M/S. KESAR MARBLE AND GRANITES LTD.,,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BANGALORE

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER

ITA Nos.373 to 376 & 382/Bang/2024 Assessment Years: 2014-15 to 2018-19 respectively

M/s. Kesar Marble and Granites Ltd. 23/2, ,Coffeeday Sqaure DCIT Vittal Mallya Road Central Circle-1(3) Vs. Bangalore 560 001 Bangalore

PAN NO : AAACK4640D APPELLANT RESPONDENT Appellant by : Sri V. Srinivasan, A.R. Respondent by : Ms. Neha Sahay, D.R.

Date of Hearing : 27.06.2024 Date of Pronouncement : 03.07.2024 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These appeal by assessee are directed against the common order of CIT(A)-11, Bangalore for the assessment years 2014-15 to 2018-19 dated 31.12.2023. Certain issues in these appeals are common in nature, hence, these appeals are clubbed together, heard together and disposed of by this common order for the sake of convenience. 2. First, we will take the common ground in these appeals with regard to limitation of passing assessment orders. In these cases, there was search u/s 132 of the Income Tax Act, 1961 on 21.9.2017 in the case of Sri V.G. Siddartha, Coffee Day Enterprises, Ltd. at 7th Floor, No.23/2, Coffee Day Square, Vithal Malya Road, Bangalore 560 001 on 21.9.2017. Consequent to above search action, assessee’s place was also searched and notice u/s 153C of the Act was issued to the assessee and the present assessment has been framed in these cases u/s 153C of the Act.

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 2 of 23 3. The contention of the ld. A.R. in ITA No.373 to 376/Bang/2024 is that assessment orders were passed beyond the period of limitation as it was served on 1.1.2020 to the assessee and time limit so available to the assessee was only up to 31.12.2019. We find no force in the argument of assessee’s counsel. In this case, assessment order was passed on 29.12.2019 and dispatched to the assessee u/s 153(1) of the Act on 31.12.2019. As such, it cannot be said that assessment order passed u/s 153C of the Act after 31.12.2019 so as to hold it as barred by limitation. Being so, we find no merit in the argument of assessee’s counsel. This ground of appeal is dismissed. 4. Next common ground in all these appeals in ITA Nos.373 to 376/Bang/2024 is that the search action was conducted in the premises of assessee on the basis of warrant issued in the name of Coffee Day Group and consequent to seizure of document at assessee’s place notice u/s 153C of the Act was issued. As such the ld. A.R. for the assessee contended that search conducted in the case of assessee is bad in law. 5. We have heard the rival submissions and perused the materials available on record. As per explanation inserted to section 132 of the Act by Finance Act, 2017 with retrospective effect from 1.4.1962, the assessee cannot question the legality of the search before this Tribunal. This view if also fortified by the decision of Hon’ble Karnataka High Court in the case of Pratibha Jewellery House Vs. CIT 88 taxmann.com 94 (Karn.). Accordingly, this ground of assessee is dismissed in all appeals. 6. Next common ground in all these appeals in ITA Nos.373 to 376/Bang/2024 is with regard to framing of assessment u/s 153C of the Act as the condition precedent to issue notice u/s 153C of the Act is not satisfied. 6.1 According to the ld. A.R., there was search action conducted in the premises of the assessee on the strength of warrant of authorization issued in the name of Coffee Day Group. The seizure

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 3 of 23 of document at the premises of the assessee was resulted in issue of notice u/s 153C of the Act and that cannot be reason to issue notice u/s 153C of the Act since the search in the case of assessee itself, assessment should be framed u/s 153A of the Act. 7. We have heard the rival submissions and perused the materials available on record. In this case, search warrant was issued in the name of Coffee Day Group and not in the name of assessee. The said warrant of authorization issued in the name of Coffee Day Group was also covered the premise of the assessee. Consequent to this, assessee’s place of business was searched and that being the case, the assessee is other person u/s 153C of the Act. Hence, notice u/s 153C of the Act was issued to the assessee. In our opinion, the proceedings u/s 153C of the Act is in accordance with law and we do not find any infirmity in those proceedings and the same is confirmed. This ground of appeal of the assessee in all appeals is dismissed. 8. The assessee filed one common additional ground in ITA Nos.373, 374 & 375/Bang/2024 for the assessment years 2014-15 to 2016-17 respectively which is as follows: “The ld. CIT(A) ought to have appreciated that the addition of Rs.22,00,000/- made towards payment of salary and Rs.35,00,000/- towards purchase of granite block from Sri Santosh was not based on any incriminating material found during the course of search and only based on similar expenditure incurred for the AY 2017-18 and AY 2018-19 and the income offered in the statement recorded u/s 132(4) of the Act and thus, the same ought to have been deleted under the facts and in the circumstances of the appellant’s case.”

8.1 The assessee filed petition for admission of this common additional ground. 9. We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 4 of 23 additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 10. The ld. A.R. submitted on merit of the additional ground that this addition is made in the assessment years from 2014-15 to 2016-17 without any seized material and the addition is based on the statement recorded u/s 132(4) of the Act. The assessee’s counsel strongly relied on the following judgements:

(i) In the case of PCIT Vs Best infrastructure (India) Pvt Ltd (ITA No. 13/2017) the question of law framed before Delhi High Court is as under: “Did the ITAT fall into error in holding that the additions made under Section 68 of the Income Tax Act, 1961, on account of the statements made by the assessee’s Directors in the course of search under Section 132 of the Act were not justified ?”

In the case, the learned CIT-(A) held that evidence does not mean only documentary evidence and the statement under section 132(4) of the Act is an important evidence collected as a result of search and seizure operation and thus, the addition of share capital was based on evidence gathered during the search. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The Hon’ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under:

“38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 5 of 23 effect that the assessee were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessee herein was not justified in law.” [Emphasis in bold and underline supplied]

(ii) In the case of CIT Vs Harjeev Aggarwal (2016) 290 CTR 263 (Delhi), the Hon’ble High Court observed as under:

“19 In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV –B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The works evidence found as a result of search” would not taken within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the Assessee during search operation.” [Emphasis in bold and underline supplied]

He submitted that the Hon’ble High Court in the above case further noted that the statement recorded under section 132(4) of the Act may be used for making the assessment but only to the extent it is relatable to the incriminating evidence/material unearthed or found during the course of search. (iii) In the case of Moon Beverages Ltd. Vs ACIT, Central Circle- 15, New Delhi (ITA No.7374/Del/2017 dated 07.06.2018) Delhi bench held as under:

“45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 6 of 23 decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.”

(iv) In the case of M/s. Brahmaputra Finlease (P) Ltd. Vs DCIT (ITA No. 3332/Del/2017 dated 29.12.2017) Delhi Tribunal held as under:

“4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search.” [Emphasis in bold and underline supplied]

(v) In the case of PCIT Vs Suman Agrwal (ITA NO. 167 OF 2022) Honourable Delhi High court held as under: 8. We have perused the statement dated 3rd August, 2015 and the contents of the letter dated 31st July, 2015, both authored by Sh. Madho Gopal Agarwal. There is no reference to M/s KGN Industries Limited in either of the said documents. No other material found during search pertaining to M/s KGN Industries Ltd. has been placed on record. The Revenue has not placed on record any incriminating material which was found as a result of the search conducted on the assesee herein. It is also the contention of the assessee that there was no surrender by her unlike Sh. Madho Gopal Agarwal and she, therefore, specifically disputed that any notice under section 153A of the Act could have been initiated against her. The said facts are not disputed by the counsel for the Revenue.

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 7 of 23

[Emphasis in bold and underline supplied] (vi) Honourable Delhi High Court in the case of Pr. CIT v. Anand Kumar Jain [2021] 432 ITR 384 held as under: “This statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment.”

[Emphasis in bold and underline supplied]

(vii) Honourable Mumbai Bench of ITAT in the case of Arihant Universal Realty (P.) Ltd. v. DCIT( ITA NO. 4342/2017 dated 05.04.2022 ) held as under: 6.1 We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2009-10 was originally completed u/s 143(1) of the Act and hence it falls under concluded proceeding, as on the date of search. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to such concluded year, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceeding was not pending on the date of search to get itself abated. It is not in dispute that both the ld AO and the ld CITA had admittedly not made any reference to any seized material found during the course of search in their orders relatable to the completed assessment year with regard to the items that were subject matter of disallowances/addition. In this regard, we hold that the disallowances/additions that were made by the ld. AO in section 153A assessment were already forming part of the regular books of accounts and were duly recorded in the regular books of the assessee and cannot be construed as incriminating in nature. Every assessee would be having its regular books of accounts (where books are maintained) and would be filing his regular returns of income and assessments framed accordingly. If such person is subjected to search and the very same regular books of accounts were found at the time of search and if the ld AO tries to take a different view on the already recorded transactions in the said regular books of accounts in the search assessment u/s 153A of the Act which is contrary to the view taken by him in the original scrutiny assessments u/s 143(3) or intimation u/s 143(1) of the Act, then it would only result in giving another innings to the ld AO to review his own earlier decision on the very same set of facts and figures. This would make the entire scheme of the Act meaningless and the ld AO would be conferred with unfettered powers to review the earlier decisions taken either by him or by his

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 8 of 23 predecessor on the very same issue , which in our considered opinion, cannot be the intention of the statute. That's why the legislature had duly drawn a distinction between the completed and abated assessments.

[Emphasis in bold and underline supplied]

Held that it is not possible to say that this is a case of no evidence at all inasmuch as evidence in the form of the statement made by the assessee himself and other corroborative material are there on record.”

(ii) Judgement of Hon’ble High Court of Kerala in the case of CIT, Kozhikode Vs. O. Abdul Razak reported in (2013) 350 ITR 71 (Kerala) where held as follows: “IT: As self-serving retraction, without anything more cannot dispel statement made under oath under section 132(4)”.

(iii) Judgement of Hon’ble High Court of Jharkhand in the case of Mahabir Prasad Rungta Vs. CIT, Ranchi reported in (2014) 266 CTR 175 (Kharkhan) (9.1.2014) wherein held as under: “IT: Where assessee has not adduced any rebuttal evidence to show that entries made in diary/loose sheets recovered during search are not income in hands of assessee, addition is to be upheld.”

(iv) Judgement of Hon’ble Supreme Court of India in the case of Roshanlal Sanchiti Vs. PCIT reported in (2023) 150 taxmann.com 228 (SC), wherein held that “SLP dismissed against order of High Court that retraction of statement recorded u/s 132(4) of the Act has to be made within reasonable time or immediately after statement of

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 9 of 23 assessee is recorded and hence where retraction of statement recorded u/s 132(4) and later confirmed in statement recorded u/s 131 had been made by assessee after almost 8 months same was to be disregarded.” (v) Judgement of Hon’ble Delhi High Court in the case of CIT Vs. Chetan Das Lachman Das wherein held as follows: “13. Coming to the order of the Tribunal, we are of the view that the reasons given by it to distinguish the judgment of the Supreme Court cited (supra) are not sound. Firstly, there was seized material in the present case to show that the assessee has been indulging in off-record transactions. The observation of the Tribunal that no evidence was found to show that the actual turnover of the assessee was more than the declared turnover is hair splitting. The Tribunal lost sight of the fact that all was not well with the books of account maintained by the assessee and it has been keeping away its income from the books. That should have been sufficient for the Tribunal to examine the estimate made by the Assessing Officer, having regard to the principles laid down in the judgment of the Supreme Court (supra). The Tribunal also failed to note the difference between Section 158BB appearing in the Chapter-XIVB and the assessment made by virtue of the provisions of Section 153A of the Act. Secondly, the Tribunal expects the purchasers from the assessee to come forward and declare that they have paid more than what was appearing in the sale bills issued to them and has commented upon the lack of any inquiry from the purchasers on this line. Suffice to say that this throws an impossible burden on the Assessing Officer, having regard to the observations of the Supreme Court that the assessee cannot be permitted to take advantage of his own illegal acts, that it was his duty to place all facts truthfully before the assessing authority, that if he fails to do his duty She cannot be allowed to say that assessing authority failed to establish suppression of income, that the facts are within his personal knowledge and therefore it was the burden of the assessee to prove that there was no suppression. Thirdly, the Tribunal has stated that there was no corroborative material to substantiate the contents of the loose papers found during the search. We are not impressed by this reason at all. The papers are not denied or disputed by the assessee. The CIT (Appeals) has found that the partners of the assessee firm had admitted to the practice of suppressing the profits. The papers themselves show two different rates, one higher and the other lower and on comparison with the sale bills it has been found that the sale bills show the lower rate and these findings have not been denied by the assessee. The Tribunal, therefore, erred in looking for some other corroboration to substantiate the contents of the loose papers, overlooking that the loose papers needed no further corroboration and the sale bills compared with the seized papers themselves corroborated the suppression of income. Fourthly, the Tribunal has relied on the observations of the CIT (Appeals) that no serious consideration can be given to the loose papers and has held that this shows that there is "nothing more in Revenue s kitty apart from those said loose papers pertaining to November, 2005 (financial year 2005-06) to support suppression of sales receipts on the part of the assessee firm". The Tribunal,

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 10 of 23 with respect, has misread the observations of the CIT (Appeals) and has relied on a single observation without reading the order of the CIT (Appeals) as a whole. Moreover, in such cases, it is expected of the Tribunal to also independently examine the decision of the CIT (Appeals) which is impugned before it. In such cases it would be more appropriate to find out or ascertain whether there is any positive material which is in support of the assessee’s case or anything upon which the assessee can rely in order to discharge the burden placed upon him in the light of the judgment of the Supreme Court in H M Esufali H. M. Abdulali (supra). Mere negative findings should not be made use of to throw out the case of the department. Lastly, the reliance placed by the Tribunal on the judgment of this Court in CIT v. Anand Kumar Deepak Kumar, (2007) 294 ITR 497 does not seem appropriate. There it was held that there was no presumption that unaccounted sales in the pre-search period would continue in the post search period also. This judgment has no application to the present case because the search took place on 13.12.2005 which falls in the year relevant to the assessment year 2006-07. The assessments under Section 153A of the Act have been completed up to and including the assessment year 2006-07. Even if there can be no presumption that after 13.12.2005 there could have been unaccounted sale of Hing or compound Hing, it is hardly material since only a period of 31/2 months were left aft e date of search till the end of the previous year i.e. 31.3.2006.”

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 11 of 23 during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income Of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/ material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/ material found during search in order to for an assessment to be based on the statement recorded."

12.1 Further, the ld. AO cannot solely rely on the statement recorded u/s 132(4) of the Act as recently held by Hon’ble Delhi High Court in the case of PCIT Vs. Pavitra Realcon Pvt. Ltd. reported in ITA No.579/2018 dated 29.5.2024, wherein held as under: “17. We have heard the learned counsels appearing on behalf of the parties and perused the record.

In the case of Kailashben Manharlal Chokshi v. CIT1, the Gujarat 21. High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: - 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 12 of 23 authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary state ment, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disbelieve the retrac tion made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee.

[Emphasis supplied]

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 13 of 23 which would corroborate said statements, do not grant the AO the authority to make an assessment.

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 14 of 23 This Court in the case of CIT v. Kabul Chawla5, has explicitly noted 26. that the information/material which has been relied upon for assessment has to relate with the assessee. The relevant portion of the said decision is extracted herein below: - (iv) Although section 153A 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 Assessing Officer 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 the seized material."

[Emphasis supplied]

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 15 of 23 had been observed earlier, namely, the existence of the power being merely enabling as opposed to a statutory compulsion or an inevitable consequence which was advocated

***** 56. We also bear in mind the pertinent observations made in RRJ Securities when the Court held that merely because an article or thing may have been recovered in the course of a search would not mean that concluded assessments have to “necessarily” be reopened under Section 153C and that those assessments are not liable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect was again emphasised in para 38 of RRJ Securities with the Court laying stress on the existence of material that may be reflective of undisclosed income being of vital importance. All the aforenoted judgments thus reinforce the requirement of incriminating material having an ineradicable link to the estimation of income for a particular AY.”

[Emphasis supplied] 28. So far as the submission made by the learned counsel for the Revenue that the AO acted on a bona fide belief that the date of search has to be taken as the date of initiation of proceedings under Section 153C of the Act is concerned, it is apposite to refer to our decision in the case of CIT v. Ojjus Medicare (P) Ltd.8 This Court, in the said case, reiterated the already settled law that the date of initiation of assessment proceedings under Section 153C would be calculated from the date of handing over of the books of accounts, documents or assets seized to the jurisdictional AO of the non-searched person. The relevant paragraphs of the said decision are extracted herein below: - “K. SUMMARY OF CONCLUSIONS 119. We thus record our conclusions as follows:

A. Prior to the insertion of Sections 153A, 153B and 153C, an assessment in respect of search cases was regulated by Chapter XIVB of the Act, comprising of Sections 158B to 158BI and which embodied the concept of a block assessment. A block assessment in search cases undertaken in terms of the provisions placed in Chapter XIVB was ordained to be undertaken simultaneously and parallelly to a regular assessment. Contrary to the scheme underlying Chapter XIVB, Sections 153A, 153B and 153C contemplate a merger of regular assessments with those that may be triggered by a search. On a search being undertaken in terms of Section 153A, the jurisdictional AO is enabled to initiate an assessment or reassessment, as the case may be, in respect of the six AYs' immediately preceding the AY relevant to the year of search as also in respect of the “relevant assessment year”, an expression

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 16 of 23 which stands defined by Explanation 1 to Section 153A. Of equal significance is the introduction of the concept of abatement of all pending assessments as a consequence of which curtains come down on regular assessments.

B. Both Sections 153A and 153C embody non-obstante clauses and are in express terms ordained to override Sections 139, 147 to 149, 151 and 153 of the Act. By virtue of the 2017 Amending Act, significant amendments came to be introduced in Section 153A. These included, inter alia, the search assessment block being enlarged to ten AYs' consequent to the addition of the stipulation of “relevant assessment year” and which was defined to mean those years which would fall beyond the six year block period but not later than ten AYs'. The block period for search assessment thus came to be enlarged to stretch up to ten AYs'. The 2017 Amending Act also put in place certain prerequisite conditions which would have to inevitably be shown to be satisfied before the search assessment could stretch to the “relevant assessment year”. The preconditions include the prescription of income having escaped assessment and represented in the form of an asset amounting to or “likely to amount to” INR 50 lakhs or more in the “relevant assessment year” or in aggregate in the “relevant assessment years”. C. Section 153C, on the other hand, pertains to the non-searched entity and in respect of whom any material, books of accounts or documents may have been seized and were found to belong to or pertain to a person other than the searched person. As in the case of Section 153A, Section 153C was also to apply to all searches that may have been undertaken between the period 01 June 2003 to 31 March 2021. In terms of that provision, the AO stands similarly empowered to undertake and initiate an assessment in respect of a non-searched entity for the six AYs' as well as for “the relevant assessment year”. The AYs', which would consequently be thrown open for assessment or reassessment under Section 153C follows lines pari materia with Section 153A. D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 17 of 23 of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. E. The reckoning of the six AYs' would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs' would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A. F. While the identification and computation of the six AYs' hinges upon the phrase “immediately preceding the assessment year relevant to the previous year” of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it “from the end of the assessment year”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the six year period and employing the expression “from the end of the assessment year” while speaking of the ten year block.”

[Emphasis supplied] 29. It is thus seen that in order to determine block of six AYs, one must first identify the FY in which the search occurred, leading to the identification of the AY relevant to the previous year of the search. The block of six AYs will then be those immediately preceding the AY relevant to the search year. For a search assessment under Section 153C of the Act, the only difference is that the previous year of the search is replaced by the date or year in which the seized books of accounts, documents, and assets are handed over to the jurisdictional AO, rather than the year of the search, which is the basis for an assessment under Section 153A of the Act. Therefore, the relevant AY in the

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 18 of 23 present case would come under the block of six AYs immediately preceding the AY in which the satisfaction note was recorded by the AO of the respondent- assessee companies.

“23.Now, coming to Design Infracon (P) Ltd., we find from the material available on record that there is brazen violation of principles of natural justice inasmuch as neither the statement of Mr. Jain recorded at the time of search nor his cross- examination was provided to the assessee by both the lower authorities despite specific and repeated requests made by the assessee in this regard. The Hon'ble Supreme Court in the case of M/s Andaman Timber Indusgies vs. CCE reported in 281 CTR 241 has held that not giving opportunity of cross-examination makes the entire proceedings invalid and nullity. The Co- ordinate Bench of the Tribunal in the case of Best City Infrastructure Ltd. (supra) has also held that not providing opportunity of cross-examination makes the addition invalid. It has come to our notice that the Hon'ble Delhi High Court recently has upheld the said decision as reported in 397 ITR 82.”

“6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 19 of 23 with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to crossexamine those dealers and what extraction the appellant wanted from them.” [Emphasis supplied] 32. Additionally, the Supreme Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer2, held that tax authorities being quasi- judicial authorities are bound by the principles of natural justice. The relevant paragraph is extracted herein below: -

“2. Now, the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi- judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. It is true, as pointed out by this Court in Dhakeswari Cotton Mills Ltd. v. CIT [AIR 1955 SC 154 : (1955) 1 SCR 941 : (1955) 27 ITR 126] that a taxing officer “is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law”, but that does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice. It is, however, necessary to remember that the rules of natural justice are not a constant: they are not absolute and rigid rules having universal application. It was pointed out by this Court in Suresh Koshy George v. University of Kerala [AIR 1969 SC 198 : (1969) 1 SCR 317 : (1969) 1 SCJ 543] that “the rules of natural justice are not embodied rules” and in the same case this Court approved the following observations from the judgment of Tucker, L.J. in Russel v. Duke of Norfolk [(1949) 1 All ER 109] :“There are, in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth. Accordingly, I do not derive much assistance from the definitions of natural justice which have been from time to time used, but, whatever standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case.”

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 20 of 23

[Emphasis supplied] 33. Further, the argument of learned counsel for the Revenue that this mistake is curable under Section 292B of the Act lacks merit as the plain language of the said Section makes it abundantly clear that this provision condones the invalidity which may arise merely by mistake, defect or omission in notice. The said Section reads as under: -

292-B. Return of income, etc., not to be invalid on certain grounds.—No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

12.2 Being so, in our opinion, the addition on this count to be made only if there is corresponding seized material and not solely on the

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 21 of 23 relying of the statement recorded u/s 132(4) of the Act from the assessee. In the present case, this is the additional ground raised by assessee and lower authorities have no occasion to examine the same. Even the ld. D.R. is also not able to establish that these additions are based on any seized material. Hence, in the interest of justice, in our opinion, it is appropriate to remit the issue to the file of ld. AO to examine whether any seized material represent these additions other than the statement recorded u/s 132(4) of the Act. If there is any incriminating material suggesting these additions, then only he shall make additions and if there is no corroborative material, no addition could be made. With these observations, this additional ground raised by assessee in ITA Nos.373 to 375/Bang/2024 for the assessment years 2014-15 to 2016-17 is remitted to the file of ld. AO for fresh consideration. 13. Last ground No.3 in ITA No.382/Bang/2024 for the assessment year 2018-19 is with regard to addition of Rs.1,12,16,600/- being additional income assessed on account of sale of granite. 13.1 The ld. A.R. submitted that the ld. AO made addition of Rs.1,12,16,600/- towards unaccounted sales of granite pertaining to M/s. Kesar Marble and Granites Ltd. This addition has been made by ld. AO on the basis of submission made by Shri Nitin Bagmane, M.D. vide his letter dated 13.11.2019. During the course of assessment proceedings in the case of Shri Nitin Bagmane, show cause notice was issued on 8.11.2019. One of the issues raised in the show cause notice was income admitted by Shri Nitin Bagmane on account of cash sales, wherein the ld. AO based on the seized material arrived at a figure of Rs.2,12,16,600/- (Rs.1,12,53,000/- + Rs.87,63,600/- + Rs.12,00,000/-) as against the figure of Rs.1 Crore admitted by the M.D. However, in response to show cause notice vide letter dated 13.11.2019, he stated that the cash sales on granite of Rs.1,12,16,600/- pertaining to M/s. KMGL. However, no

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 22 of 23 explanation was given. Hence, the ld. AO made the said addition of Rs.1,12,16,600/-. On appeal, ld. CIT(A) confirmed the same. 13.2 Now the contention of the ld. A.R. is that excessive income has been offered in other assessment years, which is not based on any incriminating material and the excess income offered in other assessment years to be telescoped out of the addition made by ld. AO in the assessment year at Rs.1,12,16,600/- and the addition to be sustained only to the extent of incriminating material found during the course of search otherwise it amounts to double addition. 14. The ld. D.R. fairly conceded that this may be examined at the end of ld. AO. 15. After hearing both the parties, we are of the opinion that the addition in these assessment years should be confined to the incriminating/seized material found during the course of search action and if the assessee already offered additional income in any other assessment years, without any corresponding corroborative material, no addition could be made on this count. Further, also it was brought to our notice that assessee has offered excess additional income in the assessment year 2017-18 more than the seized material found during the course of search action and he drew our attention to page 72 of the CIT(A) order for the assessment year 2018- 19 and submitted that there was seized material to the tune of Rs.2,43,83,000/-. However, additional income admitted by the assessee in assessment year 2017-18 was Rs.2,90,00,000/- and he sought telescoping benefit of excess income offered in assessment year 2017-18 in assessment year 2018-19. In our opinion, this required to be examined at the end of ld. AO. Accordingly, this issue is remitted to the file of ld. AO for fresh consideration to decide accordingly. Ordered accordingly. This ground of appeal of the assessee is partly allowed for statistical purposes.

ITA Nos.373 to 376 & 382/Bang/2024 M/s. Kesar Marble & Granites Ltd., Bangalore Page 23 of 23 16. In the result, all the appeals of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on 3rd July, 2024

Sd/- Sd/- (Prakash Chand Yadav) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 3rd July, 2024. VG/SPS

Copy to:

Asst. Registrar, ITAT, Bangalore.