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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DLEHI
Before: SHRI PRASHANT MAHARISHI & SHRI K. NARASIMHA CHARY
PER K. NARASIMHA CHARY, J.M. Aggrieved by the orders dated 19.09.2016 passed by the Commissioner of Income Tax (Appeals)-29, New Delhi ("Ld. CIT(A)") in the cases of M/s. Sarthak Vanijya India Limited (“the assessee”) for the assessment years 2008-09 & 2010-11, the Revenue preferred these appeals. The assessee has also filed cross objections against these appeals of the Revenue.
Brief facts of the cases are that the assessee is a company and filed its return of income for the assessment years 2008-09 and 2010-11 on 27.09.2008 and 25.09.2010 declaring income of Rs.2,50,769/- and Rs.6,12,550/- respectively and the same were processed u/s. 143(1) of the Income-tax Act, 1961 (“the Act” for short).
There was a search and seizure action u/s. 132 of the Act carried out in Bindal Group of cases including the assessee on 07.03.2014, in which, according to the Revenue, various books of account/documents etc. were found and seized and statements of various persons were also recorded. Subsequently, assessee was issued a notice u/s. 153A of the Act on 18.05.2015, in reply to which the assessee filed return of income on 09.02.2016 for both the years declaring income of Rs.2,50,770/- for the assessment year 2008-09 and Rs.6,12,610/- for the assessment year 2010-11. Assessments were complete by orders dated 31.03.2016 for both the years at an income of Rs.1,67,50,770/- for the assessment year 2008-09 and Rs.8,47,12,580/- for the assessment year 2010-11 by making addition of Rs.1.65 crores for the assessment year 2008-09 and Rs.8.41 crores for the assessment year 2010-11 on account of unexplained credits in the books of account u/s. 68 of the Act.
Aggrieved by such additions, the assessee preferred appeals before the ld. CIT(A), who by way of the impugned orders deleted the additions holding that the addition was made by relying upon the statement of Mr. Brijesh Bhagat recorded on 16.03.2016 without having any proof or corroborative evidence to establish the transaction to be bogus, no further investigation was done in this regard, nothing was found during the search with regard to the alleged bogus entries as unexplained share capital, the statement recorded on 16.03.2016 was retracted on 29.03.2016 by way of an affidavit, but the Assessing Officer had not provided opportunity of being heard to the assessee and rejected the retraction of statement by Mr. Brijesh Bhagat without any basis by simply saying that he has given contradictory statements, which according to the ld. CIT(A) does not substantiate or prove conclusively that the said share capital and premium, received is generated out of unexplained income of the assessee routed through it as an accommodation entry. Learned CIT(A) further held that the statement of Mr. Rajesh Agarwal is not directly related to the case of the assessee and was taken before the search. Lastly, ld. CIT(A) observed that the Assessing Officer based the addition at the behest of the suggestion by DDIT(Investigation) regarding retraction of statement by Mr. Bhagat and therefore, such an opinion was not independent one without being supported by any further material.
Before the ld. CIT(A), assessee also challenged the addition to be unsustainable on the ground that there was no incriminating material found or seized during the search qua the assessment year qua the addition and therefore, in view of the decision of Hon’ble jurisdictional High Court in CIT vs. Kabul Chawla, 380 ITR 573(Del), no such addition is sustainable. Learned CIT(A) observed that in view of the fact that the relief was given to the assessee on merits, deciding this question of law is academic in nature and therefore, he left it open.
Challenging the deletion of the addition, Revenue preferred and 6368/Del/2016 for the assessment years 2008-09 and 2010-11 respectively, whereas the assessee, aggrieved by the findings of the ld. CIT(A) that the validity of reopening proceedings in the absence of any incriminating material in respect of a concluded assessment need not be decided, the assessee filed cross objections No. 71 & 72/Del/2020 for both the years respectively.
It is argued by the ld. DR that one Mr. Brijesh Bhagat, director of the assessee company himself admitted twice in his statement that the assessee company was involved in providing accommodation entries and therefore, ld. CIT(A) is not correct in holding that there is no incriminating material against the assessee. Further, such an admission of Mr. Bhagat establishes that the assessee routed their own money into the business by way of accommodation entries and therefore, the impugned order has to be set aside.
It is submitted on behalf of the assessee that the ld. Assessing Officer himself admitted that absolutely nothing was found during the search with regard to the alleged bogus investment and the Assessing Officer based the addition at the suggestion of DDIT(Investigation) and the statement of Mr. Bhagat stood an uncorroborated statement, which cannot be a basis for making any addition. He placed reliance on the decision of Hon’ble jurisdictional High Court in the case of PCIT vs. Anand Kumar Jain (HUF) and others in and batch by order dated 12.02.2021 wherein the court held in unequivocal terms that the statements recorded u/s. 132(4) of the Act do not by themselves constitute incriminating material as has been explained by the Hon’ble Delhi High Court in the case of PCIT vs. Best Infrastructure (India) P. Ltd. (2017) 84 taxmann.com 287 (Delhi HC). He also brought to our notice the submissions made by the assessee before the ld. CIT(A) which the ld. CIT(A) recorded in the order to the effect that the ld. Assessing Officer himself admitted that absolutely there was nothing found during the search with regard to the alleged bogus investments by the search team. He, therefore, prayed that the cross objections made be allowed by returning a finding that in view of the decision of jurisdictional High Court in the case of Kabul Chawla (supra), the notice u/s. 153A of the Act and consequential assessment proceedings are bad under law.
We have gone through the record in the light of submissions made on either side in the appeal and the cross objections. It remains an undisputed fact that the ld. Assessing Officer placed heavy reliance on the statement of Mr. Brijesh Bhagat recorded on 16.03.2016 despite the fact that the said person retracted the same by way of an affidavit on 29.03.2016 and except the statement of Mr. Bhagat and the suggestion of DDIT(Investigation), there is no material, whatsoever, to corroborate and substantiate the addition. In view of the decision of Hon’ble jurisdictional High Court in the case of Anand Kumar Jain (HUF) (supra), wherein the Hon’ble High Court followed the decision in CIT vs. Harjeev Aggarwal (2016) 70 taxmann.com 95 (Delhi) and observed that though the statement recorded u/s. 132(4) of the Act has evidentiary value and the relevance as contemplated under the Explanation therefore, on standalone basis such statement does not empower the Assessing Officer to frame the block assessment without there being any material discovered during the search and seizure operations. In so far as the merits are concerned, the observations of the ld. CIT(A) are lawful and his conclusions are impeccable. The statement of Mr. Brijesh Bhagat on standalone basis cannot afford any support to the addition and in view of the decisions of Hon’ble jurisdictional High Court in the case of Best Infrastructure (India) Pvt. Ltd. (supra) and CIT vs. Harjeev Aggarwal (supra), such a statement requires corroboration of some other material discovered during the search and seizure operations. It, therefore, follows that any addition contrary to this position cannot be sustained. On this score, we do not find any reason to interfere with the observations of the ld. CIT(A).
Now, coming to the cross objections of the assessee, it remains an admitted fact that the returns of income for the assessment years 2008-09 and 2010-11 were filed on 27.09.2008 and 25.09.2010 respectively whereas search operation took place on 07.03.2014. Admittedly, the returns of income for both the assessment years were processed u/s. 143(1) of the Act. Long prior to the search, the time period permissible for issuance of notice u/s. 143(2) by proviso thereunder expires. It leaves no doubt that as on the date of search, there were no assessments pending or were abated due to search. In CIT vs. Kabul Chawla, Hon’ble jurisdictional High Court has held that the assessment cannot be arbitrary or made without any relevance or nexus with the seized material and an assessment has to be made under this section only on the basis of seized material. It is further held by the Hon’ble Court that 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 or the documents requisitioned or undisclosed income/property discovered in the course of search.
In view of this undisputed facts and the settled position of law, we are of the considered opinion that the additions qua the assessment year are unsustainable in the absence of any incriminating material that was unearthed during the search and seizure operations. On this premise, we allow the cross objections of the assessee.