TECHNODOT ENGINEERS PVT. LTD,GANDHINAGAR vs. THE DCIT, CIRCLE-2(2), AHMEDABAD

We shall take up IT(SS)A No. 147/Ahd/2019 as the lead year and our observations would apply to balance years as well, wherever applicable.

1 The brief facts of the present group of cases are that there was a search under Section 132 of the Income Tax Act, 1961, carried out at the premises of Neesa Group on September 8, 2010. Neesa Group was being managed by the assessee, late Shri Sanjay Gupta. A search warrant was authorized for the assessee's premises and a proceedings under Section 153A of the Act were initiated. However, the assessee remained non-compliant to several notices issued by the Department. The assessee later requested that the original return filed under Section 139(1) for the Assessment Year 2005-06 be considered as the return under Section 153A of the Act. Despite several reminders and extensions by the Assessing Officer, the assessee failed to submit necessary documents such as the income computation, profit and loss account, and balance sheet. The Assessing Officer observed that even after nearly one year, compliance to the notice under Section 153A was only made on June 26, 2012. The first notice under Section 143(2) was issued on June 1, 2012, and served by June 4, 2012, followed by subsequent notices under Section 142(1) on the same day and later on September 25, 2012, and October 18, 2012. However, the assessee's responses were found to be inadequate, and many of the details were not provided. The assessee also filed a writ petition in the Gujarat High Court challenging the validity of the search proceedings, on the ground that the Department lacked sufficient reasons to initiate the search. The IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 3– Gujarat High Court dismissed the petition on March 4, 2011, affirming that the necessary conditions for the search under Section 132 had been met. The Assessing Officer observed that again the assessee continued to obstruct the investigation by not providing the requested documents, despite repeated attempts by the Department to obtain them. On October 30, 2012, a show-cause notice under Section 271(1)(b) was issued, for consistent non- appearance citing the assessee's non-compliance with the notices under Sections 143(2) and 142(1). The assessee's responses, submitted on November 20, 2012, were deemed insufficient, and a penalty under Section 271(1)(b) was levied on November 27, 2012. The assessee's appeal against the penalty was dismissed by the CIT (A) on May 9, 2013, for failure to comply fully with the notices. The assessee's non-cooperative attitude led to the case being referred for a special audit under Section 142(2A) of the Income Tax Act. A detailed show-cause notice was issued on December 26, 2012, which highlighted discrepancies in the accounts and financial data provided by the assessee. These discrepancies were especially evident when comparing the digital data seized during the search to the audited accounts. The discrepancies raised concerns over the authenticity of the books of accounts, leading to the referral for special audit. The special auditor revealed several inconsistencies, including discrepancies between the digital data seized during the search and the reported figures in the audited accounts, particularly related to loans, unsecured loans, and sundry creditors. One notable issue was the substantial loan amounts shown as being provided by the assessee's family members, which, upon investigation, were found to have been routed through third parties and accommodation entries. Despite numerous requests and deadlines set by the Department, the assessee

Thereafter, the Assessing Officer proceeded to make certain additions. The detailed assessment of the assessee’s income revealed several adjustments that have led to an increase in the total income. The Assessing Officer identified various unaccounted investments, amounting to Rs. 2,50,000/-. These investments were not disclosed in the financial records of the assessee,

In appeal, Ld. CIT(Appeals) confirmed the additions since the assessee contiuned to remain con-cooperative, failed to furnish necessary documentation / evidences in support of it’s contentions and did not furnish proper explanation with respect to any of the additions made by the AO.

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the additions made by the Assessing Officer. The Counsel for the assessee before us took various legal arguments, which we shall be discussing in the succeeding paragraphs.

The present appeal filed by the assessee in IT(SS)A 147/Ahd/2019 is being taken as a lead year and our observations for this year, would also apply to balance years before us for our consideration. This is for the reason that the present group of appeals are emanating out of search conducted on the Neesa group of companies, of which the assessee is the main promoter. Certain additions have been made in hands of the assessee for Assessment Years 2005- 06 and 2006-07 and additions have been made in the hands of Techno Dot Engineers Private Limited for various assessment years before us.

The assessee has taken the following Grounds of Appeal:

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.1,51,200/- on account of unexplained credits.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.98,50,000/- on account of unrecorded investment.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.2,31,055/- on account of unrecorded investment.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming disallowance of interest amounting to Rs.5,92,835/- u/s 36(1)(iii) of the Income Tax Act,1961. 6.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.33,525/- on account of unaccounted cash.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.45,768/- on account of unrecorded investment.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.29,00,105/- on account of deemed dividends u/s 2(22)(e)of the Income Tax Act,1961. 9.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming disallowance of deduction amounting to Rs.15,000/- u/s 80G of the Act.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming addition of Rs.4,402/- on account of unrecorded interest.

0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming disallowance of depreciation amounting to Rs.5,06,392/-.”

The assessee has raised the following Additional Grounds of Appeal:

The Counsel for the assessee has primarily taken four legal arguments before us (has and has not specifically discussed the merits of each of the additions made by the assessing officer and upheld by Ld. CIT(Appeals).

We shall be discussing each of the four legal arguments taken before us by the counsel for the assessee and its applicability to assessee’s set of facts.

The first legal argument taken before us by the Counsel for the assessee is regarding the approval granted under Section 153D of the Income Tax Act. It has been argued that the approval obtained for both the late Sanjay Gupta's cases and Technodot Engineers Pvt. Ltd.'s group of cases was done in a "mechanical manner," i.e. approval was granted without due application of mind and without reviewing the essential documents by the approving authority. This approval was obtained on the same date as the request made by the Assessing Officer (AO), and the Joint Commissioner of Income Tax (JCIT) granted a "common approval" for all the assessment years in question. It was submitted that a perusal of the approval process divulges several critical aspects which suggest the approval was not given in a thorough manner. It was argued that the JCIT, while granting the approval, merely analyzed the draft assessment orders and did not review the entire case records / documents, thereby supporting the argument that the approval was granted in a mechanical manner. The approval was thus granted without considering the vital case records, indicating a mechanical approach while granting the approval. Reliance was placed by the Counsel for the assessee on legal precedents in which it has been held that the approval under Section 153D is not merely a formality, but requires the prescribed authority to apply their mind to the facts and circumstances of the case. If the approval is granted in a mechanical manner without reviewing relevant materials, the subsequent assessment orders must be quashed. Several court decisions were relied upon, including the cases of PCIT vs. Anuj Bansal (ITA 368/2023), Anuj Bansal vs. ACIT (ITA No.1016/Del/2021), ACIT vs. Serajuddin & Co. (2023), PCIT vs. Siddarth

In response, Ld. DR produced before us Guidelines relating to search and seizure operations, and submitted that on perusal of the same, it is evident that it is not only at the stage of approval that the complete facts come to the notice of the Approving Authority for the first time but the Approving Authority has complete knowledge right from the start of search operations. The Ld. DR submitted before us that the approving authority is in complete know-how of things from the start of search and seizure operations in Group cases. It is not a case where the relevant materials, including draft assessment orders and case records are produced before the approval authority for the first time, at the time of grant of approval. The Ld. DR submitted that the Guidelines dated 22nd December, 2006 throw useful light on the procedure related to search and seizure assessments. A perusal of the same would show that from the moment search operations are initiated, the assessing officer and the Approving Authority are in complete know-how of the facts relating to the parties in respect of whom, the search operations are being carried on. The DR submitted before us that there has been no opportunity for the Courts to analyse the complete procedure relating to search assessments, since this procedure was never brought to the knowledge of the Hon’ble Courts for their consideration, so as to reach an informed decision. The Ld. DR submitted that the decision on this issue may be taken by taking into consideration the Guidelines relating to search and seizure assessments.

We have heard the rival contentions and perused the material on record. It would be useful to reproduce, as part of our decision, a brief analysis /

The Guidelines provide that upon receiving the appraisal report within 60 days of a search operation, the Assessing Officer must become familiar with both the report and the seized material. Once the material is received, the AO, along with the Range Head, should scrutinize the material to determine if notices under sections 153A, 153C, or 148 are required. An “Action Note”, detailing these findings and the need for further action such as audits or investigations, must be prepared within 90 days of receiving the seized material. This note should also consider proposals for special audits and centralization of cases, as well as investigate third-party connections and opening of seized hard disks. A copy of this action note is to be sent to the CIT (Central) for supervision. After issuing the necessary statutory notices, the AO must ensure that proper satisfaction is recorded for the application of Sections 153A and 153C, especially as these sections deal with the six financial years preceding the year of the search. In addition,

Once the return is filed, the AO should prepare a detailed questionnaire to seek explanations from the assessee on the seized materials and the documents filed with the return. This questionnaire should address any discrepancies or queries that arise from the assessee’s submissions. The AO will then analyze the replies based on the material available, determining whether they are prima facie acceptable, require further enquiry, or are outright unacceptable. The assessment should focus on establishing the facts and understanding the modus operandi used by the assessee to generate undisclosed income. This involves conducting independent enquiries from external entities such as banks, financial institutions, and government departments. The assessment should be built on preponderance of probabilities rather than assumptions, in line with judicial principles from cases like CIT v. Durga Prasad More and Sumati Dayal v. CIT. Affidavits provided by the assessee should be scrutinized and accepted only after verification, in line with the principles laid down by the Supreme Court in cases like Mehta Parikh and Company vs. Commissioner of Income Tax. Proper cross-examination rights must be afforded to the assessee, following judicial precedents. If the AO disagrees with findings in the appraisal report, these should be discussed with the Range Head, and if necessary, the CIT (Central). The AO may IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 13– also request guidance from higher authorities under section 144A to ensure the proper handling of complex issues or disputes that arise during the assessment process.

Once the investigation and enquiries are complete, the AO should issue a final show cause notice to the assessee. This notice must give the assessee an adequate opportunity to respond and should outline the structure of the proposed order, the evidence on record, and the case laws relied upon. Any case law referenced should be examined in the context of the issue it addresses, not merely on the ratio of the decision, as emphasized in CIT v. Sun Engineering Works Pvt. Ltd. The assessment order should be detailed and clear, making it understandable even to a layperson. It must consider and address the assessee's replies and evidence, rebutting any arguments or presenting the applicable case law. The order must also explicitly mention the seized materials, detailing where and when they were found, and must include any relevant annexures or scanned copies of critical documents.

On going through the contents of the Guidelines, we observe that the Guidelines provide that the assessing officer on receipt of appraisal report, which is expected to be received within 60 days of the search, is required to be acquainted with the appraisal report in the seized material before he takes up the assessments for the Group cases. The guidelines further provide that on receipt of the appraisal report and seized material, both the Assessing Officer and the Range Head should jointly scrutinize the appraisal report and seized material and prepare an “Examination Note” to decide appropriate

Therefore, on perusal of the Guidelines issued by the Department in relation to search and seizure guidelines, it is evident that once a search been carried out, and appraisal report is prepared within 60 days of the search, the assessing officer is required to be acquainted with the appraisal report and seized material before he takes the assessment of the case. On receipt of the appraisal report and seized material, the assessing officer and range head jointly scrutinize the appraisal report and seized material and prepare an “Examination Note” to decide cases where notices under section 153A of the Act are required to be issued. Thereafter, an “Action Note” based on a comprehensive and methodical examination of seized material, in addition to the comments available in the appraisal report is prepared within 90 days of receipt of seized material. This action note covers various aspects including proposals for special audit under Section 142(2A), identification of third parties, in respect of form enquiries have to be carried out, report on opening of all hard disks seized and printouts obtained, identification of evidence including ascertainment of handwriting on loose papers were seized and statements recorded under Section 132 etc. Therefore, on analysis of the detailed Guidelines in relation to search and seizure operations, it is evident that a detailed investigation is carried out including both the assessing officer

Therefore, we observe that in case of search and survey operations, it is not a case where the entire case records are presented before the approving authority on the last date of approval for his /her approval, as the case is typically made out to be before Courts, but both the assessing officer as well as his senior officials, including the Approving Authority are in the knowhow of affairs, right from the date of search.

Further, looking into the specific facts of the instant case, on perusal of the letter sent to joint Commissioner for approval of assessment orders in the group cases before us, we observe that the draft assessment orders along with case records were submitted for approval as required under the provisions of Section 153D of the Act. Further, the approving authority, approved the assessment orders and after due approval, it was specifically mentioned that the case records were also returned to the Assessing Officer. Therefore, as observed above, it is not a case where the joint Commissioner came to be aware of the facts of the search and survey operations only when the draft assessment orders were sent for his approval. The fact that approval was granted on the same date itself would not render the approval having been granted in a mechanical manner. The Guidelines further provided a copy of the IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 16– action note should be should be sent to the CIT (Central) through the additional/joint Commissioner as part of compliance report to enable proper supervision by him. Upon going through the Guidelines relating to search and survey operations, it is observed that the assessing officer and the range head are in complete know-how of complete set of facts relating to search and seizure operations. In view of the facts of the instant case wherein we have noted that complete case records were sent to Joint CIT for his approval, we are of the considered view that the procedure recorded in this case was not in a mechanical manner. Further, the argument of the counsel for the assessee that individual approval has to be granted for each of the cases for each of the assessment years, we observe that as per Guidelines relating to search operations, it has been specifically mentioned that as far as possible, assessment should be taken up Group Wise to ensure holistic approach as well as to ensure that no income remains unassessed due to any confusion about regarding the hands in which it is to be assessed. It is not an allegation of the assessee that any prejudice has been caused to the assessee, by joint approval in group cases. We observe that the approval is granted jointly in Group matters so that a comprehensive assessment in relation to group matters is carried out so that there is no escapement of income and there is clarity in whose hands the income is to be assessed. In the present case, it is observed that the assessee has been engaged in fraudulent activities in a consistent manner and has taken every steps to stonewall the assessments sought to be completed in his name and other group concerns of which he was the promoter. The Hon’ble Gujarat High Court accordingly, passed appropriate orders to ensure that assessments were duly completed in the name of the assessee and his group concerns. The challenges by the IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 17– assessee to initiation of search proceedings and appointment of special auditor were also rejected by the Hon’ble Gujarat High Court, keeping in view the assessee’s set of facts. The assessee and his group concerns have been given multiple opportunities of hearing to present the facts on merits, but there has been consistent non-compliance/non-appearance and non-furnishing of relevant materials/evidence/documents so as to enable the assessing officer/Department to complete the assessment. It is not a case of the assessee that there was any denial of justice or opportunity of being heard not having been granted to the assessee or his group concerns. However, despite a large number of opportunities, the assessee consistently kept on evading all notices of hearing and has avoided furnishing of necessary documents/details both before the assessing officer as well as before Ld. CIT(Appeals) and has taken recourse to legal/technical arguments to hinder the assessment/appellate proceedings. While respectfully following the decisions, wherein it has been held that grant of approval cannot be carried out in a mechanical manner, however, in our considered view those decisions would not come to the aid of the assessee in the instant facts for the reason that in some of the cases in which this principle has been upheld, notices have been approved by the Approving Authority for multiple sets of assessees having no relation with each other whatsoever by way of a common order (however, the case of those assessees and the present Group are on a different footing since search was conducted on Neesa Group in which the assessee is the main promotor). Secondly, as observed by us in the preceding paragraphs, the complete set of Guidelines relating to search and seizure operations have not been brought to the notice of the Hon’ble Tribunals / Courts so as to take an informed decision regarding the due procedure followed by the Approving Authority in search

Accordingly, looking into the facts of the assessee’s case, and detailed discussion relating to procedure involving search operations, we are of the considered view that the approval has not been granted in a mechanical manner by the Approving Authority, and therefore, this legal ground of the assessee is hereby rejected.

The Counsel for the assessee submitted that the case of "Neelu Gupta, L/H of Sanjay Gupta - IT(SS)A 147/Ahd/2019 - AY 2005-06," may be considered the lead case /appeal. A search under Section 132 of the Act was conducted on 08.09.2010 in the "Neesa group of cases," during which the premises of the late Sanjay Gupta were covered. Following the search, assessments for the Assessment Years (AYs) 2005-06 to 2006-07 were framed

The above legal argument, it was argued, is applicable to all assessment years under consideration before us. Therefore, our

The legal proposition, that in case of search cases relating to unabated assessment years, addition can be made only on the basis of “incriminating material” found during the course of search, is a well-settled / well-accepted legal proposition. There is no dispute so far as this legal proposition is concerned. Therefore, this brings us to the question whether in the instant case, the additions have been made on the basis of “incriminating material” found during the course of search or not. The counsel for the assessee has stated that all the additions for all the assessment years before us (seven in total) have not been made on the basis of any incriminating material found during the course of search. It has stated that all the additions have been made only on the basis of recommendation of special auditor and therefore, no addition is liable to be sustained. At the outset we may point out that so far as assessment years 2010-11 and 2011-12 are concerned, admittedly those are abated assessment years and therefore the above legal argument would not apply to those years under consideration before us.

Specifically, in the case of the assessee Late Shri Sanjay Gupta, for Assessment Year 2005-06, firstly let us take into consideration the basis for initiating the present proceedings. On perusal of the reasons for initiating present assessment proceedings, it is observed that the “Reasons” take note of the fact that a search proceeding under the Income Tax Act, 1961, were carried out on 08.09.2010 in case of Neesa Group and its associates. In the case of IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 21– M/s. Neesa Leisure Ltd., a warrant of authorization under Section 132 of the Act was issued for the premises at Cambay Square, Gandhinagar. During the search, several documents belonging to M/s. Technodot Engineers Pvt. Ltd. were found and seized from the Gandhinagar office of M/s. Neesa Leisure Ltd. These included: pages 80 to 113 of Annexure A-19, which contained a Facility Management Agreement between Technodot Engineers Pvt. Ltd. and Neesa Agritech Pvt. Ltd., signed by Mr. Prakash Dave, the authorized signatory for Technodot Engineers Pvt. Ltd.; page 121 of Annexure A-19, which listed various credit and debit balances in the accounts of Neesa Leisure Ltd. (NLL), DHPL, NIL, NEPL, NTPL, and Shri Sanjay Gupta in the books of Technodot Engineers Pvt. Ltd.; pages 152 to 156 of Annexure A-19, which contained a Development Agreement between Technodot Engineers Pvt. Ltd. and Neelu S. Gupta, signed by Shri Rohit Gupta on behalf of Technodot Engineers Pvt. Ltd.; and pages 89-90 of Annexure A-9, which contained the minutes of a meeting held on 14.08.2010 at the corporate office of Technodot Engineers Pvt. Ltd. Furthermore, a separate search was conducted on 09.09.2010 in the case of Shri Sanjay Gupta. A warrant of authorization under Section 132 of the Act was issued for his premises at B-202, Dhananjay Tower, Ahmedabad. Documents found and seized from this location, relating to M/s. Technodot Engineers Pvt. Ltd., included pages 16-17 of Annexure B-1, which contained the profit and loss account of Technodot Engineers Pvt. Ltd. for the period from 01.04.2010 to 06.07.2010. Therefore, after having satisfied that there were substantial material to initiate the present search proceedings, search action was taken and subsequent assessments were framed for various assessment years, which are the subject matter of appeal before us.

The assessee filed a writ petition in the Hon'ble High Court of Gujarat challenging the validity of the search proceedings conducted under the provisions of the Income Tax Act, 1961. In the Writ Petition, the assessee argued that the Department did not have sufficient "reasons to believe" before initiating the search under Section 132 of the Act. The assessee's contention was that the conditions required for the search authorization were not met, which led to the filing of the writ petition. However, the Hon'ble High Court of Gujarat dismissed the petition in its order dated March 4, 2011, in Special Civil Application No. 13498 of 2010. In its ruling, the Gujarat High Court observed that the conditions precedent for the exercise of powers under Section 132(1) had been duly fulfilled prior to the issuance of the search authorization. The Court further found that there was sufficient reason for the concerned officer to issue notices under Section 133(6) of the Act, which are related to calling for information from the assessee. As a result, the petitioners were not entitled to the reliefs they had sought, and the petition was dismissed.

However, the assessee remained non-cooperative throughout the assessment proceedings and despite issuance of several notices of hearing, the assessee provided little assistance/details with a view to stonewall the assessment proceedings. Keeping in view the non-cooperative the assessee, the case of the assessee was referred to special audit. The appointment of special auditor was challenged by the assessee before the Hon'ble High Court of Gujarat, which was dismissed by the Hon'ble High Court, keeping into consideration the facts of the assessee’s case.

Upon reviewing these documents, including those supplied by the assessee during assessment proceedings, several discrepancies and complexities were pointed out by the Special Auditor. A number of issues, including discrepancies between the data seized during the search and the audited accounts submitted by the assessee for various assessment years were observed. The seized data revealed significant differences in balance sheet figures, loans, and creditors compared to the audited accounts. In addition, there were several differences noted between the digital data impounded from various premises, and the accounts presented by the assessee for the relevant assessment years. The Special Auditor pointed out that the assessee had failed to provide certain requested books of account for the assessment years 2005-06 to 2011-12, despite being asked to do so via a notice under Section 142(1) dated 07.11.2012. Furthermore, during the search, the Special Auditor pointed out that the assessee was confronted with an amount of Rs. 7,10,46,010/- appearing in their personal books, allegedly from unsecured loans in the names of the assessee’s parents. However, the father of the assessee, Shri Raghunath Prasad Gupta, denied giving any loan. It was later discovered that the funds were linked to cheques issued by Bhuj Mercantile Co-op. Bank, with the sources traced back to businesses owned by Shri Bharat Shah, who admitted to providing accommodation entries for commission income. Additionally, other discrepancies related to personal loans and credit transactions were highlighted, but the required explanations or documentation were not provided by the assessee in the stipulated timeframes. The audit also uncovered cash deposits of Rs. 2,46,77,980/- as per documents seized from the assessee's office. Despite several reminders and notices, the assessee failed to provide any details regarding the source of these

Therefore, on perusal of the observations made by the special auditor, it is observed that a detailed comparison was made between the data as appearing in the tax audit report and the data seized from the office premises of Shri Sanjay Gupta at Ahmedabad, in which several discrepancies were pointed out with respect to details of unsecured loans, sundry creditors, loans and advances etc. Therefore, it is not a case where the additions were made without reference to any incriminating material found during the course of search. The special auditors despite lack of cooperation part of the assessee, observed that there are various differences in the books of accounts when compared with the books of accounts impounded in the digital form from the office premises of Shri Sanjay Gupta at Ahmedabad. During the course of search, from the premises of the IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 25– assessee the auditors observed that an amount of ₹ 7.10 crores were appearing in the personal books of accounts towards unsecured loans, while in the statement dated 8 September 2010, the father of the assessee admitted that he had not given any loan to the assessee whatsoever. Further, the special auditors observed that Shri Bharat Shah and others had already the accepted during their statements taken on 29 September 2010 and 10 December 2010 under Section 131 of the Act that they had provided accommodation entries to the assessee for which they had earned commission income and this amount was linked to this commission income. During the course of survey at the premises of the assessee, total cash deposits to the tune of Rs. 2.46 crores were found, for which the special auditors asked the assessee to provide the requisite explanation. Further, from the documents impounded from the office of the assessee, certain details for purchase of land by the group was found at Udaipur. However, the assessee did not provide any documents relating to purchase of the land. Further with regards to sale of flat at Goyal intercity, Ahmedabad from the documents impounded from the office of the assessee, it was observed there were cash receipts of ₹ 10 lakhs which was found, for which the assessee gave no plausible explanation. Here we are dealing with facts only related to assessment year 2005-06, which has been taken as a lead assessment year. A perusal of the basic facts itself revealed that substantial documents were impounded from the office premises of the assessee, on the basis of which the special auditors requisitioned for substantial details, which the assessee failed to provide. Therefore, substantial additions were made in the hands of the assessee for various sources of income, the details of which are provided in the assessment order. Even during appellate proceedings before Ld. CIT(Appeals), the assessee

On going through the assessment orders for all the years under consideration before us, we observe that similar facts emerged that on the basis of documents found in the course of search, several discrepancies were noted by the Special Auditors when comparing the same with the audited books of accounts submitted by the assessee, thereby leading to rejection of the books of accounts. Various incriminating documents were found during the course of search and statements of various persons were taken, leading to the conclusion that the books of accounts were manipulated, the assessee was engaged in taking accommodation entries and further, the assessee was not providing any assistance whatsoever during the course of assessment proceedings. Therefore, a blanket statement that all the additions which have been made in the hands of the assessee, were not made on the basis of any incriminating material found during the course of search, is highly general and unacceptable, looking into the assessee’s set of facts.

Also, we may point out that the argument that any addition made on the basis of recommendation of / on the basis of observations made by a Special Auditor, are not liable to be sustained is also erroneous. In our view, one cannot generalise the conclusion that no additions can be made in case of search assessments on the basis of recommendations of a Special Auditor. If this general proposition were to be accepted, then in all search cases, all additions proposed to be added on the basis of recommendations of the Special

We also observe that no evidence/discussion was carried out before us on merits of the case for any of the several years before us and only a general statement was made that all the additions have been made, without any reference to any incriminating material found during the course of search. However, as pointed out in the preceding paragraphs, even taking into consideration the facts of the lead case before us, certain additions evidently were made on the basis of incriminating material found in the course of search. We are therefore, unable to accept the general proposition/argument that “none” of the additions relating to all the impugned years under consideration before us were made on the basis of incriminating material found during the course of search (leaving aside the abated assessment years relating to Assessment Year 2010-11 and 2011-12, in which the assessing officer was not under an obligation to restrict the additions on the basis of incriminating material found in the course of search). As stated above, the assessee has not given any supporting documents/any discussions relating to the merits of the case before us and is only taking recourse to multiple legal arguments with a view to set aside the assessment/appellate orders.

However, keeping in view the fact that substantial additions have been made during the course of assessment in the case of the assessee, and evidently some of which is on the basis of incriminating material found in the course of search as pointed out by us in the preceding paragraphs, in interest of justice, the matter is restored to the file of Ld. CIT(Appeals) so as to allow one more opportunity to the assessee to file documentary evidence in support of its case and thereafter, in light of the evidence produced by the assessee, decide each of the disallowances/additions on merits of the case. If however, with respect to any particular addition/disallowance, the assessee is able to substantiate/ demonstrate that the particular addition does not have any reference to any incriminating material found during the course of search, then keeping in view the legal principle that in case of search cases for unabated assessment years , no additions can be made in absence of any incriminating material found during the course of search, such addition may be deleted in the hands of the assessee.

We observe that these are admittedly abated assessment years and therefore, the legal arguments sought to be taken by the counsel for the assessee that the additions in case of unabated assessment years have to be restricted to incriminating material found during the course of search only do not come to the assistance of the assessee for these two assessment years.

However, as pointed out in the preceding paragraphs that since no supporting evidence/arguments were taken before us on the merits of the case, and also as noted by us that since substantial additions have been made in the IT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 29– hands of the assessee, in interest of justice, even for these two assessment years i.e. Assessment Year 2010-11 and 2011-12, the matter is restored to the file of Ld. CIT(Appeals) for de-novo consideration, so as to enable the assessee one more opportunity to present the necessary supporting documents/evidences in support of its case. The Ld. CIT(Appeals) thereafter, after taking into consideration any evidence sought to be placed by the assessee in support of its case, may take appropriate action accordance with law.

The Counsel for the assessee also relied upon several decisions in support of the above proposition. Specifically dealing with the above legal argument of the assessee, we observe that the cases on which reliance has been placed by the counsel for the assessee are distinguishable on facts and hence do not apply to the assessee’s particular set of facts. Firstly, at the outset it is observed that none of the cases on which reliance is not be placed relate to search assessment matters. It may be pointed out that search cases are special cases involving detailed investigation involving several assessment years, taking statements of several parties etc. The facts of the cases are completely different and would not come to the aid of the assessee. Secondly, as pointed out by assessee preceding paragraphs, the additions have not been made solely on the basis of books of accounts which were rejected by the assessing officer, but also on the basis of substantial incriminating material found during the course of search. On the basis of incriminating material found during the course of search proceedings at the premises of the assessee and other group

In the result, this legal argument of the assessee is hereby rejected.

This specific legal argument is only applicable/has been taken with specific reference in the case of Techodot Engineers Pvt. Ltd for assessment year 2006-07 only.

The argument taken by the Counsel for the assessee is that in the case of Technodot Engineers Pvt. Ltd., the case records were centralized on November 22, 2012, and notices under Section 153C of the Income Tax Act were issued on December 12, 2012. Consequently, the case records were transferred to the AO in the Financial Year 2012-13 relevant for the Assessment Year 2013-14. In cases where proceedings under Section 153C are initiated, the "date of initiation of search under Section 132 or making requisition under Section 132A" is understood as the "date of receiving books of accounts, documents, or assets seized or requisitioned by the AO having juri iction over the person concerned." This interpretation is supported by various judicial precedents, including the decision of the Supreme Court in CIT v. Jasjit Singh (2023) 458 ITR 437, PCIT v. Shalimar Town Planners P Ltd. (2024) 161 taxmann.com 306, and the Ahmedabad Tribunal's ruling in Madhodas Nehchaldas Ramchandani vs. ITO (IT(SS)A 152/Ahd/2023). In the case of Technodot Engineers Pvt. Ltd., the case records were received by the AO for the Assessment Year 2013-14, specifically in the period between FY 12-13/AY 13-14. As a result, the six-year period for initiating proceedings under Section 153C is applicable from the Assessment Years 2007-08 to 2012-13. Given this timeline, it was argued that proceedings under Section 153C cannot be initiated for the Assessment Year 2006-07, as it falls outside the six-year limit stipulated for such proceedings.

We observe that this is a legal argument has been taken for the first time before us. Since, the entire assessments have been restored to the file of Ld. CIT(Appeals) for de novo consideration, after giving due opportunity of hearing to the assessee to present its case on merits along with supporting documents/evidences in respect of each addition made, this legal arguments/issue is also restored to the file of Ld. CIT(Appeals) for his consideration, for carrying out due enquiries on the precise date when the case records were received by the assessing officer of Technodot and thereafter, to decide the applicability of the judicial precedents relied upon by the assessee, to the assessee’s particular set of facts.

Accordingly, the legal argument relating to Assessment Year 2006-07 in the case of Technodot Industries Private Limited is hereby restored to the file of Ld. CIT(Appeals) for his consideration, keeping in light the assessee’s particular set of facts.

Accordingly, this legal ground of the assessee is allowed for statistical purposes.

In the combined result, appeals of the assessee are partly allowed for statistical purposes. This Order pronounced in Open Court on 26/11/2024 (MAKARAND V. MAHADEOKAR) JUDICIAL MEMBER Ahmedabad; Dated 26/11/2024 TANMAY, Sr. PSIT(SS)A Nos.147 & 148/Ahd/2019 & 21 to 23/Ahd/2020 & 15/Ahd/2022 & 93/Ahd/2020 Sanjay Gupta vs. DCIT & others Asst.Years –2005-06 to 2008-09 & 2010-11 & 2011-12 - 33–

""थ" / The Respondent. 3. संबंिधत आयकर आयु" / Concerned CIT 4. आयकर आयु"(अपील) / The CIT(A)- 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER,