M/S METAL IMPEX,CHENNAI vs. ACIT, CENTRAL CIRCLE-1(1), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: These appeals preferred by the assessee are against the common consolidated order of the Learned Commissioner of Income Tax (Appeals)-18, (hereinafter in short ‘the Ld.CIT(A)’), Chennai, dated 31.01.2024 for the Assessment Years (hereinafter in short ‘AY’) 2013-14, 2014-15, 2016-17 to 2020-21. Since several issues involved are common, all the appeals for all the assessment years were heard together. Both the parties also argued them together raising similar arguments on these

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issues. Accordingly, for the sake of convenience and brevity, we dispose

all the appeals by this consolidated order.

first be relevant to cull out the basic facts of the case in respect of the

AYs before us. Search u/s 132 of the Income Tax Act, 1961 (hereinafter

referred to as "the Act") was conducted against Shri Kamlesh Jain &

Others, on 25-02-2020. The AO has noted that, some excel sheets was

extracted from server seized during the course of search, whose path

was, E:/Extract-4HDD/ D_Server_Cloud/ G_drive-live-data/ AmithParik f

server data/ Amithparik/ PCNAMU and material ID marked

ANN/MS/JMG/LS/S1 was seized, which contained information relating to

the assessee. It is observed that, the AO had recorded two satisfaction

notes both dated 26-03-2022, and on the next date i.e. 27.03.2022,

notices u/s 153C of the Act was issued upon the assessee for the AYs

impugned before us. According to the AO, ordinarily having regard to the

date of search i.e. 25-02-2020, he was within his jurisdiction to issue

notices u/s 153C of the Act in respect of six assessment years preceding

the assessment year of search i.e. the year in which the original search

took place (AY 2020-21). The AO accordingly issued notices u/s. 153C of

the Act reopening six preceding assessment years preceding the searched

assessment year and those AY's were AYs 2014-15 to 2019-20 and the

AO also reopened the AY 2020-21 u/s 153C(2) of the Act. However, in

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this case, the AO is noted to have exercised powers conferred under

Section 153C of the Act read with fourth proviso to Section 153A of the

Act, which was inserted by Finance Act 2017 w.e.f. 01.04.2017, and

reopened AY 2013-14, which was beyond six assessment years but,

according to the AO, within ten assessment years. It is not in dispute

that, the income-tax assessments of the assessee for all AYs before us

were either completed u/s 143(1)/143(3) of the Act and/or the time limit

for issue of notice u/s 143(2) of the Act had expired, at the time when the

notices u/s 153C was issued by the AO. Accordingly, the income-tax

assessments for AYs 2013-14, 2014-15, 2016-17, 2017-18, 2018-19,

2019-20 & 2020-21 did not abate consequent to the search. The

summary of the additions/disallowances in Rupees made by the AO in the

assessments completed u/s 143(3)/153C of the Act, which are in dispute

in these appeals are as follows:-

AY Addition of Disallowan Addition on Addition on unexplained ce of loss a/c of a/c of cash cash credit incurred in unexplaine interest u/s 68 of the derivatives d income Act commission 2013-14 63,82,48,400 - - 70,000 2014-15 - 11,55,400 53,836 1,40,000 2016-17 - - - 2,00,000 2017-18 - - - 3,64,29,253 2018-19 - - - 4,36,95,943 - - - 2019-20 6,50,93,385 2020-21 - - - 56,30,000

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No.799/Chny/2024 for AY 2013-14. It is noted that, the AO had recorded

a satisfaction note dated 26.03.2022 wherein he expressed his

satisfaction that, the seized material in his possession had a bearing on

total income of the assessee for AYs 2010-11 to 2020-21 and therefore,

he inter alia issued notice u/s 153C of the Act for the AY 2013-14.

Reading of the satisfaction note reveals that, according to AO, the seized

material bearing ID mark ANN/MS/JMG/LS/S1 showed that, M/s KSJ

Infrastructure Pvt Ltd had given loan to the assessee in FY 2012-13. The

AO found that, in this year, Shri Kamlesh Jain & Smt Geeta Jain

(searched-persons) had acquired two companies which held shares of M/s

KSJ Infrastructure Pvt Ltd, which in turn gave loan to the assessee, in

which these individuals were also partners. The AO observed that, there

was no business operation in M/s KSJ Infrastructure Pvt Ltd in FY 2012-13

and therefore, the loan transaction appeared to be non-genuine. In light

of the foregoing, the AO is noted to have drawn the satisfaction note

wherein he was inter-alia satisfied that, this seized material had a bearing

on total income of the assessee in AY 2013-14.

It is noted that, the AO, in the impugned assessment order, has 4.

analyzed the bank statements of M/s KSJ Infrastructure Pvt Ltd in light of

the statement of Mr. Kamlesh Jain recorded u/s 131 of the Act on

28.09.2020. The AO is noted to have held that, the credits in the bank

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statements of M/s KSJ Infrastructure Pvt Ltd was from entry providing

entities, which were in turn advanced to the assessee. The AO thus

concluded that, it was understandable that, these credits received in bank

account of M/s KSJ Infrastructure Pvt Ltd was only for money layering

which was credited to the assessee-firm and therefore, added the receipt

of loan by way of unexplained cash credit u/s 68 of the Act. Aggrieved by

the order of the AO, the assessee preferred appeal before the Ld. CIT(A)

who by his common order confirmed the same. Being aggrieved by the

Ld. CIT(A)’s action, the assessee is now in appeal before us.

assessee challenged the validity of the notice issued u/s 153C of the Act

as well as the consequent order u/s 153C/143(3) of the Act for AY 2013-

14 on several legal fronts. The first challenge raised by the Ld. AR was to

the usurpation of jurisdiction u/s 153C of the Act by the AO, without first

satisfying the essential condition precedent in the fourth proviso to

Section 153A read with Explanation (2) of the Act. It was pointed out

that, the notice for AY 2013-14 was beyond the period of six (6)

assessment years preceding the searched year and therefore the AO

could have validly issued notice u/s 153C of the Act only when he had in

his possession, any incriminating material, which revealed that income

represented in the form of ‘asset’ valued at Rs.50,00,000/- or more, had

escaped assessment. The Ld. AR of the assessee showed us that, the

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term ‘asset’ was specifically defined in Explanation (2) and argued that

the AO had nowhere identified or averred to any such unexplained asset

in the satisfaction note for him to have validly assumed jurisdiction u/s

153C of the Act.

ANN/MS/JMG/LS/S-1 found and seized from the premise of Jain Metal

Group, which according to him, did not reveal any such ‘asset’ of the

assessee which had escaped assessment. He also pointed out that, the

seized document relied upon by the AO only contained information

relating to M/s KSJ Infrastructure Pvt Ltd in as much as the contents

thereof had no relation to the assessee. The Ld. AR further showed us

that, the ledgers and bank statements referred to in this seized material

was relating to M/s KSJ Infrastructure Pvt Ltd, and therefore it could not

by any stretch of imagination be construed as unexplained ‘asset’ of the

assessee. The Ld. AR thus argued that, ordinarily adverse inference qua

the seized material, if any, could have only been drawn in the hands of

M/s KSJ Infrastructure Pvt Ltd, to whom these documents related to, and

not the assessee-firm. He further showed us that, the AO had also

reopened the assessment of M/s KSJ Infrastructure Pvt Ltd u/s 153C of

the Act and added the impugned credits in hands of M/s KSJ

Infrastructure Pvt Ltd as well. The Ld. AR thus argued that, the impugned

action of reopening the assessment of the assessee u/s 153C of the Act

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was erroneous and on wrong assumption of jurisdictional fact and was

impermissible being excessive and unsustainable. It was also shown that,

the addition impugned before us was made on account of liabilities added

as unexplained cash credit u/s 68 of the Act, which cannot be said to have

constituted income represented in the form of ‘asset’ escaping

assessment in terms of fourth proviso to Section 153A of the Act. The Ld.

AR thus urged that, the notice issued u/s 153C of the Act, in terms of

fourth proviso to Section 153A of the Act and the consequent impugned

order, was bad in law for want of jurisdiction.

drawn by the AO from the seized material viz., ANN/MS/JMG/LS/S1 for

the relevant AY 2013-14 did not relate to or pertain to it. The Ld. AR

showed us that, the seized material ANN/MS/JMG/LS/S1 comprised of

day-books of M/s KSJ Infrastructure Pvt Ltd and it contained the entries

passed by the said entity in its regular books of accounts for FY 2012-13.

The Ld. AR thus vehemently contended that, the noting in question

pertained to M/s KSJ Infrastructure Pvt Ltd and not the assessee-firm.

The Ld. AR thus urged that the initiation of proceedings u/s 153C of the

Act and the consequent impugned order was bad in law.

unabated assessment year and therefore the impugned addition made in

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this AY was unsustainable, since it was not based on any incriminating

material found in the course of search. The Ld. AR relying upon the

decisions of the Hon’ble Supreme Court in the case of CIT vs Sinhgad

Technical Education Society (397 ITR 344) and Hon’ble Delhi High

Court in the case of CIT vs Kabul Chawla (380 ITR 573), which has

since been affirmed by the Hon’ble Supreme Court in the case of PCIT vs

Abhisar Buildwell Pvt. Ltd. (149 taxmann.com 399), urged that the

addition made u/s 68 of the Act by way of unexplained bank credit in the

unabated AY 2013-14, in absence of incriminating material found in the

course of search, deserves to be deleted.

the action of the lower authorities. The Ld. CIT, DR argued that, there

was no such pre-requisite set out in the fourth proviso to Section 153A of

the Act that, the AO is required to first record his express satisfaction

stating that income represented in form of ‘asset’ had escaped

assessment, prior to issuing the notice issued u/s 153C of the Act for

‘relevant assessment year’ i.e. AY 2013-14. The Ld. CIT, DR further

contended that, ultimately the addition made by way of unexplained cash

credit was in the nature of ‘asset’ as defined in fourth proviso to Section

153C of the Act and hence the condition precedent set out in fourth

proviso to Section 153A of the Act was met. The Ld. CIT, DR further

submitted that, the impugned addition was made with reference to

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incriminating material viz., Annexure ANN/MS/JMG/LS/S-1 unearthed in

course of search and according to him therefore, the reliance placed by

the assessee on the decision of PCIT vs Abhisar Buildwell Pvt. Ltd.

(supra) was distinguishable. Overall, the Ld. CIT, DR urged that all the

legal pleas raised by the assessee deserves to be dismissed.

We have heard both the parties and perused the material placed 10.

before us. We are inclined to first adjudicate the legal issues raised by the

assessee, which if found valid, goes to the root of the matter [since it

challenges the jurisdiction exercised by the AO u/s 153C of the Act]. The

first question before us is, whether the AO had validly assumed

jurisdiction to issue notice u/s 153C of the Act upon the assessee for AY

2013-14 in terms of the fourth proviso to Section 153A of the Act, read

with Explanation (2) of the Act.

law relevant to this issue. It is noted that, the fourth proviso of Section

153A of the Act which was inserted by the Finance Act, 2017 with effect

from 01.04.2017, enabled an AO of a searched person to issue notices u/s

153A of the Act for “relevant assessment year or years” in terms of

Explanation 1 of the fourth proviso to Section 153A of the Act i.e.

assessment years beyond the six (6) assessment years till tenth (10)

assessment year preceding the searched assessment year (i.e. 7th to

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10th AY's preceding the searched AY), provided the AO satisfies the

essential conditions specified therein. The relevant portion of Section

153A of the Act i.e., fourth proviso to Section 153A of the Act, which has

a bearing on the controversy in hand, is being reproduced below:

“Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless—

(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;

(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and

(c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.

Explanation 2. For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.”

the Act, it can be seen that, the expression used by the Parliament, while

enlarging the power of the AO to extend the jurisdiction u/s 153A of the

Act from seventh to tenth AY is, first of all, prohibiting the AO to issue the

notice u/s 153A/153C of the Act, unless the condition precedent therein is

satisfied. The expression used is "no notice for assessment or

reassessment shall be issued by the AO for the relevant AY/AY‟s"; and

the relevant AY/AY's has been explained by the aid of Explanation 1

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appended to it. Therefore, it is noteworthy that, the fourth proviso to

section 153A bars the AO to issue notice u/s. 153A/153C of the Act for

the assessment or reassessment of the 7th - 10th AY's unless, he has in

his possession evidence/material which revealed that income represented

in the form of ‘asset’ valued Rs. 50 lakhs or more has escaped

assessment. So, the AO, in order to assume jurisdiction for the extended

period i.e. 7th to 10th AY preceding the searched year, should have in his

possession income represented in the form of ‘asset’ valued Rs. 50 Lakhs

or more which has escaped assessment, which is the ‘jurisdictional fact’,

which if present/or in possession of AO will then only enable the AO to

assume jurisdiction u/s. 153A r.w. 153C of the Act to issue notice for

these extended AYs'. According to the Ld. AR, this ‘jurisdictional fact’ was

absent in the facts of the present case and hence, the action of AO

reopening the assessment for AY 2013-14 u/s 153C of the Act was bad in

law for want of jurisdiction. So, the issue to be examined in the present

case is whether the AO was in possession of this ‘jurisdictional fact’ prior

to issuance of notice u/s. 153C for AY 2013-14 i.e., existence/possession

of undisclosed/unaccounted ‘assets’ valued at Rs. 50 lakhs or more, as

defined in Explanation 2 to fourth proviso of Section 153A qua the assessee qua the 7th to 10th AY un-earthed from search, without which

the AO cannot issue notice u/s 153C of the Act for this AY 2013-14.

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In this regard, we first gainfully refer to the decision of this Tribunal 13.

at Guwahati in the case of ACIT Vs Fortune Vanijya Pvt Ltd (ITA No.

21/Gau/2021) dated 10.12.2021 wherein the facts involved are noted

to be similar to the present case. In the decided case, the AO had seized

regular books and ledgers of the assessee from the premises of third

person (searched person) and referring to these ledgers the AO recorded

his satisfaction note that, it had a bearing on the determination of total income of the assessee for the 7th AY (relevant assessment year) and

therefore reopened the same u/s 153C read with fourth proviso to Section

153A of the Act. The AO completed the assessment u/s 153C/143(3)

wherein the bank credits out of which loans were advanced in the regular

books of accounts was added to the total income. On appeal this Tribunal

explained the meaning of the term ‘asset’ as defined in Explanation (2) to

Section 153A of the Act and the condition precedent set out in fourth

proviso to Section 153A, which was required to be met prior to issuance

of notice u/s 153C of the Act. The Tribunal held that, the contents of

seized material viz., regular books of accounts, were neither incriminating

in nature nor in any manner revealed income represented in form of

‘asset’ which had escaped assessment and therefore, in absence of this

‘jurisdictional fact’, quashed the notice issued u/s 153C and the

consequent order passed by the AO. The relevant findings taken note of

by us, are as follows:-

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“On a reading of the fourth proviso to Section 153A of the Act along with Explanation 2 to it which defines ‘Asset’, we find considerable merit in the contention of Shri Dudhwewala that in order to invoke jurisdiction u/s 153A of the Act for the seventh to tenth AY preceding the searched year, the AO should have in his possession the jurisdictional fact i.e. existence/possession of undisclosed/unaccounted assets valued at Rs. 50 lakhs or more as defined in Explanation 2 to fourth proviso of Section 153A qua the assessee qua the 7th to 10th AY un-earthed from search, without which the AO cannot issue notice u/s 153A/153C of the Act for these extended AY’s. It is only when there exists this jurisdictional fact the AO can validly reopen those extended AYs; and then only AO can validly assume jurisdiction and then only he is empowered to issue notice. In other words, unaccounted asset valued at Rs. 50 lakhs or more which were discovered during search qua the assessee qua the assessment year (7th 10th years) preceding the searched assessment year is the jurisdictional fact; and if the jurisdictional fact is in the possession of the AO, [and possession means physical possession; or personal knowledge of the existence of the undisclosed asset which need to be spelled out in clear terms (not vaguely) qua assessee qua AY 2011-12 discovered during search.] then he can assume jurisdiction u/s. 153C/153A of the Act and issue notice to assess the assessment of the escaped income for these assessment year’s (7th to 10th year) which is the ‘fact in issue’ or ‘adjudicatory fact’. On the other hand if the AO did not have in his possession the jurisdictional fact, then he is debarred from invoking/issuance of notice u/s 153C/153A of the Act for the 7th- 10th AY preceding the search.

……..

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upheld by the Hon'ble Gauhati High Court which is reported in 459 ITR

72, by observing as follows:-

“16. From the rival contentions, we note that, the assessee had specifically objected to the AO's action of reopening the unabated

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 15 ::

assessment for AY 2011-12 u/s 153C of the Act and had requested the AO to give details of the purported 'assets' which had escaped assessment. The AO however did not provide the details of the undisclosed/unaccounted assets of the assessee, which he claims were in his possession before the issuance of notice u/s 153C of the Act for AY 2011-12. The AO was however duty bound to decide the said question as to his jurisdiction, and record finding as to whether he had in his possession, details of any undisclosed/unaccounted assets valued as Rs. 50 lacs and more, qua the assessee qua the assessment year (7th to 10th year) preceding the searched assessment year, and thereby state clearly as to how the case of assessee was being brought under the 4th proviso of section 153A read with explanation 2. Only upon valid assumption of jurisdiction, the AO could have proceeded against the assessee for assessment of escaped/undisclosed assets.

….

the facts involved in the present case, as already noted by us earlier. It is

not in dispute that, the AY 2013-14 before us is an unabated assessment.

In the present case, search had been conducted upon the Jain Metal

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 16 ::

Group (searched person) on 25-02-2020. The satisfaction note was

however drawn out by the AO satisfying himself that, the

assets/documents found in the course of search belongs/pertains to "the

other person" (third party i.e. the assessee in this case). Pursuant

thereto, the AO of the assessee recorded the following satisfaction note

on 26-03-2022, which is extracted below:

“A search operation u/s.132 of the Income-tax Act, 1961 was conducted in the premises on 25.02.2020 in the case of M/s.Jain Metal Rolling Mills, M/s Jain FGL Metal Industries, Shri. Kamlesh Jain, Shri.Shantilal Jain, Smt. Geetha Jain and Shri.Sanchit Jain

Documents seized during search u/s 132 of the act and received along with the satisfaction note from the assessing officer of M/s.Jain Metal Rolling Mills, M/s. Jain FGL Metal Industries, Shri.Kamlesh Jain, Shri. Shantilal Jain, Smt. Geetha Jain and Shri.Sanchit Jain have been perused. Documents seized vide ANN/RR/JMG/ED/S-4 have been examined. During the course of search proceedings conducted at the head office of Jain Metal group at the Lattice, No. 20, 4th floor, Waddles Road, Kilpauk, Chennai, one 'D-Server' which contains the actual books (accounted & unaccounted) of accounts of Jain Metal group was found which was imaged and seized vide ANN/RR/JMG/ED/S-4. M/s Metal Impex is a partnership firm which predominantly deals in money lending business. Mr. Kamlesh Jain is active partner in the firm. On verification of the D-Server, some excel sheets(.xlsx format) which were found in the following pathway of the D-Server:

E: ->> EXTRACT -4 HDD ->>D_Server_Cloud ->>G_drive- Live-data- >>AmithParak f server data ->>AmithParik ->> PCNAMU It contains the Interest computation workings pertained to the advances given by the M/s Metal Impex, a partnership firm, to various parties, date of advancement of loan and date of recovery of Interest and loan etc. The workings contains the columns like loan amount, interest, TDS, cheque, DD, Cu, Copper, Cash etc.

The entries pertaining to cash interest received by M/s Metal Impex Partnership firm, from various parties (as recorded against "DD", "Cu" "Copper" and 'Cash') were consolidated year-wise which is reproduce below for reference:

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F.Y AMOUNT 2012-13 70,000 2013-14 1,40,000 2015-16 2,00,000 2016-17 3,64,29,253 2017-18 4,36,95,943 2018-19 6,50,93,385 2019-20 56,30,000 Total 15,12,58,581

On verification of the seized material seized ANN/MS/JMG/LS/S1 from the Corporate Office of Jain Metal Group, it is found vide Annexure that KSJ infrastructure Pvt Ltd has given a loan of Rs.63,82,48,400/- to M/s Metal Impex in the FY 2012-13. In FY 2012-13, it is found that Shri Kamlesh Jain and Smt Geeta Jain has purchased the shares of the holding companies namely Jackpot Commodeal Pvt Ltd and Salputri Dealers Pvt Ltd of the M/s KSJ Infrastructure Pvt. Ltd. thereby indirectly becoming the shareholders of M/s KSJ Infrastructure Pvt. Ltd. M/s KSJ Infrastructure Pvt. Ltd. has given loan to M/s Metal Impex in which Shri Kamlesh Jain is one of the Partner and Shri Kamlesh Jain is also the Director of M/s KS) Metal Impex another partner of M/s Metal Impex. It is found that there is no operation in the company KSJ infrastructure Pvt Ltd and the transaction appears to be not genuine. From the Balance Sheet it is seen that the assesse firm has total assets of Rs. 51,25,64,272/- and the partner Shri Kamlesh Jain has made capital drawings during the financial year.

Therefore, I am satisfied that the above referred seized material seized from head office of Jain Metal group at the Lattice, No. 20, 4th floor, Waddles Road, Kilpauk, Chennai, seized vide ANN/RR/JMG/ED/S-4 and Annexure ANN/MS/JMG/LS/S1 In the case of M/s. Jain Metal Rolling Mills, M/s.Jain FGL Metal Industries, Shri. Kamlesh Jain, Shri. Shantilal Jain, Smt. Geetha Jain and Shri.Sanchit Jain has information relating to M/s Metal Impex and has a bearing on the total income of the assessee.

Therefore, I am satisfied that M/s Metal Impex, Partnership firm is covered under section 153C of the Income Tax Act. Accordingly, notices u/s 153C of the act are issued for A.Ys 2010-11 to A.Y. 2019-20 and u/s 153C(2) for A.Y. 2020-21.”

Having perused the satisfaction note (supra), it is noted that, the 16.

satisfaction note does not reveal or point out the ‘asset’ which had

escaped assessment in the relevant AY 2013-14. The AO has only made a

sweeping reference to the seized material bearing ID mark

ANN/MS/JMG/LS/S1 and averred that the information contained therein

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had a bearing on total income of the assessee. It is common knowledge

that, seized material may contain both disclosed & undisclosed assets,

liabilities, expenses & income etc. It was therefore imperative for the AO

to set out the specific details of the ‘asset’ unearthed from this seized

material which represented income escaping assessment. We however

find that, the AO has not done so. Rather the AO usurped the extended jurisdiction to invoke/assess in respect of 7th to 10 AYs particularly AY

2013-14 in a casual manner by simply referring to the seized material,

without specifying the ‘jurisdictional fact’ necessary for assumption of

jurisdiction, as noted above.

simply set out the contemporaneous details of acquisition of shares of

certain bodies corporate by Shri Kamlesh Jain & Smt Geeta Jain and the

loans advanced by its subsidiary i.e. M/s KSJ Infrastructure Ltd to the

assessee, all of which are noted to be transactions forming part the

regular books of accounts. There is no whisper of any unaccounted or

undisclosed asset which was unearthed from the seized material

mentioned in the satisfaction note. The Ld. AR also took us through the

contents of the seized material Annexure - ANN/MS/JMG/LS/S1, and we

agree with him that, the said material also did not refer to any ‘asset’

pertaining or relating to the assessee which had escaped assessment.

Instead, it is noted that, the AO in the penultimate part of the paragraph,

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doubted the genuineness of loan received by the assessee from the group

entity i.e. M/s KSJ Infrastructure Pvt Ltd on an apprehension that, there

was no business operations in M/s KSJ Infrastructure Pvt Ltd. In light of

the foregoing, we find ourselves in agreement with the assessee that, the

noting referred by the AO in the satisfaction note were contemporaneous

facts, which were forming part of the regular books of accounts and there

was nothing contained therein which could suggest that any unexplained

or undisclosed asset of the assessee had escaped assessment. Even at

the time of hearing, the Ld. CIT, DR was unable to point out to us the

relevant material contained in the seized material, basis which the AO

could have stated that, the income represented in the form of ‘asset’ had

escaped assessment. According to us, the AO only after having in his

possession this ‘jurisdictional fact’, could have assumed jurisdiction, and

issued notice u/s. 153C r.w. 153A of the Act or else he could not have

issued notice, as done in this case. Hence the issuance of notice u/s.

153C of the Act for AY 2013-14 is held to be bad in law.

the case of ACIT Vs Goldstone Cement Ltd (ITA No. 126 to

131/Gau/2020) which has since been affirmed by the Hon’ble Gauhati

High Court reported in 156 taxmann.com 529. In the decided case, the

Tribunal held that, it is imperative that, the AO sets out his objective

satisfaction from the seized material regarding the details of the income

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 20 ::

represented by the specific/undisclosed ‘assets’, in his possession qua the

assessee valued Rs. 50 lakhs or more, prior to issuance of notice in terms

of fourth proviso to Section 153A of the Act. In absence of the same, the

issuance of notice u/s 153A under the fourth proviso shall be rendered

bad in law. The relevant findings of this Tribunal, as taken note of by us,

is as follows:-

“8.18 Be that as it may, we further note another interesting aspect that, the AO while denying the details of assets for AY 2011-12 observed that, “at this point of time i.e. [04-11- 2019] the undersigned has recorded reasons there is seized material available on the basis of which the case of assessee for AY 2011-12 has been covered u/s 153A”, This factual assertion made by the AO while making the order-sheet entry dated 04.11.2019 shows that, he had not recorded his satisfaction prior to issuance of notice dated 11.09.2019 in terms of the fourth proviso to Section 153A of the Act, but did so only subsequent to reopening of the assessment on 04.11.2019. His own admission in the noting sheet reveals that he has recorded satisfaction only on 04.11.2019 to cover the case of assessee in respect of AY 2011-12 on the strength of the seized material. From this assertion/averment/admission, it is clear that AO did not have in his possession the jurisdictional fact [on or prior to 11.09.2019] to invoke and issue notice u/s. 153A of the Act. Here, one should bear in mind that the fourth proviso was inserted by the Parliament w.e.f. 1.04.2017 by Finance Act, 2017, thereby extending the jurisdiction of the AO to assess/re-assess beyond six AY’s to ten AY preceding the searched year. And as discussed at para 8.5, the fourth proviso clearly bars the AO to issue notice for the extended period (7th – 10th AY) unless the AO is in possession of the jurisdictional fact of undisclosed asset valued Rs. 50 lakh or more qua the assessee qua the extended assessment year. So the Legislative intent is very clear that AO would be empowered to issue notice u/s 153A only if he is in possession of the jurisdictional fact otherwise he cannot issue notice u/s 153A of the Act. No such bar can be seen in the case of six AY’s preceding the searched AY. So the Parliament while extending the jurisdiction of AO by Finance Act, 2017, for 7th – 10th AY has prescribed this particular safe guard against arbitrary exercise of power by the AO u/s 153A of the Act. It is thus prescribed in the fourth proviso that, no notice shall be issued by AO, unless the AO is in possession of the undisclosed assets valued Rs. 50 lakh or more qua the assessee qua the AY. Hence, the admission made by the AO in the order sheet on 04.11.2019, that “at this point of time” he was recording his satisfaction for covering AY 2011-12 u/s 153A of the Act as he had seized material with him, clearly shows that the AO had not applied his mind to the seized material prior to issuance of notice u/s 153A on 11.09.2019. The AO had not gone through the seized material to gather details/information which would suggest discovery of undisclosed assets qua the assessee qua the AY 2011-12 and even if something was found, then whether the undisclosed

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 21 ::

asset was valued Rs 50 lakhs or more? This exercise was not carried out by the AO. Instead, he simply made a sweeping statement that since seized material is there with him, so he is covering the case of AY 2011-12. This action of the AO cannot be accepted. According to us, the AO’s bald assertion/dependence on the seized material before him, does not fulfil the requirement of law to confer on himself jurisdiction u/s. 153A of the Act. The extended jurisdiction to invoke/assess 7th – 10th AY is conferred on the AO by authority of law and the AO cannot confer to himself the jurisdiction in a casual manner by stating/substituting the specific jurisdictional fact to encompass all seized material. It is common knowledge that, seized material may contain both disclosed &undisclosed assets, liabilities, expenses & income. So, it is imperative that before issuance of notice u/s 153A [for the extended period], the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in his possession qua the assessee for AY 2011-12 valued Rs. 50 lakhs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s 153A for 7th to 10th AY. For this, we rely upon the dictum of the Privy Council in Nazir Ahmed Vs. King Emperor AIR 1936 PC 253(which has since been accepted and later followed by Hon’ble Supreme Court), that when a statute requires a thing to be done in a particular manner, it must be done in that manner or not at all. As discussed at Para 8.5 (supra), the language of the fourth proviso to section 153A of the Act show that issuance of notice can be resorted to by the AO only after he is in possession of the jurisdictional fact, which is found to be absent in the present case. Therefore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153A of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153A dated 11.09.2019 was issued by the AO without authority of law and without satisfying the essential jurisdictional fact, and hence the issuance of notice u/s. 153A is held to be bad in law.

8.19. Even though we are fortified with our above view, that prior to issuance of notice u/s 153A for the 7th – 10th AY, the AO should be in possession of the jurisdictional fact, we deem it fit to further examine the facts as to whether ultimately the AO, while addressing the request of the assessee to provide the details of the undisclosed assets qua the assessee for AY 2011-12,did at all make any endeavour to discover any undisclosed asset qua assessee for AY 2011-12. It is noted that the AO even in the impugned order did not bother to bring on record the jurisdictional fact nor did he even whisper anything about any undisclosed asset in the order nor did he make any addition in respect of undisclosed assets u/s 69 or 69A or 69B of the Act, which clearly shows not only did the AO not havein his possession the jurisdictional fact before invoking or while assumption of jurisdiction u/s 153A for AY 2011-12 but it remained absent even when he framed the impugned assessment order. The Hon’ble Supreme Court has categorically held that, if the jurisdictional fact does not exist, the AO/quasi-judicial authority or authority cannot act on the erroneous supposition that it exists. Further the Hon’ble Supreme Court held that, if a quasi judicial authority or authorities wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. [Here in this case, it may be noted that AO refused to divulge the details of the undisclosed Assets discovered during search qua assessee for AY 2011-12 and asked the assessee to await the

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outcome of the reassessment order, which action of AO tantamounts to deny the assessee an opportunity to approach the Hon’ble High court for issue of writ of certiorari, which action of AO cannot be countenanced.] The Hon’ble Supreme Court further laid down the principle that, by erroneously assuming existence of jurisdictional fact, no authority/AO in this case can confer upon itself jurisdiction which it otherwise does not possess. From the facts narrated in the foregoing, it is evident that at no point of time did the AO have in his possession the evidence regarding the undisclosed/unaccounted assets as defined in Explanation (2) to the 4th proviso qua the assessee qua the assessment year 2011-12 and therefore he could not have conferred upon himself the jurisdiction under section 153A of the Act. Thus, on these admitted facts as discussed (supra), and for other defects and contention noted (infra), we find merit in the submission of Shri Dudhwewala that, the notice u/s 153A for AY 2011-12 had been issued by the AO in an arbitrary and casual manner, without first satisfying himself that he was in possession of incriminating material which revealed that income represented in form of asset had escaped assessment for AY 2011-12 which was the essential jurisdictional fact found to be absent in this case. In our considered view therefore, the AO’s failure to do so, rendered the very act of usurpation of jurisdiction and issuance of notice dated 11.09.2019 under the fourth proviso to Section 153A of the Act for AY 2011-12 to be null in the eyes of law.”

even in the impugned order did not bother to bring on record the

‘jurisdictional fact’ viz., he did not mention or specify any undisclosed

asset in the order nor did he make any addition in respect of undisclosed

assets u/s 69 or 69A or 69B of the Act, which clearly shows not only did

the AO not have in his possession the jurisdictional fact before invoking or

while assumption of jurisdiction under the fourth proviso to Section 153A

of the Act for AY 2013-14, but it remained absent even when he framed

the impugned assessment order.

account of loan obtained from M/s KSJ Infrastructure Pvt Ltd by way of

unexplained cash credit u/s 68 of the Act, cannot be said to constitute,

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‘asset’ which had escaped assessment in terms of the fourth proviso to

Section 153A of the Act. Taking us through the definition of the term

‘asset’ as defined in Explanation 2 to the fourth proviso to Section 153A of

the Act, the Ld. AR of the assessee has rightly contended that, the

impugned addition represented loan/liability of the assessee and thus it

did not fall within the term ‘asset’ as defined in Explanation 2 to the

fourth proviso to Section 153A of the Act. We find that the meaning of the

term ‘asset’ as defined in Explanation 2 to fourth proviso of Section 153A

of the Act has been explained by the Tribunal in the case of ACIT Vs

Goldstone Cements Ltd (supra), which has been affirmed by the

Hon'ble Gauhati High Court. The relevant extracts of the decision, as

noted by us, is as follows :-

“8.11. Having held so, let us examine the next argument of Shri Dudhwewala that, the Parliament by specifying the jurisdictional fact as undisclosed asset valued Rs. 50 Lakhs or more, has impliedly excluded other items of income viz., liabilities/credit, unexplained expenditure etc. A reading of the fourth proviso to section 153A of the Act and Explanation (2) to fourth proviso to section 153A of the Act which defines ‘Asset' for the purpose of fourth proviso to section 153A of the Act, clarify the intention of the Parliament to permit the AO to enlarge the assessment u/s. 153A after search u/s. 132 of the Act beyond six assessment years to ten assessment years preceding the searched assessment year, provided the AO has in his possession the essential jurisdictional fact i.e. ―undisclosed/unaccounted asset valued Rs 50 lakhs or more of the assessee discovered during search pertaining to 7th to 10th Assessment Year preceding the searched assessment year. Since the Parliament has used the expression income in the form of asset' and the definition of asset has been spelled out in the fourth proviso, this itself necessarily implies that the liability/items falling in the left side of the Balance Sheet stands excluded. For this view of ours, we rely on the legal Maxim for interpretation ―Expressio Unius Est Exlcusio Alterius which principle states that, express mention of one is the

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exclusion of other and this maxim has been accepted by the Hon'ble Supreme Court in GVK Industries Ltd. Vs. ITO [197 Taxman 337] (Constitution bench of 5 Supreme Court Judges). By express mention of ‘Assets' and definition given to it specifically, it is implied that the Parliament silently excluded the items of ‘revenue', ‘expenditure' & liabilities' from its jurisdictional fact for invoking/assumption/usurpation of jurisdiction u/s. 153A of the Act for the seventh to tenth assessment year preceding the searched assessment year.

8.12 It is a rudimentary accounting concept, that ―debit denotes ―asset and ―credit denotes ―liability. An asset represents an economic resource, either immovable or movable, having value, such as immovable property viz., land or building, investment held in shares and securities, loans & advances given and deposits in bank account. On the other hand, ‘Liability' includes items such as share capital, reserves, loans obtained (secured as well as unsecured) etc. which cannot be characterized or classified as ‘Asset'. Similarly, items of ‘expenses' or revenues in form of ‘sales' / ‘turnover' does not constitute ‘asset'. This can be illustrated in the following manner (‘Asset' below falls within the ambit of the fourth proviso to Section 153A of the Act):

Profit & Loss Account Particulars (Debit) Particulars (Credit) Expenses Revenues

Balance Sheet Liabilities (Credit) Assets(Debit) Share capital / Reserves/ Loan/ Immoveable Property/ Loans & Current Liabilities Advances/ Shares/ Bank Balance

8.13 The above view of ours get bolstered from reading of Explanation 2 appended to the fourth proviso, which defines ‘asset', for the purpose of fourth proviso to Section 153A,to include i) immovable property, ii) shares and securities , iii) loans and advances & iv) Deposit in bank. Hence, where search action u/s 132 of the Act reveals that, (i) the assessee owns an undisclosed immovable property, or (ii) information has been gathered which shows that the assessee had given loans or advances outside the regular books or (iii) search has revealed unaccounted investments held by assessee in shares & securities, which do not form part of regular books of accounts or (iv) if undisclosed bank accounts having deposits, have been found in the course of search, pertaining to the 7th-10th AY preceding the search; then having in his possession this jurisdictional fact, the AO may assume jurisdiction under the fourth proviso to Section 153A of the Act for the relevant seventh to tenth assessment year preceding the searched assessment year. Hence,

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the most important aspect is that, these ‘assets' must have been found to be undisclosed or unaccounted, in the regular books of account maintained by the assessee, and discovered during the course of search, which otherwise would not have seen the light of the day but for the search, resulting in escapement of income.

8.14 As per our discussion, is to be kept in mind that, the term ‘deposits in bank account' has to be considered with the term ‘asset'. The term ‘deposits in bank account' and ‘asset' are to be understood in their cognate sense, as it takes their colour from each other, i.e., the more general is restricted to a sense analogous to the less general. Hence, the term ‘deposits in bank account' denotes discovery of an ‘asset' in the form undisclosed bank deposits, say fixed deposit bank a/c, savings deposit bank a/c, foreign deposit bank a/c etc. which is found to have escaped assessment in the 7th-10th AY preceding the search. It does not suggest or include any or all credits in bank accounts, which is disclosed and forms part of the regular books of accounts. To say, if any credits in a regular bank account, like sale proceeds/ loan / share capital etc. is found to be unexplained, then it may be a case of discovery of undisclosed ‘income' / ‘cash credit' but it does not suggest discovery of an undisclosed ‘asset' by the Revenue so as to bring it within the teeth of the fourth proviso to Section 153A of the Act for invoking jurisdiction u/s 153A for the extended period.

8.15 Hence, from the above discussion, it is thus clear that Section 153A of the Act can be invoked only if the AO comes to a positive conclusion that he has in his possession documents or information revealing an undisclosed asset of the assessee qua the assessment year (7th to 10th) which is valued Rs. 50 lakhs or more. This, in our judgment is a foundational, fundamental or jurisdictional fact.

......

8.21. The Ld. A.R Shri Dudhwewala in the alternate also pointed out that, even in the assessment order, the AO had singularly failed to identify and spell out such ―asset‖, as defined in Explanation 2 to the fourth proviso to Section 153A of the Act, which had escaped assessment for AY 2011-12 and did not make any addition to the income of the assessee u/s. 69, 69A or 69B of the Act. So, therefore, according to Shri Dudhwewala, since the AO did not make any addition on account of escaped income represented in form of undisclosed/unaccounted asset, the AO could not have made any other addition like, in respect of credit entry u/s. 68 of the Act. For this, he relied on the decisions rendered by the case of Hon'ble High court of Bombay in Jet Airways (supra) and Hon'ble Delhi High Court in Ranbaxy Laboratories (supra) though in the context of reopening u/s. 147 of the

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 26 ::

Act. So, according to Shri Dudhwewala, the AO's action of making addition u/s. 68 of the Act, was even otherwise, legally impermissible.

8.22. From our discussion (supra) it is clear that, only if any of specified ‘asset/s' as defined in Explanation (2) is unearthed during the course of search and the acquisition of such an ‘asset' being unexplained or undisclosed, which is valued Rs. 50 Lakhs or more, that the AO can be said to be in possession of the jurisdictional fact to initiate proceedings u/s 153A for 7th-10th AY (AY 2011-12, in the instant case). Now, to understand the alternate ground of argument of Shri Dudhwewala, let us for the sake of argument, assume that the AO had validly invoked the jurisdiction u/s 153A for AY 2011-12.Then in such an event, it has to be borne in mind that, first the AO had to make addition in respect of the purported undisclosed asset valued at Rs. 50 lakhs or more; and only thereafter the AO can venture to make any other additions/disallowance which are not in the nature & character of ‘Asset' but represents undisclosed/unexplained income/expenditure/credit etc. Perusal of the assessment order impugned before us, shows that that AO did not make any addition/s in respect of escaped/undisclosed asset in the relevant AY 2011-12. We therefore find ourselves in agreement with Shri Dudhwewala that, unless the AO made addition/s of Rs. 50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. liabilities like credit entry etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153A of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the 7th to 10th AY. It is therefore incumbent upon the AO to show that the key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped/unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the AO for reopening the assessment is either incorrect or where the AO himself abandons the jurisdictional fact in the course of assessment proceedings, then as a corollary, it has to be held that the key used by the AO for opening the lock was incorrect and thereby the lock placed earlier on the concluded assessment remained unopened and therefore the AO could not enter upon the arena of reassessing the income of the assessee. So, when the AO fails to make any addition for the ‘undisclosed asset', then it tantamount to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153A for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option

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but to drop the assessment proceedings. He may however proceed again, if there is any new/fresh jurisdictional fact before him, of course, subject to limitation. For this conclusion of ours, we rely on the ratio laid down in the judgments of CIT Vs Jet Airways (supra) & Ranbaxy Laboratories Ltd. vs. CIT (supra).Though these judgments were rendered in the context of reopening u/s. 147 of the Act, however the ratio decidendi will apply in the present case, because, like Section 147/148 of the Act, the AO gets the authority to assess/reassess the income of a searched person or other person u/s 153A/153C for the extended assessment years (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed. If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment order; then the AO cannot legally proceed further with the assessment/reassessment and/or make any other items of additions/disallowances, because the jurisdictional fact on the strength of which he assumed section 153A jurisdiction is absent or not in existence. In the light of the aforesaid discussion, and in our considered opinion, this alternate plea of Shri Dudhwewala is well founded and deserves to be accepted.

8.23. In view of the above and on perusal of the impugned re- assessment order, we note that the only addition made by the AO in AY 2011-12 was on account of unexplained cash credit represented by share application monies of Rs.5,38,35,000/- u/s 68 of the Act. According to the AO, the source of source of the monies received from shareholder, M/s Hari Trafin Pvt Ltd was not properly explained, and therefore the same was added as unexplained cash credit u/s 68 of the Act. As noted above, the additions on account of unexplained cash credit and that too share capital, which is in the nature of ‘liability' could not have been made by AO, unless he first made an addition of undisclosed ‘asset' valued at Rs. 50 Lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO's hand or in his possession when he assumed jurisdiction u/s 153A for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153A of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO's action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed. The assessee thus succeeds on this ground raised in the cross objections and the same is allowed.”

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squarely applicable to the present case, it is held that the addition made

on account of the unsecured loan by way of unexplained cash credit does

not suggest discovery of any income represented in form of ‘asset’

escaping assessment so as to bring it within the teeth of the fourth

proviso to Section 153A of the Act.

possession of any evidence / material which suggested that income

represented in form of an ‘asset’ had escaped tax in the AY 2013-14 and

therefore the jurisdictional fact as prescribed under the fourth proviso to

Section 153A of the Act is found to be absent and the AO is noted to have

usurped jurisdiction u/s 153A r.w. 153C of the Act on wrong assumption

of jurisdictional fact. Accordingly, the impugned order passed u/s

153C/143(3) of the Act for AY 2013-14 is held to be ab initio void and bad

in law for want of jurisdiction and the same is hereby directed to be

quashed.

satisfaction note prepared by the AO also does not satisfy the

requirement of law as stipulated u/s. 153C of the Act, as the relevant

seized material did not pertain to the assessee, thereby rendering the

issuance of notice u/s 153C and the consequent order to be bad in law.

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non-searched person (assessee, in this case) can issue notice u/s 153C

read with 153A of the Act, only when he is satisfied, from a perusal of the

books of account or documents or assets seized or requisitioned from the

premises of searched person (Jain Metal Group, in this case), that it had a

bearing in the determination of the total income of the non-searched

person, i.e. the assessee. The satisfaction of Assessing Officer should be

objective and has to be based upon cogent material. The reason for it is

that, section 132(4A)(i) of the Act clearly stipulates that, when inter alia

any document is found in the possession or control of any person in the

course of a search, it may be presumed that such document belongs to

such person (the searched person). The presumption as to asset, books of

accounts, etc. is governed by section 292C(1)(i) of the Act which

presumes that the same belong or belongs to the person from whom the

said assets/documents were found during the course of search u/s. 132 or

survey u/s. 133A of the Act. In other words, whenever an asset/document

is found from a person who is being searched, the normal presumption is

that the said asset/document belongs to that person. It is for the

Assessing Officer to rebut that presumption and come to a conclusion or

'satisfaction' that the asset/document in fact belongs/pertains/relates to

somebody else (third party like assessee in this case). There must be

some cogent material available with the Assessing Officer, which was

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 30 ::

unearthed during search, basis which he/she arrives at the satisfaction

that the seized asset/document does not belong to the searched person

but to somebody else. Surmise and conjecture cannot take the place of

'satisfaction' and the same interpretation has been given by various

courts.

Court in the case of CIT Vs Singhad Technical Education Society

(397 ITR 344), wherein the Hon’ble Supreme Court upheld the decision

of the Hon'ble Bombay High Court reported in 378 ITR 84 by observing

that, unless and until the AO can establish document-wise (or asset wise)

correlation between what has been seized from the 'Searched person' -

and - how the same is incriminating in nature qua each of the assessment

years in question for which jurisdiction u/s. 153C is sought to be invoked

for the 'other Person' - then the notice issued under section 153C to the

assessee qua the said assessment year would be without the satisfying

the jurisdictional fact required to invoke section 153C of the Act. We draw

our attention in this regard to the following excerpts of the decision of the

Hon'ble Supreme court in Sinhgad Technical Education Society's case

(supra), wherein their Lordships took note of the Hon'ble High Court's

findings while confirming Tribunal’s view, which is as under:—

"6. The tribunal has found that incriminating material seized and stated to be pertaining to all six assessment years did not establish any co-

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relation document-wise with the assessment year in question. In other words, the tribunal concluded that the present matter indicates that the issue of notice could be on the basis that there is specific incriminating information in possession of the Assessing Officer. It is in these circumstances that the tribunal found and as indicated in paragraph 8 of the impugned order that the revenue's assertion that the Assessing Officer is empowered under the statute to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted and therefore the satisfaction which is recorded in the satisfaction note is enough, is erroneous. Therefore, the notice cannot be upheld and such stand of the revenue cannot be accepted. The reasons, therefor are to be found in paragraph 9 and 10 of the impugned order. If certain items pertain to assessment year 2004-05 or thereafter then it cannot be assumed, that the documents seized or incriminating material giving information are specific and to all assessment years. The tribunal found that they were concluded assessments. They could not have been disturbed. The documents in question are neither incriminating ones nor unaccounted transactions of the assessee. They also did not relate to the four assessment years. It is in these circumstances that the tribunal found that it will not be possible to uphold the stand of the revenue that overall approach in matters of concealment by the group assessee and all the discoveries of the search on Shri Navale and it concerns, will have to be taken into account while forming the satisfaction. The satisfaction note was very closely examined and the reasons assigned by the Assessing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon.

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these appeals raises any substantial question of law. They are accordingly dismissed. No costs."

And the aforesaid finding of Hon'ble High Court has been affirmed 26.

by the Hon'ble Supreme Court by observing as under:

facts of the present case. In order to test the validity of the jurisdiction of

AO to legally usurp the jurisdiction u/s. 153C against a third party who

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has not been searched, we have to ascertain whether Assessing Officer

satisfied the condition-precedent before issue of notice u/s. 153C of the

Act, for which we need to examine the contents of the satisfaction note

(supra).

was the seized material marked as Annexure - ANN/MS/JMG/LS/S1.

Having perused these documents (portions of which has also been

reproduced in the assessment order), it is noted that, these are day book/

ledgers of M/s KSJ Infrastructure Pvt Ltd (non-searched person), which

was seized from the premises of Jain Metal group (searched person). It

contains the entries passed regarding their sale of investments, in their

journal day book, in the course of regular business and the bank ledger

reflected the payments received through banking channel upon sale of

investments. These seized documents are therefore noted to contain

information relating to M/s KSJ Infrastructure Pvt Ltd and not the

assessee.

seized material, the AO of the searched person had recorded another

satisfaction stating that the information contained therein related to M/s

KSJ Infrastructure Pvt Ltd and that the AO of M/s KSJ Infrastructure Pvt

Ltd had also reopened its assessments inter-alia including AY 2013-14 u/s

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153C of the Act. The Ld. AR also showed us that, the amounts found

mentioned in these seized material were adversely inferred by the AO of

M/s KSJ Infrastructure Pvt Ltd who made addition u/s 69 of the Act in the

hands of M/s KSJ Infrastructure Pvt Ltd as well. The assessee has thus

rightly contended that, this very same seized material cannot now in the

same breath be alleged to contain information relating/pertaining to the

assessee, when clearly the title of these documents and entries therein

suggests otherwise i.e., it relates/pertains to M/s KSJ Infrastructure Pvt

Ltd.

considered view, shows that, the satisfaction recorded by the AO of the

assessee was based on incorrect assumption of fact that, the purported

seized material related to the assessee, which as noted in the foregoing,

is factually erroneous. This is also corroborated by the fact that, the last

portion of the satisfaction note read as, “..M/s KSJ Infrastructure Pvt. Ltd.

has given loan to M/s Metal Impex in which Shri Kamlesh Jain is one of

the Partner and Shri Kamlesh Jain is also the Director of M/s KSJ Metal

Impex another partner of M/s Metal Impex. It is found that there is no

operation in the company KSJ infrastructure Pvt Ltd and the transaction

appears to be not genuine.”, which clearly reveals that, this satisfaction

stating that he was in possession of information having a bearing on total

income of the assessee, was not based on the seized material but was

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 35 ::

based on apprehension and suspicion of the AO. Hence, the assertion of

the Revenue that the seized document Annexure - ANN/MS/JMG/LS/S1

mentioned in the satisfaction note was incriminating material qua the

assessee does not have any basis whatsoever.

Hon’ble Apex Court (supra), we hold that the satisfaction note prepared

by the AO does not satisfy the requirement of law as stipulated u/s. 153C

of the Act, as the relevant seized material did not pertain to the assessee

nor did it contain anything incriminating against the assessee.

Accordingly, the notice issued under section 153C of the Act without

satisfying the condition precedent as discussed (supra), the very

assumption of the jurisdiction in the AY 2013-14 is held to be bad in the

eyes of law and hence the consequent impugned order is hereby quashed.

impugned in unabated AY 2013-14 was not based on any incriminating

material found in the course of search and therefore has urged that the

same be deleted. On this aspect, we find that, the settled legal position is

that, in unabated assessments u/s 153C of the Act, the AO is empowered

to only make those additions which are based on incriminating material

found/unearthed during search. In support of this proposition, we

gainfully refer to the decision of the Hon'ble Supreme Court in the case of

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 36 ::

Pr. CIT v. Abhisar Buildwell (P.) Ltd. (supra) wherein it was held as

under:-

"In case where 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 assessment, no addition can be made by the AO in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A of the Act, 1961.”

Supreme Court in the case of DCIT vs U.K. Paints (Overseas) Limited

(454 ITR 441) has held that, in absence of any incriminating material

which was found from the premise of the third party (searched person),

no addition/s is permissible in an unabated assessment u/s 153C of the

Act of the assessee (other person). The relevant findings taken note of by

us are as follows:

“1. In this batch of appeals, the assessments in case of each assessee were under section 153-C of the Income-tax Act, 1961 (for short, `the Act'). As found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under section 153-C of the Act are rightly set aside by the High Court. However, Shri N Venkataraman, learned ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd.[2023] 149 taxmann.com 399 (SC), more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under section 153- A of the Act have been saved.

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 37 ::

In light of the above judicial precedents, we hold that in the case of 34.

unabated assessments of an assessee, no addition is permissible in the

order u/s 153C of the Act unless it is based on any incriminating material

found during the course of search.

of the present case to ascertain whether the income which the AO

assessed in the order impugned in this appeal was based on or made with

reference to any incriminating document found in the course of search

which would justify the addition made u/s 68 of the Act.

that the document marked as ANN/MS/JMG/LS/S-1 was the regular books

of accounts of the lender, M/s KSJ Infrastructure Pvt Ltd. This fact has

also been acknowledged by the AO in his assessment order. As noted

earlier, these documents are noted to contain day book/ ledger forming

part of the regular books of accounts of M/s KSJ Infrastructure Pvt Ltd

and does not contain anything incriminating qua the assessee. The entries

found noted in these seized documents relates to the entries passed in

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 38 ::

the regular books of account of M/s KSJ Infrastructure Pvt Ltd, which does

not have any bearing on the case of the assessee. Having examined these

documents, we find that not only were these documents print-outs of the

day-books from the regular books maintained by the lender, M/s KSJ

Infrastructure Pvt Ltd but more importantly it did not contain any

information pertaining or relating to the assessee which would incriminate

it of any wrong-doing in any manner. When confronted with the same,

even the Ld. CIT, DR was unable to co-relate or link as to how the

contents of these documents led to unearthing of unexplained income of

the assessee, that too represented by an ‘asset’ by the AO in the AY

2013-14. Having regard to the foregoing facts, we thus find that, the

information contained in the referred seized document i.e.

ANN/MS/JMG/LS/S-1 did not contain anything pertaining or relating to the

assessee in as much as it also did not contain anything which would be

said to constitute ‘incriminating’ material qua the assessee. Accordingly,

the addition made u/s 68 of the Act in this unabated AY 2013-14 is held

to be unjustified.

Mr. Kamlesh Jain, which was extensively relied upon by the Ld. CIT(A) to

justify the impugned addition. At the onset, it is noted that this statement

was recorded on 28-09-2020 subsequent to the date of search (25-02-

2020). Accordingly, this statement cannot under any circumstances be

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 39 ::

construed as an incriminating material unearthed in the course of search,

so as to justify the impugned addition in the unabated AY 2013-14.

Moreover, we have also perused the contents of the statement of Mr. Jain

and it is nobody’s case that, he had admitted to any wrong doing or had

averred that, the loan received by the assessee from M/s KSJ

Infrastructure Pvt Ltd represented their unaccounted monies. Reading of

the statement shows that, he had only sought time to verify from his

records and submit the details regarding the same. This, according to us,

cannot be treated as incriminating statement to draw adverse inference in

an unabated assessment. Having regard to the foregoing and more so

when the impugned statement itself did not contain any admission or

surrender to any wrong doing, we do not countenance this plea of the

Revenue that, the said statement constituted incriminating material

unearthed in the course of search.

therefore of the considered view that there was no incriminating material

found in the course of search on the basis of which addition u/s 68 of the

Act could have been legally made in the unabated AY 2013-14. We

accordingly direct the AO to delete the impugned addition made u/s 68 of

the Act in the unabated AY 2013-14.

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 40 ::

the Act to be invalid and also deleted the addition made u/s 68 of the Act

for want of incriminating material found & seized in the course of search,

the other grounds raised by the assessee on merits of the impugned

addition has now become academic in nature and is therefore not being

separately adjudicated upon.

No.799/Chny/2024 for AY 2013-14 stands allowed.

AY 2014-15. Ground Nos. 1 & 2 of this appeal relates to the disallowance

of loss of Rs.11,55,400/- incurred in futures & derivatives and addition of

Rs.53,836/- by way of purported unexplained commission u/s 69C of the

Act paid in relation thereto. Briefly stated, the AO, in the course of

assessment, had requisitioned the details of trades in futures & options on

the Stock Exchange. In response, the assessee furnished the details of

transactions undertaken through registered broker, M/s Network Stock

Brokers Ltd. Upon analysis of these trades, the AO held that the loss of

Rs.11,55,400/- incurred therein was fictitious and disallowed the same.

The AO also made an addition on account of unexplained commission

expenditure u/s 69C of the Act being 2% of the value of trades, which

according to the AO, the assessee would have incurred to accommodate

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 41 ::

the fictitious loss. Being aggrieved by this action of the AO, the assessee

preferred appeal before the Ld. CIT(A) who confirmed the same. Now the

assessee is in appeal before us.

assessee contended that the relevant AY 2014-15 was an unabated

assessment year and therefore the impugned disallowance was

unsustainable since it was not based on any incriminating material seized

during the course of search. For this, the Ld. AR reiterated his reliance on

the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell

(P.) Ltd. (supra) and DCIT vs U.K. Paints (Overseas) Limited (supra).

According to Ld. AR, even if this legal plea is not upheld, the impugned

disallowance was not also permissible on merits, as according to him, the

transactions in derivatives were supported by contemporaneous evidences

and that the addition had been made by the AO only on suspicion. Per

contra, the Ld. CIT, DR supported the order of the lower authorities.

record, we find that admittedly AY 2014-15 was an unabated assessment

year and during the course of search, no incriminating material was found

with respect to the loss incurred on derivatives. As noted by us above,

following the decision of the Hon'ble Supreme Court in the case of Abhisar

Buildwell (P.) Ltd. (supra), in case of unabated assessments, the AO can

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 42 ::

re-assess the income only to the extent and with reference to any

incriminating material which the Revenue has unearthed in the course of

search qua the assess qua the AY. On the given facts before us, we find

that the AO has made disallowance of loss incurred in derivatives and

addition by way of unexplained commission expense on the basis of his

own analysis of the documents/details requisitioned in the course of

assessment, without any reference to any seized material impounded in

the course of search. Following the decision of Hon'ble Supreme Court

(supra), we are in agreement with the Ld. AR that, the impugned

addition/s could not have been made in the unabated AY 2014-15, in

absence of there being any incriminating material found in the course of

search relating to this impugned issue. Accordingly, this legal plea of the

assessee stands allowed and hence both the additions by way of loss on

derivatives of Rs.11,55,400/- and unexplained commission of Rs.53,836/-

is hereby directed to be deleted.

addition made on account of cash interest income of Rs.1,40,000/-. It is

further noted that, the facts and issue involved in this ground of AY 2014-

15 is identical to the sole Ground No.1 involved in the respective appeals

for AY 2016-17 to 2020-21 in ITA Nos. 801 to 805 /Chny/2024. It is

noted that the reasoning given by the AO for making the above

addition/disallowance were verbatim same across all these AYs. Hence,

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 43 ::

for the sake of convenience, and to avoid repetition of facts; we deem it

fit to adjudicate this particular common issue across all AYs before us

together.

confirming the addition/s made by the AO on account of noting of interest

income in cash, found in the excel sheets, which was extracted from

server seized during the course of search on Shri Kamlesh Jain, whose

path was E:/Extract-4HDD/D_Server_Cloud/G_drive-live-data/ AmithParik

f server-data/Amithparik/PCNAMU. The details of the cash-interest

income, as tabulated by the AO, is as follows:-

F.Y AMOUNT 2012-13 70,000 2013-14 1,40,000 2015-16 2,00,000 2016-17 3,64,29,253 2017-18 4,36,95,943 2018-19 6,50,93,385 2019-20 56,30,000 Total 15,12,58,581

electronic data was seized from the office premises of Shri Kamlesh Jain,

who was one of the person searched u/s 132 of the Act. He showed us

that, the searched person i.e. Shri Kamlesh Jain had already owned up

the cash interest notings found in this electronic data as his own

undisclosed income and had already paid the taxes along with interest

thereon. The Ld. AR, in this regard, invited our attention to the copy of

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 44 ::

the Settlement Application filed by Shri Kamlesh Jain before the Income-

tax Settlement Commission ('ITSC') on 12-03-2021, copy of which is

found placed at 40 to 81 of the paper book, and more particularly to Page

53 of the application, to show us that, the interest computation excel

sheets in question, which contained aggregate cash interest notings of

Rs.15,12,58,581/- had been offered to tax by Shri Kamlesh Jain and his

own undisclosed income and that he had also paid taxes thereon. The Ld.

AR also pointed out that, although the Interim Board of ITSC had initially

refused to admit the Settlement Application vide their order dated

30.07.2023 [Pages 90 to 96 of paper book], but the Hon’ble Madras High

Court vide their order dated 17.11.2023 had reversed the order of the

ITSC and treated the Settlement Application as deemed pending

application before the ITSC for adjudication. The Ld. AR had placed the

copy of the said High Court order at Pages 97 to 134 of the paper book. It

was also brought to our notice that, the SLP preferred by the Revenue

against the order of Hon’ble High Court has since been dismissed by the

Hon’ble Apex Court vide order dated 09.07.2024 and therefore the matter

of admissibility of Settlement Application had attained finality, copy of

which was placed at Pages 135 to 137 of Paper Book. The Ld. AR thus

urged that, the impugned addition was unsustainable for the reason that,

the impugned seized material and the contents therein, basis of which the

impugned addition was made, had already been owned up by the

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 45 ::

searched person as belonging/ pertaining/relating to him and he had also

paid the taxes on the incriminating notings mentioned therein and thus it

could not now be inferred in the hands of the assessee. It was also urged

that the impugned addition/s would otherwise also amount to double

addition of the same sum and hence ought to be deleted. Per contra, the

Ld. CIT, DR supported the order of lower authorities.

conducted upon Mr. Kamlesh Jain, certain excel sheets were retrieved

from the server which inter alia contained interest computation workings

pertaining to the advances given by the assessee firm, in which Shri

Kamlesh Jain was a partner. The workings are noted to contain various

columns, like, cheque, TDS, cash, DD, Cu, Copper, etc. When confronted

with this excel-sheet, it is noted that Mr. Kamlesh Jain in his sworn

statement had stated that, the words ‘DD’, ‘Cu’ and ‘Copper’ represented

cash interest received from parties. It is noted that, Mr. Kamlesh Jain,

however is noted to have nowhere stated that, the assessee-firm was the

recipient of the cash component of the interest income. Hence, ordinarily

the presumption would therefore be against the person searched i.e. Mr.

Kamlesh Jain unless he had stated otherwise. The Ld. AR also explained

that, although the advances were given by the assessee-firm but only the

cheque component of the interest income was received/accrued in the

books of assessee-firm and that the cash component of the interest

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 46 ::

income was being received/collected by the partner, Shri Kamlesh Jain in

his own proprietary capacity. We find this to be corroborated by the fact

that, Shri Kamlesh Jain in his Settlement Application filed before the ITSC

on 12.03.2021 had admitted that these cash interest receipts by way of

his own undisclosed income. It is noted that, the additional income

offered to tax by Mr. Kamlesh Jain across AYs 2013-14 to 2020-21 inter-

alia included the aggregate interest of Rs.15,12,58,581/- found

mentioned in the aforesaid excel-sheets retrieved from the server. It is

also noted that Shri Kamlesh Jain had inter alia discharged the tax liability

on the aforesaid admitted additional income and the copies of the

relevant tax challans were also enclosed along with the Settlement

Application. We also note that, pursuant to the order of the Hon’ble

Madras High Court dated 17.11.2023, which has since attained finality,

the Settlement Application of Shri Kamlesh Jain stands admitted before

the ITSC. Having regard to these contemporaneous facts, we thus find

merit in the assessee’s plea that since the cash notings found on the excel

sheets of interest computation workings, had already been admitted and

owned up by the searched person, i.e. Shri Kamlesh Jain, as his own

undisclosed income, that too prior to the reopening of assessment of the

assessee u/s 153C of the Act, the AO’s inference that these cash interest

notings related to the assessee was unjustified in as much as the

impugned addition/s made on account of cash interest income by the AO

ITA Nos.799 to 805/Chny/2024 (AYs 2013-14, 2014-15 & 2016-17 to 2020-21) M/s. Metal Impex :: 47 :: of the assessee amounted to double addition of the same sum, which we find to be unsustainable on facts. Accordingly, for the reasons set out in the foregoing, and particularly having regard to the fact that, the impugned cash interest income in question has already been admitted and offered to tax by Shri Kamlesh Jain, partner of the assessee firm as his own undisclosed income, these additions impugned before us are held to be unjustified and is accordingly directed to be deleted. Hence, Ground No.3 of AY 2014-15 and Ground No. 1 of AYs 2016-17 to 2020-21 stands allowed.

Order pronounced on the 30th day of September, 2024, in Chennai.

Sd/- Sd/- (अिमताभ शु�ा) (एबी टी. वक�) (AMITABH SHUKLA) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 30th September, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF