M/S JAIN AMAR CLOTHING PVT. LTD.,LUDHIANA vs. DCIT, CC-III, LUDHIANA

Briefly the facts of the case are that search and seizure operation under section 132(1) of the Act was carried out at the residential and business premises of the assessee company, M/s Jain Amar Clothing Pvt. Ltd. on 26/02/2016. Thereafter, notice under section 153A(1) dt. 28/09/2016 was issued to the assessee company and in response, the assessee company filed its return of income on 04/01/2017 declaring total income of Rs. 8,85,15,010/-. Thereafter, notice under section 143(2) and 142(1) alongwith detailed questionnaire were issued to the assessee. It was stated by the AO that during the course of search proceedings as well as assessment proceedings, it has been noticed that the assessee has received share premium of Rs. 28.26 Cr. on 30/03/2012 from three Kolkata based companies namely M/s Ever Green Goods Pvt. Ltd. from whom an amount of Rs. 11.20 Crores has been received, M/s Megacity Sales Pvt. Ltd. from whom an amount of Rs. 9.30 Crores has been received and M/s Ajnabi Vanijya Pvt. Ltd. from whom an amount of Rs. 7.80 Crores has been received by way of share premium.

1 Thereafter, during the course of assessment proceedings, a show cause dt. 08/12/2017 was issued to the assessee company. In the show-cause notice, the AO referred to the statement of the directors of the assessee company, Shri Sunil Kumar Jain and Shri Vaibhav Jain recorded under section 132(4) during the course of search, information gathered by the Income Tax Investigation Wing, Kolkata way back in the month of March 2015 and as part of that, statement of various persons recorded under Section 131, post search physical inquiry conducted during 05/12/2016 to 08/12/2016 at Kolkata and the financial statements of the investor companies as well as the share holder pattern of the investor companies and stated that the amount of capital introduced by these investor companies is basically assessee’s company own unaccounted money which has been routed through these investor companies in the form of bogus share premium and also the fact that the credit worthiness of these investor companies is doubtfull and the assessee company was accordingly show caused as to why an amount of Rs. 28.26 Cr. should not be brought to tax in terms of provisions of Section 68 of the Act.

2 In response to the show-cause, the assessee filed its submission and documentation which were considered but not found acceptable to the AO.

3 As per the AO, in terms of Section 68 of the Act, the assessee has to prima facie prove the identity of the subscriber, the genuineness of the transaction and the credit worthiness or the financial strength of the investor company. And in the instant case during the course of search proceedings as well as in the assessment proceedings, the issue of share capital has been thoroughly examined and the assessee could not substantiate the genuineness, credit worthiness and identity of the investor companies.

4 Further, referring to the determination of share premium, the AO invoking the provision of Income Tax Rules 11UA(2)(a) has held that even the Fair Market Value of the share of the assessee company so determined does not justify the huge premium which has been received by the assessee company and it was accordingly held that the assessee has not offered satisfactory explanation about the nature and source of the share premium amounting to Rs. 28.26 crores and the same was brought to tax under Section 68 of the Act. As against the returned income of Rs. 8,85,15,010/-, the assessed income was determined at Rs. 37,11,61,260/- by bringing to tax the whole of the share premium amounting to Rs. 28,26,46,250/-.

Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has since sustained the addition and against the said findings and the directions of the Ld. CIT(A), the assessee is in appeal before us.

The assessee through its Ground Nos. 2, 4 & 5 has effectively challenged the action of the AO in assumption of juri iction under section 153A in absence of any incriminating material/documents found during the course of search in case of the assessee and the ld CIT(A) confirming the said assumption of juri iction by the AO.

Before we advert to the rival contentions raised by both the parties, we deem it appropriate to refer to the grounds of appeal taken by the assessee before the Ld. CIT(A), the submissions so made during the appellate proceedings, the findings of the AO in the remand report and the findings of the Ld. CIT(A) in the impugned order which are under challenge before us.

In its appeal before the Ld. CIT(A), the assessee in its ground of appeal no. 2 has challenged the addition made by the AO stating that no incriminating material concerning the addition in respect of share premium was found during the course of search and further no assessment for the impugned assessment year was pending as on the date of search and it is thus a case of completed/unabated assessment.

1 In this regard, it was submitted by the assessee during the appellate proceedings that in this case, assessment was originally completed under section 143(3) by the DCIT, Circle-III, Ludhiana on 23/12/2014 and it is therefore a case of completed assessment which was not abated as on the date of search i.e. 26/02/2016. It was further submitted that the completed assessment can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. It was submitted that in the instant case, the AO has not dealt with the said issue nor has he disclosed any documents which was found during the course of search and treated as incriminating documents and even in the assessment order, there is no mention of any incriminating documents found during the course of search and therefore the assumption of juri iction by the AO under section 153A deserves to be set aside and reliance was placed on various legal authorities on the subject.

2 The submissions so filed by the assessee were shared by the ld CIT(A) with the AO and his report and the comments were called for during the appellate proceedings. In his report, the AO has stated that the grounds of appeal so taken by the assessee cannot be accepted as the fact of the case are different from the case laws relied upon by the assessee including the case of CIT vs. Kabul Chawla 234 Taxman 300 (Del) and M/s Oasis Distilleries Ltd. Vs. DCIT Central Circle-2, Ludhiana (in ITA No. 1349/Chd/2017 dt. 11/05/2018) as in the case of the assessee company, the issue of introduction of bogus share capital and premium was unearthed during the investigation by Kolkata DDIT Investigation Unit-2(1) and it was found that Shri Naval Jalan, Ex-Director of M/s Megacity Sales Private Limited was involved in providing accommodation entries of share capital and premium in lieu of commission.

3 It was stated by the AO in the remand report that this was a major issue which was investigated during the search and post search inquiry. The statement of the Director, Shri Sunil Kumar Jain was recorded under Section 132 on 26/02/2016 where he admitted having received the share capital and premium but failed to give details of the investor company although his family member had become the directors in the investor company. It was further stated by the AO that Shri Sunil Kumar Jain also failed to produce the books of account during the search to substantiate the genuineness of the share capital and premium received from these companies. Similarly, the other Director, Shri Vaibhav Jain could not explain the genuineness of the investment in his statement recorded under section 132. It was stated by the AO that it is beyond the human reasoning and probabilities that even the common directors who know about all the affairs of the investor company and the recipient company fail to give basic proofs about the genuineness of the transaction they had undertaken even after giving sufficient opportunities and therefore the onus of proof remained un-discharged on the part of the assessee company. It was stated by the AO that the Director denied to provide any concrete facts about these transactions and said denial in the statement recorded on oath under section 132 constitute a direct incriminating statement which has actionable information found during the course of search and it has also become incriminating in nature as it indicate the non genuine nature of the introduction of share capital and premium.

4 It was stated by the AO that under the Act, there is no presumption in law that the income be assessed by direct evidence only and the material available on record, surrounding circumstances, human conduct during the search and post search, preponderance of probabilities and nature of incriminating information/ evidence found and available on record needs to be considered. Referring to the decision of Hon’ble Kerala High Court in case of CIT Vs. St. Francies Clay Decar Tiles, 70 Taxmann.com 234 wherein it was held that neither under section 132 or under section 153A, phraseology “incriminating” has been used by Parliament, it was held by the AO that any material found in search or statement recorded in search is a valuable piece of evidence. Further, referring to the decision of Hon’ble Delhi High Court in case of Kabul Chawla(supra), the AO stated that the department has not accepted the said

5 The assessee company, in its rejoinder to the remand report, submitted that the search took place on 26.02.2016 and the share capital and premium was received during the financial year relevant to AY 2012-13 i.e. four years before to date of search and said share capital and premium stood already disclosed in the audited balance sheet and forms part & parcel of the return of income filed for AY 2012-13. It was submitted that when such investment had already been disclosed and is the part of the record with the Assessing Officer and recorded in the books of accounts and, thus, it cannot be said to be any incriminating evidence. Further, the fact that Sh. Sunil Kumar Jain, Director could not give the details of the investor companies during search conducted on 26.02.2016, cannot lead to the fact that such investment of the share capital by the companies is bogus. It was submitted that the Ld. AO has forgotten perhaps that a human being cannot remember the transaction which happened four years before and this fact already stood communicated to the Ld. AO in the returns of income filed for AY 2010-11, 2011-12 & 2012-13 and thus, this observation of the Ld. AO was without any basis.

6 It was further submitted that no incriminating material had been found during the course of search and the disclosed income/investment cannot be treated as incriminating and it is a settled law that no addition could be made in the assessment framed u/s 153A without their being any incriminating material found during the course of search operation. There is no evidence or document which is found or noticed to suggest any receipt outside the books of accounts. The said investment is part of the audited books of accounts and all such investment had already been explained through the normal banking transactions

7 It was further submitted that the all the three parties had advanced unsecured loan to M/s. Aayush Apparels Pvt. Ltd. and the said concern had advanced the money to the assessee company in the Assessment Year 2010-11, 2011-12 & 2012-13. The said amount was returned back to M/s. Aayush Apparels Pvt. Ltd. and the latter, in turn returned back the amount to the respective three parties and then during the assessment year under consideration, the same amount came back in the shape of investment in the share capital/premium in the assessee company and, thus, since the same amount of capital was invested by the three parties and, as such, there is no fresh introduction of capital, the whole basis of doubt & suspicion is out of context. It was submitted that for AY 2010- 11, unsecured loan provided by M/s. Aayush Apparels Pvt. Ltd. was subject matter of notice u/s 263 issued by the Ld. PCIT for the AY 2010-11 which were subsequently dropped. Thus, in such circumstances, the assumption that there is an incriminating material detected as a result of search on the assessee company is entirely misconceived, misplaced and wholly untenable.

8 It was further submitted that there are number of judgments wherein it has been held that the statement recorded during the course of search or during the course of assessment proceedings itself per se is not the evidence found during the course of search as the same cannot be treated as incriminating in absence of any corroborative evidence.

9 The submissions so filed by the assessee company were considered but not found acceptable to the Ld. CIT(A). As per the Ld. CIT(A), a perusal of assessment order and remand report of the AO clearly brings on record that introduction of bogus share capital & premium was unearthed consequent to the search action and the above fact was supported by the report sent by the DDIT Investigation Unit-2(1), Kolkata. In the report of the Investigation Wing Kolkata, it was revealed that M/s. Evergreen Goods Pvt. Ltd., M/s. Mega City Sales Pvt. Ltd. and M/s. Ajnabi Vanijya Pvt. Ltd. had provided accommodation entries of share capital/premium to the assessee company. It was further revealed that Sh. Naval Jain, ex-Director of M/s. Mega City Sales Pvt. Ltd. was involved in providing accommodation entries. It was further seen that family members of the Director of the assessee company Sh. Sunil Kumar Jain had become directors/shareholders in the investor companies as well.

10 The ld CIT(A) further referred to the meaning of incriminating material as per an Article published in tax journal, Taxman reported at [2020] 122 taxmann.com 203 and held that it is very clear that the entries of Share premium in the books of accounts of the assessee concern have been used to understate the income and were only a device based on misrepresented facts, hence they fall very well within the definition of 'incriminating material'.

11 The ld CIT(A) further referred to the decision of the Hon'ble Supreme Court in the case of PCIT-3 vs. Abhisar Buildweil Pvt. Ltd. (in Civil Appeal No. 6580 of 2021 dated 24.04.2023) wherein in para 14(iii), it has held as under on the issue of incriminating material :- "iii) in case any incriminating material is found/unearthed, even, in case of unabated/ completed assessments, the AO would assume the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns"

12 The ld CIT(A) held that from reading of the above judgment of the Hon’ble Supreme Court, it is clear that in case, any incriminating material is found during the course of search, the AO can assess the total income of the assessee on the basis of incriminating material as well as any other material in knowledge or possession of the AO including the total income declared in the returns. Hence, the contention of the assessee that no incriminating material was found is without basis and is liable to be dismissed.

We therefore find that the matter relating to unabated assessment and framing of assessment in absence of incriminating material found during the course of search were agitated by the assessee by way of specific ground of appeal and various

During the course of hearing, the Ld. AR submitted that Ld. CIT(A) has failed to appreciate that it is a case of unabated assessment where the assessment u/s 143(3) has already been completed prior to the date of search, and during the course of search at the premises of the assessee, no incriminating material/evidence has been found in respect of receipt of share premium which have been duly reflected in the financial statements and thus duly disclosed as part of the original return of income.

1 It was submitted that the complete details as filed by the assessee during the original assessment proceedings and thus duly disclosed are as follows:

2 It was further submitted that the decision of Hon’ble Supreme Court in case of PCIT-III Vs. Abhisar Buildwell Pvt. Ltd. (Supra) has not been appreciated and considered properly by the Ld. CIT(A) and therefore in absence of any incriminating evidence

3 It was further submitted that the Ld. CIT(A) has confirmed the order of the AO by relying upon the statement u/s 131 of Shri Naval Jain, ex-director of M/s Mega City Sales Pvt Ltd Shri Manoj kumar, ex-director of M/s Ajnabi Vanijya Pvt Ltd and Shri Shiv Kumar Khemka, ex-director of M/s Evergreen Good Pvt Ltd which was recorded by the Investigation Wing, Kolkata on 23/03/2015, 30/01/2014 and 7/07/2014 respectively and not during the course of search of the assessee and thus the same could not be said to be the incriminating evidence as found during the course of search in case of the assessee.

4 It was further submitted that the findings of the Ld. CIT(A) about the meaning of the “incriminating material” by relying upon certain article reported in a tax journal is without any basis and substance as it has been held in various judgments of Hon’ble High Courts / Tribunal that the mere statement cannot be held to be incriminating material found during the search and further the assessee had never conceded during the course of search that such receipt of share premium was bogus. It was further submitted that all these statements have nothing to do with the search proceedings of the assessee as these were recorded during their respective investigation proceedings way back in the year 2015 and these statements were anyway recorded at the back of the assessee and no opportunity to cross examine was ever given to the assessee inspite of specific request being made in this regard.

5 It was further submitted that the statement recorded during the course of search has no evidentiary value and cannot be said to be incriminating evidence by itself as found during the course of search as held in various decisions and in this regard, reliance was placed on the decisions of Hon’ble Delhi High Court in case of Pr. CIT Vs. Regarding the findings of the Ld. CIT(A), point wise rebuttal was submitted as under:

7 It was submitted that the decision of the Hon’ble Supreme Court in case of PCIT Vs. Abhisar Buildwell (supra) infact supports the case of the assessee that where there is no incriminating material found during the course of search, the AO cannot proceed and reassess the income for the year in which the assessment also stood completed and not abated as on the date of search.

8 It was further submitted that the decision of Hon’ble Supreme Court has since been followed by the Department and CBDT has also issued instruction dt. 23/08/2023 Pvt. Ltd. 455 ITR 506 (SC), Pr. CIT Vs. King Buildcon Pvt. Ltd. in Civil Appeal No. 4326/2023 dt. 10/07/2023 (SC), DCIT Vs. U K Paints Overseas Ltd. reported in [2023]150 taxmann.com 108 (SC) wherein the legal proposition so laid down in Abhisar Buildwell has been subsequently followed and reiterated by the Hon’ble Supreme Court. Further, our particular reference was drawn to decisions in case of Pr. CIT Vs. Shardaben Arvindbhai Patel [2023] 152 Taxmann.com 535 (Guj HC), Pr. CIT Vs. Ms. Kavita Agarwal [2022] 143 Taxmann.com 404 (Del HC) and Ashok Commercial Enterprises vs ACIT [2023] 459 ITR 100 (Bom) wherein the said principle has been followed by the Hon’ble Gujarat, Delhi and Bombay High Court. Further, our reference was drawn to the recent decision of this Bench in case of Ashish Jain vs DCIT (ITA No. 352/Chd/2023 and others dated 23/01/2024) wherein similar findings have been recorded.

In his submissions, the ld CIT/DR submitted that the issue of bogus share capital and share premium was initially unearthed during the investigation by Kolkata DDIT Investigation Unit-2(1) wherein it was found that these companies were involved in providing accommodation entries of share capital and premium. It was submitted that this was a major issue which was investigated during the search and post search inquiry in case of the assessee. It was submitted that the statement of the Director, Shri Sunil Kumar Jain was recorded under Section 132(4) on 26/02/2016 where he admitted

1 It was submitted that there is no dispute that the Hon’ble Supreme Court in case of Pr. CIT Vs. Abhisar Buildwell (P) Ltd. has held that where no incriminating material has been found during the course of search, no addition can be made in the hands of the assessee in case of unabated assessment as on the date of search. It was submitted that in the instant case even though it is a case of unabated assessment as on the date of search, the fact remains that statement of the directors of the assessee company have been recorded and where the same is read along with the report of the Investigation Wing and statements recorded u/s 131, the same are clearly incriminating in nature. Further he relied on the findings of the AO as well as the Ld. CIT(A). It was accordingly submitted that there is no basis in the contentions so advanced by the Ld. AR that no incriminating material has been found and seized during the course of search in the case of the assessee and the addition so made by the AO therefore has rightly been sustained by the ld CIT(A) and the same should be confirmed.

We have heard the rival contentions and purused the material available on record. In case of Ashish Jain (supra), we had an occasion to examine the issue and relevance

2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no juri iction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: "15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer

Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act."

For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material.

While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961. 9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make

On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) 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 or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,—

As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the juri iction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub- section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the juri iction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfillment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.

If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the juri iction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the juri iction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-

For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.

In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the juri iction for block assessment under section 153A; (ii)all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv)in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.”

The Hon’ble Supreme Court in the aforesaid decision has held that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act and thus, the object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material unearthed during the course of search, the AO would assume the juri iction to assess or reassess the total income in case of completed/unabated assessment taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the return. In case, no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments and has upheld the decisions of Hon’ble Delhi High Court in case of CIT Vs. Kabul Chawla [2016] 380 ITR 573 and Hon’ble Gujarat High Court in case of Pr. CIT Vs. Saumya Construction (P.) Ltd. [2016] 387 ITR 529. 14. As to what constitute incriminating material found/unearthed during the course of search, the Hon’ble Delhi High Court in case of Kabul Chawla (Supra) held that completed assessment can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon’ble Delhi High Court in the said decision referred to the decision of Hon’ble Bombay High Court in case of CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 wherein the question for consideration was whether the scope of assessment under section 153A encompasses addition not based on any incriminating material found during the course of search. It was held by the Bombay High Court that no addition can be made in respect of the assessment that has become final in the absence of incriminating material found during the course of search. The Bombay High Court referred to its earlier decision in case of CIT Vs. Murli Agro Products Ltd. (ITA No. 36 of 2009 dated 29/10/2010) and expressed its agreement with the earlier decision holding that the crucial words “search” and “requisition” appear in substantive provisions of section 153A and that would through light on the applicability of the provisions which is being enacted to a search or requisition and that its construction has to be read and understood accordingly. The Hon’ble Bombay High Court further affirmed the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. Vs. DCIT [2012] 18 ITR (Trib) 106 (Mumbai) wherein it was held that the “incriminating material” in the context of the relevant provision means books of account, other documents found in the course of search but not produced in the course of original proceedings and secondly, the undisclosed income or property discovered in the course of search. We deem it appropriate to reproduce the findings of the Hon’ble Bombay High

Court in case of Continental Warehousing Corporation (supra) and the same read as under:

The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken

Before proceeding further, we may now examine the provision contained in sub- section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the juri iction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search.

The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account.

Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1).

The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.

The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso ? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results:- (a) In so far as pending assessments are concerned, the juri iction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.

It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the juri iction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of juri iction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency."

The matter relating to incriminating material coupled with various other issues again came up for consideration before the Hon’ble Bombay High Court recently in case of Ashok Commercial Enterprises vs Assistant Commissioner of Income tax (Writ petition no 2595 and others dated 04/09/2023). Referring to the decision of Hon’ble Supreme Court in case of Pr. CIT Vs. Abhisar Buildwell (P) Ltd. (supra), it was held that no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act. Referring to the decision of Hon’ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society 397 ITR 344 (SC), it was held that the incriminating material seized must pertains to assessment year in question and notice issued under section 153C for other assessment

We therefore find that the term “incriminating material” have to be read and understood in the context of one or more of the conditions stipulated in section 132(1) and on satisfaction of which, a search can be authorised and search warrant can be issued. That is, there is information in possession of the competent authority and basis which he has reasons to believe that (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced under the erstwhile 1922 Act or under section 142(1) of the present Act, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. Therefore the information in possession of the competent authority at the time of authorization of search becomes relevant and basis the same, his satisfaction that search action is warranted coupled with material actually found and seized during

Applying the aforesaid legal proposition in the instant case, we find that it is a case of completed/unabated assessment wherein the original return of income filed on 29/09/2012 stood processed under section 143(1) and accepted in absence of any notice under section 143(2) and statutory period of issuance of such notice stood expired well before the date of search which was conducted on 26/02/2016. 19. As per section 153A of the Act, once a search and seizure action is carried out, the AO has to assess or reassess the total income of the assessee in respect of six years immediately preceding the assessment year relevant to the previous year in which a search is conducted or requisition is made. In case the assessment is pending on the date of search the same shall be abated as per proviso to section 153A(1) of the Act and the AO is free to assess the income of the assessee as regular assessment. However, in case of completed assessment and not abated as on the date of search, as in the instant case, the AO has to reassess the total income of the assessee and the assessment already completed can be tinkered with or distrusted where some incriminating material is found and seized during the course of search indicating undisclosed income of the assessee. Therefore, the AO would assume the juri iction to reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the return. In case no incriminating material is unearthed during the search, the AO cannot reassess taking into consideration the other material in respect of completed assessments/unabated assessments.

In the instant case, search and seizure operations were carried at the business and residential premises of M/s Jain Amar Clothing Pvt. Ltd. Group of cases on 26/02/2016 and the assessee, being part of the said group were also searched on the said date along with other family members. What has been found and seized are certain documents from a bank locker maintained with HDFC Bank, Kidwai Nagar, Ludhiana which admittedly doesn’t belong to the assessee but is in the name of and belongs jointly to Shri Sunil Kumar Jain, the father of the assessee and Smt. Kamla Jain, the grandmother of the assessee. Therefore, the documents so found and seized are from a bank locker, which is neither in the name of the assessee nor it’s the case of the Revenue that the locker is operated by the assessee. The assessee has not been found in possession of the keys of the locker and thus, the assessee is not having the effective possession of the said locker and it’s again not the case of the Revenue either. Thus, where the documents have been found from a locker of family members of the assessee maintained with a bank located at a premises other than residential premises and in respect of which the assessee doesn’t have any access or possession thereof, it can be safely concluded that no documents or material has been found during the course of search either from the premises or the possession of the assessee and what to talk about any incriminating nature of such material found and seized. What has been found and seized is from the possession of third persons, who no doubt are part of the assessee’s family and covered as part of the same search proceedings, but the same cannot be held as found during the course of search in case of the assessee.

Where the documents have been found from the locker of third persons during the course of search but belongs to the assessee, the satisfaction note of the Assessing officer of the third persons so searched assumes significance as the same alone will indicate the incriminating nature of such material so found belonging to the assessee during the course of search as held by the Bombay High Court in case of Ashok Commercial (supra) wherein it was held that the contents of the said satisfaction note are the only statement/material to be looked at and the Revenue cannot seek to augment, supplement or add to the material recorded to support the claim that the incriminating material has been found and the Revenue cannot refer to any other document or material to establish such a claim. In the instant case, we find that there is nothing on record and/or brought to our notice during the course of hearing which demonstrates that any satisfaction note has been prepared and recorded by the Assessing officer of family members whose locker has been searched and from where the documents belonging to the assessee has been found and seized. The fact that the assessee’s premises were also searched and he was covered as part of the same search operations and action is initiated u/s 153A in his case, the same doesn’t take away the statutory requirement of recording of satisfaction note by the Assessing officer of family members whose locker has been searched and from where the documents belonging to the assessee has been found and seized.

Moving further, we look at the show cause dated 14/09/2017 issued during the reassessment proceedings in case of the assessee wherein the AO referred to page no. 1 to 34 and 180 to 182 of Annexure-A seized from aforesaid bank locker and stated that the document so seized relates to purchase of shares on different dates by the assessee in terms of share certificate of M/s Maple Goods (P) Ltd. and the copy of the contract cum bill notes issued by the share broker, Shri S.K. Khemka and which has been termed as incriminating in nature.

In this regard, it is an admitted and undisputed position that the assessee had purchased the shares of M/s Maple Goods (P) Ltd. during the financial year 2010-11 relevant to assessment year 2011-12 and thus, the said transaction doesn’t pertain to impugned assessment year 2012-13 and cannot be held as incriminating in nature for the impugned assessment year. The Hon’ble Supreme Court in case of Singhad Technical Education Society (supra) considering the issue under section 153C held that the incriminating material which was seized had to pertain to assessment years in question. The Hon’ble Supreme Court in case of Abhisar Buildwell (P) Ltd (supra) considering the issue under section 153A reiterated the said principle wherein it was held that the intention does not seem to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search.

Further, it is noted that during the financial year 2010-11 relevant to assessment year 2011-12, the assessee had purchased the shares wherein the payment had been made through normal banking channel and the transaction is duly reflected and disclosed in the bank statement of the assessee. The proceedings for Assessment Year 2011-12 were also reopened u/s 153A pursuant to search action and the reassessment proceedings have been completed u/s 153A r/w 143(3) vide order dated 29/12/2017 where the AO has not recorded any adverse findings regarding the aforesaid purchase of shares of M/s Maple Goods (P) Ltd even though the documents found and seized from the locker were in the knowledge of the Assessing officer and a specific show-cause notice dated 14/09/2017 regarding bogus LTCG has been issued by the AO and considering the submissions of the assessee, the transaction of purchase of the shares of M/s Maple Good (P) Ltd through the broker Shri S.K Khemka has been duly accepted by the AO. Therefore, where for assessment year 2011-12, the documents so found and seized from the locker have not been found as incriminating in nature by the Assessing officer and in that scenario, it is difficult to understand and appreciate how the same documents can be treated as incriminating in nature for the impugned assessment year

Moving further, it is noted that pursuant to scheme of amalgamation approved by the Hon’ble Calcutta High Court, the assessee had received shares of Access Global in lieu of shares held in Maple Goods (P) Ltd. and the shares of Access Global were received and credited in the demat account of the assessee. Therefore, once the scheme of amalgamation has been implemented, Maple Goods (P) Ltd loses its legal existence and identity and merges into Access Global and the fresh shares of Access Global have been issued and credited in the D-mat account of the assessee against the shares held in Maple Goods (P) Ltd. In the impugned assessment year 2012-13, we find that the assessee has sold certain shares of Access Global and disclosed long term capital gains on sale of shares of Access Global as part of the original return of income filed on 29/02/2012 well before the date of search on 26/02/2016. While calculating the long term capital gains, the assessee has disclosed sale consideration on sale of shares of Access Global and has claimed cost of acquisition of original shares of M/s Maple Goods (P) Ltd which matches with particulars as per the share certificates initially purchased and transferred in the name of the assessee and contract notes issued by the broker Shri S.K Khemka which were found from the locker of the family members. Thus, the transaction of sale and purchase of shares have been duly disclosed as part of the original return of income and the assessment thereof stood completed/unabated as on the date of search. Therefore, the share certificates and contract notes represent and corroborate a disclosed transaction of purchase and sale of shares as part of the original return of income and cannot be termed as incriminating material so found and seized during the course of search in case of the assessee for the impugned assessment year. Further, there is nothing found during the course of search in case of the assessee that Shri S.K Khemka was an unauthorized broker indulging in illegal trading. Therefore, the findings of the AO that the share certificates and contract notes are incriminating in nature are not borne out of record and infact, the said documents corroborate and confirm the disclosed transaction of purchase of shares of Maple Good (P) Ltd by the assessee. Further, the fact that these documents have a direct bearing on the estimation of correct income of the assessee doesn’t make them incriminating in nature as so held by the ld CIT(A).

Now, coming to statement of Shri S.K Khemka from whom assessee had purchased shares of Maple Good (P) Ltd, admittedly, the said statement was recorded on 13/03/2015 by the Investigation Wing, Calcutta in context of some other proceedings well before the date of search in case of the assessee which happened on 26/02/2016. As per the AO, the statement of Shri S.K Khemka is highly relevant to assessee’s case as the assessee has purchased shares through the said broker. There is a difference between relevancy of material and incriminating nature of material found during the course of search. The material which could be relevant doesn’t necessarily be held as incriminating in nature. In case of unabated assessment, what is required to be seen is whether there is any incriminating material unearthed during the course of search. Only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the juri iction to assess or reassess the total income in case of completed/unabated assessment taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the return.

As we have noted above, the share certificates corroborate and confirm the disclosed transaction of purchase of shares of Maple Good (P) Ltd by the assessee and cannot be termed as incriminating in nature. Therefore, where there is no incriminating material found during the course of search, the statement of Shri S.K Khemka (and what has been stated therein) which is recorded well before the date of search in case of the assessee and in the context of some other proceedings, independent of the impugned search proceedings, is availability of certain “other material/documentation” with the AO during the course of reassessment proceedings but not material/documentation which is incriminating in nature found during the course of search in case of assessee for the impugned assessment year.

As per ld CIT/DR, the statement of Shri S.K Khemka is corroborated by evidence in nature of share certificates and contract notes seized during the course of search and basis the same, it was contended that documents so seized would fall within the definition of incriminating material. In other words, the statement of Shri S.K Khemka has formed the basis for forming the belief that share certificates and contract notes are incriminating in nature. As we have noted above, the question whether any material found during the course of proceedings under section 132 is incriminating or otherwise has to be tested based only on the satisfaction note recorded by the AO. It has been held by the Courts that the contents of the said satisfaction note are the only statement/material to be looked at and the Revenue cannot seek to augment, supplement or add to the material recorded to support the claim that the incriminating material has been found and the Revenue cannot refer to any other document or material to establish such a claim. In the instant case, there is nothing on record and/or brought to our notice during the course of hearing that the Competent authority was seized of the aforesaid statement of Shri S. K Khemka at the time of recording of the satisfaction whereby the authorization has been issued and the search warrant was issued whereby the search has been initiated in case of the assessee. Therefore, the statement of Shri S.K Khemka is availability of other material/documentation which has come in the knowledge and possession of the AO for the first time during the course of reassessment proceedings and therefore can’t be referred to and relied upon by the AO to augment, supplement and add to the material found during the course of search in terms of the share certificates and contract notes and in terming the same as incriminating material found during the course of search in case of the assessee. The contents advanced by the ld CIT/DR therefore cannot be accepted.

In view of the aforesaid discussion and in the entirety of facts and circumstances of the case and respectfully following the dicta laid down by the Hon’ble Supreme Court, Hon’ble Delhi and Bombay High Court as well as Special Bench of the Tribunal, we are of the considered view that the addition of Rs 87,04,733/- made by the AO during the reassessment proceedings completed u/s 153A is not based on any incriminating material found or seized during the course of search and seizure action u/s 132 of the Act in case of the assessee. Being a case of completed/unabated assessment, in absence of any incriminating material found during the course of search, the addition so made cannot be sustained and is hereby directed to be deleted. In the result, the ground no. 2, 3 & 4 of the assessee’s appeal is allowed.”

Applying the aforesaid legal proposition in the instant case, we find that it is a case of completed/unabated assessment wherein the original return of income stood processed under Section 143(1) and thereafter, the assessment proceedings stood completed u/s 143(3) vide order 23/12/2014 well before the date of search which was conducted on 26/02/2016. In the entire reassessment proceedings right from the initial show-cause to the findings, the AO has not referred to any material or document, what to talk about any incriminating material, in respect of receipt of share premium from the either of the three investor companies by the assessee company, which has been found during the course of search at the premises of the assessee. As we have noted earlier, in the show cause dt. 08/12/2017, the AO has referred to the statement of directors of the assessee company, Shri Sunil Kumar Jain and Shri Vaibhav Jain recorded under section 132(4) during the course of search, information gathered by the Income Tax Investigation Wing, Kolkata way back in the month of March 2015 and as part of that, the statement of various persons recorded earlier under Section 131 and physical inquiry conducted during the post search inquiry from 05/12/2016 to 08/12/2016 at Kolkata and the financial statements of the investor company as well as the shareholding pattern of the investor companies. There is nothing in the show-cause which remotely suggests that any incriminating material has been found and seized during the course of search relating to share premium by the assessee company.

We have also gone through the statement of the two directors recorded u/s 132(4) and find that in their statement, they have confirmed having received the share premium during the financial year 2011-12 from the investor companies and the fact that the same has been duly reflected in the books of accounts. The AO has not disputed the fact that these transactions have been duly reflected in the financial statements of the assessee company and thus duly disclosed. The original return of income and financial statements are already on record and taken into consideration while completing the assessment proceedings u/s 143(3) of the Act. We therefore find that there is nothing incriminating in the said statements which can be held against the assessee. Further, the report of the Investigating Wing, Kolkata and statement of ex- directors of the investor companies recorded u/s 131 cannot be termed as incriminating material found during the course of search as these investigations were conducted and the statements so recorded in the year 2014/2015 well before the date of search which was conducted on 26/02/2016. 14. Regarding the findings of the ld CIT(A) that the introduction of bogus share capital and share premium unearthed during the course of search was supported by the report of the Investigation Wing, Kolkata and the entries in the books of accounts of the assessee company have been used to understate the income and only a device based on misrepresented facts and thus fall within the definition of incriminating material. In other words, the support of the report of the Investigation wing has been sought to build the case for the Revenue that incriminating material has been found during the course of search. We are unable to subscribe to the said view taken by the ld CIT(A). As we have noted earlier, there is no iota of material on record which has been unearthed during the course of search at the assessee’s premises as far as transaction of receipt of the share premium is concerned. No doubt, the Directors of the assessee company have been asked about these share transactions during the course of search but merely the fact that the question have been asked and responded to by the directors and their statements have been recorded u/s 132(4) cannot be equated with the fact that some material and that too, incriminating material has been found during the course of search. As we have noted earlier, there is nothing in the statements which can be held to be incriminating and in any case, there is no corroborative material which has been unearthed during the course of search to support the theory of any incriminating material found during the course of search. Therefore, the finding of the ld CIT(A) that the introduction of bogus share capital and share premium has been unearthed during the course of search is not borne out of records and consequentially, the support of the report of the Investigation Wing cannot be drawn to augment and to support the claim that the incriminating material has been found and the Revenue cannot refer to any other document or material to establish such a claim.

In view of the aforesaid discussion and in the entirety of facts and circumstances of the case and respectfully following the dicta laid down by the Hon’ble Supreme Court and Hon’ble High Courts, we are of the considered view that the addition of Rs 28,26,46,250/- made by the AO during the reassessment proceedings completed u/s 153A is not based on any incriminating material found or seized during the course of search in case of the assessee. Being a case of completed/unabated assessment, in absence of any incriminating material found during the course of search, the original assessment so completed u/s 143(3) need to be reiterated and the addition so made by the AO and sustained by the ld CIT(A) is hereby directed to be deleted. In the result, the ground no. 2, 4 & 5 of the assessee’s appeal are allowed.

In view of the aforesaid discussions where we have deleted the addition in absence of any incriminating material, other grounds of appeal on merits of the case, lack of opportunity for cross-examination, etc have become academic in nature and we don’t deem it necessary to adjudicate the same. These grounds of appeal are thus

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 16/05/2024. आकाश दीप जैन िव"म "सह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा"य" / VICE PRESIDENT लेखा सद"य/ ACCOUNTANT MEMBER AG आदेश क" "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant

""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File