DCIT CC-1(4), KOLKATA, KOLKATA V. GIRHAR TRACOM PVT LTD , KOLKATA

ITSSA 23/KOL/2024

AI Insights

The case involves appeals by the revenue against the orders of the Ld. Commissioner of Income Tax (Appeals)-20, Kolkata, for the assessment years 2013-14 to 2019-20. The appeals were consolidated due to the similarity of issues across the years. The primary contention was the deletion of additions made under section 68 of the Income Tax Act, 1961, concerning bogus unsecured loans. The revenue challenged the CIT(A)'s decision, arguing that the CIT(A) misinterpreted the Supreme Court's decision in Pr. CIT Vs. Abhiser Buildwell (P) Ltd., which emphasized the use of 'material' rather than 'documents'. The Tribunal found that no incriminating materials were seized during the search operation that could substantiate the additions made for the years in question.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469684 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-10-2024
• Assessment Year: misc
• Appeal Filed On: 09-03-2024
• Other Referred Cases: Pr. CIT Vs. Abhiser Buildwell (P) Ltd., CIT vs. Harjeev Agarwal, CIT v. Shri Ramdas Motor Transport, PCIT vs. Sunrise Finlease (P) Ltd., CIT vs. Sanjeev Kumar JIN, CIT vs. Rajesh Kumar JIN, CIT vs. Best Infrastructure (I) Pvt. Ltd., CIT vs. Kabul Chawla, CIT vs. Saumya Construction (P.) Ltd., CIT vs. Devangi alias Rupa, CIT vs. IBC Knowledge Park (P.) Ltd., CIT vs. Salasar Stock Broking Ltd., CIT vs. Gurinder Singh Bawa, CIT vs. Naresh Kumar Agarwal, CIT vs. Abhisar Buildwell Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ISSUING NOTICE US. A DATED .. WHICH WAS; OBSERVING; HELD
• Keywords: Corroborative evidences; Income from undisclosed sources; Document seized; Documents seized; Reopening of assessment; Search and seizure; Accommodation entries; Block assessment; Opportunity of cross examination; Bogus
• Section: 147; 148; 143(3); 143(2); 250; 143(1); 153; 132; 153A; 68; 131; 133(6); 2; 158BC; 158B(b)

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ “बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA Įी राजेश क ुमार, लेखा सटèय एवं Įी Ĥदȣप क ुमार चौबे, ÛयाǓयक सदèय क े सम¢ [Before Shri Rajesh Kumar, Accountant Member &Shri Pradip Kumar Choubey, Judicial Member] I.T.(S.S).A. Nos. 23-24 & 32 to 36 & 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 DCIT, CC-1(4), Kolkata Vs. Girhar Tracom Pvt. Ltd. (PAN: AACCG 1735 P) Appellant / ) अपीलाथȸ ( Respondent / Ĥ×यथȸ Date of Hearing / सुनवाई कȧ Ǔतͬथ 17.10.2024 Date of Pronouncement/ आदेश उɮघोषणा कȧ Ǔतͬथ 07.11.2024 For the Appellant/ Ǔनधा[ǐरती कȧ ओर से Shri Manish Tiwari, FCA For the Respondent/ राजèव कȧ ओर से Shri Prakash Nath Barnwal, CITDR ORDER / आदेश Per Rajesh Kumar, AM: These are the appeals preferred by the revenue against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-20, Kolkata (hereinafter referred to as the “Ld. CIT(A)”] for the AYs 2013-14 to 2019-20 respectively passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). . 2 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. 2. Since the issues are mostly identical and all the appeals have heard together, we dispose of all the captioned appeals by this consolidated order for the sake of convenience and brevity. The A.Y. 2013-14 and 2014-15 were beyond six years but within ten years and the revenue has challenged the order of CIT(A) holding that re- opening as bad on the ground that the AO did not have in his possession any books of accounts or documents or evidence revealing that any income represented in the form of asset has escaped assessment of Rs. 50.00 Lacs or more. Whereas the remaining A.Y. 2015-16 to 2019-20 were within six years from the date of search and were unabated and the additions were made without there being any incriminating materials seized during search action and the ld. CIT(A) deleted the additions sans any incriminating materials seized during search. We are deciding all the appeals by the revenue together though the facts are taken from the lead case IT(SS)A No. 23/Kol/2024 A.Y. 2013-14. 3. The common issue raised by the revenue in the grounds of appeal is against the deletion of addition by Ld. CIT(A) which was made by the AO u/s. 68 of the Act on account of bogus unsecured loans without appreciating the fact that in the Hon’ble Apex Court decision in the case of Pr. CIT Vs. Abhiser Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC) the word ‘material was used and not ‘documents’ as used by Ld. CIT(A). 4. Facts in brief are that a search and seizure action u/s. 132 of the Act was conducted in the case of Primarc Group of Companies and other associated entities on 05.01.2021. Consequent to the search operation, proceedings u/s. 153A of the Act were initiated against the assessee by issuing notice u/s. 153A dated 23.02.2022 which was duly served upon the assessee. The assessee filed the return of income on 12.03.2022 declaring total income of Rs.49,72,610/-. Thereafter, notice u/s. 143(2) of the Act was issued and served upon the assessee. It is pertinent to note that during the course of search operation and post search enquiry it was observed that certain incriminating materials were seized. The assessee filed the original return of income on 28.09.2013 declaring totql income at Rs. 49,72,610/- which was processed u/s 143(1) of the Act. 3 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. The assessment was thereafter completed u/s 153C/143(3) of the Act on 30.12.2017 with assessed income of Rs. 54,25,920/-. Subsequently the case of the assessee was re- opened u/s 147 r.w.s. 148 of the Act and assessment was framed vide order dated 01.09.2021 assessing the income at Rs. 59,45,043/-. Notice u/s. 133(6) of the Act was also issued to many companies from whom the assessee had raised huge unsecured loans which were duly replied in many of the cases but in some cases no replies were received . The AO further noted that assessee has raised loans from companies having no identity and creditworthiness. The AO also issued summons u/s 131 of the Act to the assessee to produce the directors of the lender companies. The AO also noted that statements u/s 132(4) were also recorded during the search operation of Shri Mahesh Pansari and Shri Sidharth Pansari being the directors of the group companies who could not give satisfactory replies. The AO finally concluded that the unsecured loans were nothing but re-routing its own money in the form of unsecured loans. Finally, the AO after discussing the modus operandi of the entry operators and also regarding the fact that documents found during the course of search operation and post search enquiry and also the fact that the assessee could not furnish any plausible explanation with respect to the creditworthiness and genuineness of the transactions of unsecured loans , treated these loans as bogus and not genuine loans and added Rs. 3,21,11,167u/s. 68 of the Act to the income of the assessee. Besides, commission @ 5% was also added on notional basis towards arranging these unsecured loans thereby making an addition of Rs.1,60,556/- to the income in the assessment framed u/s. 153A read with section 143(3) of the Act dated 31.12.2022. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) challenging the addition on the ground of no incriminating material found during the course of search and also challenging the exercise of power conferred under 4th proviso to section 153 of the Act for reopening the 7th year i.e. AY 2014-15 and 8th year i.e. for AY 2013-14 which were beyond six years but within ten years. The assessee submitted before the AO that the reopening of 7th and 8th assessment years are 4 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. invalid and against the facts on record as AO did not have other books of account which revealed that any income of Rs. 50 lacs or more represented in the form of assets had escaped assessment. It was also stated that the definition of assets as contained in sec. 153A of the Act does not include unsecured loans which was also contended before the Ld. CIT(A). The alleged statements of entry operators/ dummy directors were recorded behind the back of the assessee without providing any opportunity for rebuttal nor the assessee was provided any opportunity of cross examination. The assessee submitted that the AO had added the unsecured sans incriminating materials/evidences found during search specially when the assessment years are unabated on the date of search. The Ld. CIT(A) also called for a remand report from the AO which was duly submitted by the AO. Finally, ld. CIT(A) allowed the appeal of the assessee by observing and held as under: “4.4 Observations and decision: 4.4(a) I have carefully considered the facts of the case and submission of the appellant. Perusal of the assessment order shows that in the initial part of the order, A.O. has mentioned that during the course of search operation, several incriminating documents were seized. It is further mentioned that during the course of search operation and post search enquiries, it is seen that some of the materials seized during the course of search operation belongs/pertains to the assessee. These evidences point out that assessee group has brought back its own unaccounted income in the form of bogus unsecured loan by layering the transaction through several paper/shell companies. However, A.O. has not referred to any such evidences in the assessment order. Assessment order does not mention any incriminating evidences found during search. Although several documents were seized during search but A.O. has not discussed the contents of any such seized documents which he considers to be incriminating. Rather, he has relied on statements of various persons, recorded during post search enquiry, to make addition. In the assessment order, A.O. has reproduced some extracts from the statement of Mr. Mahesh Pansari and Mr. Siddharth Pansari, directors in group companies. However, perusal of these statements do not indicate that they have accepted any wrong doing on their part. They have not mentioned anywhere that loans taken by their group concerns were not genuine. They have stuck to their stand that all the loans are genuine. Next, A.O has referred to the statements of Shri Mantosh Yadav which was recorded on 16-02-2021 u/s.131 of the Act and the statement of Shri Pritam Ghosh, which was recorded on 22-02-2021 u/s.131 of the Act. In their statements these two persons have accepted that they are dummy directors but at the same time they also mentioned that they are not fully aware about the transactions conducted through the said companies, as they have been acting on the instructions of Shri B.L. Mittal and Shri Pradip Kr. Chowdhury. Statement of another dummy director, Shri Gopal Maity was also recorded on 22-02-2021 u/s.131 of the I.T. Act. In his statement Mr. Maity stated that he was controlled by entry operator, Shri Jivendra 5 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. Mishra and Shri Sagarmal Nahata. Similarly, statement of another dummy director, Shri Radha Kant Tiwari was also recorded on 22-02-2021 u/s.131 of the Act. He had acted on the introductions of Shri Sagarmal, entry operator. Perusal of these statements revealed that in the first place, the statement of dummy directors do not appear to have been confronted to the entry operators (their handlers) and neither to the directors of the assessee group. Secondly, these statements were recorded almost one & half months after the date of search. While recording the statement there is no reference to any incriminating evidences found during the course of search which needed to be confronted to these persons. In their statement the dummy directors have provided only generalised information without providing any specific information about the group concerns. In any case the statement given by dummy directors are not supported by any incriminating evidence found during search and neither these were confronted to the director of assessee group. 4.4(b) Now, let us examine whether statement u/s132(4) in itself can be considered as incriminating evidence in the light of several judicial pronouncements. This matter was considered by the Hon’ble Delhi High Court in the case of CIT vs. Harjeev Agarwal 241 taxman.com 199 (Delhi). Hon’ble High court had held that the statement recorded u/s. 132(4) do not themselves constitute incriminating material if these are not by based upon any seized/incriminating material. The operating part of the judgement is as under: “19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words \"evidence found as a result of search\" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. 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 6 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 22. In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman 300, a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below:— \"A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle.\" 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the 7 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 25. In CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306, a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. The relevant extract from the said judgement is quoted below: \"17. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under section 94 of the Code of Criminal Procedure by operation of sub-section (13) of section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent.\" \"18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee.\" \"19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section 158BC of the Act.\" This decision was reiterated by the Hon’ble Delhi High Court in the case of Pr. CIT vs. Best Infrastructure (I) Pvt. Ltd. 397 ITR 182 (Delhi). The relevant findings of the Hon’ble High Court mis reproduced as under: “35. As noted in Meeta Gutgutia (supra), several other High Courts have also come to a similar conclusion either by following Kabul Chawla (supra) or otherwise. This includes the decisions of the Gujarat High Court in Pr. CIT v. Soumya Construction (P.) Ltd. [2016] 387 ITR 529/[2017] 81 taxmann.com 292 (Guj.); Pr. CIT v. Devangi alias Rupa [Tax Appeal Nos. 54, 55 to 57 of 2017, dated 2-2-2017]; the Karnataka 8 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. High Court in CIT v. IBC Knowledge Park (P.) Ltd. [2016] 385 ITR 346/69 taxmann.com 108 (kar.); the Kolkata High Court in Pr. CIT v. Salasar Stock Broking Ltd. [GA No. 1929 of 2016, dated 24-8-2016] and the Bombay High Court in CIT v. Gurinder Singh Bawa [2016] 386 ITR 483/[2017] 79 taxmann.com 398. In Meeta Gutgutia (supra) the entire gamut of the case law had been analysed and the legal position was reiterated that unless there is incriminating material qua each of the AYs in which additions are sought to be made, pursuant to search and seizure operation, the assumption of jurisdiction under Section 153A of the Act would be vitiated in law. This is one more occasion for the Court to reiterate that legal position. 36. Turning to the facts of the present case, it requires to be noted that the statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal 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 AYs. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law.” 4.4. c. In his report, A.O. has referred to various case laws where Courts have held that the statement recorded under oath have evidentiary value for assessment proceedings. There is no disagreement with A.O’s views in this regard. However, for search assessment, the Hon’ble Courts have held that additions should be supported by incriminating evidences found during the search. There are several judgements on this issue which point out that some credible evidences should be discovered during the search to justify the addition in search assessment. Reference to ‘Hayden’s Rule of Mischief’ would not fit in the criteria laid down by the Courts for interpreting the 9 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. incriminating evidence found during search. Search assessment proceedings are special proceedings and Hon’ble Courts have held that addition should be based on incriminating evidences found during search and not from other sources. Incriminating evidences, other than those found during search, can be used against the assessee in other proceedings under the Act, but not during the search assessment proceedings. Statements of the alleged entry operators were recorded behind the back the assessee. Leave alone providing opportunity of Cross examination, it appears that even the copies of the statements were not provided to the appellant during assessment proceedings for rebuttal. In the case of Suraj Mal Mohta and Co. vs. A.V. Vishcanatha Sastrim (1954) 26 ITR 1 (SC), Hon’ble Supreme Court has held that assessee has the right to inspect the record and the adverse material and must be provided sufficient time and opportunity to lead his rebuttal. The very failure to afford the assessee with the opportunity to cross examine, when the said statement is being utilized as evidence against the assessee, would make those statements devoid of any evidentiary value against the assessee, as held by the Hon’ble Courts in the following judgements : i) Andaman Timber Industries vs. CCE (2015) 281 CTR 241 (SC) ii) In the case of Kishinchandra Chellaram, AIR 1980 SC 2117 (SC) iii) In the case of Eastern Commercial Enterprise, (1994) 210 ITR 103 (Calcutta) iv) CIT vs. Sanjeev Kumar JIN (2009) 310 ITR 178 (P & H) v) CIT vs. Rajesh Kumar JIN (2008) 306 ITR 27 (Delhi)) In the case of PCIT vs. Sunrise Finlease (P) Ltd. (2018) 80 taxmann.com 1 (Gujarat) when no incriminating evidences were found against the assessee during the course of search, it was held that no addition can be sustained on the basis of a statement recorded u/s.131 of the Act. 4.4(d) It is apparent from the above discussion that no incriminating evidences were found during search, which might be relevant for the current year. There is no reference to any such incriminating evidences in the assessment order. During appellate proceedings in the case of M/s Primarc Pecan Retail Pvt. Ltd., A.O. was given one more opportunity to point out the incriminating evidences found during search, which might be the basis for addition. However, A.O. has not provided any such direct evidences. His report mentions his interpretation of incriminating evidences on the basis of circumstantial evidences and deductions based on his understanding. There is no reference to any direct incriminating evidences found during the search. On the contrary there are a number of judgements, some of which are discussed in the preceding paras, which are directly on the issue as to what is to be considered as incriminating evidences found during search. Even statements of the Directors/Main person of the entities, recorded u/s.132(4) of the I.T. Act, 1961 are not considered incriminating if these are not corroborated by direct evidences found during search. In the present case, A.O. has referred to statements of some of the dummy directors. But these were recorded during post search inquiries. Dummy directors have provided only generalized information and they have admitted that they are not fully aware of entire transaction. These statements do not appear to have been confronted to their handler entry operators and neither to the directors of the assessee group. Appellant alleges that even copies of these statement were not provided for rebuttal, leave along the opportunity to cross examine such persons. Under the circumstances, these are of no evidentiary value, as held by several courts. Further, 10 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. in the assessment order for the current year, names of different entry operators have been mentioned who are alleged to have arranged the loans. However, none of them appear to have been examined even during post search enquiries. 4.4(e) In view of the discussions made in the preceding paras, I am in agreement with assessee’s contentions that additions in search assessment in the current assessment year, which happens to be an unabated/complete assessment year, are not supported by any incriminating evidences found during search. Now let us examine some of the leading cases where the Courts have held that additions in search assessment, without incriminating evidences found during search, are not sustainable. In the case of CIT vs. Kabul Chawla (2016), 380 ITR 573(Delhi) the Hon’ble Delhi High Court has held that once a search takes place, notice u/s. 153A (1) has to be mandatorily issued. Assessment and re-assessment pending on the date of search shall abate. But, an assessment under the section 153A has to be made only on the basis of seized materials. In absence of any incriminating materials, the completed assessment can be only reiterated and assessment can be made only in respect of abated assessment or re- assessment. Completed assessment can be only interfered with by the AO while making the assessment u/s.153A 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 course of search which were not produced or not already disclosed or made known in the course of original assessment. While delivering the judgment; the Hon'ble Delhi High Court followed the judgment of the Bombay High Court in CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645. These two judgments have been followed by various High Courts and Tribunals on this issue. The position as on today is that in respect of completed assessment any addition can be made under proceedings u/s.153A only if any incriminating documents are found. Issue relating to additions being based on incriminating evidences found during search, has been recently examined by the Hon’ble Supreme Court. Several SLPs pending in the Hon’ble Supreme Court were heard together with the lead case in Pr. CIT, Central-3 vs. Abhisar Buildwell Pvt. Ltd., Civil Appeal No.6580 of 2021, order dated 24-04-2023. While deciding this appeal several judgements of various High Courts were discussed. Lead judgements by Delhi High Court in the case of Kabul Chawla and judgement of Gujarat High Court in the case of Saumya Construction were specifically discussed elaborately. After considering the arguments of the Department and the Assessee’s Advocates, the Hon’ble Supreme Court has upheld the judgement of the Hon’ble Delhi High Court in the case of Kabul Chawla and the judgement of Gujarat High Court in the case of Saumya Construction. Thus, the Hon’ble Supreme Court has held that no addition can be made in respect of completed assessment in absence of any incriminating material found during search. The operative part of the judgement is as under : “14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the 11 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.” As mentioned above, no incriminating documents have been found during search against the assessee relevant to this particular assessment year. In the current case, additions (disallowances) have been made on the basis of information available in the Audit Report/Return of Income and on the basis of statements recorded u/s.131 of the Act, during post search enquiries. Hence, respectfully following the judgments/decisions of various High Courts and the Tribunals, including those of the jurisdictional High Court and ITAT and the judgement of the Hon’ble Supreme Court in PCIT, Central-3 vs. Abhisar Buildwell Pvt. Ltd., Civil Appeal No.6580 of 2021, order dated 24-04-2023, it is held that the disallowances/additions made are not sustainable. In view of the facts narrated and the discussion above, the disallowances/additions made by the AO vide order u/s.153A read with section 143(3) in this particular assessment year are not sustainable, as these are not linked to any incriminating material found at the time of search. Hence, addition of Rs. 16,41,37,108/-, 8,20,686/- and Rs. 5,25,206/- are deleted. 4.4(f) It is apparent from discussions in the preceding paras that no incriminating evidences were found during search. Statements of some dummy directors and entry operators have been recorded during post search enquiries and the AO has relied on these statements for making the addition and also these statements have been heavily relied upon while recording satisfaction for initiating proceedings u/s 153A for the current year, which happens to be a period beyond six assessment years from the year of search. For the current year AO has invoked powers conferred in 4th proviso to section 153A(1) of the IT Act. However, the pre conditions mentioned therein have not been met. In the first place there should have been some incriminating evidences unearthed during search and secondly, income represented in the form of asset, which has escaped assessment, should be Rs. 50,00,000/- or more. However, the search has not resulted in discovery of any such undisclosed asset. AO has made his own interpretations and presumes that the unsecured loans must have been converted into the assets, to justify initiation of proceedings u/s 153A for the current year. However, this is very far-fetched and this would not fit into the definition of ‘asset’ provided in Explanation 2 to section 153A(1). Search has not resulted into unearthing of any incriminating evidences, as discussed in the preceding paras. Consequently, additions made in order u/s 153A r.w.s. 143(3) are not sustainable in view of the judicial decisions, as referred to in preceding paras. Going by the same logic, issue of notice u/s 153A of the IT Act for period beyond six years from the year of search is not justified as there were no incriminating evidences found during search. Hence, issue of notice u/s 153A in the current year is not justified.” 12 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. 6. The Ld. DR vehemently submitted before us that Ld. CIT(A) found that there was no incriminating materials found and seized during the course of search whereas, as a matter of fact, during post search enquiries and recording statements of the entry operators it was unearthed that the assessee had taken unsecured loans in the form of accommodation entries and, therefore, the department has sufficient evidences/documents in its possession to make the addition. The Ld. DR also referred to the decision of the Hon’ble Apex Court in the case of Pr. CIT Vs. Abhiser Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC) and submitted that in para 14 sub para (iii) the Hon’ble Apex Court has referred to the incriminating material which was found and unearthed even in case of unabated and completed assessment and the AO should assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns. However, the Ld. CIT(A) while recording his conclusion mentioned that no incriminating documents have been found during the course of search against the assessee relevant to the impugned assessment year and Ld. CIT(A) further observed that the addition/disallowance was made on the basis of the information available in the audit report, return of income and on the basis of statements recorded u/s. 131 of the Act during post search enquiries. The Ld. DR submitted that the Hon’ble Apex Court has used the word ‘material’ which is a very wider connotation and is inclusive of documents as have been used by Ld. CIT(A) are also encompassed therein. Therefore, deletion of addition by Ld. CIT(A) on the basis of the fact that no incriminating document was found is incorrect and hence the appellate order may be reversed. 7. Ld. AR, on the other hand, strongly opposed the arguments preferred by the Ld. CIT, DR by submitting that this is undisputed fact that no incriminating material was found during the course of search relating to the assessee and whatever addition was made by the AO was based upon the information as contained in the audit report, return of income and also on the basis of statements recorded u/s. 131 of the Act post search. 13 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. The Ld. AR submitted that the information were already contained in the records of the assessee which were already available with the department. The Ld. A.R argued that the statements do not constitute any incriminating materials unless there are corroborative evidences found during the course of search. The Ld. AR, therefore, prayed that the Ld. CIT(A) has rightly relied on the decision of Hon’ble Apex Court in the case of Abhiser Buildwell Pvt. Ltd. (supra). So far as the reopening of assessment in terms of 4th proviso to section 153A(1) of the Act is concerned, the Ld. AR submitted that the AO has reopened the assessment without the necessary pre-conditions having been met or satisfied. The Ld. AR argued that there are pre-conditions for invoking such jurisdiction which should be in the form of incriminating evidences/materials unearthed during the course of search and income represented in the form of asset which has escaped assessment of Rs. 50,00,000/- or more. The Ld. AR submitted that, however, during the course of search no discovery of undisclosed assets was found. The Ld. AR finally, prayed before the Bench that order passed by the Ld. CIT(A) may kindly be affirmed by dismissing the appeals of the revenue. 8. After hearing the rival contentions and perusing the material available on record, we find that pursuant to search on M/s. Trimarc Group of Companies and other associated companies on 05.01.2021, a notice u/s. 153A of the Act was issued to assesseein respect of six assessment years prior to the year of search including the instant assessment year. The said notice has been complied with by the assessee by filing the return of income on 12.03.2023 declaring total income of Rs. 49,72,610/-. The AO further in exercise of powers conferred under fourth proviso to section 153A of the Act also re-opened 7th and 8 the assessment years A.Y. 2014-15 and A.Y. 2013- 14. u/s According to the Ld. AO, certain materials were seized during the search operation and hence, the reopening of assessment was made. We note that the AY 2013-14 and 2014-15 are beyond six years but before 10 years whereas the remaining five years namely, 2015-16 to 2019-20 were falling within six year. We note that the AO, on the basis of information as contained in the audit report/audited accounts and 14 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. also on the basis of statements recorded of entry operators in post search enquiries , came to the conclusion that unsecured loans taken by the assessee were nothing but accommodation entries taken from these companies which were bogus and non- genuine. Accordingly, the additions were made. We find that the AO has made the addition by referring to the modus operandi of the shell companies, their way of operation in the market and manner of providing accommodation entries to the beneficiaries and finally, treated the unsecured loans taken by the by the assessee as non-genuine. However, we note that during the search proceedings no incriminating material was found in respect of these unsecured loans. Therefore, the jurisdiction of the AO is confined to making addition on the basis of incriminating material seized during the search unabated/completed assessments years. In this case also since there was no seized incriminating material found during the course of search , the AO has no jurisdiction to make the addition and therefore the Ld. CIT(A) rightly deleted the addition by following the decision of Hon’ble Apex Court in the case of Abhiser Buildwell Pvt. Ltd. (supra). Further, we also note that AY 2013-14 and 2014-15 were reopened beyond six years but before tenth year from the date of search in consonance with the 4th proviso to section 153A of the Act. We note that the jurisdiction has been exercised by the AO for these two assessment years without the necessary pre- conditions having been met namely. First, there was no incriminating material found during the course of search and second income represented in the form of asset which has escaped assessment should be Rs. 50,00,000/- or more. But, as a matter of fact, during search no such discovery of undisclosed assets was made by the search team. Keeping in view these facts and circumstances, we are inclined to hold that the Ld. CIT(A) has passed a very detailed, reasoned and speaking order which do not require any interference at our end. Accordingly, we dismiss the appeals of the revenue by upholding the orders of the Ld. CIT(A). The appeals for A.Y. 2013-14 & 2014-15 are dismissed on the ground of AO not having met the mandate of 4th proviso to section 153A and A.Y. 2015-16 to 2019-20 which were unabated assessments on the date of 15 I.T.(S.S).A. Nos.23 & 24/Kol/2024 IT(SS)A Nos. 32 to 36/Kol/2024 IT(S.S)A No. 64/Kol/2024 Assessment Years: 2013-14 to 2019-20 Girhar Tracom Pvt. Ltd. search are dismissed because of AO not having any jurisdiction to made addition without seized incriminating materials during search. 9. In the result, all the appeals filed by the revenue for AYs. 2013-14 to 2019-20 are dismissed. Order is pronounced in the open court on 7th November, 2024 Sd/- Sd/- (Pradip Kumar Choubey /Ĥदȣप क ुमार चौबे) (Rajesh Kumar/राजेश क ुमार) Judicial Member/ÛयाǓयक सदèय Accountant Member/लेखा सदèय Dated: 7th November, 2024 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- DCIT, CC-1(4), Kolkata 2. Respondent – Girhar Tracom Pvt. Ltd., 6E, Elgin Road, 2nd Floor, Kolkata- 700020 3. Ld. CIT(A)- 20, Kolkata 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "