INDUSTRIAL MINERAL CO, 100%EOU,TUTICORIN V. ACIT,CENTRAL CIRCLE-1, MADURAI, MADURAI

ITA 390/CHNY/2023

AI Insights

The case involves cross appeals by M/s. Industrial Mineral Co., the assessee, and the ACIT Central Circle-(1), Madurai, the revenue, concerning the assessment year 2012-13. The appeals arose from an order by the Commissioner of Income Tax (Appeals)-19, Chennai, which was based on an assessment framed under sections 143(3) read with 153A of the Income Tax Act, following a search operation. The Tribunal examined various legal and factual issues, including the jurisdiction under section 153A, the validity of additions made based on loose sheets seized during the search, and the application of the 4th proviso to section 153A. The Tribunal's decision was influenced by precedents and interpretations of the law concerning the treatment of completed assessments and the conditions under which reassessments can be made following a search.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360741 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: Pr.CIT Vs Gahoi Foods Pvt Ltd, Kabul Chawla, Saumya Construction (P.) Ltd., CIT vs. Continental Warehousing Corporation, Pr. CIT V/s Meeta Gutgutia, CBI vs. V.C. Shukla, Common Cause vs. UOI, ITO vs. Kranti Impex Pvt. Ltd., CIT vs. Sunil Kumar Sharma
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.CLEMENT RAMESH KUMAR LD
• Assessee Lawyers: N. ARJUN RAJ LD
• Keywords: Set aside; Reassessment proceedings; Depreciation; Unexplained investment; Principle of natural justice; Search and seizure; Block assessment; Loose papers; Bogus
• Section: 143(3); 132; 153A

Judgement Text

" आयकर अपीलीय अिधकरण “सी” \u000eा यपीठ चे\u0013ई म\u0016। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI मा ननीय \u0019ी मनोज क ुमा र अ वा ल ,लेखा सद\" एवं मा ननीय \u0019ी मनु क ुमा र िग&र, \u000eा ियक सद\" क े सम'। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM AND HON’BLE SHRI MANU KUMAR GIRI, JM 1. आयकरअपील सं ./ ITA No.390/Chny/2023 (िनधा (रण वष( / Assessment Year: 2012-13) M/s. Industrial Mineral Co. 100% EOU 1/1C, Harbour Express Highway, Thermal Nagar SO, Tuticorin-628 006. बना म/ Vs. ACIT Central Circle-(1), Madurai \u0001थायीलेखासं./जीआइआरसं./PAN/TAN No. AAAFI-9714-R (अपीलाथ\u001a/Appellant) : ( थ\u001a / Respondent) & 2. आयकरअपील सं./ ITA No.529/Chny/2023 (िनधा (रण वष( / Assessment Year: 2012-13) ACIT Central Circle-(1), Madurai बना म/ Vs. M/s. Industrial Mineral Co. 100% EOU 1/1C, Harbour Express Highway, Thermal Nagar SO, Tuticorin 628006 \u0001थायीलेखासं./जीआइआरसं./PAN/TAN No. AAAFI-9714-R (अपीलाथ\u001a/Appellant) : ( थ\u001a / Respondent) अपीलाथ\u001a की ओर से/ Assessee by : Shri N. Arjun Raj (Advocate) – Ld.AR थ\u001a की ओर से/Revenue by : Shri R. Clement Ramesh Kumar (CIT) -Ld. DR सुनवाईकीतारीख/Date of Hearing : 26-02-2025 घोषणाकीतारीख /Date of Pronouncement : 21-05-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid cross appeals for Assessment Year 2012-13 arises out of an order of learned Commissioner of Income Tax (Appeals)-19, Chennai [CIT(A)] dated 27-02-2023 in the matter of an assessment framed by Ld. 2 Assessing Officer [AO] u/s. 143(3) r.w.s. 153A of the Act on 30-07-2021. 1.2 The grounds raised by the assessee read as under: - 1. The order of the Commissioner of Income Tax (Appeals) in so far as it is against the assessee, is contrary to law, erroneous and unsustainable on the facts the case. A. Jurisdiction 2. The CIT(A) erred in upholding the assumption of jurisdiction by the assessing officer under sec.153A of the Act. 3. The CIT(A) failed to appreciate that the asst. year 2012-13 falls beyond the period of six years from the relevant asst. year 2019-20 (search conducted on 25.10.2018) and hence the notice u/s.153A and the consequent assessment are not in accordance with law and liable to treated as void in law. 4. The CIT(A) further failed to appreciate that the case of assessee does not fall for consideration within the 4th Proviso to sec.153A(1) since the investment in immovable property is recorded in the books of assessee and there was no new asset that remained undisclosed by the assessee. 5. The CIT(A) further failed to appreciate that the loose sheet relied on by the officer to bring the case of assessee within the 4th Proviso would not enable the officer to issue notice beyond the period of six years, in as much as no evidentiary value can be attached to the loose sheet as expounded by the Supreme Court in various decisions and hence the impugned proceedings are untenable in law. 6. The CIT(A) further failed to appreciate that surmises and conjectures by the officer cannot be the basis to extend the time limit beyond the six years and hence the notice u/s.153A and the assessment framed are liable to be annulled. 7. The CIT(A) was not justified in adjudicating the various issues raised by assessee in its grounds of appeal without affording adequate opportunity and hence the order is liable to be set aside. 8. The CIT(A) ought to have seen that the assessee had to collate voluminous data for submission in the appeal proceedings and hence was not correct in concluding the appeal in haste and confirming most of the additions made in the assessment. 9. The CIT(A) ought to have seen that the order is in violation of principles of natural justice for the lack of inadequate opportunity to the assessee and is untenable in law. C. ADDITION AS UNACCOUNTED INVESTMENT IN PROPERTY : 10. The CIT(A) erred in confirming the addition of Rs.90,45,000 under sec.69B of the Act. 11. The CIT(A) failed to appreciate that the entry in the loose sheet cannot be taken as the basis to conclude that the assessee had made cash payments over and above the document value in the purchase of the immoveable property. 12. The CIT(A) further failed to appreciate that the assessing officer based on the seized loose sheet had assumed that there was on-money payment in the purchase of immoveable property at second avenue, Harrington Road and unless the contents of loose sheet is corroborated by documentary evidence, the addition u/s.69B was wholly unjustified. 13. The CIT(A) further failed to appreciate the settled law that loose sheets per se do not carry evidentiary value and the entries made therein cannot be subject matter of addition in income tax assessments and hence the wholesome reliance on the loose sheet by the officer is unsustainable in law. 14. The CIT(A) further failed to appreciate that the partner of the assessee firm had completely disowned the loose sheet as not authored by him and hence the difference 3 between the document value and the entry in the loose sheet cannot be assumed as the unexplained investment of assessee and thus deleted the addition. D. DISALLOWANCE OF PURCHASE OF MATERIAL REPRESENTED BY RECEIPT FROM SISTER CONCERN THROUGH ARBITRATION AWARD : 15. The CIT(A) erred in confirming the addition of Rs.32 crores on account of purchase of material represented by value of the material received from a sister concern through an arbitration award. 16. The CIT(A) failed to appreciate that having not disputed the terms of arbitration award dated 13.7.2011, leading to the receipt of semi processed and processed minerals from M/s. VV Minerals and the value of materials having been duly debited to Profit & Loss a/c, there was no case for disallowance of the amount. 17. The CIT(A) further failed to appreciate that the semi processed and processed minerals received from the sister-concern was directly attributable to the award of arbitrator and that debiting the profit & loss account with the value by the assessee should be seen in the context of inter se mutual settlement amongst the contending parties and was not an isolated event and hence the assessee was fully justified in debit of the amount and the disallowance was unjustified. 18. The CIT(A) further failed to appreciate that the seized tally data were not updated with the purchase value of materials received and that the difference between this tally data and the debit in the profit & loss account filed along with the ROI cannot be impromptu considered as the unexplained investment of assessee. 19. The CIT(A) ought to have considered the terms of award by the arbitrator in the proper perspective and seen that purchase value of materials was rightly debited by assessee in the Profit & loss account and the disallowance of the amount was unjustified and unsustainable on the facts of the case. E. ADDITION OF DIFFERENCE IN NET_PROFIT_BETWEEN SEIZED TALLY ACCOUNTS AND AS PER P & L IN ROI: 20. The CIT(A) erred in confirming the addition of Rs.9,87,52,288/- arising out of the alleged difference in net profit as per seized tally accounts and net profit as per P & L account shown in return of income. 21. The CIT(A) ought to have appreciated that the difference arose due to the revaluation of closing stock as per the provisions of the I.T. Act and duly considered in the return of income filed, whereas the revaluation was yet to be incorporated in the tally accounts as on date of search and hence the addition of this difference to the net profit is unjustified on the facts of the case. 22. The CIT(A) ought to have seen that the assessee had reconciled the difference arising out of closing entries towards valuation of closing stock, forex loss and agricultural income in the proceedings before the A.O. and there was no case for addition to the net profit returned by the assessee. 23. The CIT(A) ought to have considered that the assessee was bound to value the closing stock as per the provisions of I.T.Act and having filed the return accordingly, the addition on surmises as to the higher amount available in the tally accounts cannot be the basis for the addition. 24. The CIT(A), in any view of the matter, ought to have seen that there was apparent lack of jurisdiction in invoking the provisions of sec.153A and that the additions and disallowances were made on surmises and conjectures and thus deleted the additions made in the assessment. 4 1.3 The grounds raised by the Revenue read as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in deleting the addition of Rs.24,85,17,972/- towards disallowance of purchase of materials, Rs.12,71,95,200/- towards purchase of materials from V V. Indech Rs.5,11,80,421 towards land development expenses for AY 2012-13 stating that the disallowances were made solely on the basis of facts relating to AY 2013- 14 and not on the basis of any seized material relating to AY 2012-13. 2.1 The CIT(A) erred in failing to appreciate that Excel sheets seized as page No.34 & 35 vide Annexure:132/S&S/CHE/RR-4 dated 27/10/2018 contains the P&L account for the year ending 31/03/2012 i.e., for the AY 2012-13 and the assessee had not produced any evidence for purchase of materials debited in P&L Account & transfer from V.M.Indech and land development expenses during the search proceedings or assessment/appellate proceedings. 2.2 The CIT(A) failed to appreciate that as per the tally data seized for the AY 2012-13 net profit is Rs.62,29,81,924 as compared to net profit of Rs.17,78,00,980/- any evidence for difference in profit, thus seized tally accounts are incriminating in nature. 3. Without prejudice to the grounds raised on the merits of the case, it is submitted that the Ld.CIT(A) erred in deleting the addition of Rs.24,85,17,972/-towards disallowance of purchase of materials, Rs.12,71,95,200/- towards purchase of materials from V.V.Indech, Rs.5,11,80,421 towards land development expenses for AY 2012-13 stating for the reason that these disallowances made in the unabated assessments have no nexus with incriminating materials found and seized during the course of search. 3.1 The Ld.CIT(A) erred in failing to appreciate that as per the provisions of Sec.153A of the Act, the assessing officer has to mandatorily issue notice u/s.153A of the Act to assess or reassess the total income of each of the six assessment years immediately preceding the year in which search action u/s.132 of the Act was initiated or requisition u/s.132A was made. The Ld.CIT(A) failed to appreciate that total income of the assessee cannot be brought to tax if the scope of Section 153A is limited to only undisclosed income on the basis of seized materials 3.2 The Ld.CIT(A) erred in failing to appreciate that on the issue of addition to be made in the assessments framed u/s.153A on the basis of seized materials, the SLP filed by the Revenue has been accepted the Hon'ble Apex Court in the case of Pr.CIT Vs Gahoi Foods Pvt Ltd (117 Taxmann.com 118) and is still pending, thus the issue has not attained finality. 3.3 The Ld.CIT(A) erred in failing to appreciate that there is no express provision in the Act that the additions made in the search assessment can be made only on the basis of incriminating seized materials. 3.4 The Ld.CIT(A) erred in deleting the disallowance of Rs.42,68,93,593/- by giving narrow interpretation to the provisions of Sec.153A of the Act. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored As is evident, the subject matter of appeals is various additions which are arising out of search proceedings on the assessee. 5 1.4 The Ld. AR advanced legal arguments as well as assailed confirmation of impugned additions on merits. The Ld. CIT-DR also advanced agreements and supported the assessment as framed by Ld. AO. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. As is evident, the subject matter of cross appeals is – (i) Addition of unaccounted investment in property for Rs.90.45 Lacs; (ii) Disallowance of purchase and other expenses. 1.5 The assessee-firm is stated to be engaged in processing of beach sand and sale of beach minerals. The assessee-firm was constituted by two partners i.e., Shri S. Chandrasen and Smt. Amutha Chandrasen. The return of income as filed by the assessee on 16-11-2013 was duly scrutinized u/s 143(3). However, pursuant to search action on assessee u/s 153A on 25-10-2018, notice u/s 153A was issued to the assessee on 28-10-2020. The assessee questioned the jurisdiction of Ld. AO to issue notice beyond six years. Considering the amended 4th proviso to Sec.153A, Ld. AO rejected the legal ground of the assessee and proceeded to determine the total income of the assessee. It was noted by Ld. AO that notice u/s 153A could be issued beyond six years if the escaped income was likely to exceed Rs.50 Lacs and the said income was represented in the form of an asset including immoveable property. All these conditions were held to be fulfilled in the present case. The assessee also argued that in the absence of any incriminating material, impugned additions could not be made. However, Ld. AO referred to loose sheets as seized by the department during search on assessee and rejected this argument also. 6 2. Assessment Proceedings 2.1 Addition of unaccounted investment in property for Rs.90.45 Lacs This addition has been made on account of a property purchased by the assessee at 2nd Avenue, Harrington Road. The Ld. AO referred to Page No.75 of loose sheets as seized from the office of the assessee at Chetpet vide Annexure-132/S&S/IMC/CHE/RR-2 dated 27-10-2018. The same contained details of property transactions that happened on 14-03- 2012. The recorded value of the property was Rs.163.36 Lacs as against actual sale consideration of Rs.253.81 Lacs. The Ld. AO alleged that the assessee made cash payment of Rs.90.45 Lacs and accordingly, the same was added to the income of the assessee as unexplained investment u/s 69B. 2.2 Disallowance of purchases and other expenses etc. This addition was made on the basis of Page Nos.34 & 35 of bunch of loose sheets seized vide Annexure-132/S&S/IMC/CHE/RR-4 dated 27- 10-2018. The same allegedly contained Profit & Loss Account of the assessee for financial year 2011-12. The profit as per this Profit & Loss Account was Rs.17.25 Crores and purchases were Rs.69.61 Crores. The purchase amount include figure of Rs.32 Crores given as transfer from VV through arbitration and Rs.12.71 Crores claimed as purchase from VV Ind Tech. No supporting documents were found for the same during search. During assessment proceedings, it transpired that in the process of arbitration settlement of dispute, Shri S. Chandrasen received various properties including business assets, land, building, Vehicles, stock of raw material, finished goods, stores and spares. The business assets relating to mining activities were transferred to the assessee-firm. The materials were transferred directly from VV Minerals and delivered 7 at various godowns / factory belonging to Shri S. Chandrasen based on the arbitration award and the same were recorded as transferred from VV through arbitration and received from VV Ind. Tech in the books of the assessee-firm. However, Ld. AO questioned the debit of this expenditure in the Profit & Loss Account and finally, in the absence of any supporting documents, rejected the explanation of the assessee. Finally, the entire purchases of Rs.69.61 Crores were added to assessee’s income. The Ld. AO also noted that the assessee debited land refilling & environment expense for Rs.511.80 Lacs in the Profit & Loss Account as extracted from tally software in Accountant’s laptop. The net profit as shown therein was Rs.62.29 Crores as against the profit of Rs.17.78 Crores as reflected by the assessee leaving a gap of Rs.44.51 Crores. After adjusting depreciation component, the net gap was Rs.41.87 Crores. The difference of Rs.32 Crores was nothing but transfer from VV through Arbitration. The remaining difference was on account of difference in closing stock valuation, discrepancy in other income & expenses which has been tabulated at para-131 of the assessment order. Accordingly, Ld. AO added the remaining component of Rs.9.87 Crores to the income of the assessee. The Land refilling expenses for Rs.5.11 Crores were separately disallowed. The assessee contended that the tally data was an incomplete data and it was not the final data which was used to file the return of income. However, Ld. AO rejected the explanation of the assessee and framed the assessment by making following additions: - 8 Aggrieved, the assessee assailed the impugned additions in first appeal. 3. Appellate Proceedings 3.1 The Ld. CIT(A) rejected legal grounds qua applicability of 4th Proviso to Sec.153A and held that the contents of the loose sheet revealed payment of consideration in cash for purchase of immoveable property over and above registered sale consideration Reference was made to CBDT Circular No.2/2018 dated 15-02-2018 to hold that undisclosed investment in an asset was wide enough to cover not only the investment in an undisclosed asset but also undisclosed investment in an asset which was otherwise disclosed in the Balance Sheet. Accordingly, the assumption of jurisdiction u/s 153A was held to be valid one. 3.2 On merits of addition of Rs.90.45 Lacs, the Managing Partner, in replies to Q. Nos. 7,8 & 9 stated that the loose sheet was prepared in order to show a higher value for the concerned property in connection with offering the said property as collateral security to the bank for obtaining loan for a sister concern M/s Q2Q solutions Pvt. Ltd. The cash payment was shown only for the purpose of boosting the value of the land to obtain bank loans. He subsequently disowned the loose sheet. The assessee required cross-examination of the author of the sheet. During appellate proceedings, the assessee contended that it was a No. Head Amount 1. Unaccounted investment in property Rs.0.90 Crores 2. Material Purchased from VV Minerals through Arbitration Rs.32 Crores 3. Purchases from VV Ind Tech Rs.12.75 Crores 4. Disallowance of balance purchases Rs.24.85 Crores 5. Disallowance of Land refilling / environment expenses Rs.5.11 Crores 6. Disallowance of bogus expenses Rs.9.87 Crores 9 dumb document having no evidentiary value. However, Ld. CIT(A) held that loose sheet contained all the details required to ascertain the nature, characteristics and timing of the transaction and therefore, it was a speaking document. The onus was on assessee to rebut the presumption of Sec. 132(4A) and 292C which was not discharged by the assessee. Accordingly, this addition was confirmed. Aggrieved, the assessee is in further appeal before us. 3.3 The disallowance of balance purchase of Rs.24.85 Crores was based on material found for AY 2013-14. The assessee contended that in the absence of any incriminating material as found for this year, this addition could not be made in terms of various judicial decisions. The same found concurrence of Ld. CIT(A) who observed that this disallowance was made with reference to facts pertaining to AY 2013-14. The Ld. AO concurred that figures of purchases in loose sheets were matching with the returned figures for AY 2013-14. The return of income for AY 2012-13 was already scrutinized u/s 143(3) and this year was unabated year and therefore, in the absence of any incriminating material, no such addition could be made in the hands of the assessee. Similar findings were rendered on the issue of purchases of Rs.12.75 Crores stated to be made from VV Ind Tech as well as land development expenses for Rs.511.80 Lacs stated to be incurred by the assessee. Accordingly, all these additions were deleted. Aggrieved, the revenue is in further appeal before us. 3.4 On the issue of purchase of material from M/s VV Minerals for Rs.32 Crores, the assessee contended that the material was received based on arbitration award and memorandum of settlement (MOS) between the Managing Partner and his brothers as per the directions of 10 competent court which was duly and correctly recorded in the books of accounts. The Ld. CIT(A) accepted the fact the dispute was resolved through arbitration award dated 13-07-2011 which was awarded by a former judge of the Supreme Court and MOS was signed by the parties to the dispute which was part and parcel of the arbitration award. Pursuant to the same, the assessee was in receipt of semi-processed minerals and processed minerals from VV Minerals during the year on giving effect to the said arbitration award. The value to the same was debited as purchase of material. The Ld. AO doubted the valuation for want of documentary evidences. It was also held by Ld. AO that the claim was not genuine claim. The claim made for purchases in the return of income was higher than the purchase shown in the tally data as seized from the laptop. Even if the material was received from sister concern pursuant to award, the same could not be claimed as an expenditure since the assessee did not incur any cost towards acquisition of the said material. Accordingly, the addition for Rs.32 Crores was sustained against which the assessee is in further appeal before us. 3.5 The addition of net profit difference of Rs.9.87 Crores was confirmed on the ground that the assessee merely made a claim regarding reduction in value of closing stock due to revaluation without furnishing any details of such revaluation. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it emerges that the assessee-firm is engaged in processing of beach sand and sale of beach minerals. The assessee’s regular return of income was duly scrutinized u/s 143(3). The assessee 11 was subjected to search on 25-10-2018 based on which impugned assessment has been framed. It is quite clear that this year is a case of unabated assessment year and therefore, the additions which could have been made, are to be based strictly on the basis of incriminating material as found during search on the assessee. This is as per the decision of Hon’ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399) wherein the Hon’ble Court, considering all the earlier decisions holding the field, held as under: - 5. We have heard learned counsel for the respective parties at length. The question which is posed for consideration in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under section 132 or requisition under section 132A or not, i.e., whether any 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 132 A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under section 132 or requisition under section 132A, the assessment has to be done under section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to pass assessment orders and to assess the 'total income' taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments. 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. CIT v. Mehndipur Balaji 2022 SCC Online All 444/[2023] 147 taxmann.com 201/ [2022] 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. 12 ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs \"in which both the disclosed and the undisclosed income would be brought to tax\". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 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 the course of search which were not produced or not already disclosed or made known in the course of original assessment. 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: \"15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six 13 assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub- section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading \"Assessment in case of search or requisition\". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.\" 8. For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. 9. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961. 9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' 14 and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: \"153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: 15 Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.\" 11. As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub- section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income 16 is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 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 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 fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. Civil Appeal Nos.7738-7739/2021, 7736- 7737/2021, 7732-7735/2021 and 7740-7743/2021 15. Insofar as the aforesaid Civil Appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 6-9-2016 passed in ITA Nos. 270/2014, 269/2014, 15/2015, TANVI 16/2015, 268/2014 and 17/2015, as also, against the order dated 21-9-2017 passed in the review applications. It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under section 143(1)(a) or 143(3) of the Act, 1961 and to reassess the total income taking notice of undisclosed income even found during the search and seizure operation. 15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court 17 taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was available at the time of original assessment does not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs. Approving the decision of Hon’ble Delhi High Court in the case of Kabul Chawal (380 ITR 573) as well as the decision of Hon’ble Gujarat High Court in Saumya Construction (P.) Ltd. (387 ITR 529), it was held that in respect of completed assessments / unabated assessments, no addition could be made by Assessing Officer in the absence of any incriminating material found during course of search under section 132 or requisition made under section 132A. 5. Similar is the decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [2015; 374 ITR 645]. We find that similar is the view of Hon’ble Delhi High Court in Pr. CIT V/s Meeta Gutgutia (82 Taxmann.com 287) which has primarily followed the decision of Kabul Chawla (supra). We also find that Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02.07.2018 which is reported at 96 Taxmann.com 468. The decision of Hon’ble Court was as under: - 1. Delay condoned. 2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed. 3. Pending application stands disposed of. In all these decisions, it has been held that in respect of unabated assessment, the additions are to be strictly based on the basis of books of account or other documents not produced in the course of original 18 assessment but found in the course of search and undisclosed income or undisclosed property discovered during search. 6. In the present case, the Ld. CIT(A) has rendered factual findings that addition of purchases of Rs.24.85 Crores, addition of purchases made from VV Ind. Tech for Rs.12.75 Crores and Land Development expenses for Rs.5.11 Crores are not supported by any incriminating material as found during the course of search. During hearing, nothing has been shown to us to rebut these findings. Therefore, respectfully following the ratio of aforesaid binding judicial decisions, we confirm the adjudication of Ld. CIT(A) on all these issues. The corresponding grounds as raised by the revenue stand dismissed. 7. So far as the issue of purchase of material from M/s VV minerals for Rs.32 Crores is concerned, we find that it is undisputed fact that the assessee has received certain material based on arbitration award and memorandum of settlement (MOS) between the Managing Partner and his brothers as per the directions of competent court. The Ld. CIT(A) has rendered a finding that the dispute was resolved through arbitration award dated 13-07-2011 which was awarded by a former judge of the Supreme Court and MOS was signed by the parties to the dispute which was part and parcel of the arbitration award. Pursuant to the same, the assessee was in receipt of semi-processed minerals and processed minerals from VV Minerals during the year on giving effect to the said arbitration award. The value of the same was debited as purchase of material. The Ld. AO has merely doubted the valuation thereof and the claim has been held to be non-genuine. However, we find that the material has duly been received by the assessee as per arbitration award and the value has been recorded as per the award. The material 19 received by the assessee constitute its trading stock and used in trading operations. Therefore, the same has correctly been debited in the Profit & Loss Account and we seen no reason for disallowance of the same. The right arising to the assessee to the extent of Rs.32 Crores stood extinguished by receipt of material from the other party and therefore, it could not be said that no cost was associated with the acquisition of the stock. In our considered opinion, the expenditure has been debited pursuant to legally valid arbitration award. Accordingly, the claim of the assessee is to be accepted. We order so. The corresponding grounds as raised by the assessee stand allowed. 8. The addition of net profit difference of Rs.9.87 Crores primarily arises from valuation of closing stock. In the seized material, the stock has been valued at Rs.21.13 Crores whereas in the final accounts, the assessee has valued the stock at Rs.11.09 Crores which explain the discrepancy in profit to the extent of Rs.10.04 Crores. It is noteworthy that no discrepancy in physical stock has been pointed out by Ld. AO. In the audited books, the assessee has revalued its stock and reflected correct stock in its books of accounts based on generally accepted accounting principles. In our considered opinion, in the absence of any discrepancy in physical stock, the impugned addition merely based on valuation could not be sustained since the lower valuation of stock in this year would have direct impact on the profitability of subsequent year. Therefore, it is mere valuation difference only and the same could not be sustained in the absence of any positive material on record indicating that the stock value was deliberately reduced so as to suppress the profits. A small discrepancy in the profit has arisen due to treatment of forex losses. The assessee has explained that foreign exchange gains 20 and forex losses were considered together and the net amount was shown in the income tax return whereas in tally accounts, the same gains were separately shown as ‘other income’ and losses were separately shown as ‘expenses’. Therefore, the discrepancy to that extent is otherwise fully explained by the assessee. Finally, on the given set of facts, we delete the impugned addition of Rs.9.87 Crores and allow the corresponding grounds as raised by the assessee. 9. The last issue in the appeal is addition of unexplained investment in the immoveable property which is based on Page No. 75 of loose sheets as seized from the office of the assessee at Chetpet vide Annexure-132/S&S/IMC/CHE/RR-2 dated 27-10-2018. The same has been extracted at para-4 of the assessment order. Upon perusal of the same, it could be seen that it does not contain any date of alleged cash payment by the assessee. The same is merely in the shape of rough scribblings only. There is no acknowledgement of receipt of cash by any of the party. It is noteworthy that no enquiry has been carried out by Ld. AO with the seller of the property to corroborate the same. Nothing has been shown that similar addition has been made for the seller. The Managing Partner, in replies to Q. Nos. 7,8 & 9 merely stated that the loose sheet was prepared in order to show a higher value for the concerned property in connection with offering the said property as collateral security to the bank for obtaining loan for a sister concern M/s Q2Q solutions Pvt. Ltd. The cash payment was shown only for the purpose of boosting the value of the land to obtain bank loans. There is no admission of any cash payment. On all these facts, it could be concluded that the loose sheet was merely in the nature of dumb document only which was not sufficient enough to drawn conclusion of 21 alleged cash payment by the assessee. There is neither any corroboration of this document nor any admission by any of the parties who have entered into the transactions. The Hon’ble Karnataka High Court in the case of CIT vs. Sunil Kumar Sharma (159 Taxmann.com 179; 22.01.2024) held that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. The Hon’ble Court referred to the decision of Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) as well as another decision in Common Cause vs. UOI (supra) while arriving at such a conclusion. The Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon’ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. Pertinently, Special Leave Petition (SLP) of revenue against this decision has been dismissed by Hon’ble Supreme Court on 20-08-2024 which is reported as 165 Taxmann.com 846. We are of the opinion that aforesaid principle as laid down by Hon’ble Court would apply to the facts of the present case before us and the same strengthens the arguments of Ld. AR. Similarly, Mumbai Tribunal, in the case of ITO vs. Kranti Impex Pvt. Ltd. (ITA No.1229/Mum/2013) held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for 22 determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. Upon cumulative consideration of given facts, we would hold that impugned additions as made by Ld. AO merely on the basis of loose sheets without any corroboration thereof, was not adequate enough to draw adverse inference of unexplained investment in the hands of the assessee. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. 10. The issue of applicability of 4th proviso to Sec.153A, in our considered opinion, has adequately been dealt with by lower authorities in their respective orders. We concur with the same and reject the legal grounds as raised by the assessee. 11. In the result, the assessee’s appeal ITA No.390/Chny/2023 stand partly allowed. The revenue’s appeal ITA No.529/Chny/2023 stand dismissed. Order pronounced on 21st May, 2025 Sd/- (MANU KUMAR GIRI) \u000eा ियक सद\" / JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद\" / ACCOUNTANT MEMBER चे1ई Chennai; िदनांक Dated : 21-05-2025 DS आदेशकीIितिलिपअ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001a/Appellant 2. थ\u001a/Respondent 3. आयकरआयु:/CIT Chennai/Coimbatore/Madurai 4. िवभागीय ितिनिध/DR 5. गाड?फाईल/GF "