Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 17212 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-03-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2016-2017
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL \nMUMBAI BENCH “A”, MUMBAI \n \nBEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER \nAND \nSHRI ANIKESH BANERJEE, JUDICIAL MEMBER \n \nITA No.6935/Mum/2024 \n \n- \nA.Y. 2015-16 \nITA No.6957/Mum/2024 \n \n- \nA.Y. 2016-17 \nITA No.6958/Mum/2024 \n \n- \nA.Y. 2017-18 \nITA No.6959/Mum/2024 \n \n- \nA.Y. 2018-19 \nITA No.6960/Mum/2024 \n \n- \nA.Y. 2019-20 \nITA No.6956/Mum/2024 \n \n- \nA.Y. 2020-21 \nITA No.6961/Mum/2024 \n \n- \nA.Y. 2021-22 \n \nAnnapurna Properties, \nShop No.6, \nRachana CHG Ltd, \nOpp. Joggers Park, \nBehind Laxminarayan Temple, \nBorivali West, \nMumbai \nPAN : AAPFA1330G \nvs \nDCIT, Central Circle-1, \nRoom No.10, 6th Floor, \nAshar IT Park, \nWagle Industrial Estate, \nThane (W) \nMaharashtra \nAppellant \n \nRespondent \n \nAssessee by \n \n: \nShri Vijay Mehta \n \n \n \n \nRespondent by \n: \nDr. K.R. Subhash, CIT- DR & \n \n \n \n \n \nShri Ram Krishn Kedia, Sr.DR \n \n \n \nDate of hearing \n \n: \n13-02-2025 \n \nDate of pronouncement : \n07-03-2025 \n \nO R D E R \n \nPER BENCH: \n \n \nAll the appeals filed by the assessee are directed against the common \norder dt.24-10-2024 passed by the Ld. Commissioner of Income Tax \n\n2 \nAnnapurna Properties, \n(Batch) \n(Appeals)-Pune-11, [„Ld.CIT(A)‟] and they relate to AYs. 2015-16 to 2021-\n22. Since common issues are urged in these appeals, they were heard \ntogether. Hence, they are being disposed of by this common order, for the \nsake of convenience. \n \n2. \nThe common issue contested in all these years (except in AY 2015-16 \nand 2017-18) is related to the addition of estimated profit on the alleged \non-money received by the assessee on sale of flats. In AY 2015-16 and \n2017-18, the assessee is contesting the addition made by the AO u/s 68 of \nthe Act in respect of alleged accommodation loans taken by the assessee. \n \n3. \nThe facts relating to the case are stated in brief. The assessee herein \nbelongs to „Span Group‟ and it is a leading builder and developer. This \ngroup is engaged in the business of construction and sale of residential \nand commercial buildings in Mira and Bhayander areas in the District of \nThane. The Revenue carried out the search and seizure action u/s. 132 of \nthe Income Tax Act, 1961 („the Act‟) on 12-01-2021 in the business as well \nas the residential premises of the group. Consequent thereto, the \nassessments of assessment years 2015-16 to 2020-21 were completed by \nthe AO u/s. 143(3) r.w.s 153A of the Act. The assessment of AY 2021-22 \nwas completed u/s 143(3) of the Act. \n \n4. \nThe common issue urged by the assessee in all the assessment years \nunder consideration relates to the profit estimated by the AO on the \nalleged on-money receipts. \n \n5. \nDuring the course of search action, the residential premises of one of \nthe employees named Mr. Anil Morarka was also subjected to search. It \nwas noticed that the above said person used to maintain cash record of \n\n3 \nAnnapurna Properties, \n(Batch) \nSpan Group of the entities. It was noticed from the seized material that \nthey contained noting relating to on-money received by the assessee in \ncash and also certain expenses incurred in cash. It is noticed that they \nhave not been accounted for in the books of accounts. Accordingly, it was \ninitially proposed to assess entire amount of „on money‟ receipts as income \nof the assessee. Even though the assessee contended that it did not \nreceive any on-money by way of cash, yet as an alternative contention, it \nagreed to offer the profit element embedded in the alleged on money \nreceipts. Accordingly, the assessee requested the AO to estimate the profit \non the alleged on-money receipts @ 8%. In this regard, the assessee also \nrelied upon certain case laws. The AO also agreed with the alternative \ncontention of the assessee. But he did not accept the profit rate of 8% \nproposed by the assessee. The AO observed that the rate of profit in real \nestate business varies between 10% and 15%. Accordingly, the AO took the \nview that the embedded profit in the „on money receipts‟ should be \nestimated @ 15%. The details of on-money receipts and profit estimated \nby the AO are tabulated below: \n \n \nAY. \nOn-money \nreceipts (Rs.) \nProfit estimated \n@ 15% (Rs.) \n2016-17 \n35,00,000 \n5,25,000 \n2018-19 \n1,15,00,000 \n17,25,000 \n2019-20 \n3,35,00,000 \n50,25,000 \n2020-21 \n8,25,00,000 1,23,75,000 \n2021-22 \n2,48,56,700 \n37,28,516 \n \nAccordingly, the AO added the respective amount of profit so estimated by \nhim @ 15% of on money receipts in the above said assessment years. The \nLd.CIT(A) also confirmed the same. \n \n\n4 \nAnnapurna Properties, \n(Batch) \n6. \nThe Ld.AR submitted that the assessee is engaged in the business of \ndeveloping residential projects for lower middle class and middle class \npeople. The carpet area of flats promoted by the assessee in these years \nwas in the range of 372.20 sq.ft. to 766.10 sq.ft only in the project named \n„Annapurna Acquarius‟. Further, this project was developed in Bhayander \narea of Thane District, which is far away from the Mumbai region. He \nsubmitted that the assessee cannot earn higher profits in these projects for \nthe specific reasons narrated above. He submitted that the AO did not \ntake into account these factual aspects relating to the assessee while \ndetermining the rate of profit. Accordingly, the Ld A.R submitted that the \nAO was not justified in estimating the profit @ 15% of the alleged on-\nmoney receipts. Further, he submitted that the AO did not bring any \ncomparable cases to support the rate of profit of 15% determined by him. \nThe Ld.AR further submitted that the average rate of net profit declared by \nthe assessee in its books of accounts during the period from AY. 2014-15 \nto 2021-22 was 9.01% only. No other material to show that the assessee \nhad earned profit at higher rate than that disclosed by the assessee was \nfound. Further, during the course of search, no unaccounted cash was \nseized from the assessee. Even though physical cash amounting to Rs. \n3.48 crores was seized from certain persons as belonging to the „Span \nGroup‟, but it has been accepted to belong to another concern named M/s. \nSpan Venture, wherein the above said cash was telescoped against the \nprofit estimated in its hands in respect of the alleged on-money received by \nthat assessee. Accordingly, the Ld.AR submitted that the AO was not \njustified in estimating the profit of the assessee @ 15%, ignoring the \npeculiar facts surrounding this case. The Ld.AR further submitted that in \nthe case of M/s. Platinum Properties Vs. DCIT, ITA No. 2600/Mum/2012, \nthe \nnet \nprofit \non \non-money \nreceipts \nhas \nbeen \nestimated \n\n5 \nAnnapurna Properties, \n(Batch) \n@ 8%. Accordingly, the Ld.AR prayed that the profit from alleged on-money \nreceipts may be estimated at the rate of 8%. \n \n7. \nOn the contrary, the Ld.DR supported the order passed by the \nLd.CIT(A). \n \n8. \nWe heard rival contentions on this issue and perused the record. We \nnotice that the AO, after having observed that the rate of profit in real \nestate business ranges from 10% to 15%, has decided to adopt the higher \nrange of rate of profit of 15% to estimate income from alleged on-money \nreceipts. However, we notice that the AO did not bring any material or \ncomparable cases on record to support rate of profit of 15% adopted by \nhim. There should not be any dispute that the estimate made by the \nassessee or AO should not only be reasonable, but also justifiable vis-à-vis \nthe facts surrounding the case. We notice that, in the instant case, the AO \ndid not take into account the peculiar facts prevailing, viz., that it is \npromoting the real estate projects in Bhayander area, which is far away \nfrom Mumbai region; that the projects are targeted for middle class and \nlower middle class people; that the carpet area is very less. It is in the \ncommon knowledge of everyone that the cost of construction of a smaller \narea will be more than the cost of construction of a larger area due to \ninvolvement of fixed costs. Further the construction of larger area would \nenable efficient utilization of all resources. Hence the cost of construction \nof smaller size flats is always higher than the large sized flats. \nConsequently, the profit on sale of smaller size flats is expected to be \nlower. Accordingly, we are of the view that there is merit in the contentions \nof the assessee that the profit from those projects will be lower. \n \n\n6 \nAnnapurna Properties, \n(Batch) \n8.1. We notice that the contention of the assessee with regard to the rate of \nprofit is supported by its books of accounts, wherein the average rate of \nprofit declared by the assessee works out to 9.01% only. We also noticed \nearlier that the AO did not bring any material or comparable cases on \nrecord to support the rate of profit of 15% estimated by him. Hence, we \nare of the view that there is merit in the prayer of the assessee for lowering \nthe rate of profit on alleged on-money receipts. \n \n8.2. \nWe also notice the above said plea of the assessee would also get \nsupport from certain decisions rendered by co-ordinate benches and also \nby Hon‟ble High Courts. In the case of Platinum Properties (supra) and \nalso in the case of Dhanlaxmi Builders Vs DCIT (ITA No. 504/Mum/2009), \nthe Tribunal estimated the rate of profit from on-money receipts @ 8%. In \nan unreported decision rendered by Ahmedabad bench of Tribunal in the \ncase of Anand Builders, the Ahmedabad bench of Tribunal had estimated \nthe profit from on-money receipts @ 8% and the same was upheld by \nHon‟ble Gujarat High Court. It was submitted that the SLP filed by the \nrevenue has been dismissed by Hon‟ble Supreme Court in the same case of \nITO Vs Anand Builders reported in 265 ITR 37(Stat.). \n8.3. \nWe noticed that the assessee has declared average profit @ 9.01%. \nAccordingly, we are of the view that, in the facts and circumstances of the \npresent cases, the profit from alleged on-money receipts may be estimated \n@ 9%. Accordingly, we set aside the orders passed by Ld CIT(A) on this \nissue in AY 2015-16 to 2020-21 and direct the AO to assess the profit from \non-money receipts @ 9% thereon in the above said years. \n8.4. \nIn the appeals of the assessee filed for AYs. 2016-17 and 2018-19 to \n2021-22, the above said issue alone is being contested. With the \n\n7 \nAnnapurna Properties, \n(Batch) \nadjudication of this issue, the appeals of above said years would get \ndisposed of. \n9. \nWe shall now take up the appeals relating to AY 2015-16 and 2017-18 \nThe only issue urged in these two appeals relates to the addition made u/s \n68 of the Act in respect of alleged accommodation loans amounting to \nRs.4,55,15,136/- and Rs.62,52,550/- respectively. \n \n9.1. The facts relating to the same are discussed in brief. During the \ncourse of pre-search investigation carried out by the department, it was \nnoticed that the assessee group has taken accommodation entries by way \nof loans from various dummy companies. The AO took the view that the \naccommodation entries by way of loans are usually obtained by paying \nequal amount of unaccounted cash to the lending companies. It was \nnoticed that the assessee herein has taken an aggregate amount of Rs. \n4.90 crores as loans during the years relevant to AYs. 2015-16 to 2018-19. \nAccordingly, he proposed to assess the loans taken by the assessee as its \nincome. In response thereto, the assessee contended that the loans taken \nby it are genuine loans. In the alternative, the assessee submitted that, if \nat all the AO proposes to assess loans as income of the assessee, then \ntelescopic benefit should be given to the amount of loan repaid by it and \nalso to the profit estimated on the on-money receipts. The AO accepted the \nalternative contentions of the assessee and accordingly he prepared a cash \nflow statement by treating \n \n \n(a) \nthe loan received by the assessee as „cash outflow‟ \n \n(b) \nloan repaid by the assessee as „cash inflow‟. \n(c) \nincome estimated by the AO on the alleged on-money receipts \nas „cash inflow‟. \n \n\n8 \nAnnapurna Properties, \n(Batch) \n9.2. The above said workings made by the AO revealed that there was \nnegative peak balance of Rs.4,55,15,136/- and Rs.62,52,550/- in the \nfinancial years relevant to AY. 2015-16 and 2017-18, meaning thereby, \nthere was cash outflow in the above said two years to the extent mentioned \nabove. The AO treated the excess cash outflow as unaccounted income of \nthe assessee and assessed the above said amounts in the respective years. \nThe Ld.CIT(A) also confirmed the same. \n \n9.3. The Ld.AR submitted that both the assessment years, viz., AY 2015-16 \nand 2017-18 would fall under the category of “unabated assessment \nyears”. Accordingly, the Ld.AR submitted that the AO could not have made \naddition on peak balance of loan entries, without there being any \nincriminating material found during the course of search. In support of \nthis proposition, the Ld.AR placed reliance on the decision rendered by the \nHon‟ble Supreme Court in the case of Abhisar Buildwell (P) Ltd., \n[2023] 454 ITR 212 (SC). He submitted that the search officials did not \nfind any incriminating material during the course of search conducted in \nthe hands of the assessee in order to show that the loans taken by the \nassessee from various companies are in the nature of accommodation \nentries. \n \n9.4. The Ld.DR, on the contrary, contended that the AO has received \n„Incriminating information” regarding accommodation loans taken by the \nassessee from various paper companies. He also submitted that the \nenquiries/search conducted in the hands of those paper companies have \nbrought to light that they were providing only accommodation entries to \nthe beneficiaries. He submitted that the revenue has found incriminating \nmaterials in respect of on-money receipts for both these years, which were \nunabated assessment years. Hence the AO has validly assumed \n\n9 \nAnnapurna Properties, \n(Batch) \njurisdiction to assess or reassess the total income of these two years. He \nsubmitted that the AO was in the possession of incriminating information \nthat the assessee had availed accommodation loans at the time at the time \nthe assessment of AY 2015-16 was completed. Hence the said \nincriminating information could also be used by the AO in the case of \nunabated assessment year as held by Hon‟ble Supreme Court in the case \nof Abhishar Buildwell P Ltd (454 ITR 212)(SC). In this regard, the Ld D.R \nplaced his reliance on the following observations made by Hon‟ble Apex \nCourt in paragraph 14(iii) of its order:- \n \n“in case any incriminating material is found/unearthed, even, in case of \nunabated/completed assessments, the AO would assume jurisdiction to \nassess or reassess the „total income‟ taking into consideration the \nincriminating material unearthed during the search and the other material \navailable with the AO including the income declared in the returns” \n \nAccordingly, the Ld D.R contended that incriminating information received \nin respect of accommodation loans shall constitute „other material‟ which \ncould be used by the AO in the unabated assessment year 2015-16. \nAccordingly, he contended that the addition made by the AO u/s 68 of the \nAct was justified. \n \n9.5. On the contrary, the Ld.AR submitted that the interpretation given by \nthe Ld D.R is not in accordance with the ratio laid down by Hon‟ble \nSupreme Court in the case of Abhisar Buildwell P Ltd (supra). He \nsubmitted that the ratio of the decision rendered by Hon‟ble Supreme \nCourt should be understood by reading entire order. He submitted that a \ncareful reading of entire order passed by the Hon‟ble Supreme Court in the \nabove said case would show that the Hon‟ble Apex Court has completely \nagreed with the decisions rendered by Hon‟ble Delhi High Court in the case \nof Kabul Chawla and by Hon‟ble Gujarat High Court in the case of Saumya \nConstruction, wherein it has been clearly held that the addition in the case \n\n10 \nAnnapurna Properties, \n(Batch) \nof unabated assessment should be based on incriminating material found \nduring the course of search conducted in the hands of the assessee. \nFurther, the Hon‟ble Supreme Court has also held that the foundation for \nmaking assessment u/s 153A can be said to be existence of incriminating \nmaterial showing undisclosed income detected as a result of search. Once \nan incriminating material relating to an unabated assessment year is \nfound, then the AO assumes jurisdiction to assess or reassess “total \nincome” of that year. The Ld A.R submitted that, under the erstwhile \nscheme of block assessments made u/s 158BA to 158BD of the Act, the \nAO was required to assess only the “undisclosed income” found during the \ncourse of search. However, under the present scheme of assessment u/s \n153A of the Act, the AO is required to assess or reassess the „total income‟, \nwhich can be arrived at by adding the undisclosed income found during \nthe course of search to the total income already assessed by the assessing \nofficer. He submitted that the Hon‟ble Supreme Court has used the \nexpression, viz., „other material available with the AO including the income \ndeclared in the returns‟ only to make it clear that the final total income of \nan unabated assessment year can be arrived by consolidating the \nundisclosed income and other income already known to the AO. \nAccordingly, he submitted that the AO could not get power to consider any \nother addition in the case of an unabated assessment year, which was not \nsupported by the incriminating material found during the course of search \nconducted in the hands of the assessee. Accordingly, he submitted that \nthe alleged incriminating information about accommodation loans cannot \npartake the character of „incriminating material‟ unearthed during the \ncourse of search. \n \n9.6. We heard rival contentions and perused the record. There is no \ndispute with regard to the fact that the assessment years 2015-16 and \n\n11 \nAnnapurna Properties, \n(Batch) \n2017-18 would fall under the category of „unabated assessment years‟. \nThe law is now well settled that the AO can make any addition in an \nunabated assessment year only on the basis of any incriminating material \nfound during the course of search conducted in the hands of the assessee. \nIn this regard, we may take support of the decision rendered by the \nHon‟ble Supreme Court in the case of Abhisar Buildwell P Ltd (supra). \n \n9.7. Under the scheme of assessments to be made u/s 153A of the Act, we \nnoticed that the “total income” has to be assessed or reassessed for each of \nthe assessment years falling in the block. Under the erstwhile scheme \ncovered by the provisions of sec.158BA to 158BD of the Act, only \n„undisclosed income‟ shall be assessed for the block period, while the \nassessment of regular income shall be carried out separately in the normal \ncourse. Hence, under the erstwhile scheme, there were two parallel \nassessments, viz., one regular assessment for assessing regular income of \neach of the year and second one for assessing the „undisclosed income‟ for \nthe block period. This distinction between old scheme and new scheme \nwas elaborately brought out by Hon‟ble Supreme Court in the above said \ncase as under:- \n“9.1 That prior to insertion of Section 153A in the statute, the relevant \nprovision for block assessment was under section 158BA of the Act, \n1961. The erstwhile scheme of block assessment under section 158BA \nenvisaged assessment of 'undisclosed income' for two reasons, firstly \nthat there were two parallel assessments envisaged under the erstwhile \nregime, i.e., (i) block assessment under section 158BA to assess the \n'undisclosed income' and (ii) regular assessment in accordance with the \nprovisions of the Act to make assessment qua income other than \nundisclosed income. Secondly, that the 'undisclosed income' was \nchargeable to tax at a special rate of 60% under section 113 whereas \nincome other than 'undisclosed income' was required to be assessed \nunder regular assessment procedure and was taxable at normal rate. \nTherefore, section 153A came to be inserted and brought on the statute. \nUnder Section 153A regime, the intention of the legislation was to do \naway with the scheme of two parallel assessments and tax the \n'undisclosed' income too at the normal rate of tax as against any special \nrate. Thus, after introduction of Section 153A and in case of search, there \n\n12 \nAnnapurna Properties, \n(Batch) \nshall be block assessment for six years. Search assessments/block \nassessments under section 153A are triggered by conducting of a valid \nsearch under section 132 of the Act, 1961. The very purpose of search, \nwhich is a prerequisite/trigger for invoking the provisions of sections \n153A/153C is detection of undisclosed income by undertaking \nextraordinary power of search and seizure, i.e., the income which cannot \nbe detected in ordinary course of regular assessment. Thus, the \nfoundation for making search assessments under sections 153A/153C \ncan be said to be the existence of incriminating material showing \nundisclosed income detected as a result of search.” \n \n9.8. \nThe scope of assessments to be framed u/s 153A/153C of the Act \nhas been explained by Hon‟ble Delhi High Court in the case of Kabul \nChawla (380 ITR 573)(Delhi) and by Hon‟ble Gujarat High Court in the \ncase of Saumya Construction (387 ITR 529)(Guj). The Hon‟ble Supreme \nCourt has approved the interpretations given by the Hon‟ble Delhi and \nGujarat High Court in the above said cases. The relevant observations \nmade by Hon‟ble Supreme Court are extracted below:- \n7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering \nthe very issue and on interpretation of section 153A of the Act, 1961, has \nsummarised the legal position as under: \nSummary of the legal position \n38. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, \nand in the light of the law explained in the aforementioned decisions, the legal \nposition that emerges is as under: \ni. Once a search takes place under section 132 of the Act, notice under \nsection 153A(1) will have to be mandatorily issued to the person searched \nrequiring him to file returns for six AYs immediately preceding the previous \nyear relevant to the AY in which the search takes place. \nii. Assessments and reassessments pending on the date of the search shall \nabate. The total income for such AYs will have to be computed by the AOs as \na fresh exercise. \niii. The AO will exercise normal assessment powers in respect of the six \nyears previous to the relevant AY in which the search takes place. The AO \nhas the power to assess and reassess the 'total income' of the \naforementioned six years in separate assessment orders for each of the six \n\n13 \nAnnapurna Properties, \n(Batch) \nyears. In other words, there will be only one assessment order in respect of \neach of the six AYs \"in which both the disclosed and the undisclosed income \nwould be brought to tax\". \niv. Although Section 153 A does not say that additions should be strictly \nmade on the basis of evidence found in the course of the search, or other \npost-search material or information available with the AO which can be \nrelated to the evidence found, it does not mean that the assessment \"can be \narbitrary or made without any relevance or nexus with the seized material. \nObviously an assessment has to be made under this Section only on the basis \nof seized material.\" \nv. In absence of any incriminating material, the completed assessment can \nbe reiterated and the abated assessment or reassessment can be made. The \nword 'assess' in Section 153 A is relatable to abated proceedings (i.e., those \npending on the date of search) and the word 'reassess' to completed \nassessment proceedings. \nvi. Insofar as pending assessments are concerned, the jurisdiction to make \nthe original assessment and the assessment under section 153A merges into \none. Only one assessment shall be made separately for each AY on the basis \nof the findings of the search and any other material existing or brought on \nthe record of the AO. \nvii. Completed assessments can be interfered with by the AO while making \nthe assessment under section 153 A only on the basis of some \nincriminating material unearthed during the course of search or \nrequisition of documents or undisclosed income or property discovered in \nthe course of search which were not produced or not already disclosed or \nmade known in the course of original assessment.\" \n7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, \nwhile referring the decision of the Delhi High Court in the case of Kabul \nChawla (supra) and after considering the entire scheme of block assessment under \nsection 153A of the Act, 1961, had held that in case of completed \nassessment/unabated assessment, in absence of any incriminating material, no \nadditional can be made by the AO and the AO has no jurisdiction to re-open the \ncompleted assessment. In paragraphs 15 & 16, it is held as under: \n\"15.On a plain reading of section 153A of the Act, it is evident that the \ntrigger point for exercise of powers there under is a search under section \n132 or a requisition under section 132A of the Act. Once a search or \nrequisition is made, a mandate is cast upon the Assessing Officer to issue \nnotice under section 153A of the Act to the person requiring him to furnish \nthe return of income in respect of each assessment year falling within six \nassessment years immediately preceding the assessment year relevant to the \n\n14 \nAnnapurna Properties, \n(Batch) \nprevious year in which such search is conducted or requisition is made and \nassess or reassess the same. Since the assessment under section 153A of the \nAct is linked with search and requisition under sections 132 and 132A of the \nAct, it is evident that the object of the section is to bring to tax the \nundisclosed income which is found during the course of or pursuant to the \nsearch or requisition. However, instead of the earlier regime of block \nassessment whereby; it was only the undisclosed income of the block period \nthat was assessed, section 153A of the Act seeks to assess the total income \nfor the assessment year, which is clear from the first proviso thereto which \nprovides that the Assessing Officer shall assess or reassess the total income \nin respect of each assessment year, falling within such six assessment years. \nThe second proviso makes the intention of the Legislature clear as the same \nprovides that assessment or reassessment, if any, relating to the six \nassessment years referred to in the sub-section pending on the date of \ninitiation of search under section 132 or requisition under section 132A, as \nthe case may be, shall abate. Sub-section (2) of section 153A of the Act \nprovides that if any proceeding or any order of assessment or reassessment \nmade under sub-section (1) is annulled in appeal or any other legal \nprovision, then the assessment or reassessment relating to any assessment \nyear which had abated under the second proviso would stand revived. The \nproviso thereto says, that such revival shall cease to have effect if such \norder of annulment is set aside. Thus, any proceeding of assessment or \nreassessment falling within the, six assessment years prior to the search or \nrequisition stands abated and the total income of the assessee is required to \nbe determined under section 153A, of the Act. Similarly, sub-section (2) \nprovides for revival of any assessment or reassessment which stood abated, \nif any proceeding or any order of assessment or reassessment made under \nsection 153A of, the Act is annulled in appeal or any other proceeding. \n16. Section 153A bears the heading \"Assessment in case of search or \nrequisition\". It is well settled as held by the Supreme Court in a catena of \ndecisions that the heading of the, section can be regarded as a key to the \ninterpretation of the operative portion of, the section and if there is no \nambiguity in the language or if it is plain and clear, then the heading used in \nthe section strengthens that meaning From the heading of section 153, the \nintention of the Legislature is clear, viz, to provide for assessment in case of \nsearch and requisition. When, the very purpose of the provision is to make \nassessment in case of search or requisition, it goes without saying that the \nassessment has to have relation to the search or requisition. In other words, \nthe assessment, should be connected with something found during the search \nor requisition, viz., incriminating material which reveals undisclosed income \nThus, while in view of the mandate of sub-section (1) of section 153A of \nthe Act, in every case where there is a search or requisition, the Assessing \nOfficer is obliged to issue notice to such person to furnish returns of \nincome for the six years preceding the assessment year relevant to the \n\n15 \nAnnapurna Properties, \n(Batch) \nprevious year in which the search is conducted or requisition is made, any \naddition or disallowance can be made only on the basis of material \ncollected during the search or requisition. In case no incriminating \nmaterial is found, as held by the Rajasthan High Court in the case of Jai \nSteel (India) v. Asst. CIT (supra)**, the earlier assessment would have to \nbe reiterated. In case where pending assessments have abated, the Assessing \nOfficer can pass assessment orders for each of the six years determining the \ntotal income of the assessee which would include income declared in the \nreturns, if any, furnished by the assessee as well as undisclosed income, if \nany, unearthed during the search or requisition. In case where a pending \nreassessment under section 147 of the Act has abated, needless to state that \nthe scope and ambit of the assessment would include any order which the \nAssessing Officer could have passed under section 147 of the Act as well as \nunder section 153A of the Act.\" \n8. For the reasons stated hereinbelow, we are in complete agreement with the view \ntaken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat \nHigh Court in the case of Saumya Construction (supra), taking the view that no \naddition can be made in respect of completed assessment in absence of any \nincriminating material. \n(** 36 taxmann.com 523) \n \nThe above said decisions rendered by Hon‟ble Delhi High Court and \nHon‟ble Gujarat High Court bring out the proposition of law that the \ncompleted assessments (unabated assessments) can be interfered with \nonly on the basis of some incriminating material unearthed during the \ncourse of search or requisition of documents or undisclosed income or \nproperty discovered in the course of search which were not produced or \nnot already disclosed or made known in the course of original assessment. \nThe Hon‟ble Supreme Court has approved the above said interpretation \ngiven by both the High Courts. \n9.9. \nA careful reading of the decision rendered by the Hon‟ble Gujarat \nHigh Court in the case of Saumya Constructions(supra) would show that \nthere are two aspects involved while framing assessment u/s 153A of the \nAct. One is making addition and another one is computing total income. \n\n16 \nAnnapurna Properties, \n(Batch) \nIn case of an unabated assessment year, the Hon‟ble Gujarat High Court \nhas made it clear that any addition or disallowance can be made only on \nthe basis of material collected during the search or requisition. It was \nfurther held that, in case no incriminating material is found, as held by \nthe Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (36 \ntaxmann.com 523), the earlier assessment would have to be reiterated. \n9.10. The Hon‟ble Supreme Court has extracted the submissions made by \nthe assessee in a tabular form in paragraph 4.1 of the order. A perusal of \nthe same would show that the assessees have stated that the addition u/s \n153A can be made only on the basis of any incriminating material found \nduring the course of search. It is further contended that, if the AO was \nhaving any other information available with him or any other information \nwas found from external sources, then the AO can use those information \nin a separate proceeding initiated u/s 147 of the Act or u/s 263 of the Act. \n9.11. The Hon‟ble Supreme Court has again explained the scope of \nprovisions of sec.153A of the Act in paragraph 11 and 12 of its order, \nwherein Hon‟ble Apex Court has again reiterated that the AO is required to \ncompute „total income‟ u/s 153A of the Act. The relevant observations are \nextracted below:- \n“…..Therefore, the intention of the legislation seems to be that in case of \nsearch only the pending assessment/reassessment proceedings shall \nabate and the AO would assume the jurisdiction to assess or reassess \nthe 'total income' for the entire six years period/block assessment period. \nThe intention does not seem to be to re-open the completed/unabated \nassessments, unless any incriminating material is found with respect to \nconcerned assessment year falling within last six years preceding the \nsearch. Therefore, on true interpretation of Section 153A of the \nAct, 1961, in case of a search under section 132 or requisition \nunder section 132A and during the search any incriminating \nmaterial \nis \nfound, \neven \nin \ncase \nof \nunabated/completed \nassessment, the AO would have the jurisdiction to assess or \nreassess \nthe \n'total \nincome' \ntaking \ninto \nconsideration \nthe \nincriminating material collected during the search and other \n\n17 \nAnnapurna Properties, \n(Batch) \nmaterial which would include income declared in the returns, if \nany, furnished by the assessee as well as the undisclosed income. \nHowever, in case during the search no incriminating material is found, in \ncase of completed/unabated assessment, the only remedy available to \nthe Revenue would be to initiate the reassessment proceedings under \nsections 147/48 of the Act, subject to fulfilment of the conditions \nmentioned in sections 147/148, as in such a situation, the Revenue \ncannot be left with no remedy. Therefore, even in case of block \nassessment under section 153A and in case of unabated/completed \nassessment and in case no incriminating material is found during the \nsearch, the power of the Revenue to have the reassessment under \nsections 147/148 of the Act has to be saved, otherwise the Revenue \nwould be left without remedy. \n12. If the submission on behalf of the Revenue that in case of search \neven where no incriminating material is found during the course of \nsearch, even in case of unabated/completed assessment, the AO can \nassess or reassess the income/total income taking into consideration the \nother material is accepted, in that case, there will be two assessment \norders, which shall not be permissible under the law. At the cost of \nrepetition, it is observed that the assessment under section 153A of the \nAct is linked with the search and requisition under sections 132 and \n132A of the Act. The object of Section 153A is to bring under tax the \nundisclosed income which is found during the course of search or \npursuant to search or requisition. Therefore, only in a case where the \nundisclosed income is found on the basis of incriminating material, the \nAO would assume the jurisdiction to assess or reassess the total income \nfor the entire six years block assessment period even in case of \ncompleted/unabated assessment. As per the second proviso to Section \n153A, only pending assessment/reassessment shall stand abated and \nthe AO would assume the jurisdiction with respect to such abated \nassessments. \nIt \ndoes \nnot \nprovide \nthat \nall \ncompleted/unabated \nassessments shall abate. If the submission on behalf of the Revenue is \naccepted, in that case, second proviso to section 153A and sub-section (2) \nof Section 153A would be redundant and/or rewriting the said \nprovisions, which is not permissible under the law. \n13. For the reasons stated hereinabove, we are in complete agreement \nwith the view taken by the Delhi High Court in the case of Kabul \nChawla (supra) and the Gujarat High Court in the case of Saumya \nConstruction (supra) and the decisions of the other High Courts taking \nthe view that no addition can be made in respect of the completed \nassessments in absence of any incriminating material.” \n \n9.12. The above said discussions would show that the AO is entitled to \nmake addition in an unabated assessment year only on the basis of \n\n18 \nAnnapurna Properties, \n(Batch) \nincriminating material found during the course of search conducted in the \nhands of an assessee. Once the undisclosed income is determined on the \nbasis of said incriminating material in the case of an unabated assessment \nyear; then the AO should proceed to determine the total income by making \naddition of undisclosed income to the total income already determined on \nthe basis of return of income and other material. \n9.13. The Ld D.R submitted that the assessing officer was in possession of \ninformation that the loans already taken by the assessee was only \naccommodation entries and the same would constitute „incriminating \ninformation‟. According to Ld D.R, the said incriminating information \ncould be used by the AO while computing total income of unabated \nassessment year, viz., AY 2015-16, since the revenue has unearthed \nincriminating material relating to on-money receipts during the course of \nsearch conducted in the hands of the assessee. The Ld D.R also furnished \na copy of report received from the assessing officer. However, on a perusal \nof the same, we notice that the AO has furnished following details:- \n \n(a) \nA brief note about M/s Span Group \n \n(b) \nDetails of entities under M/s Span Group \n \n(c) \nDetails of projects undertaken by M/s Span Group \n(d) \nDetails of Unsecured loans taken by M/s Span Group and it is \ntitled as “Accommodation entries in the form of Unsecured \nloans received by M/s Span Group”. \n \n(e) \nCopy of seized materials relating to on-money receipts. \nWe notice that the incriminating materials, which were found during the \ncourse of search, were related to the on-money receipts only. We notice \nthat the search team did not find any material to support the case of the \n\n19 \nAnnapurna Properties, \n(Batch) \nRevenue that the loans taken by the assessee were in the nature of \naccommodation entries. We noticed earlier that the AO has observed in the \nassessment order that the search action u/s 132 of the Act was \nundertaken in the hands of the group on the basis of pre-search \ninformation that the assessee group has availed accommodation entries in \nthe form of loans. However, it is no where stated that the revenue could \nfind any incriminating material during the course of search proceedings in \norder to support the above said view of the revenue/AO. Accordingly, in \nour view, that the AO has only entertained presumption that the loans \ntaken by the assessee are in the nature of accommodation entries and \nfurther, the assessee would have paid equal amount of cash to the lender \nin order to get the loans through banking channels by way of \naccommodation entries. \n9.14. First of all, the above said suspicion of the revenue cannot be termed \nas „incriminating information‟ as contended by the Ld.DR. Secondly, even \nif it is accepted as incriminating information, the same was not unearthed \nduring the course of search conducted in the hands of the assessee. \nThirdly, the said information would only trigger further investigation and \nhence it cannot be said to be concrete proof to show that the assessee has \navailed accommodation entries. Fourthly, as observed by the AO in the \nassessment order, the search itself was conducted on the basis of above \nsaid information, but the search did not bring out any incriminating \nmaterial to support the view of the revenue that the loans taken by the \nassessee were in the nature of accommodation entries. Fifthly, it is not the \ncase that the AO had already computed the total income earlier by making \naddition of loans/peak credit of loans. Accordingly, in our view, the AO \ncould not have made any addition of the peak credit of loans in the \nunabated assessment years and hence the Ld DR was not correct in law in \ncontending that there was incriminating information with the AO and the \n\n20 \nAnnapurna Properties, \n(Batch) \nsame would constitute „other material‟, as mentioned in the order passed \nby the Hon‟ble Supreme Court in the case of Abhisar Buildwell P Ltd. \n(supra). \n9.15. In view of the foregoing discussions, we are of the view that the AO \nwas not correct in law in making addition of peak credit of loans in AYs. \n2015-16 and 2017-18, being unabated assessment years, in the absence \nof any incriminating material found during the course of search conducted \nin the hands of the assessee. Accordingly, we set aside the order passed \nby the Ld CIT(A) on this issue in AY 2015-16 and 2017-18 and direct the \nAO to delete this addition made in these two years. \n10. \nIn the result, the appeals filed by the assessee for the AYs. 2015-16 \nand 2017-18 are allowed. The appeals of other years are partly allowed. \n \n Order pronounced in the open court on 07-03-2025 \n \n \n \n \n \n \n \n \n Sd/- \n \n \n \n \n \n \n Sd/- \n[ANIKESH BANERJEE] \n \n [B.R. BASKARAN] \n JUDICIAL MEMBER ACCOUNTANT MEMBER \n \nMumbai, \nDated: 07-03-2025 \n \n \nTNMM \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n21 \nAnnapurna Properties, \n(Batch) \nCopy to : \n1) \nThe Appellant \n2) \nThe Respondent \n3) \nThe CIT concerned \n4) \nThe D.R, ITAT, Mumbai \n5) \nGuard file \n \n \n \n \n \n \n \n \n \n By Order \n \n \n \n \n \n \n \n \n Dy./Asst. Registrar \n \n \n \n \n \n \n \n \n I.T.A.T, Mumbai \n \n \n"
Mehul