BABU LAL SHARMA,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, JAIPUR

1. That on the facts and in the circumstances of the case the ld. LD. CIT (A) is wrong, unjust and has erred in law in confirming addition to the extent of Rs. 18,40,000/- made by ld. AO to the income of the appellant on account of alleged unexplained cash credit u/s 68 of the I.T. Act, 1961 and in further upholding application of provision of sec. 115BBE of the IT Act, 1961 to the addition confirmed by him.

2. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.

Assessment Year : 2012-13 :

1. That on the facts and in circumstances of the case, the ld. AO is wrong, unjust and has erred in law in confirming addition of Rs. 25,00,000/- made by the ld. AO to the income of the appellant on account of alleged unexplained cash credit u/s 68 of the IT Act, 1961.

2. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.

The assessee has also raised an additional ground as under :

3. That on the facts and circumstances of the case the ld. LD. CIT (A) is wrong and bad in law in confirming the action of ld.AO in initiating the proceedings u/s 153C of the IT Act, 1961 in case of the appellant in as much as no incriminating documents pertaining to the appellants was found and / or seized during the course of search of Sh. Raju Sharma. The consequent assessment made by the ld. AO is, therefore, wrong and bad in law.

We first take up the appeal in ITA No. 179/JP/2024 for the Assessment Year 2018- ITA No. 179/JP/2024 19 as under :-

2. The Brief facts of the case are that the appellant is an Individual and engaged in milk supply distribution activities at a very small scale. The activity of the assessee is that he collects milk from various villages and supply the same in Jaipur City. Besides the said activity, he is carrying on agricultural activity on his agricultural land measuring about 9 bighas. The income of the assessee from the said activities is below taxable limits and accordingly no return of income was filed by the assessee for the year under consideration. A search and seizure action under section 132(1) of the IT Act, 1961 was carried out on 02.08.2017 at the various premises of Shri Raju Sharma Group, Jaipur and residential premises of the appellant was also covered therein. Satisfaction note was recorded on 19.09.2019. Notice under section 142(1) of the IT Act was issued to the appellant on 20.09.2019 which was duly served. The appellant was required to furnish return of income. However, the appellant had not furnished any return of income for the year under consideration. Further, show cause notices under section 144 of the IT Act were issued to the appellant on 11.10.2019 and 25.11.2019. The appellant again failed to furnish return of income for the year under consideration. Finally, the AO completed the assessment vide order dated 20.12.2019 at a total income of Rs. 27,00,000/- by making additions to Rs. 27,00,000/- on account of unexplained cash credit under section 68 of the Act. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. IT (A). The ld. CIT (A) after considering the written submissions of the assessee, allowed part relief of Rs. 8,60,000/- and confirmed the addition of Rs. 18,40,000/- made by the AO. The present appeal filed by the assessee before us is against this order of the ld. CIT (A).

“Ground No. 1 of the appeal is challenging the addition of Rs. 18,40,000/- confirmed under section 68 of the IT Act, 1961 on account of alleged cash deposit in Current Account No. 11212032146 of the assessee on the following dates:-

Dates Amount 19.03.2018 350000 19.03.2018 250000 19.03.2018 860000 19.03.2018 140000 21.03.2018 600000 31.03.2018 500000 Total 2700000

In this connection it is submitted that the finding and observations of the ld. AO is grossly wrong and far from the correct facts of the case. No alleged cash was deposited by the assessee in the above said bank account. All the above said transactions in the bank account were made through account payee cheques. The said amounts are borrowings of the assessee made from the following persons for the purpose of release of title deeds of his properties from the Income Tax Department:-

S. Name Extract from Remarks on Comments CIT(A) Findings in Submission of N affidavit affidavit of AO in order appellant o Remand Report

1. Lal Chand Affidavit 1 The bank On perusal The appellant has It is alleged in Sharma account copy of not given specific the order that 2. ;g gS fd eSus in support of documents rebuttal of the no legible copy of fnukad 17-03-2018 affidavit as furnished in remand report bank statement dks :i;s submitted by respect to and has made of loan debtor filed. 3]50]000@&Jheku the appellant Shri Lal common In this connection ckcqyky 'kekZ tks fd is not legible. Chand submissions w.r.t. it is submitted that esjs fj’rsnkj dks Sharma, it all lenders in the in the although muds ekaxus ij m/kkj fn;s FksA mi;qDrZ has been rejoinder. image is little bit :i;k esjs cSad [kkrs noticed that dull but in ls fd;k x;k gSA copy of There is no ID Bank statement bank proof, address both cheque Affidavit 2 account is proof of the no. as well as not legible; lender on record. amount are legible. 2- ;g gSa fd eSus further, The bank account During the course fnukad 17-03-2018 supporting from which it is of appellate dks :i;s 2]50]000@& Jheku evidences claimed that the proceedings, the ckcqyky 'kekZ tks fd regarding payment has been appellant esjs fj’rsnkj dks creditworthi made to the submitted & 178/JP/2024 Shri Babu Lal Sharma, Jaipur. muds ekaxus ij m/kkj ness and appellant is not confirmation fn;s FksA mi;qDrZ identity legible. In letter(s), PAN :i;k esjs cSad [kkrs have also rejoinder No., Bank ls fd;k x;k gSA not been comments also no account statement furnished. fresh copy was and affidavit(s) Therefore, provided. of the persons the from he borrowed transaction Lender has stated the said amounts in the in affidavit that his by account absence of source of income payee cheques/ these is not is business inter banking verifiable. however PAN, ITR, transfer. The etc. have also not said documents been submitted. explained the source of No documents deposits made regarding by the said creditworthiness persons. Thus, have been the appellant submitted. has proved identity, genuineness and creditworthiness of the loan creditors and accordingly he completely discharges the onus cast by the IT Act,1961 to prove deposits in his Bank account. 2- ;g gSa fd eSus 2. Khema As per copy On perusal The appellant has The Ld. AO fnukad 19-03-2018 Ram of bank of not given specific accepted and dks :i;s Choudhar statement documents rebuttal of the submission and 8]60]000@& Jheku y submitted by furnished in remand report documentary ckcqyky 'kekZ tks fd the respect to and has made evidences filed esjs fe= dks muds ekaxus ij m/kkj fn;s appellant, Shri Khema common and deleted FksA mi;qDrZ :i;k Rs. Ram, submissions w.r.t. the addition. esjs cSad [kkrs esa 8,60,000/- supporting all lenders in the fdlku ØsfMV dkMZ credited on evidences rejoinder. [kkrs ls vk;s FksA 19.03.2018 regarding

in his bank creditworthi The credit account with ness and received in the remarks as identity bank account is Cr. KHEMA have also not cash deposit RAM not been and is received CHOUDHARY furnished. from another . Therefore, account of Sh. the Khema Ram transaction Choudhry. The in the lender has given absence of affidavit that the these not same was from his verifiable. Kisan Credit Card The said account. The Ld. person also AO has failed to not having rebut this PAN. statement which is prima-facie Further on correct from the 19.03.2018 perusal of bank a credit statement. Ld. AO entry has not brought amounting on record any to Rs. counter evidence. 8,60,000/- is appearing in In the affidavit it is his bank stated that the account and source of income the same is agriculture and amount was land documents transferred are attached on very however there is same day no attachment. i.e. on However once it is 19.03.2018, found that the thus the source of payment same received by the appears to appellant is bank / be a non- kisan credit card genuine the income transaction. earning source documents are immaterial in the factual background of the case when there is no other adverse evidence on record. 2- ;g gSa fd eSus 3. Ram As per copy On perusal The appellant has During the course fnukad 19-03-2018 Prakash of bank of not given specific of appellate dks :i;s Sharma statement documents rebuttal of the proceedings, the 1]40]000@& Jheku submitted by furnished in remand report appellant ckcqyky 'kekZ tks fd the respect to and has made submitted esjs fj’rsnkj dks appellant, Shri Ram common confirmation muds ekaxus ij m/kkj fn;s FksA mi;qDrZ Rs. Prakash submissions w.r.t. letter(s), PAN :i;k esjs cSad [kkrs 1,40,000/- Sharma, all lenders in the No., Bank esa fdlku ØsfMV credited on supporting rejoinder. account statement dkMZ [kkrs ls vk;s 19.03.2018 evidences and affidavit(s) of FksA in his bank regarding On 19.03.2018 the persons from account with creditworthi cash amounting to he borrowed the remarks as ness and Rs. 1,40,000/- was said amounts CASH identity deposited in his by account RECEIPT. have also bank account and payee cheques/ not been the same amount inter banking furnished. was transferred on transfer. The said Therefore, very same day i.e. documents the on 19.03.2018. explained the transaction source of in the On 19.03.2018 deposits made by absence of cash amounting to the said persons. these not Rs. 1,40,000/- was Thus, the appellant verifiable. deposited in his has proved The said bank account. identity, person also Later on another genuineness and not having amount of Rs. creditworthiness PAN. 3,24,000/- is of the loan Further received on creditors and 19.03.2018 19.03.2018 which accordingly he cash (Rs. 3,30,000) is completely amounting withdrawn on discharges the to Rs. same date for self. onus cast by 1,40,000/- Identity of the real the IT Act,1961 was source lender / to prove deposits deposited in cash source is not in his Bank account. this bank disclosed as account and apparently the the same account of Sh. amount was Bhairu Ram is used transferred as conduit. on very same day The bank i.e. on statement email is 19.03.2018, on the email id of thus the one Kamlesh same Sharma. appears to be a non- Evidences genuine regarding transaction. creditworthiness and identity have also not been furnished. 2- ;g gSa fd eSus 4 Bhairu As per copy On perusal The appellant has During the course fnukad 21-03-2018 Ram of bank of not given specific of dks :i;s statement documents rebuttal of the appellate 6]00]000@& Jheku submitted by furnished in remand report in proceedings, the ckcqyky 'kekZ tks fd the respect to his rejoinder appellant esjs fe= dks muds ekaxus ij m/kkj fn;s appellant, Shri Bheru comments and has submitted FksA mi;qDrZ :i;k Rs. Ram, made common confirmation esjs dslhlh [kkrs ls 9,90,000/- supporting submissions w.r.t. letter(s), PAN fn;k x;k gSA credited on evidences all lenders. No., Bank 19.03.2018 regarding account statement in his bank creditworthi The bank and affidavit(s) of account with ness and statement email is the persons from remarks as identity on the email id of he borrowed the CASH have also one Kamlesh said amounts RECEIPT not been Sharma. by account furnished. payee cheques/ Therefore, Evidences inter banking the regarding transfer. The said transaction creditworthiness documents in the and identity have explained the absence of also not been source of these not furnished. deposits made by verifiable. the said persons.

The said On 19.03.2018 Thus, the appellant person also cash amounting to has proved not having Rs. 6,00,000/- was identity, PAN. deposited in his genuineness and Further on bank account and creditworthiness of 19.03.2018 the same amount the loan creditors cash was transferred on and accordingly he amounting 21.03.2018 to the completely to Rs. appellant. Identity discharges the 6,00,000/- of the real source onus cast by the was lender is not IT Act,1961 to deposited in disclosed as prove deposits in his bank apparently the his Bank account. account and account of Sh. the same Bhairu Ram is used amount was as conduit. transferred on 21.03.2018, thus the same appears to be a non- genuine transaction. 2- ;g gSa fd eSus 5. Harshita As per copy On perusal The appellant has During the course fnukad 31-03-2018 Constructi of bank of not given specific of appellate dks :i;s on statement documents rebuttal of the proceedings, the 5]00]000@& Jheku submitted by furnished in remand report appellant ckcqyky 'kekZ tks fd the respect to and has made submitted esjs fe= dks muds ekaxus ij m/kkj fn;s appellant, M/s common confirmation FksA mi;qDrZ :i;k Rs. Harshita submissions w.r.t. letter(s), PAN esjs cSd [kkrs ls 5,00,029.50/ Constructio all lenders. No., Bank fd;k x;k gSA - debit on n, account statement 31.03.2018 supporting There is no ID and affidavit(s) of from its bank evidences proof, address the persons from account with regarding proof of the he borrowed the remarks as creditworthi lender on record. said amounts CHQ/948341 ness and The affidavit is by account TRANSFER – identity signed by one payee cheques/ BABU LAL have also Rakesh Meena inter banking SHARMA not been however his transfer. The said furnished. designation / documents Therefore, connection with explained the source the lender is not of deposits made transaction specified. by the said in the persons. Thus, absence of Lender has stated the appellant these not in affidavit that his has proved verifiable source of income identity, is building genuineness and construction creditworthiness activity however of the loan PAN, ITR, etc. have creditors and not been accordingly he submitted. completely discharges the No documents onus cast by the I regarding Act,1961 to creditworthiness prove deposits in have been his Bank account. submitted.

The ld. AO made the addition treating the said amount as cash deposits whereas amount was not cash deposits but the deposits are by account payee cheques. Thus the basic foundation of addition made by the AO proves to be wrong and incorrect. In view of the above facts, the impugned addition made by the ld. AO to the income of the appellant on account of alleged cash deposits made in his bank account is apparently wrong and made only the basis of presumption and accordingly bad in law. Further the ld. AO has not mentioned any section of the Income Tax Act under which she made the addition on account of deposits in bank account. In view of the above facts and circumstances it is requested that the impugned addition made by Ld. AO and confirmed Ld. CIT(A) to the extent of Rs.18,40,000/- may kindly be deleted.”

“ Please refer to the above aforementioned subject. Aforesaid appeal is pending in this office for the Assessment Year 2018-19. The LD.AR of the appellant Sh. R.K. Bhatra has furnished detailed written submissions alongwith paper book (page 1 to 45) vide letter dt. 11.07.2023.

(i) Whether the additional evidences are admissible in terms of Rule 46A or not and (ii) Without prejudice to your comments for Sr. No. (a) above, you are also directed to examine the additional evidences on merits.”

The AO furnished his remand report dated 14.11.2023. The ld. CIT (A) after considering the facts of the case, written submissions of the appellant and the remand report and the rejoinder submitted by the appellant, the LD. CIT (A) allowed part relief of Rs. 8,60,000/- by sustaining the addition of Rs. 18.40 lacs.

5.1 On perusal of the material available on record and the documentary evidences, we find that as regards addition of Rs. 27,00,000/-, the AO has not controverted /denied the facts and submissions made by the appellant that there was no alleged cash deposit of Rs. 27.00 lacs in his bank account, on which basis the impugned addition of Rs. 27.00 was made by the AO. The facts of the case are that a sum of Rs.

27.00 lacs were borrowed by the appellant by account payee cheques or inter banking transfer and the said cheque amounts were deposited in his bank account. Further, the said amount was arranged to deposit the amount in PD A/c of the Income Tax Department to release the assessee’s residential house No. 239 registered documents seized by the Income Tax Department during the course of search on Shri Raju Sharma. During the course of appellant proceedings, the appellant submitted confirmation letters and affidavits of the persons from whom the assessee borrowed the said amounts by account payee cheques/inter banking transfer. The said documents explained the sources of deposits made by the said persons, PAN numbers of the persons who were filing income tax returns, copies of bank accounts have also been submitted. All the loan creditors have confirmed that they have given the loans to the appellant by submitting affidavits duly notarized and bank accounts. In the affidavits, all the loan creditors have stated that in case the Income-Tax Department wants to record their statement in person in respect of the loan amount, they are ready to cooperate with the Income Tax Department. On the contrary, the AO has not made any enquiry to prove that the transactions of the loan creditors are not genuine. Once the assessee has produced the letters and affidavits, then the primary onus on the assessee has been discharged. The ld. CIT (A) while confirming the addition has placed reliance on the various decisions. However, we find that all those decisions are not applicable in the facts of the present case of the appellant. The AO has only expressed his doubt about the genuineness but this is only a suspicion without any basis. When the assessee has produced all the relevant documents which includes PAN, bank accounts, notarized affidavits of the loan creditors etc. offering to give statements before the Income Tax authorities, then in the absence of any contrary material to controvert or disprove the documentary evidence produced by the assessee, the addition made by the AO under section 68 is not justified. Thus, the appellant has proved identity, genuineness and creditworthiness of the loan creditors and accordingly discharged the onus cast by the IT Act, 1961 to prove the deposits in the bank account of the appellant. Accordingly, in view of above discussions and also relying on the judgement of the Hon'ble Supreme Court in the case of Mehta Parikh & Co. vs. LD. CIT, 30ITR 181 (SC) and LD. CIT vs. Smt. P.K. Noorjehan, 103 Taxman 382 (SC), we find that the primary onus on the assessee to prove the identity and creditworthiness of the creditors as well as the genuineness of the transactions stood proved and neither the ld. AO nor LD. CIT (A) have controverted and or gave negative finding regarding the averment made in the affidavits filed before the AO. It is also verifiable from the Affidavits that the deponents have stated that they are ready to appear to the I.T. Authorities, if so called. As per record, it is evident that the AO has not called the loan creditors nor further enquiry was made in this regard. Thus the legal inference is that the AO has accepted the statements made by the deponents by filing the affidavits. Accordingly, the addition of Rs. 18.40 lacs sustained by the LD. CIT (A) is deleted.

Assessment Year 2012-13.

For the sake of convenience, we first adjudicate the additional ground as under :

Now the assessee is in appeal before us.

“ That on the facts and circumstances of case the Ld. CIT(A) is wrong and bad in law in confirming the action of Ld. AO in initiating the proceedings u/s 153C of the IT Act, 1961 in case of the appellant in as much as no incriminating documents pertaining to the appellants was found and / or seized during the course of search of Sh. Raju Sharma. The consequent assessment made by the Ld. AO is therefore wrong and bad in law. The said ground of appeal is challenging the action of the ld. AO in initiating the proceedings under section 153C of the IT Act, 1961 against the assessee. For ready reference and for the sake of convenience, the provisions of section 153C are reproduced hereunder below:-

“153C. 72[(1)] [Notwithstanding anything contained in section 139, section 147, section 148, section 149,section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, 74 belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assessor reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A] :] [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :] [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [and for the relevant assessment year or years as referred to in sub-section (1) of section153A] except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.] [(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April,2021.]” As per above provisions of law, it is mandatory to issue the notice under section 153C that a person other than the person referred to in section 153A, then the books of account or documents or assets, seized shall be handed over to the ld. AO having jurisdiction over such other person and the ld. AO shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with the provisions of section 153A. Thus, as per requirement of section 153C, there must be some books of account and/or other valuable articles or things or documents found during the course of proceedings under section 132 of the IT Act, 1961 with some other person and the said books of account, articles or things should pertain to other person. Further satisfaction notes are also required for issuing the notice to the other person by the ld. AO of the person referred to in section 153A as well as by the ld. AO of some other person. It is submitted that as evident and verifiable from the assessment order itself that no incriminating document, valuable articles or things pertaining to the appellant for the year under assessment were found with the person referred to in provisions of section 153A and accordingly time limit for issue of a notice under section 142(1) /143(2) stood expired on 30.09.2013, as such no assessment was pending for the above said assessment year when the search was conducted on the person referred to section 153A of the Act. Thus the assessment year under appeal is unabated as per provisions of section 153A and the additions, if any, to be made would be restricted to incriminating document found during the course of search. In other words, no routine additions are permitted. As in the case of the assessee, the search action under section 132 was carried out against the person referred in section 153A of the IT Act, 1961 on 02.08.2017 and accordingly no notice under section 142(1) and/or 143(2) can be issued upto 30.09.2013 and latest by 31st March, 2015. In the light of above facts it is evident that on the date of search i.e. 02.08.2017, the assessment year 2012-13 was unabated and accordingly no addition except supported by any incriminating document is permissible as per law.

1(i) This position has been settled by a number of judicial pronouncements, few of which are reproduced herewith:

(i) All Cargo Global Logistic Ltd. Vs. DCIT 137 ITD 287 (Mum)(SB) – Upheld by Bombay High Court.

Relevant extracts: Para 58 of SB decisions: Thus, question No. 1 before us is answered as under: (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately :

(b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i) books of account , other documents, found in the course of search but not produced in the course of original assessment, and (ii) Undisclosed income or property discovered in the course of search.

CIT vs Kabul Chawla Delhi High reported in (2016) 380 ITR 5733 (Delhi) vide and others, dated 28.8.2015, (SLP dismissed by Hon'ble Supreme Court on 7-12- 2015) wherein the Hon'ble Delhi High Court has reiterated the above settled legal proposition that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed ………………..

Rajasthan High Court in the case of Jai Steel (India) vs ACIT reported in 259 CTR (Raj.) 281 “….. The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, in as much as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. ………. ………. Para 26 of the Judgement: The plea raised on behalf of the assessee that as the first proviso provides for assessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words ‘assess’ or ‘reassess’ have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word ‘assess’ has been used in the context of an abated proceedings and word “reasons” has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.

There are various recent decisions on the issue that there can be no addition in respect to completed assessment if no incriminating material found during the course of search namely : -

Jai Lokenath Oil Extraction P. Ltd. Vs. DCIT (2017) 166 ITD 161 (Kol – ITAT). CIT Vs. Deepak Kumar Agarwal (2017) 251 Taxman 22 (Bombay H.C.). Ratan Kumar Sharma Vs. DCIT (ITAT – JPR order dated 25-7-1).

Similar view point was expressed by the Hon’ble Delhi High Court in the case of Kabul Chawla vs. ACIT 380 ITR 573 (Del HC) (order upheld by Hon’ble Supreme Court). The relevant observation of Hon’ble court could be seen in para 37 & 38 of order.

Summary of the legal position 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light o/ the law exploited in the aforementioned decisions, the legal position that emerges is as under.' i Once a search takes place under Section 132 o] the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date o/ the search shall abate. The total income for such AYs swill have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ’roro/ income' of' the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis o] evidence found in the course of the search, or other post-search material or information available with the AO which con 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. O6vious/y an assessment files to be made under this Section only on the basis of seized material.” v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ’assess' in Section 153 A is relatable to abated” proceedings i.e. those pending on the date o/ search) and the word 'reassess’ to completed assessment proceedings. vi. In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A on/y on the basis of some incriminating material unearthed during the course of 1(ii) The above said legal position is finally upheld by the Hon’ble Supreme Court of India, in case of PCIT vs. Abhisar Buildwell P. Ltd. in Appeal No. 6580 of 2021 vide Order dated 24.04.2023. In the said judgment the Hon’ble Supreme Court has relied upon the various judgments of the Hon’ble High Courts including Delhi High Court judgment in case of Kabul Chawla. The para 13 of the said judgment is reproduced herein below:-

“13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.”

In view of the above facts, the impugned proceedings initiated under section 153C and consequently the assessment order passed is grossly wrong and bad in law. It is requested that the impugned order passed on the basis of said illegal notice may kindly be quashed.”

“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that (a) any money, bullion jewellery or other valuable article or thing, seized or requisitioned, belongs to or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person 3 and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A.

Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to 6 sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:

Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which 10 search is conducted or requisition is made4 and for the relevant assessment year ar years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.

(2) Where books of account or documents or assets seized or requisitioned as referred to in sub- section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year-

(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.

11.1. As per above provisions of law, it is mandatory to issue the notice under section 153C that a person other than the person referred to in section 153A, then the books of account or documents or assets, seized shall be handed over to the AO having jurisdiction over such other person and the AO shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with the provisions of section 153A. Thus, as per requirement of section 153C, there must be some books of account and/or other valuable articles or things or documents found during the course of proceedings under section 132 of the IT Act, 1961 with some other person and the said books of account, articles or things should pertain to other person.

Further satisfaction notes are also required for issuing the notice to the other person by the ld. AO of the person referred to in section 153A as well as by the ld. AO of some other person. It is evident and verifiable from the assessment order itself that no incriminating document, valuable articles or things pertaining to the appellant for the year under assessment were found with the person referred to in provisions of section 153A and accordingly time limit for issue of a notice under section 142(1) /143(2) stood expired on 30.09.2013, as such no assessment was pending for the above said assessment year when the search was conducted on the person referred to section 153A of the Act. Thus the assessment year under appeal is unabated as per provisions of section 153A and the additions, if any, to be made would be restricted to incriminating document found during the course of search. In other words, no routine additions are permitted. As in the case of the assessee, the search action under section 132 was carried out against the person referred in section 153A of the IT Act, 1961 on 02.08.2017 and accordingly no notice under section 142(1) and/or 143(2) can be issued upto 30.09.2013 and latest by 31st March, 2015. In the light of above facts, it is evident that on the date of search i.e. 02.08.2017, the assessment year 2012-13 was unabated and accordingly no addition except supported by any incriminating document is permissible as per law.

11.2. In light of the above, we are of the considered opinion that, as per provisions of law, the Assessing Officer can proceed only on the basis of incriminating material which has a bearing on determination of the total income of such other person. Nowhere in the assessment order it has been mentioned that any incriminating material has been seized related to the alleged business of the assessee. The ld. A/R placed reliance on the decision of Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. in Appeal No. 6580 of 2021 vide order dated 24.04.2023. We find that the Hon'ble Supreme Court placing reliance on various judgments of Hon'ble High Courts including Delhi High Court judgment in the case of Kabul Chawla, observed in para 13 of its order as under :

“13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be

Order pronounced in the open court on 30/09/2024.

Sd/- Sd/- ¼ jkBkSM+ deys'k t;arHkkbZ ½ ¼lanhi xkslkbZ½ (RATHOD KAMLESH JAYANTBHAI) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30/09/2024. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Babu Lal Sharma, Jaipur. 1. izR;FkhZ@ The Respondent- The DCIT, Central Circle-1, Jaipur. 2. 3. vk;dj vk;qDr@ CIT vk;dj vk;qDr@ CIT(A) 4. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत