Appeal Details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 9111 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-02-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
H
Assessment Year
2011-2012
Appeal Filed On
19-03-2020
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA no.1574/Mum./2020 (Assessment Year : 2011–12) M/s. Simtools Pvt. Ltd. 412, 17G, Vardhaman Chamber Cawasji Patel Road, Horniman Circle Fort, Mumbai 400 020 PAN – AAECS1757S ................ Appellant v/s Dy. Commissioner of Income Tax Central Circle–7(3) (Erstwhile DCIT, CC–42) Mumbai 400 020 ................ Respondent Assessee by : Shri Anuj Kisnadwala Revenue by : Shri Vinay Sinha Date of Hearing – 17.11.2021 Date of Order – 09.02.2022 O R D E R PER SHAMIM YAHYA, A.M. The present appeal has been filed by the assessee challenging the impugned order dated 27 th February 2020, passed by the learned Commissioner of Income Tax (Appeals)–48, Mumbai, for the assessment year 2011–12. In the appeal, the assessee has challenged the jurisdiction of addition u/s. 153C as well as merits of addition (Rs.105,84,000/- + Rs. 207,21,096/-) and disallowance of set off of brought forward loss of Rs.28,68,288/- 2. Brief facts are the assessee is in the business of development and construction of real estate. The AO in the assessment order noted that A search 2 M/s. Simtools Pvt. Ltd. and seizure action under section 32(1) of the Act was carried out on Lodha Group of cases on 10 th January 2011. That the assessee company is part of the Lodha Group, and is a connected entity by a string of transactions. That during the search proceedings, it was found that Lodha Group was engaged in suppression of sale receipts on account of sale of car parking space outside the regular books of accounts. That simultaneously, instances of receipt of on money against sale of flat were also found which shows that the group had been indulging in receipt of on money on sale of flats over and above the disclosed receipts. That shri Abhinandan Lodha, director and a key person of Lodha Group was confronted with the evidences found during the search of Lodha Group of Companies and his statement was recorded on 12 th January 2011 under section 132(4) of the Act wherein he made a declaration of Rs.199.80 crore as undisclosed income in the hands of various companies of Lodha Group on various accounts. That in his statement he had made a voluntary disclosure in the hands of the assessee company also for various assessment years including the assessment year under consideration, i.e. AY 2010-11, where in an amount of Rs.487 lakh was admitted on account of undisclosed cash receipt on sale of car parking space. That consequent to search, the Lodha Group was centralized with the Dy. Commissioner of Income Tax, Central Circle–7(3). That it is gathered that the Assessing Officer of the searched persons i.e., Lodha Group of cases recorded the satisfaction note mentioning therein the reason for a notice to be issued under section 153C of the Act in the case of the assessee company and thereafter the A.O. of the assessee company issued a notice under section 153C of the Act on 27 th September 2012, which was served on the assessee on the same day. That in response to the said notice, the assessee had originally filed its return of income for the A.Y. 2011–12 on 29 th September 2011, declaring total income of Rs. 5,32,73,099. That subsequently, the return of income was revised on 5 th March 2013, showing income of Rs.8,02,84,557. 3 M/s. Simtools Pvt. Ltd. That in due consideration to the facts of the case, the Assessing Officer completed the assessment under section 153C of the Act on an income of Rs. 8,74,46,483, vide order dated 28 th March 2013, by making various additions on account of sale of car parking space and undisclosed on–money received on sale of flats. 3. The Assessing Officer’s observation with regard to the addition of disallowance made by him read as under:– “ 4. DISALLOWANCE OF SET OFF FOR BROUGHT FORWARD LOSS In the instant case in the previous year relevant to A.Y. 2008–09 as mentioned in the assessment order of that year the share holding pattern has undergone sea change in as much as the 100% share holding was possessed by Lodha Developers Ltd. Upto 31–03–2007 has been transferred to Lodha Elevantion Buildcon in toto. This change in share holding has consequence of invoking of provisions of section 79 which disentitles assessee from set off for brought forward losses for all the earlier years. As per the finding in that assessment order the loss of A.Y. 2007-08 of Rs. 28,68,288/- is not available for set off in the year under consideration following the dictum of section 79. As a result assessee is denied set of off loss of A.Y.2007-08. 5. DISCLOUSRE OF ADDITIONAL INCOME DURING SEARCH PROCEEDINGS on account of sale of car parkings As mentioned in the opening para during the course of search and seizure action it was found that the Lodha Group was engaged in suppression of sale receipts by receiving car parking receipts outside the books of accounts. It was found that the assessee adopted the following modus operandi for sale of car parking stands as under :- The purchaser of car parking used to approach the developer of Lodha Group. If the terms of sale of car parking are accepted by the prospective buyer, the Lodha Group used to take a cheque from such buyer in the name of either of the following entities :- 1. Navkar Enterprises 4 M/s. Simtools Pvt. Ltd. 2. Nakoda Enterprises 3. Raj Vijay 4. Arihant Enterprises 5. Dev Industries 6. Hirani Enterprises 7. Sh tv Sha kti Enterprises 8. V Raj Enterprises 9. Weaves Impex 10. Vijaylaksmi and Co. 11. Arya Enterprises The cheques issued by the buyer were given to the seller i.e. Lodha Group. The Lodha Group used to pass on these cheques to Shri Hirachand Jain or any other entity for discounting the same and the cash generated after discounting was collected by Shri Hirachand Jain, the person to whom the cheques were given for discounting and it was ultimately passed to Lodha Group of concerns wherefrom it has been routed. At times, the car parking receipts were also accepted in cash. The episode narrated above shows how the cash is being generated in the Lodha Group of cases and the cash so generated is not reckoned in the books of account. Evidences to this effect were found in the form of unaccounted cash, cheques favouring third parties and linking them to various projects of the Lodha Group during the course of search. During the statement of Shri Abhinandan Lodha was recorded on 12/01/2011 whereby he was confronted with the various evidences found . During the course of statement, he has made an additional disclosure of income amounting to Rs.199.80 Crs. This amount of additional disclosure has been made in the hands of various entities of the Lodha Group including the assessee company. The issue is that the Lodha Group was indulging in large scale receipt of unaccounted receipts on account of car parking. The evidences pertaining to the group as a whole were substantial. The ITAT, Mumbai in the case of 5 M/s. Simtools Pvt. Ltd. M/S. DIAMOND INVESTMENTS & PROPERTIES, MUMBAI while dealing with the issue of on money has interalia held as under” transfer of any on-money from one hand to the other is best known to the parties concerned and It Is within their exclusive knowledge. The Assessing Officer can draw Inference only from the surrounding circumstances under the peculiar facts and circumstances of each case. Thus, in this case, considering that the facts of suppression of receipts on account of undisclosed car parking were in the knowledge of the assesssee and the director had offered additional income on account of the undisclosed car parking during the course of search, it has to be inferred that the assessee company was indulging in suppression of receipts on account of car parking. In the backdrop of these facts, it is pertinent to note that the assessee company had offered an additional income of Rs.7,00,000/- in the original return of income. When confronted and required to explain the same, the assessee company filed the revised return withdrawing the said additional income. Section 153A does not envisage such revision of return of income once filed. However, the facts do substantiate the income earned other than what is reflected in the books of account. However, on perusal of the return of income it is observed that the assessee company has incorporated the aforementioned additional income only Rs.7 lacs as against Rs.47.52 lacs disclosed during search proceedings. The assessee has neither retracted the disclosure of additional income made during the search proceedings of Rs.47.52 lacs nor offered any plausible explanation for not including the balance disclosure of 40.52 lacs in the return of income. In the backdrop of these facts, the additional income disclosed by the assessee of Rs.40.52 lacs is brought to tax as additional income. As discussed in subsequent para the assessee has sold 24 flats during the previous year relevant to AY under consideration. Needless to mentioned that the sale of flats was coupled with car parking. However the consideration received on sale of car parking was not accounted in the books of accounts there by not offered for tax in the return of income. During the course of search proceedings as discussed earlier this issue cropped up and disclosure was made of Rs. 40.52 lakhs on this account. However the disclosure though not incorporated in the return was found totally inadequate and insufficient, taking into consideration the 6 M/s. Simtools Pvt. Ltd. prevailing rate of car parking of Rs.4,41,000/-. This rate exactly matches with rate at which car parking were sold by the lodha group of company M/S NSIL having project in the same area of Thane city. Therefore going by this rate the assessee ought to have made disclosure of Rs.1,05,84,0007- (24 x 4,41,000), Thus in addition to disclosure made by the assessee during the search of Rs.40.52 lakhs further addition on this account is called for of Rs.65,32,000/- which is also considered accordingly. In the background of the discussion in earlier sub paras the total addition on sale of car parking is made of Rs.1,05,84,000/-. Accordingly penal proceedings u/s 271(1)(c) is initiated. 6. RECEIPT OF ON MONEY ON SALE OF FLATS During the course of search proceedings it was observed that in the Lodha Group of concerns to which assessee belongs receive on money in the form of cash on sale of the flats. Even during the search proceedings the evidence in the form of documents was found which corroborate the fact that such element of acceptance of on money is involved in sale and purchase of the flats. Even Shri Abhinandan Lodha, a key person of Lodha Group in his sworn statement recorded accepted this fact and in consonance with this fact he has made a disclosure of Rs.52 Crores. In regard to the on money transaction the statement of Kirti Ahuja, employee of Lodha group recorded u/s.!33A(3)(iii) on 10.01.2011, statement of Shri Abhjit Shetty recorded u/s.131 on 10.01.2011 are very significant and important from this point of view. Therefore, the relevant part of the statements is reproduced hereunder:- Statement of Ms. Kirti Ahuja, employee of Lodha Group, recorded u/s. 133A(3)(iil) on 10.01.2011 in the case of M/s. Lodha Excellencia at Road No. 22, Wagte State, Sathe Nagar, Near Dostl Pinnacles, Thane Q.9 Please explain the term "SCUD" which is used in your correspondence with the Management? Ans If there is any investor or customer, who is interested to buy more than two flats together and wants the further discount or any relaxation in payment Schedule which is due as per the construction level, we make that as a case and presented to higher management (Including HOD and directors 7 M/s. Simtools Pvt. Ltd. of the company) for the special approval which called as SCUD. They might get approval or they might not Q.10 I am showing you a computer printout taken from the computer in Cabin No.2 which gives the summary of deviations for approval, wherein Column NO.Cand D remarks such as '15% c component to be adjusted' and 20% C in agreement to be adjusted' have been made. Kindly explain what according to you the alphabet 'c' denotes in the above remarks and also explain these entries. Ans. The alphabet 'c' in the above remarks stands for 'cash component and the remarks which is written in Column 'C and 'D' are made by the Sales Manager viz. Nayan Vora and Mukul Mehta to get the special deviation under SCUD as asked by the clients / customers for which no approval is given by the higher management. Q.11 lam showing you another computer print out taken from the computer in Cabin No.2 which gives the summary of deviations for approval, wherein Column 'D' there is a remarks 30% in C'. The remarks made by the committee on this request are 'the C-component is a facility provided, no discount would be provided. Please give your comments. Ans. As per the printout, comment is made by Sales Manager named as Jayant for the project 'Casa Ultima', as myself is confused for the remarks which is given by the Committee as in approved column it's dearly mentioned 'NO'. Statement of Shrl Abhijit Shetty, Asst. Manager (Sales) recorded u/s. 131 on 10.01.2011 in the case of M/s. Casa Unlvts, Next to Bafana Motars Workshop/ Bhayanderpada, Ghodbunder Road, Thane 400604 Q.11 In the course of survey proceedings and on verification of your clients lists randomly at Page No. 29 Sr.n No. 476, Annexure A-l namely, Mr. Bhushan Sureshn Paranjaple, we confirmed with his wife over telephonic (0250-2506393) talk that 20% i.e. around Rs. 9 lakhs has been paid in cash and for the balance 80% is to be paid i.e. Rs. 39 f 83,850/- as per Schedule mentioned in the agreement. Please consult the said client and confirm the same. Ans. Yes, I have consulted and confirmed with the client over the telephone (No. 0250-2506393) that 20% i.e. around Rs. 9 lakhs has been paid in cash. However, I wish to add that the 8 M/s. Simtools Pvt. Ltd. client's booking date is 20.12.2008 and it is 5 months before I joined the organization. Q.12 Further it is confirmed with the other client bearing Sr.No. 5272, Page No. 2 of Annexure A-l namely, Mr. Suman Datta, we confirmed with the client on Mobile No. 9867013043 that 20% i.e. around Rs. 6 lakhs has been paid in cash and for the balance 80% is to be paid as per schedule mentioned in the agreement. Please consult the said client and confirm the same. Ans. I could not consult the client due to late hours. Hence cannot confirm the same. Statement of Abhinandan Lodha recorded on 12.01.11 Q.11. Please go through the following loose paper file seized from your office: Annexure Pages A-l 1 to 124 A-2 Ito61 A-3 Computer Back up A-4 1 to 122 A-5 Computer back up Kindly confirm that they have been seized from your office premises. Also, please explain the contents of the pages. Ans: .... ..... Pages 107-108 (Annexure A/4): These pages contain the consideration received in respect of various flats. The remarks such as "other mode" denote cash receipt. It may be noted that as a general principle, we don't accept cash in our flats. However, in certain cases, cash has been received on account of convenience of customers, and the same has not been accounted in the books of accounts. Such cash receipts have been worked out by as Rs.52 crores across various projects, and the same Is offered as additional income for taxation. ......... On collective reading of ail the three statements clearly reveal that under the garb of SCUD meeting what was being done in 9 M/s. Simtools Pvt. Ltd. the Lodha Group of companies was that the key person and top bosses of the company used to decide the element of cash money and to that extent the agreement price was brought down viz-a-viz market value. Even the flats which are sold almost in the same period had different rates as per agreement where there was no SCUD meeting the rates charged were higher viz-a-viz the rates fixed after SCUD meeting. Taking into consideration this factor, Mr. Abhinandan Lodha made a disclosure of Rs.51 Crore accepting in principle that the Lodha Group of concerns were indulged in the acceptance of on money. After having accepted in principle that the Lodha Group of cases including assessee, the only question remains what is the quantum of on money received by the assessee company in the sale of flats. Therefore, the exercise was made to go thoroughly through the data collected at this end and then as a natural consequence it was decided that the highest rate at which any flat has been purchased or sold is the real marketable value and any flat which is sold at the rate lesser than the highest value is a result of receipt of consideration in cash. On the basis of this, the working of on money received has been made which is enclosed as Annexure A to this order. The quantum of on money determined works out to Rs.2,07,21,096/-” 4. Against the above order, assessee appealed before the ld.CIT(A). 5. Ld.CIT(A) referred to the submissions made by the assessee. He observed that search was carried out at the various premises of Lodha group and residential premises of directors and employees etc. That the search action resulted in seizure of books of accounts, documents, loose sheets, besides seizure of cash of Rs. 9,28,52,476/-( out of the total cash found of Rs. 9,81,41,753/-) and seizure of gold, diamond jewellery, watches worth Rs. 4,69,82,272/-( out of such items found of Rs. 19,43,70,069/-). That assessee company is one of the entities amongst the 200 odd entities floated by Lodha Group. That assessee was not covered u/s. 132 of the Act. He observed that during the search at the premises of Lodha Developers Ltd., a statement of Shri Abhinandan Lodha was recorded. Abhinandan Lodha along with his father and brother manages activities of the group. That during the search Abhinandan 10 M/s. Simtools Pvt. Ltd. Lodha was appraised about the statement recorded of certain employees. Thereafter, Ld.CIT(A) observed that in the statement u/s. 132(4) of the Act in terms of the quantum of car parking charges received and how the same were not accounted for in books of accounts, he referred the submission of Shri Abhainandhan Lodha. He further observed that cash of Rs. 9 crore was seized during the search from various premises which obviously include on money for car parking and sale of flats. That Shri Abhinandan Lodha declared a sum of Rs. 199.8 crore for taxation in Lodha Group of concerns. Ld. CIT(A) referred to the breakup of the disclosure which mentions at item no. 19 Sr.No. Entity Project No. of units Car parking Cash sales Total 19 Simtools Ultima 278 3.9 3.9 6. He further referred to the breakup of 199.8 as under:- i) Rs. 99.8 crores towards unaccounted car park receipts ii) Rs. 52 crores on account of unaccounted cash receipts on sales of flats. iii) Rs. 2 crores on account of sale of scrap in cash iv) Rs. 17 crores on account of cash dealings with brokers v) Rs. 29 crores approx on account of other discrepancies 7. Referring to the above, ld.CIT(A) held that it is abundantly clear that cash found and seized at various placed was in respect of the on money received on account of car parking and sale of flats a part of which belonged to assessees company, which the director of the assessees company, Shri Abhinandan Lodha declared as undisclosed income u/s. 132(4) fo the Act . Hence, he held that it clearly shows that unaccounted cash receipts of car parking and on money was resorted by the assessee. He further referred to the search action at the premises 11 M/s. Simtools Pvt. Ltd. of Shri Somnathan Nair said to be the key employer of the Lodha Group and custodian of the unaccounted money. He observed that various documents were seized from the residence of Somnath Nair and these were considered by Shri Abhinandnan Lodha while making his statement. Hence, he observed that large number of incriminating documents were found during the search of the searched person. 8. Ld.CIT(A) observed that he finds enough indications of the evidence of incriminating material particularly unaccounted cash discovered during the course of search belonged to the appellant. That as per provisions of section 153C of the act notice can only be issued to a person with respect to whom incriminating material is found and the AO of that assessee makes a report that the said material is belonged to the said person. That in the present case, AO satisfaction was found that the cash discovered during the search of the searched person was unaccounted and belonged to the assessee, which was evidenced by categorical statement by director of the assessees company admitting the on money transactions, car parking and sale of flats. He held that the asseseees allegation that satisfaction note is based on surmise and conjectures is not sustainable. Hence, he held that ingredient of 153C have been satisfied in the present case. Hence, he held that notice issued u/s. 153 of the act is held to be as per law. Therefore, he held that AO has rightly assumed jurisdiction issued notice u/s. 153C of the Act. Therefore, he referred to the assessees contention that no notice u/s. 143(2) was served on it. He held that notice u/s. 143(2) is not mandatory in a case covered u/s. 153A. For this, he referred to Hon’ble Delhi High Court in the case of Ashok Chadha Vs ITO ITA No. 271/2011 dated 27.07.2011. He further observed that the reliance placed by the appellant on the decision of his predecessor in the case of M/s. National Standard India Ltd. (NSIL) A.Ys 2005-06 to 2010-11 is misplaced. That in the case of NSIL 12 M/s. Simtools Pvt. Ltd. there was no disclosure of income u/s. 132(4) for AY 2010-11 whereas in the instant case there is a disclosure of income u/s. 132(4) of Rs. 4.80 crores. 9. With regard to the addition of unaccounted sale / parking space of Rs. 1,05,84,000 (Rs. 40,52,000 + Rs. 65,32,000), the learned CIT(A) observed as under:– I have considered the facts of the case and submission of the assessee. In regard to appellant's claim that it had not indulged in sale of car parking the observation of Settlement Commission are worth mentioning as made in its order dtd. 28/11/2014 u/s. 245D(4) of the Act.: "8.2 Search u/s.132 dated 10/01/2011 on the Lodha Group of cases had resulted in seizure of incriminating documents, papers besides cash and jewellery.The incriminating documents led to detection of undisclosed sale of car parking receipt of 'on money' on sale of flats, undisclosed sale of scrap, unaccounted and undisclosed cash loans, foreign transactions and round trping." 7.5 Enquiries were carried out u/s.245D(3) which revealed that the applicant group continues to receive unaccounted car parking amounts after 16/09/2010 to the date of search. On the issue of car parking charges after the date of search, CIT mentioned in 245D(3) report that post search, no significant increase in rates of flats sold was noticeable. This would imply that the applicants continues to take car parking amounts outside the books even after search. 7.6 It is further observed by the Hon’ble Settlement commission that the Lodha group of Companies, the appellant being one of the entities of such huge group, in this Statemnt of Facts (SOF) admitted the important basic fact of quantum directly reflected in the incriminating documents:s a) Cash received as part of sale proceeds (on money) 24 instances totaling to Rs. 1,05,84,000/- b)From Shri Hiralal Jain, Finance Broker, discounting of cheques through 11 sham concerns was found in the statement of bank accounts of these sham concerns . 10. Thereafter, ld.CIT(A) referred to the modus operandi as noted by the AO. He referred to the statement of employees of Lodha group and based upon that of Shri A Abhinandan Lodha and concluded as under:- 13 M/s. Simtools Pvt. Ltd. From the above, it becomes clear that the appellant company had been collecting parking charges by cheques in the names of concerns operated by others. These cheques were then given to Hirachand for discounting and after deducting commission, Hirachand returned back cash to the appellant company, an entity of Lodha group. Certain evidences, in the form of loose papers inventorised as A/2 ( pages 1 to 223), were seized on 10/03/2011 at Lodha Pavillion, Mahalaxmi, the main office of Lodha group, which contain copies of cheques received on account of car parking in the name of concerns other than Lodha Group of Companies. The reverse side of the copy of the cheque indicates from whom they were received and which flat they pertains. Shri Abhinandan Lodha was confronted with the said evidences and consequently, he conceded the fact that the Lodha Group indeed collected cheques for car parking and encashed them in the market. Relevant extract of Shri Abhinandan Lodha's statement recorded on 10.03.2011. Q.No.8:During the course of statement recorded from you on 12.01.2011 you had made an disclosure of 199.80 crs .You are asked to provide the company wise and year wise break up of the same. However, you have not provided that. Can you produce it now ? Ans. Yes. It took us a lot of time to go through the seized material. I am providing the same now as follows: Sr. No. Item-wise breakup Name of the company FY Amount ( INR in crs) 1 Car parking As per Annexure 1 2009-10 & 2010-11 48.89 58.91 2 On money As per Annexure 2 2009-10 &2010-11 22.00 30.00 3 Sale of scrap Sree Saiinath Enterprises 2010-11 2.00 4 Cash loans/ 2010-11 38.00 others Total 199.80 The appellant has accordingly offered additional income on account of sale of car parking. The appellant contends that he had sold parking slots but has not charged for some of them. It does not stand to reason that he sells parking without charging for them. The AO has rightly brought to tax the amount of such sale of car parking, which assessee has not offered for taxation on the premise that the same 14 M/s. Simtools Pvt. Ltd. were not sold for a consideration. It does not seem plausible and has not been substantiated by the appellant. In the present case, the appellant company has not offered any amount on account of car parking in its original return of income as well as in a revised return filed u/s. 153C of the Act. In view of the above facts it may be concluded that the assessee was indeed involved in selling parking slots and considerations was received in cash which was unaccounted. Accordingly additions of Rs. 1,05,84 ( 000/- made by the AO in this regard is upheld 11. As regards the issue of addition of Rs.2,07,21,096, for on–money on sale of flats, the learned CIT(A) noted the following submissions of the assessee:- 8.1 Appellant's Submission: The appellant is part of Lodha Group of Companies. A search u/s 132 was conducted on Lodha Group on 10.1.2011. During the search, the statement of certain individuals were recorded, including Mr. Abhinandan Lodha, who was the director of Lodha Developers Pvt. Ltd. It may be clarified that Mr. Abhinandan Lodha was neither employee nor director of the appellant company. In the statement recorded for certain disclosure was made by Mr. Abhinandan Lodha in respect of on money and sale of car parking for project being developed by the appellant company. Based on the statement recorded, the assessment was completed and an assessment order was passed u/s I53A r.w.s. 153C/143(3) wherein the following additions were made: Sr. no. Particulars Amount (Rs.) 1 Unaccounted sale of car parking 1,05,84,000 2 Unaccounted on money on sale of flats 2,07,21,096 Appellant's Contentions: At the outset it is submitted that this being the year in which the search was conducted, no assessment can be made u/s 153A r.w.s. 153C. Therefore, the order passed by the AO is illegal and bad in law. Without prejudice to the above, the assessment done u/s 153C is invalid and illegal, as the same was issued based on the mere statement of Mr. Abhinandan Lodha (who was neither a director nor an employee of the company), which cannot be treated as a document or material belonging to the appellant seized in the said search action on Lodha Group. No 15 M/s. Simtools Pvt. Ltd. incriminating material is found or seized in respect of the appellant during the search process on Lodha Group. The AO failed to bring on record any document or material requisitioned or seized belonging to the appellant and in the absence of such material requisitioned or seized, the notice u/s 153C is bad in law. It is a well-accepted legal position, as per various judicial pronouncements, that the statement recorded during the search operations cannot be treated as document or material requisitioned or seized for invoking section 153C of the Act. Past decisions on similar issue; . In the similar situation and based on the same statement of Mr. Abhinandan Lodha, the AO assessed and made additions in another group company M/s. National Standard (India) Limited (NSIL). A copy of the order of the AO is for AY 2010-11 is attached as Annexure 1. The fact pattern and reasons for assessment are identical, except the amount of MSIL and the appellant company. Your predecessor has already quashed the assessment of NSIL made u/s.!53A r.w.s. 153C vide order dated 24 April 2015. A copy of the order of CIT(A)-48 is attached as Annexure 2. The order of CIT(A) was subsequently challenged by the department before the Mumbai Tribunal and the Tribunal vide its order dated 28 July 2017 has upheld the decision of CIT(A) that the action of the AO u/s 153C is bad in law and illegal. A copy of the order of the Mumbai is attached as Annexure 3. As per the information available with the appellant, the department has accepted the decision of Mumbai Tribunal in the case of NSIL and has not preferred any appeal before the Bombay High Court. On Merits: SI. No. Issue Amount (Rs.) Assesse's Contention 1 Unaccounted sale of car parking 10,84,00,000 Both these additions were made merely on the basis of the statement of Mr. Abhinandan Lodha recorded for AY 2011-12 during the search action. No incriminating material is found or seized in respect of the appellant during the search process on Lodha Group. The AO has relied on pages 107 and 108 of Annexure A4 seized during the search action which represents the chart showing the projects of the appellant, sales consideration etc. At no place there is mention of project ‘Casa Ultima’ developed by the Appellant which proves that the appellant has not received any on money from the project. 2 Unaccounted on money on sale of flats 16,78,31,372 16 M/s. Simtools Pvt. Ltd. 12. Thereafter, ld.CIT(A) referred to search in Lodha group and retrieval of a deleted file from computer. That the same contained on money collection. He again referred to statement of other employees of Lodha group and thereafter that of Shri Abhinandhan Lodha. He referred to following case laws i) Surjeet Singh chhabra v. Union of India (SC) ii) TS Kumarasami v. ACIT , 65 ITD 188 (Mad.) iii) MK Mohammad Kunhi v. CIT 92 ITR 341 (ker.) iv) V Kunhikannan v CIT 219 ITR 235 (Ker.) v) Hotel Kiran v ACIT, 82 ITD 453 (Pune.Trib) vi) Dr.SC Gupta v. CIT, 248 ITR 782(Alld) 13. He concluded as under:- “Respectfully following the above judicial authorities on the subject, I hold as under:- (i) Statements in the nature of declarations covered by the provisions of Section 115 of the Evidence Act, are binding on the declarant. They can neither be retracted nor do they require any corroboration. Such declarations can form the sole basis for assessment. The declaration made by the appellant recorded under section 132(4) of the Income tax Act, 1961 falls squarely within the ambit of section 115 of the Evidence Act and hence the same was neither open to retraction nor required any further corroboration. The AO could, therefore, base the impugned addition on the said declaration. (ii) Statements which are not in the nature of declarations under Section 115 of the Evidence Act are also binding and can form the sole basis for assessment if they are not effectively retracted. Effective retraction is possible in two situations. First situation is where it is not voluntarily made. A statement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the said principle will also govern the statement recorded by a public official and this is more particularly so when it is recorded in pursuance of the statutory provisions of law. The provisions of Sub-section (4) of Section 132 at so create rebuttable presumption in favour of the statements recorded thereunder and authorize their use in evidence in any proceeding under the Income- 17 M/s. Simtools Pvt. Ltd. tax Act. The burden is therefore squarely on the person who alleges that the statement was not made voluntarily to prove that it was involuntarily made or made under coercion or undue influence or that it was made under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the person seeking to retract proves, by leading cogent and reliable evidence, the erroneous or incorrect nature of the facts stated or confessed at the earliest possible opportunity. In the case before us, it has been held above that the assessee has squarely failed to satisfactorily discharge the burden that the confessional statement made by him Under Section 132(4) was involuntarily made or made under coercion or undue influence or was made under mistaken belief or obtained by fraud or misrepresentation. Rather, the evidence available on record shows that it was voluntarily made by the appellant with due care and caution and after necessary consultations with all concerned. Besides, there has been inordinate delay, which has not been substantiated to retract from the confessional statement. Retraction is also not supported by any independent or reliable evidence to prove the incorrect nature of the facts confessed in the statement. The confessional statement of the appellant is also corroborated by other evidence. For these reasons also, the AO was, therefore, in my view, justified in basing the impugned addition on the basis of confessional statement made at the time of search. (iiii) A confessional statement, which is not in the nature of declaration Under Section 115 of the Evidence Act, continues to have evidentiary value even after its retraction. However, such retracted confession/statement needs corroboration if it has been successfully retraced. As held above, the case of the assessee before us does not fall under this category. The appellant is a practicing Chartered Accountant and he is in the practice in the last 42 years. Considering his long legal background, the contention of the appellant that he was made to give the statement u/s. 132(4) of the Act cannot be accepted. Moreover the assessee made statement on the date of search itself and confirmed the same on the next date. Therefore, the appellants contention that he was not aware of the various provision of the law in general and Income Tact Act in particular cannot be accepted. After giving careful consideration to all the relevant aspects of the case, I am of the view that the Lodha group of cases including the present assessee sold the flats and receive on-money, over and above the disclosed sales. Even the flats which are sold almost in the same period had different rates as per agreement where there ws no SCUD meeting the rates charged were higher. Therefore, there is no reason or occasion to interfere in the order of the AO in adding an amount of Rs. 2,07,21,096/-. The same is therefore upheld. 14. As regards, the issue of carry forward of losses, he held as under:- 18 M/s. Simtools Pvt. Ltd. This issue has been dealt with by the AO in para 4 of the assessment order. The AO was of the view that share holding pattern of the assesse company has undergone sea change as 100% shareholding which was held by Lodha Developers till31.03.2007, has been transferred to Elevation Buildcon P Ltd and therefore in view of provisions of section 79 of the Act, the brought forward losses from earlier years are not eligible for carry forward and set off against the income of subsequent years. I am inclined to agree with the AO and hold that the assessee is not eligible for carry forward of such losses after AY 2007-08. Accordingly, these grounds of the assessee also fail. 15. Against the above order, assessee has filed appeal before ITAT challenging the above. 16. We have heard both the parties and perused the records. We note that the first issue dealt with by the learned CIT(A) is the assessee’s challenge that provisions of section 153C are not satisfied and hence, the jurisdiction of assessment in this case is defective and liable to be quashed. Before proceeding further, it will be gainful to refer to the necessary provisions of the Act. Section 153A provides the procedure of assessment in the case of search cases, where incriminating material pertaining to the assessee is found. Section 153C provides for the procedure in case of the person relating to whom materials are found in case of search of the other person to whom section 153A is applicable. Section 153A in the explanation at the end provides that the procedure mentioned in this section shall also be applicable to cases covered under section 153C. The necessary provisions read as under:- Assessment in case of search or requisition:- 153A. (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 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], 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 and for the relevant assessment year or 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 19 M/s. Simtools Pvt. Ltd. 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 and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or 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 132A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years : Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless— (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.—For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (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 Principal Commissioner or Commissioner: 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 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; 20 M/s. Simtools Pvt. Ltd. (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. Assessment of income of any other person:- 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 21 M/s. Simtools Pvt. Ltd. [(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.] 17. Hon’ble Supreme Court in the case of Sinhgad Technical Education Society (Civil Appeal No. 11080 of 2017). has expounded upon the jurisprudence with regard to the jurisdictional aspect of assessment under section 153C. Hon’ble Supreme Court in paragraph 18 of the said order has expounded as under:- “In this behalf it was noted by the ITAT that as per provisions of section 153C of the act, incriminating material, which was seized had to pertains to assessment years in question and it is an undisputed fact that the document which were seized did not establish any correlation, document wise, with these for assessment years since this requirement under section 153C of the act is essential for assessment under the provision it becomes a jurisdictional defect. We find this reasoning to be logical and valid having regard to the provisions of section 153C of the Act.” 18. A reading of the above makes it clear that for removal of jurisdictional defect, it is necessary that incriminating material seized during search has to pertain to the specific assessment year in question. If the documents, which are seized do not establish any correlation, document wise with the concerned assessment years, the assessment for that year suffers from jurisdictional defect. 19. Now, we refer to the finding of the authorities below regarding incriminating material found and seized and referring to the assessee in this case. It is noted that the search was not conducted at the premises of the assessee. The assessee is a limited company. Being an artificial judicial person, it has its separate identity form that of that its shareholders. It can sue and be sued in its own name. For tax purposes also, it has separate status and identity. 20. Now, it is undisputed that in the findings referred by the authorities below, there is no mention to any specific material corresponding to the assessment year under reference, which was found in search, which belong to the assessee 22 M/s. Simtools Pvt. Ltd. in this case. The entire finding of the authorities below is based upon the search and material found in the case of Lodha Group. There is no mention of any specific material much less incriminating material relating to the assessee found in the search. The authorities below are also referring to statements given by the employees of Lodha group. There is no mention that these employees were that of the assessee’s company. There is much importance given to the statement of Shri Abhinandan Lodha. The ld.CIT(A) has mentioned that the said person is a director in the assessee company. This has been disputed by the assessee even before the ld.CIT(A) that the said person is not a director of the assessees company. The assessee company has also mentioned that it has separate legal entity and the term Lodha group cannot be used against it without identifying the specific material belonging to it. The ld.CIT(A) has ignored this aspect despite reproducing the assessee submission before him in his appellate order. When the said person is not a director in the said company his statement by no stretch of imagination can be said to be applicable or binding upon the said company. In such eventuality, the said material cannot be said to be any material much less incriminating material found during search giving jurisdiction to the AO for assessment under section 153C on the touchstone of exposition of the Hon’ble Supreme Court referred above. 21. Apart from the above, the ld.CIT(A) has referred to cash declared by Shri Abhinandan Lodha declared in his statement to be belonging to the assessee company. Firstly, as noted above except for the statement of Shri Abhinandan Lodha, there is no material whatsoever, that the cash seized at the premises which did not belong to the assessee belong to the assessee. In such circumstances, the said cash account cannot be said to be material found under the proceedings of section 153C giving jurisdiction to the AO to frame the assessment. Same is a situation of the material found relating to receipt of on 23 M/s. Simtools Pvt. Ltd. money. These are also based upon materials found in the case of search of Lodha group and the statement of other employees of Lodha group and the statement of Abhinandan Lodha. There is no material whatsoever specifying the material pertaining to the assessment year found belonging to the assessee company. In this view of the matter, there is a jurisdictional defect in the assessment framed under section 153C and the same is liable to be set aside on the account itself. 22. Now, we come to the merit of addition in this case relating to on money received and the cash found relating to undeclared sale of parking space and flats. 23. As noted above, these are also not based upon reference to any specific materials relating to the assessees company. The additions are said to be based upon materials belonging to the Lodha group and statement of employees of Lodha group and statement of Shri Abhinandan Lodha, which has been retracted afterwards. 24. As found out by us above, the assessee is a separate legal entity. There is no mention whatsoever regarding the nature of particular material belonging to the assessee company, which gives rise to the inference of on money receipt. This is based upon statement of other employees of Lodha group and that of Shri Abhianndan Lodha. As pointed out by us above, assessee has already disputed that assessee is a distinct legal entity and the term Lodha group cannot be used to incriminate the assessee and that Shri Abhinandan Lodha is not at all related to the assessee company. Hence, the material referred are not germane and hence, the addition on merits is also not sustainable. In this regard, we also note 24 M/s. Simtools Pvt. Ltd. that the ld.CIT(A) has given the elaborate reference to case laws regarding the evidence Act and evidentiary value of statements obtained. 25. In this regard, we note that none of the statement referred here are identified to be belonging to the assessee company. In these circumstances, we note that none of the case laws referred by ld.CIT(A) expound that statement of persons not belonging to the assessee company can be an evidence against the assessee and which can be the basis of addition of undisclosed income. In this regard, it may also be relevant to refer to the material found in the search at other places and on the basis of which these statements have been obtained. The materials found in search mentioned is the retrieval of deleted file stored in computer system. In this connection, the law in this regard has been elaborately dealt with by the larger Bench Hon’ble Surpeme Court in the case of Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal and ors in civil appeal No. 2407 of 2018, vide order dated 14.07.2020. The said larger Bench of Hon’bel Apex Court noted the reference before to it in para 2 of the said order as under:- “2. These Civil Appeals have been referred to a Bench of three honourable Judges of this Court by a Division Bench reference order dated 26.07.2019, dealing with the interpretation of Section 65B of the Indian Evidence Act, 1872 (“Evidence Act”) by two judgments of this Court. In the reference order, after quoting from Anvar P.V. v. P.K. Basheer & Ors (2014) 10 SCC 473 (a three Judge Bench decision of this Court), it was found that a Division Bench judgment in SLP (Crl.) No. 9431 of 2011 reported as Shafhi Mohammad v. State of Himachal Pradesh (2018) 2 SCC 801 may need reconsideration by a Bench of a larger strength.” 26. Thereafter, Hon’ble Supreme Court in paragraph 13 to 24 dealt with the provision of law in this regard and the decision of Anvar P.V(supra) as under:- 13. It is now necessary to set out the relevant provisions of the Evidence Act and the Information Technology Act, 2000. Section 3 of the Evidence Act defines “document” as follows: “Document.-- "Document" means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter.” “Evidence” in Section 3 is defined as follows: 25 M/s. Simtools Pvt. Ltd. “Evidence."-- "Evidence" means and includes—(1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence; (2) all documents including electronic records produced for the inspection of the Court; such documents are called documentary evidence.” The Evidence Act also declares that the expressions “Certifying Authority”, “electronic signature”, “Electronic Signature Certificate”, “electronic form”, “electronic records”, “information”, “secure electronic record”, “secure digital signature” and “subscriber” shall have the meanings respectively assigned to them in the Information Technology Act. 14. Section 22-A of the Evidence Act, which deals with the relevance of oral admissions as to contents of electronic records, reads as follows: “22A. When oral admission as to contents of electronic records are relevant. -- Oral admissions as to the contents of electronic records are not relevant, unless the genuineness of the electronic record produced is in question.” 15. Section 45A of the Evidence Act, on the opinion of the Examiner of Electronic Evidence, then states: “45A. Opinion of Examiner of Electronic Evidence.-- When in a proceeding, the court has to form an opinion on any matter relating to any information transmitted or stored in any computer resource or any other electronic or digital form, the opinion of the Examiner of Electronic Evidence referred to in section 79A of the Information Technology Act, 2000 (21 of 2000), is a relevant fact. Explanation.-- For the purposes of this section, an Examiner of Electronic Evidence shall be an expert.” 16. Sections 65-A and 65-B of the Evidence Act read as follows: “65A. Special provisions as to evidence relating to electronic record.--The contents of electronic records may be proved in accordance with the provisions of section 65B.” “65B. Admissibility of electronic records.- (1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence or any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely: (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly 26 M/s. Simtools Pvt. Ltd. or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, - (a) identifying the electronic record containing the statement and describing the manner in which it was produced; (b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer; (c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this subsection it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it. (5) For the purposes of this section, (a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment; -- (b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities; (c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment. Explanation. -- For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.” 17. The following definitions as contained in Section 2 of the Information Technology Act, 2000 are also relevant: “(i) “computer” means any electronic, magnetic, optical or other high-speed data processing device or system which performs logical, arithmetic, and memory 27 M/s. Simtools Pvt. Ltd. functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software or communication facilities which are connected or related to the computer in a computer system or computer network;” “(l) “computer network” means the inter-connection of one or more computers or computer systems or communication device through– (i) the use of satellite, microwave, terrestrial line, wire, wireless or other communication media; and (ii) terminals or a complex consisting of two or more interconnected computers or communication device whether or not the inter-connection is continuously maintained;” “(l) “computer system” means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, which contain computer programmes, electronic instructions, input data and output data, that performs logic, arithmetic, data storage and retrieval, communication control and other functions;” “(o) “data” means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer;” “(r) “electronic form”, with reference to information, means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;” “(t) “electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;” 18. Sections 65A and 65B occur in Chapter V of the Evidence Act which is entitled “Of Documentary Evidence”. Section 61 of the Evidence Act deals with the proof of contents of documents, and states that the contents of documents may be proved either by primary or by secondary evidence. Section 62 of the Evidence Act defines primary evidence as meaning the document itself produced for the inspection of the court. Section 63 of the Evidence Act speaks of the kind or types of secondary evidence by which documents may be proved. Section 64 of the Evidence Act then enacts that documents must be proved by primary evidence except in the circumstances hereinafter mentioned. Section 65 of the Evidence Act is important, and states that secondary evidence may be given of “the existence, condition or contents of a document in the following cases...”. 19. Section 65 differentiates between existence, condition and contents of a document. Whereas “existence” goes to “admissibility” of a document, “contents” of a document are to be proved after a document becomes admissible in evidence. Section 65A speaks of “contents” of electronic records being proved in accordance with the provisions of Section 65B. Section 65B speaks of “admissibility” of electronic records which deals with “existence” and “contents” of electronic records being proved once admissible into evidence. With these prefatory observations let us have a closer look at Sections 65A and 65B. 20. It will first be noticed that the subject matter of Sections 65A and 65B of the Evidence Act is proof of information contained in electronic records. The marginal 28 M/s. Simtools Pvt. Ltd. note to Section 65A indicates that “special provisions” as to evidence relating to electronic records are laid down in this provision. The marginal note to Section 65B then refers to “admissibility of electronic records”. 21. Section 65B(1) opens with a non-obstante clause, and makes it clear that any information that is contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document, and shall be admissible in any proceedings without further proof of production of the original, as evidence of the contents of the original or of any facts stated therein of which direct evidence would be admissible. The deeming fiction is for the reason that “document” as defined by Section 3 of the Evidence Act does not include electronic records. 22. Section 65B(2) then refers to the conditions that must be satisfied in respect of a computer output, and states that the test for being included in conditions 65B(2(a)) to 65(2(d)) is that the computer be regularly used to store or process information for purposes of activities regularly carried on in the period in question. The conditions mentioned in sub- sections 2(a) to 2(d) must be satisfied cumulatively. 23. Under Sub-section (4), a certificate is to be produced that identifies the electronic record containing the statement and describes the manner in which it is produced, or gives particulars of the device involved in the production of the electronic record to show that the electronic record was produced by a computer, by either a person occupying a responsible official position in relation to the operation of the relevant device; or a person who is in the management of “relevant activities” – whichever is appropriate. What is also of importance is that it shall be sufficient for such matter to be stated to the “best of the knowledge and belief of the person stating it”. Here, “doing any of the following things...” must be read as doing all of the following things, it being well settled that the expression “any” can mean “all” given the context (see, for example, this Court’s judgments in Bansilal Agarwalla v. State of Bihar (1962) 1 SCR 331 and 1 “3. The first contention is based on an assumption that the word “any one” in Section 76 means only “one of the directors, and only one of the shareholders”. This question as regards the interpretation of the word “any one” in Section 76 was raised in Criminal Appeals Nos. 98 to 106 of 1959 (Chief Inspector of Mines, etc.) and it has been decided there that the word “any one” should be interpreted there as “every one”. Thus under Section 76 every one of the shareholders of a private company owning the mine, and every one of the directors of a public Om Parkash v. Union of India (2010) 4 SCC 172). This being the case, the conditions mentioned in sub-section (4) must also be interpreted as being cumulative. 24. It is now appropriate to examine the manner in which Section 65B was interpreted by this Court. In Anvar P.V. (supra), a three Judge Bench of this Court, after setting out Sections 65A and 65B of the Evidence Act, held: “14. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65-A, can be proved only in accordance with the procedure prescribed under Section 65-B. Section 65-B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a 29 M/s. Simtools Pvt. Ltd. computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, company owning the mine is liable to prosecution. No question of violation of Article 14 therefore arises.” 2 “70. Perusal of the opinion of the Full Bench in B.R. Gupta-I [Balak Ram Gupta v. Union of India, AIR 1987 Del 239] would clearly indicate with regard to interpretation of the word “any” in Explanation 1 to the first proviso to Section 6 of the Act which expands the scope of stay order granted in one case of landowners to be automatically extended to all those landowners, whose lands are covered under the notifications issued under Section 4 of the Act, irrespective of the fact whether there was any separate order of stay or not as regards their lands. The logic assigned by the Full Bench, the relevant portions whereof have been reproduced hereinabove, appear to be reasonable, apt, legal and proper.” (emphasis added) without further proof or production of the original. The very admissibility of such a document i.e. electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65-B(2). Following are the specified conditions under Section 65- B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. 15. Under Section 65-B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied: (a) There must be a certificate which identifies the electronic record containing the statement; (b) The certificate must describe the manner in which the electronic record was produced; (c) The certificate must furnish the particulars of the device involved in the production of that record; (d) The certificate must deal with the applicable conditions mentioned under Section 65-B(2) of the Evidence Act; and (e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device. 16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, compact disc (CD), video compact disc (VCD), pen drive, etc., pertaining to which a statement is sought 30 M/s. Simtools Pvt. Ltd. to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. 17. Only if the electronic record is duly produced in terms of Section 65-B of the Evidence Act, would the question arise as to the genuineness thereof and in that situation, resort can be made to Section 45-A—opinion of Examiner of Electronic Evidence. 18. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65-B of the Evidence Act are not complied with, as the law now stands in India. xxx xxx xxx 20. Proof of electronic record is a special provision introduced by the IT Act amending various provisions under the Evidence Act. The very caption of Section 65-A of the Evidence Act, read with Sections 59 and 65-B is sufficient to hold that the special provisions on evidence relating to electronic record shall be governed by the procedure prescribed under Section 65-B of the Evidence Act. That is a complete code in itself. Being a special law, the general law under Sections 63 and 65 has to yield. 21. In State (NCT of Delhi) v. Navjot Sandhu a two-Judge Bench of this Court had an occasion to consider an issue on production of electronic record as evidence. While considering the printouts of the computerised records of the calls pertaining to the cellphones, it was held at para 150 as follows: (SCC p. 714) “150. According to Section 63, “secondary evidence” means and includes, among other things, ‘copies made from the original by mechanical processes which in themselves insure the accuracy of the copy, and copies compared with such copies’. Section 65 enables secondary evidence of the contents of a document to be adduced if the original is of such a nature as not to be easily movable. It is not in dispute that the information contained in the call records is stored in huge servers which cannot be easily moved and produced in the court. That is what the High Court has also observed at para 276. Hence, printouts taken from the computers/servers by mechanical process and certified by a responsible official of the service-providing company can be led in evidence through a witness who can identify the signatures of the certifying officer or otherwise speak of the facts based on his personal knowledge. Irrespective of the compliance with the requirements of Section 65-B, which is a provision dealing with admissibility of electronic records, there is no bar to adducing secondary evidence under the other provisions of the Evidence Act, namely, Sections 63 and 65. It may be that the certificate containing the details in sub-section (4) of Section 65-B is not filed in the instant case, but that does not mean that secondary evidence cannot be given even if the law permits such evidence to be given in the circumstances mentioned in the relevant provisions, namely, Sections 63 and 65.” It may be seen that it was a case where a responsible official had duly certified the document at the time of production itself. The signatures in the certificate were also identified. That is apparently in compliance with the procedure prescribed under Section 65-B of the Evidence Act. However, it was held that irrespective of the compliance with the requirements of Section 65-B, which is a special provision 31 M/s. Simtools Pvt. Ltd. dealing with admissibility of the electronic record, there is no bar in adducing secondary evidence, under Sections 63 and 65, of an electronic record.” 22. The evidence relating to electronic record, as noted hereinbefore, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Sections 59 and 65-A dealing with the admissibility of electronic record. Sections 63 and 65 have no application in the case of secondary evidence by way of electronic record; the same is wholly governed by Sections 65-A and 65-B. To that extent, the statement of law on admissibility of secondary evidence pertaining to electronic record, as stated by this Court in Navjot Sandhu case, does not lay down the correct legal position. It requires to be overruled and we do so. An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65-B are satisfied. Thus, in the case of CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65- B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible. 23. The appellant admittedly has not produced any certificate in terms of Section 65- B in respect of the CDs, Exts. P-4, P-8, P-9, P-10, P-12, P-13, P-15, P-20 and P- 22. Therefore, the same cannot be admitted in evidence. Thus, the whole case set up regarding the corrupt practice using songs, announcements and speeches fall to the ground. 24. The situation would have been different had the appellant adduced primary evidence, by making available in evidence, the CDs used for announcement and songs. Had those CDs used for objectionable songs or announcements been duly got seized through the police or Election Commission and had the same been used as primary evidence, the High Court could have played the same in court to see whether the allegations were true. That is not the situation in this case. The speeches, songs and announcements were recorded using other instruments and by feeding them into a computer, CDs were made therefrom which were produced in court, without due certification. Those CDs cannot be admitted in evidence since the mandatory requirements of Section 65- B of the Evidence Act are not satisfied. It is clarified that notwithstanding what we have stated herein in the preceding paragraphs on the secondary evidence of electronic record with reference to Sections 59, 65-A and 65- B of the Evidence Act, if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act, the same is admissible in evidence, without compliance with the conditions in Section 65-B of the Evidence Act.” 27. The Hon’ble Supreme Court answered the reference in para 72 as under:- “72. The reference is thus answered by stating that: (a) Anvar P.V. (supra), as clarified by us hereinabove, is the law declared by this Court on Section 65B of the Evidence Act. The judgment in Tomaso Bruno (supra), being per incuriam, does not lay down the law correctly. Also, the judgment in SLP (Crl.) No. 9431 of 2011 reported as Shafhi Mohammad (supra) and the judgment 32 M/s. Simtools Pvt. Ltd. dated 03.04.2018 reported as (2018) 5 SCC 311, do not lay down the law correctly and are therefore overruled. (b) The clarification referred to above is that the required certificate under Section 65B(4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where the “computer” happens to be a part of a “computer system” or “computer network” and it becomes impossible to physically bring such system or network to the Court, then the only means of providing information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate under Section 65B(4). The last sentence in Anvar P.V. (supra) which reads as “...if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act...” is thus clarified; it is to be read without the words “under Section 62 of the Evidence Act,...” With this clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to be revisited. (c) The general directions issued in paragraph 62 (supra) shall hereafter be followed by courts that deal with electronic evidence, to ensure their preservation, and production of certificate at the appropriate stage. These directions shall apply in all proceedings, till rules and directions under Section 67C of the Information Technology Act and data retention conditions are formulated for compliance by telecom and internet service providers. (d) Appropriate rules and directions should be framed in exercise of the Information Technology Act, by exercising powers such as in Section 67C, and also framing suitable rules for the retention of data involved in trial of offences, their segregation, rules of chain of custody, stamping and record maintenance, for the entire duration of trials and appeals, and also in regard to preservation of the meta data to avoid corruption. Likewise, appropriate rules for preservation, retrieval and production of electronic record, should be framed as indicated earlier, after considering the report of the Committee constituted by the Chief Justice’s Conference in April, 2016.” 28. In terms of above, we note that though ld.CIT(A) has elaborately dealt with evidences and evidences act, his order is conspicuously silent on the evidences of electronic data referred in this case and the compliance with the above exposition of law. We are conscious that this issue has not been raised, but then it is also settled that there is no estoppel as to law. 29. In the background of aforesaid discussion and precedents in our considered an addition of merits also is not sustainable. 33 M/s. Simtools Pvt. Ltd. 30. We also note that the ld.CIT(A) has dismissed the assessees plea that the issue is covered in assesees favour by the decision, the lTAT and ld.CIT(A) in the case of NSIL Ltd on the ground that in that case there was no disclosure of section 132(4) of the Act, whereas in the present case, there is a disclosure of income u/s. 132(4) of Rs. 4.80 crores. As noted by us above the said so called disclosure was by Shri Abhinandan Lodha, who is not at all related to the assessees company and his statement was based upon the electronically retrieved data. As observed by us the above cannot distinguish the case from that of the assessees group company in NSIL ltd. Hence, the order of ld.CIT(A) is not sustainable on this ground also. 31. We note that assessee has raised a ground before the ld.CIT(A) that assessment is bad inasmuch as no notice u/s. 143(2) has been issued in this case. Ld.CIT(A) has dismissed this issue by noting that in case of assessment u/s. 153A, it has been held by Hon’ble Delhi High Court and A Third Member Bench of the ITAT that 143(2) notice is not mandatory. In this connection, we note that these discussions by the ld.CIT(A) are besides the point inasmuch as in the submissions before us, the assesse has submitted that assessee has received notice u/s. 143(2) of the Act dated 27.09.2012 issued by ACIT,Circle-42, Mumbai to the assessee. Hence, this argument by the assessee before the ld.CIT(A) that notice u/s. 143(2) has not been issued is not factually correct. Hence, the said issue by the assessee is dismissed. 32. Now, we come to the issue of adjustment of carry forward losses as pleaded by the assessee. The ld.CIT(A) has rejected the issue on the basis of AO’s finding that the share holding pattern of the assesse company has undergone sea change. Now, in his submission, the assessees counsel has given chart, the claim of the assessee is that finding of the authorities below are not 34 M/s. Simtools Pvt. Ltd. factually correct. We find that since this is a factual issue the same we need an examination by the AO. Hence, this issue is remitted to the file of the AO to examine the issue afresh in light of the documents submitted by the assessee regarding change in share holding pattern. 33. We also note that there in the submission before us by the assessee that it would like the Settlement commission, order dated 28.11.2014, which was brought before the ld.CIT(A) to be followed and the same has not been followed by the ld.CIT(A). Hence, assessee would also not press ground No.1 34. We note that firstly this issue is not arising out of the grounds of appeal before us. These submissions are also contrary to the facts recorded in the order of the AO and ld.CIT(A). In any case, as found out by us hereinabove, on the facts and circumstances of the case of assessee itself discussed by us above, we are not in agreement with the assessees request in this regard and hence, this aspect of the assessees claim is dismissed. 35. In the result, this appeal by the assessee stands allowed as above. Order pronounced in the open Court on 09.02.2022 Sd/-/- AMARJIT SINGH JUDICIAL MEMBER Sd/- SHAMIM YAHYA ACCOUNTANT MEMBER MUMBAI, DATED: 09.02.2022 Copy of the order forwarded to: (1) The Assessee; ` (2) The Revenue; 35 M/s. Simtools Pvt. Ltd. (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Kasarla Thirumalesh Sr. Private Secretary Assistant Registrar ITAT, Mumbai
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