ACIT CENTRAL CIRCLE-14, NEW DELHI V. RAMA PASHU AAHAR PVT LTD, NEW DELHI

ITA 5021/DEL/2019

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 40229 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: RAKESH GUPTA; RS.; I.E. RS.
• Keywords: Question of law; Corroborative evidences; Cost of acquisition; Document seized; Documents seized; Bogus purchase; Principle of natural justice; Search and seizure; Block assessment; Bogus
• Section: 142(1); 143(2); 132; 153A; 153C; 234B; 72; 158BC; 260A; 158B(b)

Judgement Text

" IN THE INCOMETAXAPPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIALMEMBER ITA No.5028, 5029 & 5030/DEL/2019 (Assessment Years : 2010-11, 2011-12 & 2012-13) DCIT, CC – 14, vs. Rama Allied Products Marketing Pvt. Ltd., New Delhi. Siyana Road, Bulandshahr – 203 001 (Uttar Pradesh). (PAN: AACCR0688N) ITA No.3335, 3336 & 3337/DEL/2019 (Assessment Years : 2010-11, 2011-12 & 2012-13) Rama Allied Products Marketing Pvt. Ltd., vs. DCIT, CC – 14, C/o RRA TAXINDIA, New Delhi. D-28, South Extension Part I, New Delhi – 110 049. (PAN: AACCR0688N) ITA No.3120, 3121, 3122 & 3123/DEL/2019 (Assessment Years : 2009-10, 2010-11, 2011-12 & 2012-13) Rama Hygienic Products Pvt. Ltd., vs. DCIT, CC – 14, C/o RRA TAXINDIA, New Delhi. D-28, South Extension Part I, New Delhi – 110 049. (PAN: AAACR4597A) 2 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 ITA Nos.5016, 5017, 5018 & 5019/DEL/2019 (Assessment Years : 2009-10, 2010-11, 2011-12 & 2012-13) DCIT, CC – 14, vs. Rama Hygienic Products Pvt. Ltd., New Delhi. 27/29, Street No.9, Vishwas Nagar, Shahdara, Delhi – 110 032. (PAN: AAACR4597A) ITA Nos.3332, 3333 & 3334/DEL/2019 (Assessment Years : 2009-10, 2010-11 & 2011-12) Rama Pashu Aahar Pvt. Ltd., vs. ACIT, CC – 14, C/o RRA TAXINDIA, New Delhi. D-28, South Extension Part I, New Delhi – 110 049. (PAN: AACCR1144B) ITA Nos.5020, 5021 & 5022/DEL/2019 (Assessment Years : 2009-10, 2010-11 & 2011-12) ACIT, CC – 14, vs. Rama Pashu Aahar Pvt. Ltd., New Delhi. 27/29, Street No.9, Vishwas Nagar, Shahdara, Delhi – 110 032. (PAN: AACCR1144B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Dr. Rakesh Gupta, Advocate Shri Saksham Agarwal, Advocate Shri Somil Agarwal, Advocate Shri Deepesh Garg, Advocate REVENUE BY : Shri Javed Akhtar, CIT DR Date of Hearing : 05.12.2024 Date of Order : 28.02.2025 3 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 O R D E R PER S. RIFAUR RAHMAN, AM : 1. The assessee, Rama Allied Products Marketing Pvt. Ltd. as well as Revenue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to ‘Ld. CIT (A)’) dated 25.03.2019 for AYs 2010-11 to 2012-13. The assessee, Rama Hygienic Products Pvt. Ltd. as well as Revenue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to ‘Ld. CIT (A)’) dated 25.03.2019 for AYs 2009-10 to 2012-13. The assessee, Rama Pashu Aahar Pvt. Ltd. as well as Revenue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to ‘Ld. CIT (A)’) dated 25.03.2019 for AYs 2009-10 to 2011-12. 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up ITA No.5028/Del/2019 for AY 2010-12 in the case of Rama Allied Products Marketing Pvt. Ltd. as lead case. 3. Brief facts of the case involved in AY 2010-11 are, a search and seizure 4 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 action was carried out on the Param and Rama group on 28.02.2014 and various residential and business premises of the assessee were also covered. The case was centralized by ld. CIT (A), Circle 2, New Delhi vide order under section 127 of the Income-tax Act, 1961 (for short ‘the Act’). Certain incriminating material was found pertaining to the assessment year under consideration. Accordingly, the AO issued notice u/s 153A of the Act dated 28.12.2015 and served on the assessee. In response, ld. AR of the assessee submitted vide letter dated 11.01.2016 that return filed dated 25.08.2010 be treated as return filed in response to notice issued u/s 153D. Subsequently, notices u/s 143(2) along with questionnaire were also issued and served on the assessee. In the questionnaire issued to the assessee u/s 142(1) of the Act includes to confirm whether assessee has maintained stock register, directed to file copy of qualitative and quantitative opening stock and closing stock along with basis of valuation of stock with documentary proof. In response, assessee has submitted that assessee has maintained stock register properly as per the requirements and also submitted that the assessee has valued the stock at cost i.e. on acquisition cost, along with the details of closing stock for the relevant assessment year in Annexure 1 which 5 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 contained the closing stock, details of raw material, packing material, oil and lubricants, finished goods and bardana for the total value of stock at Rs.1,97,74,982.21. Subsequent to issue of other notices, the AO relied on the STR pertaining to M/s. Mohan Lal Gupta & Sons, M/s. T.R. Traders and M/s. Raghuveer Singh Devendra Kumar received from Investigation Wing, which showed peculiar nature of the transactions in the concerned bank accounts operated all these companies having transactions with Rama group based in Bulandshahr, UP. The AO by observing certain discrepancies from the bank statements of the abovesaid three entities wherein cash withdrawals were made below the threshold limit of Rs.10 lakhs in a single day and the entire debits in the bank accounts were by way of cash withdrawals only and that too withdrawal below the threshold limit. By relying on the statement of Shri Mohan Lal Gupta, sole proprietor of M/s. T.R. Traders and Shri Devendra Kumar, Proprietor of M/s. Raghuveer Singh Devendra Kumar and M/s. Mohan Lal Gupta & Sons and Shri Sanjay Mudgal, Accounts Head of the assessee, Shri Sanjeev Kumar, the owner of the Rama group, Assessing Officer came to the conclusion that no purchases were made by the Rama group of companies and they raised bogus sales vouchers only as per the 6 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 directions of Sanjeev Kumar who was looking after the affairs of Rama Pashu Aahar Private Ltd., Rama Allied Products Marketing Pvt. Ltd. and Rama Hygienic Products Private Ltd.. Based on the above said statement and correlating transport vouchers and bills, AO came to the conclusion that the purchases made by the assessee amounting to Rs.2,38,00,000/- during the year are bogus purchases and accordingly he proceeded to make the addition. Further he observed that as per Annexure A-35 seized from party RU-1 wherein at serial no.15 the tally data contained the transaction relating to Rama Rusk Unit Store wherein turnover was recorded at Rs.4,45,112/- for FY 2009-10. Since the data entries are absurd data entries and the tally data are in educational mode and during post search enquiries rejecting the explanations submitted by the assessee, he proceeded to make the addition of Rs.4,45,112/-. 4. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. After considering the detailed submissions of the assessee, ld. CIT (A) dismissed the jurisdictional issues raised by the assessee and treated the purchases as bogus and proceeded to sustain 10% of the purchases as addition to the income of the assessee and 7 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 further enhanced the profit to the extent of Rs.5,33,120/- and other grounds of appeal as consequential in nature. Accordingly, he partly allowed the appeal filed by the assessee. 5. Against the abovesaid order, both assessee as well as Revenue are in appeal for AY 2010-11 before us raising following grounds of appeal :- “ASSESSEE’S APPEAL 1. That having regard to the facts and circumstances of the case, Ld. has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 153A and further erred in passing the impugned assessment order. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153A, is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs.23,80,000/- made by Ld. AO on account of alleged bogus purchases made from M/s TR Traders, more so when no incriminating material has been found as a result of search and impugned addition has been made by recording incorrect facts and findings and without granting opportunity of cross examination of the entire adverse material and deponents used against the assessee and without observing the principles of natural justice. 8 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 4. That in any case and in any view of the matter, action of Ld. CIT(A) in sustaining the addition of Rs.23,80,000/- made by Ld. AO on account of bogus purchases made from M/s TR Traders, is bad in law against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in enhancing the income of assessee by Rs.5,33,120/- (i.e. Rs.2,38,00,000/- * 0.0224) on the alleged ground that assessee has suppressed the profit embedded in purchases from bogus entity and that too by recording incorrect facts and findings and in violation of principles of natural justice. 6. That in any case and in any view of the matter, action of Ld. CIT(A) in enhancing the income of assessee by Rs.5,33,120/- (i.e. Rs.2,38,00,000/- * 0.0224) on the alleged ground that assessee has suppressed the profit, is bad in law and against the facts and circumstances of the case . 7. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.4,45,112/- on account of seized digital data on the basis of material allegedly found during the course of search and further erred in treating the same as unaccounted sales of assessee and that too by recording incorrect facts and findings and in violation of principles of natural justice. 8. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 9 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 9. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A & 234B of Income Tax Act, 1961. REVENUE’S APPEAL 1. That the Ld. CIT(A) has erred in facts and in law in only confirming 10% of the total additions made by the AO on account of bogus purchases without any basis and deleting 90% of the additions made on account of total bogus purchases of Rs.2,38,00,0000/-. 2. That the Ld. CIT(A) has erred in facts and in law in confirming only 10% of the additions made on account of bogus purchases and completely ignoring the fact that both Shri Mohan Lal Gupta and Shri Devendra Kumar have confirmed in their statement on oath that they were providing only bogus bills to the assessee company and not doing any actual sale / purchase activities. 3. That the Ld. CIT(A) has erred in facts and in law in confirming only 10% of the bogus purchases by arbitrarily and without any reasons arriving at the figure of 10% for computing bogus purchases. 4. That the Ld. CIT(A) has erred in facts and in law in deleting 90% of the additions made on account of bogus purchases by ignoring the statements of the persons who have supplied bogus bills and also corroborative evidences like mentioning of non-existent vehicle numbers in the bogus bills. 5. That the Ld. CITCA) has erred in facts and in law in making contradictory statements in the appeal order i.e. on one hand stating that from the statements of the persons it is not clear whether their supplied the goods and also stating that the 10 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 assessee indeed undertake some manipulation in purchases but at the same time deleting 90% the additions made on account of purchases. 6. That the Ld. CITCA) has erred in facts and in law in only allowing enhanced GP on the purchases booked through the entry operators/ bogus bills providers but in reality these suppliers were bogus and also doubtful, (as he himself has mentioned in the appeal order) and accordingly the entire addition on account of bogus purchases should have been confirmed and not only the GP addition. 7. (a) The order of the CIT(Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of hearing of the appeal.” 6. At the time of hearing, ld. AR of the assessee raised the jurisdictional issue of incriminating material found during the search. In this regard, he submitted that date of search is 28.02.2014 in the group concerns including in the case of the assessee and submitted that the assessee has filed its return of income for the present assessment year on 25.08.2010. Therefore, he submitted that in the case of assessment years involving AYs 2009-10, 2010-11, 2011-12 & 2012-13 are unabated assessment years and he submitted that the time period to issue notices u/s 143(2) has been already over on the date of search and he submitted that these assessment years are 11 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 unabated assessment years. Further he brought to our notice pages 6 to 17 of the assessment order and submitted that certain statements were recorded before search and also post search proceedings and the AO has heavily relied on the statements recorded before search. He submitted that it clearly shows that there is no incriminating material found during the course of search in respect of purchase of Maida from T.R. Traders. Further he submitted that the statement of Mohan Lal Gupta was recorded on 16.04.2012 and the same was reproduced at page 28 of the ld. CIT (A)’s order. He further submitted that statement of Devender Kumar was recorded on 26.07.2013 and brought to our notice page 24 of the ld. CIT (A)’s order. He further submitted Devender Kumar statement dated 26.07.2013 (refer page 17 of the assessment order of AY 2012-13). He submitted that the search was conducted on 28.02.2014 and subsequently further statements were recorded of Sanjay Mudgal on 28.02.2014, Mohan Lal Gupta was recorded post search on 28.02.2014 and Sanjeev Kumar on 01.03.2014 and further statement of Mohan Lal Gupta was recorded on 07.12.2016 and 17.12.2018. 7. Further he brought to our notice page 239 of the PB wherein assessee has 12 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 made submissions before ld. CIT (A) that the statement of Mohan Lal Gupta was not supplied to the assessee though in the notice dated 09.12.2016 it was mentioned that statement of Mohan Lal Gupta was recorded on 07.12.2016. The same was not provided to the assessee. Further he submitted that the detailed submissions before the ld. CIT (A) was reproduced at pages 11 to 13 of the ld. CIT (A)’s order wherein assessee has objected to the statement recorded with Mohan Lal Gupta and Devender Kumar before the search proceedings and the same was never supplied to the assessee. He further submitted that the abovesaid statements were recorded behind the assessee and, is there any search proceedings initiated against them were also not clear from the information supplied by the AO or mentioned in the assessment order. 8. Further it was submitted that subsequent statements recorded of Mohan Lal Gupta were never supplied to the assessee nor any opportunity was given for cross-examination. By relying on several case laws in its submission before ld. CIT (A), he submitted that the information gathered by the Revenue at the back of the assessee before the search proceedings in the case of the assessee and no corroborative evidence are incriminating material found 13 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 during the search and the AO has relied heavily on the post search enquiry and statements recorded from Mohan Lal Gupta, again it was not supplied to the assessee for cross-examination and any material which was not found during the search cannot be used against the assessee particularly in the unabated assessment years. 9. Further he brought to our notice pages 26 & 27 of the appellate order and brought to our notice findings of the ld. CIT (A) and submitted that even though ld. CIT (A) considered the arguments of the assessee but has not brought out any particular incriminating material allegedly found in search. He submitted that ld. CIT (A) has discussed overall scheme which emerges from the material gathered by the AO to initiate the proceedings u/s 153A and he observed that the issue of existence of incriminating material has to be considered in totality and he further observed that the issue has to be construed with the trade practices and the expected action of the independent entity in normal circumstances. Ld. CIT (A) justified with the argument that it had to construe the incriminating material in harmonious fashion with the general and vague observation so relied from the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (2015) 61 taxman.com 412 14 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 (Delhi). Accordingly, he rejected the submissions of the assessee and dismissed the grounds in this regard. Ld. AR submitted that since there is no incriminating material found as a result of search which could have shown the alleged bogusness of the purchases from T.R. Traders and in this regard, he heavily relied on the following decisions :- (i) CIT vs. Kabul Chawla – (2016) 380 ITR 0573 (Delhi); (ii) Pr. CIT vs. Meeta Gutgutia Prop. Ferns ‘N’ Petals & Ors. 395 ITR 526 (Delhi); (iii) PCIT vs. Kurele Paper Mills P. Ltd. 380 ITR 571 (Delhi); and (iv) CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 (Bombay). 10. He reiterated that the only material based upon which the impugned disallowances were made, are :- (i) Statement of Mohan Lal Gupta recorded on 25.09.2012 which was prior to the date of search; (ii) Statement of Mohan Lal Gupta during the course of search as reproduced in the assessment order; (iii) Statement of Sanjay Mudgal, Accounts Head of the assessee recorded during the course of search; 15 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 (iv) Statement of Sanjiv Kumar, Director of the assessee recorded during the course of search. 11. Further he submitted that these statements by themselves cannot be said to be incriminating material found during the course of search as held in the following cases :- (i) PCIT vs. Anand Kumar Jain (HUF) ITA 23/2021 dated 12.02.2021 High Court of Delhi; (ii) PCIT vs. Best Infrastructure (India) (P.) Ltd. 397 ITR 82 (Delhi); (iii) CIT vs. Harjeev Agricultural (2016) 290 CTR 263 (Delhi); and (iv) CIT vs. Raj Pal Bhatia (2011) 333 ITR 315 (Delhi). 12. Further he heavily relied on the decision of Shyam Sunder Jindal vs. ACIT (2024) 159 taxmann.com 1384 (Delhi) in which similar issue was considered by the Hon’ble Delhi High Court and decided the issue in favour of the assessee. 13. On the other hand, ld. DR of the Revenue however relied on the facts in the case of Rama Hygenic Products Pvt. Ltd. (2009-10) and submitted that the facts involved in all these cases are exactly similar and prayed that these facts may be considered as he has prepared the case based on these facts available in AY 2009-10 in Rama Hygenic Products Pvt. Ltd.. He brought 16 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 to our notice page 1 of the assessment order and submitted that AO has issued several notices u/s 142(1) and assessee has not complied to all those notices. He brought to our notice page 23 of the appellate order wherein the case of Sanjeev Kumar was relied wherein non-compliance / non- explanation of the issues was held to be non-genuine. Further he brought to our notice pages 4 to 7 of the assessment order and he took us through the various questions raised in the statement recorded with Mohan Lal Gupta and further he brought to our notice para 9 of the assessment order, and submitted that the activities of the assessee’s group are such that they purchased raw material from various parties and routed through the transporters. The statement of transporters are relevant and Mohan Lal Gupta is an agent of the assessee who sources raw material and utilizes the transporters. His statements are very much relevant and the informations contained in the statements of Mohan Lal Gupta and Sanjay Mudgal, Accounts Head are relevant and particularly Mohan Lal Gupta has confirmed the method of transactions of purchases made by the Rama group which were corroborated during the course of search and further he brought to our notice page 25 of the appellate order wherein ld. CIT (A) has 17 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 observed that the Assessing Officer is in possession of specific information flowing consequent to the search proceedings. It is undisputed fact that department found information in form of various documents and statements of people on the modus operandi during the course of search operations that upon collating with the information received lead to specific inputs in respect of genuineness of the equity infused in the companies of the group. The material gathered prima facie incriminating in nature and substance to attract the provisions of section 153A of the Act. Further he relied on the decision of E.N. Gopa Kumar vs. CIT (2016) 75 taxman.com 215 (Kerala) and N.K. Industries 72 taxman.com 289 (Gujarat). He submitted that assessee has purchased bogus bills from these alleged parties which confirms from the statements recorded from Mohan Lal Gupta, Sanjeev Kumar, Devender Kumar and Sanjay Mudgal, the Director of the assessee which corroborates the findings of the AO and with regard to incriminating material he heavily relied on the findings of the ld. CIT (A). 14. In the rejoinder, ld. AR submitted that ld. DR has not shown the details of material found during the search and further submitted that ld. DR has relied on the decision of Hon’ble Kerala High Court. However, he insisted that the 18 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 decision of the jurisdictional High Court is relevant and he relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Abhisar Buildwell (P.) Ltd. (2023) 454 ITR 212 (SC). He further relied on the decision of Hon’ble Delhi High Court in the case of CIT vs. Pavitra Realcon Pvt. Ltd. in ITA 579/2018 order dated 29.05.2024 and filed a copy of the same. 15. Considered the rival submissions and material placed on record. It is fact from the record submitted before us that the assessment years involved in these group cases are AY 2009-10 to 2014-15, further AYs 2009-10 to 2012- 13 are unabated assessment years. In brief all these assessment years are unabated, ld. AR has submitted the relevant information which is placed on record which clearly shows that AYs 2009-10 to 2012-13 are unabated assessment years and any addition can be made only on the basis of any incriminating material found during the search. In the present case, as per the record submitted before us, it shows that two statements were recorded prior to the search initiated in the case of the assessee i.e. on 28.02.2014 and a statement was recorded from Mohan Lal Gupta on 16.04.2012 and Devender Kumar on 26.07.2013. These statements were recorded prior to the search and the AO has relied on STRs received from the Investigation 19 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 Wing during the assessment proceedings. As per the fact brought before us, 3 STRs are information received from the Investigation Wing which were collected prior to search was provided to the AO and subsequent to search, further statements were recorded from Sanjay Mudgal and Mohan Lal Gupta on 28.02.2014 i.e. on the day of search and other statements were recorded subsequently from Mohan Lal Gupta on 07.12.2016 and 17.05.2018. Further it is brought to our notice that these statements which were recorded from Mohan Lal Gupta were not supplied to the assessee for any cross objection. Based on the statements recorded prior to search, assessee was asked to submit stock statements and other purchase details along with transport vouchers etc. We observed that the AO has heavily relied on the statements recorded prior to search and also statements recorded from Mohan Lal Gupta subsequent to search and not shared those statements with the assessee and proceeded to complete the assessment merely on the basis of statements without bringing any corroborative evidence relating to transactions carried on by the assessee in particular unabated assessment years. Further we observed that even ld. CIT (A) has not brought on record any incriminating material. Further he proceeded to reject the plea of the 20 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 assessee on the basis of circumstantial evidence and presumed that assessee group must have carried on its transaction based on the statements recorded prior to search. We observed that it is fact on record that no corroborative evidences were found during the search and further the AO has proceeded to make the addition only and only on the basis of statements recorded prior and subsequent to search. In the similar circumstances, Hon’ble jurisdictional High Court in the case of PCIT vs. Anand Kumar Jain (supra) and held as under :- “7. The preliminary question under consideration before us is whether a statement under Section 132(4) constitutes incriminating material for carrying out assessment under S. 153(A) of the Act. A reading of the impugned order reveals that the statement of Mr. Jindal recorded under Section 132(4) forms the foundation of the assessment carried out under Section 153A of the Act. That statement alone cannot justify the additions made by the AO. Even if we accept the argument of the Revenue that the failure to cross-examine the witness did not prejudice the assessee, yet, we discern from the record that apart from the statement of Mr. Jindal, Revenue has failed to produce any corroborative material to justify the additions. On the contrary we also note that during the course of the search, in the statement made by the assessee, he denied having known Mr. Jindal. Since there was insufficient material to support the additions, the ITAT deleted the same. This finding of fact, based on evidence calls for no interference, as we cannot re-appreciate evidence while exercising jurisdiction under section 260A of the Act. 8. Next, we find that, the assessment has been framed under section 153A, consequent to the search action. The scope and ambit of section 153A is well defined. This court, in CIT v. Kabul Chawla,1 21 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 concerning the scope of assessment under Section 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. This court in Principal Commissioner of Income Tax, Delhi v. Best Infrastructure (India) P. Ltd., has inter-alia held that: “38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal.” 9. In Commissioner of Income Tax v. Harjeev Aggarwal,4 this Court had held as follows: “23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 24. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words “evidence found as a result of search” would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or 22 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 25. (…) However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 26. In CIT v. Sri Ramdas Motor Transport Ltd., (1999) 238 ITR 177 (AP), a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. (…) 27. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to 23 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 29. In Commissioner of Income Tax v. Naresh Kumar Aggarwal: (2014) 3699 ITR 171 (T & AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. (…)” 10. Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the 24 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.” 16. Further he relied on the decision of Hon’ble Delhi High Court in the case of PCIT vs. Best Infrastructure (India) (P.) Ltd. (supra) wherein Hon’ble High Court held as under :- “37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.” 25 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 17. From the above, it is clearly held that without there being any incriminating material found during the search and merely relying on the statements recorded alone cannot be the basis of addition. Moreover, in the present case, the statements recorded prior and after the search were heavily relied to make the addition without there being any incriminating material or any mismatch of purchase or closing stock brought on record to be treated as incriminating material found during the search. In our considered view, the assessee has submitted all the relevant quantitative details of raw material supported by tax audit report for the impugned assessment years under consideration and no discrepancies were brought on record except on the basis of statements recorded from Mohan Lal Gupta and Devender Kumar prior to search and also heavily relied on the 3 STRs forwarded by the Investigation Wing. Further, we observed that there is no incriminating or corroborative evidence with the Revenue in conformity with the statements given by Mohan Lal Gupta and Devender Kumar. They made the statements prior to search and the Revenue must have gathered supporting evidence in line with the statements recorded. On the contrary, they just presumed that the statements are genuine and no specific admission by Shri Sanjeev 26 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 Kumar, Director, clearly shows that the Assessing Officer has merely presumed the activities by non-genuine without brining on record any corroborative evidences. Therefore, in the absence of any incriminating material or any corroboration of material in line with the statements recorded prior to the search were brought on record which cannot be treated as incriminating material. Merely relying on circumstantial evidences without there being any corroborative evidence cannot be treated as incriminating material. Ld. DR of the Revenue heavily relied on the decision of Hon’ble Kerala High Court and in our view, the facts are distinguishable and moreover the decision of Hon’ble jurisdictional High Court is more relevant than the decision of other Hon’ble High Courts. Accordingly, we hold that the assessments completed u/s 153A are without any incriminating material. Therefore, the assessment order is quashed. 18. The assessee has raised other grounds of appeal on merits which are not adjudicated at this stage. 19. In the result, the appeal in the case of Rama Allied Products Marketing Pvt. Ltd. for assessment year 2010-11 filed by the assessee is partly allowed and the appeal for AY 2010-11 filed by the Revenue is dismissed. 27 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 20. Since the facts in the other appeals filed by the assessee in Rama Hygenic Products Pvt. Ltd. in AYs 2009-10, 2010-11, 2011-12 and 2012-13 and Rama Pashu Aahar Pvt. Ltd. in AYs 2009-10, 2010-11 & 2011-12 are exactly similar and the findings given in Rama Allied Products Marketing Pvt. Ltd. in AY 2010-11 are applicable mutatis mutandis. In the result, all the appeals filed by the assessee are partly allowed. All the Department’s appeals are dismissed since we have allowed the jurisdictional issued raised by the assessee in their appeals. 21. To sum up : all the appeals filed by the assessee are partly allowed and all the Department’s appeals are dismissed. Order pronounced in the open court on this 28th day of February, 2025. Sd/- sd/- (ANUBHAV SHARMA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 28.02.2025 TS 28 ITA Nos.5028 to 5030/DEL/2019 ITA Nos.3335 to 3337/DEL/2019 ITA Nos.3120 to 3123/DEL/2019 ITA Nos.5016 to 5019/DEL/2019 ITA Nos.3332 to 3334/DEL/2019 ITA Nos.5020 to 5022/DEL/2019 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "