HETAL RAKESH MEHTA ,MUMBAI V. ACIT, CC-1(2), PUNE

ITA 1727/PUN/2024

AI Insights

The case involves Hetal Rakesh Mehta, the appellant, who was assessed for the year 2018-19 under the Income Tax Act, 1961. A search and seizure operation under section 132 of the Act was conducted on 06.11.2019, and subsequent assessments led to the addition of Rs.11,36,791 to the appellant's income, estimated as commission income from alleged bogus entries provided to M/s. BVG India Ltd. The appellant contested the addition, arguing the absence of incriminating material and the legality of the addition in an unabated assessment. The Tribunal, referencing decisions from the Supreme Court and other High Courts, concluded that no addition could be made in the absence of incriminating material in an unabated assessment, thus allowing the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315424 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Other Referred Cases: Chandrika Mansukhlal Dodhia vs. DCIT, PCIT vs. Abhisar Buildwell (P.) Ltd., PCIT vs. Harjeev Agarwal, M/s. Odeon Builders Pvt. Ltd. vs. CIT, Krishnanand vs. The State of Madhya Pradesh, Jaydayal Poddar (Deceased) through his L.Rs & Anr. vs. MST Bibi Hazra and Ors, Omar Salay Mohamed Sait vs. CIT, Dhirajlal Girdharilal vs. CIT, M/s. Lalchand Bhagat Ambical Ram vs. CIT, Ashish Batham vs. State of Madhya Pradesh, State vs. Gulzari Lal Tandon, J.A. Naidu vs. State of Maharashtra, PCIT vs. Jagdish Thakkar, PCIT vs. Tejua Rohitkumar Kapadia, ACIT vs. Jindal Saw Piples Ltd., CIT vs. K Mahim Udma, Ram Niwas Gupta vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Assessee Lawyers: SIMRAN DHAWAN VIRTUAL
• Keywords: Set aside; Corroborative evidences; Document seized; Documents seized; Bogus purchase; Principle of natural justice; Third party statement; Search and seizure; Accommodation entries; Block assessment; Opportunity of cross examination; Bogus
• Section: 143(3); 142(1); 132; 153A; 139; 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.1727/PUN/2024 Assessment year : 2018-19 Hetal Rakesh Mehta 9/10, Vidya Nagar, 60 Feet Road, Ghatkopar East, Mumbai – 400077 Vs. ACIT, Central Circle 1(2), Pune PAN: AMMPM9670L (Appellant) (Respondent) Assessee by : Ms Simran Dhawan (virtual) Department by : Shri Ravi Prakash Date of hearing : 29-04-2025 Date of pronouncement : 13-05-2025 O R D E R PER R.K. PANDA: This appeal filed by the assessee is directed against the order dated 21.06.2024 of the Ld. CIT(A), Pune-11 relating to assessment year 2018-19. 2. Facts of the case, in brief, are that the assessee is an individual and filed her return of income u/s 139 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 30.10.2018 declaring total income of Rs.11,36,670/- for the impugned assessment year. A search and seizure action u/s 132 of the Act was conducted in the case of the assessee on 06.11.2019. In response to the notice u/s 153A of the Act issued on 05.02.2021 the assessee filed her return of income on 30.03.2021 declaring total income of Rs.11,36,670/-. Statutory notices u/s 143(2) 2 ITA No.1727/PUN/2024 and 142(1) of the Act were issued and served on the assessee in response to which the assessee filed the requisite details as called for by the Assessing Officer. 3. During the course of assessment proceedings the Assessing Officer noted from the perusal of the seized documents and the statements given during the search action that the assessee was engaged in providing data entries for purchases made by M/s. BVG India Ltd. He noted from the details furnished and the appraisal report of the investigation wing that the assessee has made sale of Rs.11,36,79,121/- in financial year 2017-18 relevant to assessment year 2018-19 to M/s. BVG India Ltd. He, therefore, issued a show cause notice asking the assessee to furnish the details such as all purchase bills, sale bills, delivery challans of the above mentioned transaction with M/s. BVG India Ltd and also to give details of all the concerns which operated from the said premise i.e. Room No.1330, Building No.45, Near Pant Nagar Post Office, Ghatkopar (East), along with details of proprietor, director, and address of all premises including place where books of accounts are kept maintained and nature of business involved. He also asked the assessee to produce the ledger account of all parties from whom the assessee has made purchases of goods which have been sold to M/s BVG India Limited, along with corresponding purchase bills, delivery challans, weight bridge receipts, transport bill payment made thereof. 4. From the submissions made by the assessee, the Assessing Officer noted that the assessee has not offered any commission income in her return of income for 3 ITA No.1727/PUN/2024 assessment year 2018-19. He noted that during the course of search action in the case of BVG India Ltd., it was noticed that with reference to purchases made from some concerns, normal purchase process was not followed. He observed that Shri Madhuchnadra Kalaskar, AGM Finance in his statement dated 06.11.2019 has identified 19 such parties where proper purchase process was not followed. The name of the assessee also appears in the said list. Since the assessee was not able to provide any satisfactory reply, the Assessing Officer estimated the commission @ 1% of the sales made by the assessee which comes to Rs.11,36,791/- which he added to the total income of the assessee by observing as under: “3.2. In response thereof, the assessee has not filed any reply or submission. On perusal of the submission, it is also noted that the assessee has not offered any commission income in her return of income for the A.Y. 2018-19. During the course of search action in the case of M/s BVG India Ltd. it was noticed that with reference to purchases made from some concerns, normal purchase process was not followed. Shri Madhuchnadra Kalaskar, AGM Finance, in his statement dated 06.11.2019 has identified 19 such parties where proper purchase process was not followed. Mainly are (1) M/s H. H. Traders prop. Smt Hetal Mehta (ii) M/s V. H. Group Prop. Rakesh Mehta (HUF). A search and seizure action u/s 132 of the Act was also carried out in the cases of Rakesh Mehta, Hetal Mehta and Rakesh Mehta HUF. During the search action, Shri Rakesh Mehta was asked to state the details regarding all the steps and procedure involved in his business, along with details of documents prepared thereof. However, the assessee was not able to provide a satisfactory reply in this regard. 3.4 Further, he was asked by the Authorised Officer to produce the ledger account of all parties from whom he has purchased goods which have been sold to M/s BVG India Ltd, along with corresponding purchase bills, delivery challans weight bridge receipts, transport bill payment made thereof, However, during the search and post search enquires, Shri Rakesh Mehta failed to make any submissions, substantiating the genuineness with valid supporting documents of the transactions having taken place. 3.5 In the statement of Madhuchandra Kalaskar (AGM Finance M/s BVG India Ltd) provided that delivery of cash to BVG India Ltd was facilitated by Shri Rakesh Mehta. From above instances, it is clear that M/s H. H. Traders, prop- Smt. Hetal Mehta and M/s V. H. Group prop Shri Rakesh Mehta HUF are merely accommodation entry providers and have not sold any goods to M/s BVG India Ltd. 4 ITA No.1727/PUN/2024 3.6. Having said that, it is common practice in this line of business to charge commission on the bogus entry provided by way of sales. But, the assessee has not offered any such income in the return filed by her. After considering the facts of the case and the evidences found during the search action, I estimate the commission @ 1% of the sales made by the assessee which comes to Rs.11,36,791/-, which is added to the total income.” 5. Before the Ld. CIT(A) the assessee apart from challenging the addition on merit, challenged the validity of the addition. It was argued that in absence of any incriminating material found during the course of search, no addition could have been made in an unabated assessment. For the above proposition, the assessee relied on various decisions. 6. However, the Ld. CIT(A) rejected the said ground by observing as under: “6. I have considered the facts of the case and the submission made by the appellant. As discussed earlier in this order, the search on the appellant was conducted as a part of BVG group. During the search at the residence of Shri Madhuchandra Kalaskar who was working as Assistant General Manager (Finance) with M/s BVG India Limited, his mobile phone was seized and print out of WhatsApp conversations of his mobile (IMEI 1:869430045490215, ΙΜΕΙ 2:869430045490207) were taken and seized. These WhatsApp conversations are with various persons such as the Chairman of BVG India and other persons including Shri Rakesh Mehta. Chats with these persons were in coded language which was confronted with Shri Kalaskar and he explained that the chats are related to cash payments made at various locations on the instructions of the Chairman of M/s BVG India Limited. When asked about the methodology of these cash transactions, Shri Kalaskar stated that BVG India Ltd. is using services of brokers. He stated that money through banking channels is transferred to the bank account of the party as told by these brokers and thereafter the cash is arranged by these brokers at the desired location. As admitted by Shri Madhu Kalaskar, Shri Rakesh Mehta was one of these brokers who used to issue bogus purchase bills to BVG India in lieu of Commission. The amount received as sale consideration through banking channel used to be returned in cash to BVG India, by Shri Mehta. 7. It may be further mentioned that during the search operation on the assessee, Shri Rakesh Mehta was asked by the Authorised Officer to produce the ledger account of all parties from whom he has purchased goods which have been sold to 5 ITA No.1727/PUN/2024 M/s BVG India Ltd, along with corresponding purchase bills, delivery challans, weight bridge receipts, transport bill payment made, etc. However, these documents could not be produced by Shri Rakesh Mehta. He further mentioned that the same got destroyed in flood. 8. Shri Rakesh Mehta had claimed to have purchased goods from M/s Mahavir Steel, Nagpur whose premise was also covered u/s 132 of the Act and the proprietor of M/s Mahavir Steels, Shri Bhavesh C. Gandhi admitted that he has provided accommodation entries in the form of bogus bills and did not transport any material whatsoever, 9. The above facts clearly suggest that during the fact that the appellant had provided accommodation entries to BVG India in the form of bogus purchase bills, was discovered during the search only. Therefore, it cannot be said that the addition was not based on incriminating material discovered during the search. Accordingly, the ground no. 1 raised by the appellant is DISMISSED.” 7. So far as the addition on merit is concerned, it was submitted that the assessee, during the course of assessment proceedings filed the following details which have been reproduced by Ld. CIT(A) and which read as under: “10……In this regard, the appellant has submitted that during the assessment proceedings, it filed various details such as copies of ledger account of purchases made, sales made, copies of sales invoices on sample basis, item-wise sales register, copies of GST returns, copies of bank statement, etc, which conclusively prove that it is carrying genuine trading activities. However, the assessing officer ignored these documents and held that it had provided bogus bills to M/s BVG India Limited, solely on the basis of statement of Shri Madhuchandra Kalaskar. The appellant has also contended that no opportunity of cross-examination of Shri Madhuchandra Kalaskar was provided by the assessing officer.” 8. However, the Ld. CIT(A) dismissed the above ground by observing as under: “11. I have considered the facts of the case and the submissions filed by the appellant. In this connection, it may be stated that it is not the claim of the appellant that he requested the assessing officer to allow cross-examination of Shri Madhuchandra Kalaskar but the AO did not allow the same. The appellant has not submitted any document/letter suggesting that any request of cross- examination was made before the assessing officer. It is a settled legal position that after foregoing its right of cross-examination at the stage of assessment proceedings, the appellant now cannot take this plea at this stage that it was not 6 ITA No.1727/PUN/2024 provided the opportunity of cross-examination. This position has been upheld by Hon'ble High Court of Calcutta in the case of Hindustan Tobacco Company vs CIT 211 Taxman 11(Cal.). The relevant portion of the said decision is reproduced as under:- 34. If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in the proceeding, the said party would be precluded from raising such issue at a later stage of the proceeding. Therefore, the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law. 35. Plea of violation of natural justice taken at the appellate stage appears to be belated and clearly an afterthought. It appears that no prejudice had been suffered by the appellant assessee in the manner the proceeding was conducted by the Assessing Officer and the assessee was not aggrieved at that stage. Only when the assessment order went against it, the assessee conveniently raised such belated plea of denial of opportunity of fair hearing and breach of principles of natural Justice. (Emphasis supplied) 12. Regarding the claim of supporting documents furnished during the assessment proceedings, it is seen that the appellant had furnished following documents:- i. Copy of ledger account for sales made during the year ii. Copy of ledger account for purchases made during the year. iii. Copy of ledger account of BVG India Limited. iv. Copies of some of purchase and sales invoices along-with Weigh- bridge slips. A perusal of these documents suggests that none of the purchase/sale Invoice or weigh-bridge slip pertain to alleged sales made to M/s BVG India Limited. 13. Till date, the appellant has not furnished the details of entities from whom purchases were made which are claimed to have been sold to M/s BVG India Limited. Neither any supporting document with regards to sales made to BVG India has been filed. On the other hand, M/s BVG India Limited has accepted that bank account of the appellant was used to transfer money through banking channels in the garb of purchases and the cash was received back from the appellant. 7 ITA No.1727/PUN/2024 14. It may also be mentioned that while completing the assessment in the case of BVG India Ltd., the A.O. had held that the purchases claimed to have been made from the appellant during the year under consideration were not genuine and accordingly the said purchases were disallowed by holding the same as bogus purchases. The A.O. has also held that the amount paid by BVG India Ltd. to the appellant as sale consideration was received back in the form of cash which was utilized by M/s. BVG India Ltd. elsewhere. It may also be mentioned that the appeal filed by M/s. BVG India Ltd. has been adjudicated upon by the undersigned wherein the findings of the A.O. that the purchases made from the appellant assessee were bogus, has been upheld by me. It may be stated that although BVG India Ltd. has got relief from Hon'ble ITAT, however the relief was granted on technical ground by observing that the approval u/s. 153D of the Act was not proper. The Hon'ble Tribunal has not given any finding that the purchases claimed to have been made by M/s. BVG India Ltd. from the appellant are genuine. In view of these facts, my factual findings while deciding the appeal of M/s. BVG India Ltd. has not been reversed by the Hon'ble ITAT. In view of these facts, it is held that the sales shown to have been made to M/s. BVG India Ltd. during the year under consideration are nothing but accommodation entries. Accordingly, the action of the A.O. that the appellant is engaged in the activities of providing accommodation entries is upheld. 15. The A.O. has held that over and above the profit shown in the P&L account, the appellant must have earned some commission on account of bogus bills provided to M/s. BVG India Ltd. The A.O. has estimated the said commission @ 1% of the amount of accommodation entries, which appears to be fair. Accordingly, the addition of Rs.11,36,791/- made by the assessing officer is upheld. 16. To sum up, the findings of the A.O. that the appellant is engaged in providing accommodation entries and has provided bogus purchase bills to the extent of Rs.11,36,79,121/- to M/s. BVG India Ltd. is upheld. Further, the addition of Rs.11,36,791/- made by the A.O. on account of commission received by the appellant from M/s. BVG India Ltd. is also upheld. The grounds no.2, 3 and 4 are accordingly DISMISSED. 17. The ground no. 5 raised by the appellant is of general nature and does not require any specific adjudication.” 9. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. On the facts and circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs.11,36,791/- made in the assessment order passed by the Assessing Officer u/s 143(3) r.ws 153A of the Income Tax Act, 1961 on 30.09.2021 on account of alleged commission income despite the fact that the assessment 8 ITA No.1727/PUN/2024 for the year under consideration has attained finality and no assessment reassessment was pending as on the date of search and in the absence of any incriminating material in relation to alleged commission income, the addition was not permissible under the law. 2. On the facts and circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs.11,36,791/- made in the assessment order passed by the Assessing Officer u/s 143(3) r.w.s 153A of the Income Tax Act, 1961 on 30.09.2021 on account of alleged commission income @1% of sales from providing alleged accommodation entry to BVG India Limited disregarding the materials / evidence placed on record in support of the genuineness of transactions and without appreciating the fact that the sales and purchases and consequent income arising from these transactions had already been fully disclosed and accounted for in the appellant's income tax return. 3. On the facts and in circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in ignoring the failure of the Assessing Officer to provide the appellant with a copy of the statement of Madhuchandra Kalaskar, AGM Finance of M/s BVG India Ltd. relied upon and consequently the opportunity of cross examination, thereby violating principles of natural justice and depriving the appellant of a fundamental opportunity to effectively present its case and be heard on the matter. 4. The appellant craves leave to add to, alter, amend, modify and for delete all or any of the foregoing grounds of appeal. 10. The Ld. Counsel for the assessee at the outset submitted that the assessment involved is assessment year 2018-19, the original return was filed on 30.10.2018 and the notice period for issuing a notice u/s 143(2) of the Act has already been expired on the date of search that took place on 06.11.2019. Further, no incriminating material was found during the course of search and the addition was on estimate basically on the basis of statement of third party. She accordingly submitted that in absence of any incriminating material found during the course of search, addition cannot be made in an unabated assessment on the basis of third party statement. For the above proposition, she relied on the decision of the Mumbai Bench of the Tribunal in the case of Chandrika Mansukhlal Dodhia vs. 9 ITA No.1727/PUN/2024 DCIT vide IT(SS)A No.199/MUM/2025 for assessment year 2016-17, order dated 15.04.2025. 11. Referring to the decision of Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 454 ITR 212 (SC), she submitted that in respect of completed assessment / unabated assessment, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search u/s 132 of the Act or requisition u/s 132A of the Act. 12. Referring to the decision of Hon’ble Delhi High Court in the case of PCIT vs. Harjeev Agarwal reported in 290 CTR 263 (Del), she submitted that the statement recorded u/s 132(4) of the Act could not be considered as incriminating material unless corroborated by any incriminating evidence found. She also relied on the following decisions: i) M/s. Odeon Builders Pvt. Ltd. vs. CIT vide Review Petition (C) Diary No.22394 of 2019 in Civil Appeal Nos.9604-9605 of 2018, order dated 21.08.2019 ii) Krishnanand vs. The State of Madhya Pradesh AIR 1977 SC 796 iii) Jaydayal Poddar (Deceased) through his L.Rs & Anr. vs. MST Bibi Hazra and Ors. 1974 AIR 171 iv) Omar Salay Mohamed Sait vs. CIT AIR 1959 SC 1238 v) Dhirajlal Girdharilal vs. CIT vide Appeal (Civil) No.246 of 1953, judgment dated 25.10.1954 vi) M/s. Lalchand Bhagat Ambical Ram vs. CIT 1959 AIR 1295 vii) Ashish Batham vs. State of Madhya Pradesh vide Appeal (Crl.) No.148 of 2002, judgment dated 09.09.2002 10 ITA No.1727/PUN/2024 viii) State vs. Gulzari Lal Tandon AIR 1979 SC 1382 ix) J.A. Naidu vs. State of Maharashtra AIR 1979 SC 1537 x) PCIT vs. Jagdish Thakkar (2022) 145 taxmann.com 414 (Bom) xi) PCIT vs. Tejua Rohitkumar Kapadia vide Tax Appeal No.691 of 2017, order dated 18.09.2017 xii) ACIT vs. Jindal Saw Piples Ltd. vide ITA No.221/2010, order dated 06.09.2010 xiii) CIT vs. K Mahim Udma (2000) 242 ITR 133 (Ker) xiv) Ram Niwas Gupta vs. DCIT vide ITA Nos.4881 to 4883/Del/2016, order dated 06.02.2019 13. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. 14. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee has filed her original return of income on 30.10.2018 and a search action took place in the case of the assessee u/s 132 of the Act on 06.11.2019. The period for issue of notice u/s 143(2) of the Act has expired by the time the search took place. It is also an admitted fact that no incriminating material whatsoever were found during the course of search and the addition of 1% commission on the sales has been made by the Assessing Officer on the basis of statement of Shri Madhuchnadra Kalaskar, AGM Finance of M/s. BVG India Ltd. Further, the estimation of 1% commission on sales has been made 11 ITA No.1727/PUN/2024 by the Assessing Officer stating the same to be as a common practice in line of business to charge commission on the bogus entry provided by the assessee. Under these circumstances, we have to see as to whether the addition can be made in 153A proceedings in an unabated assessment in absence of any incriminating material and on the basis of third party statement without any corroborative material. 15. We find the Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (supra) has held that in respect of completed assessment / unabated assessment, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search u/s 132 of the Act or requisition u/s 132A of the Act. 16. We find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Chandrika Mansukhlal Dodhia vs. DCIT (supra). We find the Mumbai Bench of the Tribunal in the said case deleted the addition by relying on the decision of the Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (supra) and the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Harjeev Agarwal (supra) by observing as under: “6. We have heard rival submissions of the parties and perused the relevant materials on record. The Hon'ble Delhi High Court in the case of Kabul Chawla [2016] 380 ITR 573 (Delhi) held that in case of unabated assessments, no additions could have been made without the aid of the incriminating material. In the case of the assessee search was conducted on 27.11.2019. The original return of income in the case for year under consideration was filed on 15.10.2016 and therefore, notice u/s 143(2) of the Act for selection of the case could have been issued up to 30.09.2017 and since no such notice was issued therefore, limitation 12 ITA No.1727/PUN/2024 for issue of notice u/s 143(2) of the Act had already expired before the date of execution of search, hence there was no pendency of the scrutiny assessment on the date of search. Therefore, the assessment year is in the category of the unabated assessment. The ratio in the case of Kabul Chawla (supra) has been upheld in the case of Abhisar Buildwell Pvt. Ltd. (supra) therefore, in the unabated assessment year only addition could be made on the basis of incriminating material found from the premises of the assessee. In the case of the assessee, the addition of Rs. 1 crores has been made in respect of unsecured loan of Rs. 1 crores received from M/s Vinam Finance Pvt. Ltd. The lower authorities in the impugned order have only mentioned the fact of statements of Shri Minesh Dodhia, Shri Bhavik Jhkharia and Shri Bhadresh Dhodia. The Ld. CIT(A) has specifically mentioned to the statement u/s 132(4) of the Act Shri Bhadresh Dhodhia justifying the addition the unsecured loan in the case of the assessee. 6.1 The Ld. Departmental Representative (DR) on the other hand before us, submitted that the statement recorded u/s 132(4) of the Act referred by the Ld. CIT(A) are in the nature of the incriminating material and therefore, the addition in the hands of the assessee should have been sustained. However, it is evident that there is no reference of any incriminating material or documents either from the premises of the assessee or from any other premises covered under the search in relation to addition of the unsecured loan except the statement of three persons which have been referred by the Ld. CIT(A) but the Hon'ble Delhi High Court in the case of PCIT v. Harjeev Agarwal in ITA No. 8/20004 have held that statement recorded u/s 134(4) could not be considered as incriminating material unless corroborated by any incriminating evidence found. The relevant finding of the Hon'ble High Court (supra) id reproduced as under: “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 we.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 13 ITA No.1727/PUN/2024 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 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.” 6.2 In view of above discussion, we set aside the finding of the Ld. CIT(A) on the issue in dispute and hold that no addition in respect of unsecured loan of Rs. 1 crores could be made in the hands of the assessee without aid of any incriminating material found from the premises of the assessee. The ground No. 5 of the appeal of the assessee is accordingly allowed. 6.3 Since we have already upheld that no addition in respect of unsecured loan of Rs.1 lakh could have been made in the hands of the assessee, therefore, the other grounds raised by the assessee challenging the merit of the addition are rendered merely academic and therefore, we are not required to adjudicate upon at this stage. 7. In the result, the appeal of the assessee is allowed.” 17. Since the addition in the instant case has been made in absence of any incriminating material found during the course of search and since the assessment is an unabated assessment and the addition is based mainly on the basis of third party statement without any supporting evidence and that too on estimate basis, therefore, respectfully following the decisions cited (supra), we hold that the addition made by the Assessing Officer by estimating the commission income in 14 ITA No.1727/PUN/2024 153A assessment is not in accordance with law. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition. The first issue raised by the assessee in the grounds of appeal challenging the addition in absence of any incriminating material found during the course of search is accordingly allowed. Since the assessee succeeds on this legal ground, the second and third issue challenging the addition on merit is not being adjudicated being academic in nature. 18. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 13th May, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; \u0005दनांक Dated : 13th May, 2025 GCVSR आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ\u0007 / The Appellant; 2. \b थ\u0007 / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune 15 ITA No.1727/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 06.05.2025 Sr. PS/PS 2 Draft placed before author 07.05.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "