ACIT, CENTRAL CIRCLE-2(4), PUNE, BODHI TOWER V. JASDEEPSINGH MANMOHANSINGH BEDI, PUNE

ITSSA 36/PUN/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A), which had deleted an addition made by the Assessing Officer on the grounds of unexplained money amounting to Rs.2,50,00,000. This addition was based on WhatsApp messages found on the phone of a third party, Shri Kiran Baburao D Chandere, during a search operation. The assessee, Shri Jasdeepsingh Manmohan Singh Bedi, argued that no incriminating material was found at his premises and that the assessment was unabated, thus no addition could be made based on materials found in another person's premises. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling that in cases of unabated assessments, no addition can be made without incriminating material found at the assessee's premises.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471139 (ITAT-PUNE)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: PCIT (Central)-3 vs. Ananda Kumar Jain (HUF), PCIT vs. Abhisar Buildwell P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: S B C MALAKAR
• Keywords: Search and seizure; Block assessment; Futures and options
• Section: 143(3); 132; 69A; 139

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “A” BENCH : PUNE BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER I.T.(S.S.).A.No.36/PUN./2024 [E-APPEAL] Assessment Year 2015-2016 The ACIT, Central Circle-2(4), 6th Floor, Bodhi Tower, Aaykar Sadan, Salisbury Park, PUNE – 411 037. Maharashtra. PAN ABGPB3885M vs. Shri Jasdeepsingh Manmohan Singh Bedi, Street No.2, 64-Anand Park, Avundh, PUNE – 411 007. Maharashtra. (Appellant) (Respondent) For Revenue : Shri Amol Khairnar, CIT-DR For Assessee : S/Shri B C Malakar And Premchand C Patil Date of Hearing : 10.12.2024 Date of Pronouncement : 27.01.2025 ORDER PER RAMA KANTA PANDA, V.P. : This appeal filed by the Revenue is directed against the order dated 26.03.2024 of the learned CIT(A), Pune-12, relating to assessment year 2015-2016. 2. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of dealing in derivatives, futures and options and dealing in lands and properties. The assessee also has a proprietary business under the name and style of M/s.Jade Enterprises in which he offers consultancy services. He filed his return of income on 27.09.2015 declaring total loss of Rs.7,77,03,503/-. The order 2 IT(SS)A.No.36/PUN./2024 u/sec.143(3) of the I.T. Act, 1961 was passed on 03.08.2017 determining the total loss at Rs.7,64,29,586/-. 2.1. Subsequently, a search and seizure action u/s.132 of the Act was carried-out on 19.12.2017 at the residential premises of the assessee at Flat No.201 and 202, Cappela Apartment, Lane No.2, Anand Park, Aundh, Pune – 411 007. During the course of search, incriminating documents and jewellery was found. However, no jewellery was seized in this case. In response to notice issued u/sec.153A, the assessee filed the return of income on 12.03.2019 declaring total loss of Rs.7,77,03,503/-. The Assessing Officer issued statutory notices u/sec.142(1) and 143(2), in response to which, the Authorised Representative of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 2.2. The Assessing Officer noted that during the course of search and seizure action carried-out on 19.12.2017 in the case of Shri Baburao D Chandere and his family members, incriminating material was seized by the Party No.RC-1, Bundle No.1 which contains Pages 1 to 39. These pages are the transcripts of the Whatsapp Messages found in the phone of Shri Kiran Baburao Chandere, the son of Shri Baburao D Chandere. Shri Kiran B Chandere's statement was recorded on oath u/sec.132(4) of the Act on 19.12.2017, 20.12.2017 and 3 IT(SS)A.No.36/PUN./2024 21.12.2017. The Assessing Officer also noted the messages, on Page No.2 which are as under : “Bedi Sir 2.50 cr cash 1.92 crchek 7 lack profit 5 lack Fourtuner 4.50 supab” 2.3. He further noted that Shri Kiran Baburao Chandere [searched-party] had explained that the transactions are related to the present assessee. The Assessing Officer noted that all the transactions which Shri Kiran Chandere has explained are found to be genuine. He noted that the cheque of Rs.1.90 crore was issued to the assessee on account of profit on land at Mhalunge, payment of 5 lakhs for Fortuner and 4.50 lakhs for Skoda Supab have been found to have actually taken place. Shri Kiran Baburao Chandere though has denied payment of Rs.2.5 crore in cash to the assessee but the circumstantial evidence clearly suggests that Rs.2.5 crore have been paid in cash to the assessee. He observed that Shri Kiran B. Chandere had stated that the assessee is doing a JV project with the Chandere family for land at survey no. 132, Baner. Therefore, he held that the amount of Rs.2.5 crore have been paid in relation to this project and brought to tax the same as the unexplained money u/s.69A of the Act. 4 IT(SS)A.No.36/PUN./2024 3. Before the Ld. CIT(A), elaborate submissions were made. It was argued that no incriminating material was found from the premises of the assessee and since it was the case of an „unabated‟ assessment, no addition can be made. It was argued that the addition was made in the case of the assessee on the basis of Whatsapp messages found from some other assessee at his premises. Even if that material has to be considered as incriminating material and pertaining to the assessee, it was mandatory for the Assessing Officer of the party, from whose premises the material was found, to transfer such material to the Assessing Officer of the assessee after recording his satisfaction that such incriminating material pertains to the assessee and reveals the income of the assessee, which has escaped assessment. Since this exercise was not done and no satisfaction was recorded, the assessment made thereon is illegal and deserves to be cancelled. Relying on various decisions, it was submitted that the statement of third party recorded in the course of search conducted in the case of such third party cannot form the basis for making an assessment u/sec.153A. Decision of the Hon‟ble Delhi High Court in the case of PCIT (Central)-3 vs. Ananda Kumar Jain )HUF) [2021] SCC Online Del-3174 was heavily relied. Referring to the decision of PCIT vs. Abhisar Buildwell P. Ltd., [2023] 454 ITR 212 (SC), it was argued that since the assessment in the instant case is an „unabated‟ 5 IT(SS)A.No.36/PUN./2024 assessment and no incriminating material was found from the premises of the assessee during the course of search, no addition can be made in the hands of the assessee in an assessment u/sec.143(3) r.w.s.153A. 3.1. Based on the submissions and arguments advanced by the assessee, the Ld. CIT(A) called for a remand report from the Assessing Officer. After considering the remand report of the Assessing Officer and the rejoinder of the assessee to such remand report, the Ld. CIT(A) deleted the addition by observing as under : 6.5. I have considered the facts of the case, assessment order, remand report and the submissions of the appellant. The appellant filed its original return of income u/s 139 of the Act on 27.09.2015 declaring current year loss of Rs.7,77,03,503 and there was an assessment completed u/s 143(3) of the Act on 03.08.2017. The search action was carried out on 19.12.2017 and no assessment proceedings for the year under consideration were pending. Therefore, it was a case of unabated assessment, as claimed by the appellant. 6.6. The appellant has also relied upon the decision of the Hon'ble Delhi High Court in the case of PCIT(Central)-3 vs. Anand Kumar Jain, wherein it is held that it is a settled position of law that the statement of 6 IT(SS)A.No.36/PUN./2024 third party recorded in the course of search conducted in the case of third party cannot form the basis for the assessment u/s 153A. 6.7. Now, let us consider the legal position on the issue raised by the appellant. Recently, the Hon'ble Supreme Court in case of PCIT Vs. Abhisar Buildwell P. Ltd. (Civil Appeal No. 6580 of 2021) held that in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. The relevant portion of the said decision is reproduced as under. “14. 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 jurisdiction 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 jurisdiction to assess or reassess the 'total income' 7 IT(SS)A.No.36/PUN./2024 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.\" 8 IT(SS)A.No.36/PUN./2024 Applying the judgment of the Hon'ble Supreme Court in the case of Pr. CIT(Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) to the facts of the case of the appellant, it is clear from the assessment order dated 30.12.2019 that the assessment proceedings in case of the appellant for the AY 2015-16 are unabated and are not based on any incriminating material found during the course of search at the premises of the appellant, rather the same was found in the mobile of one Shri. Kiran Baburao Chandere (on the basis of whatsapp's message), who was a third party and in whose case also search and seizure action was conducted u/s 132 of the Act. 6.8. Therefore, as the assessment for the AY 2015- 16 is unabated, respectfully following the above judgment of Hon'ble Supreme Court in the case of PCIT(Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021). the additions of Rs.2,50,00,000/- on account of alleged unexplained money u/s 69A of the Act, which was not based on any incriminating material found during the course of search operation in the case of appellant is hereby deleted. Since, the case of the appellant is squarely covered by the above judgment of the Hon'ble Apex Court; it is not being decided on merits. The revised ground no. 3 of the appeal, are hereby allowed. 9 IT(SS)A.No.36/PUN./2024 6.9. Further, as the case of the appellant for the AY 2015-16 is covered under para 14(iv) of the decision of Hon'ble Supreme Court as mentioned above, the Assessing Officer is free to take any action in pursuance to the observation of the Hon'ble Supreme Court cited in para 14(iv) and also as per Instruction No.1 of 2023 of the CBDT. 6.10. Since the quantum relief has been granted in respect of ground no. 3 of the appeal, the other related revised grounds No. 1, 2 and 4 do not require separate adjudication.” 4. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds : 1. “On the facts and circumstances of the case and in the law, the Ld CIT(A) has erred in deleting addition of Rs.2,50,00,000/- made on account of alleged unexplained money holding that addition was not based on any incriminating material found during the course of search action without appreciating the fact that addition was made based on seized material (whatsapp messages in the phone of Shri Kiran Baburao Chandere)and during the assessment proceedings, it was established with credible 10 IT(SS)A.No.36/PUN./2024 evidence that all the 05 whatsapp messages, were found to be correct. 2. On the facts and circumstances of the case and inlaw, the Ld. CIT(A) has failed to appreciate the fact that statement of Shri Kiran Baburao Chandere cannot be considered as third party since the search took place at his residence on 19.11.2017. The contents of the seized material have clearly established the nexus in the business transaction of Rs.2.50 crore and the assessee has miserably failed to being any evidence to rebut the same. 3. The appellant craves leave to add, amend ground/grounds of appeal which may be necessary or alter any ground/grounds of appeal which may be necessary.” 5. The Learned DR referring to the decision of Hon‟ble Supreme Court in the case of PCIT vs. Abhisar Buildwell P. Ltd., [2023] 454 ITR 212 (SC) submitted that nowhere in the Act or the decision, the definition of “incriminating material” has been given. He submitted that when the search took-place in the case of Shri Baburao D Chandere and his family members, certain Whatsapp messages were found from the phone of Shri Kiran Baburao D Chandere s/o. Shri Baburao D Chandere. He submitted that when part of the Whatsapp chat is acceptable to the assessee, he cannot disown the remaining 11 IT(SS)A.No.36/PUN./2024 part. He accordingly submitted that the order of the Ld. CIT(A) be reversed and that of the Assessing Officer be restored. 6. Learned Counsel for the Assessee, on the other hand, while supporting the order of the Ld. CIT(A) submitted that original assessment order was completed u/sec.143(3) on 03.08.2017 and search took-place in the case of assessee on 19.12.2017 and it is an admitted fact that no incriminating material was found during the course of search from the premises of the assessee, on the basis of which, addition has been made. The addition was made on the basis of certain Whatsapp chat found from the mobile phone of Shri Kiran Baburao D Chandere s/o.Shri Baburao D Chandere during the course of search at his premises on 19.12.2017. He submitted that no cross-examination was ever given by the Assessing Officer. Further in the statement recorded u/sec.132(4), no such query was raised by the search-party to the assessee. Whatever documents have been found from the premises of the assessee, it does not contain any amount of this Rs.2.5 crore. 6.1. Referring to the decision of Hon‟ble Supreme Court in the case of PCIT vs. Abhisar Buildwell P. Ltd., (supra), Learned Counsel for the Assessee submitted that no addition can be made in the hands of the assessee in absence of any incriminating material found during the course of search since 12 IT(SS)A.No.36/PUN./2024 it is an „unabated‟ assessment and the original assessment was completed u/sec.143(3) on 03.08.2017 i.e., before the date of search on 19.12.2017. 7. We have heard the rival arguments made by both the sides and perused the material available on record. It is an admitted fact that the original assessment u/sec.143(3) was completed on 03.08.2017 and search took-place in the case of assessee on 19.12.2017. In otherwords, on the date of search it was an „unabated‟ assessment. It is also an admitted fact that no incriminating material was found during the course of search from the premises of the assessee on the basis of which the impugned addition has been made. The entire addition of Rs.2.5 crore made by the Assessing Officer was based on the Whatsapp messages found in the phone of Shri Kiran Baburao D Chandere s/o. Shri Baburao D Chandere during the course of search at his premises on 19.12.2017 and his statement was recorded u/sec.132(4) of the Act and it is the basis for the addition in the hands of the assessee. We find the Ld. CIT(A) deleted the addition on the basis of the decision of Hon‟ble Supreme Court in the case of PCIT vs. Abhisar Buildwell P. Ltd., (supra), the reasons of which have already been reproduced in the preceding paragraphs. 7.1. We do not find any infirmity in the order of the Ld. CIT(A) deleting the addition by following the decision of Hon‟ble 13 IT(SS)A.No.36/PUN./2024 Supreme Court in the case of PCIT vs. Abhisar Buildwell P. Ltd., (supra), wherein it has been held that in case no incriminating material is un-earthed during the course of search, the Assessing Officer cannot assess or re-assess taking into consideration the other material in respect of the completed assessment/unabated assessment. It has further been held that completed/unabated assessment can be reopened by the Assessing Officer in exercise of the powers u/sec.147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned u/sec.147/148 of the Act and those powers are saved. Since the Ld. CIT(A) while deleting the addition has given a free hand to the Assessing Officer to take any action in pursuance to the observations of the Hon‟ble Supreme Court as per para-14(iv) and also as per Instruction No.1 of 2023 of the CBDT, the Assessing Officer is at liberty to take appropriate action, if he deems it necessary and if the same is in accordance with law. In view of the above discussion and in view of the detailed reasoning given by the Ld. CIT(A), we do not find any infirmity in his order on this issue. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. 8. In the result, appeal of the Revenue is dismissed. 14 IT(SS)A.No.36/PUN./2024 Order pronounced in the open Court on 27.01.2025. Sd/- Sd/- [MS. ASTHA CHANDRA] [RAMA KANTA PANDA] JUDICIAL MEMBER VICE PRESIDENT Pune, Dated 27th January, 2025 VBP/- Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune-12, Pune. 4. The Pr. CIT, Pune concerned 5. D.R. ITAT, “A” Bench, Pune. 6. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune. S.No. Details Date 1 Draft dictated on 16.12.2024 & 01.01.2025 Sr.PS 2 Draft placed before author 16.12.2024 & 01.01.2025 Sr.PS 3 Draft proposed & placed before the Second Member .01.2025 V.P. 4 Draft discussed/approved by Second Member .01.2025 J.M. 5 Approved Draft comes to the Sr. PS/PS .01.2025 Sr.PS 6 Kept for pronouncement on .01.2025 Sr.PS 7 Date of uploading of Order .01.2025 Sr.PS 8 File sent to Bench Clerk .01.2025 Sr.PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "