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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI PAWAN SINGH
सुनवाई की तायीख / Date of Hearing : 08.12.2016 घोषणा की तायीख /Date of Pronouncement : 17.02.2017 आदेश / O R D E R PER BENCH: There are six appeals under consideration and all of them are filed by the assessee for the AYs 2005-06 to 2010-2011. Since, the issues raised in all these appeals are inter-connected / identical, therefore, they are clubbed, heard combinedly and disposed off in this consolidated order. Appeal wise adjudication is given in the following paras of this order.
In all these appeals, there are common issues that cover all the appeals and they relate to (i) legal issue of sustainability of the additions made u/s 153A in cases of “non-abated assessments” when the facts and figures on the so called “incriminating material” are already accounted in the books of account of the assessee. The corresponding additions made in other assessments (ARPL) were found unsustainable by the Tribunal. In this case, the AO made additions based on the said so called incriminating material.; (ii) Share capital additions u/s 68 of the Act; (iii) sustainability of the addition on account of bogus purchases coupled with the additions of commission and book profits connected to the said bogus purchases and (iv) addition on account of peak credit / cash credits u/s 68 of the Act. The details of additions in all the assessment years are tabulated by the Ld Counsel for the assessee at page 2 of the written submissions and the same is scanned and placed as under:-
Issues 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Share capital 24,00,000 0 27,00,000 60,00,000 30,00,000 3,00,000 Alleged Commission Paid Addition made by the AO 64,259 1,459 55,531 1,23,659 2,27,549 2,03,456 Alleged Inflation of Purchase Price Addition made by the AO 1,60,647 3,585 1,38,829 3,09,149 5,68,872 5,08,639 Peak Credit Addition made by the AO 1,22,840 0 0 1,88,416 14,25,112 25,696
The facts leading to the above additions for all the six assessment years include the assessee is engaged in the business of „manufacturing and trading of pharma products‟. Assessee belongs to a flagship company, named „Acquatic Remedies P. Ltd‟. There was a survey action u/s 133A of the Act at the premises of M/s. Globe Pharma on 01.09.2009. Subsequently, the said survey action lead to search action u/s 132 of the Act on 9.9.2010 in the business of M/s. Acquatic group of cases ie Acquatic Remidies P Ltd (ARPL) and the assessee-Acquatic Formulations
(I) Ltd (AFIL). The said search action resulted in getting the disclosure of unaccounted income of Rs. 25.35 Crs. Out of this, an amount of Rs. 24 Crs was disclosed in the hands of ARPL and a sum of Rs. 1.35 Crs was disclosed in the hands of the present assessee (ARPL). The said disclosure involves AYs 2004-05 to 2010- 11. Involving the present assessee, the search team seized “share application transfer form” as well as “few purchase bills”. These papers constitute incriminating materials for the Revenue. It is an admitted fact that the said share transfer forms are blank and signed by Tora Marketing Pvt Ltd; Aryamaan Mercandise Pvt Ltd; Sharma Capital & Finance Pvt Ltd and Poonam Corporation Ltd. These companies subscribed to share capital into the said ARPL and AFIL. In the assessments made u/s 153A of the Act in the case of the said ARPL and AFIL, the Assessing Officer made various additions on accounts of share capital, bogus purchases, commission paid for buying the accommodation entries and the peak credit additions. The share capital related additions include the ones on account of the premium collected by the assessees in connection with the said share capital.
Regarding the disclosure of the said unaccounted income of Rs. 25.35 Crs, the facts are that the disclosure of unaccounted income on 9.9.2010 as per the statement given by Shri Darshan B Mehta u/s 132(4) of the Act on the said date. It is also an undisputed fact that the said statement was retracted by Shri Darshan B Mehta on 10.9.2010 within 24 hours. However, during the assessment proceedings, the said retraction was ignored by the Revenue during the assessment proceedings in both the cases of ARPL and AFIL. Further, it is an undisputed fact that the disclosure of Rs. 24 Crs in the hands of ARPL was added under various heads mentioned above and the same were confirmed by the CIT (A). Eventually, the sid addition was deleted by this Tribunal and the details are as follows.
In the appellate proceedings before the Tribunal, the said additions in the case of ARPL were completely deleted vide and others dated 17.4.2015 involving the assessment years 2005-06 to 2011-12. It is also an undisputed fact that the accommodation bills and the blank share application forms were found by the Tribunal as not incriminating / enough for making sustainable additions. Per contra, the Tribunal approved the strength of other documentary evidences furnished by the assessee to the Tribunal while deleting the additions. Otherwise, the transactions relating to both purchases of materials as well as for getting the share application money with premium were done through involving the banking channels. Confirmations were furnished in this regard from the share subscribers. There are other evidences discussed in the said order of the Tribunal dated 17.4.2015. The gist of the said order of the Tribunal in the case of ARPL is that the additions on account of share application money as well as the bogus purchases are unsustainable in law on merits. Legal issues raised by the ARPL on the validity of 153A assessment were not adjudicated considering the relief granted on merits. The other additions on account of commission payments and the peak credits were also deleted being consequential to the deletion on account of bogus purchases. The Tribunal did not adjudicate the legal issue relating to the sustainability of the additions in a concluded assessment (non-abated ones) not based on the legally dumb incriminating material. Assessee raised this issue as an additional grounds and the Tribunal dismissed the same as academic. The contents of pra 32 onwards of the said Tribunal‟s order are relevant in this regard.
In the background of the above, Ld Counsel for the assessee brought our attention to the fact that the legal issue relating to the sustainability of the additions in the absence of incriminating material is relevant for the AYs 2005-06 to 2008-09 in the instant appeals. Therefore, we shall take up the legal issue relating to the validity of the additions made u/s 153A of the Act in the case of non-abated assessment years 2005-06 to 2008-09.
Referring to the said assessment years as well as the legal ground, Ld Counsel for the assessee submitted the following data that reflects the due dates for issuing of notice u/s 143(2) of the Act and demonstrated that these four assessment years (AYs 2005-06 to 2008-09) constitutes non-abated assessments. The said data is extracted as follows:-
Issues 2005-06 2006-07 2007-08 2008-09 Date of filing return 30.10.05 30.10.06 24.10.07 26.9.08 Original assessment u/s 143(1) u/s 143 (1) u/s 143 (1) u/s 143 (1) Last date of issue of 31.10.2006 31.10.2007 31.10.2008 30.9.2009 notice u/s 143(2) Date of search 9.9.2010 9.9.2010 9.9.2010 9.9.2010 Date of issue of 23.09.2011 notice u/s 153A of the Act
From the above, it is evident that for the AYs 2005-06 to 2008-09, the last dates for issue of notice u/s 143(2) of the Act are 31.10.2006; 31.10.2007; 31.10.2008 and 30.9.2009. Considering the date of search ie 9.9.2010, the said statutory notice was never issued u/s 143(2) of the Act in respect of these four AYs making the assessments made u/s 143(1) of the Act as completed assessments. In this regard, Ld Counsel for the assessee relied on various decisions as follows:-
(i) CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd (ITA No. 523 of 2013) (Mum.); (ii) CIT vs. Murli Agro Products Ltd (ITA No. 36 of 2009) (Mum);
(iii) CIT vs. Kabul Chawla (ITA No.707 of 2014) (Del); (iv) Jai Steel (India) vs. ACIT [2013] 259 CTR 281 (Raj.); (v) Nikki Agarwal vs. ACIT Cent. Circle 32 (ITA Nos. 879-880, 8915-8916/M/2011); (vi) ACI vs. Jayendra P Jhaveri (ITA Nos. 2141-2144/Mum/2012) and (vii) Gurindersingh Bawa vs. DCIT Central Cir. 29 (ITA Nos. 2075 & 2669/M/2010) 9. Thus, it is the case of the assessee, the additions, if any, can be made in respect of the completed assessments only based on the meaningful incriminating material as a result of search action u/s 132 of the Act.
10. Referring to the aforesaid incriminating material (a) blank share application transfer forms and (b) few copies of the purchase bills (so called accommodation bills), Ld Counsel for the assessee brought our attention to the said application forms and submitted that they are blank share application transfer forms only, signed by some individuals with stamp and the contents of the said stamp are illegible. It is further brought to our notice the said forms are not accompanied by the share certificates. In this regard, Ld Counsel for the assessee submitted the following written submissions on this issue and pleaded that the said form / bills do not constitute incriminating material for making additions validly in a case of non-abated assessment and the contents of the said submissions are extracted as under:-
1.1 “A statement giving details of assessments that have attained finality is enclosed – refer page no. – Assessment years 2005-06 to 2008-09 have attained finality and assessment years 2009-2010 and 2010-11 abate. 1.2. The Assessing Officer mentions that incriminating documents in the form of incomplete share applications / signed blank application transfer forms have been found during the course of search. 1.3. It is contended that incomplete share applications / signed blank share application transfer forms by itself can by any of imagination be considered to be incriminating documents inasmuch as they are merely incomplete share applications / signed blank share application transfer forms and are not with the share certificate. If there had been transfer deeds with share certificate then the AO could have stated that these are incriminating documents and could have entertained a doubt of cash being paid as consideration for transfer of shares. 1.4. The reason that the blank transfer forms were found during the course of search was that these forms were incomplete and not properly stamped. The transferors were therefore, required to send complete transfer forms with proper stamps. The transferors sent fresh form with correct amount of stamping and the shares were thereafter transferred. The transfer of shares has been properly recorded in the transfer registers maintained by the appellant. No discrepancy was found in the Minutes Books and / or transfer registers of the appellant. Thus, mere presence of blank transfer forms cannot be treated as incriminating documents by any stretch of imagination. 1.5. In any case, this issue has already been examined by the hon‟ble Tribunal in the case of Acquatic Remedies. Refer page 14 para 13 of the Tribunal order wherein they have noted the observations of the AO regarding blank transfer forms. They have thereafter by a well reasoned and a detailed order and after considering all the facts of the case proceeded to decide the matter in favour of the appellant therein. 1.6. Further, the case of the Assessing Officer is mentioned in para (iv) above, it is contended, no incriminating documents in the form of accommodation purchase bills have been found and thus, the first leg of the stand of the Assessing Officer fails. 1.7. In all fairness, it is imperative to mention that similar issue arose before the Tribunal in the case of Acquatic Remedies (I) Limited, and the hon‟ble Tribunal on page no. 26, para no.32 of its order mentioned that since the issue on merits have been decided in favour of the assessee, the legal issue is not being adjudicated.”
11. Further also, Ld Counsel for the assessee submitted that the said transfer forms and purchase bills are the basis for making huge additions in the case of ARPL for the assessment years 2005-06 to 2011-12 and the said additions were deleted on merits. Therefore, such so called incriminating material, which was the basis for making unsustainable additions cannot be considered as incriminating documents. Therefore, the legal ground should be sustained. In this regard, Ld Counsel for the assessee brought our attention to page 14 of the said Tribunal‟s order (supra). Referring to the contents of para 24 of the said Tribunal‟s order, Ld Counsel for the assessee read out the following:-
“24.......We, therefore, set aside the finding of the CIT (A) and directed the AO to delete the addition made on account of bogus shares / accommodation entries for all the assessment years....” 12. Further, referring to paras 20 and 21 of the said Tribunal‟s order, Ld Counsel for the assessee read out the following lines relating to the additions u/s 68 of the Act relating to the share application and the premium. The said lines are extracted as under:-
“20.......transactions have been made in cheque........we find that no adverse inferences have been drawn in this respect nor we find that no adverse inferences have been drawn in this respect nor we find that any verification from the bank have been made by the AO for making the impugned addition. The entire addition have been made only on the basis of admission of the Director during the course of search proceedings. However, we find that the admission was made on 9.9.2010 and retracted by the Director on the very next day ie 10.9.2010. Further, the addition is based on the surmises that assessee was taking bogus purchase bills and the cash was reintroduced in the form of share capital. However, there is no demonstrative evidence brought on record which could justify the additions made by the AO.
Considering the entire factual matrix, in the light of the judicial decisions discussed elsewhere and in the light of the evidences produced by the assessee, we set aside the order of the CIT (A) and direct the AO to delete the additions made u/s 68 of the Act for all the assessment years under this appeal.”
From the above, it is evident that the case of the Ld Counsel for the assessee is that the additions made by the AO on account of share capital u/s 68 of the Act are also bogus purchases again based on the said transfer forms, bogus accommodation bills are not to be sustained. Consequently, such documents do not constitute incriminating information as the additions so made based on such papers were found unsustainable eventually. According to the Ld AR, so long as the entries / figures that appear on the seized documents are found entered in the books of account of the assessee, there is no incrimination against the assessee. As such, books of account were not rejected by the Revenue u/s 145(3) of the Act. Further, it is the argument of the Ld Counsel for the assessee that the entries appearing on the seized papers, if any, are duly accounted in the books of accounts, be it a share capital, the premium collected, the purchases etc. Therefore, as per the assessee‟s AR, these papers do not constitute incriminating material and thus, the additions are unsustainable in view of the settled legal proposition pronounced by the Hon‟ble jurisdictional High Court.
On the other hand, Ld DR for the Revenue filed written submissions stating that the said transfer forms and accommodation bills constitute incriminating material. Ld DR also submitted that the retraction made by the Director is invalid and therefore, the contents of the original statement made on 9.9.2010 should be considered as valid. Further, Ld DR submitted that the assessee has not discharges his onus and the shares so allotted to the said companies were eventually purchases by the individuals connected to the company. Therefore, the addition on account of share capital should be sustained. Similarly, regarding bogus purchases also Ld DR submitted that the assessee is involved in the bogus purchases and cash in the business which finally found its way to the above referred share capital of the company. 15. We have heard both the parties and perused the orders of the Revenue Authorities as well as the order of the Tribunal in the case of ARPL (supra). We find, the back ground facts that lead to the adverse assumptions by the AO against the assessee as well as ARPL (sister concern) are identical. The so called incriminating material is common in both the cases. Statement / retraction dated 10.9.2010 relating to undisclosed income given by Shri Mehta is also common. It is an undisputed fact that the blank share transfer forms and the purchase bills are the only basis that led to the disclosure of unaccounted income u/s 132(4) of the Act on 9.9.2010. The said statement was immediately retracted by Shri Mehta on 10.9.2010. No efforts were made by the AO to disprove the correctness of the said retraction of Shri Mehta. No other evidence was referred / gathered by the AO or investigation wing in their order to support the additions on account of share capital and premium as well as bogus purchases and the commission / peak credit additions. It is a concluded fact that the said transfer forms / bills do not constitute incriminating material by virtue of the fact that the contents mentioned in the material were already accounted in the books of accounts and the additions made on such papers are held unsustainable on merits by this Tribunal. In our considered opinion, the notice issued u/s 153A dated 23.9.2011 is certainly a valid notice considering the binding judgment in the case of Jai Steel (India) vs. ACIT [2013] 36 taxmann.com 523 (Rajasthan). However, we find it is a case of non-abated assessment as the notice u/s 143(2) was never issued and the due date for the same has expired before the search action on the assessees. In this regard, we have perused the order of the Tribunal in the case of Shri Govind Agarwal vs. ACIT vide (AY: 2002-2003) and ITA No. 3390/M/2011 (AY: 2004-2005) vide order dated 10.01.2014wherein one of us (AM) is a party to the said Tribunal‟s order, which is relevant for the proposition that when the due date expired for the issue of notice u/s 143(2) of the Act, the same is considered as non-abated assessment and the additions, if any, have to be made only based on the incriminating material in the case of the assessment u/s 153A of the Act. “9. We have heard both the parties on the legal issue relating to the sustainability or validity of the additions made in the assessments made u/s 153A read with section 143(3) of the Act in respect of completed assessments.
The stand of the Revenue is that the first proviso to section 153A empowers the AO to issue notice u/s 153A of the Act in respect of the 6 AYs prior to the assessment year in which the search took place. The relevance of the existence of incriminating material is not provided in the said provisions. As per the revenue there should not be any difference qua the completed assessments and the abated assessments for all six AYs in so far as the powers of the AO is concerned and he is empowered to issue notice u/s 153A and make additions either based in the incriminating material or otherwise.
Per contra, the case of the assessee is that the AO may be empowered to issue notices for all the six AYs in view of the cited decisions ie Jai Steel (India) Ltd (supra), Scope (P) Ltd (supra) etc. However, in case of completed assessments, AO is empowered to made additions only based on the incriminating materials and not otherwise Jai Steel (India) Ltd (supra), LMJ International Ltd (supra), Gurinder Singh Bawa (supra) etc. For making the routine additions, which are normally done in the regular assessments, the completed assessment need not be disturbed by invoking the provisions of section 153A of the Act if not for reiterating the returned or assessed income as the case may be. Judgment in the case of Jai Steel (India) Ltd (supra) supports the above legal proposition. As per the assessee, regarding the cases of abated assessments, considering the scheme of assessments u/s 153A, per contra, even the routine additions are done in these assessments.
We have heard the parties and their divergent stands on the legal issue and the validity of the instant assessment/reassessment with the routine additions u/s 68 and section 14A of the Act based on the accounted transactions. The instant case for the AY 2002-03 deals with the case of disturbing the „completed assessment‟. Earlier the assessment was completed u/s 143(1) of the Act. Completeness of the summary assessment is considered and held in favour of the assessee vide many judgments cited above. In the assessment u/s 153A, the AO made (i) Addition u/s 68 on account of artificially inflated investment in house duly disclosed in the balance sheet of the assessee Rs.31,33,070/-; and (ii) disallowance u/s 14A: Rs. 23,31,469/-. Admittedly, there is no incriminating material before the AO to support the above additions. The valuation report, which is garnered by the authorities constitutes mere estimates and the provisions of section 132 is not required to obtain such report from the DVO. As such, for making aforesaid additions of Rs 31,33,070/-, AO has not used even the said valuation report and the AO disallowed what is reported in the books. Similar is the case with the additions u/s 14A of the Act. Therefore, undisputedly, the impugned quantum additions are made merely based on the entries in the accounted books and certainly not based on either the unaccounted books of accounts of the assessee or books not produced to the AO earlier or the incriminating material gathered by the investigation wing of the revenue. Considering the legal propositions place before us by the assessee‟s counsel, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT - From Held portion: ….The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed.
……From a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under sections 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stands abated in terms of second proviso to section 153A, the Assessing Officer acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. …..The argument of the assessee that the Assessing Officer is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under section 153A is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. Para 26 of the Judgment: The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. B. [2012] 28 Taxmann.com 328 (Mumbai –Trib.) in the case of Gurinder Singh Bava vs. DCIT …. Whether since assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A - Held, yes [Para 6.2] [In favour of assessee] Para 6.1 of the Order: The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. B. All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income-tax, Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB)
Para 58 of SB decisions: Thus, question No.1 before us is answered as under : (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately ; (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.
14. Thus, in case of the completed assessments either u/s 143(1) or 143(3), the above extracts are uniform in advocating against making additions in routine manner in the assessments made u/s 153A of the Act when there is no incriminating material gathered in the search action. Statutory notice u/s 153A of the Act can also be issued to reiterate the returned income or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further, for the sake completeness of the order, we have perused the orders/judgments relied upon by Ld DR for the revenue and found they are distinguishable on facts for one reason or other. To start with, we have perused the judgment of Honble Hon‟ble Delhi High Court in the case of Madugula Venu (supra) and find that, though explained the provisions in plain language, it does not dealt with the relevance or factum of incriminating material. Further, the judgment of Andhra Pradesh High Court in the case of Gopal Lal Bhadruka (supra) is not on the notices issued u/s 153A of the Act and the same is pronounced in the context of the notice u/s 153C of the Act. Further, also, the Coordinate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s 153A of the Act was upheld. However, this order has not considered the then existing decision of the Coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit from the Special Bench decision in the case of All Cargo Global Logistics Ltd (supra), which is relevant for the proposition that the assessment u/s 153A will be made on the basis of incriminating material such as books of accounts, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search.
We also find that the CIT(A) made a reference to the incriminating material, which yielded disclosure of some undisclosed income. But, on perusal of the documents, we find that the CIT(A) entered into an error zone and the disclosure is only Rs 5 crores in this case and the same relates to the lands deals. In principle this disclosure has nothing do with the impugned additions u/s 68 or 14A of the Act. In the instant case, specific to the assessee, no incriminating material with the details was referred either in the assessment order or in the order of the CIT (A) for making the impugned additions. As per the cited judgment in the case of Jai Steels Ltd, supra, the assessment u/s 153A is only for reiteration rather than making any additions in a routine manner without the strength of the incriminating materials. Similar view was taken up by the ITAT, Delhi „H‟ Bench, in the case of V.K. Fiscal Services P Ltd vs. DCIT vide to 5465/Del/2012 (www.itatonline.org). In this regard, para 13 from the said order of the ITAT Delhi Bench (supra) is relevant and the same reads as under: “13. Applying the above case laws to the facts of the case, we have to necessarily quash the assessment proceedings for AY 2004-2005, 2005-06, 2007-08, 2008-09 on the following grounds . (a) No books of accounts belonging to the assesse were found and seized in the premises of the other person. What was found was in the hard disk was only a confirmation of account that an attached annexures. Such documents cannot be said to be books of accounts or documents belonging to the assessee. (b) The Revenue has not produced the record of the searched person to demonstrate that satisfaction was recorded during the course of assessment proceedings in the case of M/s. Global Reality Ventures P. Ltd. On the date of recording of satisfaction, first notice u/s 153(c) was issued. There is no indication whatsoever, that the assessment proceedings in the case of Global Reality Ventures P. Ltd were in progress or not, at the point of time and that the AO during the course of that proceedings recorded this satisfaction. The procedure contemplated under the Act was not followed. The satisfaction is recorded on 23rd July, 2010. The relevant AY would be 2011- (c)
12. The six preceding AYs relevant to this AY would be 2005-06 / 2006-07 / 2007-08 / 2008-09 / 2010-11. Thus, the notice issued u/s 153‟C‟ for the AY 2004- 05 is clearly barred by limitation. (d) Even otherwise, as there is no incriminating material found during the course of search, the AO should have dropped the proceedings initiated u/s 153‟C‟ of the Act. (e) As there is no dispute that no assessment or reassessment has abated in this case for the reason, that the date of search, the date of search which in the case on hand would be 25.3.2010, by virtue of First Proviso to section 153‟C‟, i.e., the date of passing an order u/s 127 transferring the cases of the assessee to the present Assessing Officer no assessment or reassessment was pending. When no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law.“ 16. In these circumstances, we have no doubt about the absence of any seized material which are incriminating in nature to back the additions u/s 68 or 14A o the Act made in the assessment made u/s 153A of the Act for the AY under consideration. Regarding the DVO‟s report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, cannot be sustained legally. As such, we find that the AO has not used the said report of the DVO also for making additions of Rs. 31,33,007/-, the difference between accounted amount of Rs. 46,13,007/-, claimed as the amount spent on construction of house and acquisition of land as on 31.3.2002 minus Rs. Rs. 14.8 lakhs, the investment made on the land plots. AO made addition for assessee‟s failure to provide evidences / bills in support of the claim of expenditure on the construction. It the presumption of the AO that the plots since acquired only by July 2001, the assessee would not have spend Rs. 31,33,007/- by 31.3.2002. This is merely a presumption rather conclusion based on any evidences. Such additions are unsustainable in law in the assessments made u/s 153A r.w.s 143(3) of the Act.
Rajasthan High Court judgment in the case of Jai Steel (India) (supra), vide para 18, it is categorically mentioned that “the requirement of assessment or reassessment under the said section (153A) has to be read in the context of sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of search or requisition, then the question of reassessment of the concluded assessments does not arise, which would more reiteration………….”. Thus, the judgment of Hon‟ble High court in the case of Jai Steel Ltd, supra and above decisions of the Tribunal are categorical in concluding that, in case of the concluded assessments like the present one, the additions are made only based on the incriminating material discovered during the search action. The facts of the Jai Steel Ltd (supra) are identical to the present one ie AO made additions by reassessing u/s 153A on the completed assessment u/s 143(1) of the Act. Thus, considering the judgment in the case of the Jai Steel Ltd (supra), the arguments on the legal issue raised before us stands covered. Therefore, considering the Rajasthan High Court‟s judgment in the case of Jai Steels Ltd, supra, we have no difficulty in (i) upholding the issue of notice u/s 153A of the Act and (2) in disapproving the making of the impugned additions u/s 68 and 14A of the Act, which are not backed by the incriminating materials. In the absence of incriminating material, the role of the AO is only to reiterate the returned income filed in response to the notice u/s 153A of the Act. Accordingly, in substance, the common legal issue raised in the grounds for both the appeals of the assessee (ITA NO 3389&3390/M/2011) is allowed.
Regarding other two grounds on the merits of the additions raised in both the appeals, considering the relief granted to the assessee on the legal ground, we find the adjudication is only of academic importance. Therefore, we dismiss the same academic.