M/S. HARIS MARINE PRODUCTS,MANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1,, MANGALORE

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

These two appeals by the assessee are directed against two different orders of CIT(A) both are dated 12.3.2024 for the assessment years 2016-17 & 2017-18. 2. The first common ground in both appeals is that the assessment order passed u/s 153C of the Income Tax Act, 1961 (in short “The Act”) is bad in law and void-ab-initio as condition precedent to invoke the provisions of section 153C of the Act namely discretionary in assets/documents in the course of search conducted in the case of any person that belong to the assessee and is relevant for computing the income of the assessee for the year under appeal is totally absent. 3. The facts of the issue are that there was a search u/s 132 of the Act carried out in the case of associated concern of the assessee Mukka Sea Food Industries Pvt. Ltd. and also at the residence of

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 2 of 37 partner of the assessee firm. Later, there was search u/s 133A of the Act at the assessee’s firm situated at First Floor, Trinity Complex, NG Road, Attavar, Mangaluru 575001. The registered officer of Mukka Sea Food Industries Pvt. Ltd., an associated concern of assessee firm is also in the same premises. A survey u/s 133 of the Act was conducted at the factory of the assessee at Ullal Industrial Area, Ullal. Similarly, search was conducted u/s 132 of the Act at Mukka Sea Food Industries Pvt. Ltd. and the residence of K. Mohammed Haris at Umaya Garden, B.R. Karkera Road, Pandeshwar, Mangalore. 3.1 During the course of search on 8.2.2018, it was noticed that payment towards purchase of raw fish/fish meal were being made from the employees of Mukka Sea Food Industries Pvt. Ltd. i.e. Raghav Poojary and Sri Abdul Rasheed and in some other names. The accountant Shri Mohammed Shareef was questioned on the issue. He admitted in his statement that no raw fish or fish meal was purchased from these parties and these entities are entirely bogus in nature. The relevant statement is as follows:

3.2 Further, it was identified that similar payments were made to the truck driver namely Shri Syed Ebrahim, Shri Katakeri Ebrahim Sayeed etc. According to the ld. AO on further verification of books of accounts certain other entries were also detected where no supply was made but only payments were made. Later, Mohammed

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 3 of 37 Shareef, the accountant was questioned and his statement was recorded. The accountant identified the entries and finished the list of bogus payments made towards purchase of raw fish/fish meal in the books of accounts of the assessee. According to the ld.AO, the bogus purchases were recorded as below:

3.3 On 9.2.2018, Shri Mohammed Shareef, accountant had admitted that these entries are made under the direction of Shri K. Mohammed Haris and explained that once the amounts were credited to the bank accounts of the employee/truck drivers, the amounts used to withdraw by Shri Ismail, brother of CMD Shri Abdul Razak. Further, during the course of search while recording the statement u/s 132(4) of the Act from Shri K. Mohammed Haris, a statement recorded from Shri Mohammed Shareef, accountant was shown to him which contains the list of bogus purchases made in the books of accounts of the assessee. 3.4 Shri K. Mohammed Haris admitted that bogus purchase entries are made in the books to inflate expenses and hence reduced the profits and agreed to offer the same as additional income. According to the ld.AO, the bogus purchase for the relevant assessment year was Rs.1,23,85,406/- as admitted by Shri Mohammed Haris. However, in the return of income, assessee

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 4 of 37 has admitted a sum of Rs.93,00,821/- towards bogus purchase. However, the ld. AO was of the opinion that bogus purchase for these two assessment years is Rs.1,18,69,898/- for the assessment year 2016-17 and Rs.77,82,870/- for the assessment year 2017-18, where he computed as below: AY 2016-17: During the course of search in your case on 08.02.2018 it was noticed that payments towards purchase of raw fish/fish meal were being made to the employees whereas no material was actually purchased from them. Further during the course of search Sri K. Mohammed Haris, admitted that bogus purchase entries were made in the books to inflate the expenses and reduce the profits and agreed to offer the same as his additional income. The details of the purchases entered in the books for which no goods were received but payments made, and cases where additional income is offered in the return of income filed in response to notice u/ s 153C is as follows:

In the statement u/ s 132(4) K.Mohammed Harris had admitted Rs.1,23,85,406 as bogus purchases for the year and agreed to offer the same as additional income. However in the return of income filed in response to notice u/ s 153C the assessee firm has declared only Rs.93,00,821. The purchases recorded from the above parties in the books of account for the relevant period is Rs.2,11,70,719/- In view of this you are requested to showcause why Rs.1,18,69,898 being the difference in purchases entered in the books for which no goods were received but payments made and the additional income

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 5 of 37 declared in the return of income filed in response to notice u/ s 153C should not be disallowed and added to your income. AY 2017-18: During the course of search in your case on 08.02.2018 it was noticed that payments towards purchase of raw fish/fish meal were being made to the employees whereas no material was actually purchased from them. Further, during the course of search Sri K. Mohammed Haris, admitted that bogus purchase entries were made in the books to inflate the expenses and reduce the profits and agreed to offer the same as his additional income. The details of the purchases entered in the books for which no goods were received but payments made, and the cases where additional income is offered in the return of income filed in response to notice u/s 153C is as follows:

In the statement u/ s 132(4) K.Mohammed Harris had admitted Rs.2,25,57,180/- bogus purchases for the year and agreed to offer the same as additional income. However in the return of income filed in response to notice u/s 153C the assessee firm has declared only Rs.8,64,276/-. The purchases recorded from the above parties in the books of account for the relevant period is Rs.86,47,146/-

In view of this you are requested to showcause why Rs. 77,82,870 being the difference in purchases entered in the books for which no goods were received but payments made and the additional income declared in the return of income filed in response to notice u/s 153C should not be disallowed and added to your income.

3.5 The assessee rebutted the contention of the ld. AO as below: 7.1 The contentions of the assessee are not acceptable for the following reasons:  The assessee has only filed the ledger extract of the parties as appearing in the books of the assessee, signed by the alleged suppliers.

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 6 of 37  The assessee has not furnished any explanation as to why the difference pointed out in the show cause notice should not be assessed to tax except stating that these parties are genuine and they have confirmed the sale.  It is pertinent to note that the accountant of the assessee firm on the date of search/ survey had confirmed that no raw materials were received in respect of the purchase bills in respect of the parties referred to above.  The accountant has also stated that these purchases were recorded at the instance of the partner K. Mohammed Harris.  The statement of the accountant was confirmed by the partner who admitted that the firm was inflating its purchases to reduce its income.  Further it is very significant to note that parties who have issued these bills include employees of Mukka Sea Foods Industries Private Limited, associate concern of the assessee firm.  This corroborates the fact that bills were procured without purchases as these employees are full time employees of the associated concerns and under the direct control of the directors/ partners vulnerable for manipulation.  The assessee has not admitted the purchases made from Abdul Rasheed (Sl.No.2 of the show cause notice) and Syed Ibrahim and Katakeri Ebrahim Sayeed (Sl.No.3 & 4 of the showcause notice).  It is to be noted that Syed Ibrahim and Katakeri Ebrahim Sayeed are one and the same but two ledger accounts are being maintained his name. Syed Ibrahim is a truck driver working for the assessee.  It is pertinent to note that the purchases booked in the name of Syed Ibrahim for A. Y. 2018-19 has been accepted as bogus and offered to tax in that assessment year.  It is to be noted that all these alleged supplies are the employees of sister concern Mukka Sea Foods Industries Private Limited and not a regular trader in fish.  The assessee has filed the confirmations only from these alleged suppliers who are the employees even now.  The case law relied upon by the assessee is not applicable to the facts of the case of the assessee, as here the accountant and the director had confirmed on the date of search itself that no materials were received in respect of the bills issued by these parties.  Relying on the case law, the contention of the assessee is that there cannot be sales without purchases and since sales is not disproved there cannot be inflated purchases.  This argument is not acceptable because in the case of the assessee the purchase is raw fish and the sale is fish meal, fish oil and fish paste which is variable due to many factors like protein content, quality, moisture and wastage depending on the breed and other manufacturing variables. 3.6 The ld. AO not agreeing with the contention of the ld. AO, he computed the bogus purchase for these two assessment years as follows:

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 7 of 37 AY 2016-17:

“7.12 The purchases as per books from the parties from whom bogus bills were admitted to have been taken [referred to in the statement u/ s 132(4)] during the relevant assessment year is Rs. 2, 11, 70,719. The assessee has admitted Rs. 93,00,821 as additional income in the return of income filed in response to notice u/ s 153C. The details of the purchase parties where inflation in purchases was accepted but not admitted in the return of income filed in response to 153C is as follows:

Accordingly taking into account the statement of the partner, the evidence found during the course of survey and details verified during the assessment proceedings Rs.1,18,69,898 is added to the income under the head "Income from Business".

AY 2017-18: 7.12 The purchases as per books from the parties from whom bogus bills were admitted to have been taken [referred to in the statement u/ s 132(4)] during the relevant assessment year is Rs. 86,47,146. The assessee has admitted Rs. 8,64,276 as additional income in the return of income filed in response to notice u/ s 153C. The details of the purchase parties where inflation in purchases was accepted but not admitted in the return of income filed in response to 153C is as follows:

Accordingly taking into account the statement of the partner, the evidence found during the course of survey and details verified during the assessment proceedings Rs. 77,82,870 is added to the income under the head "Income from Business".

3.7 Now the contention of the ld. A.R. is that the addition in this case made towards bogus purchase at Rs.1,18,69,898/- for the assessment year 2016-17 and Rs.77,82,870/- for the assessment year 2017-18 only on the basis of statement recorded u/s 132(4) of

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 8 of 37 the Act without support of any corroborative material. As such, initiation of proceedings u/s 153C of the Act only on the basis of statement recorded u/s 132(4) of the Act is void-ab-initio. 4. On the other hand, ld. D.R. submitted that statement recorded u/s 132(4) and 131 of the Act which is not retracted by assessee and this is important evidence and it can be the basis for initiation of proceedings u/s 153C of the Act. For this purpose, she relied on the judgement of Hon’ble Supreme Court in the case of Roshanlal Sanchiti Vs. CCIT 292 Taxman 549 (SC). 4.1 Further, she relied on the judgement of Hon’ble Supreme Court in the case of Video Master Vs. JCIT (378 ITR 374), wherein held that “it is not possible to say that this is the case of no evidence at all in as much evidence in the form of statement made by assessee himself and other corroborative material are there on record.” 4.2 For the same proposition, she relied on the judgement of Hon’ble Kerala High Court in the case of CIT Vs. Abdul Razak, wherein held that “self-serving retraction without anything more cannot be dispel statement made u/s 132(4) of the Act.” 4.3 She also relied on the 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

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 9 of 37 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, 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.”

4.4 Further, she relied on the judgement of Hon’ble Jharkhand High Court in the case of Mahaveer Prasad Rangta Vs. CIT 266 CTR

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 10 of 37 175 wherein held that “where the assessee has not adduced any rebuttal evidence to show that entries made in any diary/loose slips recovered during the search are not income in the hands of assessee, addition to be upheld.” 4.5 She further relied on the judgement of Hon’ble Madras High Court in the case of Tiru S. Shyam Kumar Vs. ACIT 99 Taxmann.com 39, wherein held that “where entries in loose slips are clear and legible pointing out of money payment for purchase of property by assessee addition u/s 69 was justified.” 4.6 She also relied on the order of Tribunal Mumbai Bench in the case of Ali Akbar Sami Chowdhari Vs. DCIT in ITA No.455/Mum/2024 for the assessment year 2015-16 order dated 17.5.2024, wherein held as follows: 10. “In the statement of Shri Sandeep Runwal the list is attached wherein Shri Sandeep Runwal has given the details of cash received on sale of flats at various projects of the Runwal Group with names of the customers and the exact amount. The name of the assessee is at Sl.No.21 for the Flat No. 501 at Runwal Elegante which shows the cash receipt by Runwal Group of ₹.82,13,261/-. The contention of the counsel that it is merely an estimation defies all commercial logic because an estimated figure is always a complete figure. But the figure mentioned hereinabove is so accurate that it cannot considered as an estimated figure. Most important fact is that the recipient i.e., seller has admitted of having received a cash component of the transaction. Therefore, it is reasonable to conclude that the payee must have made the said payment. The undisputed fact is that the assessee has in fact purchased the flat from Runwal Group. When the purchase is not in dispute, the payment is not dispute then in all probability the cash component is also correct. The seller has admitted of having received on-money which is the income of the seller and no prudent business man would offer income which it has never earned / received. The decision of the Coordinate Benches are misplaced in as much as each case has to be decided on the facts of its own and since in the case in hand the income has been assessed in the hands of the seller applying the principles of preponderance of probability on the facts of the case in hand, we do not find any reason to interfere with the findings of the Ld.CIT(A).”

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 11 of 37 4.7 According to her, the initiation of proceedings u/s 153C of the Act is rightly made and it is to be confirmed. 5. We have heard the rival submissions and perused the materials available on record. In this case, there was search in the case of Mukka Sea Food Industries Pvt. Ltd. and at the residence of K. Mohammed Haris at Umaya Garden, B.R. Karkera Road, Pandeshwar, Mangalore. Registered officer of Mukka Sea Food Industries Pvt. Ltd. is situated at 1st Floor, Trinity Complex, NG Road, Attavar, Mangalore. There was also search u/s 133 of the Act in the case of above assessee. Statement was recorded from accountant Shri Shareef. The statement from Shreef was questioned and he stated as discussed in the facts of the case that there was no purchase from the employees of Mukka Sea Food Industries Pvt. Ltd. namely Shri Raghav Poojary and Shri Abdul Rasheed and on the basis of statement recorded u/s 132(4) of the Act from K. Mohammed Haris who has admitted that there was a bogus purchase made by assessee at Rs.1,23,85,406/- in the assessment year 2016-17 and Rs.2,25,57,180/- in assessment year 2017-18. However, the assessee admitted additional income in the return of income filed in response to notice u/s 153C of the Act as follows: For AY 2016-17 - Rs.93,00,821/- For AY 2017-18 - Rs.8,64,276/- 5.1 Thus, ld. AO arrived at a difference of income between the amount declared in statement u/s 132(4) of the Act towards bogus purchase and amount of additional income declared by the assessee in his return for these two assessment years filed u/s 153C of the Act as follows:

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 12 of 37

A B C D AY Declared Additional Addition made amount Income (difference admitted u/s admitted in between 132(4) of the return of B & C) Act income 2016-17 2,11,70,719/- 93,00,821/- 1,18,69,898/- 2017-18 86,47,146/- 8,64,476/- 77,82,870/-

5.2 The ld. AO was of the opinion that certain employees of sister concern have supplied fish and the payments were made to them were withdrawn by one Sri Ismail, brother of CMD Abdul Razak. Further, during the course of search action, statement recorded u/s 132(4) of the Act from Shri K. Mohammed and he has stated with reference to the statement recorded from Shri Md. Shareef, accountant that bogus purchase entries made in the books of accounts to inflate the expenses and to reduce the profits and he has agreed to offer additional income of Rs.2,25,57,180/-. However, assessee has only offered income of Rs.93,00,821/- for assessment year 2016-17 and Rs.8,64,476/- for the assessment year 2017-18. Thus, ld. AO made further addition on this count as above. As seen from the above, the ld. AO have no iota of corroborative evidence supporting the statement recorded u/s 132(4) of the Act or u/s 133A of the Act.

5.3 Further, we find that Hon’ble Delhi High Court in the case of PCIT Vs Best Infrastructure Private Limited, 397 ITR 82 has held that statement under section 132(4) in the itself does not constitute incriminating material. The relevant finding of the Hon’ble High Court is reproduced as under: “38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 13 of 37 admission by the Assessees themselves on critical aspects, of failure to maintain 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 effect that the Assessees 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.”

5.4 As per section 31 of Indian Evidence Act, 1878, admissions are not conclusively proved as against admitted proof. In the absence of rebuttable conclusion, admission bind the maker when these are not rebutted or retracted. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and the maker can show that it was incorrect. In our opinion admission made by the assessee will constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be relied upon without considering the aforesaid contention. In our opinion, the voluntary admission are not conclusive proof of the facts admitted and may be explained or shown to be wrong but they do raise an estoppel and shift the burden of proof to the person making the admission. It is to be noted that, unless shown or explained to be wrong, they are an efficacious proof of the facts admitted. Thus, the burden to prove “admission” as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 14 of 37 proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity. 5.5 Further, the parties from whom the assessee made purchases who have confirmed the same and their return of income has been filed and there was no rejection of their claim by the department. The details of confirmations and returns of income filed by them are as follows:

AY 2016-17: Name of the ROI filed on Subject to Turnover Addition supplier Audit declared made in the case of the appellant for purchases Katakeri 07.10.2016 Yes u/s 1,05,71,925/- 67,45,177/- Ebrahim (See page 44AB Sayeed 180 to 185 of paper book) Abdul 07.10.2016 Yes u/s 1,11,88,867/- 51,24,721/- Rasheed (See page 44AB 176 to 179 of paper book)

AY 2017-18: Name of the ROI filed on Subject to Turnover Addition supplier Audit declared made in the case of the appellant for purchases Katakeri 30.10.2017 Yes u/s 58,38,982/- 62,19,370/- Ebrahim (See page 44AD @ 8% Sayeed 119 to 122 of turnover of paper book) Abdul 30.10.2017 Yes u/s 71,83,507/- 15,63,500/- Rasheed (See page 44AD @ 8% 114 to 118 of turnover of paper book)

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 15 of 37 5.6 It was brought on record by the assessee vide letter 22.11.2019 the ledger extract of all the above parties and also made it clear that Sayeed Ibrahim and Katakeri Ibrahim Sayeed are same. Thus, there was confirmation from these parties brought on record by the assessee vide letter dated 9.12.2019 which is placed on record in paper book page no.91 to 93. It is also to be noted that returns income of above suppliers have been filed before the due date of search conducted in the case of assessee on 8.2.2018 and confirmation from the aforesaid suppliers also been filed before the concerned authorities. In such circumstances, it is not possible to doubt the purchases made by assessee from these parties and treat it as a bogus so as to disallow the same and brought to tax as undisclosed income of the assessee. 5.7 Further, there was a CBDT circular file no.286/98/2013-IT (Inv.II) dated 18.12.2014 which states as under:

“Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 16 of 37 under coercion/under influence. Keeping in view the guidelines issued by the CBDT from time to time regarding statements obtained during search and survey operations, it is undisputedly clear that the lower authorities have not collected any other evidence to prove that the impugned income was earned by the assessee. …………………………………………………………………………………… …………………………………………………………………………………… 5.8 At this stage, it is pertinent to refer to the judgment of the Supreme Court in the case of Vinod Solanki (2009) (233) ELT 157 observed as under :

"22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. [see Pon Adithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] ...................

5.9 In case of Romesh Chandra Mehta vs. State of West Bengal (1969) 2 SCR 461 although Hon’ble Court held that any statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 5.10 It has been similarly held by the Hon’ble Supreme Court in the case of K.T.M.S. Mohd. & Anr. vs. Union of India (1992) (197 ITR 196) as under:

"We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 17 of 37 qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order be vitiated. Reference may be made to a decision of the Full Bench of the Madras High Court in Roshan Beevi vs. Jt. Secretary to the Government of Tamil Nadu, Public Deptt. etc. (1983) Mad LW (Crl.) 289 : (1984) 15 ELT 289 : AIR 1984 NOC 103, to which one of us (S. Ratnavel Pandian, J.) was a party."

5.11 In our opinion, the above additions cannot be made solely based on the statements recorded u/s 132(4) of the Act. Reliance is placed on following decisions:

• The Hon'ble Delhi High Court in Commissioner of Income-tax v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi) held as under: "21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession Of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such Examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 18 of 37 of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search A statement of a person, which is not relatable to any incriminating document or material found 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."

5.12 We further rely in the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon'ble Supreme Court has held that:

-"Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition." 5.13 We also rely on the decision of the Hon'ble Tribunal in the case of Kamla Devi S. Doshi v. Income-tax Officer [2017] 88 taxmann.com 773 (Mumbai - Trib.) / [2017] 57 ITR(T) 1 (Mumbai - Trib.) held as under: -

"We however are unable to persuade ourselves to subscribe to the view that such information arrived at on the basis of the stand-alone statement of the aforesaid person, viz. Sh. Mukesh Chokshi (supra), falling short of any corroborative evidence would however justify drawing of adverse inferences as regards the genuineness of the share transactions in the hands of the assessee. We though are also not oblivious of the settled position of law, as per which a very heavy onus is cast upon the assessee to substantiate the LTCG on sale of shares, as projected by her in the return of income for the year under consideration. Thus, to be brief and explicit, though the reopening of the case of the assessee in the backdrop of the aforesaid factual matrix cannot be faulted with, however such stand-alone information, i.e., the statement of Sh, Mukesh Chokshi (supra), cannot be allowed to form the sole basis for dislodging the claim of the assessee in respect of the LTCG reflected by her in the return of income for the year under consideration. We would not hesitate to observe that the lower authorities which have rushed through the facts to arrive at a conclusion on the basis of principle of preponderance of human probability, had however absolutely failed to appreciate that the said principle could have been validly applied only on the basis of a considerate view as regards the facts of the case in totality, and not

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 19 of 37 merely on the basis of the standalone statement of the aforesaid third party, viz. Sh. Mukesh Choksi."

5.14 We rely on the judgement of the Hon'ble Gujarat High Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income-tax [2008] 174 Taxman 466 (Gujarat) held as under:"-

"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 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 statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction 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 committed an error in ignoring the retraction made by the assessee." "16.4 We have duly considered the contention of the assessee and also perused the documentary evidences produced by the assessee. On perusing the facts, it is apparent that the addition is made based on the general practice of cash payments made outside the books of accounts in the case of immovable property transactions. The AO was of the opinion that there are ample instances that cash payments are made outside the books of accounts in effecting money lending transactions and therefore, the statement made by Mr, R. Ravish can be relied and the addition sustainable. However, we do not subscribe to this view of the AO. In order to establish that the assessee had paid amount outside the books of accounts for effecting money lending transactions substantial evidence has to be placed on record which is absent in this case. It would be unjust if an addition is made on the assessee based on a statement made by third party without further making inquiries and collecting evidence. Therefore, we hereby request to delete the additions made by the Ld. AO in the concerned AY's. This entire question is based on facts and therefore, no interference is necessary."

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 20 of 37 5.15 Thus, it is settled position of law that onus lies upon the Department to collect cogent evidence to corroborate the notings on the loose sheets. The additions cannot be made merely on the basis of notings on the loose sheet papers which are in the nature of “dumb documents” having no evidentiary value. The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondent- assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands. Reliance in this regard can be placed on the following decisions:

(i) Pr.CIT vs. Umesh Ishrani (2019) 108 taxmann.com 437 (Bom)

(ii) CIT vs. Atam Valves (P.) Ltd. (2009) 184 Taxman 6 (P&H)

(iii) CIT vs. Maulikkumar K. Shah (2008) 307 ITR 137 (Guj)

(iv) CIT vs. C.L. Khatri (2006) 282 ITR 97 (MP)

(v) Pr.CIT vs. Kamlesh Prahladbhai Modi (2018) 94 taxmann.com 356 (Guj)

(vi) CIT vs. Shri Girish Chaudhary (2008) 296 ITR 619 (Del)

(vii) CIT vs. Vivek Aggarwal (2015) 56 taxmann.com 7 (Del)

(viii) CIT vs. Salek Chand Agarwal (2008) 300 ITR 426 (All)

(ix) CIT vs. Dinesh Jain (HUF) 352 ITR 629 (Del)

5.16 We find that the conclusions reached by the Assessing Officer are merely based on presumptions and assumptions without bringing corroborative material on record. It is settled position of law that no addition in the assessment can be made merely based on assumptions, suspicion, guess work and conjuncture or on

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 21 of 37 irrelevant inadmissible material. Reliance can be placed in this regard on the following decisions:

(i) Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC)

(ii) Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC)

(iii) CIT vs. Maharajadhiraja Kameshwar Singh of Darbhanga (1933) 1 ITR 94 (PC)

(iv) Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC)

(v) Umacharan Shaw & Bros vs. CIT (1959) 37 ITR 271 (SC)

(vi) Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151 (SC)

5.17. Further, the Hon’ble Delhi High Court in the case of CIT vs. Dinesh Jain (HUF), 352 ITR 629 after referring to the decision of the Hon’ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) held that no addition can be made taking into account notorious practice prevalent in the similar trade. The relevant findings vide para 14 and 15 are as under:

“……….

“Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf.”

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 22 of 37 15. This takes care of the argument of Mr. Sabharwal that judicial notice can be taken of the practice prevailing in the property market of not disclosing the full consideration for transfer of properties”.

5.18. The Hon’ble Supreme Court in the case of K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC) held that the capital gains is intended to tax the gains of assessee not what an assessee might have gained and what is not gained cannot be computed as gain and the assessee cannot fastened with the liability on a fictional income. Similarly, the Hon’ble Supreme Court in the case of CIT Vs. Shivakami Co. (P.) Ltd. (1986) 159 ITR 71 (SC) held that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for making addition.

5.20 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 Assessees herein was not justified in law."

5.21 We find the Hon'ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263 has observed as under :- "23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment." 5.22 The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under:-

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 23 of 37 "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 ITA No.7374/Del/2017 ITA No.7567/Del/2017 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. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search."

5.23 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.

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 24 of 37

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 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.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 25 of 37 132(4) of the Act. However, such statements on a stand alone 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 supplied]

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 26 of 37 “36.4. In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved.” [Emphasis supplied]

This Court in the case of CIT v. Kabul Chawla5, has explicitly 26. noted 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.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 27 of 37 under Section 153C. Here too, the AO would have to firstly identify the AYs' to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of AYs' falling within the block of six AYs' or for that matter all years forming part of the block of ten AYs', appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to Section 153A as well as Section 153C ex abundanti cautela. Which however takes us back to what 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

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 28 of 37 119. 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 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

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 29 of 37 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 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

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 30 of 37 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 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.”

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 31 of 37 and the same will render the order passed null and void. The relevant paragraph of the said decision is extracted herein below: -

“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 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

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 32 of 37 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.”

[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.

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 33 of 37 the respondent-assessee group. Notably, the satisfaction note has also been prepared in a mechanical format and it does not provide any details about the incriminating material. Therefore, a failure on the part of the Revenue to manifest as to how the material gathered from the search of Jain group of companies belonged to the respondent-assessee group and the same is incriminating, vitiates the entire assessment proceedings.

5.24 In the light of the above decisions, statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material.

5.25 As mentioned earlier, the addition was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material.

5.26 The Hon'ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 has upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 34 of 37 undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years.

5.27 It is pertinent to refer to the judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt Ltd ITA No.13/2017 covers the case of the assessee on the facts. Relevant Para of the judgment is extracted below:- “In Principal Commissioner of Income Tax Central 2, New Delhi v. Meeta Gutgutia (supra),this Court had considered the entire ground of case law on the assumption of jurisdiction under Section 153A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the sold decision in Smt. Dayawanti Gupta v, CIT(supra) is being again discussed herein.

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 35 of 37 Corporation (Nhava Sheva) Ltd, [2015] 58 taxmann.com76(Born), wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and I53C of the Act. The decisions of this Court in CIT v. Anil Kumar Bhalia (supra) and CIT v. Chetan Das LachmanDas [2012] 254CTO392 (Del) were extensively discussed in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra). The Court in Commissioner of Income Tax(Central-Ill) v. Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACCT (2013) 36 taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search is a separate and distinct assessment. "It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. ” 34. Before the learned CIT (A), the assessee has produced the copy of bank account of all the share applicant companies. The CIT (A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no cash deposit in the bank account of any of the share applicant before the issue of cheque for share application money to the group companies of the assessed. On the other hand, the credit is by way of transaction. During remand proceedings, the Assessing Officer has made necessary verification from the bank of the share applicant and no adverse finding is recorded by him in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to Shri Tarun Goyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because

(i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement. — Conclusion — 44. Accordingly the question framed by the Court in ATA Nos. 11, 12 and 21 of 2017 by the order dated 21st March. 2017 is answered in the negative i.e. in favour of the Assessee and against the Revenue by holding that the additions made under Section 68 of the Act on

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 36 of 37 account of the statements made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. 5.28 It is also noted that in the case of M/s. Yashaswi Fish Meal and Oil Company, the Tribunal in ITA Nos.62 to 66/Bang/2023 for the assessment years 2012-13 to 2015-16 and 2017-18 the coordinate bench of the Tribunal vide order dated 1.9.2023 deleted similar addition made by ld. AO towards bogus purchase.

5.29 Respectfully following the above judgment, which is on identical factual matrix, it can be reasonably inferred that material found during the search in respect of the equity received by the assessee cannot lead to the conclusions drawn by the AO. No specific corroborative evidence has been brought on record by Assessing Officer to prove that the equity subscription is an accommodation entry. 5.30 In the instant case, the addition is solely based on statement recorded u/s 132(4)/131 of the Act without any corroborative material found during the course of search action u/s 132 of the Act we hold that no notice u/s 153C of the Act could be issued to the assessee and any addition made consequent to notice issued u/s 153C of the Act is unsustainable. 5.31 Even otherwise, learned AO has not disputed the sales declared by the appellant. The sales offered in the Return of Income are accepted by the learned AO in toto. Hence, unless there is purchase there cannot be sale of goods. That too when assessee is maintaining quantitative details of stock and the same have been audited by the qualified Chartered Accountant the learned AO ought not to have held that the purchases as bogus without verifying the corresponding sale. Unless sale is disproved the purchases cannot be held as bogus. He submitted that Hon’ble Bombay High Court in PCIT Vs Nitin Ramdeoji Lohia (ITA Nos. 673 and 750 OF 2018 dated 21.10.2022) held as under:

ITA Nos.610 & 611/Bang/2024 M/s. Haris Marine Products, Mangalore Page 37 of 37 “We are in agreement with the view expressed by the CIT (Appeals) that, if the purchases are bogus, it would be impossible for the assessee to complete the business transaction and that if the purchase is bogus, the corresponding sale also must be bogus or else the transaction would be impossible to complete and as a necessary corollary, unless the corresponding sale is held to be bogus, the purchase also cannot be held to be bogus, rather it would be a case of purchase from bogus entities/parties. That view has been upheld by the Tribunal in principal while dismissing the appeal of the Revenue. In view of the above, we are of the opinion that the questions of law proposed as (a), (b), and (c) in the appeal cannot be said to be substantial questions of law.”

5.32 In view of the above discussion, we delete the additions made towards bogus purchase in these two assessment years. These ground Nos.2 to 8 in appeals in ITA Nos.610 & 611/Bang/2024 are allowed. 5.33 The other grounds of appeals of the assessee are either academic or consequential in nature, which do not require any adjudication. 6. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 3rd July, 2024

Sd/- Sd/- (Keshav Dubey) (Chandra Poojari) Judicial Member Accountant Member

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

Copy to:

Asst. Registrar, ITAT, Bangalore.