Shri Suresh Kumar Gupta, 163, New Mandi Yard, Sriganganagar V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, INCOME TAX OFFICE

CO 3/JPR/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3117 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-06-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 28-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Gift; Revision of order; Income from undisclosed sources; Search and seizure; Principle of natural justice; Opportunity of cross examination; Question of law; Accommodation entries; Block assessment; Retraction; Reassessment proceedings; Audi alteram partem; Capital Gains
• Section: 147; 131; 68; 148; 263; 132; 271(1)(c); 139; 143(3); 142(1); 133A; 153A; 139(5); 143(2); 207; 139(1); 64; 158BC; 158B(b); 113; 72; 13; 153; 119; 22; 153C

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la- @ITA No. 54/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2013-14 Deputy Commissioner of Income Tax Income Tax Department, Central Circle-3 cuke Vs. M/s N. M. Agrofood Products Pvt. Ltd. 34, 35, 36, 1 st Phase Udhyog Vihar, RIICO, Sri Ganganagar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCN 3552 D vihykFkhZ@Appellant izR;FkhZ@Respondent izR;k{ksi.k@C.O. No. 04/JP/2022 (Arising out of vk;dj vihy la-@ITA No. 54/JP/2022) fu/kZkj.k o"kZ@Assessment Year 2013-14 M/s N. M. Agrofood Products Pvt. Ltd. 34, 35, 36, 1 st Phase Udhyog Vihar, RIICO, Sri Ganganagar cuke Vs. Deputy Commissioner of Income Tax Income Tax Department, Central Circle-3 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCN 3552 D vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 55/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2013-14 Deputy Commissioner of Income Tax Income Tax Department, Central Circle-3 cuke Vs. Shri Suresh Kumar Gupta, Prop. M/s Nandlal Naresh Kumar, 168, New Mandi Yard, Sri Ganganagar (Raj.) LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAZPG 6172 A vihykFkhZ@Appellant izR;FkhZ@Respondent 2 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta izR;k{ksi.k@C.O. No. 03/JP/2022 (Arising out of vk;dj vihy la-@ITA No. 55/JP/2022) fu/kZkj.k o"kZ@Assessment Year 2013-14 Shri Suresh Kumar Gupta, Prop. M/s Nandlal Naresh Kumar, 168, New Mandi Yard, Sri Ganganagar (Raj.) cuke Vs. Deputy Commissioner of Income Tax Income Tax Department, Central Circle-3, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAZPG 6172 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj l s@Assessee by : Sh. P. C. Parwal, C.A jktLo dh vksj ls@Revenue by: Sh. Sanjay Dhariwal, CIT lquokbZ dh rkjh[k@Date of Hearing : 30/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/08/2022 vkns'k@ORDER PER BENCH These are two appeals filed by the revenue aggrieved from the order of the Commissioner of Income Tax (Appeal)- 4, Jaipur [ Here in after referred as Ld. CIT(A) ] passed on 25.11.2021 for the assessment year 2013-14 in the two cases. The appeal filed before the ld. CIT(A) was arising out of the assessment order passed by the Assistant Commissioner of Income Tax, Central Circle-3, Jaipur dated 31.12.2019 pursuant to the search and seizure action under section 132 of the Income Tax Act, passed under section 143(3) r.w.s. 153A of the Act. The assessee has also 3 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta preferred a cross objection against the revenue’s appeal in ITA No. 54/JPR/2022 and 55/JPR/2022. 2. All these set of appeals are related to one group and issues are interrelated and almost common, heard together and therefore, the same is disposed off by this common order. 3. Both the parties have argued and considered the related facts and contentions raised from the folder in the case of M/s. N. M. Agrofoods Products Private Limited for assessment year 2013-14 and the same is considered as lead case for the purpose of disposing these bunch of group cases. 4. Before us the revenue has assailed the impugned order of the ld. CIT(A) on the following grounds: Ground-1. The learned CIT appeals has earned in law and on facts in the surrounding circumstances in granting relief by deleting the addition of Rs. 53,27,32,653/- made by the Assessing Officer on account of unexplained income under section 68 of the income tax act 1961. Ground-2. While granting relief, the learned CIT Appeal has erred by ignoring the statement of Sri Amit Gidra, the main accountant of the group, as detailed in para 10 of the assessment order, wherefrom it is clear that the assessee has been indulging in bogus transactions where actual purchase/sale did not take place and only bills were raised. 4 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Ground-3. Further, the learned CIT Appeal has erred in law and on facts in granting relief to the taxpayer by ignoring the findings of the learned Assessing Officer detailed in para 12 of the assessment order, wherein among others, she has held that Shri HanishToshniwal has accepted in his statement that he had provided only bogus accommodation entries from M/s.Kalyani Suppliers Private Limited and M/s.Everlink Vyapar Private Limited in the form of purchase transactions in the books of the taxpayer. Ground-4. While granting relief to the assessee, the learned CIT appeals has ignored the test of human probability and surrounding circumstances as laid down by the Honourable Supreme Court in the cases of Sumati Dayal 214 ITR 801 SC, and Durga Prasad More 82 ITR 540 SC. Ground-5. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in ignoring the factual survey/inquiry report as reported in the assessment order. Ground-6. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition inspite of the assessee's admission in oath u/s 132(4) of the IT Act, 1961 regarding no physical possession of goods purchased from M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyappar Pvt. Ltd. Ground-7. The Appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 5. Whereas, in the same case of the same assessment year the assessee has taken the following ground in the cross objections filed; Grounds of cross-objections 1. The Ld. CIT(A) has erred on facts and in law in upholding the assessment order passed u/s 143(3)/153A of the Act even after accepting that no incriminating material was found in search in support of the addition made by the AO by observing that statement recorded u/s 132(4) is also important piece of evidence which can be relied by the AO for making the addition even when there is no admission of income in statement u/s 132(4). 2. The assessee carves right to add, alter, amend, and modify any of the ground of appeal. 3. Necessary cost be awarded to the assessee. 5 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 6. The brief facts of the case are that in this case, original return of income was filed by assessee on 31.03.2014, declaring total income at Rs. 53,82,460/- for the Assessment Year 2013-14. Thereafter, the case of assessee was selected for scrutiny. Accordingly, the assessment u/s 143(3) of the Income tax Act, 1961 was completed on 01.03.2016 and the income was assessed at Rs. 79,31,480/-. 7. A search was conducted on 08.02.2018 in the case of "NM Group, Sriganganagar" to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. On account of the search the jurisdiction of the assessee was transferred pursuant to the order under section 127 of the Income Tax Act, 1961 [ here in after the Act ] dated 04.05.2018 by the Pr. Commissioner of Income Tax, Bikaner. 8. Accordingly, notice u/s 153A of the IT Act, 1961 for this year was issued on 30.07.2018 and duly served upon the assessee. In compliance to the notice u/s 153A of the IT Act, 1961, return of income was e-filed on 22.08.2018, declaring total income of Rs. 53,82,460/- for the year under consideration. The assessee company is carrying out business of Grain 6 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Merchants. Apart from this, the assessee has shown income from house property. 9. Notices u/s 143(2) & 142(1) of the Income tax, 1961 were issued along with questionnaire requiring certain details/ information, which was duly served upon the assessee. During the course of assessment proceedings, it was observed that assessee has shown to have engaged in purchase with M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd for F.Y. 2012-13. The assessee company has shown to have made purchases of stock - in - trade from M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd. M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd as on the date of search were shown to be outstanding trade creditors in the books of the assessee to the tune of Rs. 28,50,60,169/- and Rs. 24,76,72,484/-respectively. In order to examine the bonafides of such creditors, the complete financial statements including annexures of some of the group concerns of the assessee company along with the details of these companies were analysed in great detail during the search as well as during the assessment proceedings. Broadly two major companies were identified to be bogus sundry creditors from whom the assessee has shown to have made purchases in its books of accounts but 7 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the same amount was outstanding as per the books for around five years which creates serious doubts with regards to normal business prudence. In the light of the above facts detailed discussion is made on the credentials of these two companies in the assessment order. The ld. AO observed that M/s. Kalyani Suppliers Private Limited is incorporated at Kolkata. No information was found with regard to any branch office, factory godown etc. of this company in Sriganganagar. The financial details of the company were retrieved from the AST system of the income tax department and are reproduced as under: Name & PAN (M/s.) Assessment Year 2015-16 2014-15 2013-14 Kalyani Suppliers P. Ltd. AADCK8563G Total Revenue 413311334 2017262524 1922277256 Net Profit 6,42,460 4,74,775 2,29,436 NP % 0.15% 0.02% 0.01% 10. The assessee has shown to have engaged in purchase with M/s Kalyani Suppliers Pvt. Ltd for the F.Y. 2012-13. The very fact that this company, shown to be based in Kolkata is one of the large creditors i.e. one of the large trade partner of a firm based in Srigangangar, Rajasthan appears unusual. On perusal of the financials of M/s Kalyani Suppliers Pvt. Ltd, it is seen that M/s Kalyani Suppliers Pvt. Ltd. has shown to have 8 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta engaged in huge volume of sale/ purchase, however, the corresponding net profit that it is offering to tax is very low. Further, the turnover has decreased by more than 5 times from A.Y. 2014 15 to A.Y. 2015-16. However, the corresponding net profit has marginally increased which is in itself illogical and cannot be reasonably explained. 11. It was also learnt that the Directorate of Income Tax (Investigation), Kolkata had previously identified M/s Kalyani Suppliers Pvt. Ltd. to be a jama kharchipaper company floated for the sole purpose of providing accommodation entries. The Directorate had also identified one Shri Hanish Toshniwal to be the entry operator controlling this company. During the course of a statement recorded from Shri Hanish Toshniwal by the D.D.I.T., Unit 1(2), Kolkata on 11.03.2015 u/s 131 of the I.T. Act, Shri Hanish Toshniwal, in his statement, has admitted that he was the entry operator who was managing, inter alia, M/s Kalyani Suppliers Pvt. Ltd (listed as company No. 187 in the statement) for the purpose of providing accommodation entries to certain clients. 12. In light of the above-mentioned anomalies, and in order to verify the credentials of this company, a survey u/s 133A was conducted at the given 9 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta registered address of M/s Kalyani Suppliers Pvt. Ltd at 340, GT Road, Howrah, Kolkata during the course of search action in the case of the NM Group. The survey team did not find the existence of this company at the given registered address, and therefore, the survey authorization was returned unexecuted. Another survey team conducted survey at a business premises occupied by Shri Hanish Toshniwal and recorded his statement. In the said statement, Shri Hanish Toshniwal re-iterated his stand that M/s Kalyani Suppliers Pvt. Ltd is a shell company and that he has utilized M/s Kalyani Suppliers Pvt. Ltd to provide accommodation entries to the NM Group. 13. From the perusal of the statement it is clear that the assessee has taken accommodation entry in the grab of bogus purchase and has shown M/s. Kalyani Suppliers Pvt. Ltd. to be one of the bogus sundry creditors. Shri Hanish Toshniwal has clearly stated that amount was received in the bank accounts through cheque or RTGS and the same was being returned back by routing it after withdrawal of the same amount of cash in lieu of commission. During the course of search, Shri Manoj Kumar, the key individual of the NM Group was confronted with the above-mentioned evidences and was asked to provide his clarification on the matter 10 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta regarding the existence and identity of M/s. Kalyani Suppliers Pvt. Ltd. In response, Shri Manoj Kumar stated that he had entered into sale-purchase of agro commodities with one Shri Roopchandji of Bikaner, and that this person Shri Roopchandji traded on behalf of M/s Kalyani Suppliers Pvt. Ltd. Shri Manoj Kumar did not offer any explanation on the existence or otherwise of M/s Kalyani Suppliers Pvt. Ltd in Kolkata though he was confronted with the same. Also from the statements of Sh. Amit Gidra, the main accountant of the Group it is clear that the entities of the group including M/s N. M. Agrofood Products Pvt. Ltd. is involved in booking bogus purchases which actually doesn't take place but are simply recorded in the books of accounts. Hence from the statement it is clear that the assessee Group has been regularly indulging in such practices of creating bogus trade creditors wherein the actual sale and purchase of the commodities doesn't take place. Sh. Amit Gidra is the main accountant of the Group and is also related to Sh. Manoj Gupta, therefore, he is well versed with the practices adopted by the entities of the group to manage its transactions. 14. During the search proceedings, a computer was found at his premises in which only the details related to accounts of the Group were 11 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta maintained. Even the house in which he was residing belongs to the members of the group only. Shri Amit Gidra has clearly stated that to maintain the assessee company turnover was indulged in circular trading and Kolkata based companies are also part of such practice. 15. During the course of post-search proceedings, when asked about the genuineness of purchases shown to have been made from M/s Kalyani Suppliers Pvt. Ltd, Shri Manoj Kumar stated on oath that since the amounts due to be paid to M/s Kalyani Suppliers Pvt. Ltd have remained outstanding in their books of accounts for over 05 years, he is voluntarily willing to write- back on account of cessation of liability owed by the N. M. Group concerns M/s Kalyani Suppliers Pvt. Ltd and consider such ceased liability as the Income of the NM Group concerns for the F.Y. 2017-18. The ld. AO observed that if these transactions were genuine then why the assessee would offer to write back the same. Even no evidences related to payment persuasion have been submitted by the assessee. Evidences gathered during search indicate that M/s Kalyani Suppliers Pvt. Ltd was non-existent at the registered address at the time of survey. Evidences gathered also indicate that Shri Hanish Toshniwal has claimed to have used this company to provide accommodation entries to certain clients including N.M. Group. 12 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta The assessee has voluntarily acceded to write-back the liabilities of M/s Kalyani Suppliers Pvt. Ltd and consider the liabilities owed to this company by the NM Group concerns as incomes for the F.Y. 2017-18 and the assessee company has written back the same but on the other hand has also claimed bad debts of nearly same amount. Even otherwise the assessee could neither provide any evidence to controvert the findings as discussed above nor could show any evidence related to any efforts being made by M/s Kalyani Suppliers Pvt. Ltd for realisation of its funds. It is hard to believe that why would any company in the course business not try to realise the funds extended by it for sale of goods/services. It is against business expediency to even think that the said company would simply leave such a big amount lying as it is the hands to one of its debtors and not push for any kind of repayment. 16. Same was the case of M/s Everlink Vyapaar Pvt Ltd which was also shown to be an outstanding trade creditor in the books of M/s N M Agrofood Private Limited to the tune of Rs. 24,76,72,484/-. 17. M/s Everlink Vyapaar Pvt. Ltd has shown itself to be a company Incorporated at 77, Netaji Subhash Road, 5th Floor, Room No. SA, 13 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Kolkata. No information has been found with regard to any branch office, factory, godown etc. of this company in Sriganganagar. The financial details of this company were retrieved from the official AST System of the Income Tax Department, and are reproduced as under: Name & PAN (M/s.) Assessment Year 2015-16 2014-15 2013-14 Everlink Vyapar P. Ltd. AACCE1091L Total Revenue 86207440 1044980037 443535554 Net Profit 2,86,788 144847 1,33,252 NP % 0.33% 0.01% 0.03% The assessee company has shown to have engaged in purchase with M/s Everlink Vyapaar Pvt. Ltd for the F.Y. 2012-13. M/s Everlink Vyapaar Pvt. Ltd is shown to be an outstanding trade creditor in the books of M/s N M Agrofood Products Pvt. Ltd. to the tune of 24,76,72,484/- The very fact that this company, shown to be based in Kolkata is one of the large creditors i.e. one of the large trade partners of a company based in Srigangangar, Rajasthan seemed unusual. On a perusal of the financials of M/s Everlink Vyapaar Pvt. Ltd, It is seen that M/s Everlink Vyapaar Pvt. Ltd. has shown to have engaged in huge volume of sale /purchase, however, the corresponding net profit that it is offering to tax is abysmally low. Further, 14 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta there is wide variation in the total revenue year-on-year, whereas the net profit remains approximately the same, which is in itself illogical and cannot be reasonably explained. 18. As discussed above the Directorate Income-tax (Investigation), Kolkata has also identified M/s Everlink Vyapaar Pvt. Ltd to be a jama- kharchi paper company floated for the sole purpose of providing accommodation entries through its entry operator Shri Hanish Toshniwal. During the course of a statement recorded from Shri Hanish Toshniwal by the D.D.I.T., Unit 1(2), Kolkata on 11.03.2015 u/s 131 of the I.T. Act, Shri Hanish Toshniwal, in his statement, has admitted that he was the entry operator who was managing, inter-alia, M/s Kalyani Suppliers Pvt. Ltd (listed as company No. 126 in the statement) for the purpose of providing accommodation entries to certain clients. 19. In light of the above mentioned anomalies, and in order to verify the genuineness of this company, a survey u/s 133A was conducted at the given registered address of M/s Everlink Vyapaar Pvt. Ltd at 77, Netaji Subhash Road, 5th Floor, Room No. 5A, Kolkata during the course of search action in the case of the NM Group. The survey team did not find 15 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the existence of this company at the given registered address, and therefore, the survey authorization was returned unexecuted. 20. Another survey team conducted survey at a business premises occupied by Shri Hanish Toshniwal and recorded a statement from him. In the said statement, Shri Hanish Toshniwal re-iterated his stand that M/s Everlink Vyapaar Pvt. Ltd is a shell company and that he has utilized M/s Everlink Vyapaar Pvt. Ltd to provide accommodation entries to the NM Group. 21. During the course of post-search proceedings, when asked about the genuineness of purchases shown to have been made from M/s Everlink Vyapaar Pvt. Ltd, Shri Manoj Kumar Initially stated on 21.03.2018 that the money owed to M/s Everlink Vyapaar Pvt. Ltd was on account of sale- purchase of guwar, and that due to shortage of funds, payment could not be done. Shri Manoj Kumar further stated that they have been receiving legal notices from M/s Everlink Vyapaar Pvt. Ltd for payment of outstanding dues, and that insofar as non-existence of M/s Everlink Vyapaar Pvt. Ltd is concerned, the NM Group had entered into dealing with Shri Roopchand 16 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Toshniwal and only he can explain why the said company does not currently exist at the given address. 22. Subsequently, Shri Manoj Kumar was again, on 07.05.2018, asked to explain the bonafides of the outstanding credit amount owed to M/s Everlink Vyapaar Pvt. Ltd. Shri Manoj Kumar further submitted that the NM Group concerns would voluntarily write-back the amounts owed to M/s Everlink Vyapaar Pvt. Ltd and consider such ceased liability as the income of the NM Group concerns for the current year i.e F.Y. 2018-19. 23. Evidences gathered during search indicate that M/s Everlink Vyapaar Pvt. Ltd was not existent at the registered address at the time of survey. Evidences gathered also indicate that Shri Hanish Toshniwal has claimed to have used this company to provide accommodation entries to certain clients including NM Group. 24. The assessee company couldn't prove the genuineness of this transaction during the assessment proceedings. The legal letters as mentioned by the Shri Manoj Gupta were not presented nor could the assessee produce any kind of evidence to substantiate that the creditor has 17 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta pressurized the assessee to pay the outstanding dues even after a long interval of time has elapsed. 25. During the course of assessment proceedings, the assessee was asked to show cause that in the view of facts and circumstances as discussed above why the purchases shown to have been made by the assessee from M/s Everlink Vyapaar Pvt. Ltd. and Kalyani Suppliers Pvt. Ltd. amounting to Rs. 53,27,32,653/- shouldn't be considered as bogus and added back to the total income of the assessee for FY 2012-13. 26. The relevant part of the reply of the show cause notice furnished by the assessee is reproduced hereunder: "With reference to above and in continuation to earlier submission, we are to submit as under; i) That assessee has entered into certain genuine purchase/ sale transaction with Kalyani Suppliers Pvt Ltd. and Everlink Vyapar Pvt Ltd. However due to financial crisis & liquidity problem, payment could not be made to both these parties. Though these trade creditors are genuine but being long outstanding for more than three year & statement given during the course of search regarding writing back of these trade creditors in AY 18-19 & 19-20, assessee has written back the outstanding amount of both these companies in AY 2018-19 & AY 2019-20. ii) Following supporting documents are enclosed in support of genuineness of the transaction with both these parties: a) Copy of ledger account from AY 2012-13 to AY 2019-20 showing complete detail of transaction entered with these parties. 18 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta iii) Copies of purchase & sale bill of both the parties are enclosed for your verification. It is submitted that assessment proceeding of AY 2013-14 has been completed u/s 143(3) wherein all these trading transactions has been fully examined. Copy of assessment order is enclosed. iv) A search & seizure operation u/s 132 of the Act has been carried out at the business & residential of assessee. During the course of search, no incriminating material suspecting the transaction with both these parties has been found. Further prior to this, a search proceeding u/s 132 was also carried 17-07-2013 and also survey proceeding u/s 133A of the Act in March 2012 December 2014 and during all these proceeding no incriminating material was found these transactions. transactions entered with both these parties are genuine and fully verifiable. v) It is submitted that trading transaction with both these parties has been entered in AY 2013-14. vi) It is submitted that both these company are active company and duly complying all the statutory compliance and also uploaded their geographical location on the MCA website. vii) Copy of audited financial statement of both these company for AY 2013- 14 & 2018-19 is enclosed. viii) Assessee has approached present director of both these companies and they are sending the confirmation showing outstanding balance due to them. Confirmation will be submitted within 2 3 days' time. 1. That your good self has not pointed out any specific reason of alleging the transaction of two trade creditors. It is thus requested to provide specific reason or basis of alleging the these transaction and giving show cause to add the entire amount u/s 68 of the Act. 2. It appears that sole basis of your allegation that transactions entered with two companies namely Kalyani Suppliers Pvt Ltd. and Everlink Vyapar Pvt Ltd. are accommodation entries is on the basis of statement of Shri Hanish Toshniwal. Shri Hanish Toshniwal in his statement dt. 11-03-15 has pointed out 207 companies list as Jamakharchi company' and also provided list of beneficiaries, however list of beneficiaries company were not provided to us. It is further submitted that in statement dt. 08-02-18, he has pointed out the name of beneficiary as 'N M Group' but that is limited to transaction with Kalyani Suppliers Pvt Ltd and Everlink Vyapar Pvt Ltd. Thus his statement cannot be taken as base to allege share capital transaction or unsecured loan transaction. 3. It is submitted that statement of Shri Hanish Toshniwal cannot be taken as base as he is neither director at the time of when all these transactions has taken place nor at the time when his statement was recorded. 4. It is submitted that statement of Shri Hanish Toshniwal is not at all reliable on account of following reasons: Statement of Shri Hanish Toshniwal was recorded u/s 131 on 08-02-18. In Q No. 8, Shri Hanish Toshniwal was confronted with the statement given by him 19 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta on 11-03-2015. It appears all these statements are tutored or recorded under pressure. No opportunity of cross examination was allowed to assessee. ..............Thus, it is apparent that Investigating authority has approached to Shri Hanish Toshniwal with pre decided motive. In such circumstances, statement of Shri Hanish Toshniwal is not at all rellable and cannot be taken as basis for alleging the transaction with assessee company." 27. The ld. AO analyzed the reply submitted and considered that the reply is not acceptable in the light of following issues: 1. The assessee has pointed out that the firm has made genuine purchases from the above-mentioned companies but no source or link through whom assessee established business links with such companies situated in Kolkata have been explained. 2. Also, the assessee has not answered the fact that how can a company which is offering such low income to tax not botherabout receiving such huge amounts of payments from the assessee. 3. The assessee has submitted that the assessment proceedings for the year under consideration has already been completed but here it is pertinent to mention that a search was conducted in this case wherein number of incriminating evidences have been gathered which clearly indicate that the assessee has entered into bogus transactions with the companies as mentioned above in the garb of purchase transactions. 4. The assesee's contention that these companies are existing companies is rejected in the light of the fact that surveys were conducted at the business premises of these bogus companies and even the survey warrant couldn't be executed as nobody was found at the premises. The survey report is reproduced above in para-5.4. 5. The assessee couldn't during the search and post search proceedings produce any evidence or communication regarding payment persuasion from these companies. It was only in its reply dated 20.12.2019 that the assessee submitted the confirmations of these two companies. 6. The assessee has further contended that the statement of Sh. HanishToshniwal is not reliable and same is tutored or recorded under pressure which is completely baseless and vague. The assessee simply has levelled allegations upon the manner in which the statements were recorded. It is pertinent to mention that Sh. Toshniwal didn't file any retraction at any point of time from his statement. He gave the statements and stated the same facts twice during the statements recorded on 11.03.2015 and 08.02.2018. Had this been a case of apparent tutored 20 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta statement as submitted by the assessee then why would he state the same fact twice. 7. It is relevant to note here that the statement recorded on oath u/s 132(4) holds evidentiary value and it can't be simply challenged upon the baseless allegations as levied by the assessee. 8. Sh. Hanish Toshniwal has elaborately explained in detail the entire modus operandi of such orchestrated transactions which itself poses a question mark over the submission of the assessee. The assessee has now submitted that a confirmation letter vide letter dated 20.12.2019 but the present directors are not those who knew about these orchestrated transactions. They would have simply given the confirmation looking into the statements but what was the real nature of these transactions was already explained by Sh. Toshniwal who was then managing the affairs of the company. 9. The assessee's request with regards to cross examination is not acceptable as the same was not raised throughout post search and assessment proceedings. The aseesee has asked for the same on 13.12.2019 when the case is getting barred by limitation on 31.12.2019. It is important to mention here that right of cross examination is not an absolute right (Nath International Sales Vs. UOI, AIR 1992 (Del.) 295). The Hon'ble Supreme Court has also held that right of hearing does not necessarily include right of cross-examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned. (State of J&K Vs. Bakshi Gulam Mohammad, AIR 1967 SC 122). The question whether the assessee is entiled to cross examination a question which may largely depend on the facts and circumstances of the case (Shyamlal biri Merchant Vs UOI 1993 68 ELT 548, Allahabad). The Hon'ble Rajasthan High Court in the case of Rameshwar Lal Mall V/S CIT 256 ITR 536 (Raj.) has held that "There is no provision for permitting the cross examination the persons whose statement were recorded during survey." In the case of Mahendra N. Chatterjee V/s Collector of Central Excise (1977) Tax LR 1754 (Cal.) the Hon'ble Calcutta High Court held that "Right to cross examination not necessarily a part of reasonable opportunity." 28. It has further stated that the fact of the matter also becomes amply clear when the statements Shri Amit Gidra, the main accountant of the 21 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta group are perused which makes clear that the assessee has been indulging in such bogus transactions where actual purchase-sale doesn't take place and only bills are raised. 29. It is hard to believe that if these were actual business transactions then why the assessee would write back the same in form of cessation of liability. It is pertinent to note that the turnover of the assessee in the year under consideration around Rs. 5,69,52,30,590/- out of which the sum pertaining to these two companies Rs. 53,27,32,653/- which is nearly one ten of the total turnover. Normal business prudence doesn’t allow any business entity to write back such huge amount vis a vis turnover had these been genuine transactions. 30. To summarize following important issues are evident: 1. The assessee has shown to have involved in purchase of huge amounts from M/s Kalyani Suppliers Pvt. Ltd and M/s EverlinkVyapaarPvt. Ltd and these are appearing in the books of accounts as creditors around 5 years. 2. During the course of investigation surveys were conducted and these companies were found to be non-existent. 3. Sh. Hanish Toshniwal's statement was recorded and he has accepted to have provided bogus accommodation entries from M/s 22 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd in form of purchase transactions in the books of the assessee. 4. The assessee couldn't substantiate the above mentioned purchase transactions and voluntary offered to write back these transactions for FY 2017-18 and 2018-19. 5. But these transactions are bogus transactions in the garb of purchase transactions as shown in the books of accounts as evident from the discussion in pre pages. 31. Therefore, the transactions entered into by the assessee with M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd are alleged as bogus transactions entered into for the purpose of artificially inflating the expenses and thereby reducing the taxable income. These are simply bogus transactions which is orchestrated to suit the financial needs of the assessee company. However, fact of the matter is that these companies have provided accommodation entries to the assessee, therefore the said accommodation entry bills are bogus and are to be treated as the assessee's unexplained income under the provisions of section 68 of the Income tax Act, 1961. The same are unexplained and reflecting in the books of accounts of the assessee for an amount of Rs. 53,27,32,653/-. 23 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 32. Aggrieved from the order of the ld. AO the assessee marched the appeal before the ld. CIT(A). The ld. CIT(A) after discussing the matter in detailed, partly allowed the appeal of the assessee. The revenue aggrieved by the order of ld. CIT(A) assailed this appeal before us and the assessee has also filed cross objection against the said order of the ld. CIT(A) before us. 33. The ld. DR has filed the Paper book containing 56 pages of the evidences relied upon on 25.04.2022 wherein ld. DR has submitted various statement of the persons in these group cases and also filed the report of the inspector who conducted verification / inquiry in this case. He has also filed his written submission at length which is extracted here in below: Written Submissions A search was conducted on 08.02.2018 in the case of N.M. Group, Sriganganagar and M/s N.M. Agro Food Products Pvt. Ltd. was also covered under search operation. Order w/s 143(3)/153A was passed in this case on 31.12.2019. As the case of Shri Suresh Kumar Gupta is similar to the present case, therefore, the case of the assessee company is treated as the leading case and all arguments taken in this case in these submissions will be applicable in the case of Shri Suresh Kumar Gupta also. In the assessment order dated 31.12.2019 the assessing officer had made addition of Rs.53,27,32,653/- in this case u/s 68 of the Act. The said additions were made on account of bogus purchases from two parties, namely, M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd.. The assessee has shown purchases of Rs.28,50,60,169/- from M/s Kalyani Suppliers Pvt. Ltd. and purchases of Rs.24,76,72,484/- from M/s Everlink Vyapaar Pvt. Ltd. The AO had made addition giving the following reasons 24 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta i. The Directorate of Income Tax (Inv.), Kolkata had identified both the parties as paper companies floated for the sole purpose of providing accommodation entries. The Directorate also identified Shri Hanish Toshniwal as the entry operator controlling these companies and he had also admitted in statement u/s 131 of the Act that he used to provide accommodation entries through these companies. ii. A survey was conducted simultaneously during the course of search in the case of the assessee company at the premises of both the companies but these companies were found non-existent at the time of survey. iii. Business premises of Shri Hanish Toshniwal was also surveyed and he admitted in the statement during the course of survey also that both the companies were floated for providing accommodation entries. iv. The AO also referred to the statements of Shri Manoj Kumar, the key person of The N.M. Agro Group and Shri Amit Gidra accountant of the group to bring home the point that there was no real business transactions between the assessee company and the aforesaid two companies. v. The AO has also mentioned the fact that the above two companies are appearing as creditors in the books of account of the assessee company for past around five years and when the assessee could not substantiate the above purchase transactions, it has voluntarily written back these purchase transactions in FY 2017-18 and 2018-19. On the basis of the above facts, the AO made addition of Rs.53,27,32,653/-. The assessee filed appeal before the CIT(A). One of the grounds of appeal was that as the addition is not based on any incriminating material, therefore, the same is required to be deleted. The Ld. CIT(A) vide her order dated 25.11.2021 dismissed this technical ground. She discussed in her order that how incriminating material present was found in this case. However, on merits, the Ld. CIT(A) deleted entire addition of Rs.53,27,32,653/-. The relief was provided by the Ld. CIT(A) mainly on the grounds that the modus operandi cited by Shri Hanish Toshniwal was not applicable in this case, as there was no payment to these parties and therefore, the question of receiving back of the paid amount in cash does not arise. It was further observed by the Ld. CIT(A) that the appellant has already written back the amount of these two creditors as cessation of trading liability and offered them to tax u/s 41(1) of the Act in AY 2018-19 and 2019-20. The order of the ld. CIT(A) suffers following infirmities 1. As far as the question of non-application of the modus operandi clarified by Shri Hanish Toshniwal is concerned, it is to be kept in mind that he provided entries to numerous beneficiaries across the country. There cannot be any standard modus operandi in this situation and the fact remains that the assessee claimed expenses of Rs.53,27,32,653/- through 25 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta bogus purchases from these companies in this year. Whether the same amount was received back or not, is not important. What is important is that whether the expenses on purchases were genuine or not. If the purchases were not genuine, then the same can always be disallowed straight away without mentioning any section. In this case, it is clear from the factual matrix presented by the AO in the assessment order that the companies were non-existent at the given addresses, the entry operator Shri Hanish Toshniwal had admitted twice in his statements that these companies were created for providing accommodation entries. Further, there was no payment to these companies against the alleged purchases for more than five years and the assessee company has indirectly admitted the purchases being bogus by writing back the amounts in AY 2018-19 and 2019-20. Therefore, it is a clear case of disallowance in this year. Merely because the amount has been written back by the assessee in subsequent year does not entitle the assessee to claim this amount in the year concerned. The bogus entry cannot be allowed in the year when it was claimed only because of the fact that it has been offered for taxation u/s 41(1) of the Act in a subsequent year. 2. It is also to be kept in mind that in the return filed in response to notice u/s 153A of the Act, the assessee has shown total income of Rs.53,82,460/-. However, in the return of income filed for the AY. 2018-19, the assessee has shown total income of Rs.11,55,995/- and the total income for AY 2019 20 has been shown at loss of Rs.1,34,44,659/- Thus the assessee has written back the bogus amounts in a pre-managed manner in order to hoodwink the Revenue since even after offering these amounts, the returned income in AY 2018-19 is just Rs. 11,55,995 and it is at a whopping loss in AY 2019-20. Had the bogus losses would not have claimed in AY 2013-14, then the total income of the assessee would have been Rs. 53,81,15,113. The Ld. CIT(A) could not appreciate the facts of the case in the correct perspective and granted the relief to the assessee in an erroneous manner. Similarly in the case of Sh Suresh Kumar Gupta there are heavy losses in AY 2019-20 and the ld. CIT(A) has allowed the relief in an erroneous manner. It has been held by the Hon'ble Kolkata Bench of the Tribunal in the case of Green Star Corporation v ACIT in ITA No. 2463/Kol/2017 that no addition can be made in the income of the assessee in that asstt. year, as in the view of the AO the outstanding liability in question was bogus and non-existent. The Hon'ble Tribunal further held that the question of cessation of such non-existent as bogus liability does not arise. Hence, section 41(1) cannot be applied. (Copy of the order is enclosed) 3. If it was felt that the AO had applied a wrong section in the facts and circumstances of the case, then the remedy would have been to correct the mistake of the AO by the CIT(A), rather than deleting the entire addition. 26 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Counter-arguments to the contentions of the Id. AR in Cross-objections. The ld. AR has objected to the dismissal of the ground of appeal of absence of incriminating material by the ld. CIT(A). It has been argued that the statement of Sh. Hanish Toshniwal cannot be regarded as incriminating material, as how he could remember the name of all companies, assumption has been made by the ld. AR that the departmental officers have provided the list to him, it has been further argued that there was no payment in this case so question of receiving back money in cash does not arise. It has been further argued that the directors have not met Sh Toshniwal in person. Finally it has been argued that no opportunity of cross examination was provided to the assessee. The issue of non-payment and modus-operandi has already been dealt on page- 2 and 3 above. As regards the list containing name of companies is concerned, it is to be noted that a person is not required to memorize the names of companies. During survey he can always have an access to his books of account and cull out information from there. The entry operators have always have a list of companies operated by them with them to conduct their day-to-day so-called business. The allegation of providing the list by the departmental officers is without any iota of evidence and is highly objectionable and contrary to the presumption as per the Evidence Act. Further, even if it is assumed for sake of argument the the fact narrated by Sh Toshniwal regarding meeting the directors of the assessee company is wrong, then also it does not have any impact on the case. It is not required to meet in person for transactions in modern days of advanced telecommunication tools and internet facilities. As far as opportunity of cross-objections is concerned, it is to be noted that this right is not an absolute right and it is mandatory only when addition is based solely on the basis of some statement. In this case, addition has been made on the basis of following material. apart from the statement of Sh Hanish Toshniwal 1. Finding of the survey at the premises of the supplier companies. 2. Statement of key person of the group and main accountant of the group. 3. Non-payment of the amount for about 5 years. 4. Writing- back of the amount by the assessee itself in AY 2018-19 and AY 2019-20 in a pre-managed manner to hoodwink the Revenue indicating the indirect admission on the part of the assessee itself. Hence, the cross-objections of the assessee are liable to be dismissed. 34. In addition to the above written submission, before us, the ld. DR also heavily argued and relied upon the findings of the assessing officer and 27 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta prayed that the order of the ld. CIT(A) be set-a-side and that of the AO be restored. The ld. DR further argued that the addition made in the total income of the assessee were well related to the undisclosed income unearthed during the search and seizure action initiated by the department. The addition is fully based on the evidences in the possession of the AO which was collected at the time of search and seizure action and consequent there upon addition is also well reasoned. The ld. DR submitted that Shri Hanish Toshniwal in a statement recorded on 11.03.2015 admitted that the company is engaged in the accommodation entry list. Again, he has after a period of 3 years on 08.02.2018 admitted the same facts. The assessee has made the purchases from the two companies and have not paid to the creditor’s companies for more than 5 years and the purchases made are bogus purchases and the consequent liability is also bogus. In the statement the key person himself has agreed to write off this amount as income shows that the liability is not genuine and is required to be tax in the year in which it is created. The contention of the assessee that they have write off the amount lying as sundry creditors is also against loss incurred and that is also not real written off. The ld. DR heavily relied upon the findings of the ld. CIT(A) and the same is extracted for the brevity: 28 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (ii) On appeal, the appellant contended that the case of appellant for the year under consideration was completed u/s 143(3) of the Act on 29.12.2017. Thus, the assessment proceedings for AY 2013-14 was not pending on the date search. search no incriminating material indicating any undisclosed income for year under consideration was found and there was no seized material based on which assessment had been completed by the AO its case, assessment so framed by the AO u/s 153A of Act illegal and bad law. In support of his contention, the appellant placed reliance on the decisions various High Courts and also of the Hon'ble Supreme Court mentioned in submissions mentioned supra. (iii) After careful consideration of the submissions of the appellant, it is observed that there no dispute that Search was carried out in the case the appellant on 08.02.2018 and no assessment for the AY 2013-14 was pending when notice u/s 153A of the Act was served upon the appellant. In fact, the case of appellant was assessed u/s 143(3) for the year under consideration and therefore was not pending as on the date of search. In search assessment, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded assets/material found any incriminating or documents found as representing undisclosed income earned. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 (Delhi HC), while analyzing the provisions of section 153A read with section 132 of the Act has observed para 37 and 38 as under: "37. On conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of law explained in aforementioned decisions, the legal position that emerges is under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. ii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the total income of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six A Ys "in which both the disclosed and the undisclosed income would be brought to tax". iii. ........ iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the 29 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess' in Section 153 A is relatable to abated proceedings (ie. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessmentshall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the LD. ASSESSING OFFICER while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." (iv) In view of the aforesaid decision and the legal position, it is clear that section 153A brings into the purview of assessment both regular and undisclosed income subsequent to action u/s 132 or section 132A upon invocation of section 153A. The proviso to section 153A clearly mandates the AO to assess or reassess the total income in respect of each assessment year falling within six assessment years. The next proviso further mandates that any assessment or reassessment in respect of any of those six years which are pending shall abate. Thus, once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. 30 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (v). course In the light of the above facts & legal position, it is observed that during the of search in the case of the appellant, various assets/books of accounts/documents were found & seized as per Annexure prepared during the course of Search. The fact remains that the appellant has shown to have been engaged in purchase with M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd for FY 2012-13 and as on the date of search in the case of appellant, these companies were shown to be outstanding trade creditors in the books of the appellant to the tune of Rs. 28,50,60,169/- and Rs. 24,76,72,484/- respectively and that the aforesaid amount was outstanding as per the books for around five years. The AO further observed that the Directorate of Income Tax (Investigation), Kolkata had previously identified M/s Kalyani Suppliers Pvt. Ltd to be a jama-kharchi paper company floated for the sole purpose of providing accommodation entries. The Directorate had also identified one Shri Hanish Toshniwal to be the entry operator controlling this company. During the course of statement of Sh. Hanish Toshniwal recorded on 11.03.2015 u/s 131 of the I.T. Act by the D.D.I.T., Unit 1(2), Kolkata, Sh. Hanish Toshniwal, in his statement, has admitted that he was the entry operator who was managing, inter alia, M/s Kalyani Suppliers Pvt. Ltd (listed as company No. 187 in the statement) for the purpose of providing accommodation entries to certain clients. (vi) Subsequently, during the course of search action in the case of the NM Group on 08.02.2018, a survey u/s 133A was conducted at the given registered address of M/s Kalyani Suppliers Pvt. Ltd. at 340, GT Road, Howrah, Kolkata and M/s Everlink Vyapaar Pvt. Ltd. at 77, Netaji Subhash Road, 5th Floor, Room No. 5A, Kolkata. The survey team did not find the existence of the aforesaid companies at the given registered address, and therefore the survey authorization was returned unexecuted. Simultaneously another survey team conducted survey at the business premises occupied by Shri Hanish Toshniwal and recorded his statement. In the said statement, Shri Hanish Toshniwal re- iterated his stand that M/s Kalyani Suppliers Pvt. Ltd. andM/s Everlink Vyapaar Pvt. Ltd. are shell companies and that he has utilized the above companies to provide accommodation entries to the NM Group. The relevant part of the statement is reproduced at page no. 5 of the assessment order. In view of the aforesaid statement, the AO held that the appellant has taken accommodation entry in the garb of bogus purchase and has shown the aforesaid companies to be one of the bogus sundry creditors. (vii)/During the course of search on 08.02.2018, Shri Manoj Kumar, the key individual of the NM Group was confronted with the above mentioned evidences and was asked to provide his clarification on the matter regarding the existence and identity of M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. In response, Shri Manoj Kumar stated that he had entered into sale-purchase of agro commodities with one Shri. Roopchandji of Bikaner, and that this person Shri Roopchandji traded on behalf of M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. Shri Manoj Kumar did not offer any explanation on the existence or otherwise of M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink 31 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Vyapaar Pvt. Ltd. in Kolkata though he was confronted with the same. Also from the statements of Sh. Amit Gidra, the main accountant of the Group, the AO observed that the appellant company was indulged in circular trading and Kolkata based companies are also part of such practice. (viii) Further the fact also remains that during the course of post-search proceedings, when asked about the genuineness of purchases shown to have been made from M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd., Shri Manoj Kumar stated on oath that since the amounts due to be paid to the aforesaid two companies have remained outstanding in their books of accounts for over 05 years, he is voluntarily willing to write-back on account of cessation of liability owed by the NM Group concerns to M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. and considers such ceased liability as the income of the NM Group concerns for the F.Y. 2017-18 and 2018-19. (ix) It is observed that the evidences gathered during search indicate that M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. were non-existent at the registered address at the time of survey and that Sh. Hanish Toshniwal has claimed to have used this company to provide accommodation entries to certain clients including NM Group. Further the fact also remains that the appellant has voluntarily acceded to write-back the liabilities of M/s Kalyani Suppliers Pvt. Ltd and consider the liabilities owed to this company by the NM Group concerns as incomes for the F.Y. 2017-18 and 2018-19. (x) Thus, it is observed that in support of its assumption of jurisdiction under section U/s 153A of the IT Act 1961, the AO not only placed reliance on the Statements of the accommodation entry provider namely Shri Hanish Toshniwal, the Director in the aforesaid companies who categorically admitted of having engaged in the business of providing accommodation entries to various parties including the appellant but also of the main accountant of the group Shri Amit Gidra of the business group recorded on oath u/s 132(4) and also on the basis of Survey conducted in the case of the aforesaid trade creditors namely M/s Kalyani Suppliers Pvt. Ltd and M/s Everlink Vyapaar Pvt. Ltd. who were found non- existent at the registered address at the time of survey conducted at their registered addresses during the course of search in the case of the appellant group. In the facts and circumstances of the case, the AO was of a firm belief that the transaction reflected in regular books or documents did not represent the true state of affairs of the appellant firm. (xi) In search assessment, any undisclosed income, which can be ultimately be added, is only to the extent of any unrecorded assets/material found or any incriminating documents found as representing undisclosed income earned as held by the Hon'ble ITAT, Kolkata in the case of ACIT Circle3(2) Kolkata Vs. M/s Mani Square Limited, Kolkata No.58/Kolkatta/2019. very recently on 6th August,2020 in ITA 32 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (xii) In the case of MGF Automobiles Ltd. Vs ACIT (ITAT Delhi) ITA Nos. 4212 & 4213/DEL/2011 dt. 28/06/2013, the issue whether statement recorded u/s 132(4) can be considered as incriminating material was discussed as under: "15. Similar views were held by ITAT (Mum) in the case of Shri Gurinder Singh Bawa Vs. Dy. CTT, ITA No. 2075/Mum/2010 and LMJ International Ltd. Vs. DCIT,(2008) 119 1TJ (Kol) 214 and in the case of Anil P. Khimani vs. DOT,2010- TIOL-1 77-ITAT-Mum. During proceedings before us, the bench asked a question to Ld. AR as to whether any statement u/s 132(4) was recorded during search to which the Ld. AR replied in negative and Ld. Departmental Representative also showed his ignorance about such statement. This question was asked because the view of the Bench is that if during course of search, some statement is recorded u/s 132(4) and, in that statement certain facts are recorded from the interpretation of which Assessing Officer could conclude that there was some undisclosed income, then that statement can be considered as incriminating material". (xiii) It is also observed that the evidence does not mean only documentary evidence but the Statement recorded under section u/s 132(4) of the IT Act has also been judicially held as an important piece of evidence collected as a result of Search and Seizure Operation. In the present case, it is not only the statements of the Director of the appellant firm but also of the main accountant as well as Director of the Companies which admitted of providing accommodation entries to the appellant during the course of Survey in his case which was simultaneously conducted at the time of Search conducted at the premises of the appellant which were relied upon by the AO for framing the assessment in the case of the appellant. Therefore looking to the facts .of the case, I am of the view that there is no ambiguity in the assessment order of the AO in the case of the appellant for the year under consideration which is based on the incriminating material found during the course of Search. Accordingly, the Ground of Appeal No. 1 treated is dismissed. 35. So, in terms of these observations of the ld. CIT(A), ld. DR submitted that the statement recorded during the course of search is an incriminating material. But she has allowed the relief to the assessee on merits. But based on the set of facts argument the ld. DR submitted that the amount can be added as unexplained credit in the year of purchase and not in the year of write off made. The ld. DR further submitted that the ld. CIT(A) has 33 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta not considered the observations of ITAT Kolkata bench in the case of ITO Vs. M/s. C D Steel (P) Ltd. ITA no. 1360/Kol/2017 dated 29.08.18. The relied upon extract is as under : 9. Applying the proposition of law laid down in the above case to the facts of this case, we hold that no addition can be made to the income of the assessee in this asst. years, as in the view of the AO the outstanding liability in question is bogus and non-existent. The question of cessation of such non-existent as bogus liability does not arise. Hence, Sec. 41(1) cannot be applied. Only when there is a genuine liability and there is cessation of such liability or it is written off in the books of account, then Sec. 41(1) of the Act can be applied. Law permits the Ld. AO to re-open the assessment for the earlier year and consider whether the expenditure incurred are to be allowable or not and, in such cases, additions can be made of bogus expenditure. Thus, in view of the above discussion, we delete all these additions of outstanding liabilities/expenses as appearing in the balance sheet as made by the Ld.AO and confirmed by the Ld. CIT(A) and allow the grounds of the assessee. 36. The ld. DR also submitted that ld. CIT(A) has stated that the AO had applied a wrong section in the facts and circumstances of the case, then the remedy would have been to correct the mistake of the AO by the CIT(A), rather than deleting the entire addition. The ld. DR further relied on the judgement of Swati Bajaj case relied upon paras are extracted here in below : “57. In a very recent decision of the Hon'ble Supreme Court in M.J.James after referring to a catena of decisions on the point the Hon'ble Supreme Court pointed out that natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more lead to the conclusion that prejudice is thereby caused. Where procedural and /or substantive provisions of law embodied the principles of natural justice, their infraction per-se does not lead to invalidity of the order passed. The prejudice must be caused to the litigant, except in the case of a 34 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta mandatory provision of law which is conceived not only in individual interest but also in public interest. Further by referring to the decision in State of Uttar Pradesh Versus Sudhir Kumar Singh 88, it was held that the "prejudice" exception must be more than a mere apprehension or even a reasonable suspicion of a litigant, it should exist as a matter of fact or to be cast upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice. 58. Therefore, the assessees have to specifically point out as to how they were prejudiced on account of non-furnishing of the investigation report in its entirety, failure to produce the persons from whom the statements were recorded for being cross examined would cause prejudice to the assessee as nowhere in the report the names of the assessees feature. The investigation report states that the investigation has not commenced from the individuals but it has commenced who had dealt with the penny stocks, concept of working backwards. This is a very significant factor to be remembered. Therefore, there has been absolute anonymity of the assessee in the process of investigation. The endeavour of the department is to examine the "modus operandi" adopted and in that process now seek to identify the assessees who have benefited on account of such "modus operandi". Therefore, considering the factual scenario no prejudice has been established to the assessee by not furnishing the investigation report in its entirety nor making the persons available for cross examination as admitted by the department in substantial number of cases the assessees have not been specifically indicted by those persons from whom statements have been recorded. 59. We are conscious of the fact that there may be exceptions however nothing has been brought before us to show that there was an exception in any of these appeals heard by us. In a few cases the assessee has been made known of the statement of the Director of the penny stock company or the stock broker, entry operator despite which those assessees could not make any headway. While on this issue, we need to consider as to whether and under what circumstances the right of cross examination can be demanded as a vested right. In Kishanlal Agarwalla, the Hon'ble Division Bench of this Court pointed out that no natural justice requires that there should be a kind of formal cross examination as it is a procedural justice, governed by the rules and regulations. Further it was held that so long as the party charged has a fair and reasonable opportunity would receive, comment and criticize the evidence, statements or records on which the charges is being against him, the demand and tests of natural justice are satisfied. 35 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 60. In Bakshi Ghulam Mohammad 89 the Hon'ble Supreme Court held that the right of hearing cannot include the right of cross examination and the right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. 90. At this juncture it would be relevant to take note of the decision of the High Court of Delhi in Suman Poddar vs. Income Tax Officer (ITO) which was affirmed by the Hon’ble Supreme Court in (2019) 112 taxman.com 330:- The first, issue which has been raised by the assessee that it has not been confronted with the statements of various parties relied upon by the Assessing Officer. The assessee has also contended that opportunity of cross-examining those parties/persons was not provided to the assessee. According to the assessee, this resulted in the violation of the principles of natural justice and thus assessment should be held void ab intio. However, in our opinion, not providing opportunity of cross examination may be in the nature of irregularity which is curable but not an illegality leading to annulling of the assessment. Further, the ld. CITA) in para 4.1 of the impugned order has held that addition has not been made solely on the basis of the statement of those persons/parties. The relevant part of the order of Ld. CIT(A) is reproduced as under: I have considered the submission of the appellant and observation of the AO made in the assessment order on the issue. The appellant has stated that it has not been allowed cross-examination of parties on the basis of whose statement, the addition has been made. On this issue it is observed from the assessment record that the AO has made the addition on the strength of independent analysis of the documents to arrive at the conclusion that the appellant has failed to prove genuineness of the transaction in respect of STCL as discussed above. Statements and other material found in the course of investigation has been used by him as a corroborative material to strengthen his findings. As per the requirements of Section 68 of the Act, the AO has shifted the onus back on the appellant by confronting the adverse findings. Therefore, the appellant has failed to discharge the onus cast upon it u/s. 68 of the Act to explain the transaction. The Investigation Wing has conducted detailed enquiries, made analysis of the seized/impounded documents and made analysis of beneficiaries. The report prepared contains details 36 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta of complete modus operandi, commission charge against accommodation entries, list of conduit companies, list of their bank accounts in the name of conduits. The said list contains names of companies in which the appellant dealt. Therefore, the findings in the case of Investigation Wing corroborate the independent findings of the AO. Therefore, the AO was not required to allow the appellant the opportunity to cross-examine. The Tribunal in the case of Ram Nilwas Gupta, Dehradun vs. DCIT, Dehradun on 6th February, 2019 in ITA No. 4881 to 4883/Del/2016 (Assessment Years: 2010-11, 2012-13 and 2013-14), after considering various decisions of the Hon'ble Supreme Court, including the decision in the case Andaman Timbers Industries us. Commissioner of Central Excise, Kolkata-II reported in MANU/SC/1250/2015: 2015 (324) E.L.T. 641 (SC), 2017 (50) S.T.R. 93 (SC), 2016 (15) SCC 785 has held as under: In our opinion right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the dictum, "audi alteram partem". The principles of natural justice do not require formal cross-examination. Formal cross examination is a part of procedural justice. It is govered by the rules f evidence, and is the creation of Court, It is a part of legal and statutory justice therefore it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature. We find that the Assessing Officer in the assessment order has referred to the general modus operandi of the bogus accommodation entry and thereafter, he has further referred to statement of the parties who has provided accommodation managing and controlling the companies, in which the entry through shares of the has also transacted. The Assessing Officer thereafter asked the assessee to justify the rationale behind investment in these penny stock companies not having financial worth, however, the assessee failed to justify the same. The Assessing Officer provided as why the investment in the shares transacted by the assessee was not justified in view of the comparison of the other shares available. 37 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta The Assessing Officer also pointed out the price fluctuation in the shares of the companies over a period, dividend history and other financial parameters to substantiate that there was no term capital loss against receipt of cash money. The Ld. Assessing Officer accordingly concluded that the addition was made on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. In view of the above facts and circumstances and in law, we find that in instant case addition in dispute is not solely on the basis of the statement of persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surround circumstances and preponderance of probability. We accordingly uphold the finding of the CIT(A) on that issue in dispute. The relevant grounds of the appeal of the assessee are accordingly rejected. After describing the general modus operandi of accommodation entry by way of bogus capital gain/loss, the Assessing Officer has highlighted the statement of the persons who claimed to have provided bogus capital gain/loss entries. The assessee was then asked to justify the investment in the relevant shares. The Assessing Officer has pointed out that these companies are not having any significant/real business as seen from the financial statement of those companies. The price movement of the shares was also found to be unrealistic by him. The Assessing Officer has particularly pointed out that price movement of the relevant transacted by the assessee, were not matching with movement of the share market in general and movement of the other scrips in the same line of the business. The Assessing Officer also pointed out that volume transacted in those companies. The ld. Assessing Officer has pointed out that the assessee could not explain, why it invested in such script without knowing the financial performance of the company. The relevant analysis has been reproduced by the Assessing Officer in Para 3.4 (page 1 J.) of the assessment order. The conclusion of AO has already been reproduced by us in brief facts of the case. The Hon'ble Delhi High Court in the case of Suman Poddar (supra), observed that shares of Cressanda Solutions Ltd. Have been identified by the Bombay Stock Exchange as penny stock used for obtaining bogus Long Term Capital Gain and no evidence of actual sale except contract 38 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta notes issued by the share broker were produced by the assessee. The Hon'ble High Court accordingly dismissed the appeal of the assessee as no substantial question of law involved. Thus, Tribunal has in depth analyzed balance sheets and profit and loss accounts of Cressanda Solution is Ltd. Which shows that astronomical increase in share price of said company which led to returns of 491 % for Appellant, was completely unjustified. Pertinently, EPS of said company was Rs. 0.01/- as in March 2016, it was Rs. 0.01/-as in March 2015 and - 0.48/- as in March 2014. Similarly other financial parameters of said company cannot justify price in excess of Rs. 500/- at which Appellant claims to have sold said shares to obtain Long Term Capital Gains. It is not explained as to why anyone would purchase said shares at such high price. Tribunal goes on to observe in impugned order as follows: With such financials an affairs of business, purchase of share of face value Rs. 10/- at rate of Rs. 491/- by any person and assessee's contention that such transaction is genuine and credible and arguing to accept such contention would only make decision of judicial authorities fallacy. Evidences put forth by Revenue regarding entry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of long term capital gains assessee has failed to prove that share transactions are genuine and http://itatonlin.org could not furnish evidences regarding sale of shares except copies of ITA 841/2019 Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprises dealing with share transactions net worth of company is not known to assesses. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal vs. CIT case. Though assessee has received amounts by way of account payee cheques, transactions cannot be 39 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta treated as genuine in presence of overwhelming evidences put forward by Revenue fact that in spite of earning such steep profits assessee never ventured to involve himself in any other transaction which broker cannot be mere coincidence of lack of interest. Reliance is place on judgment in case of Nipun Builders and Developers Put. Ltd. (supra) where it was held that it is duty of Tribunal to scratch surface and probe documentary evidence in depth, in light of conduct of assessee and other surrounding circumstances in order to see whether assessee is liable to provisions of section 68 or not in case of NR Portfolio, obtrusive. Similarly bank statements provided by assessee to prove genuineness of transaction cannot be considered in view of judgment of Hon'ble Court in case of Pratham Telecom India Pvt. Ltd. Wherein it was stated that bank statement is not sufficient enough to discharge burden. Regarding failure to accord opportunity of cross examination, we rely on judgment of Prem Castings Pvt. Ltd. Similarly tribunal in case of Udit Kalra ITA No. 6717/Del/2017 for assessment year 2014-15 has categorically held that when there was specific confirmation with Revenue that assessee has indulged in ITA 841/2019 page 8 of 10 non-genuine and bogus capital gains obtained from transactions of purchase and sale of shares, it can be good reason to treat transactions as bogus difference of case of Udit Kalra attempted by Ld. AR does not add any credence to justify transactions. Investigation Wing has also conducted enquires which proved that assessee is also one of beneficiaries of transactions and entries provided, Even BSE listed this company as being used for generating bogus LTCG. On facts of case and judicial pronouncements will give rise to only conclusion that entire activities of assessee is colourable device to obtain bogus capital gains. Hon'ble High Court of Delhi in case of Udit Kalra ITA No. 220/2009 held that company had meagre resources and astronomical growth of value of company's shares only excited suspicion of Revenue and hence, treated receipts of sale of shares to be bogus. Hon'ble High Court has also dealt with arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. Ld. AR arguments that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this Case, Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK Rajeshwari us. ITO in ITA No 12.10.2018. 17231Bang/2018, Abhimanyu Bimalchand Jain us 40 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Soin order dated Sanjay ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 591 Nag/2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT no. 995/Mum/2012, order dated 03.08.2016. ITA 841/2019 page 9 of 10 Disha N Lalwani ITO in ITA No. 6389/Mum/2012, order dated 22.03.2017. ITO us. Shamin M. Bharwani MANU/IU/0493/2015: [2016] 69 taxmann.com 65. Usha Chandresh Shah vs. ITO in ITA No. 26.09.2014, 6858/Mum/2011, CIT US Smt. order Jasvinder MANU/GH/0241/2013: 357 ITR 638 dated Kaur Facts as well as rationale given by Hon'ble High Court are squarely applicable to case before us. Hence, keeping view overall facts and circumstances of case that profits earned by are part of major scheme of accommodation entries and keeping in view ratio of judgments quoted above, we, hereby decline to interfere in order of Id. CIT(A). 98 In a few appeals, the order of the Tribunal has been passed in appeals filed by the assessees against the orders passed by the Commissioner invoking the power under Section 263 of the Act. The Learned Senior Counsel for the assessee submitted that the assumption of jurisdiction by the Commissioner under Section 263 is thoroughly flawed that there has been violation of principles of natural justice in as much as the Commissioner has pre-decided the issue even at the stage of issuance of show cause notice. 99. While proposing to invoke the power under Section 263 of the Act, the question as to whether the Commissioner was justified in invoking the power under Section 263 has to be decided based on facts of each case. The assessee cannot be allowed to contend that the language employed in the orders passed by the Commissioner under Section 263 does not mention about how the assessments order was erroneous in so far as it is prejudicial to the interest of revenue. These words or phrases are contained in Section 263 of the Act. Merely because the Commissioner has not used these words or phrases occurring in Section 263 will not vitiate the assumption of jurisdiction. What is required to be seen is the content of the order and the discussion and findings rendered by the Commissioner. This is because the cardinal principle is that substance over form has to be preferred. The Commissioner while issuing the show cause notice had come to the prima facie conclusion that the assessing officer did not conduct an enquiry as required to justify such prima facie opinion. The Commissioner was required to set out as to why in his opinion the enquiry by the assessing officer was not proper or insufficient. On reading of the orders passed by the Commissioner under Section 263 41 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta which are the subject matter in ITAT No. 156 of 2021 and other similar matters, it is seen that the Commissioner has disclosed to the assessee as to why in his case the power under Section 263 has to be invoked. On reading of the orders passed by the Commissioner, we find that the order to be a reasoned order and there is nothing to conclude. The issue was pre-decided. The assessments orders which are subject matter of Section 263 action shows that an enquiry has not been conducted by the assessing officer in the manner it ought to have been conducted. We say so because, the officers of the income tax department were fully aware of the investigation which was done and the report been circulated and therefore at that stage that the officer had to take note of such report to put the assessee on notice and commenced an enquiry by calling upon the assessee to justify the genuineness of the claim of LTCG/STCL. The assessing officer turned a blind eye to the project investigation which was carried out by the department. The assessing officer lost sight of the fact that the enquiry did not commence from that of the assessee and more particularly the name of the assessee did not feature in the investigation report. Therefore the assessing officer was bound to cause an enquiry by calling upon the assessee to explain and justify the genuineness of the claim for exemption made by them. If the assesses has not established the genuinity at the "other end" the assessing officer would have no other operation except making the addition under Section 68 of the Act. We find that in these cases the assessing officers missed an important point as to what is the nature of enquiry which he is required to do. The assessing officer merely went by the submission that the stock broker is a public sector company. Unfortunately this is not the manner in which the enquiry should have been conducted. The entire case before the department was the genuinity of the claim for LTCG/STCL and the basis was unhealthy and steep rise of the price of the shares of mostly the paper companies though listed before the stock exchanges their shares were very rarely traded and in the background of these facts the enquiry should have been conducted by the assessing officer. Therefore we are of the clear view that the assumption of jurisdiction under Section 263 of the Act by the respective Commissioners was fully justified and are shown to be proper exercise of power. The tribunal while interfering with the orders of the Commissioner once again posed a wrong question to itself and failed to approach the matter in the proper perspective considering the backgrounds in which the power was invoked. The tribunal brushed aside the surrounding circumstances which have led to such assessments or orders under Section 263. The manipulative practice adopted by the stock 42 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta brokers and entry operators was not even adverted to by the tribunal and the entire matter was dealt with in a very superficial manner without dwelling deep into the core of the issue. The tribunal being the last fact finding authority was required to go deeper into the issue as the matter have manifested large scale scam. Thus, the orders of the tribunal are not only perfunctory but perverse as well. The exercise that was required to be done by the tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the "players" can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the tribunal which exercise has not been done. We have considered as to whether in such an event, should the matter be remanded to the tribunal for fresh consideration. We have held that there is no such requirement and that is the Court is empowered to examine the findings recorded by the assessing officer, or the CIT (A) to arrive at a conclusion. The assessees have been harping upon the opinion rendered by the financial experts, professionals in the said field the information which were available in the media etc. All these opinions are at best suggestions to an investor. The assessees cannot state that merely because an expert had issued a buy call or there was news in the media that a particular shares shows an upwards trend and it is good time for buying those shares. They jumped into the fray the assessees are to be reminded of the doctrine of "caveat emptor". The assessees cannot take shelter under the opinion given by the experts as it is not the expert who has indulged in the transaction but it is the assessee. Therefore by following such experts advice if the assessee gets into an "web" it is for him to extricate himself from the tangle and he cannot reach out to the expert to bail him out. The assessees cannot be heard to say that they had blindly followed advice of a third party and made the investment. Selection of shares to be purchased is a very complex issue, it requires personal knowledge and expertise as the investment is not in a mutual fund. None of the assessees before us have shown to have to made any risk analysis before making their investment in a "penny stock". If according to them they have blindly taken a decision to invest in insignificant companies they having done so at their own peril have to face the consequences. Thus, the conduct of the assessees before us probabilities the stand taken by the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It is in this background that the human probabilities would assume significance. As observed earlier the doctrine of preponderance of probabilities could very well be applied in cases like the present one. We 43 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta say human probabilities to be the relevant factor as on account of the fact that the assessees are of individuals or Hindu Undivided Families and the trading has been done in the name of the individual assessee or by the Karta of the HUF. None of the assessee before us have been shown to big time investor. This is evident from the income details of the assessee which has been culled out by the respective assessing officers. Assuming that the assessee is a regular investor as was submitted to us by the learned advocates for the assessees that in any manner cannot improve the situation as the claim for LTCG has been only restricted to the shares which were purchased and sold by the assessees in penny stocks companies. Therefore merely because the assessee had invested in other blue chit companies had earned profit or incurred Joss cannot validate the tainted transactions. It has been established by the department that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee before us. Therefore, the assessing officers were well justified in coming to a conclusion that the so called explanation offered by the assessee was not to their satisfaction. Thus, the assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the persons to whom the transactions were done, have to necessarily fail. In such factual scenario, the Assessing Officers as well as the CIT(A) have adopted an inferential process which we find to be a process which would be followed by a reasonable and prudent person. The Assessing Officers and the CIT(A) have culled out proximate facts in each of the cases, took into consideration the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under Section 68 of the Act. 100. It was argued by the learned Advocates for the assesses that the clients are ordinary people who have made meagre investments and they 44 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta cannot be branded as scamsters when big players in the market have been left scot free and in certain other cases, the big players who were also branded as scammers were allowed to avail the benefit of the Vivad Se Viswas Scheme. In fact, similar argument was advanced when we heard the applications filed by the revenue to condone the delay in filing in some of the present appeals. The argument on behalf of the assessee was that on account of not filing the appeals by the revenue within the period of limitation, their vested right to avail the benefit of the Vivad Se Viswas Scheme was taken away. We have rejected such an argument firstly by holding that there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on time, the assessee may have availed the benefit under the V.S.V. Scheme. In fact, we find that the Comptroller and Auditor General has also severely commented upon the action taken by the Income Tax Department on such issues and that no uniform procedure had been followed by the various Income Tax Officers and in certain cases the assessments were not even reopened. Therefore, merely because in certain cases, appeals were preferred within the relevant time enabling, those assessees to avail the benefit of the V.S.V. Scheme can in no manner advance the case of the assessees before us. As has been argued before us by the learned Senior Standing Counsels, in the chain of events, there are three main person who are involved, the first of which is the entry operator who is said to have managed the overall scam as the entry operator controls several paper companies which have been utilized for routing the cash. The operator is also in control of some penny stock companies whose shares are listed on recognized stock exchanges, It is true that "penny stock" is not an offensive word or comes with a stigma. Penny stock is a stock which trades at a relatively low prices and market capitals. These stocks are highly speculative and they are categorized as high risk stocks largely due to lack of liquidity. Furthermore, the shares of the penny stock are closely held as the general public is not interested in these stocks due to the poor financials of the listed companies. It is for such reasons the entry operators are said to have chosen these penny stocks. In certain cases before us it has been established that the promoters/ Directors of the penny stock companies are also involved and they allowed the entry operators to manage the affairs of the company in return of a commission paid to them. The third set of persons involved, are the share brokers. As 45 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta submitted by Mr. S.N. Surana, learned Senior Counsel, the brokers are required to comply with very stringent KYC norms before registering any entity as their client. The SEBI Regulations cast very onerous responsibilities on the share brokers. However, the trend appears that the penny stock companies have no business or very little business got involved with the stock brokers and it is stated that the share brokers receive commission for allowing the paper entities to trade through their terminal and some of the brokers have also stated to be performing the trading activity themselves on behalf of the paper companies. The report states as to why the department has taken an investigation as a project, largely due to huge syndicate of the ent operators, share brokers and money launderers. The report states that Kolkata is a very distinctive place among the cities of India, so far as the accommodation entry is concerned and action has been initiated against more than thirty share broking entities and more than twenty entry operators working in Kolkata. The report states that almost everyone has accepted its activity, participation in providing accommodation entry of LTCG. The investigation has also indicated as to how the scheme of merger is being misused. Though the scheme of merger is approved by the Company Court, in the event it is found that such merger was done/ obtained by playing fraud, the Company Court is empowered to revoke the order and it appears that the Income Tax Department has not taken any steps in this regard to approach the Company Court or the Tribunal with such a prayer. Thus, we have no hesitation to hold that the orders passed by the CIT(A) affirming the orders passed by the Assessing Officers as well as the orders passed by CIT under Section 263 of the Act were proper and legal and the Tribunal committed a serious error in reversing such decisions. Mr. Arif Ali, learned Advocate appearing for the appellant in ITAT No. 44 of 2020 (Assessee-Gupta Agarwal) submitted that the facts which have been set out in the memorandum of appeal, is wholly incorrect and does not pertain to the assessee- Gupta Agarwal. We have gone through the memorandum of appeal as well as the substantial questions of law suggested by the revenue and find the same to be not relatable to the assessee. This is on account of non-application of mind both by the Income Tax Department as well as the Officers of the Ministry of Law and Justice. More often we have stated that due care and caution has to be taken when appeals are drafted and filed before this Court and this is not the first case which has come up before us where the pleadings were irrelevant to the facts of the case. However, the substantial questions of 46 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 of the Act. Furthermore, we have to note that more than 90 appeals were allowed by the Tribunal in a single order and the facts of the 89 assessees were not noted by the Tribunal. In any event, the assessee, Mr.Gupta was quite happy with the result and he made no attempt to request the Tribunal to note his facts which according to him may have been unique as was submitted before us. If the assessees could take shelter under an order passed by the Tribunal which has not discussed even the basic facts of the assessees' case, we are not inclined to non- suit the revenue on the ground that some of the questions suggested in ITAT No. 44 of 2020 may not be relatable to the assessee- Gupta Agarwal. Therefore, though the grounds are not relatable to the assessee, this will not vitiate the appeal in its entirety as the core is the substantial questions of law which is required to be decided. Based on the above observation ld. DR stated that cross examination is not assessee’s right and is required to be dismissed. 37. As regards the contention that the income has already been offered u/s. 41(1) of the Act the ld. DR relied on the judgement of Hon’ble SC in the case of British Paints Limited [ reported at 54 Taxman 49 ] and stated the income is to be taxed in the correct year. The relevant observation is as under: Para 20 “Any system of accounting ............. Each year being a self-contained unit, and the taxes of a particular year being payable with reference to the income of the year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deducted therefrom. It is 47 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income.” 38. Based on these set of arguments ld. DR supported the order of the ld. Assessing officer. 39. Per contra, the ld. AR submitted that in compliance to notice under section 153A of the Income Tax Act, 1961, the assessee submitted its return of income on e-filling portal on 22.08.2018. The AO completed the assessment under section 153A r.w.s. 143(3) of the Act vide order dated 31.12.2019 by making addition of Rs. 53,27,32,653/ u/s. 68 of the Act being the amount shown as sundry creditors on account of alleged bogus transactions. The ld. AR of the assessee also filed a detailed paper book containing 315 pages wherein he has submitted all the relied upon evidence such as submission made before lower authorities, statement recorded and relied upon, inspectors report, Extract from the ROC website about the active status of the companies with whom the transactions are recorded extract of the bank transactions, legal notice received from the creditors and relied upon judicial decisions. He also submitted his averments in the written submission which reads as under: 48 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Brief facts 1. The assessee company is engaged in the trading of agricultural commodities in Sriganganagar. It filed the return u/s. 139(1) declaring total income of Rs. 53,82,460/- (PB-1-4). The assessment u/s. 143(3) was made on 01.03.2016 at total income of Rs. 79,31,475/- (PB-38-45). 2. A search was conducted on 08.02.2018 in the case of "NM Group, Sriganganagar" to which the assessee belongs. In response to notice u/s 153A assessee filed the return on 22.08.2018 declaring total income of Rs.53,82,460/- (PB 57-60). 3. During assessment proceedings AO observed that the assessee has shown to have engaged in purchase with M/s Kalyani Suppliers Pvt. Ltd. and M/s Iverlink Vyapaar Pvt. Ltd. As on the date of search M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. were shown to he outstanding trade creditors in the books of assessee for Rs.28,50,60,169/- and Rs.24,76,72,484/- respectively. 4. The AO made enquiries in respect of these two companies and made certain observations reproduced at Pg 2 to 13 of the assessment order. On the basis of these observations, assessee was issued a show cause notice as to why the purchases shown to have been made from both these two parties amounting to Rs.53,27,32,653/- should not be considered as bogus and added back to the total income. In response to same assessee filed detailed reply vide letter dt. 13.12.2019 (PB 133-148) countering cach of the observation made by AO but the AO reproduced only part of the reply at Pg 14 & 15 of the assessment order and rejected the explanation of assessee by giving the following observations: (i) The assessee has not explained the source or link through whom assessee establishes business links with such companies situated in Kolkata. (ii) The assessee has not answered the fact that how can a company which offering such a low income to tax not bothered out receiving such huge amount of payment from the assessee. (iii) In search number of incriminating evidences have been gathered which clearly indicates that the assessee has entered into bogus transaction with the companies in the grab of purchase transactions. (iv) In survey conducted at the premises of these companies, the survey warrant could not be executed as no body found at the premises and therefore the assessee's contention that these companies are existing is rejected. (v) Assessee could not during scarch and post search proceeding produce any evidence or communication regarding persuasion from these companies except vide reply dated 20.12.2019 whereby confirmation of these companies were submitted. (vi) The contention of the assessee that statement of Hanish Toshniwal is completely baseless as his statement was recorded two time one on 49 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 11.03.2015 and again on 08.02.2018 and the same were never retracted. The statement recorded u/s 132(4) has evidentiary value. (vii) Harish Toshniwal has claborately explained in detail the entire modus operandi of such orchestrated transactions. The assessee has now submitted the confirmation of the present directors who are not those who knew the orchestrated transactions. (viii) The request of cross-examination was denied on the grounds that the assessee asked for the same only on 13.12.2019 when the case was getting barred by limitation and that right of cross examination is not an absolute right. The AO quoted various case laws in support of the same. (ix) The fact of the matter also become clear when in the statement Shri Amit Gidra, Accountant of the assessee group explained that the assessee has been indulging in such bogus transactions where actual purchase or sales does not take place and only bills are raised. (x) It is hard to believe that when these are the real transaction why the assessee would write back the same in the form of cessation of the liability. Normal business prudence does not allow any business entity to write back such huge amount vis a vis turnover had these been genuine transactions. (xi) The assessee could not substantiate the above mentioned purchase transactions and voluntarily offered to write back these transactions for FY 2017-18 and 2018-19. 5. The AO, thereafter, concluded that the transactions entered into by the assessee with these companies are bogus transactions entered into for the purpose of artificially inflating the expenses and thereby reducing the taxable income. These are simply bogus transactions. These companies have provided accommodation entries to the assessee and therefore the said accommodation entry bills are bogus and are to be treated as unexplained income u/s 68 of the Income tax Act. Accordingly, the amount of Rs.53,27,32,653/- (28,50,60,169+ 24,76,72,484) is hereby added u/s 68 of the Act to be taxed u/s 115BBE. 6. Before Ld. CIT(A) assessee challenged the validity of the order passed u/s 153A of the Act and the addition made by AO u/s 68 of the Act. The Ld. CIT(A) vide letter dt. 16.09.2021 (PB 25A-27A) called for remand report. The remand report dt. 02.11.2021 submitted by AO to Ld. CIT(A) is at PB 28A-37A. The assessee's reply in response to remand report is at PB 38A-40A. 7. On legality, the Ld. CIT(A) at Para 5.2(xiii), Pg 24 held that the evidence does not mean only documentary evidence but the statement recorded u/s 132(4) of the IT Act has also been judicially held as an important piece of evidence collected as a result of search and seizure operation. In the present case, it is not only the statement of Director of the appellant firm but also of the main accountant as well as Director of the companies which admitted of providing accommodation entries to the appellant during the course of survey in his case which was simultaneously conducted at the time of search conducted at the premises of the appellant which were relied upon by the AO for framing the assessment in the case of appellant. Thus, there is no ambiguity in the 50 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta assessment order of AO in the case of the appellant for the year under consideration which is based on the incriminating material found during the course of search. On merits, the Ld. CIT(A) after considering the submission of assessee and giving the findings at Para 6.4(i) to (x), Pg 46-53 deleted the addition made by the AO. Submission: 1. It is submitted that the Ld. CIT(A) upheld the assessment order passed u/s 143(3)/153A of the Act even after accepting that no incriminating material was found in search in support of the addition made by the AO by observing that statement recorded u/s 132(4) is also an important piece of evidence which can be relied by the AO for making the addition. It is a settled law that statement recorded u/s 132(4) did not by themselves constitute incriminating material and on the basis of statement alone without reference to any other material discovered during search and seizure operations, assessment u/s 153A cannot be made. For this purpose, reliance is placed on the following cases: PCIT (Central) & Ors. Vs. Anand Kumar Jain (IIUF) & Ors. (2021) 432 ITR 0384 (Del) (IIC) (PB 304-308) The relevant Para 8 is reproduced as under: 8. Next, we find that, the assessment has been framed under s. 1534, consequent to the search action. The scope and ambit of s. 1534 is well defined. This Court, in CIT vs. Kabul Chawla (2015) 281 CTR (Del) 45: (2015) 126 DTR (Del) 130 (2016) 380 ITR 573 (Del): 2015 SCC Online Del 11554, concerning the scope of assessment under s. 1534, 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 s. 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 40 to frame the block assessment PCTT Vs. Vikas Telecom Ltd. (2022) 209 DTR 373 (Del) (IIC) (PB 309-311) The head note of this decision reads as under: 51 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Search and seizure-Assessment under s. 153C-Scope vis-a-vis absence of incriminating material-CIT(A) as also the Tribunal, have found that the AO has not made use of any seized documents while making additions to the total income of the assessee under s. 68 Books and papers seized relating to the assessee were not relevant to the additions made by the AO under 68-Addition was not therefore sustainable DCIT Vs. Frost Falcon Distilleries Ltd. (2021) 207 DTR(Trib.) (Del) (Trib.) (PB 312-315) In absence of any incriminating material, addition could not be made by treating the share capital received by the assessee as unaccounted money by relying solely on the statement of dummy director of the investor company recorded during the survey action in the case of that company without confronting the same the assessee. CIT Vs. Dilbagh Rai Arora (2019) 177 DTR 220/263 Taxman 30 (AIL.) (IIC) The relevant Para 15 to 18 & 22 are reproduced as under: "15. We have perused the record of the case. The respondent-assessee has filed his return on 30th Oct, 2006 and offered Rs. 24 crores for taxation. Assessee has filed the return and disclosed income from house property, income from other sources and loss on long-term capital gain on the sale of immovable property. The assessee has further disclosed profit from trading in commodity exchange and has also filed evidence in support of his claim. The assessing authority has added back Rs. 7 crores only on the ground that at the time of survey dt. 1st Sept., 2005 the assessee had made a disclosure of sum of Rs. 31 crores for taxation in the year under consideration. But, no incriminating materials and documents had been brought on record for addition of such amount. The CIT(A) while allowing the appeal of the assessee has deleted the said amount, which was being confirmed by the impugned order. The assessee-respondent in the statement given on 6th Oct., 2005, has surrendered Rs. 18 crores on account of investment made in purchase of jewellery/precious stones and Rs. 6 crores were surrendered as cash in hand duly shown in the books of account, balance Rs. 7 crores were surrendered with stipulation that details of the same would be given in due course of time. 16. The assets to the magnitude of Rs. 7 crores were neither found by the authorities below nor such assets were identified or declared by the appellant. In such a situation, it could be inferred that no such assets actually exists. In other words, there is no clinching evidence or material to justify such addition of Rs. 7 crores. The addition can only be made, if there is incriminating material or the surrounding circumstances reveal there is material justify the addition. 52 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 18. The person making an admission is not always mindful of it and some time can get out of its binding purview. If the person can explain exclusive with supportive evidence/material or otherwise that the admission by him earlier is not correct or contain a wrong statement or that a tre state of affairs is different from that represented therein and so the same should not be accepted upon forecasting tax liability which should rather be fixed on the basis of correct and true affairs us ascertained from the material on record 22. Therefore, the case law relied upon by the appellant is of no help, the case in hand the assesser respondent has given documents, material and explained threadbare with regard to amount of Rs 24 crores but the assessing authority has mechanically made the addition of Rs. 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted." PCIT Vs. Best Infrastructure India Pvt. Ltd. (2017) 397 ITR 82/ 159 DTR 257 (Del.) (IIC) The head note of this decision reads as under Search and seizure-Assessment under s. 1534-Scope vis-a-vis incriminating material-Statements of AG make it plain that the surrender of the sum of Rs. 8 crores was only for the assessment year in question and not for each of the six assessment years preceding the year of search-Secondly, when AG was confronted with A-1. A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for-Even these, therefore, could not be said to be incriminating material qua each of the preceding assessment years-Eurther statements recorded under s. 132(4) do not by themselves constitute incriminating material-Tribunal was fully justified in concluding that the assumption of jurisdiction under s. 1534 qua the assessees was not justified in law 2. The Ld. CIT(A) has also observed that not only the statement of Director of appellant firm but also that of the main accountant as well as Director of the companies which admitted of providing accommodation entries to the appellant during the course of survey constitute the incriminating material. For this he has referred to the decision of Hon'ble ITAT, Delhi Bench in case of M/s MGF Automobiles Ltd. Vs. ACIT. It may be noted that statement of the accountant of assessee, i.e. Sh. Amit Gidra and that of Sh. Ilanish Toshniwal who stated to have provided the accommodation entries are not relevant/ constitute incriminating material as explained in Para 3(a) & (c) below. Further Hon'ble ITAT, Delhi Bench in case of M/s MGF Automobiles Ltd. has only observed that if some statement is recorded u/s 132(4) where certain facts are recorded, from the interpretation of which AO could conclude that there was some undisclosed income, then that statement can be considered as incriminating material. However, in the present case, from the statement of Amit Gidra/ Ilanish Toshniwal it cannot be concluded that the transaction with M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapar Pvt. Ltd. are not genuine nor these statements are relevant. Hence, this decision is not applicable on facts more particularly when in the subsequent decisions of various High Courts including Delhi High 53 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Court it has been held that statement u/s 132(4) cannot be considered to be incriminating material. The another decision of Ilon'ble ITAT, Kolkata referred by CIT(A) rather supports the case of assessee. Hence, the Ld. CIT(A) has erred in upholding the order passed by AO u/s 153A of the Act. The Ld. D/R in his written synopsis at Pg 4 has not countered the argument of assessee by placing any material evidence on record. Therefore, the CO of assessee be allowed. 3. On merit the Ld. CIT(A) has rightly deleted the addition made by AO after referring to the statement of Hanish Toshniwal, Amit Gidra and various assumptions made by him after giving the detailed findings on the various contentions raised by the assessee. The same is summarised as under: (a) The AO has heavily relied on the statement of Hanish Toshniwal dt.11.03.2015 (PB 149-155) & dt.08.02.2018 (PB 156-162) recorded u/s 131 in course of survey proceedings. These statements have no evidentiary value. The Hon'ble Supreme Court in case of CIT Vs. S. Khader Khan Son 352 ITR 480 has held that section 133A does not empower any income tax authority to examine any person on oath and thus, any such statement has no evidentiary value. Further in assessment proceedings, the assessee filed the detailed explanation as to why the statement of Hanish Toshniwal cannot be relied upon. However, the AO reproduced only part of the reply in the assessment order. From perusal of these statements it is apparent that they are forced statement and not given by free will and therefore these statements cannot be the basis for treating the transaction made by the assessee from these companies as non-genuine. The fact that statement of Hanish Toshniwal dt.11.03.2015 is forced one is evident from the following table: Question asked in the Statement Statement of Hanish Toshniwal Explanation of the assessee Q.6 Please state the name of the companies managed and controlled by you and also state who are the directors in these companies? In the statement he gave name of 207 companies which is stated to be managed by him by appointing dummy directors. He further stated that the sole purpose of creating these companies is to provide accommodation entries. He also stated the names of few dummy directors namely Shri Kant Tiwari, Sanjay Singh, Mukesh Jain, Ganesh Mal Rawat, Grish Mehta, Surrendra Jain, It may be noted that it is impossible for any person of average intelligence to give name of 207 companies which is managed by him at one go. It appears that list of these companies were provided by the officer recording the statement. In this list name of Kalyani Suppliers Pvt. Ltd. and Everlink Vyapar Pvt. Ltd. appear at S.No 186 & 187 but neither Hanish Toshniwal nor any of the 54 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Bimal Doshi, Prakash Baid. person mentioned in the statement were director in these companies at the time when the transaction with the assessee took place. Q.7 What is the modus operandi of accommodation entries? He stated that the companies are formed for providing accommodation entries in the form of share capital, share premium, unsecured loan, bogus billing entry etc. Money is received from clients mostly in the form of cheques. The funds are routed through layer of companies and finally reaches the account of beneficiary. In the transaction with the assessee there is no payment of any money and therefore question of the same being routed through layer of companies and finally reaching back to beneficiaries do not arise. The statement of Hanish Toshniwal dt.08.02.2018 and the assessee’s explanation on the same is as under:- Question asked Reply of the Hanish Toshniwal Explanation of the assessee Q.9 Go through the list of companies that you have admitted in the statement given by you as controlled and managed by you and state whether Kalyani Suppliers Pvt. Ltd. and Everlink Vyapar Pvt. Ltd. are managed by you? I was director in some of the companies. The companies mentioned in the list are managed and controlled by me. He further stated that he was engaged in providing accommodation entries through Kalyani Suppliers Private Limited and M/s Everlink Vyapar Private Limited who were also managed and controlled by him. The list of 207 companies were provided in the statement recorded on 11.03.2015 i.e. more than 3 years back. He was not the director of the company during the FY 2012-13 (PB 199-211) and therefore how he can manage these two companies. Hence his statement is not reliable. Q.10 How and where do the books of account of Kalyani Suppliers Pvt. Ltd and Everlink Vyapar Pvt. are maintained? He stated that he has resigned from the said two companies in 2016 and at present he is not a director even in a single company. The books of account were given to the present director whom I don’t know. It is clear that he is not a director when his statement was recorded and he even does not know who are the present directors. He has no material to prove that the said two companies have provided accommodation entries to the assessee. Thus his statement is not reliable. 55 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Q.12 What was the modus operandi of accommodation entries? Against the bogus bills issued we use to receive money in our bank account through cheques or RTGS. After charging commission of 0.5% on the billing amount the remaining amount was returned back to the parties through brokers. Copy of account of these two companies in the books of assessee is at PB 184-187. From the copy of the account it is clear that no payment is made to these companies against the purchases and therefore there do not arise any question of payment of commission and receipt back of cash as stated by Hanish Toshniwal. Hence his statement is patently incorrect and not worthy of reliance. Q.13 Do you know the N.M Group of companies of Sriganganagar, Rajasthan? He stated that he knew N.M Group of Companies of Sriganganagar as he has provided accommodation entries to them None of the directors of the assessee group has ever met Hanish Toshniwal nor do they have any connection with him. Thus the statement given by him is false and cannot be relied upon. Q.15 Please state the name of the middle man through whom accommodation entries were provided as well as the names of promoters of NM group of companies? Mohd. Salem was the middle man through whom the accommodation entries were provided. I have never met any of the promoters of the NM Group, only I know the names of the promoter but I confirm that the accommodation entries have been provided by me. None of the directors of assessee group has ever known or met Mohd. Salem. How he can do such huge transactions of alleged accommodation entry without even meeting any of the directors of the assessee. Therefore his statement is false. Thus the statement of Hanish Toshniwal is neither reliable nor is relevant with reference to the transaction of assessee when he has no locus standi in these two companies when the transaction took place. This fact is not countered by Ld. D/R in his written synopsis. Hence, Ground No.3 of the department is misplaced. (b) The assessee vide letter dt.13.12.2019 (PB 85-94) requested to cross-examine Shri Hanish Toshniwal. However the AO denied the same on the grounds that the assessee asked for the same only on 13.12.2019 when the case was getting barred by limitation and that right of cross examination is not an absolute right. In this regard it is submitted that when additions are solely/mainly based upon statements of third parties, it is the duty of AO to provide opportunity of cross examination whether demanded or not. The right of cross examination is an integral part of principles of natural justice and any addition made without providing such an opportunity is bad in law. The Hon’ble Supreme Court in case 56 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta of Andaman Timber Industries Vs. CCE 127 DTR 0241 has held that denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natural justice. Similarly, Hon’ble Supreme Court in case of CIT Vs. Sunita Dhadda (2018) 101 CCH 277 has dismissed the SLP filed against the High Court order where it is held that as per principle of natural justice it was obligatory on the part of AO to provide all the materials to the assessee which was being used against her and also an opportunity to cross-examine the person whose statement was relied upon by the AO. Therefore, the contention of Ld. D/R in his written synopsis that right of cross examination is not an absolute right or is mandatory is against the law laid down by the Hon’ble Supreme Court. (c) The AO has sought to rely upon the Q. No.28 & 29 of statement of Shri Amit Gidra, Accountant of the NM Group dated 08.02.2018 (PB 112-113, 125-127). The relevant question and answer is reproduced as under:- -7 प प प , प - प द " ? #$ %& & ' ( ) * + ' + प & , - प . ./0 प +( प 12 3 प 4 . 4 5 6प & . ./0 7 #82 4 . 78 9 9 0 द " * + : 28 .; 23 .; 27 प <द #$ = >प 2 - NM Group 9 3?8 = @ & 6प = .A 7प & < = B द3 ', C D $ 3 E 3)4 F G H. I 6प = " = B Credit Balance A I . .0 B प ? #$ - ' प * B ( - * + I 6प = - Transaction B $ 9 J B & %& - F H ': 7प K * + # 6प = B ( 6प = C Credit Balance A ' 4 प&2H L <2 . 3). 4 3). A प . 3). M & , N M & F) . 3). : ( = 6प = . ./0 - ; A C Kप(8O ) : %& Kप(8O ) H H 1- ) <द 7 %& . 7, ) B , 168 0 P &, %& . B 78 ( H 1- ) <द प I ( 6प = . ./0 Q ) ? , C I8O H-" = B 3) : %& Kप(8O ) 3 R & %& - - F H 6प B : 29 57 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta ' 4 . 4 . , - प . ./0 = <द . 08/12/2018 Trial Balance B 78 1 प <2 = 59 Sद TH & Debit to Credit 9 C 2 = द3 प I A A ? #$ %& I Trial Balance B UM प <2 = A . ./0 .A - , प 8 - 1 ' D Credit Limit " 3)4 Circular Trading ?& D & : C B ) Q )= द - द V - द द , > 9 W L <2 द - द H. : I D Circular Trading you M/s R.M. Trading Company, M/s Madanlal Chandak & Sons, M/s Sheeji Trading Company, M/s Shiv Shankar Enterprises, M/s Shirnath Rai Anil Kumar, M/s Shivnath Rai Lavish Kumar, M/s R.P. Gupta & Sons, M/s Shankar Lal Khetar & Sons, M/s Akash Traders, M/s Ganpati Food Products, M/s Brahmani Marketing, M/s Banwari Lal Brahmanarand, M/s B.M. Auto Mobiles I$ <द : From the above statement it can be noted that Amit Girda was employed only from last four years whereas the transaction with these firm relates to six years back. Further in the statement he stated that sometimes circular trading is also carried out to maintain the credit limit with the bank and given the list of parties with whom such circular trading was carried out. However in the list there is no name of M/s Ever Link Vyapar Pvt. Ltd. & M/s Kalyani Suppliers Pvt. Ltd. Hence on the basis of the statement of Amit Girda, the transaction carried out by the assessee with these two companies can’t be said to be non genuine. Hence, Ground No.2 raised by the department is misplaced. (d) The statement of Manoj Gupta, the key person of NM group was recorded on various dates. The relevant extract of his statement of his recorded statement with regard to M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapar Pvt. Ltd. is as under:- Statement dt.08.02.2018 4.13 42 * * + V 9 3?8 : .14 प Nप V प * #$ 6प & & D : I प * M प 7?& H. : . 15 ROC D website प N M& F) .3). Address - 340, GT Road, Havwada (Kolkata) & . J 2015-2016 B 4 . 4 4) D D creditor दH 58 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta V M/s Nandlal Naresh Kumar a 20 da awal a creditor of rafas any and ad for day and 0प - & D & : I B प ? #$ # 6प & 9 > Q )= Registered office Address H H B H. : .16 प 6प & 3)4 प A C & V प I 6प & ) 9 X #$ - # 6प & ) - प & > B C> द D H - Y - & H. : द " द * . : %& > &प I) - Y 7?& द H. : Statement dt.09.02.2018 (PB 200-207) .15 प प&Z द - प M/s Kalyani Suppliers ills Vouchers gig I 6प & . ./0 Bill > - 3) प & द M/s Kalyani Suppliers Bills > - H प : प ?& ( - D M/s Kalyani Suppliers & Bills Voucher I & 0 168, New Dhan Mandi, Sriganganagar प H " , R ?& प Q > - B 7 R) प M/s Kalyani Suppliers & ?& 1 ) -द - H H.? प 7प >प 2H M द #$ - H R [ Books of records shop no. 168, New Dhan Mandi, Sriganganagar प D 8 " J 2012-13 B M/s kayani Suppliers 9 ( H 1 sale V purchase Transition H Books of accounts B " प8 52 प Recorded , Bill Book 4 . Bill R I) H Y B H. , + H द - B Record द " प H. "& 1 + H. ()H 1: H दB H. . /0 ' I H ( * + प * B ?& I Firm Accounts Confirmation Form B <द : I 6प & # sale purchase द = Transition J 2012-13 B - 4 द = D concern 6प & : 59 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 421 प \ B प M/s Kalyani Suppliers Agriculture Commodity 7. Purchase V ) " Hद # D Delivery, Physically H. 3) प] #$ - M/s Kalyani Suppliers ^ & purchase ? Delivery B - Y प , ) D Delivery ? Kप H. 3) , CN ) M/s kayani Suppliers प H purchase द " - V H 9 X : .20 प प N.M Group D Business Concern M/s Everlink Vyapar Pvt. Ltd. .0 ? #$ - #प 6प & 9J #$प द -9 X 7 I H A प ] . .0 : 4.30 M/s Kalyani Suppliers Pvt. Ltd. aM/s Everlink Vyapar Pvt. Ltd. B 9 ? +( दH द = 6प & ) Based 6प & V %& & & ) & I 6प & D .( ) <द . 08/02/2018 9 ? D H I द = 6प & प .? - 1 + प %& &प & & ) & द , + I I 6प & B 7 M/s Kalyani Suppliers Pvt. Ltd, aM/s Everlink Vyapar Pvt. Ltd. 7. 1 H. : %& &J & ) & ?& > & 4 4 Accommodation Entry Provider V #8 M/s Kalyani Suppliers Pvt. Ltd. 7. M/s Everlink Vyapar Pvt. Ltd. 7. M/s N.M. Group Accommodation Entry Provide D , प Books of Accounts B <द" H : : I %& & & ) & = >प 2 Accommodation Entry awa? Books of Accounts # wa Bogus Entry & amr M/s Kalyani Suppliers Pvt. Ltd. andar a M/s Everlink Vyapar Pvt. Ltd. ara o Credit Entry Outstanding = Bogus Entry & ? प I .द? B 7प >प 2H M प ? M/s Kalyani Suppliers Pvt. Ltd. N.M. Agro Food Product Pvt. Ltd. / Outstanding Balance Rs. 28,50,60,169/- V Nand Lal Kamlesh Kumar Rs. 20,90,74,975/- : I & M/s Everlink Vypar Pvt. Ltd. Outstanding Balance, N.M. Agro Food 60 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Product Pvt. Ltd. Rs. 24,76,72,484/- H V Nand Lal Kamlesh Kumar Rs. 36,64,06,907/- : प >प 2 ? #$ #प B = D 9 3?8 R [ B द = 6प = Gwar 9 X H Books of Accounts B द , C D प ) ?& Account Confirmation, Copy प 9 ? दH ( - D , द = 6प = 1 ?& - द Bank \ ) -द H. - , H 9 3?8 R [ ) 9 X - . ) H R [ # द 6प = 1 Bogus Entry )H : Sales Tax B ?& Registration , C B ?& . ./0 J D X -9 X B द - , ) ' Entry )H : Statement dt.21.03.2018 (PB 179) . . प 4. प D A R B .द) ) J - 4 .4 . 4, R * 2 . 3). 4 3). A प . 3). ? - J . I . .0 9 ? #प 6प & registered office 5th Floor, Room No. 5A, 77NS Road, Kolkata-700001, Room No. 405 & 405A, 4th Floor, 4 Fairlie place प 9 ? _ 0 1334 H प #प प = & 6प & ` R H. () I . .0 B प ( : #$ ' + >पa2 ( * + 4 3) . 3). द /0 ^ D " Hद/Q D . ./0 : 4 3). A प . 3). 7?& ? - प , M C R [ ) # B ?& ? - F H. - , 7 b liquidity D > : 4 3). A प . 3). ) ? - , )H )5 <2 ?& F - : 7?& I 6प & 4 2 ? - . ./0 Y ?& : H ' + >पa2 ( * + + B N M& F) . 3). 4 . B 4 3). A प . 3). non existence D , ' + ( * + I 6प = ^ " Hद-Q D transactions %& Kप(8O J ) R - 4 ', I B ' प * B द ?& ( - : Kप(8O J ) H deal ', 6प & ` R प > B # = verify H. : प Kप(8O J ) <द4 , H : 61 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Statement dt.07.05.2018 (PB 181) . 3 NM Group, Srigangangar B H द प प D , - प R / 6प & B 4 3) A प . 3). sundry creditors Kप B 6 दJ : S. No. Name of Firm/ Company Sundry Creditors (Amount) 1 Suresh Kumar Gupta Prop. Nand Lal Naresh Kumar 36,84,06,907/- 2 NM Agro Food Products Pvt. Ltd 24,76,72,484/- Total 61,60,79,391/- I . .0 B प <द 21.03.2018 I >पa2H M . C B प #प 6प & B existence V I #प 3 द : I . .0 B #प 6प & registered office 5th Floor, Room No. SA, 77NS Road, Kolkata-700001, Room No. 405 & 405A, 4th Floor, 4 Fairlie place, Kolkata प 9 ? _ 0 1334 H प #प प प & 6प & ` R H. () : 7 b प प - b प * Z I R / 6प = B द creditors B >प>2H M दB: #$ - ' 4 3). A प . 3). 4 2 प * B ? - )H ) <2 F - 4 , C . B #8 B > - C> 7 : I पa( #8 = B )H ) D 0 D दH & C . .0 B #8 B ? - - Z installment provide - 3)" , C . .0 B 7?& 9पZ) F H I 4 2 पc F - #8 = 4 3). A प . 3). ) I2 matter 9प <द4 V 7 # matters H. &) : 7 b प # 2 6प : # 2 6प D 3 ', प 8 - # 6प H. प : <द I 7 ) द & B ?& 6प H. प , 4 3). A प .3). द R [ द 3 Q J 2018-2019 B write back द B: ?9 B ?& 4 3). A प . 3). ? - 4 , # ? - 3 deduction claim or ) B: + I 6प & ) C> प 1 ` R H. ) , # . 0 B + >प 2 ( * + I 6प = transactions %& Kप(8O J R - 4 : Kप(8O ( J ) H deal 62 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 6प & ` R प > B # verify H. ': प Kप(8O J ) <द4 , H : From the above statement it can be noted that Sh. Manoj Gupta was extensibly questioned about the transaction with M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. However he time and again stated that these transactions of M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. are genuine which was carried out by his various concerns through Roop Chand Maheshwari with their office at Bikaner. He also explained the manner in which the transactions were carried out. However only to avoid litigation with the department he offered to include the unpaid amount of these parties u/s 41(1) in AY 2018-19 & 2019-20 subject to the rider that as and when payment is made to these parties then in that year the deduction be allowed. Thus, Ground No.5 & 6 raised by the department is misplaced. Hence on the basis of statements and survey/ enquiry report alone, without reference to any incriminating material discovered during search, addition made by AO is rightly deleted by Ld. CIT(A). (e) The AO has made the addition of Rs.57,74,81,882/- by treating the credit in the name of both these companies as unexplained cash credits u/s 68 of the Act. Section 68 reads as under:- “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year: .....” From the plain reading of the provisions of section 68, it is clear that to invoke the deeming provisions of section 68, ‘any sum’ must be found credited in the books of the assessee. Hon'ble Supreme Court in case of Shri H.H. Rama Varma Vs. CIT (1991) 187 ITR 308 (SC) (PB 217-219) held that 'any sum' means 'sum of money'. Therefore, a sum of money i.e. cash or cheque must be received by the assessee during the previous year. There is a difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person– the former not being covered in the provisions of section 68. In case no money is received by the assessee, section 68 cannot be invoked. This view is also supported by the Hon’ble Supreme Court by dismissing the SLP filed by the department against the decision of Hon’ble Delhi High Court in case of PCIT Vs. M/s VNG Packaging Pvt. Ltd. ITA 693/2019 dt. 26.07.2019 63 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (PB 212-216). The High Court in the said order affirmed the interpretation of section 68 given by the ITAT and held as under:- “The ITAT interpreted Section 68 of the Act in the light of the above facts and observed in para 10 of the impugned order as under: “10. ...The creditworthiness which is required to be examined u/s. 68 can be with regard to the transaction in form of any money either in cash or cheque. To invoke the deeming provisions of section 68, it is axiomatic that the credit appearing in the books of account maintained by the assessee should be with reference to any sum received by the assessee. If the assessee has not received any sum in terms of any money, i.e., in cash or cheque, then deeming provision of section 68 will not apply.” ... Having examined the impugned orders of the PCIT and the ITAT, and having considered the submissions of learned counsel for the Revenue, this Court is of the view that in the facts and circumstances of the case on hand, the interpretation placed by the ITAT on Section 68 of the Act, its reasoning and conclusions in the impugned order are consistent with the legal position and cannot be said to be suffering from any legal infirmity.” Reliance is also placed on the decision of Hon’ble ITAT, Delhi Bench in case of Manoj Aggarwal Vs. DCIT (2008) 113 ITD 0377 (PB 220-223) “For example, in the case of credit purchases, the account of the supplier is credited with the amount payable. In such a case, where the purchase is allowed as expenditure, it may not be possible for the Assessing Officer to again call upon the assessee to prove the nature and source amount credited for the reason that the purchase itself was allowed as expenditure only on being satisfied that it was a genuine purchase on credit. Implicitly, the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Another possible argument can be that in such a case, the amount credited is not a cash credit in the sense that some monies have been received by the assessee, but the credit represents a mere liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under s. 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefor has been allowed.” In the present case, no sum of money has been received by the assessee as is evident from the copy of account in the books of assessee (PB 184-187). The outstanding credit in the account of these parties is against purchase of the goods. Therefore addition made by invoking the provisions of section 68 is legally not tenable. 64 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (f) The AO has also observed that the two companies i.e. M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. are non-existent. The assessee vide letter dated 13.12.2019 (PB 85-94) has provided the MCA master data containing complete profile of these companies where these companies are considered active compliant company. The same is at PB 188-189. Both these companies are grain merchant and commission agent operating from Bikaner. Copy of TIN/CST registration information is at PB 190-191. These companies have raised the bill on the assessee from Bikaner office. Only the registered office was at Kolkata. The department has not carried out survey at Bikaner address. Therefore simply because no person was found at the registered office of these companies at the given address, no adverse inference can be drawn. The assessee has also produced audited financial statements of these companies, sales bills as well as balance confirmation received from the Directors of the companies (PB 224-227). The assessee has also received legal notice from these companies for payment of dues (PB 192-198). Hence it cannot be said that the companies are non-existent. (g) The assessee is maintaining day to day books of accounts along with the stock register. The accounts are duly audited. All the purchase and sales including that from/ to M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapar Pvt. Ltd. are supported by the bills and vouchers. In search no document/ evidence was found which proves that the purchases made by the assessee from two companies are bogus. In assessment assessee has filed the copies of purchase bills and quantitative details. The quantitative tally of the goods dealt by the assessee as submitted along with tax audit report is reproduced as under (PB 21):- Particulars Opening Stock Purchases Sales Wt Shortage Closing Stock Guwar Gum MTP A/c 230.46 1,323.46 1,541.18 12.74 0.00 M/Seed MTP A/c - 93,869.66 93,857.44 12.22 0.00 Guwar MTP A/c 9,007.12 1,60,764.81 1,67,799.61 - 1,972.32 Barley MTP A/c 2,786.78 10,896.25 13,630.28 52.75 - Old Bardana A/c - 6.70 - 6.70 - Wheat MTP A/c - 1,970.00 1,970.00 - - Castor Seed Our Station A/c - 19,711.96 - - 19,711.96 Shares - 70,05,252.00 14,74,753.00 - 55,30,499.00 These purchases were subsequently sold to various parties. The AO has accepted the purchase & sales and the profit declared by the assessee. The GP rate and NP rate declared by the assessee is also better as compared to the earlier years as evident from the following table:- 65 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta A.Y. Sales GP GP Rate NP NP Rate 2013-14 2,70,93,89,001 2,71,93,417 1% 50,47,547 0.19% 2012-13 2,28,74,13,032 99,51,733 0.44% 23,48,361 0.10% 2011-12 71,11,10,601 53,14,771 0.75% 15,92,913 0.22% The transaction with M/s Kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapar Pvt. Ltd. is summarized as under:- M/s Kalyani Suppliers Pvt. Ltd. Particulars Amount Particulars Amount To Sales 33,69,04,332 By Purchase 54,59,79,307 To Balance b/d 20,90,74,975 54,59,79,307 54,59,79,307 M/s EverlinkVyapar Pvt. Ltd. Particulars Amount Particulars Amount To Sales 29,47,56,233 By Purchase 66,31,63,140 To Balance b/d 36,84,06,907 66,31,63,140 66,31,63,140 The AO has treated the purchases as bogus from these two companies while at the same time accepted the sales/ stock. Without purchases, sales are not possible. When sales have been accepted as genuine, purchases cannot be held as bogus. Such an addition on account of purchases while at the same time accepting the trading results of the assessee is not sustainable. For this purpose reliance is placed on the decision of Hon’ble ITAT Delhi High Court in case of PCIT Vs. Agson Global (P) Ltd. (2022) 210 DTR 225. The head note of the decision reads as under:- Income from undisclosed sources—Addition—Alleged bogus purchases—As noted by Tribunal, in the remand report, the AO had adverted to the fact that 50 per cent of the purchases had been sourced by the assessee from third parties i.e., non-related parties—These transactions were verified—Since no variation was found between the responses received from the third parties and purchases, as recorded in the assessee’s books, the addition made on account of bogus purchases was not sustainable—Tribunal also found that in respect of asst. yrs. 2012-13, 2013-14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under s. 143(3)—No defects concerning books were found either by the AO or the CIT(A)—Thus, according to it, for the concluded assessment years i.e., 2012-13, 2013-14 and 2014-15, no incriminating evidence was found—Observations made by the Tribunal are pure findings of fact, which cannot be interdicted in appeal—If the Revenue 66 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta chooses to disallow bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very same parties which would result in the assessee’s income falling below the returned/declared income—Addition towards bogus purchase was therefore rightly deleted by Tribunal (h) In various cases including the decision of ITAT, Jodhpur Bench it has been held that where purchases made are genuine, outstanding amount payable to the creditors cannot be added u/s 68. The decisions are as under:- CIT Vs. Ritu Anurag Aggarwal 2010 ITL 100 (Del.) (HC) (PB 265-266) In this case the facts are that the AO doubted the veracity and genuineness of the sundry creditors of an amount of Rs.1 lakh and added the same in the income of the assessee u/s 68 of the IT Act. The CIT(A) confirmed the addition. On further appeal, the Hon’ble ITAT allowed the same vide its order dt.13.04.2007 by holding that on genuine credit purchases section 68 does not apply. On further appeal by department, Hon’ble High Court held upheld the decision of the ITAT. CIT Vs. Pancham Dass Jain 156 Taxman 507 (All.) (HC) (PB 267-269) The head note of the decision reads as under:- Income—Cash credit under s. 68—Purchases made by assessee on credit—Tribunal had recorded a finding that the two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of s. 68 could not be attracted in the present case—The view taken by the Tribunal on this issue is sustainable inasmuch as, on the basis of the findings recorded by it that these two amounts represented purchases made by the assessee on credit and the purchases and sales having been accepted by the Department, the question of addition of the said two amounts under s. 68 did not arise inasmuch as the provisions of s. 68 would not be attracted on the purchases made on credit ITO Vs. M/s Ashok Transport Co. UDAI Service Station 2019 ITL 3374 (Jodh.) (Trib.) (PB 271-276) The facts of the case are that the outstanding amount of Rs.78,22,863/- shown in respect of freight payable as on 31.03.2014 was added u/s 68. On appeal, the CIT(A) deleted the same as they are trade creditors not covered u/s 68. On further appeal by department, the Hon’ble ITAT upheld the decision of CIT(A) by holding that when the entire turnover on transportation of Rs.11,70,63,030/- has been accepted by the AO as genuine, question of addition of the sum of Rs.78,22,863/- which represented the liability to pay the truck owners by assessee cannot be added u/s 68 of the Act. (i) It is further submitted that the assessee has already written back the amount of these 2 creditors as cessation of trading liability and offered them to tax u/s 41(1) in AY 2018-19 & 2019-20 and the same is reflected at PB 65 & 73. Copies 67 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta of return are at PB 46-75. The amounts were written back on bonafide belief that as and when the payment is made, the same would be allowed as deduction. The assessment for AY 2018-19 has been completed by the same AO u/s 143(3) and the income offered by way of cessation of trading liability has been accepted by him (PB 76-84). Thus, taxing the same amount again in AY 2013-14 would amount to double taxation which is not tenable. Hon’ble Supreme Court in the case of Laxmipat Singhania Vs. Commissioner of Income-tax (SC) (1969) 72 ITR 291 held that “It is a fundamental rule of the law of taxation that, unless otherwise expressly provided, income cannot be taxed twice.” Reliance is also placed on the decision of Hon’ble ITAT, Chennai Bench in case of Popular Foundations (P) Ltd. Vs. ACIT (2022) 209 DTR 18. The head note of the decision reads as under:- Income—Cash credit—Genuineness of loan—Assessee received a trade advance from PFD Ltd., and the same was outstanding for more than three years—It has classified the trade advance as unsecured loan because of time gap—Assessee has filed confirmation letter from the creditor and the ledger extract to prove that the said loan was received by cheque—It also filed data of creditor company available in the website of Ministry of Corporate Affairs, Government of India, as per which said company was in active status—Further, such unsecured loan has been treated as cessation of liability and offered to tax under s. 41(1) for the asst. yr. 2014-15—This fact has not been disputed by the AO—Once a particular sum is considered for taxation in subsequent years, then said loan cannot be once again treated as income of the assessee for the impugned assessment year—Hence, the AO is directed to delete addition made towards unsecured loans under s. 68 The Ld. D/R in his written synopsis at Para 2, Pg 3 & 4 has stated that the write back is in a pre managed manner to hoodwink the revenue since even after offering these amounts, the assessee has not paid any substantial tax because of losses claimed/ low income declared by the assessee in the year in which the amount is written back. This contention is far-fetched in as much as has this amount not offered for tax, the assessee would have been eligible to claim carry forward of losses which would have reduced the tax liability of subsequent year. (j) It may be noted that the original assessment for the year under consideration was made u/s 143(3) on 30.03.2016. In course of original assessment proceedings the assessee produced books of accounts which were examined. The assessee has also filed the comparative G.P. and N.P. rate chart which is reproduced at page 1 of the original assessment order (PB 27). On the basis of this chart, AO observed that the assessee has not only declared higher g.p. rate but also declared higher NP rate as compared to the earlier years and accepted the same. He made some addition in respect of activity relating to shares only. Thus, this assessment was completed after survey was carried out at Hanish Toshniwal on 11.03.2015 and no adverse inference on the basis of his statement was taken. 68 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Thereafter, assessment for AY 2014-15 was also made u/s 143(3) on 31.12.2016 (PB 235-249) i.e. after the survey was carried out at Hanish Toshniwal on 11.03.2015 but no adverse inference on the basis of his statement was taken. In AY 2015-16 assessee surrendered unaccounted profit of Rs.1 crore in consequence of survey u/s 133A dt. 08.10.2014. Thereafter the assessment was made u/s 143(3) on 30.12.2017 (PB 254-264). In the assessment a specific query at Q. No.8 for outstanding creditors was raised vide notice dt. 18.01.2017 (PB 251). The AO after examining the reply did not take any adverse inference on the same. On this date also the statement recorded in survey carried out at Hanish Toshniwal on 11.03.2015 was with the department. However, the credits outstanding in respect of these two companies were accepted as no adverse evidence for the same was found. Hence, on the basis of alleged test of human probability and surrounding circumstances which are rather in favour of assessee, no adverse inference can be drawn. Thus, Ground No.4 raised by the department is misplaced. In view of above, grounds of the department be dismissed and CO of assessee be allowed. 40. In addition to the above written arguments the ld. AR of the assessee argued that this being the search period assessment, the addition can only be made based on the basis of incrementing material placed on record which is missing in this case. Merely the survey conducted at some other party’s places and they were not found on that address the whole transaction under taken in the normal course of business cannot be considered as bogus or void on that reasons that the parties are not available at the address. For that there were various reasons, such as party has shifted may have closed the business and that the transaction done in 2012-13 and survey of that party not found in 2018, that cannot be a base 69 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta to make the addition. The original assessment already completed and the copy of the assessment order placed on record. In that original quantum assessment, proceedings the ld. AO raised various queries which were replied based on the evidence called for additions on account of four separate issues were made in that original quantum proceedings. Now in the search related assessment in the absence of any incrementing material no addition can be made on those completed assessments. The lower authorities considered the statement recorded of third party considered as incrementing material is not correct. Not only that the cross examination of the parties whose statement are relied upon were never provided to the assessee before relying on the same. The ld. CIT(A) has considered the statement of Shri Hanish Toshniwal as incrementing material is incorrect. When the transaction entered into by the company with the parties whose balance is lying in sundry creditors Shri Hanish Toshniwal was no way involved in the affairs of the company and for that the ld. AR filed the form no. DIR 2 for appointment and resignation of Shri Hanish Toshniwal in these companies. Thus, when the transaction was executed, he has no locus standing to comment on the transaction done with that company as he was not director in that period. The assessee has undertaken with Shri Roopchandji and he was dealing person and the assessee company has 70 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta acquired the material from him from Bikaner and these companies were registered under the state value added tax for that address in Bikaner and the status of the dealer was shown as active. The relevant proof has been filed at page 226-227 of the assessee’s paper book and the department has not placed on record any contrary to this facts. The statement of employee or a person who has no locus standing cannot be considered as incrementing material, as the key person has never stated any single statement that these transactions are not genuine. The statement of Shri Hanish Toshniwal and Shri Amit Gidra are forced recording of the statement and the content of that statements are incorrect facts. Not only that Shri Amit Gidra is an employee from 2014 and has last 4 year working whereas the transaction is done in the F.Y. 2012-13. The ld. AR of the assessee also drawn our attention to question no. 29 appearing at page 178 of assessee’s paper book. The same is extracted here in below: “iz'u 29 eSa ,u- ,e- xzqQ ls lacaf/kr izfr"Bkuksas ds fnukad 08-02-2018 ds Trial Balance iqu% fn[kk jgk gqWa bu Trial Balance esa vU; dbZ ikfVZ;ksa ds fo:} cM+h & cM+h Debit o Credit izfof"B;kWa iznf’kZr gSA d`i;k crk;s fd buds lkFk fdl rjg ds laoO;ogkj fd;s x;s gSA mRrj Jheku bu Trial Balance esa of.kZr ikfVZ;ksa ls O;olk; ls laca/khr laO;ogkj gq;s gS] ijUrq dbZ ckj cSad dh Credit limit dks cuk;s j[kus ds fy, Circular Trading Hkh dh tkrh gSA ftlesa dsoy fcyks dk vknku&iznku gksrk gS vkSj Hkqxrku dk vknku& iznku gksrk gS] okLrfod dkWeksfMfVt dk vknku & iznku ugha gksrk gSA bl rjg dh Circular Trading eq[;r% M/s R. M Trading Company, M/s Madan Lal Chandale & Sons, M/s Shreeji Trading Company, M/s Shiv Shankar Enterprises, M/s Shivnath Rai Anil Kumar, M/s Shivnath Rai Lavish Kumar, M/s R. P. Gupta & Sons, M/s Shankar Lal Khedan & Sons, M/s Akash Traders, M/s 71 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta Ganpati Food Products, M/s Brahmani Marketing, M/s Banwari Lal Brahmanand, M/s B. M. Automobiles bR;kfn ls fd;k x;k gSA” 41. It is evident that the name of the company given by him did not include the name of the company with whom the transactions are questioned, so his statement even though recorded not be applied as factually incorrect. Therefore, even his averments are also incorrect on facts. In the absence of allowing an opportunity to cross examine them the addition cannot sustain. Not only that the key person of the assessee company Shri Manoj Gupta nowhere in the statement accepted that the transactions are not genuine. Not only that while replying on the address of the company vide statement dated 08.02.2018 vide question no. 14 he has stated that the company is of either from Bikaner or from Jodhpur and he was not aware that these companies are of Kolkata based entities. The ld. AR in support of this contention filed the copy of the registration certificate of Rajasthan state Vat Act. He also vide question no. 16 submitted that for doing the purchase transaction he used to contact with Shri Roopchand Maheshwari and he was looking after the godown of that company and department has not done any enquiry on this aspect at that premises. In the statement recorded on 09.02.2018 also submitted that the assessee has many transactions with the company and related sales is also executed. The ld. AR of the assessee drawn our attention to following chart 72 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta M/s Kalyani Suppliers Pvt. Ltd. Particulars Amount Particulars Amount To Sales 33,69,04,332 By Purchase 54,59,79,307 To Balance b/d 20,90,74,975 54,59,79,307 54,59,79,307 M/s EverlinkVyapar Pvt. Ltd. Particulars Amount Particulars Amount To Sales 29,47,56,233 By Purchase 66,31,63,140 To Balance b/d 36,84,06,907 66,31,63,140 66,31,63,140 The ld. AR submitted that when the department is not questioning earlier transaction merely the amount is outstanding is considered as bogus and that too by invoking of provision of section 68. The provision of section 68 did not allow the assessee to consider the part transaction as genuine and part as not genuine with the same party. The AO has treated the purchases as bogus from these two companies while at the same time accepted the sales/stock. Without purchases, sales are not possible. When sales have been accepted as genuine, purchases cannot be held as bogus. Such an addition on account of purchases while at the same time accepting the trading results of the assessee is not sustainable. For this purpose, ld. AR of the assessee relied on the judgment of Delhi High Court in the case of PCIT Vs. Agson Global (P) Ltd. 210 DTR 225 the relied upon portion is as under : Income from undisclosed sources Addition Alleged bogus purchase As noted by Tribunal in the remand report, the AO had adverted to the fact that 50 per cent of 73 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the purchases had been sourced by the assessee from third parties i.e. non- related parties. These transactions were verified Since no variation was found between the responses received from the third parties and purchases, as recorded in the assessee's books, the addition made on account of bogus purchases was not sustainable Tribunal also found that in respect of asst yrs. 2012-13, 2013 14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under 143(3). No defects concerning books were found either by the AO or the CITA) Thus, according to it, for the concluded assessment years 1e, 2012-13, 2013-14 and 2014-15, no incriminating evidence was found Observations made by the Tribunal are pure findings of fact, which cannot be interdicted in appeal If the Revenue chooses to disallows bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very tame parties which would result in the assessee's income falling below the returned/declared income Addition towards bogus purchase was therefore rightly deleted by Tribunal. 42. Here in this case during the search operation nothing found which shows that for this transaction the on-money transactions are involved and the transaction were for any reasons not genuine which are recorded in the regular books of account. As the assessment for the year under consideration is already not abated and in the absence of any evidence no addition can survive in the proceedings u/s. 153A of the Act. He relied upon the various case laws cited and produced in the paper book/written synopsis filed. He has emphasized that the legal issue is covered by the Hon’ble Supreme court decision, Hon’ble Rajasthan High Court and even this bench also in many cases held that in the absence of the incrementing material no addition can be made where the assessment is not abated. As regards the survey conducted the ld. AR of the assessee submitted that the 74 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta address at which the same were carried out are not the address available on the ministry of corporate affairs (MCA) portal and that is why at the time of survey the said companies were not found at that old address. Details of the TIN registration for indirect tax is also filed and placed on record. All these evidences shows that the questioned company are active and compliant company. We found that in the case of these companies the assessee has made much more purchase than the amount outstanding and once the purchases is accepted and relevant sales thereupon, merely the trade liability is not made cannot be incriminating material and the addition of the liability again is not chargeable to tax under section 68 of the Act. When the purchase and sale transaction are not disputed how can the consequent liability appearing in the books can be disallowed merely the same is not paid by the assessee company. We have also seen that the ld. AR placed on record the recovery notices that has been issued by the parties for payment of their dues itself proves that the amount is payable. In all set of evidences merely some non-related person and that too were not at the helm of the affairs of the either parties how can an addition be made on that third person having no locus standing be bind to the assessee company. 75 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 43. Against the arguments of the ld. DR, ld. AR of the assessee further submitted that the assessee has not refrained the AO in the earlier proceedings to do the physical enquiry and in that enquiry conducted now no adverse material placed on record by the revenue. The address where the enquiry conducted is also not at the correct address as per the MCA’s website. It is not duty of the assessee company to enforce the sundry creditors to change the address as per provision of section 139A(5)(d) to change the address on PAN data base. The law already takes care of such failure and on that the assessee should not be given any type of punishment. Not only that the transaction was done in 2012-2013 and physical enquiries were conducted in 2018 then over a period of time the company might have shifted their office and address. As regards the Swati Bajaj case is not related to the Sundry creditors but it is related to Bogus Long Term Capital gain scam. The fact of that case and this case are totally different. There is no admission either by the company nor the directors of the company about the transaction being not genuine not only that no material is found in the search action so as to create doubt on these transactions. As regards the surrender of amount under section 41(1) the ld. AR of the assessee drawn out attention to question no. 3 of the statement of Shri Manoj Kumar Gupta recorded on 07.05.2018. 76 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta iz'u 03- NM Group, Sriganganagar esa lpZ dk;Zokgh ds nkSjku ;g ik;k x;k fd vkidh xzqi QeZ@dEiuh }kjk eSa- ,ojfyad O;kikj izk- fy- dks sundary Creditors ds :i esa fuEu izdkj ls n’kkZ;k x;k gSA S. No. Name of Firm/Company Sundry Creditors (Amount) 1 Suresh Kumar Gupta Prop. Nand Lal Naresh Kumar 36,84,06,907/- 2. NM Agro Food Product Pvt. Ltd. 24,76,72,484/- Total 61,60,79,391/- I 5 . .05 B5 प 5<द . 521.03.20185 5I 5>प 2H M5 . 5 5C B5 प5 5 5 5 5 5 | #प 5 6प &5existence B5 5V 5I 5#प 5 &5द 5 5 :5 I 5 . .05 59 ? 5 5#प 5 6प &5 5 registered office 5 th Floor, Room No. 5A, 77 NS Road, Kolkata-700001,oa Room No. 405 & 405A, 4th Floor, 4 Fairlie place, Kolkata प 5 59 ? 5 5 5 _ 50 513345 5 5 H5 5प 5#प 5 प =5 &5 6प &5 5` R 5 H.5()5 5 :57 b5 प 5प - b प * Z 5 5 5 5 5I 5 R d 6प =5 B5द 5 5 creditors 5 5 B5>प 2H M5दB: mRrj e54 3) 5A प 5 e3)e5 54 25 5प * 5 B5? - 5 5 5 5)H )5 <2 5 F 5 - 45 , C 5 . .05 B5| 5#8 B5 > - C> 5 57 5 5 :5I 5पa( 5 #8 = 5 B5)H )5 5 5 D50 D5दH5 &5C 5 . .05 B5 5#8 B5? - 5 5 - Z5 installment provide 5 - 5 3)" 5 , C 5 . .05 B5 7?&59पZ) 5 F 5 H5 I 5| 4 25 5पc5 F 5 - 5 , C B5#8 = 53)" 5 5 5#8 = 54 3). 5A प 5 e53)e5 ) I825 5 matter okfil5 5<द45 5V 57 5# 5matters H.5 &)5 5 5 ':57 b5 प5 # 5 25 6प 5 B:5 5# 5 25 6प 5 5 D5 3 5 5 5 ' , प 8 - 5# 5 6प 5 H.5 5प 5 5 :5 <द5I 5 57 ) 5द f & 5 5 B5?&5 6प 5 H.5 5प 5 , 54 3). 5A प 5 e3)e5 5द =5R [5 5द 5 &5 59 $ 5 J 52018-19 B5write- back 5दB :5?9 5 B5 5?&54 3). 5 A प 5 e3)e5 5? - 5 5 4 , # 5 5? - 5 &5 5 deduction claim 5)B :5 +5 5I 5 6प &5 5 ) $ 5C> 5 5प 5 15` R 5 H.5 5 5 )5 , # 5| . .05 B5 +5 5>प 25 5( 5 * + 5 5 I 5 6प =5 5 5 5 transactions %&5 Kप(8द5 & )5 5 R 5 - 45 ':5 5 Kप(8O5 & )5 5 H5 deal 5 '5 6प &5 5` R 5प 5 > 5 B5 5# 5verify 5 5 5 H.5 5 ':5 5प 5Kप(8द5 & )5 5 5<द45 ', 5ogh 5 5 :“ 77 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta As it is evident that the surrender was based on the pressure and that too with a condition that when the assessee pays this amount the deduction should be allowed and accordingly that liability is surrender by the assessee. Considering these set of facts not only the case is covered on technical ground but even on merits the department has no case against the assessee company. In summary the ld. AR submitted that in the absence of final finding on the SLP of the department ( that whether the statement recorded is incrementing or not?) in the Hon’ble Supreme Court the binding decision of jurisdictional and surrounding High Court decision should prevail and based on these set of arguments when there is no incrementing material found no addition can be made on the completed assessment and on the issues which are already settled. Thus, based on this fact the appeal of the revenue is not sustainable. 44. In the rejoinder the ld. DR submitted that the facts of the Rajasthan High Court judgment with that of this case is also differentiable. In this case the enquiry conducted shows that the companies are not in existence at the address. It is duty of the tax payer to update the address on PAN data. There is sufficient investigation done at the time of the search and that can be considered as an incrementing material and thus, the addition made by 78 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the ld. AO be restored and thus, the jurisdiction high court decision differentiated. 45. After the completion of the hearing both the parties were directed to file their brief note on the arguments raised and in support their contentions. The ld. AR of the assessee submitted further Submission on the contention of Ld. DR as for the direction of Hon'ble Bench which reads as under : The above cases were heard on 28.06.2022. Hon'ble Bench directed both the assessees and the Ld. DR to file written submission on the arguments raised by the respective representatives, if they so desired. Accordingly, the present written submission is filed against the arguments of the Ld. DR. 1. The Ld. DR contended that the addition has been made by the AO on the basis of statement of Shri Hanish Toshniwal whose statement was recorded u/s 131 in course of servey proceedings along with the search conducted on the assessee, statement of Shri Amit Gidra, main accountant of the group and statement of Manoj Gupta, the main person of the group recorded u/s 132(4) and therefore these statements are incriminating material. Hence the contention of the assessee that addition has been made without any incriminating material found in search is not correct. 2. It may be noted that the AO has relied on the statement of Shri Hanish Toshniwal recorded on 11.03.2015 and on 08.02.2018. On these dates he was not a director in M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd, whose outstanding credit balance as on the date of search was added by the AO. In fact, Shri Hanish Toshniwal became director in these companies on 20.05.2013 (PB-235-238) and 02.01.2014 (PB 235-243) respectively as is evident from Form No. DIR -12 filed by these companies with RoC. He resigned as director of these companies on 09.01.2016 (PB-244-247) as also stated by him in reply to question 9 of his statement u/s 131dated 08.01.2018 (PB-158). The assessee has 79 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta made purchase /sale transaction with M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd during FY 2012-13 when Shri Hanish Toshniwal was not a director in these companies. Hence when he has no locus standi in these companies when assessee made trading transaction with these companies, his statement has no relevance and thus cannot be considered as incriminating material. 3. Shri Amit Gidra in his statement u/s 132(4) dated 08.02.2018 (PB-163- 180A) in reply to question no 23 to 27 stated that he is working with NM Group since last 4 years. He further stated that on the outstanding balance of with M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd no interest has been paid. He has no knowledge about the transactions of purchase/sale made with these companies. This can be explain only by Shri Manoj Gupta/Shri Suresh Gupta. In reply to question no 29 he further explained that from some of the parties where the outstanding debit/credit balance is high, to maintain the credit limit, circular trading is done. However, in the list of parties with whom circular trading is done the name of M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd was not specified by him. From his statement it is clear that he was not an accountant of the group when transactions were made with M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. Further he has no where stated in his statement that the transactions made with these companies are not genuine. Thus his statement cannot be considered as incriminating material with reference to the addition made by the AO. 4. The statement of Manoj Gupta with reference to M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd was recorded on different dates i.e. on 08.02.2018, 09.02.2018, 21.03.2018 and 07.05.2018 (PB-181A-223). In these statements he stated that trading transaction made with these companies are genuine transactions, that transactions with these companies were made through their office at Bikaner (PB-226-227), the transactions with these companies are verified by the department in earlier assessment proceedings and that there is no money paid/received to/from them and thus these are not accommodation entries (PB-205-207, Q.No.- 30). Still in reply to Q.No. -41 of statement dated 10.02.2018 (PB-214 215) considering that the search continued for 3 days admitted additional business income of Rs. 35cr. Thereafter in his statement dated 21.03.2018, in reply to Q.No.- 8 with reference to additional business income of Rs. 35cr offered by him he clarified that the same is with reference to outstanding balance of M/s kalyani Suppliers Pvt. Ltd. and M/s Everlink Vyapaar Pvt. Ltd. to whom payment could not be made because of liquidity problem and the same would be return back in FY 2017-18 against which after claiming the business expenditure/loss/bad debts he would pay the tax on the balance amount and whenever payment made to these companies the same would be claimed as deduction. Thus this statement of the Manoj Gupta is not an incriminating material with refrence to the addition made by the AO. 80 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 5. It may be noted that assessee have also sold goods to these parties. The sales accepted by the AO (PB-267-268). The assessment for AY 2013-14 to 2015-16 were completed u/s 143(3) where no adverse inference with reference to the outstanding balances of these companies were drawn. Thus, when this transaction has been accepted in the regular assessment proceedings and no incriminating material was found to suggest that the transactions made are not genuine, the addition made by the AO is not sustainable both in law and on facts. 46. We have considered the rival contentions, submissions and decisions relied upon by both the parties. Undisputedly, the assessment for assessment year 2013-14 was not pending on the date of search on 08.02.2018. The assessment was completed under section143(3) of the Income Tax Act, 1961. Thus, the assessment for the assessment year 2013-14 cannot be considered as abated by virtue of search conducted under section 132 on 08.02.2018. The assessing officer would reassess the total income of the assessee as per the provisions of section 153A in respect of assessment year 2013-14. As the assessee objected to the proposed addition on the ground that during the search no incriminating material indicating any undisclosed income for the year under consideration was found, which is also apparently clear from the assessment order itself. Further it was contended since there is no incriminating material found during the course of search and seizure action, therefore, the AO is not empowered to make any addition in the total income of the assessee. It is a settled position of law that there cannot be a review under the garb of 81 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta reassessment proceeding under section 153A of the Act. Therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the possession/knowledge of the AO during the course of search proceedings. Since the assessment for the assessment year 2013-14 was not pending as on the date of search and there is no incriminating material found or seized during the course of search, then the AO is bound to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality. Therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for and an addition can only be made on the basis of undisclosed income derived from material/documents seized 82 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of any incriminating material found or seized during the course of search and seizure proceedings, the additions made by the AO during the course of reassessment under section 153A of the Act are without jurisdiction and liable to be deleted. In support of his contention the Id. A/R has relied upon the decision of Hon'ble Delhi High Court in case of Kabul Chawla, 380 ITR 573 (Delhi) and submitted that Hon'ble High Court has held that in case of completed assessment not abated by virtue of search under section 132 of the Act in the absence of any incriminating material, the same can be reiterated and, therefore, no addition could have been made to the income already assessed. 47. Here in this case though the ld. CIT(A) categorically hold a view that except a statement recorded u/s. 132(4) no other seized material is relied upon by the AO while making the addition. The relevant finding is extracted here in below : 83 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta (xiii) It is also observed that the evidence does not mean only documentary evidence but the Statement recorded under section u/s 132(4) of the IT Act has also been judicially held as an important piece of evidence collected as a result of Search and Seizure Operation. In the present case, it is not only the statements of the Director of the appellant firm but also of the main accountant as well as Director of the Companies which admitted of providing accommodation entries to the appellant during the course of Survey in his case which was simultaneously conducted at the time of Search conducted at the premises of the appellant which were relied upon by the AO for framing the assessment in the case of the appellant. Therefore looking to the facts .of the case, I am of the view that there is no ambiguity in the assessment order of the AO in the case of the appellant for the year under consideration which is based on the incriminating material found during the course of Search. Accordingly, the Ground of Appeal No. 1 treated is dismissed. The ld. AR of the assessee submitted that the department heavily relied upon the statement of Shri Amit Gidra and Shri Hanish Toshniwal. Shri Amit Gidra was not an employee of the company in the year which the transaction took place and Shri Hanish Toshnwal has no locus standi in the company as he become the director subsequent to the year in which transaction took place. Thus, the persons whose statement relied upon are not at the help of the affairs of the company and they being not having any locus standing their statement cannot be considered as binding to the assessee. Not only that these statements are mere allegation not proved with any cogent evidence unearth during the search. Thus, the ld. AR relying on the following judicial ruling submitted that the statement cannot be considered as incrementing material and addition based merely on that statement is liable to be deleted and in support of his contentions he relied 84 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta upon the judgment of PCIT(Central) & Ors Vs. Anand Kumar Jain (HUF) & ORS. (2021 432 ITR 0384 (Del)(HC) where in the Hon’ble Delhi High Court has observed as under: “8. Next we find that the assessment has been framed under 153A consequent to the search action. The scope and ambit of s 1534 is well defined This Court, in CIT vs Kabul Chawla (2015) 281 CTR (Del) 45 : (2015) 126 DTR (Del) 130: (2016) 380 ITR 573 (Del): 2015 SCC Online Del 11554, concerning the scope of assessment under s 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 s. 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 CIT vs Best Intrastructure (India) (P) Ltd (2017) 159 DTR (Del) 257 (2017) 397 ITR 82 (Del) 2017 SCC OnLine Del 95911 has inter alia held that: 38 Fifthly, statements recorded under s. 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in CIT vs. Harjeev Aggarwal (2016) 133 DTR (Del) 122 : (2016) 290 CTR (Del) 263 : 2016 SCC OnLine Del 1512.2” 9. In CIT vs Harjeev Aggarwal (2016) 133 DTR (Del 122: (2016) 290 CTR (Deb 263: 2016 SCC OnLine Del 1512, this Court had hold as follows 23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under s. 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 85 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 24. In our view, a plain reading of s. 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 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 s. 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 s. 132(4) of the Act are read in the context of s. 158BB(1) r/w s. 158B(b) of the Act, it is at once clear that a statement recorded under s. 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 s. 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 vs. Shri Ramdas Motor Transport (2000) 163 CTR (AP) 403: (1999) 238 ITR 177 (AP), a Division Bench of Andhra Pradesh High Court, reading the provision of s. 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 s. 132(4) of the Act cannot be invoked. 86 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 27. It is also necessary to mention that the aforesaid interpretation of s. 132(4) of the Act must be read with the Explanation to s. 132(4) of the Act which expressly provides that the scope of examination under s. 132(4) of the All is not limited only to the books of accounts or other assets or material found during the search However, in the context of s. 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under s. 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 s. 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 CIT vs. Naresh Kumar Agarwal (2015) 122 DTR (AP) 339: (2014) 369 ITR 171 (AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under s. 132(4) of the Act which is retracted cannot constitute a basis for an order under s, 158BC of the Act. ()" 10. Now, coming to the aspect viz the invocation of s. 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 (ie., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of s. 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 s. 153A), then the only legal recourse available to the Department was to proceed in terms of s. 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 s. 153A on the basis of alleged incriminating material (being the statement recorded under 87 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 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 s 153C has not been followed. On this count alone, we find no perversity in the view taken by the Tribunal Therefore, we do not find any substantial question of law that requires our consideration. 11. Accordingly, the present appeals, along with all pending applications, are dismissed.” 48. Thus, the ld. AR has submitted that when the Hon'ble Jurisdictional High Court has held that the requirement of assessment or reassessment under section 153A has to be read in the context of section 132 or 132A of the IT Act, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined purpose of making assessment of total income under section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The assessment or reassessment proceedings which have already been completed and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when search or requisition is made, there is no question of any abated assessment since no proceedings were pending. Therefore, the addition to 88 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the income that has already been assessed will be made on the basis of incriminating material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the Id. AR has submitted that the AO has made the addition in the assessment under section 153A whereby the completed assessment has been disturbed without even referring to any incriminating material found or seized during the course of search and seizure under section 132 of the Act. The only basis of addition is the inquiry during the search of the parties with the whom the assessee has undertaken transaction were not found at the address and it has no connection with the search proceedings of the assessee. Therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act. 49. Based on the arguments and the rival submissions as well as the relevant material on record it is not disputed that the assessment for the assessment year 2013-14 was not pending on the date of search on 08.02.2018. The assessment was completed under section 143(3) of the I.T. Act. Thus, the assessment for the assessment year 2013-14 was not 89 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta got abated by virtue of search under section 132 on 08.02.2018. Thus, the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of the assessment year 2013-14. The proceedings under section 153A in respect of the assessment year would be in the nature of reassessment and not in the nature of assessment. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee's total income, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The provisions of section 132 read with section 153A of the Act stipulate two types of situations - one where the assessment of any assessment year falling within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of 90 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under : "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYS will have to be computed by the AOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. I other words there will be only one assessment order in respect of each of the six AYS "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post- search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made. separately for each AY on the 91 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYS, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 50. Thus, following the view of the Hon'ble High Court that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in 92 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under : "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT) on bogus share capital. But, the issae was whether there was any Incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination." The SLP filed by the revenue against the said decision of Hon'ble Delhi High Court was dismissed by the Hon'ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon'ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under : "55. On the legal aspect of invocation of Section 153A in relation to AYS 2000 01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYS would be justified. 93 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 57. The question whether unearthing of incriminating material relating to any one of the AYS could justify the re-opening of the assessment for all the earlier AYS was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CITV. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two. decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating materia being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with." 94 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT[2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpurv. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has 95 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents,"’ 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CITV. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYS will have to be computed by the AOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYS "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an 96 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYS under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 97 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section Can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every czea where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or 98 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jal Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CITV. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYS in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the 99 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa(supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari 100 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYS in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYS 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books 101 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYS 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYS." 51. The Hon'ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon'ble Jurisdictional High Court in the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon'ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the Id. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under : "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted 102 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta by the Assessee. These were of two kinds one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." 52. Thus, the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under : 103 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta "23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case 104 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of hose six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total Income and such orders subsistig at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the tal income. In such a case, to reiterate, there is no 105 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating. material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on 106 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under: "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 107 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made." 53. In this regard, we are of the view that no final orders have been passed so far by the Hon'ble Supreme Court in the judgments cited by the Id. DR. Therefore, the principle of "ratio descendi" are not applicable with regard to the aforementioned cases. Therefore, we are of the view that in the absence of any order by Hon'ble Supreme Court, the decision of Hon'ble Jurisdictional High Court in the case of Jai Steel Ltd. vs. ACIT, 88 DTR 1 (Raj.), PCIT vs. Smt. Daksha Jain, DB IT No. 125/2017 are binding on us. Further, we are also fortified with the decision in the case of CIT vs. Continental Warehousing Corporation (2015) 64 taxmann.com 34 (SC), PCIT vs. Devi Dass Garg (2020) 114 taxmann.com. 552 (SC). Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue and SLP filed by the revenue is not decided by Hon'ble Supreme Court, we based on the binding nature of judgment hold that the additions made by the AO while passing the assessment order under section 153A for the assessment year 2012-13 are not sustainable. We found force in the arguments of the ld. AR of the assessee and also 108 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta convince with the findings of the ld. CIT(A) who has after considering the facts on record taken a considered view that the looking to the facts of the case on technical ground, he has considered the appeal of the assessee and before giving his findings he has called for the remand report also and the equal chance were given to revenue place their case. The ld. DR appearing on the behalf of the revenue has merely relied on the investigation done at the time of search simultaneous survey conducted in the investor company. In all these processes we have not seen any reasons as to why and how the order of the ld. CIT(A) is not correct. There is no admission of either party of any undisclosed income. As the ld. CIT(A) has after considering the detailed arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment which are already completed after making the proper enquiries by the AO, and those assessment cannot be allowed to again reframed merely based on the search and that too without any fresh evidence. Merely the surveys conducted parties are not available after 8 years it is not the fault of the assessee and without any fresh material unearthed during search no fresh addition can be made on the issue which are already settled. Even, the ld. CIT(A) has based on the arguments of the assessee followed the jurisdictional High Court decision and Tribunals 109 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta orders and even this co-ordinate bench decision is also binding on us in the absence of any contrary judgement. 54. The addition made by the AO is neither based on any single loose paper found/seized nor any statement recorded during the course of search conducted in the case of the appellant or of the person sitting at the help of the affairs which could be treated incriminating as is evident from the assessment order and the remand report of the AO. Although, the ld. CIT(A) has considered the appeal of the assessee on merits but taken a view that the statement recorded under section 132(4) of a person who are not related parties or no locus standing can be termed as incrementing material is incorrect based on the findings and observations of this case the cross objection raised by the assessee is allowed as there is no incrementing material placed on record while framing the assessment merely the statement of third parties who have not locus standi cannot be considered as incrementing when there is no corresponding admission by the assessee. In terms of this observations the cross-objection number 04/JP/2022 raised by the assessee is allowed. 110 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta 55. Since, we have based on our detailed finding taken a view that no addition could have been made in the case of the assessee based on the fact that there was no incrementing material found in the search for the completed assessment and thus we have considered the CO of the assessee on technical ground holding that in the absence of corroborative evidence to support the addition the completed assessment cannot be reassessed. As we have considered the cross objection of the assessee on technical grounds the various grounds taken by the revenue on merits become infructuous and based on these observations the appeal of the revenue is dismissed. 56. In the result the appeal of the revenue in ITA No. 54/JP/2022 is dismissed. 57. The fact of the case in ITA No. 55/JP/2022 and CO No. 03/JP/2022 marched by the assessee is similar to the case in ITA No. 54/JP/2022 and CO No. 04/JP/2022 we have heard both the parties and pursued the material available on record. The bench noticed that the issue raised by the assessee in this ITA No. 55/JP/2022 and CO No. 03/JP/2022 are equally similar on facts and the grounds in ITA No. 54/JP/2022 and CO No. 04/JP/2022. Hence, the bench feels that the decision taken by us in ITA 111 ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022 M/s N. M. Agrofood Products Pvt. Ltd. & Suresh Kumar Gupta No. 55/JP/2022 and CO No. 03/JP/2022 for the Assessment Year 2013-14 shall apply mutatis mutandis in the case of CO No. 04/JP/2022 for Assessment Year 2013-14 and in terms of these observations, ITA No. 54/JP/2022 raised by the revenue is dismissed and CO No. 04/JP/2022 raised by the assessee is allowed. The respective appeals are thus disposed off with above directions. Order pronounced in the open court on 24/08/2022. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 24/08/2022 *Ganesh Kr. vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- DCIT, Income Tax Department, Central Circle-03 2. izR;FkhZ@ The Respondent- M/s N. M. Agrofood Products Pvt. Ltd., Sriganganagar Shri Suresh Kumar Gupta, Shri Ganganagar 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 54 & 55/JP/2022 & CO No. 4 & 3/JP/2022) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar