ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA vs. SH. NAVAL KISHORE, KOTA

4. Aggrieved from the order of the assessing officer, the assessee preferred an appeal before the Commissioner of income

tax appeals. Apropos to the grounds of appeal raised the relevant finding of the ld. CIT(A) is reiterated here in below :

On the issue of reducing the income in the ITR filed in 15A at reduced income that of the original return. 5.8 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this case, the AO noted that the income declare in return filed u/s 153A was less than the income declared in the original return filed u/s 139(1) of the Act. The AO held that in the return filed u/s 153A only additional income based on incriminating documents is required to be shown in addition to the income originally declared in the regular return of income. Income declared in the regular return of income u/s 139 can in no way be under declared in the return u/s 153A.

The appellant relied upon the revised computation of Income furnished during the assessment proceedings. However, no clarification is provided with reference to the reduction of income in return filed u/s 153A in comparison to the return filed u/s 139 of the Act.

The facts of the case are considered. Any new claim in the return filed u/s 153A of the act is not acceptable as the Search Assessments are for the benefit of the revenue rather than assessee. The returns are filed uls 153A of the act are as a consequence of action taken under Section 132 of the Act on a assessee and thus can't be advantageous for the assessee and moreover the proceedings u/s 153A are analogous to proceedings under Section 147 of the Act to the extert that these are proceedings for the benefit of Revenue and not that of the assessee. The assessee cannot be permitted, to convert these reassessment proceedings es his appeal or revision in disguise and seek relief in respect of items earlier not claimed in the original return of income. Reliance is placed on the the judgment rendered by the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag Vs ITO [2000] 161 CTR (Bom) 391: [2000] 241 1TR 865 (Bom). This decision was rendered by taking notice of the principle laid by the Hon'ble apex Court in CIT Vs Sun Engineering Works (P) Ltd. [1992] 107 CTR (SC) 209: [1992] 198 ITR 297 (SC) to the effect that in reassessment proceedings, an assessee can neither claim nor be allowed a deduction that was not claimed in the original return. As such the assessment proceedings initiated on the basis of an action under Section 132 of the Act also cannot be utilised by the assessee to seek relief not claimed earlier.

Further, Chapter XTV-B has been replaced by new provisions of ss. 153A to 153C, the object of legislation is to assess undisclosed income New claim of deduction or exemption cannot be allowed to such searched pensons. If it is so allowed, then the same shall become discriminatory to the other regular assessees who have lost a right as such to claim deduction by efflux of time of by mandate of the Act. Since, the assessee neither made any such claim in the original return filed under Section 139(1) of the Act nor in regular assessment proceedings by way of filing any revised return therefore returns filed in response to notica under Section 153A of the Act are not substitute of revised return for making claim of such benefits. Having regard to the provisions of s. 139(5) of the Act and since the assessments under s. 153A are in relation to undisclosed income, it is precisely for this reason that new claim of deduction or allowance cannot be made in the completed assessments. It is a settled principle of law that what cannot be done directly can also not be done indirectly. Reference can be made on the judgment rendered by Hon'ble Allahabad High Court in Anupam Sushil Garg v. CIT [2003] 185 CTR (All) 505 [2004] 265 ITR 474 (All). When rules of interpretation are applied it would not allow making of fresh claims as such. Principle of interpretation laid by Hon'ble apex Ccurt in Poppatlal Shah v. State of Madras 1953 AIR 274 (SC) reads as under:

"It is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase, or sentence is to be considered in the light of the general purpose and object of the Act itself. The title and preamble, whatever their value might be as aids to the construction of a statute, undoubtedly throw light on the intent and design of the legislature and indicate the scope and purpose of the legislation itself."

It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 as under-

"it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided."

If a assessee is allowed to claim a allowance, deduction etc. u/s 153A not claimed earlier than it would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra).

In the following decisions it was held that the search proceedings under section 153A are for the benefit of the revenue and therefore any fresh claim is not allowable u/s153A of the act:-

1. Jai Steel (India), Vs Jodhpur Assistant Commissioner of Income-tax [2013] 36 taxmann.com 523 (Rajasthan)

2. Charchit Agarwal Vs Assistant Commissioner of Income-tax, Central Circle 12, New Delhi (2009) 34 SOT 348 (Delhi)

3. Suncity Alloys Pvt. Ltd. V Asstt CIT (2009) 124 TTJ 674 (Jodhpur)

The jurisdictional High Court in the case of Jai Steel (India), Vs Jodhpur Assistant Commissioner of Income-tax [2013] 36 taxmann.com 523 (Rajasthan) clearly held as under-

"30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made.”

Following the above discussion based on judicial principles it is held that the AO was justified in rejecting the claim of the appellant made in the return filed u/s 153A which was not claimed in the return filed u/s 139(1) of the Act. The addition made by the AO is accordingly upheld.

This ground of appeal is treated as dismissed.

Addition of Rs. 1,62,00,000/- for undisclosed income

6.5. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted in this case that the assessee has not included undisclosed income of Rs. 1,62,00,000/- in return filed under section 153A of the Act and similarly undisclosed income of Rs. 306,00,000/- on account of bogus expenditure was also included in returned income which is mentioned in seized paper number 17, 22 & 23 of exhibit 41 of party A-1 from the residence of Shri Surinder Pal Singh Sahni. The show cause notice was duly given and rule of principle of natural justice was followed.

The AO noted that assessee has voluntarily offered undisclosed income of Rs. 1,62,00,000/- in his post search statement recorded. Shri Nawal Kishore Khandelwal has already surrendered a sum of Rs. 162.00 Lacs as his un- disclosed income for A.Y. 2015-16 vide reply to Q No. 9 of his statement dated 22.09.2016. Further same facts were confirmed in his submission dated 24.10.2018. He submitted that same paper should be read in same context and development expenditure of Rs. 8.50 Crore should not be treated as bogus expenditure. It means, he has no objection of addition of Rs. 1,62,00,000/- as undisclosed receipts from "Bajaj Enclave Scheme."

The AO further noted that the assessee has not offered above undisclosed income of Rs.1,62,00,000/- in returned filed u/s 153A of the Act. Shri Naval Kishore Khandelal stated in his statement that he had already disclosed his income for A.Y. 2015-16 at Rs. 7,57,955/- (as per his ITR) whereas he offered for taxation a sum of Rs. 1,54,42,045/- Naval Kishore vs. DCIT (i.е. 1,62,00,000- 7,57,955/-) only. In this connection it is hereby observed that the returned income of Rs. 7,57,955/- is from his regular business of provisional store and the un-accounted income of Rs. 1,62,00,000/- cannot be reduced by his already disclosed income from other business activity in regular course.

As per AO Shri Vipin Kumar Lodha has offered income of Rs. 72,00,000/- before the Hon'ble settlement Commission. Likewise Shri Harvinder Singh has also paid taxes on undisclosed income of Rs. 72,00,000/- in return filed u/s 153A of the Act. Shri Surendra Pal Singh Sahni has also offered undisclosed income of Rs. 1,44,00,000/- in his return filed u/s 153A of the Act. They all were partner in this scheme. Therefore, undisclosed income of Rs. 1,62,00,000/- is added in taxable income of the assessee.

6.5.1 In the remand report the AO provided some more details as under-

1. On the basis of incriminating documents seized from the premises of shri Surender Pan Singh Sahni & Others associates, the assessee has voluntarily offered undisclosed income of Rs. 1,62,00,000/- in his statement recorded during the course of post search proceedings. While recording the statement of Shri Nawal Kishore himself admitted vide reply to Q. No. 9 of his statement dated 22.09.2016 that he had surrendered a sum of Rs. 162.00 Lacs as his undisclosed income for the A.Y. 2015-16.

2. Further, the same facts were confirmed in his submission dated 24.10.2018.

3. The assessee stated in his statement that he had already disclosed his income for the A.Y. 2015-16 at Rs. 7,57.955/- (as per his ITR) whereas he offered for taxation a sum of Rs. 1,54,42,045/- (16200000- 757955) only. The returned income of Rs. 7,57,955/- is from his regular business of provision store and un-accounted income of Rs. 162.00 Lacs cannot be reduced by his already disclosed income from other business activity in regular course.

4. Shri Vipin Kumar Lodha has offered income of Rs. 72,00,000/- before the Hon'ble Settlement Commission. Likewise Shri Harvinder Singh & Shri Surender Pal Singh Sahni have also offered undisclosed income of Rs. 72,00,000/- & Rs. 1,44,00,000/- in their ITR filed u/s 153A respectively. They all were partner in this scheme alongwith the assessee.

6.5.2 Issue of Corroborative Evidence

Per contra the appellant argued that admission is also not corroborated by any cogent evidence and on the contrary, was retracted later on therefore has no binding evidentiary value. The argument of the appellant is considered but not found to be acceptable. There is clear detection of incriminating material during the search proceedings. Incriminating documents was seized from the premises of Shri Surender Pan Singh Sahni & Other associates. The search team immediately confronted on the incriminating document during the search conducted at the premise of the appellant. At the premises of the appellant, Mrs. Rajesh Khandelwal was present. In the statement u/s 132(4) she could not explain the incriminating documents. The appellant was not present at the time of search at his residence. However, the assessee later on voluntarily offered undisclosed income of Rs. 1,62,00,000/- in his statement recorded during the course of post search proceedings considering the incriminating document and statement of other partners of the project. While recording the statement of Shri Nawal Kishore himself admitted vide reply to Q. No. 9 of his statement dated 22.09.2016 that he had surrendered a sum of Rs. 162.00 Lacs as his undisclosed income for the A.Y. 2015-16. In these circumstances, it can be said that there were corroborative evidences in the form of statement of other partners of the project, the incriminating document seized during the search etc. in addition to the statement recorded of the assessee. The issue of retraction of statement is being discussed separately.

6.5.3 Contradictory stand of the Appellant without any cogent evidence

The reply of the appellant is full of contradictions. At first the appellant stating that the assessee was ensured to get his share out of the profit received on cash sales. In these facts, the claim of the appellant that he was completely in dark is not believable. The appellant has not furnished any cogent material to prove that the facts in the statement recorded under oath in the after search proceedings are incorrect. In these circumstances, the claim of the appellant is not found to be acceptable.

It is argued that once the other 3 persons do not claim having actually shared the profit part with the assessee, no income could have been taxed in the hands of the assessee. Even assuming they transferred the profit even then, there is absolutely no evidence brought in record as to when and in what mariner such profit was paid to the appellant. Since the onus is on the Revenue, hence it is bound to prove the receipt of income.

The argument of the appellant are considered. The claim of the appellant is contradictory to the statement recorded under oath. The assessee accepted in the statement recorded under oath that profit from the project was Rs. 4,50,00,000/- and share of the assessee was Rs. 1,62,00,000/-, Once, the assessee accepted earning of profit, the evidence required for making addition is sufficient for the AO. The appellant has not proved that the profit earned of Rs. 1,62,00,000/- was kept by other partners and not kept by him. This is exclusive knowledge of the assessee which is not disclosed. Coming to the next step as discussed by the appellant, it is in the exclusive knowledge of the assessee that how he received the profit. The assessee has not disclosed the manner. Whether, the profit so earned was kept with someone, or given as loan to someone, or invested in some asset or the assessee made expenditure by utilization of the profit so earned. How the AO was required to prove these facts which are in exclusive knowledge of the appellant is not explained by the appellant. Even if proved by the AO, the utilization of such profit might have resulted in further addition in the hands of the assessee as the assessee might have earned further income by utilising this money. However, no such issue is raised by the AO. Therefore, the issue raised by the assessee is not relevant for the taxation of profit which is already earned.

The appellant argued that human probabilities support the case. Further the human probability and the surrounding circumstances plays an important role in deciding tax matters. The lack of requisite knowledge and experience of the Real Estate Business by the assessee, which in fact is glaringly evident from the plain reading of his statement and not disputed by the AO, not finding any undisclosed asset or undisclosed expenditure only suggests and the probability preponders in his favor of the assessee that he was not given/did not receive the 36% share out of the Rs 4.50 Cr.

As discussed above, the assessee accepted earning of profit, the evidence required for making addition is sufficient with the AO. Now, coming to the issue raised by the appellant, it is in the exclusive knowledge of the assessee that how he utilised the profit earned. The assessee has not disclosed the manner of utilization. However, the AO was having enough evidences for making addition which includes sworn in statement of the appellant, statement of other partners and the seized document.

The appellant relied upon the decision of Hon'ble Supreme Court in the case of Sumati Dayal vs CIT [1995] 214 ITR 801 (SC). The appellant has not explained how this decision supports his case. Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT [1995] 80 Taxman

89 (SC)/[1995] 214 ITR 801 (SC)/[1995] 125 CTR 124 (SC)[28-03- 1995] held as under:-

"It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income- tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably.

In the instant case, the amount was credited in capital account in the books of the appellant. The appellant had offered her explanation about the said receipts being her winnings from races. The said explanation had been considered in the light of the sworn statement of the appellant and other material on record The ITO and the AAC had not accepted the explanation offered by the appellant. The two members constituting the majority in the Settlement Commission had also taken the same view. There was no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What was disputed was that they were really the winnings of the appellant from the races. This raised the question whether the apparent could be considered as real. Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Chairman of the Settlement Commission, in his dissenting opinion, had laid emphasis on the fact that the appellant had produced evidence in support of the credits in the form of certificates from the racing clubs giving particulars of the crossed cheques for payment of the amounts for winning of jackpots, etc. The Chairman had rejected the contention regarding lack of expertise in respect of the appellant and had observed that the expertise was the last thing that was necessary for a game of chance and anybody had to go and call for five numbers in counter and obtain a jackpot ticket and that books containing information are available which are quite cheap. This was a superficial approach to the problem. The matter had to be considered in the light of human probabilities. The Chairman of the Settlement Commission had emphasised that the appellant did possess the winning ticket which was surrendered to the race club and in return a crossed cheque was obtained. It was a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the race club. The observation by the Chairman of the Settlement Commission that the 'fraudulent sale of winning ticket was not an usual practice but was very much of an unusual practice, ignored the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act, 1972 whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc. was withdrawn. Similarly the observation by the Chairman that if it was alleged that these tickets were obtained through fraudulent means, it was upon the alleger to prove that it was so, ignored the reality. The transaction about purchase of winning ticket took place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase had to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence."

As per the guidelines of the above case as held by the Hon'ble Supreme Court, the matter is to be considered in the light of human probabilities.

Taking on money on transaction of lands is not an unusual practice but was very much of a usual practice. The transaction of cash takes place in secret and direct evidence about such transaction would be rarely available. In this case the investigation team could gather a direct evidence of actual transaction in cash undertaken by the appellant along with other partners. An inference about cash transaction is to be drawn on the basis of the circumstances available on the record. The AO has clearly brought out these facts in the assessment order. The appellant has failed to prove that the transaction as per the sworn in statement are not true with evidence. In the absence of not furnishing any credible evidence in support of the argument the arguments are not found to be acceptable.

In view of the above discussion, the argument of the appellant are not found to be acceptable.

6.5.4 The AO has taxed real income and not hypothetical income

It is argued that there was some taxable income in the hands of an assessee, always lay upon the revenue. In the instant case there is absolutely no evidence at all successfully brought on record beyond doubts that income really accrued and the assessee received the alleged profit of Rs. 1.62 crore.

The appellant has mixed up two events in this argument, the accrual of Income and receipt of Income. The assessee accepted earning of profit, the evidence required for making addition is sufficient with the AO which includes sworn in statement of the appellant, statement of other partners and the seized document. Therefore accrual of income is proved beyond doubt. The claim of the appellant that the profit so earned might have been kept by the other partners and not shared with him is not proved with the help of evidences. Now, coming to the second issue raised by the appellant, it is in the exclusive knowledge of the assessee that how he utilised the profit earned. The assessee has not disclosed the manner of utilization. However, the AO was having enough evidences for making addition. Therefore, the issue raised by the appellant is found to be without any merit.

It is argued that there was a dispute between the assessee and the 3 parties who, must have earned the income but did not share the same with the appellant. There is no other evidence found even remotely to suggest that the profit of Rs. 1.62 Crore came to the assessee in one way or the other.

It is admitted fact that the there was profit of Rs. 4,50,00,000/- in the project by the partners. The other three partners and the appellant admitted earning of the profit of Rs. 1,62,00,000/- as per the seized document during the search. There is no dispute with regard to earnings of profit. With regard to share of profit also there is no dispute. Share of profit of the appellant is admitted at 36 per cent of the unaccounted profit. Now, the appellant is disputing that other three partners have not given his share of profit to him. The appellant is making a claim without any evidence. The appellant has not furnished any evidence that the profit earned was not shared by other partners. No evidence is furnished by the appellant that he has filed a civil suit for making recovery of the profit earned but not received by him. The transaction of cash takes place in secret and direct evidence about such transaction would be rarely available. Therefore, in the absence of contrary evidences provided the claim of the appellant remains without proof and hence rejected.

The appellant placed reliance on the case of CIT VS Shoorji Vallabhdas& Co. [1962] 46 ITR 144 (SC), "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. This was exactly what had happened in instant case. Here the agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the instant case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a gift by the assessee firm to the managed companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated."

On going through the reliance placed by the appellant it is seen that the reliance is misplaced. Hon'ble Supreme Court in the case relied upon by the appellant held that where, the income can be said not to have resulted at all as there is neither accrual nor receipt of income, even though an entry have been made in the books of account. In the case of the appellant the accrual of income is not disputed. The receipt of Income is not disputed. The appellant has only disputed that the other partners received it but not given to him. First of all the appellant has not proved with evidences that he has not received profit so earned. Secondly, the accrual of profit is not in dispute. Therefore, the facts of the present case are entirely different from the case relied upon by the appellant.

6.5.5 The claim of Regularly maintained books is Incorrect:

The appellant argued that the actual profit eamed by the assessee from real estate activity, based on the regularly maintained books of accounts, was/is only Rs. 28,39,000/- and must have been accepted.

The claim of the appellant is again against the facts. The appellant is saying that he earned Rs. 28,39,000/- from the project. The appellant has not disclosed this amount in the return filed u/s 153A or 139. This amount was disclosed by way of revised computation of Income before the AO when the appellant was not in a position to explain the transactions in bank account. The claim of regular books of accounts is therefore, not found to be acceptable as the appellant has not kept the regular books of accounts as required as per section 44AA of the Income Tax Act as in the return of Income the income was offered u/s 44AD of the Income Tax Act. Therefore claim of the appellant is incorrect that regular books of accounts were maintained.

6.5.6 Incriminating Material Found during search

It is argued that The AO may frame assessment orders either u/s. 153G or u/s. 147 of the Act as the case may be but not u/s 153A. Thus, based on the material collected during the search at the place of the third parties, no assessment can be made u/s 153A but for that purpose assessments u/s 153C or u/s 147 only could be made. It is further submitted that the documents found & seized (i.e. paper number 17, 22 & 23 of Exhibit- 41 of Party A-1) from the residence of Sh. Surinder Pal Singh Sahni& Pg. No.62 of Exhibit-3 of Party A-4 from the residence of Shri Vipin Kumar Lodha for which they explained that Rs.4.50 Cr. was total profit earned from Bajaj Enclave Project. Therefore, the AO presumed that the assessee might have earned un-disclosed income of Rs. 1.62 Cr. The AO also took support of income offered by Shri Vipin Kumar Lodha of Rs.72 Lakh before Hon'ble Settlement Commission and Income offered of Rs.72 Lakh by Shri Harvinder Singh and Rs.1.44 Cr by Shri Surendra Pal Sahni for taxation u/s 153A. It is argued that the impugned seized documents did not belong to the assessee and contained rough jotting of other three associates, even though they admitted, the assessee was neither answerable nor legally expected to explain. However, the AO failed to rebut such contention though raised during the assessment proceedings. He even failed to bring iota of evidence/corroborative documents which suggest that the assessee earned over and above the agreed sale price. It is argued that any entry made/record kept by third party in his own handwriting even though sharing the name of the assessee cannot bind the assessee unless such transaction is further corroborated with some strong and cogent evidence showing the involvement of the assessee.

The argument of the appellant is considered but not found to be acceptable. There is clear detection of incriminating material during the search proceedings. The incriminating documents were seized from the premises of Shri Surender Pan Singh Sahni & Other associates. This is an admitted fact. These persons were business partners of the appellant. The appellant was conducting business as per share of profit as admitted by the appellant and these partners. Therefore, the incriminating documents found from the place occupied by any partner of the business is deemed business premise of the all the partners including the appellant. It is admitted fact the business was being run jointly by these persons. The search was also conducted simultaneously on these persons. The search team immediately tried to confront on the incriminating document with the assessee. The search was also conducted at the premises of the assessee. In the search conducted at the premise of the appellant, Mrs. Rajesh Khandelwal was present. In the staternent u/s 132(4) she could not explain the incriminating documents. The appellant was not present at the time of search at his residence. (However, the assessee later on voluntarily offered undisclosed income of Rs. 1,62,00,000/- in his statement recorded during the course of post search proceedings considering the incriminating document and statement of other partners of the project. While recording the statement of Shri Nawal Kishore himself admitted vide reply to Q. No. 9 of his statement dated 22.09.2016 that he had surrendered a sum of Rs. 162.00 Lacs as his undisclosed income for the A.Y. 2015-16. In these circumstances, it could be said that all the persons who were keeping the details related to the accounted or unaccounted business were virtually having business premises of the assessee. (This is not a case, that the appellant was an independent party to other persons involved in the search. Therefore, if the incriminating material was found from one of the partners, the same is incriminating material for all the persons who were involved in the business and also covered during the search proceedings simultaneously. The other partners place was also his place of business. It is admitted fact that the business was being run jointly. Therefore, the incriminating document found from the possession of other partners place was virtually from the business place of the assessee. If the arguments of the appellant are accepted than partners of business will keep the unaccounted transactions at one place and if caught the other partners will say it is not found from our possession and only the person who has been caught will pay the taxes. This is not an acceptable situation. The partners in business are partners for profit and loss. The tax liability also has to be shared together by all the partners in the ratio which was decided in the beginning of partnership. The appellant accepted the profit so earned in the statement recorded after search. However, the income so admitted was not offered for taxation in the return filed u/s 153A of the Income Tax act. It is important to note that one of the partners has accepted tax liability before the settlement commission. In these circumstances, it is held that there was incriminating material found from the business partner which was virtually place of business of the assessee also as the documents related to business of the assessee were found there. The argument of the appellant are not found to be acceptable that the incriminating document were found from third party. The admission in the statement is corroborated with the seized documents and admission of other partners. These are strong and cogent evidence showing the involvement of the assessee.

Without prejudice to the above discussion, the statement recorded during search and survey under oath is an important piece of evidence and it is an incriminating material. The Kerala High Court on this issue held in the case of Commissioner of Income-tax, Thichur Vs St. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala)/[2016] 240 Taxman 168 (Kerala)/[2016] 385 ITR 624 (Kerala)/[2016] 287 CTR 187 (Kerala) (22-03-2016) as under-

"Neither under section 132 or under section 153A, is the phraseology "incriminating" used by the Parliament Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke section 153A of the Income Tax Act, 1961."

In this case also, statement recorded under oath of a key person of the partner of business, the statement recorded of wife of the applicant in which she could not explain the transactions coupled with the statement recorded of the assessee in the post search proceedings are incriminating material and these are valuable piece of evidence in order to invoke section 153A of the Income Tax Act, 1961.

In view of these facts, it is concluded that there was incriminating material available with the AO and therefore, the provisions of section 153A are rightly invoked by the AO. The decisions relied upon by the appellant are not found to be applicable on the facts of this case as there was incriminating material found during search.

6.5.7 The addition on the basis of Statement under Oath:

It is argued that the only basis with the AO for making addition is the answers to Q- 8 & 9 in his statement recorded u/s 131 on 22.09.2016 in which the assessee allegedly admitted un-accounted/un-disclosed income of Rs. 1.62 Cr. for taxation as his income for A.Y. 2015-16 ie. the residential scheme namely "Bajaj Enclave". However, admittedly, there was no evidence/incriminating material found and seized from the premises (control and possession) of the assessee which could show that the assessee earned undisclosed income /profit from Bajaj Enclave Project It is argued that mere admissions is not conclusive proof unless it is corroborated with tangible material and evidence. No doubt, the assessee in answer to Q-8 & 9 stated the undisclosed income and offered for taxation. As already discussed, it could be said that all the persons who were keeping the details related to the accounted or unaccounted business were virtually having business premises of the assessee jointly. This is not a case, that the appellant was an independent party to other persons involved in the search. Therefore, if the incriminating material was found from one of the partners, the same is incriminating material for all the persons who were involved in the business and also covered during the search proceedings simultaneously. Therefore, the claim of the appellant is incorrect that no incriminating material was found from the premises (control and possession) of the assessee. The other partners' place was also his place of business. It is admitted fact that the business was being run jointly. Therefore, virtually, the incriminating document found from the prossession of other partners place was virtually from the business place of the assessee. If the argument of the appellant are accepted than partners of business will keep the unaccounted transactions at one place and if caught the other partners will say it is not found from our possession and only the person who has been caught will pay the taxes. This is not an acceptable situation. The partners in business are partners for profit and loss. The tax liability also has to be shared together by all the partners in the ratio which was decided in the beginning of partnership. The appellant accepted the profit so earned in the statement recorded after search. However, the income so admitted was not offered for taxation in the return filed u/s 153A of the Income Tax act. It is important to note that one of the partners has accepted tax liability before the settlement commission.

In these circumstances, it is held that there was incriminating material found from the business partner which was virtually place of business of the assessee also as the documents related to business of the assessee were found there. Hence, there were corroborative evidences found during the simultaneous search operation conducted on the group of partners of business. Hence, the Arguments of the appellant in this regard are not found to be acceptable.

On a careful reading of the findings recorded by the AO, it could be seen that the assessing officer did not make assessment solely on the basis of the statement recorded under oath, but also placed reliance on the findings of search, statement recorded of other partners, the documents seized during the search etc. After having found that the appellant gave different explanations at different stages, none of which was supported by any cogent material evidence to dislodge the presumption of statement recorded under oath, the AO was justified in holding that the statement was correct. Therefore, the plea of the appellant that assessment was made solely on the basis of the statement obtained under oath, cannot be accepted, as it is contrary to the facts of the case.

Relevancy and evidentiary value of statement obtained under oath during the search proceedings are no longer res integra. In the decision of the Supreme Court in the case of Banalal Jat Constructions (P.) Ltd. v. Asstt. CIT [2019] 106 taxmann.com 128/264 Taxman 5, after referring to the judgment of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 0018, the legal position in relation to a statement under section 132(4) of the Income-tax Act, 1961 was set out as under: a. An admission is an extremely important piece of evidence though it is not conclusive. b. A statement made voluntarily by the appellant could form the basis of assessment. c. The mere fact that the appellant retracted the statement could not make the statement unacceptable. d. The burden lay on the appellant to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for appellant to make such statement. e. However, a bald assertion to this effect at much belated stage cannot be accepted.

Applying the aforesaid legal proposition herein, I am of the opinion that once a statement is recorded, it is open to the assessing officer to rely and proceed on the basis that such statement is correct and represents the true state of affairs and the burden is on the deponent to demonstrate by letting cogent, convincing and material evidence that the statement was incorrect. Therefore, the statement made under oath during search and survey proceedings has a strong evidentiary value and is binding on a person, who makes it.

6.5.8 Other Decisions Relied upon by the Appellant The Decisions relied upon the Appellant are discussed as under -

Relying on the decisions referred as 72 TTJ 323 (Jd), 73 ITD 434 (Chd) & 63 TTJ 236 (Del) it is argued that it is trite law that the person making an admission is not always bound by it but, if shown that it was due to ambiguity, under tension or was against the facts. it can always be retracted.

As discussed admission under oath on the basis of incriminating documents found during the search is an important piece of evidence. The appellant failed to show that the statement was against the facts. No evidence was furnished to prove that the statement was given on incorrect facts. Hence, the decision relied upon by the appellant are not found to be applicable on the facts of the case.

It has been held in Pullangode Rubber Produce Co. Ltd. vs. State Of Kerala &Anr. 91 ITR 18 (SC), "Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the appellant who made the admission to show that it is incorrect and the appellant should be given a proper opportunity to show that the books of account do not disclose the correct state of facts It is discussed in detail that claim of the appellant is incorrect that regular books of accounts were maintained. The appellant is saying that he earned Rs. 28,39,000/- from the project in the assessment proceedings. The appellant has not disclosed this amount in the return filed u/s 153A or 139. This amount was disclosed by way of revised computation of Income before the AO when the appellant was not in a position to explain the transactions in bank account The claim of regular books of accounts is therefore, not found to be acceptable as the appellant has not kept the regular books of accounts as required as per section 44AA of the Income Tax Act as in the return of Income the income was offered u/s 44AD of the Income Tax Act. Therefore on the facts of the appellant the decision relied upon by the appellant is not found to be applicable. 6.5.9 The Reliance Placed by the Appellant on decisions without Explaining Applicability on the facts of the case While going through the reply furnished by the appellant, it is noticed that decisions of various Courts and ITAT have been relied upon without explaining as to how these decisions are applicable on the facts and circumstances of the case. These decisions are ignored while passing the order. On the issue of placing reliance on a particular decision, Hon'ble High Court Of Gujarat in the case of Director of Income-tax (Exemption) V. Shia Dawoodi Bohra Jamat [2012] 25 taxmann.com 90 (Gujarat) observed as under. "11. It is settled legal position, that the decisions of the courts are not to be applied in the abstract, but are to be applied to the facts of the case. Without recording any findings of fact, one fails to understand as to how the Tribunal has come to the conclusion that the decisions on which it has placed reliance are applicable to the facts of the present case. It has been often reiterated that the Tribunal is the final fact finding authority, hence, the order of the Tribunal should reflect findings of fact as well the reasons for arriving at its conclusions on the basis of the findings recorded by it. The impugned order of the Tribunal is totally lacking in all quarters.

In this case also it is noticed that the appellant has merely referred to some judgments and argued that the assessee is entitled to relief, without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Therefore, such decisions relied upon by the appellant are not discussed in detail because the appellant has not explained that on what basis such reliance is placed by it on these decisions.

6.5.10 The Retraction from statement under oath is not a Valid Retraction

It is argued that the statement was not good and reliable evidence, the moment it stood retracted. Undisputedly, the appellant after making admission did not act upon it and on the contrary while filling ROI in response u/s 153A on dated 07.04.2017, declared total income at Rs. 85,320/-only not adhering to his confession and thus, duly retracted the surrendered already made. Admittedly, there is no mode prescribed for retraction and even non-inclusion of the income in ROI with or without suitable note also amounts to a valid retraction. As admitted by the appellant there is no valid retraction filed by the assessee. The appellant is stating as the appellant after making admission did not act upon it and on the contrary while filling ROI in response u/s 153A on dated 07.04.2017, declared total income at Rs. 85,320/-only not adhering to his confession, the retraction is deemed to be retraction. This is not an acceptable explanation. The statement recorded under oath is an important piece of evidence which is supported by corroborative evidences like seized documents related to unaccounted profit earned from business by the assessee and also duly corroborated by the statement of other partners in the business. In these facts, the argument of the appellant are not found to be acceptable. It is stated that the alleged admission was not made voluntarily in as much as the assesse was highly tensed and remaining under mental trauma developed hyper tension. Not having faced such a situation, he was unable to take any decision, which is a common phenomenon in every survey and search. It has been held that in the cases of survey and search, the possibility of tension and surcharge atmosphere can't be ruled out in ACIT Vs. Jagdish NaraianRatan Kumar 22 Tax World 573 (JP), since approved by Hon'ble Rajasthan High Court. The so called admission of the assessee was tutored and being influenced by the false promises made by the other three persons, who's statements were recorded much earlier on 5.09.16 7.09.16 and 9.09.16 admitting their respective share of profits. He made the admission only on the suggestion of his other associates, who might earn the excess money and thus, admission was not voluntary Moreover, statement were recorded on.2 was made on 07.04.2017. There is yet another reason not to blindly believe the so called admission because it is matter of common knowledge that during the course of survey the Revenue Authorities normally do exert unwanted pressure and influence over the appellant's to get something surrendered to make their survey a success. To expect the appellant to fumish an infallible evidence of concrete nature in such a situation is totally beyond comprehension. The statement of the appellant recorded on 22.10.2016 though heavily relied upon, were not recorded u/s 132 (4) but u/s 131 of the Act. Therefore, in absence of corroborative material found during search at the place of assessee, no addition could be made merely on the basis of statement recorded.

The reply of the appellant is considered. The claim of the appellant is without any evidence that he was influenced by the false promises made by the other three persons, who's statements were recorded much earlier on 5.09.16, 7.09.16 and 9.09.16 admitting their respective share of profits. The appellant has not furnished any such evidence. The appellant has not furnished any complaint against these persons for making false promise. In these circumstances, the claim is not found to be acceptable. Further, no evidence is furnished to suggest that he made the admission only on the suggestion of his other associates. Therefore, the argument of the appellant are found to be only assertions without any supporting evidence. In these circumstances, the AO was found to be justified in relying on the statement recorded under oath which is an important piece of evidence. The statements recorded under section 132(4) and statements recorded under section 131 both are recorded under oath and both statements are equally reliable piece of evidence. Hence, the effort made by the appellant to make distinction is not found to be acceptable. On the issue of retraction of statement recorded during search Hon'ble High Court Of Madras in the case of Thiru. A.J. Ramesh Kumar v. Deputy Commissioner of Income-tax [2022] 139 taxmann.com 190 (Madras) noted as under - "8. Pertinently, the Triburial after recording the explanations, affidavit and other documents filed by the appellant in support of his case, found that the same were not acceptable as the retraction was in the form of mere assertion and also belated. It was further pointed out by the Tibunal that there was no material evidence let in by the appellant to retract the statementmade under section 132(4) and the affidavits of itis mother-in-law wers unreliable as they were interested and self-serving testimonies. We are of the view that any retraction by the appellant should be made at the earliest point of time with sufficient, credible and corroborative evidence t support his claim and not by mere assertion as done in this case. Therefore, we do not find any reason to differ with the findings s so rendered by the Tribunal.”

In this case also, affidavit filled by the appellant in support of his retraction is perused and the same is not found to be acceptable as the retraction was in the form of mere assertion and also belated. There was no material evidence let in by the appellant to retract the statement made under during the search and survey proceedings and the affidavits are found to be unreliable as the affidavit is a self-serving testimonies. It has been held that any retraction by the appellant should be made at the earliest point of time with sufficient, credible and corroborative evidence to support his claim and not by mere assertion as done in this case. Therefore, I do not find any reason to differ with the findings so recorded by the AO.

It is noticed that various judicial authorities have held that a statement uls 132(4)/131 is an important piece of evidence and though it is open to the assessee to show that the statement under oath was erroneous. Such retraction must be made soon after the recording of the statements on oath and further such retraction should be backed with suitable and sufficient evidence. There is no valid retraction filed in this case, hence the statement can be acted upon by the AO. The search and survey proceedings were concluded on 22.09.2016 and so called retraction was made on 07.04.2017. The so called retraction is not valid retraction as filing return of Income in compliance to notice u/s 153A is not retraction. The assessee has not included the income admitted as earned in the statement recorded under oath. However, a proper retraction requires evidences and explanation with regard to earlier statement. However, no such retraction is furnished by the appellant. The filing of return without any valid explanation after 6 months after the recording of statements u/s 131 of the Income Tax Act, 1961 cannot be treated as valid retraction. In this regard, in an important decision Hon'ble Gujrat High Court of in the case of Asstt. CIT v. Hukum chand Jain [2010] 191 Taxman 319 it was held that if an allegation of duress or coercion was made almost after two years, then such allegation has to be overruled. In this case also the allegation is made now is not acceptable. Therefore, the allegations of coercion are not found to be acceptable.

The ITAT Ahmedabad Bench 'C' in the case of Kantilal C. Shah v. Assistant Commissioner of Income-tax, Circle-3, Ahmedabad [2011] 14 taxmann.com 108 (Ahmedabad) considered the similar issue. The head note of the decision is as under-

"Section 132, read with section 69, of the Income-tax Act, 1961-Search and seizure-Block periods 1-4-1985 to 31-3-1995 and 1-4-1995 to 12-12-1995- Whether section 132(4) enables an authorized officer to examine a person on oath and such a swom statement made under section 132(4), thus can be used as an evidence under Act-Held, yes - A search operation was carried out at premises of assessee whereby cash, jewellery, books of account and certain documents were found and seized Assessee on same day had given a statement under section 132(4) whereunder admissions with regard to unaccounted income of Rs. 6.20 lakhs were made - Said unaccounted income consisted of marriage expenditure, unexplained household expenditure, etc. Assessing Officer, made additions in respect of unaccounted income of Rs. 6.20 lakhs admitted under section 132(4)- However, after lapse of about nine months from date of admission, assessee through an affidavit sought to retract from statement made under section 132(4) on ground that (a) when there was no evidence or incriminating material discovered at time of search no addition could have been made merely on basis of statement under section 132(4) and (b) that impugned disclosure under admission was obtained forcefully and, hence, not binding Whether statement recorded under section 132(4) is an evidence by itself and any retraction contrary to that should be supported by strong evidence for demonstrating that earlier evidence recorded was under coercion- Held, yes Whether assessee retracted from his earlier statement without demonstrating any evidence to establish that statement recorded earlier was incorrect; an allegation of compulsion or coercion must not be accepted merely on a statement if remained unsubstantiated-Held, yes Whether, therefore, addition made on basis of statement recorded under section 132(4) was to be upheld-Held, yes [In favour of revenue]" In this case also the Assessing Officer made additions in as admitted in the statement under oath. The assessee has not filed any valid retraction. Statement recorded under oath is evidence by itself and any retraction contrary to that should be supported by strong evidence for demonstrating that earlier evidence recorded was under coercion. The assessee has not even retracted from earlier statement and without demonstrating any evidence to establish that statement recorded earlier was incorrect; an allegation of compulsion or coercion must not be accepted merely on a statement if remained unsubstantiated. Therefore, addition made on basis of statement recorded under oath was to be upheld.

The AO also noted that during the search proceedings, various incriminating documents related to unaccounted transactions made by the assessee and his partners were found wherein unrecorded transactions were mentioned which were not verifiable from regular books of accounts maintained by the assessee and the statements were recorded on the basis of material found during the course of survey/search proceedings. Therefore, the argument of the appellant that the addition is made on the basis of only statement recorded during search is not found to be acceptable.

The appellant has not furnished any evidence to support that it approached to higher authorities about the alleged coercion used during recording the statement. There is no evidence that the appellant filed any such complaint before higher authorities. Therefore, the allegations of the appellant are unfounded and therefore not found to be acceptable.

On the issue of retraction Hon'ble High Court Of Kerala in the case of Commissioner of Income-tax, Kozhikode v. O. Abdul Razak [2012] 20 taxmann.com 48 (Ker.) held as under -

"Section 132 of the Income-tax Act, 1961 Search and seizure Block period 1988-89 to 1998-99 Whether any statement recorded under section 132(4), statutorily deemed to have evidentiary value, cannot be retracted at mere will of party - Held, yes Whether a statement made under oath deemed and permitted to be used in evidence, by express statutory provision, has to be taken as true unless there is contra evidence to dispel such assumption Held, yes Pursuant to a search conducted at residential premises of assessee. Assessing Officer computed undisclosed income on basis of clear admission made by assessee in sworn statement recorded under section 132(4) First addition was with regard to actual money paid by assessee for purchase of four properties Assessee had voluntarily submitted before ITO that amount shown in document with regard to purchase of four properties were not actual amounts and he had paid more than that shown in documents - Second addition was with respect to personal expenses - Last additions was of amount of Rs. 3 lakh which assessee claimed as an NRI loan in his cash flow statement and later in a reply stated to be a loan from his elder brother - Later on, assessee retracted from his statement and contended that admissions were made under threat and coercion - Tribunal allowed appeal of assessee and held that no evidentiary value could be attributed to statement under section 132(4) especially in context of there being a retraction and that for making additions, Assessing Officer should necessarily unearth materials during search Whether on retraction being filed by assessee, there was a burden cast on assessee to prove detraction or rather disprove admissions made Held, yes - Whether since assessee failed to prove any threat or coercion and had voluntarily disclosed his Income by making statement under section 132(4), it could be said that retraction made by assessee was a self- serving after thought and no reliance could be placed on same to disbelieve clear admissions made in statement recorded under section 132(4)- Held, yes-Whether therefore, additions made on account of admissions made under section 132(4) and statement corroborated by documents recovered in search and attendant circumstances was to be sustained-Held, yes [In favour of revenue)" In this case also if the assessee wanted to retract, there was a burden cast on assessee to prove retraction or rather disprove admissions made. The assessee failed to prove any threat or coercion and had voluntarily disclosed his income by making statement under oath, it could be said that retraction made by assessee was a self-serving after thought and no reliance could be placed on same to disbelieve clear admissions made in statement recorded under oath. Therefore, additions made on account of admissions made under oath and statement corroborated by documents recovered in search and attendant circumstances is found to be justified. Without prejudice to the above, there is another angle to the admission during the search and retraction during assessment proceedings. By admitting the appellant during search and survey proceedings the assessee stopped further investigation by the investigation wing. The assessee prevented department to cause further enquiry in his case. Since, the appellant admitted that unaccounted profit was earned and the department officers stopped further enquiry. As such law of estoppels applies in this case.

It is not the case that the admission made by assessee was incorrect or there is mistake or the admission was made on wrong facts. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence.

The appellant has relied upon the decision in case of (2013) Bharat Kumar Azad 50Tax World 33 (JP) to argue that a statement recorded under this section is not conclusive proof. In this regard it is noted that in that case, it is recorded that no incriminating evidence found during search. However, in this case, there is incriminating material found and there are corroborative material in the form of seized documents and also the statement of other partners where such unaccounted profit is admitted. Therefore, the decision is not found to be applicable on the facts of the case. In view of the above discussion, the argument of the appellant are found to be without any merit and the decision of the AO is found to be justified. The addition made by the AO is upheld. This ground of appeal is treated as dismissed. Addition of Rs. 3,06,00,000/- claim of bogus development expenditure

“7.7 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted in this case that the assessee and his associates have claimed to have incurred expenditure of 850.00 Lacs for development in this project. As per mentioned table amount of Rs. 1230 Lacs has been incurred on Bajaj Enclave Project wherein Rs. 30 lacs was incurred for roads. However the sale agreement of the land is for only Rs. 350.00 Lacs which is also seized during search action Annexed at page No. 5 to 29 of exhibit -3 of party A-6. The four associate persons in their respective post search statements and their replies have admitted to incur of Rs. 850.00 Lacs as development expenses.

According to the AO in this case it is difficult to believe that in a plain plotting, where the cost of land is Rs. 3.50 Crore the developmental expenditure would be Rs. 8.50 Cr. The assessee also failed to submit the information/details/documents in respect of incurring of expenditure is Rs. 8.50 Crore for plotting on plain land. In the light of above circumstances it is clear that a sum of Rs. 8.50 Cr. Had never been incurred and only claimed in their respective replies to reduce the un-accounted taxable income. Hence the following shall be the amount of un-accounted income-Total bogus expenditure 8,50,00,000/-.

S. No. Name of associates Share Holding Share of Profit 1 Surender Pal Singh Sahani 32% 272,00,000 2 Nawar Kishore Khandelwal 36 306,00,000 3 Harvinder Singh Kohli 16% 136,00,000 4 Vipin Kumar Lodha 16% 136,00,000 Total 100% 850,00,00

The AO held that assessee has never incurred such huge expenses in this project and it is only exercise to minimize tax liability. One of the partner Shri Vipin Kumar Lodha has admitted in settlement petition that no such expenditure of Rs. 850 Lacs is incurred and therefore, the corresponding share of the applicant of this amount i.e. Rs. 136 Lakhs (850 *16%) is offered as additional income in AY 2015- 16. So assessee is also liable for pay tax on undisclosed income from this project on account of bogus development expenses. Hence, unaccounted income of Rs. 3,06,00,000/- is added in total income of the assessee.

On going through the assessment order, it appears that the intention of the AO was to treat this amount of Rs. 8.50 Cr. as additional income in addition to what have been surrendered during the search or after search proceedings.

Per contra the appellant argued that he never incurred any expenditure on account of Development Expenses. The assessee only purchased the land and associated with these three people for developing, plotting and marketing the land. All the development expenditure was born by Sh. Surinder Pal Singh Sahni, Shri Vipin Kumar Lodha and Shri Harvinder Singh.

The appellant claimed that no such expenditure was incurred. The claim of the AO is same that in fact no such expenditure was incurred. The appellant as well as other partners have accepted the gross receipts from the project on the basis of seized document during search and post search enquiry. Therefore, the appellant has accepted the gross receipts from the project in the statement under oath which is supported by corroborative evidences. In these circumstances, the conclusion drawn by the AO is found to be correct that the actual profit earned by the appellant was more than the computation made on the seized document. The conclusion of the AO is also supported by the fact that one of the partner Shri Vipin Kumar Lodha has admitted in settlement petition that no such expenditure of Rs. 850 Lacs is incurred and therefore, the corresponding share of the applicant of this amount i.e. Rs. 136 Lakhs (850*16%) is offered as additional income in AY 2015-16.

It is argued that document has to be read in its entirety. The facts are not denied that on the seized paper itself, there was entry of the incurring of the expenditure of Rs. 8.05 Crores, based on which the A.O. alleged sale of proceeds and undisclosed income there from. Since both the entries of receipt and payment, were made on the seized document, the A.O. could not read a part of it and ignored the other. Law is well settled that evidence has to read in its entirety, one cannot read the part which suits him best and to ignore the other which does not. Otherwise, following the principal of tax in real income only, the A.O. is bound to reduce the expenditure. It is also argued that the statement of the appellant also supports the claim of the appellant.

The argument of the appellant are considered. This is true that the entries made in the document should be read in its entirety. However, the interpretation of the seized document makes the difference. This amount can be considered as profit already distributed by partners out of sale proceeds of the project. The remaining amount of profit was shared later on which is admitted by the partners in their respective statements. The appellant has admitted the share of profit in the sworn in statement during the after search enquiry on the basis of the seized document. It means that the appellant has also accepted the turnover or gross receipts. Now the appellant is claiming that no expenditure on development was incurred. This is also claimed by the AO. This is to be treated as profit already distributed and the remaining amount of profit is distributed later which is discussed while discussing the addition of Rs. 1.62 Crores. It is argued that contradictory approach of AQ. The learned AO at Pg. 21 of the impugned order although clearly stated the 4 associate persons in their respective posts search statements and their replies have been admitted to incurred of Rs. 850.00 lakhs as development expenses", but at the same time, he doesn't believe the quantum of the expenditure incurred for the suspicion he entertained. Whereas, he could comfortably make addition Rs. 1.62 crore (out of the profit of Rs. 4.50 crore) merely on the basis of the admission made by the other 3 persons and the appellant but at the same time, here when the other 3 parties have again admitted to have incurred AO comfortably ignored the same because it suited him best. The statement recorded is based based on on the interpretation made by the partners at the time of search and post search enquiries. However, the interpretation is required to be corrected considering the facts of the case that one of the partner Shri Vipin Kumar Lodha has admitted in settlement petition that no such expenditure of Rs. 850 Lacs is incurred and therefore, the corresponding share of the applicant of this amount i.e. Rs. 136 Lakhs (850 *16%) is offered as additional income in AY 2015-16. Therefore, the addition of Rs. 1.62 Crores is made on the basis of admission made by the partners and this addition is also based on admission by one of the partners before the settlement commission. Therefore, it cannot be said that there is contradiction in the order of the assessing officer. It is argued that if the addition of the share of profit Rs. 1.62 Cr is sustained, the share of development expenses of Rs. 3.06 Cr must also be allowed following the concept of real income.

As discussed, this amount is additional income which is not offered in the statement but claimed as expenditure which is not real. Therefore, the real income includes this amount also in addition to the amount of Rs. 1.62 Crore already surrendered.

Considering facts and circumstances of the case, this amount is treated as additional income which is not surrendered but claimed as expenditure in the statements. The claim of expenditure is not found to be genuine and one of the partners also accepted that no such expenditure was done actually. Therefore, the addition made by the AO is confirmed as per above discussion. This amount is to be treated as additional profit earned which is distributed by the partners earlier.

This ground of appeal is treated as dismissed.”

Addition of Rs. 2,18,18,114/- unexplained credit in bank account.

8.8 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The AO noted in this case that in two banks account of the assessee a sum of Rs. 2,18,18,114/- were found credited in respect of which he could not offer any satisfactory evidence during post search enquiry. He only claimed in his reply to Q-7 that the booking amounts have been deposited in his bank account.

The AO further noted that assessee has submitted ledger accounts only to explain source of cash deposition but copy of agreements have not been submitted for examination. The assessee has offered undisclosed profit of Rs. 28,39,000/- in his revised computation filed during assessment proceedings. Since, I am inclined to add total credits in the bank accounts. Therefore, that addition is not being made in assessment order. Considering the facts and circumstances of the case, contention of the assessee is rejected and unexplained credit of Rs. 2,18,18,114/- is added in total income of the assessee under section 68 of the Act.

The appellant argued that source of Bank Deposits fully explained. The subjected deposits were sourced from various cash receipts on account of sale proceeds of various plots situated at Bajaj Enclave and were duly shown in the regularly maintained day to day cash bookand also from the receipts in the bank accounts on different occasions during the course the business. These facts are also clearly evident from the copies of the Cash Book and the copies of the bank statements and bank ledger accounts as also from the block wise list of sales proceeds and the respective sales ledger accounts It is argued that all such agreements were already produced vide letter dated 05.11.2018 to the AO It is argued that the AO on one hand added Rs 1.62 Cr. as un-disclosed 36% and has made another addition on account of unexplained credit in the two bank accounts when the assessee explained that the same were deposited out of sale proceeds, which are part of the same transaction. Thus, the addition made by the AO tantamount to be a double addition of same income in the hands of the assessee. Therefore, the approach of the AO is contradictory and hence deserves a complete deletion

It is argued that the Correct Amount is Rs. 1,75,31,192 only/-, Alternatively, and without prejudice, further submitted that subjected amount has been wrongly considered at Rs. 2,18,18,114 as against the correct amount Rs 1,75,31,192, which was the total deposits made in the current account with SBI It is clearly evident that Rs. 38,06,922 deposited in the SBI-SB account were transferred during the same previous year itself on 15/10/2014 through banking channel to the current account. Thus, to the extent of the Rs 38,06,922 the deposits have been wrongly considered twice in the total of Rs 2,18,18,114 stated by the AO Therefore, the entire addition kindly be deleted in full.

The reply of the appellant is considered. It is argued that the AO has not at all afforded any opportunity to cross examine the other 3 persons, the statements of whom were heavily relied upon by the AO for making the impugned addition/s. The issue of the cross examination raised by the appellant is not found to be relevant in this case because of following reasons-

1. The partner's statements were duly confronted in the search proceedings and after search proceedings with the assessee.

2. The partners are business partners of the assessee and they are witness of the assessee. The assessee has could not furnish any contrary evidences and in fact admitted what was stated by other partners.

3. The assessee has also consulted as admitted in the reply that on consulting with them only the assessee admitted undisclosed profit in the statement recorded during post search statement recorded under oath u/s 131 of the Income Tax Act.

In these circumstances, issue of providing cross examination is not found to be relevant and the issue is not found to be considerable. The decisions relied upon by the appellant are not found to be applicable on the facts of the appellant.

Coming to the facts, the appellant argued that the 1.62 Crores added in the hands of the appellant as un-disclosed 36% share included these receipts. However, the appellant has not furnished evidences to prove that the amount of these credits is included in the calculation of 1.62 Crore. From the evidences furnished, it is evident that the transactions as found in the search proceedings are not disclosed even after search. The transactions which have been credited in bank account are only entered in the cash book prepared after search. Therefore, the claim of the appellant that these amounts are part of Rs. 1.62 Cr. Added by the AO is not found to be acceptable in the absence of supporting documents. It is held that the appellant has only recorded the transactions in the cash book and revised computation which are credited in the bank account. The transactions which are not routed through bank account are not included in the cash book or revised computation. Therefore, argument of the appellant are not found to be acceptable in this regard.

The appellant furnished a calculation of profit from the receipts which are shown in cash book. The profit computed by the appellant was Rs. 28,39,000/- in his revised computation filed during assessment proceedings. The AO did not consider the calculation because the agreements were not furnished. However, the appellant furnished documentary evidence that the copy of the agreements were furnished. The AO has not considered the computation made by the appellant. The appellant stated that as per computation, the profit of Rs. 28,39,000/- was earned from the transactions which are appearing in the bank accounts. There is no basis explained for arriving at the profit earned by the assessee. As per the seized document, the profit of Rs. 4,50,00,000/- was earned out of sale consideration of Rs. 16,80,00,000/- as admitted by the partners during the search proceedings. The profit at the rate of 26.78 per cent was earned by these partners on these transactions. The transaction of R. 38,06,922/- is claimed to have been wrongly considered twice in the total of Rs 2,18,18,114/-. The appellant has considered Rs. 1,75,31,192/- as sale receipts. The profit which must have been earned on the sale transaction of Rs. 1,75,31,192/- at the rate of 26.78 per cent profit should have been declared at Rs. 46,94,853/-, Therefore, the addition is confirmed to the extent of Rs. 46.94,853/- considering it as profit from the transactions credited in the bank accounts.

It does not include transactions which are not routed from the bank accounts and the addition made of Rs. 1.62 Crore profit is out of sales completely unrecorded and not routed through bank accounts. In other words, the cash amount which is received as sale consideration but not deposited in bank accounts are not included in this amount of addition. Hence, the amount of addition of Rs. 1.62 Crore upheld while deciding ground no. 1 is completely earned from different transactions which are not done through banking channel. The transactions as reflected in the bank account are considered for confirming addition which is being discussed in this ground of appeal. Accordingly, addition of Rs. 2,18,18,114/- made by the AO is reduced to Rs. 46,94,853/-. The appellant gets a relief of Rs. 1,71,23,261/-. Accordingly. addition made by the AO is confirmed to the extent of Rs. 46,94,853/- out of addition made by the AO of Rs. 2.,18,18,114/-.

This ground of appeal is treated as partly allowed. xxx xxx xxx xxx 11. In the result, the appeal is treated as partly allowed.”

5. Both revenue and assessee feeling dissatisfied with the finding so recorded in the order of the ld. CIT(A) filed the cross appeals on the grounds as stated here in above. Both the parties supported the orders of the lower authorities to the extent as favorable to them.

205/JPR/2024. Ld. AR of the assessee appearing on behalf of the assessee in support of the grounds so raised filed a detailed written submission which reads as follows:

“Facts: In this case, despite admitted and undisputed facts that some material was found and seized during the course of the searches carried out at Shri Surender Pal Singh Sahni, Shri Harvinder Singh Kohli and Shri Vipin Kumar Lodha and based on the information emanating their firm, the additions have been. Hence, specific grounds were taken before the CIT(A), but did not find his favor, hence, this ground. There apart, this ground also includes the illegality committed by the authorities below while making the additions (e.g. making addition in absence of incriminating material during the course of search at the place of the assessee- following Abhisar Builders (Infra), recording of statement u/s131(1A) etc.), which has rendered the entire proceedings a nullity being without jurisdiction. Hence this Ground. Submissions A. Proceedings u/s 153A without jurisdiction (maybe u/s 153C): 1. The following submission were made before the CIT(A) on this aspect: “A. Impugned assessment u/s 153A without jurisdiction: It is submitted that almost all the Hon'ble High Courts are unanimous on the point that assessment under s. 153A is to be framed on the basis of material found during the course of search or requisitioned under s. 132A of the Act at the place of the assessee. Any information/material gathered during the search and survey carried out on third person, cannot be used for the purpose of s. 153A. The AO may frame assessment orders either u/s. 153C or u/s. 147 of the Act as the case may be but not u/s 153A. Thus, based on the material collected during the search at the place of the third parties, no assessment can be made u/s 153A but for that purpose assessments u/s 153C or u/s 147 only could be made. Admittedly, in this case, Search & Seizure operation u/s 132(1) was carried out on dated 01.07.2016 at the residence of the assessee 9G7, Mahaveer Nagar Third, Ladpura, Kota (Raj.) as also at the places of Surinder Pal Singh Sahni & Vipin Kumar Lodha. During the course of search, no cash, no jewellery, no incriminating material or documents were found or seized from the residential premises of the appellant. However, the impugned additions have been made u/s 153A in the hands of the appellant and in hands of these three persons, based on following seized papers viz. a. Pg-17,22 & 23 of Exhibit-41 of Party A-1 (PB 8-10) from the residence of one Sh. Surinder Pal Singh Sahni & b. Pg. No. 62 of Exhibit-3 of party A-4 (PB 11-23) from the residence of Sh. Vipin Kumar Lodha allegedly showing that Rs.4.50 Cr. were earned by launching Bajaj Enclave Scheme. In view these facts and legal position, the impugned assessment framed u/s 153A is completely without jurisdiction.”

2. Objections/observations of CIT(A): 2.1 The CIT(A) contended that the other 3 persons were the business partners of the assessee and since all the four were doing the business of real estate jointly, any incriminating material found even at the business premises of the other business partners, will be a case of finding incriminating material at the place of the assessee. He tried to justify that the joint affair and assessee was not an independent party and the tax liability was to be shared together by all the partners. However, it is sufficient to say that the ld. CIT (A) proceeded on the height of imagination without any evidence and even without any support of the law. Firstly, bare reading of S.153C which is quite plain and unambiguous, doesn’t admit of any other interpretation and do not contemplate any such situation. The books of accounts/any other documents at the place of finding searched person (SP) (irrespective that he may be a partner or a director),If the information contained therein related to or such document pertained to assessee then S. 153C alone which being a specific and special provision of law to meet with such situation, could be invoked but it is not any or every provision. The Lawmakers have purportedly enacted different provisions of law to meet with different situations like normal assessment u/s 143, reassessment u/s 147 and search assessment u/s 153A to 153D and such provision cannot be used interchangeably to suit one’s own requirement. Any interpretation contrary to this, shall result in chaos and undesired anarchy in the working of the department. Further, there is no evidence of there been a partnership between the assessee and other three persons based on some return agreement/ partnership deed. There was no specific document found during search showing the partnership. If the ld. CIT (A) was so sure, he must have also ensured to get the assessee recovered the profit of Rs 1.62 Cr., (assuming the contention of accrual of income is correct though not accepted). Interestingly, search team never raised any specific question as to when and how the share of profit of Rs. 1.62 Cr. was paid to the assessee. 2.2 It is not case of Revenue that there was a partnership of the assessee with the other three persons. Consequently, the act/deed done by other persons should not be treated as “act of the firm” (defined under S. 2(a) of the Indian Partnership Act,1932 as “an "act of a firm" means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm.”) and impliedly therefore, their acts could not bind the assessee as a partner, which legal and factual misconception heavily prevailed upon the Revenue. In other words, the Revenue was bound to have established that the assessee was a partner in a strict legal sense with the other 3 persons. Although the Revenue loosely referred the 3 persons as partner but did not establish the fact. Otherwise also in the eyes of law no such partnership firm existed being governed by the provisions of the Partnership Act,1932. However, to clarify, they acted merely as joint owners and not as partners. The ld. CIT (A) harped upon presumptions and assumptions which appeared to be pre-conceived in this mind. Alternatively, rather implication of this contention of CIT(A) is that he fully admitted and agreed that there was a partnership between 4 persons, all affairs of the other three were binding upon the assessee. If it was really so, then entire income of Rs. 4.50 crore was earned by that partnership firm alone. Correct person of the assessment for this purpose was this partnership firm alone. Needless to say, that there is a separate entity of partnership firm covered by the definition of person u/s 2(31) of the act.

3. Supporting Case laws: 3.1 Principal CIT vs. Saumya Construction ((2017) 297 CTR (Guj) 387 : (2016) 387 ITR 529 (Guj)) 3.2 In the case of Dy. CIT vs. Smt. Shivali Mahajan & Ors. (ITA No. 5585/Del/2015), the Tribunal was considering whether books of accounts, money, bullion, jewellery found during the course of search relates to other person than the searched person, can be considered or not while making assessment under s. 153A of the Act. Like in the present appeals, simultaneous searches were carried out at the premises of the other three persons, Sahini, Kohli and Lodha, however the Tribunal has specifically held that the material recovered from the premises of other persons cannot be used in the hands of the searched person (here the assessee) and for that purpose assessment could be made only under s. 153C or 147. It held as under: "15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the AO of the person searched shall hand over such books of account, documents, or valuables to the AO of such other person and thereafter, the AO of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, s. 153C is not invoked in the case of the assessee and the assessment is framed under s. 153A. We, respectfully following the above decisions of Hon'ble jurisdictional High Court, hold that during the course of assessment under s. 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person." 3.3 In the case of Hitesh Ashok v ACIT (2021) 214 TTJ (Ahd) 410, it has been held that: “Search and seizure—Assessment under s. 153A—Scope—In an assessment under s. 153A, income has to be assessed only on the basis of material found during the course of search against the assessee—Cash book was not found from the premises of the assessee—None of the additions, except addition of jewellery in the asst. yr. 2015-16 in the case of D was made on the basis of seized material—As far as the case of SM Ltd. is concerned, the additions were made on the basis of certain information gathered during the investigation carried out by Investigation Wing in the case of an unconnected third person—These materials could not be considered in the assessment proceedings under s. 153A—Likewise, additions made by the AO in the case of R in different assessment years are not based on the seized material found during the course of search carried out at his premises—However, addition of Rs. 44,48,456 in the case of D deserves to be confirmed because the material to this effect was found during the course of search carried out at the premises of the assessee. Held : In case a search is carried out on an assessee, it could give rise to proceedings under s. 153A qua the person who has been searched. The income has to be assessed only on the basis of material found during the course of search.—Principal CIT vs. Saumya Construction (P) Ltd. (2016) 144 DTR (Guj) 41 : (2017) 297 CTR (Guj) 387 : (2016) 387 ITR 529 (Guj) followed.

(Para 36) A perusal of the assessment order for the asst. yr. 2009-10 in the case of D would reveal that addition has been made on the basis of the details of cash payments recorded in unaccounted cash book seized from TCA. The AO is talking of on-money which has been unearthed, according to him, during the course of search, on the basis of alleged cash book. This cash book was not found from the premises of the assessee. It was found from the premises of A and VID. None of the additions, except addition of jewellery in the asst. yr. 2015-16 in the case of D was made on the basis of seized material. As far as the case of SM Ltd. is concerned, the additions are based on the basis of certain information gathered during the investigation carried out by Investigation Wing in the case of an unconnected third person. These materials could not be considered in the assessment proceedings under s. 153A. They ought to be considered under some other provisions viz. s. 153C or some other sections; but not under this section. (Paras 37 & 38) Additions made by the AO in the case of R in different assessment years are not sustainable because they are not based on the seized material found during the course of search carried out at his premises. Similarly, the additions made in the case of SM Ltd. are also not sustainable. As far as addition in the case of D in the asst. yr. 2015-16, amounting to Rs. 44,48,456 is concerned, it deserves to be confirmed because the material to this effect was found during the course of search carried out at the premises of the assessee. (Para 39)” Accordingly, the initiation of the proceedings and the issuance of notice based thereon u/s 153A is complete nullity, void ab initio and being without jurisdiction and therefore deserves to be quashed. Consequently, the impugned assessment order deserves to be quashed in its entirety. 3.4 Kindly refer ACIT v. Atul Kumar Gupta (2023) 152 taxmann.com 99 (Delhi - Trib.), where it is held that: “II. Section 153A, read with section 153C, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Search proceedings) - Assessment year 2011-12 - There was a search upon assessee and during course of search cash, jewellery and some foreign currency was found - Assessing Officer on basis of appraisal report had treated payments made on account of credit card as income of assessee under section 153A - During course of search of 'RG', a document was seized which contained a ledger account of 'D' which showed payment received by assessee during year under consideration in cash - Assessing Officer had stated that such payments had been made out of undisclosed income of assessee and made addition under section 68 - Assessee pleaded that as no document was found from assessee, assessment under section 153A did not stand - Whether since addition had been made on assessee under section 153A assessment on basis of documents found from a separate search at third party, assessment should have been done under section 153C and not under section 153A - Held, yes - Whether assessment having been made under section 153A and not under section 153C, this being a fatal error in 6/29/24, 7:08 PM 2/14 assessment order which was not curable, order of authorities below was to be set aside - Held, yes [Para 26] [In favour of assessee]” 3.5 In the case of DCIT vs. BSR Builders Engineers & Contractors in 733, 734/CHNY/2023, it has been held: “7. After going through the judicial precedents and particularly the decision of Hon'ble Delhi High Court in the case of Anand Kumar Jain, supra, we are of the view that as per the mandate provided by the provisions of section 153C of the Act, the statement made by assessee cannot be a base for making assessment u/s.153A of the Act on the basis of alleged incriminating material (being the statement recorded u/s.132(4) of the Act) on the basis of which assessment was framed u/s.153A of the Act rather assessment should have been framed u/s.153C of the Act by recording a separate satisfaction. Hence, we find no infirmity in the order of CIT(A) and we affirm the order of CIT(A) on this legal issue.” 3.6 In the case of Tirupati Construction Company Vs ITO DB CWP No. 17651/2022, it has been held: “The Rajasthan High Court quashed the reassessment orders issued under Section 148A(d), underscoring the importance of adhering to the appropriate procedural routes as stipulated in the Income Tax Act, 1961. The judgment reinforces that the reopening of assessments based on search materials must follow the provisions of Section 153C, ensuring that procedural safeguards and statutory limitations are respected.” 3.7 In the case of Shyam Sunder Khandelwal & Ors. Vs. Assistant Commissioner of Income Tax (2024) 338 CTR (Raj) 129, it has been held that: “Reassessment—Validity—Applicability of ss. 147 and 148 vis-a-vis ss. 153A and 153C—Special procedure is prescribed under s. 153A to s. 153D for assessment in cases of search and requisition—Provisions of s. 153A to s. 153D have prevalence over the regular provisions for assessment or reassessment under ss. 143 and 147/148—Language of Expln. 2 to new s. 148 is akin to s. 153A and s. 153C—Corollary being that after seizing of operational period of s. 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted s. 148—Argument that by enactment of ss. 153A to 153D has not eclipsed s. 148 does not enhance the case of respondent to initiate the proceedings under s. 148—Operating field of ss. 153A to 153D and s. 148 are different—Applicability of s. 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render s. 148 otiose—Sec. 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition—Argument that s. 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise s. 148 is to be resorted to, is misplaced—Once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted s. 153C is to be resorted to—Notice under s. 148 is therefore liable to be quashed” B. No material found and seized- No valid notice u/s 153A: 1. Supporting caselaws: 1.1 In the case of Smt. Smrutishuda nayak vs UOI (2021) 323 CTR 617 (Ori), it was held that: “Search and seizure—Assessment under s. 153A—Scope vis-a-vis absence of incriminating material—Panchnama in fact reveals that the material recovered is ‘nil’—In other words there were no materials on the basis of which the assessment proceedings under s. 153A could have been initiated—In the absence of incriminating material, proceedings under s. 153A could not be taken—It does not matter that the original assessment was not completed under s. 143(3) for that purpose Held: As regards the substantive challenge to the assessment proceedings under s. 153A, a perusal of the Panchnama shows that there is absolutely no incriminating material recovered. The Panchnama in fact reveals that the material recovered is ‘nil’. In other words there were no materials on the basis of which the assessment proceedings under s. 153A could have been initiated. It is clear that the exercise under s. 153A is not to be undertaken mechanically. In other words, it is not possible to accept the contention of the Department that there was an obligation to initiate the assessment proceedings under s. 153A only because a search has been conducted, even though no incriminating materials whatsoever have been found during search. It does not matter that the original assessment was not completed under s. 143(3) for that purpose. In the present cases, with there being absolutely no incriminating materials found or seized at the time of search, there was no justification for the initiation of assessment proceedings under s. 153A. On this ground therefore the writ petitions ought to succeed.— CIT vs. Kabul Chawla (2015) 281 CTR (Del) 45 : (2015) 126 DTR (Del) 130 : (2016) 380 ITR 573 (Del), CIT vs. Chetan Das Lachman Das (2012) 254 CTR (Del) 392 : (2012) 77 DTR (Del) 25 and Jai Steel

(India) vs. Asstt. CIT (2013) 259 CTR (Raj) 281 : (2013) 88 DTR (Raj) 1 concurred with.” C. Proceedings and notice u/s 153A without jurisdiction being issued to a legally wrong person:

1.

1. A bare perusal u/s 153A provide that in a case where search is initiated u/s 132, the AO shall issue notice to such person requiring to file a ROI and then he will complete the assessment accordingly. In the present case no doubt, search was initiated in the case of assessee as also in the case of other three persons. However, the lower authorities, particularly the ld. CIT(A) at page37-35 in para 6.5.6 has repeatedly stated that the assessee was carrying out the real estate business in partnership with the other three persons and in fact, all the four- persons including the assessee, were partners they were bound to share the profit loss arising from the activity of the firm. Assuming what the ld. CIT(A) contented is correct though not admitted, if that is the situation then the search should be considered to have been carried out in the case of firm not in the case of all these four person individually and looking the matter from that aspect, the provisions of S. 153A shall apply on such person i.e. the partnership firm which was being run by the four partner jointly [as contended by CIT(A)] and therefore as per mandate of sec. 153A such initiation of proceedings and notice u/s 153A couldn’t should have been issued only in case of the/to the said the firm not to the assessee individually. Pertinently the provisions start with non-obstacle clause and therefore, the said provisions will prevail over any provisions.

2. Needless to say, that person has already been defined u/s 2(31) of the Act which includes individual, HUF, firm, AOP, BOI and so on. It is immaterial that a particular person is an assessee or not, having a PAN or not, or any formal document for creation has been drafted or not. However, it is only that person, who is to be legally liable to be taxed and as defined in the law, can alone be taxed. Thus, it is the firm which is the legally speaking person as contemplated u/s 2(31) r.w.s 153A of the act and therefore proceeding could have been initiated against that firm alone but not against the assessee partner. Hence the impugned notice u/s 153A as also the consequent assessment order deserves to be quashed. However, this is only an alternative argument based on the contentions of CIT(A), which if upheld then the necessary outcome of such a finding shall result in the above legal position. D. Consequent to invalid search – No cognizance if statement and material can be taken: 1. The S.131(1A) reads as under:

"If the Principal Director General or] Director General or Principal Director or Director or Joint Director or Assistant Director or Deputy Director, or the authorized officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub- section, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority." From the above, three important phrases emerges, as under: a) Before he takes action under clauses (i) to (v) of S.132; b) Has reason to suspect that income has been concealed; and c) Notwithstanding that no proceedings with respect to such person or class of persons are pending. From a plain reading of the provision and the explanatory memorandum, the legislative intent and the purpose is to enables the investigation wing to exercise the powers before search and seizure. However, in this case even after conclusion of the search on dated 01.07.2016, the authorized officer recorded the statement of the assessee during post search proceedings u/s 131(1A) (APB 85-91), which has invalidated the very search carried out his place in as much as once a 'reason to believe' has already been formed as to the existence of the undisclosed income and search operations were carried out therefore, now formation of 'reason to suspect' has established that the competent officers having no reason to believe. Consequently, there was no valid search.

2. Similarly, statement of Surendra Pal Sahani was recorded on dated 01.09.2016 & 09.09.2016 u/s 131(1A) from whose possession seized documents at Pg-17,22 & 23 of Exhibit-41 of Party A-1 (PB 8-10) from the residence of one Sh. Surinder Pal Singh Sahni & Pg. No. 62 of Exhibit-3 of party A-4 (PB 11-23) from the residence of Sh. Vipin Kumar Lodha allegedly showing that Rs.4.50 Cr. were earned by launching Bajaj Enclave Scheme by four persons were 3. Reliance is placed in the case of Dr. Mrs. Anita Sahai v. DIT [2004] 136 Taxman 247 (All) (DC ) it was held that where notice is issued u/s 131(1A) after search and seizure, would show that there was neither reason to believe nor material before authorizing officer on basis of which he could issue a warrant u/s 132 and therefore, issuance of 131(1A) post search, was devoid of formation reasons to believe and in such circumstances very issue of warrant of authorization can be quashed at a later stage. The court held that:

"The respondents in their counter-affidavit had stated that it was respondent No. 4 who had sent the material to respondent No. 1 on the basis of which respondent No. 1 had recorded his satisfaction under section 132(1). It was respondent No. 4 himself who had issued summons under section 131(1A) after the search. As such, there could not possibly be any material, which could be the basis of having reason to believe in respondent No.

1. The very fact that respondents issued notice under section 131(1A) after the search and seizure operation under section 132 would show that there was neither reason to believe nor material before the authorizing officer on the basis of which he could issue a warrant under section 132. [Para 25]"

4. In any case, it us humbly submitted that even if search action is not considered as in valid by Hon’ble ITAT Bench, statement recorded u/s 131(1A) can not be relied upon for any purpose because the very purpose of S.131(1A) stands lost. A- GOA-3: Impugned addition of Rs.6,55,000/- being difference between ITR filed u/s 153A and ITR filed u/s 139 of the Act: [(AO Pg-2 ,Pr-3)/(CIT(A) Pg. 9-11 Pr. 5.8)] Facts: During the assessment proceedings u/s 153A, the AO noted that the assessee filed his return of income on 07.04.2017, declaring total income of Rs. 85,320/- in response to notice u/s 153A (PB 3-5). Whereas the assessee declared total income of Rs. 7,40,320/- in the ROI filed earlier u/s 139 of the Act on 31.03.2016 (PB 1-2). Thus, there is a difference of income of Rs. 6,55,000/- between the both ROI`s i.e. ROI filed u/s 153A and 139 of the Act. The AO stated that S.153A is not for reducing income already declared therefore, he added Rs. 6,55,000/- being difference between ITR filed u/s 153A and ITR filed u/s 139 of the Act to the total income of the assessee. In the first appeal, the ld. CIT(A) also confirmed the addition, holding as under: “5.8….The facts of the case are considered. Any new claim in the return filed u/s 153A of the act is not acceptable as the Search Assessments are for the benefit of the revenue rather than assessee. The returns are filed u/s 153A of the act are as a consequence of action taken under Section 132 of the Act on a assessee and thus can’t be advantageous for the assessee and moreover the proceedings u/s 153A are analogous to proceedings under Section 147 of the Act to the extent that these are proceedings for the benefit of Revenue and not that of the assessee. The assessee cannot be permitted, to convert these reassessment proceedings as his appeal or revision in disguise and seek relief in respect of items earlier not claimed in the original return of income. Reliance is placed on the judgment rendered by the Hon’ble Bombay High Court in K. Sudhakar S. Shanbhag Vs ITO

[2000] 161 CTR (Bom) 391 : [2000] 241 1TR 865 (Bom). This decision was rendered by taking notice of the principle laid by the Hon’ble apex Court in CIT Vs Sun Engineering Works (P) Ltd. [1992] 107 CTR (SC) 209 : [1992] 198 ITR 297 (SC) to the effect that in reassessment proceedings, an assessee can neither claim nor be allowed a deduction that was not claimed in the original return. As such the assessment proceedings initiated on the basis of an action under Section 132 of the Act also cannot be utilised by the assessee to seek relief not claimed earlier.” Hence this ground. Submissions:

1.

1. The following submissions, additional submissions and rejoinders were made before the CIT(A): “1. At the outset, it is submitted that it is a serious misconception on the part of the AO that assessee declared total income at Rs. 85,320/- u/s 153A in much as the assessee revised the same very income through revised computation (PB 6) filed vide letter dated 28.11.2018 declaring total income at Rs.29,43,477/- and deposited tax of Rs.10,38,490/- thereon (PB 7). Therefore, the AO is wrong to say that assessee reduced income in the ROI filed u/s 153A, which is not meant for reducing income already declared. Hence, it is a mere suspicion and no valid basis.

2. It is further submitted that a return filed u/s 153A takes the place of the original return u/s 139, for the purposes of all other provisions of the Act. Once the AO accepts the revised return filed u/s 153A, the original return u/s 139 is replaced. In the present case the AO considered the ROI filed on 07.04.2017 u/s 153A for the purpose of calculation and hence the provisions of the Act which apply to ROI filed in regular course u/s 139(1), would also continue to apply in case of ROI filed u/s153A. Therefore, the AO is not justified in making addition of difference of Rs. 6,55,000/- between the both ROI`s i.e. ROI filed u/s 153A and 139 of the I.T. Act, 1961.

3. Otherwise, the AO failed to bring any evidence showing undisclosed income of Rs. 6.55 Lacs. Therefore, the impugned addition of difference so made, kindly be deleted in full.”

2. Further in response to Remand Report of AO following Additional Submission-I / Rejoinder was submitted on 23.01.2024 during the appellate proceedings vide his letter dated 20.01.2024 and same is reproduced at CIT(A) order, at Pg.8 Pr.5.6, the same are reproduced hereunder:

The ld. AO erred in law as well as on the facts of the case in making additions of Rs.6,55,000/- being difference between ITR filed u/s 153A and ITR filed u/s 139 of the Act. The addition so made by the ld. AO, is totally contrary to the provisions of law and facts on the record and hence the same kindly be deleted in full.

3. Supporting Case laws: 3.1 CIT vs Ms Jagriti Aggarwal (2011) 339 ITR 610 (Punjab & Haryana) wherein inter alia, it was held that the provisions of sub section (4) to section 139 was not an independent provision, but relates to the time contemplated under section 139(1) of the Act. 3.2 CIT vs Kulu Valley Transport Company ltd (1970) 77 ITR 518(SC), wherein it was held a return filed under section 139(4) is a valid return filed under section 139(1). This decision was on the provisions of Income Tax Act 1922 which are similar to present Act. Tulsidas Gopalji Trust vs CIT (1994) 207 ITR 368 (HC of 3.3 Bombay) 3.4 CIT vs Rajesh Kumar Jalan [2006] 286 ITR 274 (Gauhati) where also it was held that to fulfill the requirements of section 54 the expiry of one year should be seen as per provisions of section 139 (4). 3.5 Fibrefill Engineers vs ACIT (2016)177 TTJ 556 (ITAT Delhi) In this case it was held that “A bare perusal of this section (139(4)) makes it clear that the legislature itself has allowed the assessee to file return belatedly subject to fulfillment of conditions written in the said section. Therefore, once those conditions are met, then return filed by the assessee would for all technical purposes be considered being filed under section 139(1). Thus keeping in view the decisions noted earlier, we do not find any reason to deny the claim of the assessee on the ground of filing the return belatedly.” 3.6 Chirakkal Services Cooperative Bank vs CIT (2016) 384 ITR 490 (Kerala)”

4. A bare reading of CIT(A) order will show that he proceeded on a mere purperted misconception and misreading of the fact while saying that no deduction / reduction could be claimed in the proceedings u/s 153A. There is no dispute on this proposition, however, these are not the correct facts in as much as it was categorically stated that the assessee had initially filed an ROI of Rs. 85,320/-, thereafter a revised computation was filed vide letter dt. 28.11.2018 declaring total income at Rs.29,43,477/- and deposited tax of Rs.10,38,490/- thereon (APB 7) and thus, the total income so declared was more in the ROI filed u/s 153A. Once it is so, there was no scope for any addition. Otherwise also undisputedly neither the AO nor CIT(A) has brought any evidence at all to substantiate this addition which is based on a misreading of law and facts and nothing else. Hence, this addition deserves to be deleted in full.

A-GOA-4: Impugned addition of Rs.1,62,00,000/- on account of the alleged undisclosed income from Bajaj Enclave Scheme. [AO Pg 2-17 Pr 5-7 (Finding at Pg-17)/ CIT(A) Pg. 29 Pr. 6.5] Facts: During the assessment proceedings, the assessee was show caused vide notice dated 05.10.2018 as to why the amount of Rs.1.62 Cr. should not be added as his un-disclosed income. As per various documents found and seized during the course of search conducted on 30.06.2016 at the premises of different persons which also included the seized documents at Pg-17,22 & 23 of Exhibit-41 of Party A-1 (PB 8- 10) from the residence of one Sh. Surinder Pal Singh Sahni & Pg. No. 62 of Exhibit-3 of party A-4 (PB 11-23) from the residence of Sh. Vipin Kumar Lodha allegedly showing that Rs.4.50 Cr. were earned by launching Bajaj Enclave Scheme by four persons with their specific sharing as follows: S N. Name of associates Share Share of Un- accounted Holding profit (Rs.)

1. Surinder Pal Singh Sahni 32% 1.44 Crore 2. Nawal Kishore Khandelwal 36% 1.62 Crore (assessee) 3. Harvinder Singh Kohli 16% 0.72 Crore 4. Vipin Kumar Lodha 16% 0.72 Crore Total 100% 4.50 Crore

The AO stated that in his explanation w.r.t seized documents, Sh. Vipin Kumar Lodha submitted that Rs.4.50Cr. is total profit earned from Bajaj Enclave Project. The AO further alleged that the above mentioned associates in their respective post search statement(s) have admitted that the amount of Rs.4.50 Cr. was unaccounted profit earned from Bajaj Enclave project and have also offered the same for taxation in their respective hands.

The AO further referred Q-8 of statement of the assessee recorded u/s 131 on 22.09.2016 (PB 85-91), in which the assessee allegedly admitted un-accounted profit of Rs.1.62 Cr. from Bajaj Enclave and offered for taxation in the income for A.Y. 2015-16 vide Q-9 of his statement recorded on 22.09.2016 (PB 85-91). When asked, the assessee vide letters dated 24.10.2018 (PB 24) and 05.11.2018 (PB 14), submitted that the actual profit earned by the assessee from real estate activity is only Rs.28,39,000/- [i.e. Sale Proceeds Rs.2,06,40,000/- Less Purchase/Registry/Misc Expenses of Rs.1,78,01,000/-]. He further stated that due to lack of knowledge of real estate, the assessee entered into an oral agreement with the above three persons i.e. Shri Surinder Pal Sahni, Shri Harvinder Singh Kohli and Shri Vipin Kumar Lodha. According to the oral agreement the assessee has to make investment in the purchase of land and these persons will develop the land and also deal with the customers. These persons having made negotiations with the customers, were having direct contact with / approach to the customers. The assessee only received the amount from the buyers as per sale agreements and after receiving the full payment executed the legal papers in favour of the customers w.r.t. transfer. The assessee was not in the knowledge of excess money, if any received by these people from the customers. However, it is a fact that the assessee did not receive anything over and above the amount showing sale agreement amount. Moreover, the assessee recorded all these transactions in his books of account fairly. There was no any iota of evidence found (showing un-disclosed profit earned by the assessee in the sale transaction if any) at the premises of the assessee except his solitary statement which was given by the assessee with the advice of his associates during the search. In fact, these amounts were also appearing in the documents found and seized from the third party premises. The AO however, was not convinced with the explanation given by the assessee. He observed that the assessee has not included undisclosed income of Rs. 1.62 Crore in return filed u/s 153A, which was appearing in seized paper number 17, 22 & 23 of Exhibit- 41 of Party A-1 from the residence of Sh. Surinder Pal Singh Sahni. He further alleged that the assessee himself voluntarily offered undisclosed income of Rs. 1.62 cr. Further, same facts were confirmed in his submission dated 24.10.2018. Finally, he added Rs.1.62 Cr. as undisclosed receipts from “Bajaj Enclave Scheme”. In the first appeal, the ld. CIT(A) also confirmed the addition, holding as under: “6.5 The AO further noted that the assessee has not offered above undisclosed income of Rs.1,62,00,000/- in returned filed u/s 153A of the Act. Shri Naval Kishore Khandelal stated in his statement that he had already disclosed his income for A.Y. 2015-16 at Rs. 7,57,955/- (as per his ITR) whereas he offered for taxation a sum of Rs. 1,54,42,045/- (i.e. 1,62,00,000- 7,57,955/-) only. In this connection it is hereby observed that the returned income of Rs. 7,57,955/- is from his regular business of provisional store and the un-accounted income of Rs. 1,62,00,000/- cannot be reduced by his already disclosed income from other business activity in regular course. As per AO Shri Vipin Kumar Lodha has offered income of Rs. 72,00,000/- before the Hon’ble settlement Commission. Likewise Shri Harvinder Singh has also paid taxes on undisclosed income of Rs. 72,00,000/- in return filed u/s 153A of the Act. Shri Surendra Pal Singh Sahni has also offered undisclosed income of Rs. 1,44,00,000/- in his return filed u/s 153A of the Act. They all were partner in this scheme. Therefore, undisclosed income of Rs. 1,62,00,000/- is added in taxable income of the assessee.” Hence this ground. Submissions: 1.At the outset it is submitted that the impugned addition is completely without any justified basis, corroborative evidences and merely based on surmises and conjunctures. These so-called admission is also not corroborated by any cogent evidence and on the contrary, was retracted later on therefore has no binding evidentiary value. The impugned addition deserves to be completely deleted for the various reasons detailed herein below: 2. Assessee not dealing with buyers: 2.1 The facts are not denied that the assessee was not having any prior experience of the field of Real Estate business and therefore, he joined hands with other 3 persons who were experts in the field. The assessee in answer to Q-8 clearly stated that he was lacking experience in the field of real estate and hence he made collaboration with other persons for the development and marketing purpose. The assessee was performing its duties under the suggestions of these persons and performing its duties as guided by them. The job assigned to the assessee was only to get the papers prepared and registered whereas the other persons were in direct touch of the buyers, negotiating with them and deciding the final figure of the sales consideration. The assessee, therefore was under a complete dark as to what sales consideration of a particular plot stood decided and how much amount have been received by them in cash (over and above the declared sales consideration), although the assessee was ensured to get his share also out of the same.

Under this background only, at the time of recording statement, the assessee was strongly advised by these people to admit such a huge amount in his statement though the assessee never earned over and above the agreed sale proceeds as per sale agreements. The share of actual profit earned by the assessee from real estate activity, is only Rs.28,39,000/- [i.e. Sale Proceeds Rs.2,06,40,000/- Less Purchase/Registry/Misc Expenses of Rs.1,78,01,000/-]. 2.2 It is not the case of the AO that these 3 persons in their respective statements asserted that the so called 36% share of profit was duly paid by them in cash or otherwise to the assessee. Interestingly, even the concerned officer did not raise a question, which had a direct bearing over the controversy. Once the other 3 persons do not claim having actually shared the profit part with the assessee, no income could have been taxed in the hands of the assessee. Even assuming they transferred the profit even then, there is absolutely no evidence brought in record as to when and in what manner such profit was paid to the assessee. Since the onus is on the Revenue, hence it is bound to prove the receipt of income. 2.3 In this regard, the assessee filed a detailed written reply on 05.11.2018 (PB 14) and stated that he has not received any amount over and above the recorded sale proceeds. The extract of the submission (AO pg 9) are as under: “……5. As regards assessee`s share of un-accounted profit of Rs.1,62,00,000/- from Bajaj Enclave Scheme, we submit that: (i) Heavy reliance has been placed on some of the question answer to bring home the point that the assessee has admitted his share of Rs.1.62 crores in the undisclosed income earned by the four associates out of Rs.4.50 crores and the same has been surrendered by him. In this connection, the admitted factual background is that the assessee is mainly carrying on the business of running a Kirana and confectionary shop, as stated earlier. The assessee has, neither in the past nor in the Later years, entered into such real estate project and therefore under this background, he had an occasion to meet Shri Harvinder PaL Singh, Surendra PaL Singh and Vipin Kumar Lodha, who are the experts of the field. From this discussion, he came to a conclusion that making investment in the Land and entering into a real estate project may result in a good amount of profit. During the course of further discussion, with reference to the Land he had purchased, these persons made projections and estimations and proposed that they may help the assessee out in developing and effective marketing thereof and if it is done, all of them may be earning a good amount of profits out of which, share of 36% was offered to him. ii) As per further discussions, the responsibility of marketing of the plot was undertaken by these three persons who were supposed to convince the prospective buyers to purchase the plot in the scheme. The assessee had already quoted the selling prices which were not to be shared by any of the persons. If anything was received over and above the agreed sale prices (between the assessee and buyer) only, was to be distributed among us, after defraying the incidental expenses. It is under this background that the assessees among with the other three persons were to proceed. The assessee was mainly concerned with the job of executing the sale transactions by observing the necessary formalities of registration, etc. Since he was already earning good profit, he was quite happy and comfortable with the arrangement in as much as the further profit, if earned by their efforts, as they themselves agreed, he was also going to gain out of that and if not, the assessee was already doing his business and honestly recording all the transactions of incomings and outgoings.” 2.4 Human probabilities support the case: Further the human probability and the surrounding circumstances plays an important role in deciding tax matters. The lack of requisite knowledge and experience of the Real Estate Business by the assessee, which in fact is glaringly evident from the plain reading of his statement and not disputed by the AO, not finding any undisclosed asset or undisclosed expenditure only suggests and the probability preponders in his favor of the assessee that he was not given/did not receive the 36% share out of the Rs 4.50 Cr. In the case of Sumati Dayal vs CIT [1995] 214 ITR 801 (SC), it was held “ Assessee had shown certain amounts in capital accounts in books claiming same to be winnings from horse races - She filed sworn statement to effect that she started going for races only towards end of year 1969 and had no experience in races but she purchased jackpot tickets on combination worked out by her on basis of advice given by her husband - She had allegedly won 16 jackpots besides trebles - Assessing Officer disbelieved her version and taxed amount as income from undisclosed sources - Settlement Commission by its majority order upheld assessment order holding that it was reasonable to infer, on facts, that assessee did not participate in races but purchased winning tickets after events with unaccounted money - Whether matter in question had to be considered in light of human probabilities - Held, yes - Whether having record to conduct of assessee as disclosed by her in sworn affidavit as well as other material on record, an inference could reasonably be drawn that winning tickets were purchased by her after race event - Held, yes - Whether, therefore, finding of majority of Settlement Commission that amount in question was not winnings from horse races but income from undisclosed sources was justified - Held, yes” 2.5 The CIT(A) objected that assessee did not explain how the decision in Sumathi Dayal (Supra) supported his case. In fact, he wanted to match each and every fact found in that case with the facts of the present case, which is a misreading and which is not a correct manner of reading a Supreme Court decision. The following portion was extracted by himself at page 33 in para 6.5.3 of his order: “This raised the question whether the apparent could be considered as real. Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities.” As per CIT(A), what was apparent was that the assessee and others admitted income, was sufficient, whereas, the assessee has repeatedly submitted (and also an undisputed fact) that during search no an iota of evidence could be found by the search team, showing even remotely that the assessee earned Rs.1.62 Cr. or the so-called firm [consisting of four partners as per CIT(A)] could earn Rs. 4.50 Cr. and that some papers were found from the possession of Shri. Surendra pal Singh Non-finding of evidence together with the fact that the assessee did not disclose such admitted income in the Return of Income (which was a legal document, equally enforceable in the eyes of law), has established that what was apparent was not real and onus was thus, discharged. But the AO, in turn, failed to prove the onus shifted to him (except taking shelter of statement of other partners which firstly, were never confronted to the assessee nor an opportunity for cross- examination was ever given to him). Moreover, the court also held that the taxing authorities, were entitled to look into the surrounding circumstances to find out the reality and that would hold good when it comes to his duties and responsibilities. Once they can look into the surrounding circumstances to find the case to their favour, they must investigate to bring the truth to the surface whatever way it goes. The various factual assertions being the lack of requisite knowledge and expertise of the assessee in the real estate business, the fact of finding no evidence of the assessee earning any profit nor getting any single penny on account of the said profit (if assuming it was so), and the fact of finding no asset at all, nor any unexplained expenditure, despite there being search, were the surrounding circumstances which the ld. CIT (A) conveniently ignored. And in this view of the matter, he even misread the decision of the Hon’ble Apex Court. 2.6 The CIT(A) alleged that the assessee failed to disclose the manner of utilization, which was within his exclusive knowledge. On the contrary, the admitted fact of finding no evidence at all in the form of, undisclosed cash, undisclosed assets, undisclosed investment, or unexplained expenditure, if any, itself established that there was no profit at all received by the assessee as alleged. Hence, there was no question of utilization and, it was for the AO to have supported his version by bringing evidence of utilization to take it to a logical conclusion, which he completely failed to do. There was no whisper at all on account of such suspected utilization even of the profits if really were earned by the assessee and CIT(A) expected the assessee to do something which is impossible to perform. 3.Income Tax is a tax on real income, but not on hypothetical income. 3.1 No income can be taxed merely on suppositions, presumptions assumptions or on hypothesis. The law is well settled that to prove that there was some taxable income in the hands of an assessee, always lay upon the revenue. In the instant case there is absolutely no evidence at all successfully brought on record beyond doubts that income really accrued and the assessee received the alleged profit of Rs. 1.62 crore. The only and only basis is the admissions made by the third parties and the diaries/papers maintained by them in their handwriting, which itself were suffering from serious infirmities, factual and legal both and the so called admission of the assessee being tutored and influenced was also retracted and not acted upon. Moreover, the fact that there was a dispute between the assessee and the 3 parties who, must have earned the income but did not share the same with the assessee. There is no other evidence found even remotely to suggest that the profit of Rs. 1.62 Crore came to the assessee in one way or the other. 3.1.1. We place strong reliance on the case of CIT VS Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC): “Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. This was exactly what had happened in instant case. Here the agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the instant case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a gift by the assessee firm to the managed companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated.” 3.2 In this regard, the assessee filed detailed written reply on 05.11.2018 (PB 14-25) and stated that he has not received any amount over and above the recorded sale proceeds. The extract of the submission (AO pg 9) are as under: “iii) On the other hand, these persons were in direct contact with the buyers, making the first dealing with them. The assessee was not aware as to what these persons were charging over and above the declared selling prices. The role of the assessee was only to the extent that when the buyers came to the assessee, he was to receive only the amount agreed through the Agreement to Sale and to fulfill the necessary formalities of entering into agreement to sale, etc. The assessee accordingly, faithfully and honestly recorded all the transactions of sale of the plots. The sale consideration was received partly by cheques and partly in cash. During the course, of this project, the assessee of course asked and reminded them to share the receipts w.r.t the share of profit they proposed but nothing happened and therefore, a dispute arose between the assessee and those persons. The assessee has not received directly or indirectly single penny over and above the agreement price. In other words, the share of 36% out of the expected net profit was never given to the assessee. In fact, all the activities i.e. marketing contacting with the prospective buyer and receiving the cash over and above the declared sale prices, might have been done off the record and absolutely without knowledge of the assessee.” iv) Unfortunately, even up to the stage of the recording of the statements on 22.09.2016, he was given a strong assurance that he is not required to worry and that he shall be given the profits, as agreed, but nothing of this sort happened. Thereafter, he kept on reminding them to give his share of profit, if any, in as much as they might have earned over and above the declared sale consideration for the simple reason that they were in direct contact with the buyers. But at the same time, he was also comfortable and happy with the profit he was earning, with the understanding that if he was able to get something, the same shall be a bonus, over and above the profit earned. Therefore, it was a good deal because instead he was assured of being given share in their profit. Therefore, it was a win-win situation for him. Later on, he came to know that for this reason or the reasons best known to them, they kept me completely out of their affairs. Further, neither they charged nor they paid me anything. v) As a matter of fact, during the course of search, there was no iota of evidence showing even remotely that assessee has earned such a huge undisclosed income running into crores (what to talk of establishing the same). No undisclosed asset, undisclosed investment or undisclosed expenditure is/are alleged to have been found or noticed during the course of search at assessee's place. There is no document found in assessee's handwriting or showing his involvement or any connection, even directly or remotely. No doubt there is a mention of assessee's name on some seized documents however, again it is in the handwriting of one of those three persons. Even the statement given by them cannot bind the assessee. Even assuming that all or any one of the three persons agreed earning undisclosed income, it is in their wisdom to suit their own purposes, but the assessee cannot be legally bound by the admission of a third party. vi) On the contrary, the assesse never received anything as alleged from the other three persons nor anything legally accrued to me. It was a mere assurance given by those persons and the rough jotting done by one of the persons (but not by the assessee) was a mere projection or estimation so far as the assessee is concerned. Such discussion and noting in the writing of a third person and also in possession of such person cannot legally bind the assessee. vii) It absolutely does not stand to a reason why a person should have agreed to pay such a huge tax liability on the income which he never received or which accrued to him. As submitted earlier also, the assessee honestly declared and accounted for all the transactions of the sale of the plots which are supported by agreements to sale under para no 4. The agreements were duly notarized and witnessed, establishing the identity of the buyers. The purchase of the Land was duly supported by agreement. The working of actual resultant profit earned by the assessee of Rs. 28,39,000/- is given in para no 4 above. In considering above we request your good self for not to consider assessee's share of Rs.1,62,00,000/- in un accounted profit from "Baja] Enclave project" merely on the basis of seized papers, appear to be deaf and dumb documents on which some rough jottings are mentioned which was found from other associates. The delay which occurred behind making the correct fact before your good self with request for not treating the un-accounted income of Rs.1,62,00,000/- in the hands of the assessee as he accepted earlier during his statement recorded u/s 131(1A) of the Income Tax Act, 1961 during post search proceedings, is fully justified and under these peculiar facts and circumstances of the case, any other person of a reasonable prudence would have acted in a similar manner. The assessee kept on reminding those persons but failed and when he got the SCN proposing huge additions, it was thought the right time to step back and to explain the true facts and circumstances…..” 3.3. Regularly maintained books of accounts is a binding evidence: The Law is well settled that entries in books of accounts including those maintained in an electronic form, regularly kept in the course of business, are not only relevant whenever they refer to a matter into which the Court has to inquire but may even bind the parties as per the S. 34 of the Indian Evidence Act, 1872. In the instant case the assessee has been maintaining regular books of accounts. Copies of the cashbook and the relevant ledger account are available in the Paper Book. Mere fact that applicant opted for S. 44AD does not reduces the evidentiary value. The actual profit earned by the assessee from real estate activity, based on the regularly maintained books of accounts, was/is only Rs.28,39,000/- and must have been accepted. The CIT(A) though rejected vide para 6.5.5.pg 36 but did not appreciate that even after opting for S. 44AD, the accounts when undisputedly maintained, couldn’t be ignored. 3.4 The CIT(A) did not properly appreciate the contention raised that there was neither any accrual nor any receipt of rupees 1.62 crore, by the assessee taking help of Shoorji Vallabhdas & Co. (supra). Undisputedly, this fact of non-receipt of this profit could not be established by the A.O. beyond reasonable doubt. In that sense, it was nothing but a hypothetical income merely based on the admissions made by other three persons (to suit their own motive) but absolutely without any evidence of handing over of such profit to assessee or without any evidence found during search at assessee’s place.

“Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the appellant who made the admission to show that it is incorrect and the appellant should be given a proper opportunity to show that the books of account do not disclose the correct state of facts” Also refer S. Arjun Singh v. CWT [1989] 175 ITR 91/[1988] 41 Taxman 272 (Del.). Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi AIR 1960 SC 100: The Hon’ble Supreme Court held that an admission is the best evidence that an opposite party can rely upon and, though not conclusive, yet could be decisive of the matter unless successfully withdrawn or proved erroneous. In Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (SC) It was held that it is true that an admission made by an assessee constitutes 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 on untrue facts, such an admission cannot be relied upon without first considering the aforesaid contention. 4.2 Admission retracted/ Not acted upon: 4.2.1 The very statement of the assessee so heavily relied upon by the AO, was otherwise not a good and reliable evidence, the moment it stood retracted. Undisputedly, the assessee after making admission did not act upon it and on the contrary while filling ROI in response u/s 153A on dated 07.04.2017, declared total income at Rs. 85,320/-only (PB 3-5), not adhering to his confession and thus, duly retracted the surrendered already made. Admittedly, there is no mode prescribed for retraction and even non-inclusion of the income in ROI with or without suitable note also amounts to a valid retraction. 4.2.2 In case of (2013) Bharat Kumar Azad 50 Tax World 33 (JP), it was held: “15).......After treading through this entire record we have found that only the basis of admissions made in the statements recorded us 132(4) of the Act the A.O. has made huge addition. Now let us examine the value of a statement recorded u/s 132(4) of the Act. It would be apt to reproduce this provision which reads as under "132(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act.

16)….. The very plain reading of the above provision makes it evidently clear that any statement recorded as above is a relevant piece of evidence and it has to be considered while making assessment. But, no where it is stated in this provision that a statement recorded under this section becomes a conclusive proof or sanctum sanatorium for making addition of the admitted income. This issue has been churned by numerous courts as this issue has arisen every now and then in similar litigations, and the courts have settled the legal position by holding that on the issue that any admission made de hors any incriminating evidence found during search cannot be made a basis for making any addition in the hands of the assessee. On some of the decisions the ld. A.R. has relied and they have been extracted along with their held portion, in the earlier part of our order. Moreover, the assessee has disproved his [their] admission with the help of proof as discussed above. In this regard, following decisions are relied:

1. 1. Pullangode Ruber Produce Co. Ltd. v State of Kerala and Another [1973] 91 ITR 18 [SC].

2. Chitra Oevi vs ACIT [2002] 77 TTJ 640 JU] 3. Abdul Qayume v CIT [1990] 184 ITR 404 (All) 4. Jagdish Chand Gupta v ACIT [1996] 56 TTJ [Chd] 337 58 ITD 142 [Chd] 5. Krishan Lal Shiv Chand Rai v CIT 88 ITR 293 [P & HJ 17)…. Accordingly, in view of the above discussion, we are of the considered opinion that no addition on account of on-money payment or investment in construction can be made on the basis of admission u/s 132(4) de hors any incriminating evidence found during search. Moreover, we would like to discuss that the admission/surrender has to be treated as retracted through Note appended with computation of return of income filed on 31.07.2008 itself which reveals the intention of the assessee. To be abundantly cautious, the assessee has appended this Note that income disclosed in the statements recorded during search conducted on 16th and 17th July 2008 at the residence and office premises of the assessee and family members which is further subject to the obtaining of copies of statements recorded during search and the same were not available on that date when the assessee filed his regular return u/s 139 of the Act, the assessee has offered lumpsum income for taxation out of the total disclosure made in the statements as a whole during search. This disclosure has been further subjected to revision after obtaining copies of the statements and other relevant documents. After obtaining copies of all the relevant documents, the assessee prepared formal affidavit which was filed before the A.O. So, the date of retraction can be safely taken as 31.7.2008 which is after few days of search. Thus the retraction. of the admission was made at the earliest opportunity by the assessee. The admission is based on no evidence found during search. We have also found the allegations of the assessee that his father was suffering from serious heart disease and the atmosphere during search was very much charged and under this scenario, the assessee has replied to question numbers 18 and 19 of his statement as correct and the same remained uncontroverted There is no reason not to accept this version of the assessee and the same seems to be correct also in the given facts and circumstances of the case. Therefore, in our considered opinion, the entire addition so made has to be deleted in the light of our above discussion. Accordingly, Ground No.7 of the assessee's appeal is allowed.” The same has been affirmed by Hon’ble Rajasthan HC in CIT vs Bharat Kumar Azad (DC ) in DBITA No. 179/2013 dt. 15.03.2019, wherein it was held that: “We have given our thoughtful consideration to the submissions advanced at the bar and have gone through the impugned judgment and the material available on record. It is not in dispute that the entire case of the appellant Revenue is based on the confession of the assessee which was extracted during the search/seizure and survey proceedings. It is also not in dispute that the assessee retracted the confession on 27.07.2009. It is also an admitted position from the record that the allegation of the Revenue that the assessee had undisclosed income over and above what was mentioned in the return, is based sheerly on the confession and no corroborative material or substantive proof was collected by the Revenue during the search/seizure and survey proceedings. In this background, we are of the firm opinion that the circular No.286/2/2003-IT (Inv.II) dated 10.3.2003 which has been reiterated in circularF.No.286/98/2013-IT (Inv.II) dated 18.12.2014 issued by the Board and the general principles of appreciation of evidence would definitely come into play and while appreciating the rival contentions, the Court would definitely require corroboration of the confessional statement by credible and tangible evidence failing which, it will be considered totally unsafe to rely solely upon the confession for upholding the liability fastened upon the assessee by the ACIT. Since, in the case at hand, admittedly, the Income Tax Authorities did not collect any tangible, corroborative evidence so as to substantiate the allegation of undisclosed income, manifestly, the view taken by the I.T.A.T. in the impugned judgment that the department failed to provide cogent, tangible and satisfactory evidence regarding the additional undisclosed income of the assessee, is absolutely justified and the impugned judgment cannot be termed to be illegal or perverse by any stretch of imagination warranting interference therein in exercise of the appellate jurisdiction of this Court. We are duly satisfied that no substantial question of law is involved in the matter so as to question the legality or validity of the impugned judgment. Hence, the appeal being devoid of merit is hereby dismissed.”

4.2.3 In Commissioner of Income Tax v. Naresh Kumar Aggarwal: (2014) 3699 ITR 171 (T & AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. The relevant extract from the said judgement is quoted below: “17. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under section 94 of the Code of Criminal Procedure by operation of sub-section (13) of section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent.” “18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee.” “19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section 158BC of the Act.”

4.3 Valid reasons behind retraction: The alleged admission was not made voluntarily in as much as the assesse was highly tensed and remaining under mental trauma developed hypertension. Not having faced such a situation, he was unable to take any decision, which is a common phenomenon in every survey and search. It has been held that in the cases of survey and search, the possibility of tension and surcharge atmosphere can’t be ruled out in ACIT Vs. Jagdish Naraian Ratan Kumar 22 Tax World 573 (JP), since approved by Hon’ble Rajasthan High Court. The so called admission of the assessee was tutored and being influenced by the false promises made by the other three persons, who’s statements were recorded much earlier on 5 .09.16 ,7.09.16 and 9.09.16 admitting their respective share of profits. He made the admission only on the suggestion of his other associates, who might earn the excess money and thus, admission was not voluntary. Moreover, statement were recorded on 22.09.2016 and such retraction was made on 07.04.2017. 4.4 There is yet another reason not to blindly believe the so called admission because it is matter of common knowledge that during the course of survey the Revenue Authorities normally do exert unwanted pressure and influence over the assessee’s to get something surrendered to make their survey a success. To expect the assessee to furnish an infallible evidence of concrete nature in such a situation is totally beyond comprehension. This is something against common sense and human probabilities. Pertinently, the Kelkar Committee has also taken note of this prevailing attitude of the search parties and consequently remarked very adversely. Consequentially, the CBDT issued a Circular No.286/ 2/2003 dated 10.03.2003 and clearly instructed not to make the additions in survey / search cases merely on the basis of surrenders until & unless further evidences / material are there to support the addition. In addition to above , notably the Hon’ble Finance Minister also , in his Budget speech for Budget 2003 gave an assurance on the floor of house on this matter vide para 151(i) &.152 as under : “………. Second, no confession shall be obtained during such search and seizure operations………..” 4.5 Statement not binding as recorded u/s 132(4): The statement of the assessee recorded on 22.10.2016 though heavily relied upon, were not recorded u/s 132 (4) but u/s 131(1A) of the Act and the implication flowing there from is that such statement cannot bind the person making it or cannot be used as an evidence against the assessee in the proceedings under the Act as the language of S. 132(4) itself suggest. No doubt, the statement recorded u/s 131 may be of persuasive value but this significant difference marked between the language of the provisions make it clear that the evidentiary value of the statements recorded u/s 132(4) cannot be equated with normal recording of the statements under other provisions of the Act (PB 85- 91). Therefore, in absence of corroborative material found during search at the place of assessee, no addition could be made merely on the basis of statement recorded u/s 132(4) of the Act which did not constitute conclusive evidence and having been given under mental duress and pressure created by the search team and other 3 persons, who had already admitted and offered in their statement in their wisdom to suit their purpose. Moreover, admission was not acted upon by not offering the income in the ROI filed on 07.04.2017 u/s 153A. It is settled rule of evidence that unless a retracted confession is corroborated it cannot be termed prudent to base the decision on the confessional statement alone.

5. No evidence at all: A. Law is well settled that without evidence, no addition can be made whether it is a case of completed /unabetted or abetted assessment. The search took place on dated 01.07.2016 and concluded on the same day, however, nothing was seized as evident from Panchnama (APB ). Consequently, no notice can be issued u/s 153A. 5.1 The assessee repeatedly contended that these documents found and seized from the other three persons and not from the premises of the assessee. Moreover, pertinently the same were written by them and not by the assessee. The assessee received the amount only as agreed in the sale agreement. The papers seized from the premises of others associates could not be used against assessee and were completely irrelevant & immaterial in so far as the assessee was concerned. Admittedly, no undisclosed asset, investment, expenses directly or indirectly were found or noted. 5.2 Otherwise also seized documents do not show undisclosed income- mere rough jotting earned by the assessee if any and therefore, no addition can be made on the basis of the same even if the said papers are presumed to be relevant for the purpose of assessment of the assessee. A bare reading of a table stated to be prepared as per seized Pg. 17,22,23 of Exhibit- 41 of Party A1 reveals that the working done is merely an imaginary exercise based on mere estimates. The seized paper do not show any receipt/payment of debit or credit and no sensible inference could be drawn there from. 5.3 Pertinently, it is not the case of AO that he made inquiries from the buyers who alleged having paid some consideration amount in cash directly to the assessee. 5.4 The law is well settled that the assessment made pursuant to the search always has to be based only and only on the basis of incriminating materials gathered or unearthed during the course of the search, as held in the following cases: 5.4.1. In Kabul Chawla Case [2015] 61 taxmann.com 412/234 Taxman 300/380 ITR 573 (Delhi), it was held as: “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 AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus

with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material.” 5.4.2. In case of Pr. CIT v. Mita Gutgutia [2017] 82 taxmann.com 287/248 Taxman 384/395 ITR 526 (Delhi), it was held: “Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to reopen at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under section 132 incriminating material justifying the re- opening of the assessments for six previous years is found that the invocation of section 153A qua each of the AYs would be justified.” 5.4.3. In the case of Jai Steel (India) v. ACIT [2013] 36 Taxman 523 (Raj), it was held that, “Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should (be) connected with something found during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153 A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found.” 5.4.4. In the case of Gurinder Singh Bawa [2016] 386 ITR 483 (Bom), the Bombay High court held that: “6…once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.”

5.4.5. In case of Jami Nirmala v. PRCIT [2021] 132 taxmann.com 267 (Orissa), it was held that: “13…In the present case, the impugned assessment order does not refer to any document unearthed during the course of the search on 26th February, 2016. Therefore, the assumption of jurisdiction under section 153A of the Act for reopening the assessment for the AY 2015- 16 was without legal basis. The impugned assessment order refers only to the cash book found during the survey purportedly conducted on 12th February, 2016 i.e. two weeks prior to the date of search. The Panchanama of the search proceedings unambiguously shows that nothing incriminating was recovered in the course of the search. Even in the counter affidavit of the Opposite Parties does not dispute this position.” 5.4.6. In case of PCIT v. Saumya Construction Pvt. Ltd. [2016] 387 ITR 529 (Guj), it was held that: “16… any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.” 5.4.7 The law on the issue involved is no more Res Integra in as much as very recently the Hon’ble Apex Court in the case of PCIT vs. Abhisar Builders (2023) 332 CTR (SC) 385 has held 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 made in respect of the completed assessments in absence of any incriminating material.

14. In view of the above and for the reasons stated above, it is concluded as under:

(i) that in case of search under S. 132 or requisition under S. 132A, the AO assumes the jurisdiction for block assessment under S. 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) 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 S. 132 or requisition under S. 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under S.s 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under S.s 147/148 of the Act and those powers are saved.”

It is pertinent to note that recently the CBDT has also taken note of the said decision in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC) in para 2 of its recent Instruction 1/2023 dated 23.08.2023. The CBDT in para 3 admitted that in the search cases where the Assessment is completed/unabetted, addition can be made only and only based on some incriminating material, if any found but not otherwise. (Copy Enclosed) For this purpose, reference has been made to the decision of Abhishar Buildwell (supra) and Kabul Chawla (infra) stating that: “It was held that the AO does not have jurisdiction for passing order under Section 153A in the absence of incriminating material found during the search under section 132 or requisition made under section 132A of the Act.” Thus, the undisputed position of law as stands now is that in the cases of completed/unabetted assessments in absence of any incriminating material no addition is legally permissible.

It is further pertinent to note that the CBDT has rather instructed the subordinates to take note on the said decision and to refer the same before the appellate authorities (CIT (A), ITAT, HC) where the appeal is pending as stated in para 6 & 7. B. Statement of assessee not an incriminating material : 5.5 In the case AO v. Himalaya Darshan Developers (Gujarat) (P.) Ltd [2021] 128 taxmann.com 435 (Ahmedabad - Trib.) (DC ) held as under: “Besides the above, the Assessing Officer has also made reference to the statement of the director of 'SJSL' recorded under section 132(4) and statement of another director under section 131(1A), wherein it was admitted that the company namely 'SJSL' is engaged in providing accommodation entries. Thus the same is a paper company. On perusal of the statement recorded under section 133(4) reproduced by the Assessing Officer in his order there was remarks made by such director to the effect that material/document seized during the search does not belong to the PS i.e. 'SJSL', or belong to the assessee company. In this regard, there were no incriminating material against OP was found in the search. Further, section 153C emphasize that there should be material or document seized which belong to the OP. As such statement recorded during search is not a material or document found and seized. Therefore, the statement recorded under section 132(4) cannot be construed as material/document for invoking proceeding under section 153C specially, in the circumstances where no material of incriminating in nature found belonging to OP. [Para 8.4] The documents/any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute the documents sufficient to make assessment for the purposes of the Act. The courts have referred such documents as an 'incriminating material'. While going through a large number of the decision rendered in the context of search assessment, it was observed that the word 'incriminating material' has been used very often, but the point here is that what is the meaning of 'incriminating material' or in other words what meaning can be attributed to 'incriminating material', as the same is the main bone of contention while framing the search assessment order under section 153A/153C and the same has not been defined under the Act. Therefore, it is imperative to understand the meaning of the word 'incriminating material'. Practically stating it can be stated that the 'incriminating material' can be in any form such as a document, content of any document, entry in the books of account, an asset etc. [Para 8.5]

Any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute an 'incriminating material' sufficient to make assessment for the purposes of the Act. [Para 8.6]” 5.6 In case of PCIT vs Best Infrastructure Pvt. Ltd. 397 ITR 82 (Del), it has been 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 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.”

5.7 The relevant paragraph of the decision of the Hon’ble Hon’ble Delhi High Court in the case of Harjeev Agrawal (supra) also reproduced as under: “20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words “evidence found as a result of search” would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation.”

5.8 In CIT v. Sri Ramdas Motor Transport Ltd.: (1999) 238 ITR 177 (AP), a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below: "A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 6.1 Documents found and seized from the other party premises and not from the assessee: It is further submitted that the documents found & seized (i.e. paper number 17, 22 & 23 of Exhibit- 41 of Party A-1) from the residence of Sh. Surinder Pal Singh Sahni & Pg. No.62 of Exhibit-3 of Party A-4 from the residence of Shri Vipin Kumar Lodha for which they explained that Rs.4.50 Cr. was total profit earned from Bajaj Enclave Project. Therefore, the AO presumed that the assessee might have earned un-disclosed income of Rs.1.62 Cr. The AO also took support of income offered by Shri Vipin Kumar Lodha of Rs.72 Lakh before Hon`ble Settlement Commission and Income offered of Rs.72 Lakh by Shri Harvinder Singh and Rs.1.44 Cr by Shri Surendra Pal Sahni for taxation u/s 153A. 6.2 Admittedly, the impugned seized documents did not belong to the assessee and contained rough jotting of other three associates, even though they admitted, the assessee was neither answerable nor legally expected to explain. However, the AO failed to rebut such contention though raised during the assessment proceedings. He even failed to bring iota of evidence/ corroborative documents which suggest that the assessee earned over and above the agreed sale price. 6.3 Notings/record maintained by a third party cannot bind the assessee. The law is well settled that any entry made/record kept by third party in his own handwriting even though sharing the name of the assessee cannot bind the assessee unless such transaction is further corroborated with some strong and cogent evidence showing the involvement of the assessee. A third party is free to create a record in whatever way he wants and there’s no control of the assessee there on. Such an attempt, sometime, maybe intended to take a revenge by putting the other (that is the assessee) in a trouble or to save its own skin to avoid heavy tax interest and penalty liabilities by such third person. The income admitted and declared before any other IT authority, Settlement Commission etc. cannot bind the assessee for the simple reason that the other 3 persons have actually earned profit over and above the declared sales consideration and rather concealed the entire profit of Rs. 1.62 crore which was to be taxed in all or any of the 3 persons. 6.4 The contentions of the assessee are duly supported by the statement of 3 other persons also as under: a. Statement of Vipin Kr Lodha (PB 94-103) • Land was purchased by the assessee and that he was engaged in the promotion of sales and marketing of the Bajaj Enclave Project (Pg. 30, PB 96) • He admitted that the other 3 persons are in the receipt earn extra income of Rs. 1.71 crore by selling the area 3.56 lakh sq feet of the Bajaj Enclave Project @ of Rs. 48 PSFT. The same was divided equally amongst them is Rs. 47 lakhs Rs each. This very admission strongly suggest that these 3 persons were actually the recipient of the undisclosed profit and not the assessee. (internal page 34, PB 100) and seized paper 62 (PB 13)

• That the figure of 7 lakh shown against the figure of 68 lakh shows the extra expenditure incurred by them jointly of 7 lakh each. (Internal page 33, PB 99) • Seized Page 62 (PB 13) shows the figure of 65 plus 57 and 37 i.r.t the other project Salasar Dham for which Shree Surendra Pal Singh Sahani is responsible who managed the site project (internal page 35 and 36 , PB 101 and 102) b. Sunder Pal Singh Sahni (PB 106 and 107) • He explains some of the papers related to Salasar Dham and Bajaj Enclave Project. Page 13 is a paper showing rough calculation of Bajaj Enclave Page 13, 17, 19, 22. At the back side 22 some estimated payments made by him. (Internal page 39, PB 106) c. Statement of Harvinder Singh Kohli dt 07.09.2016 (PB 108 to 113) Seized Pages 22 to 40 shows the details of receipt of the allotment of plots in the Bajaj Nagar Colony. (Internal page 2, PB109) d. Statement of Harvinder Singh Kohli dt 09.09.2016 ( PB 114 and 115): Seized Page 73 and 74 shows the details of the instalment received on account of sale of plots in Bajaj Enclave. Seized Page 75 shows estimated profit from Bajaj Enclave. Seized Page 76 shows account settlement between partners relating to Bajaj Enclave. Seized Page 77 shows final profit of Bajaj Enclaves. 6.5 Supporting case laws: For this proposition we place strong reliance on the case of : 6.5.1. CBI VS VC Shukla 1998 Supreme Court Cases (Cri) 761, wherein it was held as under, “ Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the former's correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far as they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (Sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, Section 34 cannot at all be pressed into service against him.” 6.5.2. In Common Cause (A Registered Society) vs Union of India [2017] 77 taxmann.com 245 (SC) held, “Considering the aforesaid principles which have been laid down, we are of the opinion that the materials in question are not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. The materials should qualify the test as per the aforesaid decision. The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissible under Section 34 of the Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, we are of the opinion that it would not be legally justified, safe, just and proper to direct investigation, keeping in view principles laid down in the cases of Bhajan Lal and V.C. Shukla (supra).”

7. No opportunity for cross examination - Addition to be deleted: The law is well settled that the assessee, against whom the evidence/witness are being used, must be given an opportunity for cross examination. In this case however, admittedly the AO has not at all afforded any opportunity to cross examine the other 3 persons, the statements of whom were heavily relied upon by the AO for making the impugned addition/s. Reliance is placed on Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC) /127 DTR 0241 (SC). In the recent case of CIT vs Sunita Dhadda [2018] 100 taxmann.com 525 (Rajasthan), the Hon’ble Rajasthan High Court has taken similar view, which has now been affirmed by Hon’ble Apex Court also in the case of CIT vs. Sunita Dhadda and SLP no. 9432/2018. of the revenue was rejected vide order dated 28.03.2018. In this case the Hon’ble Rajasthan High Court has considered several decisions on this aspect. 8.1 The CIT(A) contended that the other 3 persons were the business partners and, any incriminating material found even at the business premises of the other business partners, will be a case of finding incriminating material at the place of the assessee However, it is sufficient to say that the ld. CIT (A) proceeded on the height of imagination without any evidence and even without any support of the law. Firstly, a bare reading of S.153C which is quite plain and unambiguous, doesn’t admit of any other interpretation. The ld. CIT (A)

harped upon presumptions and assumptions which appeared to be pre- conceived in this mind. Alternatively, rather implication of this contention of CIT(A) is that he fully admitted and agreed that there was a partnership between 4 persons, all affairs of the other three were binding upon the assessee. If it was really so, then entire income of Rs. 4.50 crore was earned by that partnership firm alone. Correct person of the assessment for this purpose was this partnership firm alone. Needless to say, that there is a separate entity of partnership firm covered by the definition of person u/s 2(31) of the act. 8.2 The CIT(A) has wrongly placed reliance on the case of Francis Clay Decor Tiles (supra) by saying that there is no word ‘incriminating material’ in the statute and therefore, any material unearthed during search for any statement recorded during the course of search, is a valuable piece of evidence so as to invoke S.133A of the Act. However, such reliance placed is completely misplaced in as much as the said statement, were not recorded during search but admittedly during post search inquiry u/s 131. This very fact will render the case completely non-applicable. Moreover, these were the statements, otherwise completely without any material at all, found during search at the place of the assessee. 8.3 The ld. CIT(A) though could not dispute the fact that in the ROI filed u/s 153A dated 07.04.2017, did not include the income admitted at Rs. 1.62 crore in the statements and therefore, it can’t be denied that there was a valid retraction through filing ROI. Non filing of any letter any affidavit for that purpose have not come in the way because for that the assessee has to depend upon the advice of its Tax Consultant. When the Tax Consultant, did not advise to file any retraction, the assessee at the very first occasion. The CIT(A) did not deny that there was no mode prescribed. Hence, it was too much to expect from a poor layman assessee. 8.4. The CIT(A) admitted that the assessee was not present at the time of search at his residence, but later on offered the undisclosed income “in the statement recorded during the course of the poor search proceedings…” , yet however, he attached the same evidentiary value with full legal force with the support of S.132(4), which against the law. Further, the ld. CIT(A), wrongly stated that, there was a clear detection of incriminating material during the search proceedings, of Surendra Pal Singh Sahani and other associates, which is against the express legislative intention. 8.5. As per the mandate of S.153A, in the case of completed/unabated assessment, (or otherwise also) no addition is legally possible unless an incriminating material is found during search from the control possession of the searched person (assessee) only without considering the seized material found (if any) from the control and possession of a third party/s. The later situation of fact may hold good for invoking S.

153C but not for valid initiation of proceedings under S. 153A, (which aspect has been dealt with separately in this w/s in a detail with the support of judicial pronouncements). Kindly refer Hitesh Ashok (Supra) (headnote reproduced at page 19 of CIT(A) order) following the decision of Gujarat High Court in Saumya construction. 8.6. The CIT(A) instead of judiciously appreciating this contention that there is no evidence of the assessee getting a single penny on account of the share, he wanted the assessee to prove the negative, which was not possible. In other words, if the assessee contended that he did not get any share (if assumed), it was humanly impossible for him to prove such a fact. Therefore, saying that the assessee did not furnish any cogent material to prove such contention no evidence is a misconception of law. In his view, the sole statement on oath in absence of any evidence at all, was sufficient, which is contrary to the several decisions and such issue is no more res integra. This misconception of law with him can be explained with the interesting example of a beggar, who, during a survey search statement, admitted undisclosed income of Rs. 5 Cr., (though not an iota of evidence could be found in his case), can it be said that this confessional statement on oath was sufficient to make assessment of Rs. 5 crore income in his hand. Therefore, the actual profit of Rs.28,39,000/- earned kindly be accepted and the entire addition kindly be deleted in full. A- GOA-5: Addition of Rs.3,06,00,000/- on account of bogus development expenses. [AO Pg. 21-23 Pr 8/CIT(A) Pg. 55 Pr. 7.7] Facts: During the assessment proceedings u/s153A, the [AO] noted that the assessee group claimed expenditure of 8.50 Cr. [As per AO] assessee`s share is of 3.06 Cr. in development expenses in the Bajaj Enclave Project. However, as per the table mentioned, it appears that all the four associates incurred expenditure of Rs.12.30 Cr. (i.e. Rs.30 Lakh for Road and Rs.12 Cr. for Misc. Work) whereas the cost of land is Rs.3.50 Cr. only as per purchased deeds which was also seized & Annexed at page no. 5 to 29 of exhibit-3 of party A-6. Allegedly all the four associate in their respective post search statements and replies have admitted to incur of Rs. 8.50 Cr. as Development Expenses. The AO suspected that it is very hard to believe that in a plain plotting, where the cost of land is Rs. 3.50 Cr. only but the developmental expenditure would be by a sum of Rs. 8.50 Cr. When asked, the assessee vide letter dated 05.11.2018 submitted that assessee never incurred any expenditure on account of Development Expenses. The assessee only purchased the land and associated with these 3 persons for developing, plotting and marketing the land. All the expenditure was born by the other 3 persons.

However, ignoring the reply of the assessee, the AO finally concluded that the claimed expenditure of Rs 8.50 Cr and the development was never incurred and it was merely an attempt to reduce the taxable income, it was a claim of bogus expenditure made. Further, the AO was of the view that the assessee failed to submit the information/details/ documents in respect of incurring of expenditure for plotting on plain land. Finally, he made the addition of assessee`s share of Rs.3.06 Cr. (36% of Rs.8.50 Cr.) on account of bogus expenditure incurred. In the first appeal, the ld. CIT(A) also confirmed the addition, holding as under: “7.7….As discussed, this amount is additional income which is not offered in the statement but claimed as expenditure which is not real. Therefore, the real income includes this amount also in addition to the amount of Rs. 1.62 Crore already surrendered. Considering facts and circumstances of the case, this amount is treated as additional income which is not surrendered but claimed as expenditure in the statements. The claim of expenditure is not found to be genuine and one of the partners also accepted that no such expenditure was done actually. Therefore, the addition made by the AO is confirmed as per above discussion. This amount is to be treated as additional profit earned which is distributed by the partners earlier.” Hence this ground. Submissions:

1.

2. In this regard, the assessee filed written reply on 05.11.2018 (PB 14- 22 ) and stated that the assessee made association only for the incurrence of expenditure on account of developing and marketing with the other three persons. The extract of the submission is as under: “……v). Regarding development expenses of Rs. 850 Lacs, it is submitted that assessee has purchased the Land and sale the same after development and plotting. Sale proceeds of plots received by him have been credited into his bank account. No incriminating documents were seized from the premises of assessee. Thus assessee is not concerned with the working of receipts as well as expenses incurred seized from the premises of third parties. Detailed facts can be better explained by the person in whose possession the said documents were seized. Hence no cognizance is to be given to these papers. It is further submitted that working made on this papers appears to be imaginary because realization of such huge amount of Rs. 1680 Lacs from the value of Land of Rs. 175.50 Lacs, sharer mentioned on this paper which are not consistent with the Land document, thus ally these figures appears to be imaginary, hence no cognizance is to be given to this papers. It cannot be said that some part of the contents of papers is correct whereas other part of the content of papers are not correct & true. Thus, while assessing any income on the basis of incriminating documents, it should be read in entirety. Either this paper is to be considered as rough jotting or otherwise it has to be read in entirety and not in part. Whatsoever mentioned on these papers has to be considered in totality….”

3. Document has to be read in its entirety: The facts are not denied that on the seized paper itself, there was entry of the incurring of the expenditure of Rs. 8.05 Crores, based on which the A.O. alleged sale of proceeds and undisclosed income therefrom. Since both the entries of receipt and payment, were made on the seized document, the A.O. could not read a part of it and ignored the other. Law is well settled that an evidence has to read in its entirety, one cannot read the part which suits him best and to ignore the other which does not. Otherwise, following the principal of tax in real income only, the A.O. is bound to reduce the expenditure.

4. Statement supports: Interestingly, in Q-8 (heavily relied upon by the AO), the assessee confirmed the fact of purchasing land as also that he associated with these three persons for doing the development and marketing. However, the AO while making addition ignored the correct fact and made the addition arbitrarily. The extract of answer to Q-8 reads as under: “.....हमने कुल चार लोग� ने �मलकर इस Scheme �क Planning क� थी। यह �क�म मेरे �वारा �ाम का�लंता मे �य �क गई थी कृ�ष भू�म पर ह� क� गई थी। िजसका �ववरण म�ने ��न सं 6 के उ�तर म� बताया है। चूं�क म� इस �यवसाय म� नया था इस�लए इसका development एंव marketing के �लए तीन अ�य लोग� को शा�म� �कया... --------” A bare reading of this answer clearly shows that the assessee categorically admitted that due to the new business he only purchased the land and entered other three associates for developing and marketing. Therefore, when the part of development and marketing is the activities fixed for other persons there was no need for the assessee to incur any expenditure with respect to the development. Thus, so far as the assessee is concerned, he neither incurred nor made a claim of any such development expenditure. Therefore, such matter was to be examined entirely in the hands of the other three persons. Once no claim was made by the assesse, there was no question of disbelieving and alleging the same as bogus expenditure and disallowing the same (36 % share).

5. Contradictory approach of AO: The learned AO at Pg. 21 of the impugned order although clearly stated the “4 associate persons in their respective posts search statements and their replies have been admitted to incurred of Rs. 850.00 lakhs as development expenses”, but at the same time, he doesn’t believe the quantum of the expenditure incurred for the suspicion he entertained. Whereas, he could comfortably make addition Rs. 1.62 crore (out of the profit of Rs. 4.50 crore) merely on the basis of the admission made by the other 3 persons and the assessee but at the same time, here when the other 3 parties have again admitted to have incurred Rs. 8.50 Crores, the AO comfortably ignored the same because it suited him best. Thus, there is a clear contradiction and double standard adopted by the AO, which is not permeable in law. Such an inconsistent approach cannot be approved. Therefore, the entire addition deserves to be deleted in full.

6. Alternatively, if the addition of the share of profit Rs. 1.62 Cr is sustained, the share of development expenses of Rs. 3.06 Cr must also be allowed following the concept of real income. Additional Submission: At the outset it is submitted that in the remand report the on all the grounds, the ld.AO has repeated and rather reproduced the findings recorded by the AO in the impugned assessment order only. There is absolutely no rebuttal or disproval of the factual contentions and the evidences submitted. No contrary facts has been brought on the record then what has been stated by assessee or assessee. No new contentions have been raised. We again therefore strongly rely on w/s dated 17.01.22 filed on 17.01.22 along with the paper book. Further, the AO repeatedly alleged that the assessee made a claim of his respective share in the development expenditure whereas on the contrary, the assessee repeatedly stated that no such expenditure was incurred by him. Consequently, the question of allowing or disallowing or holding such expenditure as bogus, do not arise. The Assessee not having made any claim therefore, did not/could not reduce his tax liability which is a misconception of fact and law on the part of the AO continuing even in the remand report. Thus, the entire addition deserves to be deleted.

7. A bare reading of the order of CIT(A) on this aspect shows that he rejected the contentions of the assessing merely on assumption, presumption and suppositions, which is evident from the use the word it appears (Pg 57), it means (Pg. 58). It is not denied even by him that in the entire order, the AO has repeatedly said that no such expenditure to the extent of Rs. 8.50 crore was incurred by all the four persons on the development of the land, which otherwise was unbelievable in his view in as much as against the cost of land of Rs. 3.50 crore only, how the development expenditure could be a huge Rs. 8.50 crore. Thus, based on such bogus expenditure, he distributed the share of different persons including the assessee at 36% and addition of Rs. 3.06 crore was made. At the same time, he relied upon the statements of all the three persons and alleged that these four associate persons in their respective post search statement and their replies have admitted to incur Rs. 8,50,000 as development expenses. 7.1 On the other hand, the seized document was admittedly showing Rs. 8.50 crore as the expenditure incurred and the facts based thereon has been tabulized by the AO himself at Pg. 3 of the assessment order. Though the CIT (A) agrees with the contention that a seized document, if relied upon, has to be read in entirety and there can't be any pick and choose theory applied. However, simply because Sh. Vipin Lodha had admitted the income of his share out of Rs.8.50 crore offered before the Settlement Commission, there is no valid reason why the assessee should also be burdened with this addition. In fact, the assessee right from the beginning has consistently taken a stand that these three persons were involved in the plotting and marketing, negotiating with the customers and even in receiving the agreed sale proceeds from them and even the assessee submitted in so, in response to Q. No. 8 (stated above) vide letter dated 05.11.2018, stated that whether these persons had incurred some expenditure or not, the assessee was not at all concerned with this aspect. If as per the statement of these three persons and the seized document, it is held that some expenditure was incurred, then the net profit being Rs. 4.50 crore only be considered and consequently it is only Rs. 1.62 crore could be considered at the best or at the worst in the hands of the assessee (if assuming so, though not admitting). However, even then it is held, based on the statement of Shir Lodha that no such expenditure was incurred at all and therefore, the net profit of Rs. 4.50 crore has to be increased by the amount of Rs. 8.50 crore, then those three persons must have incurred the extra expenditure on development of Rs. 8.50 crore and the assessee was in no way connected with this aspect as against the so called admission w.r.t Rs.1.62 crore, the assessee never admitted incurring any such expenditure and the AO has wrongly stated that all the four persons admitted incurring such expense. Kindly refer Q&A 8. Other aspect to be considered is that if what the CIT (A) is considered

correct then then there will be unimaginable profit of Rs. 13 Cr (Rs. 4.5 cr + 8.5 Cr). It was unbelievable that within a short span of few days/month, the assessee and for that reason these persons, could have earned such a huge profit which is height of the imagination and close to impossible in real world scenario. This contention assumes importance in the light of the fact that no enquiry was made from various buyers and plot holders whose statements could have thrown light on the correct state of affairs as to how much amount they paid viz. whether the amount declared in the respective sale agreement or something over and above (A.O. page 3). The assessee therefore rightly contended that the working done on the seized paper was imaginary because realization of such huge amount of Rs. 16,80,000/- from the value of land of Rs.175.50 lakhs was not consistent with the land documents. The CIT (A) wrongly assumed that the assessee accepted the gross receipts from the project. 7.2 No corroborative evidence available regarding development expenses: It is submitted that the AO has not considered the facts judiciously in as much as there was no direct or indirect nor any circumstantial evidence showing unaccounted investment in the shape of development expenses made by the assessee as alleged by the AO. It is a matter of common knowledge that if the assessee engaged other person and make partnership with them with a motive that they would perform development and marketing activities then why should he pay for that activities while he has to pay only for the land and is having only 36% sharing in the profit. The AO completely failed to bring on record some independent and corroborative material to prove the incurrence of development expenses by the assessee. Thus, whatever view may be taken by the authorities below may hold good so far as the other three persons are concerned but the assessee could not have been made liable for this allegedly earned additional income as interpreted by the CIT(A). The CIT(A) therefore, seriously erred in dismissing this grounds appeal which was based purely on surmises, conjectures, assumptions and presumptions, and ignoring that there was no iota of evidence found referring to the assessee in the case of any of the searches nor the assessee admitted of such additional income. A-GOA-6 Impugned addition of Rs. 46,94,853/- u/s 68 of I.T. Act on account of the alleged unexplained credit in the Bank Account: Department’s Ground of Appeal (in short “D-GOA”) -1-3: Deletion of double addition of Rs. 38,06,922/- (out of total cash deposits Rs.2,18,18,114/-) wrongly allowed by ld. CIT(A):

[(AO Pg. 23-24 Pr 9)/CIT(A) Pg. 66 Pr.8.8] Facts: During the assessment proceedings u/s153A, the AO noted that the assessee deposited Rs.2,18,18,114/- in two bank accounts (Rs.41,06,922/- in Bank A/c No. 612400009561 and Rs.1,77,11,192/- in Bank A/c No. 61241432737). When asked to explain the source of the same, the assessee vide letter dated 24.10.2018 submitted that the amount of Rs.2,18,18,114/- were deposited out of sale proceeds of various plots situated at Bajaj Enclave. In support of the same plot wise sale details (PB 26-71) was submitted. However, AO alleged that the assessee submitted ledger accounts only to explain the source of cash deposit, however, he failed to file copy of agreements to Sale. Finally, he made the addition of Rs.2,18,18,114/- on account of unexplained credit u/s 68. In the first appeal, the ld. CIT(A) also partly confirmed the addition, holding as under: “8.8 In other words, the cash amount which is received as sale consideration but not deposited in bank accounts are not included in this amount of addition. Hence, the amount of addition of Rs. 1.62 Crore upheld while deciding ground no. 1 is completely earned from different transactions which are not done through banking channel. The transactions as reflected in the bank account are considered for confirming addition which is being discussed in this ground of appeal. Accordingly, addition of Rs. 2,18,18,114/- made by the AO is reduced to Rs. 46,94,853/-. The appellant gets a relief of Rs. 1,71,23,261/-. Accordingly, addition made by the AO is confirmed to the extent of Rs. 46,94,853/- out of addition made by the AO of Rs. 2,18,18,114/- . The appellant furnished a calculation of profit from the receipts which are shown in cash book. The profit computed by the appellant was Rs. 28,39,000/- in his revised computation filed during assessment proceedings. The AO did not consider the calculation because the agreements were not furnished. However, the appellant furnished documentary evidence that the copy of the agreements were furnished. The AO has not considered the computation made by the appellant. The appellant stated that as per computation, the profit of Rs. 28,39,000/- was earned from the transactions which are appearing in the bank accounts. There is no basis explained for arriving at the profit earned by the assessee. As per the seized document, the profit of Rs. 4,50,00,000/- was earned out of sale consideration of Rs. 16,80,00,000/- as admitted by the partners during the search proceedings. The profit at the rate of 26.78 per cent was earned by these partners on these transactions. The transaction of Rs. 38,06,922/- is claimed to have been wrongly considered twice in the total of Rs 2,18,18,114/-. The appellant has considered Rs. 1,75,31,192/- as sale receipts. The profit which must have been earned on the sale transaction of Rs. 1,75,31,192/- at the rate of 26.78 per cent profit should have been declared at Rs. 46,94,853/-. Therefore, the addition is confirmed to the extent of Rs. 46,94,853/- considering it as profit from the transactions credited in the bank accounts. It does not include transactions which are not routed from the bank accounts and the addition made of Rs. 1.62 Crore profit is out of sales completely unrecorded and not routed through bank accounts. In other words, the cash amount which is received as sale consideration but not deposited in bank accounts are not included in this amount of addition. Hence, the amount of addition of Rs. 1.62 Crore upheld while deciding ground no. 1 is completely earned from different transactions which are not done through banking channel. The transactions as reflected in the bank account are considered for confirming addition which is being discussed in this ground of appeal. Accordingly, addition of Rs. 2,18,18,114/- made by the AO is reduced to Rs. 46,94,853/-. The appellant gets a relief of Rs. 1,71,23,261/-. Accordingly, addition made by the AO is confirmed to the extent of Rs. 46,94,853/- out of addition made by the AO of Rs. 2,18,18,114/- . This ground of appeal is treated as partly allowed.” Hence this ground. Since the grounds taken by the assessee and department are being interconnected and being inter related to addition of Rs.2.18Cr made by the AO u/s 68 on account of cash deposits in bank account, common submissions are being made. Submissions: At the outset it is submitted and clarified that although assessee has filed GOA-6 for alleged addition of Rs.46,94,853/- u/s 68 of IT Act. However, the assessee had already disclosed income of Rs. 28.39 lakhs as profit from real estate activity (APB15). The assessee submitted a revised computation of total income of Rs. 29,43,477/- on 28.11.2018, to support this claim. While the revised computation wasn't challenged by the AO or CIT(A), they also did not accept the claim (as detailed in section A-GOA-3 of this submission). Therefore, the assessee acknowledges the tax liability for the disclosed income of Rs. 28.39 lakhs and has paid the due tax. This submission contests the addition of only Rs. 18,55,853 (i.e. Rs. 46,94,853 less Rs. 28,39,000). Our Submission be appreciated under this light hereinafter. 1.1 The following submissions, additional submissions and rejoinders were made before the CIT(A): “1.1. Source of Bank Deposits fully explained: At the outset it is submitted that the subjected deposits were sourced from various cash receipts on account of sale proceeds of various plots situated at Bajaj

Enclave and were duly shown in the regularly maintained day to day cash book and also from the receipts in the bank accounts on different occasions during the course the business. These facts are also clearly evident from the copies of the Cash Book (PB 116-122) and the copies of the bank statements and bank ledger accounts as also from the block wise list of sales proceeds and the respective sales ledger accounts, all placed in (PB 26-71). Even the AO does not appear to have rebutted or disputed such factual explanation furnished in any manner. 1.2 The only objection appears is the alleged failure to file copies of agreement to sale, which again is an incorrect factual statement in as much as all such agreements were already produced vide letter dated 05.11.2018 to the AO (PB 14-25). The content as of the said letter are reproduced herein : “Complete detail of sale of plots to various customers have already been submitted vide letter 24.10.2018 and copies of sale agreement produced herewith for your kind verification. In case your good self-desire, we may submit the copies of all the sale agreement before your good self.” Otherwise merely because of non-production of the agreements, such a huge addition could not be made. The assessee is having copies of agreements in each and every case, which were offered to the AO also. Some exemplary agreements are available in the paper book (PB 123-140) and the rest can be submitted if so desired. 1.3. In this regard, the assessee filed a detailed written reply on 24.10.2018 (PB 24-25). The extract of the submission is as under: "As regards explanation of sum of Rs.2,18,18,114/- credited in two bank account (Rs.41,06,922 in bank account no. 61240009561 & Rs.1,77,11,192 in bank account no. 61241432737). In this respect we submit that during above year assessee has received Rs.2,06,40,200/- in cash/cheque towards sale of various plots situated at Bajaj Enclave and deposit/credited the same in his bank account. Copy of bank statement, bank Ledger account and detail of plot wise sale enclosed herewith. (Page no.1 to 46) (PB 26-71) Against this the assessee has incurred cost of Rs.1,75,50,000/- towards purchase of Land and other expenses also. (copy of purchase agreement as well as source of payment towards purchased enclosed herewith page no.47-59. (PB 72-84) In view of above your proposition for treating entire income of Rs.2,18,18,114/- is not correct.” 1.4. Credit self-explanatory: In view of the above facts, the Bank Deposits are self-explanatory and hence no addition could have been made u/s 68, which had no application in such facts, as held in case of Smt. Harshila Chordia Vs. ITO, (2008) 298 ITR 349(Raj): “Income— Cash credit under s. 68—Receipt from customers in cash—When the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract s. 68 because the cash deposits become self-explanatory and such amount was received by the assesse from the customers against which the delivery of the vehicle was made to the customers.”

3. It is further submitted that S.68 confers discretion to the AO to make addition or not. Even if explanation is not substantiated then addition should necessarily be made. The legislature has used the word 'may' and not 'shall'. It provides discretion to the AO to consider overall probability and decide whether addition is required to be made. In CIT vs. P. K. Noorjahan (1999) 237 ITR 570 (SC) held that even when a person has no source of income, it cannot be presumed that the assessee has undisclosed income which is deposited in the bank account.

4. It is evident from the face of the impugned order w.r.t. the impugned addition that the AO was predetermined to make a high pitch assessment based on incorrect legal and factual allegations.

1.2 Further in response to Remand Report of AO following Additional Submission-I / Rejoinder was submitted and same is reproduced at CIT(A) order, the same are reproduced hereunder: “4.2 … He again repeated that the copy of the agreements were not submitted but at the same time ignored that the appellant vide its letter of 05.11.2018 clearly stated that the copies of the agreement are being produced and if so desired, the assessee was ready to submit copies of all the sale agreements before the AO. Relevant contents of the said letter are reproduced in our Written Submission at Pg 20 Pr 1.2 (APB193) and a copy also placed at PB 25. Similar request has been made before your Honour (the CIT(A)) also in para 1.2 page 20 of the same Written Submissions. It is evident that the AO has utterly failed to disprove the fact that on one hand, the assessee was in receipt of the sale proceeds in the bank account based on various agreements but did not accept for no reasons even though complete details were filed and agreements were produced. Even the mistake of considering the amount to the extent of Rs. 38,06,922/- which was a bank transfer entry only, has not been commented upon what to talk of disapproving. The further contention of double taxation has also not been adversely commented. Thus the entire addition deserves to be deleted.” 1.3 Further in response to Remand Report of AO following Additional Submission-II / rejoinder was submitted vide letter dt. 07.02.2023 and same is reproduced at CIT(A) order pg.64 pr.8.6 (also available at APB180), the same are reproduced hereunder: “1. The AO has worked out the total deposits of Rs.2,18,18,114/- from the two bank accounts (Rs.41,06,922/- in Saving Bank A/c No. 612400009561 and Rs.1,77,11,192/- in Current Bank A/c No. 61241432737) as stated in the impugned assessment order u/s 143(3) r.w.s.153A dated 18.12.2018 for A.Y.2015-16 at Pg. 23 Para 9. As asked, we are enclosing herewith two at a glance charts (PB 141-143) prepared on the basis of the bank statements showing the breakup of the above referred two amounts which, totaled to the Rs.2,18,18,114/-. A perusal of the same also clearly shows credit received in the current account at Rs.38,06,272/- as transferred from the savings account on the closure of the Saving Bank Account. Interestingly, the AO also included the amount of interest credited in the SB account. Thus Rs.38,06,272/- along with the interest and some other Cheque returned entries have also been considered unexplained, which clearly shows non-application by the ld. AO. Hence, alternatively, to the extent of Rs.41,06,922-/ there was nothing, even remotely, to be considered as unexplained.

2. Complete copy of the Cash Book starting from the very opening day i.e. 01.10.2014 which was the first day of the commencement of the business by the assessee till 31.03.2015 showing opening & closing balances as also day to day closing balances of cash in hand is also being submitted (PB 144-148). Pertinently, the entire cash receipts, particularly the entire amount of cash deposited in the aforesaid two bank accounts, under consideration, duly reconciled with the said cash book. ----xxx--------xxx--------xxx--------xxx--------xxx--------xxx---- 4. As told to us, statement of the assesse were not recorded u/s 132(4) but there is no reference to any such statement in the impugned assessment order.” 2. Part sustenance of the addition to Profit of Rs. 46,94,853/- completely legally unjustified: 2.1 Firstly, the ld. CIT(A), after due verification of the entire record placed before him, after obtaining the remand report and in the light of the detailed submission made by the Assessee on facts, was fully satisfied that there was no case made out of making addition of Rs. 2.18 crore u/s 68. He even allowed relief on that count but instead of closing the issue (originally raised by the AO of the unexplained cash deposits in the bank account u/s 68 ), he proceeded in all together different direction, which was not dealt with by the AO. 2.2 Entirely new issue raised: But in his view, the profit declared by the assessee on the declared sale proceeds of the plots was lesser, hence he estimated the profit by applying higher profit rate. The ld. CIT(A) thus, instead of completely deleting the entire addition made by the AO, despite feeling satisfied, partly reduced the same by way of making another addition on account of the lesser profit allegedly shown by the assessee. Such an approach on the part of the ld. CIT(A) and that too without confronting the proposed new addition in place of the earlier one, was completely against the principle of natural justice and was beyond jurisdiction, and being in violation of S. 251(2), as no separate notice was issued on that count. Therefore, the sustenance of this addition on account of alleged low profit, deserves to be deleted here itself. 2.3 No merit behind higher profit rate – fully unjustified: The CIT(A) worked out profit rate at 26.78%, computed w.r.t. the unrecorded sale consideration of Rs. 16.80 crore and the profit of Rs. 4.50 crore (relating to which addition of 1.62 crore was made and is under challenge by way of AGOA-4), as against declared profit rate of 13.75% (28.39 lakhs / 206.40 lakhs x 100) worked out at Rs.28,39,000/- [i.e. Sale Proceeds Rs.2,06,40,000/- Less Purchase / Registry / Misc Expenses of Rs.1,78,01,000/-]. While doing so, the ld.

CIT(A) has completely ignored the accounts and in particular the day- to-day cash book maintained and produced before him. The sale procced of Rs. 2,06,40,200/- received in cash/cheque towards sale proceeding of various plots situated at Bajaj Enclave, deposited in the bank accounts, (kindly see letter to AO, reproduced at page 23, pr 9 of the asst. order), which was explained with reference to the cash book, ledger accounts of the different schemes, the bank statement, etc. On the request of the ld. CIT(A), the complete cash book (APB 144-148) showing the opening cash-in-hand, closing cash-in-hand was also submitted vide letter dt.07.02.2022 (APB 180-181). (his comments on the claim of the assessee of regular maintenance of the accounts vide pg. 36 pr 6.5.5 is being separately commented). The ld. CIT(A) did not find any fault in the cash book, copies of ledger accounts, the sale agreements and the details showing the receipt of the sale proceeds of different schemes in Bajaj Enclave and the specific submission made before the AO for working of the profit of Rs. 28.39 lakh at page 23 Pr. 9 of the AO (and available at APB 15) which shows that the assessee incurred cost of Rs. 1,75,50,000/- towards cost of land along with other ancillary exp. Further, the fact of purchasing the plot by the assessee can't be disputed, which was based on the registered purchase agreement. 2.4 The CIT(A) not having rejected any of the supporting documents which clearly depicted the actual profit earned by the assessee Rs 28.39 lakh out of the declared sale consideration and was also declared in the Revised Computation as admitted by the CIT(A) himself and even by the AO at page 23, there was no reason for the CIT(A) to have applied now higher GP rate of 26.78% as against the declared profit rate of 13.75%. The revenue has not taken any specific ground against the deletion of Rs.1,71,23,261/-. Thus, there was absolutely no legal justification behind making a new addition of Rs. 46,94,853/- while deleting the addition of Rs 2.18 crore, as stated above, and the same digits to be deleted in full.

3.2 It may be clarified that before the AO there was no specific occasion to deal with the amount of Rs. 38,06,922/- in as much as it was already included in the total amount of Rs. 2,18,18,114/- considered by the AO for making addition u/s 68. However, it was clarified that this was a mere bank transfer and therefore, cash deposits was only of Rs. 1,75,31,192/- as against alleged Rs. 2,18,18,114/-. 3.3 The Revenue’s allegation in D-GOA 2 that: “Whether in facts and circumstances of the case, the CIT(A) is justified in applying the profit @, 26.78% on receipts of Rs. 1,80,11,192/- ( Rs. 2,18,18,114/- minus Rs. 38,06,922/-) considering the claim of the assessee that copies of agreements related to booking amount were furnished during assessment proceedings without appreciating the facts that assessee has not submitted agreements related to booking amount at the time of assessment proceedings as well as at the time of remand report proceedings.” In this regard it is firstly submitted that such an allegation is completely irrelevant and factually wrong in as much as it is not clear as w.r.t. which particular addition/deletion, the revenue has taken this ground ? The deletion of Rs. 38.06 lakh was fully justified as stated above and the profit rate has nothing to do with that. On the contrary the assessee feeling aggrieved is in appeal against such application of profit rate while sustaining the addition of Rs. 46,94,853/-. Thus, it can be said that the Revenue is also in agreement (in their D-GOA 2) with the ground A-GOA 6 taken by the assessee. 3.4 However, the allegation that agreements were not submitted is factually incorrect in as much as every time and opportunity, the assessee produced these registered documents before the A.O. and CIT(A) both as is evident from the written submission dated 17.01.2022 para 1.2 (APB 169) also reproduced herein above. Otherwise also, these were the registered agreements and were available in the public domain. Since there were voluminous records hence, they were only produced and if any of the authority so wanted, copies of the selected one or all of them could have been filed before the authorities below. But otherwise also such an allegation is completely irrelevant in the context of the ground taken by the Revenue. 3.5 While explaining the cash deposits of Rs 2,18,18,114/-, the assessee, before the law authorities specifically submitted that AO wrongly considered Rs 2,18,18,114/- as against the correct amount Rs 1,75,31,192/- which was the total deposits made in the current account with SBI. It is clearly evident that Rs. 38,06,922/- (PB 28-29) deposited in the SBI-SB account were transferred during the same previous year itself on 15/10/2014 through banking channel to the current account, which fact is clearly evident from the bank statements (PB26-36) as from also from the copies of the bank ledger accounts in the assesse books (PB 37,38,44). Thus, without any doubt, addition to the extent of the Rs. 38,06,922 the deposits have been wrongly considered twice in the total of Rs. 2,18,18,114/- stated by the AO. Assessee submitted two at a glance charts (PB 141-143) prepared on the basis of the bank statements showing the breakup of the above referred two amounts which, totaled to Rs.2,18,18,114/-. A perusal of the same shows credit received in the current account at Rs.38,06,272/- as transferred from the savings account on the closure of the Saving Bank Account which fact is not rebutted. 3.6 Non-Application of mind: Interestingly, the AO even included the amount of interest credited in the SB account as cash deposit included in Rs. 2.18Cr. Hence, alternatively, to the extent of Rs.41,06,922-/ there was nothing, even remotely, to be considered as unexplained and the CIT(A) was supposed to have granted relief up to Rs. 41,06,922/-. 3.7 Complete cash book submitted as submitted above. 3.8 No whisper by AO even in Remand Report: On this crucial contentions of the assessee the ld. AO did not make any adverse comment. He mostly repeated the findings recorded in the asst. Order. He completely failed to rebut the contention contentions raised without any cogent evidence. Thus, under the totality of the facts and circumstances detailed above, the CIT(A) rightly deleted the addition considering the same to be mistakenly included in Rs. 2.18 crore resulting into double addition of Rs.38,06,272/-. Therefore, this ground taken by the revenue deserves to be dismissed. The above submissions have been made based on the instructions and the information provided of/by the client.”

of his paper book wherein the panchanama of the search conducted in the case of the assessee is placed on record from where he draw our attention to date and time of starting of search and completion of search which reads as under:-

Thus the ld. AR of the assessee expressed his surprise as to the conduct of the search in the case of the assessee which remained 5 minutes only and nothing has been found incriminating from the premises of the assessee.

Therefore, the application of the provisions of section 153A of the Act in the case of the assessee is completely misconceived and is against the provision of the law. As is evident from the record that nothing incriminating in nature was found in the case of the assessee at the premises searched. Therefore, the invocation of provision of section 153A in the case of the assessee is completely in violation of provisions of the provision of Act.

As regards the alleged undisclosed income arising out of the project name Bajaj Enclave assessee involved as landowner and has nothing to do except the consideration upon the sale consideration received. Based on these facts the assessment made in the case of the assessee invoking the provisions of section 153A of the Act was challenged and considering that aspect of the matter assessment should have been made by invoking the provisions of section 153C of the Act.

Since the order is passed on the wrong provision of the Act is required to be quashed. To drive home to this contention, the ld. AR of the assessee relied upon the decision in the case of DCIT vs. BSR Builders

Engineers & Contractors in 733, 734/Chny/2023, wherein the co-ordinate bench has held as under :

“7. After going through the judicial precedents and particularly the decision of Hon'ble Delhi High Court in the case of Anand Kumar Jain, supra, we are of the view that as per the mandate provided by the provisions of section 153C of the Act, the statement made by assessee cannot be a base for making assessment u/s.153A of the Act on the basis of alleged incriminating material (being the statement recorded u/s.132(4) of the Act) on the basis of which assessment was framed u/s.153A of the Act rather assessment should have been framed u/s.153C of the Act by recording a separate satisfaction. Hence, we find no infirmity in the order of CIT(A) and we affirm the order of CIT(A) on this legal issue.” Ld. AR also relied upon the decision of ACIT vs. Atul Kumar Gupta

(2023) 152 taxmann.com 99 (Delhi-Trib.) & Tirupati Construction

Company vs. ITO DB CWP No. 17651/2022. The ld. AR of the assessee thus relying on the decision of the PCIT vs. Abhisar Buildwell Pvt. Ltd.

[2023] 149 taxmann.com 399 (SC) submitted that in the absence of incriminating document no addition can be made in the hands of the assessee. the assessee submitted that no addition can be made if there is no incriminating document found no addition can be made. To drive home to this contention he relied upon the decision in the case of Kabul Chawla case [2015] 61 taxmann.com 412/234 Taxman 300/380 ITR 573 (Delhi) and PCIT vs. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC).

alleged undisclosed profit and Bajaj Enclave. The assessee submitted detailed submissions before lower authorities as to why the said income cannot be added in the hands of the assessee.

The assessee is merely landowner had discussion with the other person who are responsible to develop the property and market the same by finding buyer of the property, there is no further role of the assessee in the process. Therefore, the alleged working of undisclosed profit has nothing to do with that of the income of the assessee. The revenue is relying merely on the statement recorded in the case of the assessee submitted at page No. 86 to 91 of the paper book. There is no corroborative evidence alleged to have been found or confronted to the assessee for getting alleged unfair disclosure of the income in the hands statement. Thus, the hypothetical income alleged to have been jotted being the projected profit and loss account that projected profit cannot be considered as correct income in the hands of the assessee.

The statement of the 3rd party was relied upon, and the assessee was not given the copy of the statement and was also not given an opportunity to cross examine those persons whose statement are relied upon in making the addition and therefore, the addition does not survive.

To drive home this contention, the ld. AR of the assessee relied upon the decision in the case of the Mrs. Anita Sahai vs. Director of Income- tax [2004] 136 taxman 247 (High Court of Allahabad). The ld. AR of the assessee also submitted that the tax is to be charged on real income and not the notional income which has never been received by the assessee. Therefore, relying on the decision of the Apex Court in the case of CIT vs. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC) no addition can be made. The ld. AR of the assessee relying on the decision of Rajasthan High Court in the case of CIT vs. Bharat Kumar wherein our High Court has categorically stated that any statement recorded relevant to piece of evidence and it has to be considered while making the assessment but no where it is stated in this provision that statement recorded under section 132(4) of addition what admitted income. The ld. AR of the assessee also relied upon the instructions No. 286/2/2023 (Inv.II) dated 01.03.2003 wherein the board has categorically advised that there should be a focus and consultations on collection of evidence of income which leads to information on what has not been disclosed is not likely to be disclosed before the income tax department. Similarly, regarding statement during the course of search and seizure income admitted should be made to confess as to the income. Therefore, merely the estimated income cannot be made in the hands of the assessee.

12. As regards ground No. 5 for an addition of Rs. 3,06,00,000/- being

undisclosed development expenses added in the hands of the assessee.

The ld. AR of the assessee submitted that the assessee never incurred any expenditure on account of development expenditure. The assessee only purchased the land and associated and those three persons were to develop, plot and market the land. All the expenditure to be borne by those three persons and the assessee has no role to play. Ignoring that factual aspect of the matter, the AO added a sum of Rs. 3,06,00,000/-

(36.5% of 8.5 crores) on account of bogus expenditure incurred. The assessee stands were consistently clear that he is the only landowner partner, he is not involved or acknowledged incurring expenditure in seized document be read as a whole and not in part as it is evidently clear that both the entries of receipt of payments were made recorded in the alleged seized document. The AO should not read it apart of it. On the one hand, the AO taxed profit and taxing the expenditure on the said project is also not correct. Based on that argument, the ld. AR of the assessee stated that addition of Rs. 3,06,00,000/- is required to be deleted.

13. As regards ground No. 6, the addition was made by the AO for Rs.

2,18,18,114/- which have been reduced to Rs. 46,94,853/- by ld. CIT(A) and has appreciated the fact that the assessee has disclosed the income on presumptive taxation. But while doing so he has though appreciated the percentage of profit but increased the profit rate without giving enhancement notice to the assessee and therefore, that action of the ld. CIT(A) is against the principles of nature justice. Therefore, the addition sustained to the extent of Rs. 46,94,853/- is also required to be deleted as it violates the principles of natural justice.

14. Per contra, so far as regards the appeal of the assessee is concerned ld. DR supported the order of the ld. CIT(A) who has based

on the submission of the assessee granted substantial relief to the u/s. 153A because there was a search in the case of the assessee.

Therefore, as per provisions of section 153A of the Act, assessment is required to be made under that provision of the Act. There was also a search in the case of associated person and in that search transaction between these parties were duly recorded and found there is no confusion about the partnership of the assessee in the Bajaj Enclave between the assessee and other three persons.

The other persons have accepted the fact of the disclosure, but the assessee though made disclosure in statement u/s 132(4) did not disclosed the amount in the return filed pursuant to issue of notice u/s 153A of the Act which was required to be disclosed based on the incriminating document found for the project where the assessee is involved as land owner. Therefore, the working recorded in that incriminating documents binds the assessee so far as the profit and transactions recorded in that document are concerned.

As regards the filing of return of income below the income returned in the original return of income filed by the assessee, ld. DR relied upon the finding recorded in the order of ld. CIT(A) at page No. 90 wherein it has been held that the assessee neither claimed nor be allowed a finding of the ld. CIT(A) is based on decision of Hon’ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 taxman 13.

As regards the addition made in the hands of the assessee on account of unaccounted income from Bajaj Enclave, unexplained development expenditure and unexplained deposit made in the bank account. The ld. CIT(A) has, based on written submissions already granted substantial relief to the assessee.

So far as to the receipt of sales considerations recorded in the bank account of the assessee and as regards the profit of the project and unexplained expenditure incurred by the assessee on the Bajaj

Enclave project the ld. DR relied upon the detailed finding recorded in the order of ld. CIT(A). He also submitted that nowhere assessee dispute the fact that there were four partners in the project and therefore, ld. DR on that aspect of the matter relied upon the order of the ld.

CIT(A). Ld. DR thus concluded that when based on the same documents other partners have already adhered to the disclosure made why not in the hands of the assessee. The assessee has willfully given declaration in statement recorded post search and there is no retraction by the assessee from the statement so made. The assessee did not dispute the for an amount of Rs. 1.62 crores have rightly been added in the hands of the assessee.

The ld. DR similarly also relied upon the finding of ld. CIT(A) on the issue of undisclosed expenditure recorded in the incriminating document found.

relates to the estimate of profit and another for calculating the amount of turnover. While dealing with that aspect of the matter ld. CIT(A) accepted the submission of the assessee contending that there was a duplication for an amount of Rs. 38,06,922/-. Ld. DR stated that so far as taking the amount twice the same were not contended before the ld. AO.

The second issue is related to the estimation of profit as the assessee failed to justify the same with cogent evidence, the relief granted by the ld. CIT(A) is not appropriate and required to be reversed and for this aspect of the matter he relied upon the order of ld. AO.

As is evident from the panchanama placed on record in the present case search was for the minutes only and it was carried out on 01.07.2016. In that search which was survived only for 5 minutes no material was seized at his residence 9 G 7, Mahaveer Nagar Third, Ladpura, Kota.

Ld. AO based on the impression that as there was a search action, notice u/s 153A of the Act was issued to the assessee on 22.02.2017 which was duly served. In response to notice issued u/s 153A, the assessee furnished his return of income on 07.04.2017, declaring total income of Rs. 85,320/-, which is for a less amount of Rs. 6,55,000/- with the earlier return filed as per provision of section 139 of the Act.

In the Bajaj group search incriminating documents were seized but in the case of assessee search was carried out for five minutes and no incriminating material was found. The document found at the Bajaj Group relates to Bajaj Enclave Project wherein the assessee is the owner of the land where that “Bajaj Enclave” Project being developed.

The ld. AO noted that as per seized document vide page no. 17, 22 & 23 of Exhibit- 41 of party A-1 found from the residence of Shri Surinder Pal Singh Sahni & page no. 62 of Exhibit-3 of party A-4 from the resident of Shri Vipin Kumar Lodha. On conjoint reading ld. AO found that a sum of Rs. 4,50,00,000/- was earned by the persons named herein below which remained unaccounted, as detailed below :

Bajaj Enclave Particulars Amount Rs.

Total Sales Realization (472x356) 1680 Less Road + Payment 1230 (30 + 1200) Total Un-disclosed profit 450 450*.36 Khandelwal Khandelwal 162 AD 72 B 72 R 72 V 72

In his explanation to the above-mentioned seized documents, Shri Vipin Kumar Lodha submitted that Rs. 4.50 Crore is total profit earned from Bajaj Enclave project. When questioned about the abbreviations abbreviation is AD & R means his own Benami shares, whereas B i.e.

Bucchi- nick name of Shri Harvider Singh Kohli and V is Vipin Kumar Lodha.

These four associates in their respective post search statement(s) have admitted that amount of Rs. 450.00 lacs as unaccounted profit from Bajaj Enclave project and have offered the same for taxation in their respective hands. In the post search investigation statement dated 22.09.2016 of Shri Nawal Kishore Khandelwal was recorded. Wherein reply to Q.-8 of his statement dated 22.09.2016, he admitted that profit from Bajaj Enclave is Rs. 1,62,00,000/- which he will offer for taxation.

In the assessment proceeding ld. AO noted that the assessee maintained two banks account, wherein a sum of Rs. 2,18,18,114/- were found credited in respect of which assessee could not offer any satisfactory evidence. He claimed in reply to Q.-7 that the booking amounts have been deposited in a bank account. Therefore, the entire amount of Rs. 2,18,18,114/- required to be taxed as unaccounted income.

Ld. AO also noted that the assessee group claimed to have incurred expenditure of Rs. 850.00 Lacs for development in this project, as the assessee failed to submit the information / details / documents in land. Thus, ld. AO was of the view that it had never been incurred and only claimed in their respective reply (ies) to reduce the un-accounted taxable income. In the light of that facts ld. AO added a sum of Rs.

306.00 lacs as income for A.Y 2015-16 in the hands of the assessee on account of unaccounted expenses.

With the above discussion ld. AO determined the assessed income at Rs. 6,93,58,430/- on 18.12.2018.

The assessee challenged the order of the assessment on legal ground as well as on the merits of the case. The ld. CIT(A) partly allowed the appeal so filed by the assessee. Now before us both revenue and assessee challenge the finding of the ld. CIT(A).

(2A) Every authorisation referred to in sub-rule (2) shall be in writing under the signature of the officer issuing the authorisation and shall bear his seal. xxx xxx xxx If we peruse all these provisions together i.e. provisions of section 132 and 153A of the act along with Rule 112 of the Income-tax Rules'1962 activate the applicability of provision of Section 153A of the Act will arise.

As it evident that the search is initiated on the strength of warrant of authorization issued by the authorizing officer to the authorized officer in terms of Section 132 of the act read with Rule 112 of the Income-tax Rules'1962. Search warrant can be issued against any person who is falling within the scope of either or more of the conditions as mentioned in clause (a),(b) or (c) of section 132(1) and against whom "reasons to believe" has been formed based on the possession of information.

Therefore, the warrant of authorization so issued should specify the name of the person or persons against whom it is issued along with the complete address of the premises to be searched. In other words, if a warrant of authorization has not been issued in case of a person, the provisions of Section 153A cannot be initiated in his case.

Having discussed the relevant provision and rules now the question which the assessee posed as to whether any material found in the search of any other person than the assessee can be considered in the assessment under section 153A of the assessee?

This controversy and the scope of assessment under section 153A has been considered by the Hon'ble Delhi High Court in case of CIT v.

Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi). In the said decision, the high court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37, which is reproduced below:-

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 of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under section 132 of the Act, notice under section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. 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 of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated, and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. In clause (iv) above, the Hon’ble Cout held that "Obviously an assessment has to be made under this Section only on the basis of seized material". In clause (v), the same is reiterated by holding "In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vii), it is stated "Completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search". From a reading of the above decisions of Hon'ble High Court, it is evident that completed assessment can be interfered with by the Assessing Officer on the basis of any incriminating material unearthed during the course of search. If in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that year in exercise of power under section 153A of the Act. The reference to the incriminating material in the above decisions of Hon'ble High Court is about incriminating material found as a result of search of the assessee's premises and not of any other assessee.

Therefore, on a conjoint noticeable provision of section 153A read with section 132 of the act and the judgment of the Delhi Court, in our considered opinion only the material unearthed during the course of a search by virtue of execution of a particular warrant of authorization qua a person can be used for framing assessment u/s 153A of the act in case of such a person. This view of the Delhi High Court has been confirmed by the apex court in the case of PCIT Vs. Abhisar Buildwell (P) Ltd. [ 149 taxmann.com 399 (SC) ] wherein the apex court has held as under:

(i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A;

(ii) all pending assessments/reassessments shall stand abated;

(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) 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 132A of the Act, 1961. 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.

The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.

Based on the discussion so recorded and the fact of the case is that in the search conducted at the premises of the assessee no incriminating material was found and therefore, no addition can be made in the case of the assessee invoking the provision of section 153A of the Act. We get support of our view from the judgement of Hon’ble Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra). That view was also Therefore, ground no. 1 & 2 raised by the assessee challenging the jurisdiction of AO u/s. 153A is allowed because the material found in the search of any other person than the assessee in appeal cannot be considered in the assessment under 153A of the assessee.

On this aspect of the matter the bench noted that it was a error on the part of the ld. AO to make such addition as the assessee has in that proceeding itself revised the income by filling the revised computation (PB 6) filed vide letter dated 28.11.2018 declaring total income at Rs.29,43,477/- and deposited tax of Rs.10,38,490/- thereon (PB 7).

Therefore, the AO is wrong to say that assessee reduced income in the ROI filed u/s 153A, which is not meant for reducing income already declared. Hence, it is a mere suspicion and no valid basis. The ld. AO through ld. DR did not controvert this factual aspect, therefore, ground no. 3 raised by the assessee is allowed.

On this issue we note that when the assessee was asked to explain the Group, assessee vide letter dated 24.10.2018 (PB 24) and 05.11.2018 (PB 14), assessee submitted that the actual profit earned by the assessee from real estate activity is only Rs.28,39,000/- [i.e. Sale Proceeds Rs.2,06,40,000/- Less Purchase/Registry/Misc Expenses of Rs.1,78,01,000/-]. He further stated that due to lack of knowledge of real estate, the assessee entered into an oral agreement with the above three persons i.e. Shri Surinder Pal Sahni, Shri Harvinder Singh Kohli and Shri Vipin Kumar Lodha. According to the oral agreement the assessee has to make investment in the purchase of land and these persons will develop the land and also deal with the customers. These persons having made negotiations with the customers, were having direct contact with / approach to the customers. The assessee only received the amount from the buyers as per sale agreements and after receiving the full payment executed the legal papers in favour of the customers w.r.t. transfer. The assessee was not in the knowledge of excess money, if any received by these people from the customers.

However, it is a fact that the assessee did not receive anything over and above the amount showing sale agreement amount. Moreover, the assessee recorded all these transactions in his books of account fairly.

There was no any iota of evidence found (showing un-disclosed profit the assessee except his solitary statement which was given by the assessee with the advice of his associates during the search. In fact, these amounts were also appearing in the documents found and seized from the third-party premises. Based on these observations ground no. 4 raised by the assessee is allowed as the actual profit earned by the assessee has already been taxed.

Before the ld. CIT(A) the assessee filed various details in support of the credit made in the bank account. We note that ld. CIT(A) not having rejected any of the supporting documents which clearly depicted the actual profit earned by the assessee Rs 28.39 lakh out of the declared sale consideration and was also declared in the Revised Computation as admitted by the CIT(A) himself and even by the AO at page 23. Thus, there was no reason for the CIT(A) to have applied in the appellate stage to higher GP rate of 26.78% [ derived from the seized material of total estimate of project] as against the declared profit rate of 13.75%. The revenue has not taken any specific ground against the deletion of Rs.1,71,23,261/- by the ld. CIT(A). Thus, we see no justification behind making a new addition of Rs. 46,94,853/- while deleting the addition of Rs 2.18 crore by him. Based on these observations ground no. 6 raised by the assessee is allowed.

Based on these observation appeal filed by the assessee in is allowed.

Vide ground no. 1 revenue has challenged the finding of the ld.

CIT(A) accepting the claim of the assessee that an amount of Rs. 38,06,922/- considered twice while calculating the undisclosed amount computed. The revenue has grievance that the assessee has not raised this issue during the assessment proceeding and the remand proceedings. On this aspect of the matter, we note that the ld. AO has added complete credit in both the bank account maintained by the assessee for an amount of Rs. 2,18,18,114/-. As the whole amount was added there was no occasion by the assessee to deal with the amount of Rs. 38,06,922/-, which is not the receipt but in fact is mere bank transfer from one account to another. On this aspect of the matter the ld. AO through the ld. DR did not controvert the factual finding of ld. CIT(A) based on the evidence placed on record and therefore, the transfer of fund from one account to another cannot be added as income u/s. 68 of the Act. Thus, we see no infirmity in the finding of the ld. CIT(A) in granted relief to the extent of Rs. 38,06,922/- to the assessee. Based on these observations ground no. 1 raised by revenue stands dismissed.

Ground no. 2 & 3 raised by the revenue challenge the estimate of profit by the ld. CIT(A) and adding only profit instead of whole credit in the case of the assessee as the assessee failed to explain the nature and source of the credit with documentary evidence and therefore, the whole credit is required to be added. On this aspect of the matter we note that the assessee has explained by filling the representative documents (APB123-140) before the ld CIT(A) about the nature and source of credit in the bank account. The assessee also submitted a detailed cash book. The remand report on the documents filed were called for from the ld. AO. The relevant part of the remand report on this aspect of the matter is as under:

The submission made by the assessee before your good office is not acceptable. During the course of assessment proceedings, it is noticed that in two bank account of the assessee a sum of Rs. 2,18,18,114/- were found credited in respect of which he could not offer any satisfactory evidence during post search enquiry. He only claimed in reply to Q. No. 7 that the booking amount have been deposited in his bank account. The applicant has filed submission which is reproduced as under: “As regards explanation of Rs. 2,18,18,114/- credited in two bank account (Rs. 41,06,922 in bank account number 61240009561 and Rs. 1,77,11,192/- in bank account number 61241432737). In this respect we submit that during the above year assessee has received Rs.

2,06,40,200/- in cash/ cheque towards sale of various plots, situated at Bajaj enclave and deposit / credited the same in his bank account. Copy of bank statement, bank ledger account and details of plot wise sales enclosed here with. (Page no. 1 to 46). Against this the assessee has incurred cost of Rs. 1,75,50,000 towards purchase of land and other expenses also. ( copy of purchase agreement as well as source of payment towards purchased enclosed here with page number 47 to 59 ). In view of above your proposition for treating the entire income of Rs. 2,18,18,114 is not correct” The submission of the applicant has been pursued but not found convincing. After examine the page number 1 to 46 of the paper book, it was found that the assessee had submitted ledger account only to explain source of cash deposition, but the copy of agreements have not been submitted for examination. The assessee has offered undisclosed profit of Rs. 28,39,000/- in his revised computation filed during assessment proceedings. Considering the fact and circumstances of the case, contention of the assessee is rejected and unexplained credit of Rs. 2,18,18,114 is added in the total income of the assessee under section 68 of the IT Act.

As is evident from the above remand report submitted by the ld. AO (APB-171-175) that he merely disputed the sales consideration and thereby also not disputed the cost that has been claimed by the assessee. Thus, when based on the evidence placed on record the ld. AO has not disputed the purchase consideration and its related evidence now the revenue cannot dispute that ld. CIT(A) should have sustained the whole credit being the sales consideration against which claim of cost was allowed based on the evidence placed on record. Therefore, ground no. 3 has no force and the same is dismissed. As regards the ground no. 2 raised by the assessee as the third-party document seized suggest the profit of the project @ 26.78 % which is finding of fact by the ld. CIT(A) and in this appeal no contrary material is brough on record dismissed.

Based on the discussion so recorded the appeal of the revenue in stands dismissed.

In the result appeal filed by the assessee stands allowed and that of the revenue stands dismissed.

Order pronounced in the open court on 27/09/2024.