ‘’1. The Ld. CIT(A) has erred on facts and in law in upholding the order passed by AO u/s 153C of IT Act ignoring that the additions made by AO are protective addition whereas section 153C can be invoked only when AO is satisfied that documents seized from search party has a bearing on determination of total income of other person.

2 The Ld. CIT(A) has erred on facts and in law in confirming the protective addition of Rs. 13,73,55,249/- made u/s 69 of IT Act on account of alleged unexplained investment in properties without taking into consideration the fate of such addition made in case of M/s Macro Properties Pvt. Ltd. and M/s Macro Townships Pvt. Ltd. where substantive additions has been made even when AO has considered the assessee as benamidar. 3 The Ld. CIT(A) has erred on facts and in law in confirming the protective addition of Rs. 12,40,54,144/- on account of alleged undisclosed short term capital gain on sale of property by adopting value u/s 50C of the Act without taking into consideration the fate of such addition made in case of M/s Macro Properties Pvt. Ltd. and M/s Macro Townships Pvt. Ltd. where substantive additions has been made.’’ 4 The appellant craves to alter, amend and modify any ground of appeal

5. Necessary cost be awarded to the assessee.”

8. While dealing with Ground No. 1 to 3 of the assessee, ld. CIT(A) has dismissed the appeal by observing as under:-

‘’Ground No. 1

‘’6. Ground of appeal

No. 1, the appellant has raised purely a legal ground viz.a viz. the assessment completed u/s 153C. 6.1 I have considered the facts of the case and observations / findings of the AO in the assessment order for the year under consideration. During the appellate proceedings, no response or submission has been made by the appellant and the appellant has not been able to rebut the findings of the AO. It is specifically observed here that in spite of giving many opportunities being heard to the appellant as, detailed above, the appellant has chosen not to make any submission or furnish any information to substantiate and plead the grounds of appeal. Based on material available on file, I do not find any infirmity in the assessment made as per the Section 153C of the Act. This ground of appeal is dismissed.’’ ‘’Ground No. 2

7. The Ground of Appeal No. 2 to 2.3 are inter related hence they are clubbed together for adjudication and is with respect to the addition on a/c of unexplained investment u/s 69 of the Act amounting to Rs.13,73,55,249/- & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR 7.1 ……. 7.2 I have considered the observations / findings of the AO in the assessment order for the year under consideration. During the appellate proceedings, the appellant has not furnished any information/ evidences to rebut the findings of the AO. It is specifically observed here that in spite of giving many opportunities being heard to the appellant as, detailed above, the appellant has chosen not to make any submission or furnish any information to substantiate and plead the grounds of appeal

. There is substantial evidence on record in support of the assessment order. Based on the material is available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the addition of the ld AO. Accordingly, these grounds of appeal are dismissed. Ground No. 3

8. The Ground of appeal No. 3 to 3.3 are inter related hence they are clubbed together for adjudication and is with respect to the protective addition on account of undisclosed short term capital gain earned on sale of land situated at Ajayrajpura & Mathurawala, Tehsil- Sanganer, Jaipur amounting to Rs.12,40,54,144/- 8.1 …… 8.2 I have considered the observations / findings of the AO in the assessment order for the year under consideration. During the appellate proceedings, the appellant has not furnished any information/ evidences to rebut the findings of the AO. It is specifically observed here that in spite of giving many opportunities being heard to the appellant as, detailed above, the appellant has chosen not to make any submission or furnish any information to substantiate and plead the grounds of appeal. There is substantial evidence on record in support of the assessment order. Based on the material is available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the addition of the ld AO. Accordingly, these grounds of appeal are dismissed.’’

9. It is significant to mention here that in the course of hearing, on behalf of the appellant, only one ground has been pressed into service, and that is that this Appellate Tribunal having already set aside the substantive assessments as regards the above-named companies, thereby deleting all & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR the additions, same additions made by the AO by way of protective assessments qua the assessee-appellant herein, and confirmed by the ld. CIT(A) deserve to be deleted.

In support of his contentions, ld. AR for the assessee has filed following documents :

S.N. Particulars 1. Copy of the satisfaction note recorded by the ld.AO for assuming jurisdiction of the assessee u/s 153C 2. Copy of order in case of M/s. Macro Township Pvt. Ltd. to 399 & 367/JP/2023 3. Copy of order in case of M/s. Macro Properties Pvt. Ltd. to177/JP/2023 4. Copy of order in case of Udai Build Home Pvt. Ltd. passed by ld.CIT(A) dated 27-09-2024

Thereupon, we raised a specific question to ld. DR as what, according to her, would be the basis to sustain the additions made by way of protective assessments, when the additions made by way of substantive assessments against the above-named companies have been deleted. In response, Ld. DR did not respond to the query except by simply submitting that she reclined against the orders of the lower authorities and & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR she requested give one week to support the contention of the revenue submit any contrary decision. The bench did not find any submission after 8 days and therefore, we proceeded based on the material available.

We have gone through the satisfaction note dated 08-08-2019 issued by the DCIT, Central Circle-2, Jaipur u/s 153C of the Act, 1961 in the case of the assessee Shri Pooran Mal Kanwat for the Assessment year 2012-13 to 2017-18 which reads as under:-

Satisfaction note as required u/s 153C of the I.T. Act, 1961 in the case of Shri Pooran Mal Kanwat (PAN ADIPK 4543 R), A.Y. 2012-13 & 2018-19 & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR A search &seizure action u/s 132(1) of the I.T. Act, 1961 was carried out at the residential premises of Shri Charan Singh Khangaros s/o Shri Mukut Singh Khangarot, situatde at M-28, Income Tax Colony, Durgapura, Tonk Road, Jaipur on dated 02-08-2017 wherein certain documents were found and seized and inventorized as Annexure AS, Exhibit 1 to 06. Exhibit AS-3 contains 102 pages. Page No. 21 to 28 is a duly notorized sale agreement dated 25-05-2012 executed between Shri Tofan, Kalian S/o Shri Mahadev, Shri Foollchand, Shri Mangilal, Shri Babulal, Shri Chhotu S/o Shri Jagannath Meena, Smt. Naina Devi W/o Shri Jagannath Meena R/o Vill. Nagaliya Manpur, Dhani Bainada, Tehsil- Sanganer, Jaipur (Sellers) and Shri Pooran Mal Kanwat S/o Shri Mahtab Singh Kanwat (Purchaser) for sale of immovable property of 26 Khasra No. having total area 3.87 hectare in village Ajayrajpuria & Mathurawala, Tehsil-Sanganer, Jaipur at the sale consideration of Rs.17,10,70,000/- for the land situated at aforementioned. These lands were purchased by Shri Pooran Mal Kanwat through three sale deeds duly registered with SR-Sanganer-1, Jaipur on 11-07-2012 During the course of search proceedings at residence of Shri Ashok Singh situated at M-21. Income Tax Colony, Durgapura, laipur 3 sale deeds of these aforesaid land as mentioned in sale agreement were found and seized as page no, no. 17- 24, 25-33 & page no. 14-41 of Exhibit-4 of Annexure-AS, which reveals that sale consideration reported in these sale deeds is shown at much below the actual consideration reported in sale agreement. Details of these sale deeds are as under:- (a) 1st Registered Deed: Property admeasuring .80 hectares of land purchased from Shiri Tofan, Shri Kalyan s/o Shri Mahadev, Shri Foolchand, Shri Mangilal, Shri Babulal, Shri Chnotu s/o Shri Jagannath, Smt Naini Devi w/oShriJagananth, Viit. NangaliyaManpur, Dhani Bainada, Sanganer, Jaipur by Shri Pooran Mal Kanwat on 11/07/2012 for total sale consideration of Rs. 1,18,40,000/- out of land located at Village Mathurawala, Tehsil Sanganer. District Jaipur. However, the actual sale consideration of the land as per the duly notarized sale agreement dated 25.05.2012 is at Rs 3,53,63,307/-whereas in the registered sale deed sale consideration reported to have been paid to the sellers at Rs 1,18,40,000/-, thus there is difference in sale consideration amounting to Rs. 2,35,23,307/- between sale agreement and registered sale deed which has been paid to the sellers in cash by the purchaser out of his unaccounted income. (b) 2nd registered deed: A property admeasuring 2.56 hectares of land was purchased by Shri Pooran Mal Kanwat on 11-07-2012 from Shri Tofan, Shri Kalyan s/o Shri Mahadev, Shri Foolchand Shri Mang Lal Shri Babulal, Shri Chhotu s/o Shri Jagannath, Smt Naini Devi w/o Shri Jagananth, Vill Nangaliya Manpur, Dhani Bainada, Sanganer, Jaipur out of land located at Village Mathurawala, Tehsil Sanganer, District Jaipur. For the consideration of Rs. 2,76,48,000/- However, the actual sale consideration of the land as per aforesaid duly notarized sale agreement is at Rs. 11,31,62,583/- thus there is a difference in sale & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR consideration amounting to Rs. 8,55,14,583/- between sale agreement and registered sale deed which has been paid to the sellers in cash by the purchaser out of his unaccounted income. ( c) 3rd registered sale deed: A property admeasuring 0.51 hectares of land purchased by Shri Pooran Mal Kanwat on 11-07-2012 from Shri Tofan, Shri Kalyan s/o Shri Mahadev, Shri Foolchand Shri Mang Lal Shri Babulal, Shri Chhotu s/o Shri Jagannath, Smt Naini Devi w/o Shri Jagananth, Vill Nangaliya Manpur, Dhani Bainada, Sanganer, Jaipur out of land located at Village at Ajayrajpura, Tehsil Sanganer, District Jaipur for sale consideration of Rs. 35,70,000/-. However, the actual sale consideration of the land as per aforesaid duly notarized sale agreement is at Rs. 2,25,44,209/-. Thus there is a difference in sale consideration amounting to Rs. 1,89,74,109/- between sale agreement and registered sale deed which has been paid to the sellers in cash by the purchaser out of his unaccounted income.

From the decision in M/s. Macro Properties Pvt Ltd. to 177/JP/2023, vide order dated 17-07-2023, cited by learned AR for the appellant, while dealing with the substantive additions/assessments, it was observed as under:- ‘’17. On going through the satisfaction note so presented by the ld. DR, the bench noted that looking to the satisfaction note bench observed that there is finding of the assessing officer so as to material relied upon and thereby also the same is in the nature of incriminating in nature or not so far as it relates to the assessee company. Thus, in this case section 153 C plays a vital role whether it is applicable on the assessee or not. Here in the case, on perusal of the satisfaction note of the assessing officer though not provided to the assessee nor discussed in the order of the assessment. But when the record called for by the bench, we note that the recording of the satisfaction note does not speak to any incriminating material related to the assessee company. The transaction mentioned in the said satisfaction note are duly recorded in the books of the assessee company. Not only that the alleged deed mentioned as in the nature of & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR incriminating in nature is already cancelled and thereafter whatever transaction referred in the order of the assessment are duly recorded transaction and for that the ld. AO is not permitted to assessee the same u/s 153C of the Act for the year under consideration.Therefore, here it the important question as to whether the revenue consequent to the search make the de novo assessment regardless of any incriminating material found during the course of search. The issue is no longer res integra as the same has already been decided by a Division Bench of theHon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290/250 Taxman 225/397 ITR 344. In the case of Sinhgad (supra), the disputed questions for adjudication were primarily two fold :- Whether the additional ground raised for the first time before the Hon'ble Income-tax Appellate Tribunal ("ITAT") questioning the validity of the . notice u/s 153C of the Act (in the case of a person other than that searched) on the ground that satisfaction was not properly recorded and also that the said notice was time barred in respect of AYs 2000-01 to 2003-04, could be permitted or not? Whether as per the provisions of section 153C of the Act, the incriminating material which was seized had to pertain to the assessment . years (i.e. completed assessments for the AYs 2000-01 to 2003-04) in question and the same constituted a jurisdictional requirement which is essential for assessment under the provisions of section 153C of the Act?

In respect of the first question, the Hon'ble Supreme Court at para-19 of their order concluded that the ITAT had correctly permitted the additional ground to be raised and correctly dealt with the same on merits as well. As regards the second question, the Hon'ble Supreme Court held, inter alia, that the existence of incriminating material for interfering with completed assessments on the date of search was a jurisdictional fact failing which, no assessment was possible for those years u/s 153C of the Act. It was further affirmed that the incriminating material had to pertain to the four assessment years in question i.e.A.Ys 2000-01 to 2003-04 and since the finding of the facts at para-9 of the order of ITAT revealed that the material as per the satisfaction note belonged to A.Y. 2004-05 or thereafter which were not the four assessment years in question, no addition could be made in respect of the said assessment years. The ratio decidendi of the Hon'ble Supreme Court's judgement appears at para-18 of their order and the same is reproduced as under :- "18. The Income-tax Appellate Tribunal (ITAT) permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the Income-tax Appellate Tribunal (ITAT) that as per the provisions of section 153C of the Act, incriminating material which was seized had to & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of section 153C of the Act. Para 9 of the order of the ITAT reveals that the Income-tax Appellate Tribunal (ITAT) had scanned through the satisfaction note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred." As it is evident from the provision of section 153C, which provides for assessment/ reassessment to be made as per section 153A of the Act.The requirement of the existence of incriminating material to interfere and assess or reassess the income of the assessment years that stand completed/are not pending on the date of search, is a mandatory requirement as per the provisions of section 153A of the Act and this mandatory requirement comes into play under section 153C of the Act due to the provision of sub-section (1) of section 153C according to which once the initial requirements for the invocation of section 153C have been complied with, the assessment u/s 153C shall be made in accordance with the provisions of section 153A of the Act. Section 153C of the Act comes into play when any money, bullion, jewellery or other valuable article or thing or any books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A of the Act. This implies that if a person is searched u/s 132(1) of the Act and there are documents found on him which lead to the inference that the same belong to any other person, the provisions of section 153C of the Act would be invoked for making an assessment on such other person. Drawing of a satisfaction note by the Assessing Officer of the person searched by listing and describing the documents belonging to the other person is a pre-condition for initiation of the proceedings u/s 153C of the Act. After having recorded the satisfaction, as per the requirement of section 153C(1) of the Act, the books of account or documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over the other person and the said officer shall issue notice and assess or re-assess the income of the other person in accordance with the provisions of section 153A of the Act. It will thus be seen that once the requirement of satisfaction wherein the Assessing Officer of the searched person records that documents belong to the other person is met, the assessment or re-assessment of the income of the other person shall have to take place in accordance with section 153A of the Act. Various high courts have that the existence of incriminating material, in respect of the assessment & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR years whose assessment stood completed on the date of the search, is a mandatory requirement to assess or reassess those years. Now the issue is finally decided by the apex court so fars as the section 153A of the Act in the case of Pr. Commissioner Of Income Tax ... vs AbhisarBuildwell P. Ltd. and so far as regards the issue of section 153C is concerned same is decided in the case of DCIT Vs. M/s. U. K. Paints ( Overseas) Limited

& 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR As observed hereinabove, as no incriminating material was found in case of any of the Assessees either from the Assessee or from the third party and the assessments were under Section 153-C of the Act, the High Court has rightly set aside the Assessment Order(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Court. Hence, all these appeals deserve to the dismissed and are accordingly dismissed.’’ 19. In view of the above discussion and for the reasons stated above and considering the binding decisions of the apex court resting the issue that no addition can be made de hors the incriminating material in the proceeding u/s. 153C of the Act and thus by considering the totality of the facts, circumstances of the case and the decisions cited supra, we do not concur with the findings of the ld. CIT(A) Thus the appeal of the assessee for the assessment year 2013-14 is allowed.’’

As per the two decisions of the Co-ordinate Benches, in to 399 and 367/JP/2023 and to 177/JP/2023, cited on behalf of the assessee, the transactions recorded were the bank transfers recorded as loan and the properties referred to were in fact sold subsequently to the third party by the real owner of the property and therein it could not be established that there was any incriminating material against said companies, and as a result, those substantive additions/assessments made in three companies were finally deleted considering the decision of the Hon’ble Apex court in the case of U. K. Paints (Overseas) Ltd., holding that the addition u/s. 153C can only be invoked if the incriminating material found in the search. This fact has not disputed by the ld. DR in the course of arguments.

& 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR Revenue has not pointed out from record any material so as to establish that protective additions/assessments are based on any incriminating material as regards the assessee.

Conclusion 14. As a result of the above discussion and findings, the appeal- deserves to be allowed.

& 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR

2. The Ld. CIT(A) has erred on facts and in law in confirming the protective addition of Rs.4,28,96,664/- on account of alleged undisclosed short term capital gain on sale of property by adopting value u/s 50C of the Act without taking into consideration the fate of such addition made in case of M/s Macro Properties Pvt. Ltd. and M/s Macro Townships Pvt. Ltd. where substantive additions has been made.

3. The Ld. CIT(A) has erred on facts and in law in confirming the protective addition of Rs.40,00,000/- made u/s 69 of IT Act on account of alleged unexplained investment in properties without taking into consideration the fate of such addition made in case of M/s Uday Buildhome Pvt. Ltd. where substantive addition has been made even when AO has considered the assessee as benamidar.

4. The appellant craves to alter, amend and modify any ground of appeal.

5. Necessary cost be awarded to the assessee.”

As noticed above, as regards this appeal of the assessee, same grounds of appeal have been raised, as the ones raised in , with the only difference being in the amount(s) of the additions and the total income(s) computed. Ld. CIT(A) having dismissed the appeal of the assessee recording almost same observations and findings, having regard to the findings recorded in the impugned order passed by learned & 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR CIT(A) resulting in filing of this appeal also deserves to be allowed.

16. Admittedly, the substantive addition/assessment made in the case of M/s. Macro Properties Private Limited and Macro Township Private Limited were deleted by this Appellate Tribunal, vide orders dated 17.7.2023 and 5.12.2023 respectively, whereas the substantive addition in the case of M/s. Uday Buildhome Private Limited was deleted by ld. CIT(A) vide order dated 27.9.2024 based on the decision of the apex court followed by the two cases of the M/s. Macro Properties Private Limited and Macro Township Private Limited.

Conclusion 17. Thus, when the substantive additions stand deleted on its merits and as we have considered that aspect of the matter while dealing with the appeal of the assessee in the issue being identical, we do not deem it fit to discuss the arguments afresh, and hold that the decision taken in as noticed above, shall apply mutatis mutandis in the case of the assessee for the assessment year 2014-15. Thus, the appeal ITA No.83/JP/2024 of the assessee deserves to be allowed.

& 83/JP/2024 SHRI POORAN MAL KANWAT VS DCIT, CENTRAL CIRCLE-2, JAIPUR Result 18. As a result, both the appeals of the assessee are allowed and the impugned orders passed by Learned CIT(A), and impugned assessments framed by Assessing Officer, are set aside.

Pronounced in open Court on 28 -11-2024.