Dr. K.Nedunchezhian, Namakkal V. DCIT., Salem

CO 83/CHNY/2006

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4206 (ITAT-CHENNAI)
• Duration Of Justice: 16 year(s) 1 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 29-03-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Question of law; Block assessment; Tax effect
• Section: 132; 13; 22

Judgement Text

IT (SS) A No.5/Chny/2006 Block Period: 01.04.1996 to 12.12.2002 The Dy. Commissioner- of Income Tax, Central Circle, Salem. v. Dr.K.Nedunchezhian, 27/1, North Street, Kutchipalayam, Paramathy Velur Taluk, Namakkal Dist. [PAN: ABLPN 0833 E] (अपीलाथ /Appellant) ( थ /Respondent) IT (SS) A No.2/Chny/2018 Block Period: 01.04.1996 to 12.12.2002 Dr.K.Nedunchezhian, 27/1, North Street, Kutchipalayam, Paramathy Velur Taluk, Namakkal Dist. [PAN: ABLPN 0833 E] v. The Dy. Commissioner- of Income Tax, Central Circle, Salem. . (अपीलाथ /Appellant) ( थ /Respondent) Cross Objection No.83/Chny/2006 (in IT (SS) A No.5/Chny/2006) Block Period: 01.04.1996 to 12.12.2002 Dr.K.Nedunchezhian, 27/1, North Street, Kutchipalayam, Paramathy Velur Taluk, Namakkal Dist. [PAN: ABLPN 0833 E] v. The Dy. Commissioner- of Income Tax, Central Circle, Salem. (अपीलाथ /Appellant) ( थ /Respondent) Department by : Dr.S.Palani Kumar, CIT Assessee by : Mr.T. Banusekar, CA सुनवाई क तारीख/Date of Hearing : 15.03.2022 घोषणा क तारीख /Date of Pronouncement : 25.05.2022 आयकर अपीलीय अिधकरण, ’डी’ यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI ी वी. दुगा राव, माननीय ाियक सद एवं ी जी. मंजूनाथा, माननीय लेखा सद के सम BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 2 :: आदेश / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: These cross appeals filed by the assessee, as well as the Revenue and Cross-Objection filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore, dated 14.10.2005 and pertains to block period from 01.04.1996 to 12.12.2002. Since, the facts are identical and issues are common, for the sake of convenience, the cross appeals filed by the assessee as well as the Revenue and Cross-Objection filed by the assessee were heard together and are being disposed off, by this consolidated order. IT (SS) A No.2/Chny/2018: 2. The assessee has taken various grounds of appeal along with Form No.36, when the appeal was filed. Subsequently, the assessee, had also filed various petitions for admission of additional grounds by taking certain grounds on validity of search assessment proceedings. The assessee, had also filed modified grounds of appeal incorporating grounds of appeal raised along with Form No.36 and also additional grounds taken by filing petition for admission of additional grounds in concise form and relevant modified grounds of appeal filed by the assessee are re-produced as under: 1. The order of the Commissioner of Income Tax (Appeals) is erroneous both on facts and in law. 2. The Commissioner of Income Tax (Appeals) erred in not considering the grounds of appeal in proper perspective. The submissions of appellant has not been brought out and considered in detailed manner with regard to validity of search and block assessment. IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 3 :: 3. The Learned Commissioner of Income Tax (Appeals) erred is not noting that the conditions precedent to initiate search under section 132 as contemplated under the act has not been fulfilled or satisfied and hence, the search initiated is not valid in law. 4. The Learned Commissioner of Income Tax (Appeals) failed to note that there was no valid warrant of authorization as it had been issued in wrong name and the assessment proceedings are vitiated and void and assessment order passed in such proceedings would be void ab initio. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that a statement could not have been recorded from the appellant u/s.132(4) when the appellant is not found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article of thing and further that an addition could not have been made based on such statement. (Additional Ground) 6. For that the assessment completed u/s.158BC r.w.s.143(3) is bad in law since the additions were made only based on the sworn statement recorded during the course of search and not made based on any evidence found as a result of search (Additional Ground) 7. For that the additions cannot be made based on the sworn statement recorded during the course of search and / or without any material found as a result of search. (Additional Ground) 8. For that the Commissioner of Income Tax (Appeals) erred in concluding that the stock of Manapalli quarry, it has to be added as undisclosed income, has to be added only in the hands of the appellant and that the amount realized on sale of such sand in subsequent year is to be offered u/s.41(1)(Additional Ground). 9. For that the Commissioner of Income Tax (Appeals) erred in confirming the additions on account of capital investment in Kunnipalayam Sand Quarry (Shri Murugan Traders) and Manapalli Sand Quarry (Sri Lakshmi Traders) as undisclosed income of the appellant without appreciating that the AOPs had filed their regular return of income up to assessment year 2002-03 wherein the details of investments were furnished and accepted (Modification of grounds 4, 5 and 6 already filed) 10. For that the Commissioner of Income Tax (Appeals) erred in confirming the additions on account of income from Kunnipalayam Sand Quarry (Shri Murugan Traders) and Manapalli Sand Quarry (Sri Lakshmi Traders) without appreciating that the same has been disclosed in the return of income of the respective AOPs filed prior to the search and that the same has been assessed in the hands of the respective AOPs (Additional Ground) 11. For that the Commissioner of Income Tax (Appeals) erred in confirming the addition of undisclosed investment in construction of residential house of V.G.Shanmugam (Additional Ground). 12. The appellant contests all the findings of fact and law made by the Commissioner of Income Tax (Appeals) against the appellant. 13. The appellant craves leave to file Additional Grounds of appeal at or before the time of hearing. 14. Any other ground that may be raised at the time of personal hearing. 3. As regards petition filed by the assessee for admission of additional grounds, the Ld.AR for the assessee submitted that the assessee had taken IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 4 :: additional grounds challenging validity of search assessment in light of warrant of authorization issued by the Department, Panchanama drawn during the course of search and also statement recorded u/s.132(4) of the Act, from the assessee and contended that search assessment framed by the AO u/s.158BC/BD is invalid, because, the warrant of authorization and Panchanama has been drawn in the name of different person other than the assessee. He further submitted that the legal grounds taken by the assessee are purely a question of law, which can be taken at any time of the proceedings, including the proceedings before the Tribunal and thus, prayed for admission of additional grounds in light of decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT reported in [1998] 229 iTR 383 (SC). 3.1 The Ld.DR, on the other hand, strongly opposing the additional grounds of appeal filed by the assessee submitted that the assessee could not make out a case of question of law involved in various additional grounds taken by the assessee by filing petition for admission of additional grounds and thus, additional grounds filed by the assessee cannot be admitted at this stage. 3.2 We have heard both the parties and considered the petition filed by the assessee for admission of additional grounds. We find that additional grounds filed by the assessee challenging validity of search assessment IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 5 :: framed u/s.158BC/BD of the Act, in light of warrant of authorization and Panchanama drawn in the name of the assessee and also statement recorded u/s.132(4) of the Act, during the course of search, are purely a legal ground, which can be taken at any time of proceedings, including proceedings before the Tribunal and thus, by following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (supra), we admit additional grounds filed by the assessee. 4. Ground Nos.1-3 of modified grounds of appeal filed by the assessee, challenging validity of search assessment has been withdrawn by filing an Affidavit and thus, Ground Nos.1-3 are dismissed as not pressed. 5. Ground Nos.4-7 relates to validity of search conducted by the Department and consequent assessment proceedings in light of warrant of authorization and Panchanama drawn during the course of search and also statement recorded u/s.132(4) of the Act, by the Department. The Ld.AR for the assessee referring to various documents, including warrant of authorization and Panchanama drawn during the course of search submitted that warrant of authorization is issued in the name of Dr.K.P.K.Nedunchezhian, is not valid in law, since the name of the assessee is Dr.Nedunchezhian, but not Dr.K.P.K.Nedunchezhian. Since, the warrant is issued in a wrong name, there is no application of mind, as to whom, is to be searched and consequently, the search proceedings and consequent IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 6 :: assessment proceedings, is invalid and liable to be quashed. He further submitted that the AO has framed search assessment u/s.158BC of the Act, solely on the basis of statement recorded during the course of search u/s.132(4) of the Act, without any incriminating material or books of accounts, documents, money, bullion or jewellery or valuable article or thing, found during the course of search. Thus, the assessment order passed u/s.158BC of the Act, on the basis of statement recorded u/s.132(4) of the Act, is invalid and liable to be quashed. In this regard, he relied upon the plethora of judicial precedents, including the decision of the Hon’ble AP High Court in the case of CIT v. Shri Ramdas Motor Transport reported in (1999) 238 ITR 177. 5.1 The Ld.DR, on the other hand, referring to statement recorded during the course of search from the assessee and other relevant documents submitted that although, in certain documents name of the assessee appears as Dr.K.P.K.Nedunchezhian, but in the statement, the assessee himself introduced he is Dr.K.P.K.Nedunchezhian and further, the assessee has also filed Power of Attorney in the name of Dr.K.P.K.Nedunchezhian. Further, the AO has rebutted the contentions of the assessee by bringing on record various evidences, as per which, Dr.K.P.K.Nedunchezhian and Dr.Nedunchezhian are one and the same and merely, because warrant of authorization was issued in the name of Dr.K.P.K.Nedunchezhian, search assessment, cannot be called invalid. As regards, assessment framed on IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 7 :: the basis of statement recorded u/s.132(4) of the Act, he submitted that the moment search takes place, the assessments for 10 years immediately preceding to the year, in which, search took place, has to be assessed on the basis of books of accounts and other evidences found during the course of search. Further, said evidences also includes statement recorded u/s.132(4) of the Act, from the assessee. This principle is supported by the decision of the Hon’ble Madras High Court in the case of B. Kishore Kumar v. DCIT reported in [2014] 52 taxmann.com 449 (Madras) and also the decision of the Hon’ble Kerala High Court in the case of CIT v. St. Francis Clay Décor Tiles reported in (2016) 70 taxmann.com 234. Moreover, the assessee has very categorically admitted undisclosed income in the statement recorded during the course of search and thus, it cannot be held that assessment framed u/s.158BC/BD is illegal. 5.2 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. There is no dispute with regard to fact that warrant of authorization and Panchanama drawn in the name of Dr.K.P.K.Nedunchezhian. It is also an admitted fact that in the PAN Card issued by the Department, the name of the assessee appears as Dr.K. Nedunchezhian. In light of above, assessee has questioned validity of search assessment on the ground that there is no application of mind, as to whom, is to be searched and thus, whole IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 8 :: proceedings become vitiated and liable to be quashed. We find that although, the name of the assessee appears as Dr.K. Nedunchezhian in the PAN Card, but the assessee himself introduced in the statement recorded u/s.132(4) of the Act, that he is Dr.K.P.K.Nedunchezhian. We further noted that the assessee has issued Power of Attorney to the Counsels in the name of Dr.K.P.K.Nedunchezhian. All other evidences brought on record, including Challans for payment of taxes, are in the name of Dr.K.P.K.Nedunchezhian. Therefore, the AO, on the basis of evidences during the course of search and post search investigation very clearly established that Dr.K.P.K.Nedunchezhian and Dr.K. Nedunchezhian are one and the same and it is only technical mistakes appeared in some documents and thus, for these reasons, the assessment cannot be called into question. Therefore, we are of the considered view that there is no merit in ground taken by the assessee challenging validity of search and consequent assessment proceedings in light of warrant of authorization and Panchanama drawn during the course of search. Hence, grounds taken by the assessee are rejected. 6. In so far as Ground Nos.5-7 taken by the assessee challenging validity of search assessment framed u/s.158BC of the Act, on the basis of statement recorded u/s.132(4) of the Act, we find no merit in arguments advanced by the Ld.AR for the assessee for the simple reason that there is IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 9 :: no bar under the Act to frame assessment when the search took place. In other words, the moment search took place, the assessment for the immediately preceding 10 assessment years (block period) should be assessed, whether or not, any books of accounts and other evidences found during the course of search. The arguments of the assessee that in the absence of incriminating materials, no assessment can be framed, does not hold good, because the arguments may hold good for the purpose of examining the additions made by the AO, but not for framing the assessment orders. In so far as various case laws relied upon by the assessee, including the decision of the Hon’ble jurisdictional High Court of Madras in the case of CIT v. G.K.Senniappan reported in [2006] 284 ITR 220 (Madras), we find that the Hon’ble High Court examined additions made by the AO on the basis of statement recorded u/s.132(4) of the Act, without any reference to incriminating material found during the course of search. Under those facts, it was clearly held that no additions can be made on the basis of statement in the absence of incriminating material. In this case, the assessee has questioned the assessment order passed by the AO consequent to search proceedings in light of statement recorded u/s.132(4) of the Act. In our considered view, there is no merit in the arguments taken by the assessee, because, as we stated in our earlier part of this paragraph, the moment search took place, the AO is bound to assess income of the assessee for the block period, whether any undisclosed income found IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 10 :: during the course of search or not. Hence, we reject the arguments taken by the assessee challenging the validity of search proceedings and consequent assessment proceedings. 7. The next issue that came up for our consideration from Ground No.8 of the assessee’s appeal is additions towards stock of sand at Valavanthi Road, amounting to Rs.20 lakhs. During the course of search, from seized material, it was ascertained that the assessee was carrying on business in sand mining in various blocks, including sand mining at Manapalli Reach. In response to Q.No.12, the assessee was asked to clarify why sand mining at Manapalli Reach was taken in the name of Mr.S.Chandrasekar, for which, he admitted that the lease was taken in the name of Mr.S.Chandrasekar, because he was his associate. He further admitted that he created an AOP in the name of M/s.Sri Lakshmi Traders with 110 members, out of which, 80 members were shown to have contributed Rs.1.5 lakhs each, while, 13 members were shown to have contributed Rs.1 lakh each, amounting to total investment Rs.1.5 Crs. He further admitted that said capital contribution in AOP was actually his own investment. For which, he also filed an Affidavit dated 18.12.2002 and admitted that sand mining taken in the name of Mr.S.Chandrasekar at Manapalli Reach is, his own business and capital contribution to said AOP is also his unaccounted money. He further asked to clarify quarrying activities at Manapalli Reach and stock of IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 11 :: sand, for which, he clarified that there is no sand left for quarrying. However, there was sock of 5000 loads, which was kept at Valavandhi. This stock was seized by the Mines Department for unpermitted stock and the approximate value of the stock of sand, would be Rs.20 lakhs. 7.1 The AO, on the basis of admission of the assessee in the statement recorded u/s.132(4) of the Act, held that quarrying lease taken in the name of Mr.S.Chandrasekar and resultant business belongs to the assessee. Therefore, unaccounted stock of sand kept at Valavanthi, has been treated as undisclosed income of the assessee and thus, made additions of Rs.20 lakhs. On appeal, the Ld.CIT(A) held that additions, if any, on account of unaccounted stock has to be made, it has been made only in the hands of the assessee, but deleted the addition, because the stock was confiscated by the Mines Department and further, there was a pending case before the Hon’ble jurisdictional Madras High Court. Therefore, deleted the additions made by the AO, however, directed the AO to assess said stock of sand u/s.41(1) of the Act, when the assessee sold the stock. 7.2 The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in directing the AO to assess value of stock u/s.41(1) of the Act, when it was sold, even though, he has deleted additions made by the AO on the ground that stock of sand was not in the possession of the assessee and further, IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 12 :: there was a pending litigation before the Hon’ble Madras High Court. The Ld.AR for the assessee, further referring to the order of the Hon’ble High Court, which was available in Paper Book filed by the assessee, submitted that Mr.S.Chandrasekar claimed ownership of sand kept at Valavanthi and further, the Hon’ble Madras High Court has directed the District Collector for release of stock to Mr.S.Chandrasekar. Therefore, once the ownership of stock, has been declared in the name of Mr.S.Chandrasekar, no additions can be made towards value of the said sand in the name of the assessee. 7.3 The Ld.DR, on the other hand, referring to various evidences including statement recorded from the assessee submitted that the assessee had categorically admitted sand quarrying business is in the name of Mr.S.Chandrasekar and further, he also admitted investment made in AOP / M/s.Sri Lakshmi Traders, as his own investments. The assessee further admitted the fact that stock kept at Valavanthi, is unaccounted, which was not recorded in the books of accounts of M/s.Sri Lakshmi Traders. The AO, on the basis of evidences gathered during the course of search, rightly assessed value of stock of sand in the name of the assessee, which was further supported by the Affidavit filed by the assessee as well as license holder, Mr.S.Chandrasekar. Therefore, there is no error in the reasons given by the Ld.CIT(A) to sustain the additions made by the AO and their orders should be upheld. IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 13 :: 7.4 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. There is no dispute with regard to the sand quarrying business, which was carried out in the name of M/s.Sri Lakshmi Traders, an AOP consisting of 110 members. The AO made additions towards stock of sand in the hands of the assessee only for the reasons that the assessee has admitted investment in AOP / M/s.Sri Lakshmi Traders, as his own investment and further, he was taken lease license in the name of Mr.S.Chandrasekar. The AO relied upon the statement recorded u/s.132(4) of the Act, coupled with Affidavit filed by the assessee, Mr.S.Chandrasekar and concluded that sand quarrying business at Manapalli Reach, is carried out by the assessee and whatever investment in the capital account of AOP / M/s.Sri Lakshmi Traders, is undisclosed income of the assessee. We have given our thoughtful consideration to the reasons given by the AO in light of various evidences filed by the assessee and we ourselves do not subscribe to the reasons given by the AO for the simple reasons that except statement recorded u/s.132(4) of the Act, and Affidavit of the assessee and his associate Mr.S.Chandrasekar, the AO does not bring on record any other credible evidences to link sand quarrying business at Manapalli Reach in the name of Mr.S.Chandrasekar, in fact, belongs to the assessee. The AO has given his own reasons on the basis of suspicion and surmises, but nothing was brought on record to implicate the assessee to the said business and stock IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 14 :: lying at Valavanthi. In fact, Mr.S.Chandrasekar owned up the business of sand quarrying at Manapalli Reach and further, he had filed a case before the Hon’ble Madras High Court, challenging the action of the Mines & Geology Department in seizure of sand kept at Valavanthi. We further noted that the Hon’ble Madras High Court, has passed an order and directed the District Collector to release stock to Mr.S.Chandrasekar. On the basis of the Hon’ble Madras High Court order, the District Collector has passed an order for release of the sand to Mr.S.Chandrasekar. The assessee, further, clarified that said stock of sand, was not still sold as permission was not granted for sale. From the above, what is clear is that sand mining at Manapalli Reach was carried out by Mr.S.Chandrasekar and further, stock of sand at Valavanthi is belongs to Mr.S.Chandrasekar. Therefore, we are of the considered view that the AO is erred in making additions towards stock of sand amounting to Rs.20 lakhs in the name of the assessee on the basis of statement recorded u/s.132(4) of the Act, even though, other evidences clearly prove that said stock does not belong to the assessee. It is an admitted fact that no additions can be made on the basis of statement recorded u/s.132(4) of the Act, alone and this legal principle is supported by number of judicial precedents, including the decision of the Hon’ble jurisdictional Madras High Court in the case of CIT v. S.V.Sreenivasan reported in [2018] 404 ITR 0433 (Mad). This legal principle is further supported by the decision of the Hon’ble Madras High Court in the case of IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 15 :: CIT v. S. Jayalakshmi Ammal reported in [2017] 390 ITR 0189 and also the decision in the case of CIT v. K. Bhuvanendran & Ors. reported in [2008] 303 ITR 0235. Further, the CBDT has issued Circular F.No.286/98/2013- IT dated 18.12.2014 in continuation of its earlier Circular F.No.286/2/2003- IT dated 10.03.2003, wherein, it was directed its Field Officer to concentrate on gathering evidences to make additions on undisclosed income instead of taking confessional statement from the assessee during the course of search. In this case, on perusal of materials available on record, we find that additions made by the AO towards stock of sand, is solely on the basis of statement recorded from the assessee, but not based on any evidences collected during the course of search. Hence, we are of the considered view that the AO was erred in making addition towards stock of sand in the name of the assessee. Although, the Ld.CIT(A) has deleted the additions made by the AO towards stock of sand, but directed the AO to assess value of stock of sand u/s.41(1) of the Act, when said sand is sold. In our considered view, the Ld.CIT(A) is completely erred in appreciating the fact that the said sand does not belong to the assessee as per the order of the Hon’ble High Court coupled with order passed by the District Collector, releasing stock in favour of Mr.S.Chandrasekar. Therefore, we are of the considered view that the AO as well as the Ld.CIT(A) are erred in assessing value of stock of sand, amounting to Rs.20 IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 16 :: lakhs in the name of the assessee. Hence, we direct he AO to delete the additions made towards stock of sand. 8. The next issue that came up for our consideration from Ground No.9 of the assessee’s appeal is sand quarrying business carried out in the name of M/s.Shri Murugan Traders and M/s.Sri Lakshmi Traders. During the course of search, the assessee was asked to explain the details of sand quarrying business. For which, in response to Q.No.6, the assessee submitted that he had obtained sand quarrying lease from State Government in the name of Mr.K.P.K.Elango for Vengarai Reach and further, made initial investment and also paid yearly lease amount. The assessee further stated that he had obtained lease for sand quarrying at Kunnipalayam in the name of Mr.B.G.Shanmugam Iyer, who is his close confidant and further, admitted that he had paid lease amount of Rs.60.50 lakhs with 10% EMD. The business was carried out in the name of AOP, M/s.Shri Murugan Traders purportedly consisting of 110 members. Similarly, the assessee further stated that he had obtained lease for quarrying at Manapalli Reach in the name of Mr.S.Chandrasekar, who was his Farm Manager and further, he has paid lease amount of Rs.1.27 Crs. in addition to 10% EMD. This business was carried out in the name of AOP M/s.Sri Lakshmi Traders purportedly consisting of 51 members. The assessee was asked to explain the nature of business carried out for sand IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 17 :: quarrying business and profit derived from the said business. For which, in Q.No.7, he has stated that he is not maintained any books of accounts for sand quarrying business done in the name of his associates. However, admitted that he has spent a sum of Rs.40 lakhs towards construction of Vengarai Amman Temple by using profit earned from sand quarrying business. He had also admitted to have carried out business of sand mining in the name of his associates, but initial capital was contributed by him, but not any members of AOP. The assessee had also filed an Affidavit dated 18.12.2002 and reiterated his admission in the statement recorded u/s.132(4) of the Act. The licensees have also filed Affidavit dated 18.12.2002 and admitted that sand quarrying business carried out in the name of AOP was, in fact, belongs to Dr.Nedunchezhian and all capital & initial investment was made by him. The AO based on statement recorded from the assessee coupled with Affidavit filed by the licensees opined that investment made in sand quarrying business in the name of M/s.Shri Murugan Traders and M/s.Sri Lakshmi Traders, is undisclosed income of the assessee and thus, made additions towards capital investment in AOP and also profit derived from said AOP for the assessment years in the hands of the assessee. 8.1 The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in sustaining the additions made by the AO towards capital introduced and IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 18 :: income from sand quarrying business from Kunnipalayam Reach and Manapalli Reach, even though, M/s.Shri Murugan Traders had admitted that the business is in their name and also filed return of income for the relevant assessment years declaring income from sand quarrying business. The Ld.AR for the assessee referring to various documents submitted that quarry lease was obtained by Mr.B.G.Shanmugam Iyer and the business was running in the name of M/s.Shri Murugan Traders, an AOP consisting of 110 members. The members of the AOP have contributed initial capital. Except statement recorded from the assessee u/s.132(4) of the Act, no other evidences with the AO to prove that the business belongs to the assessee and investment made by the assessee and that investment made for the sand quarrying business, is undisclosed income of the assessee. The AOP have filed return of income and the AO assessed the AOP under the Act. Therefore, based on statement alone, no addition can be made when all other evidence goes to prove that the business was carried out by AOP and their members and the assessee is nothing to do with the said business. 8.2 The Ld.DR, on the other hand, submitted that right from day one, the assessee claimed that sand quarrying business at three locations are belong to him and he had paid initial lease amount and EMD for obtaining quarrying license. The assessee further admitted that sand quarrying business in the IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 19 :: name of AOP, is belongs to him and whatever profit earned from sand quarrying business was spent by him. The assessee had also filed an Affidavit and reiterated his admission in the statement recorded from the assessee u/s.132(4) of the Act. The licensees have filed supporting Affidavit and admitted the fact that sand quarrying business run in the name of M/s.Shri Murugan Traders and M/s.Sri Lakshmi Traders, belong to the assessee and initial investment was made by the assessee. The assessee could not produce all the members of AOP to prove the stand taken that the AOP has carried out business only and further capital contributed to AOP is not invested by the assessee. Since, the assessee has not rebutted his statement and Affidavit filed during the course of assessment proceedings, he cannot take different stand at this stage and contended that sand quarrying business was carried out by AOP and which is nothing to do with his affairs. 8.3 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The sole basis for additions towards capital contribution into two AOPs and income declared from sand quarrying business in the hand of the assessee, is search conducted in the case of the assessee u/s.132 of the Act. During the course of search, based on information collected, the Department has recorded statement from the assessee u/s.132(4) of the Act. For which, IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 20 :: the assessee has stated that he has obtained sand quarrying license in the name of his associates Mr.K.P.K.Elango, Mr.B.G.Shanmugam Iyer and Mr.S.Chandrasekar for different Reaches and also paid lease amount plus EMD for obtaining license. The assessee further stated that in response to various questions and admitted that purported AOP consisting of 110 members for Kunnipalayam Reach and its members are known to him. However, the capital contribution to AOP was his undisclosed income. Similarly, the assessee has made very same admission for Quarry at Manapalli Reach, obtained in the name of Mr.S.Chandrasekar. The assessee also filed an Affidavit and reiterated his admission made in the statement recorded u/s.132(4) of the Act. The AO has made additions towards capital contribution to M/s.Shri Murugan Traders and M/s.Sri Lakshmi Traders, on the basis of admission of the assessee in the statement recorded u/s.132(4) of the Act, coupled with Affidavit filed during the course of investigation proceedings. Except this, no other evidence with the AO to make an allegation that the business was carried out by the assessee in the name of benami persons and investment made in capital contribution to AOP was undisclosed income. Further, all evidences, including licenses obtained from State Government for sand quarrying business, was in the name of different persons. It is also not in dispute that M/s.Shri Murugan Traders had carried out quarrying activities at Kunnipalayam Reach and also filed return of income for the relevant IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 21 :: assessment years and admitted income from sand quarrying business. Similarly, Mr.S.Chandrasekar has obtained quarrying license for Manapalli Reach and the business was carried out in the name of M/s.Sri Lakshmi Traders consisting of 51 members. The capital contribution to AOP was explained by individual members of the AOP. Although, they have stated that capital contribution to AOP was given by the assessee, but, all records including permissions granted by various Departments are in the name of different individuals and AOP. Further, in the case of Quarry at Manapalli Reach, Mr.S.Chandrasekar had filed a case before the Hon’ble Madras High Court, challenging seizure of stock of sand by Mines & Geology Department and the Hon’ble High Court has passed Writ with direction to the District Collector to release the stand in favour of Mr.S.Chandrasekar. The District Collector has passed an order and released sand seized by the Mines Department in favour of Mr.S.Chandrasekar. From the above what is clear is that sand quarrying business at Vengarai was carried out by Mr.K.P.K.Elango and the investment was also made by him and the assessee is nothing to do with the said sand quarrying business. Similarly, sand quarrying business at Kunnipalayam Reach was in the name of Mr.B.G.Shanmugam Iyer and the said business was carried out by M/s.Shri Murugan Traders, an AOP consisting of 110 members. The capital was contributed by the members and also explained the source for investment made in AOP. Likewise, Quarry at Manapalli Reach was in the name of IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 22 :: Mr.S.Chandrasekar and the business was carried out in the name of M/s.Sri Lakshmi Traders, an AOP consisting of 51 members. Therefore, we are of the considered view that when all evidences gathered during the course of search, goes to prove an undoubted fact that the assessee is nothing to do with sand quarrying business at different Reaches, the AO ought not have made additions towards capital contribution to AOP in the hands of the assessee, merely, on the basis of statement recorded during the course of search u/s.132(4) of the Act. Further, it is an admitted legal position by the decision of various Courts, including the decision of the Hon’ble High Court in the case of CIT v. S.V.Sreenivasan (supra) that additions cannot be made on the basis of statement recorded u/s.132(4) of the Act, alone, unless the evidence gathered during the course of search indicate that undisclosed income belong to the assessee. The CBDT, time and again, has directed its Officers by issuing Circulars, as per which, vide CBDT Circular F.No.286/98/2013-IT dated 18.12.2014 very categorically directed its Field Officers to concentrate on gathering evidences during the course of search and strictly avoid obtaining admission of undisclosed income under coercion and undue influence. Various Courts have taken a similar view and held that additions cannot be made on the basis of admission alone, unless material collected during the course of search proven to the fact that the said admission is supported by evidences. IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 23 :: 8.4 In this case, on perusal of reasons given by the AO & the Ld.CIT(A), we find that except statement recorded u/s.132(4) of the Act, nothing on record to indicate the assessee and AO does not bring on record any evidences to prove the fact that the sand quarrying business was carried out by the assessee in the name of his associates. The AO has made additions on guess work based on admission alone, even though, the law is very clear on this aspect and further, statement made during the course of search, is not a conclusive evidence. Therefore, we are of the considered view that the AO was erred in making additions towards capital contribution to M/s.Shri Murugan Traders (AOP) and M/s.Sri Lakshmi Traders (AOP) and resultant profit for the year in the hands of the assessee. The Ld.CIT(A) without considering the relevant facts simply sustained the additions made by the AO. Hence, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the additions made towards capital contribution and income from sand quarrying business from Kunnipalayam Reach in the name of M/s.Shri Murugan Traders and Manapalli Reach in the name of M/s.Sri Lakshmi Traders, in the hands of the assessee. 9. The next issue that came up for our consideration from Ground Nos.10-11 of the assessee’s appeal is cost of construction of house property of Mr.V.G.Shanmugam for Rs.4,25,000/-. The AO has made additions towards cost of construction of house property in the name of Mr.V.G.Shanmugam as undisclosed income of the assessee on the ground IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 24 :: that the assessee has invested for construction of house property in the name of Mr.V.G.Shanmugam. The sole basis for AO to reach to above conclusion is, statement recorded from the assessee u/s.132(4) of the Act, during the course of search. It was the explanation of the assessee before the AO that house was constructed by Mr.V.G.Shanmugam and Mr.V.G.Shanmugam had explained source for investment in construction of house property by filing a cash flow statement. 9.1 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that sole basis for the AO to make additions of Rs.4,25,000/- towards cost of construction of house property in the name of Mr.V.G.Shanmugam is statement recorded from the assessee u/s.132(4) of the Act. Where, he had admitted to incur expenditure for construction of house property for Mr.V.G.Shanmugam. Except this, no other evidences with the AO to disprove the claim of the assessee that house property is in the name of Mr.V.G.Shanmugam and further, he had explained source for cost of construction of house property by filing cash flow statement. Therefore, we are of the considered view that the AO has made additions towards cost of construction of house property of Mr.V.G.Shanmugam, in the name of the assessee without any evidence with the AO to prove his claim. Hence, we direct the AO to delete the addition made towards cost of construction of house property of Mr.V.G.Shanmugam in the name of the assessee. IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 25 :: 10. In the result, the appeal filed by the assessee in IT (SS) A No.2/Chny/2018 is partly allowed. IT (SS) A No.5/Chny/2006: 11. At the time of hearing, Ld.Counsel for the assessee submitted that tax effect involved in appeal filed by the Revenue, is below threshold limit fixed for filing appeal before the Tribunal. The Ld.DR fairly agreed that the tax effect involved in appeal filed by the Revenue, is below the prescribed limit. However, strongly supported the order passed by the AO and contended that since, the issue involved in the present appeal is inter linked with the issues challenged by the assessee, in his appeal, the appeal comes within the exception as provided in the Circular issued by the CBDT for fixing threshold limit fixed for filing appeal before the Tribunal and thus, this appeal needs to be decided on merits. We find that tax effect involved in the present appeal filed by the Revenue, is below threshold limit vide CBDT Circular No.17 of 2019 dated 08.08.2019. We further noted that this appeal does not come under any of the exceptions as provided under the said Circular. Therefore, we are of the considered view that appeal filed by the Revenue is not maintainable and thus, we dismiss the appeal filed by the Revenue as infructuous. IT (SS) A No.5/Chny/2006 IT (SS) A No.2/Chny/2018 & CO No.83/Chny/2006 :: 26 :: CO No.83/Chny/2006: 12. The assessee has filed Cross-Objection in support of findings of the Ld.CIT(A) in allowing relief towards additions made on account of amount incurred for construction of Vengarai Amman Temple. Since, appeal filed by the Revenue has been dismissed as not maintainable, the Cross- Objection filed by the assessee becomes infructuous and thus, the same is dismissed as not maintainable. 13. In the result, appeal filed by the Revenue in IT (SS) A No.5/Chny/2006 & Cross-Objection filed by the assessee in CO No.83/Chny/2006 are dismissed as infructuous. Order pronounced on the 25 th day of May, 2022, in Chennai. Sd/- (वी. दुगा राव) (V. DURGA RAO) याियक सद य/JUDICIAL MEMBER Sd/- (जी. मंजूनाथा) (G. MANJUNATHA) लेखा सद य/ACCOUNTANT MEMBER चे ई/Chennai, दनांक/Dated: 25 th May, 2022. TLN आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant 4. आयकर आयु /CIT 2. यथ /Respondent 5. िवभागीय ितिनिध/DR 3. आयकर आयु (अपील)/CIT(A) 6. गाड! फाईल/GF