ACIT, CC-2, Jaipur, Jaipur V. Mahendra Singh Ratnawat, Jaipur

ITA 30/JPR/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0492 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 20-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Revision of order; Income from undisclosed sources; Search and seizure; Document seized; Tangible material; Accommodation entries; Block assessment; Documents seized; Reassessment proceedings; Bogus
• Section: 147; 131; 68; 148; 263; 132; 271(1)(c); 144; 69C; 139; 143(3); 133A; 153A; 133(6); 139(5); 195; 143(2); 48; 73; 72; 13; 153; 153C

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ ITA. No. 30 & 31/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2015-16 & 2016-17 The Asstt. Commissioner of Income-tax, Central Circle-2, Jaipur. cuke Vs. Sh. Mahendra Singh Ratnawat 53, Golimar Garden, Sahkar Marg, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFBPR 0768 Q vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA. No. 322 & 323/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2012-13 & 2013-14 The Asstt. Commissioner of Income-tax, Central Circle-2, Jaipur. cuke Vs. Smt. Ratan Kanwar Ratnawat 116, Lav Kush Nagar-1, Tonk Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACBPK 4523 H vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls @ Revenue by : Shri Sanjay Dhariwal (CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma (C.A.) & Shri R.K. Bhatra (C.A.) a lquokbZ dh rkjh[k@ Date of Hearing 06/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 18/10/2022 vkns'k@ ORDER ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 2 PER: DR. S. SEETHALAKSHMI, J.M. These bunch of four appeals filed by the Revenue against two different assessee’s are directed from the separate orders of the learned Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as “CIT(A)”] which in turn arise from the separate orders passed by the DY. Commissioner of Income Tax, Jaipur u/s 143 r.w.s. 153A of the Income Tax Act, 1961 (in short “Act”) as detailed here in below:- Sl.N o. Appeal No. Name of assessee A.Y. CIT(A) Order dt. 1. ITA No. 30/JP/2022 Shri Mahendra Singh Ratnawat 2015-16 24.11.2021 2. ITA No. 31/JP/2022 Shri Mahendra Singh Ratnawat 2016-17 24.11.2021 3. ITA No. 322/JP/2021 Smt. Ratan Kanwar Ratnawat 2012-13 25.10.2021 4. ITA No. 323/JP/2021 Smt. Ratan Kanwar Ratnawat 2013-14 25.10.2021 2. Since the issues involved in the Revenue’s appeals for all the years are almost identical except the difference in figure of additions disputed, are common, all these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. DR has submitted that the matter pertaining to pertaining to Shri Mahendra Singh Ratnawat in ITA ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 3 No. 30/JP/2022 for A. Y. 2015-16 may be taken as a lead case for discussion as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical except the difference in the amount in other assessee and assessment year. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 30/JPR/2022 is taken as a lead case. Based on the above arguments we have also seen that for three appeals grounds are and for A.Y. 2016-17 in Mahendra Singh Ratnawat grounds are different, facts are similar and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds and arguments from the folder in ITA No. 30/JPR/2022. 4. In ITA No. 30/JPR/2022 for the A.Y. 2015-16 & in ITA No. 31/JPR/2022 for A.Y. 2016-17 the revenue has raised following grounds of appeals:- ITA No. 30/JPR/2022 “01. The ld. CIT(A) has erred in law in holding that no additions can be made in the proceedings under section 153A of the Income Tax Act, 1961 in respect of the assessments which were completed prior to the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 4 date of search, except based on same incriminating material unearthed during the search which was not already available to the Assessing Officer. While granting relief to the assessee, the Ld CIT(A) has failed to take note of the position that Hon’ble Supreme Court of India has admitted SLP against this proposition in the following matters- (i) Principle Commissioner of Income Tax v. Gahoi Food (P) Ltd. 117 taxmann.com 118 (SC) 272 Taxman 521 (SC) dated 24.01.2020 (ii) Principle Commissioner of Income Tax Central-4 v. Dhananjay International Ltd.114 taxmann.com 351 (SC) 270 taxman 15(SC) dated 16.09.2020 02. The ld. CIT(A) has erred in law and on facts in not carrying out her duty of adjudicating the grounds on merit, and dismissing them only on a technical ground. 03. The appellant craves leave or reserves right to amend, modify alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” ITA No. 31/JPR/2022 “1. The ld. CIT(A) has erred in law and on facts in granting relief to the taxpayers on several counts. 2. Whether on the facts and circumstances of the case, and in law the ld. CIT(A) erred in deleting the addition to Rs. 14,51,00,000/- made by the AO on account of unexplained income u/s 68 of the Income-tax Act, 1961. 3. Whether on the facts and circumstances of the case, and in law the ld. CIT(A) erred in deleting the addition an amount Rs. 3,62,750/- u/s 69C of the Act considering the same as commission paid on acquiring this accommodation entries @ 0.25%. 4. While granting relief to the assessee, the learned CIT appeals has ignored the test of human probability and surrounding circumstances as laid down by the honorable Supreme Court in the cases of Sumati Dayal 214 ITR 801 SC and Durga Prasad More 82 ITR 540 SC. 5. The Appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal” ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 5 5. The skeletal facts essential for deciding the appeal are that the assessee derives his income from salary, business and other sources. The assessee filed his original return of income u/s 139(1) of the Act, on 30.09.2015 for the assessment year 2015-16 declaring a total income of Rs. 1,67,70,610/-. The assessee belongs to Kiran Fine Jewellers Group, on whose premises a search and seizure u/s 132 on/or survey action u/s 133A of the Act was carried out on 02.08.2017. Pursuant to this, AO issued a notice u/s 153A of the Act to the assessee in compliance of which assessee filed his return of income of Rs. 1,67,70,610/-. Finally, AO Completed the assessment u/s 143(3) r.w.s. 153A of the Act vide order dated 26.12.2019 at a total income of Rs. 23,89,84,760/- by making the following addition/ disallowance: (i) addition of Rs. 22,16,60,000/- u/s 68 treating the unsecured loan from M/s Gemini Commerce Pvt Ltd. as non genuine loan. (ii) addition of Rs. 5,54,150/- on account of alleged commission paid u/s 69C of the Act . 6. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) who has deleted the addition made by ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 6 the AO. The relevant findings of the ld. CIT(A) are reiterated here in below: “(xiii) Thus the essential corollary of these decisions and also the decision relied upon by the appellant is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. xiv) The present appeal concerns AY 2015-16. On the date of the search, the said assessment already stood completed u/s 143(3) of the Act, as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of loan obtained from M/s Gemini Commerce Pvt. Ltd. is without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2015-16 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if any, found as a result of search. It is observed that the addition is neither based on any single loose paper found/seized as also admitted by the AO in her remand report nor on any statement recorded during the course of search conducted in the case of the appellant which can be considered as incriminating as is evident from the order of the AO. Further the reference made by the AO to the statement of Shri Arpit Khandelwal cannot be considered as incriminating in view of the fact that Shri Arpit Khandelwal has never stated that M/s. Gemini Commerce Pvt. Ltd. is a shell company and providing only accommodation entries. In fact no such question was ever put to him. On the contrary the fact being that the appellant has filed all documentary evidences with reference to the loan advanced by the company to the appellant and also the fact being that the genuineness of the company M/s. Gemini Commerce Pvt. Ltd. has also been accepted in the past by the A.O. and also by the Hon'ble ITAT Jaipur in other cases. Therefore in view of the aforesaid discussion and respectfully following the binding decision of the Hon'ble Jurisdictional High Court, decision of various other High Courts and the decision of Hon’ble Supreme Court as discussed supra, it is observed that the aforesaid addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable, not being based on any incriminating document/ evidence found in the course of the search and hence is not liable to be sustained. Accordingly, the Ground of Appeal No. 1 is treated as allowed. ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 7 6. Since the appellant succeeds on legal ground, therefore the Grounds of Appeal No. 2 raised by the appellant on merits of the case is not required to be adjudicated upon. Accordingly, this ground of appeal is treated as disposed off. 7. Ground No. 3 relates an addition of Rs. 5,54,150/- on account of alleged commission paid u/s 69C of the Act. 7.1 The submissions of the appellant as per the statement of facts enclosed with Form No. 35 and reiterated during the appellate proceedings are summarized as under: The ground No. (3) of appeal relates to objecting the action of Ld. AO in making the addition of Rs. 554150/- u/s 69C of the I T Act, 1961 by holding that the appellant has allegedly paid commission at the rate of 0.25 percent on above said unsecured loan. The addition of Rs. 554150/- made u/s 69C for alleged commission is wrong in law. The addition u/s 69C of the Act can be made if expenditure is actually incurred and evidence of incurring such expenditure is available on record. No addition u/s 69C can be made notionally alleging expenses would have been made. There is no material or evidence of paying any commission by assessee nor there is any evidence to whom the same was paid and hence addition u/s 69C is wrong and bad in law. The assessee contends that unsecured loan(s) transactions are genuine transaction and no commission etc. was paid. The addition is thus wrong and deserves to be deleted. 7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- (i) The fact remains that the AO has made an addition of Rs. 5,54,150/- being commission paid @ 0.25% on acquiring the accommodation entries at Rs. 22,16,60,000/-. Before me, the appellant has contended that the unsecured loans transactions are genuine transactions and no commission etc. was paid and that there is no material or evidence of paying any commission by assessee nor there is any evidence to whom the same was paid and hence addition u/s 69C is wrong and bad in law I have duly considered the submission of the appellant and after considering the factual matrix of the case, it is held that since the assessee has got full relief in Ground of Appeal No. 1, therefore no separate ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 8 adjudication is required on this Ground of Appeal. Accordingly, the Ground No. 3 is treated as disposed off. 7. Revenue is aggrieved from the findings of the ld. CIT(A) and therefore, marched the present appeal on the grounds stated here in above. To support the grounds the ld. DR filed his written submission on 20.04.202 & 23.08.2022 which are reproduced as under:- Submission dated 20.04.2022 “In this case, the ld. CIT(A) has deleted the additions made by the AO on the legal ground that since no incriminating material was found as a result of search action u/s 132 of the Act, therefore, the additions made by the AO in the assessment order is without authority of law. The ld. CIT(A) has not decided the matter on merit. 1.1 It is submitted that as per provisions of section 153A, the AO has to issue notices u/s 153A(1) of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was Conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore, in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found during the course of search. 2.1 Further, even otherwise, if a return of income was filed u/s 139 of the Act, which was processed u/s 143(1)(a) of the Act and no assessment order was passed u/s 143(3)/144, the AO can made addition to the total income of the assessee in pursuance to notice issued u/s 153A even in the absence of incriminating material as the said processing/intimation u/s 143(1)(a) is not an assessment order as held by the Hon'ble Apex Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) and subsequently reiterated in Dy. CIT v. Zuari Estate Development & Investment Co. Ltd. [2015] 63 taxmann.com 177/[2016] 236 Taxman 1 (SC). 2.2 As per 2nd proviso to section 153A, assessment proceedings pending on the date of search shall abate. Further, in view of the provisions of section 153A(2), only the abated assessment ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 9 proceedings could be revived if the assessment made u/s 153A(1) is annulled. It would be appropriate to reproduce the provisions of section 153A(2) of the Act as under: (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: 3 Thus, in view of the above, it is submitted that if no scrutiny assessment u/s 143(3)/144 of the Act was made earlier, then the AO is duty bound to assess the total income of the assessee, whether it is based on incriminating material found during the course of search or on the basis of information available on record or comes to his notice during the assessment proceedings. Otherwise, in the case of assessee, in whose case a search was conducted and there was no assessments u/s 143(3) or 144 in respect of six assessment years for which notice u/s 153A have to be issued, there would be no assessment order and the revenue would not get any opportunity to assess such income, which could not be the intention of the legislature. 4 Judicial Pronouncements relied upon: (i) It would be appropriate to reproduce the head note in the case of CIT Vs ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala) as under: "Section 153A, read with section 132 and 132A of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 200203 to 2006-07 - Whether where there was a disclosure made by giving a statement during course of search, Assessing Officer, by virtue of power conferred on him under section 153A was competent to issue notice under said provision and require assessee firm to furnish returns as provided thereunder Held, yes - Whether neither under section 132 nor under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material which was unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A - Held, yes [Para 21][Matter remanded/In favour of revenue] (ii) The head note in the case of E.N. Gopakumar Vs CIT [2016] 75 taxmann.com 215 (Kerala) is as under: "Section 153A, read with section 132, of the Income-tax Act, 1961 - Search & seizure - Assessment in case of (Scope of) - Whether for issuance of a notice under section 153A(1)(a), it is not necessary that search on which it was founded should have necessarily yielded any ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 10 incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A (1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a) - Held, yes [Paras 7 and 8] [In favour of revenue] " (iii) In the case of CIT Vs MGF Automobiles Ltd. [2016] 72 taxmann.com 240 (SC), the SLP filed by the department has been admitted. The head note is as under: Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Conditions precedent) - Assessment years 2004-05 and 2005-06 Pursuant to High Court's order company CML was amalgamated with assessee-company from 1-4-2003 - In returns of income, assessee set offlosses of company CML against its income - Thereafter a search,took place in assessee's premises and certain incriminating material was seized, which was stated to be destroyed in a fire that took place at premises of revenue - Consequent to search, Assessing Officer framed assessments disallowing set off of losses of company CML and made additions - High Court by impugned order held that since Assessing Officer proceeded to frame assessments under section 153A relying on some information not unearthed during search, assessment orders so passed were not sustainable in law - Whether Special Leave Petition filed against impugned order was to be granted - Held, yes [Para 2] [In favour of revenue] (iv) The head note in the case of CIT Vs Dr. P. Sasikumar [2016] 73 taxmann.com 173 (Kerala) is as under: "I Section 153A, read with sections 132 and 132A, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Submission of returns for six years) - Assessment years 2002-03 to 2008-09 - Whether any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A - Held, yes Whether once search is initiated under section 132 or a requisition is made under section 132A, Assessing Officer is empowered to issue notice to person searched requiring him to furnish return of income in respect of each of following six assessment years as referred to in clause (b) of section 153A(1) - Held, yes Whether once aforesaid notice is issued, assessee has to furnish all details with respect to each assessment year since same is treated as a return filed under section 139 - Held, yes - Whether even if no documents are unearthed, nor any statement was made by assessee during course of search under section 132 or any material is received for afore specified period of six years, assessee is bound to file a return - Held, ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 11 yes - Whether abatement of assessment or reassessment pending on date of initiation of search within period of six assessment years specified under section 153A will also not absolve assessee from his liability to submit returns as provided under section 153A(1)(a) - Held, yes [Paras 5 & 6] [In favour of revenue] (v) The head note in the case of Canara Housing Development Co. Vs DCIT [2014] 49 taxmann.com 98 (Karnataka) is as under: "Section 153A, read with section 263, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of search or requisition (Conditions precedent) Assessment year 2008-09 - Whether once proceedings under section 153A is initiated, pursuant to search, order of assessment in respect of six years stands reopened and, therefore, in absence of any valid assessment order in existence, revisional proceedings under section 263 cannot be initiated in such a case - Held, yes [Paras 10 and 111 [In favour of assessee] Section 153A, read with section 132, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of search or requisition (Conditions precedent) Assessment year 2008-09 - Whether condition precedent for application of section 153A is that there should be a search under section 132, however, initiation of proceedings is not dependent on any undisclosed income being unearthed during such search - Held, yes [Para 10]" ( vi) The head note in the case of CIT Vs Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) is as under: "Section 153A, read with section 143 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment year 2000- 01 - Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment Held, yes [Para 11] [In favour of revenue/Matter remanded] (vii) The head note in the case of B. Kishore Kumar Vs DCIT [2014] 52 taxmann.com 449 (Madras) is as under: "Section 69A, read with sections 143, 153, 153A of the Income-tax Act, 1961 - Unexplained moneys (Admission in sworn statement) - Assessment years 2001- 02 to 2007-08 - Assessing Officer made additions as undisclosed income on basis of sworn statements of assessee during search and seizure - Assessee made out an issue that submissions of certain materials by him were not considered by Assessing Officer - However assessee himself stated in sworn statement that he had separate business income which was not included in his returns and outstanding loans were to be recovered with interest, hence that was a clear admission and there was no necessity to scrutinize documents - Whether therefore Assessing Officer was justified in bringing to tax undisclosed income Held, yes [Paras 5,6 & 7] [In favour of revenue] ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 12 It may be mentioned that the SLP filed by the assessee has been dismissed by the Hon'ble Apex Court as reported in [2015] 62 taxmann.com 215 (SC). (viii) The SLP filed by the department in the case of PCIT Vs Best Infrastructure (India) (P.) Ltd. 120181 94 taxmann.com 115 (SC) has been admitted. The head note is as under: "II. Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (General) - Assessment years 2005-06 to 2009-10 - High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer on said basis were not justified - Whether SLP against said impugned order was to be allowed - Held, yes [Para 1] [In favour of revenue] " (IX) The head note in the case of DR. A. V. Sreekumar Vs CIT [2018] 90 taxmann.com 355 (Kerala) is as under: "Section 153A, read with sections 132 and 143 of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 19992000 and 2000-2001 - Search was conducted at premises of assessee on basis of two documents received before search by Department through a Tax Evasion Petition allegedly filed by one of brokers involved in transaction pursuant to which notices under sections 153A and 143 were issued and assessment orders were passed for respective years making additions - Assessee contended that documents relied on to make additions, being not one seized in search conducted, proceedings under section 153A read with section 143 were non-est - However it was pursuant to search and enquiry conducted thereafter that it was revealed that assessee had rental income from a flat purchased at Bangalore which had been sold - Further, suppressed account maintained by assessee in which there was unaccounted consideration from purchaser also was unearthed and exact amount of income escaped from assessment was supported by ample evidence Whether therefore, no ground could be taken that other material which were already available with Department could not be relied on in proceedings Held, yes [Paras 13, 21 and 22] [In favour of revenue] " (X) The ld AR has placed reliance on the case of PCIT Vs Meeta Gutgutia [2018] 96 taxmann.com 468 (SC). It may be mentioned that vide above judgement dated 02.07.2018, the SLP filed by the department was dismissed. However, vide order dated 16.09.2019 in the case of PCIT Vs Devi Dass Garg [2020] 114 taxmann.com 552 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 13 (SC), the Hon'ble Apex Court has admitted the SLP filed by the department. The head note is reproduced as under: "Section 132, read with section 153A of the Income-tax Act, 1961 - Search and seizure - General (Scope of) - In course of appellate proceedings, Tribunal deleted addition made by Assessing Officer in course of scrutiny assessment primarily on ground that no fresh material was discovered during search and seizure proceedings under section 132 to justify addition under section 153A - High Court confirmed order passed by Tribunal - Whether, on facts, SLP filed against said order of High Court was to be granted - Held, yes [Para 2] [In favour of revenue]" (X-A) On the same date, Hon'ble Apex Court has also admitted SLP on the same issue in the case of PCIT Vs Dhananj ay International Ltd [2020] 114 taxmann.com 351 (SC) (XI) Similarly, vide order dated 24.01.2020 in the case of PCIT vs. Gahoi Foods (P.) Ltd. [2020] 117 taxmann.com 118 (SC), the Hon'ble Apex Court has admitted SLP filed by the department. The head note is as under: "Section 153A, read with section 132 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Assessment years 2005-06 to 2011-12 - Assessee-company was engaged in production of 'Gutka' - Assessing Officer, mainly relying upon Notification No. 30/2008-Central Excise (NT), dated 1-7-2008 came to conclusion that assessee was engaged in unaccounted production and sale of 'Gutka' - He thus made addition to assessee's income - Tribunal opined that Assessing Officer while making assessment under section 153A could make addition only on basis of some incriminating material unearthed during course of search or requisition of documents - Tribunal further concluded that since no incriminating documents during course of search were found, impugned addition made by Assessing Officer was not sustainable - High Court upheld Tribunal's order - Whether, on facts, SLP filed against order of High Court was to be granted - Held, yes [Para 2] [In favour of revenue]" (XII) It is therefore humbly submitted that the issue has not been conclusively decided by the Hon'ble Apex Court in the case of Meeta Gugutia (Supra) as relied upon by the ld. AR, otherwise, these SLPs should not have been admitted by the Hon'ble Apex Court. (XIII) In the case of Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 48 taxmann.com 347 (Kerala), it was held that: In the case of CIT v. Hotel Meriya [20101 195 Taxman 459 (Ker.) it was held that none of the provisions under Chapter XIV-B mandates, for making block assessment there shall be evidence regarding the concealment of income for every year for the block period. Though technically one is not concerned with the block assessment, based on the information as stated above for six previous assessment years, ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 14 under section 153A the Department can assess or reassess in accordance with the procedure contemplated. Therefore, there is no prohibition or embargo on the Department to consider this information for assessment or reassessments contemplated under section 153A. There is also no requirement under section 153A and other provisions requiring the Department to collect information and evidence for each and every year for six previous years under section 153A. Therefore, the argument of assessee that the information gathered either during pre-search enquiry or during the course of search cannot be made use so far as the six previous assessment years, is unsustainable. (XIV) In the case of CIT v. Orma Marble Palace (P.) Ltd. [2019] 110 taxmann.com 435 (Kerala), it has been held. that: ] "23. We have already found that there is lack of material insofar as the prior years of the block period, but the same has been held to be inconsequential, in so far as the A.0 being conferred with the power to make assessment in the best of his judgment. The AO was perfectly justified in carrying out an assessment on the best of judgment, making estimations on the basis of the materials recovered. As has been found in Hotel Meriya, it cannot be assumed that a dealer who practises suppression would retain the materials disclosing suppression, for long years; in the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment." XV In Orma Marble Palace P. Ltd. V. CIT [2019] 110 taxmann.com 436 (SC), SLP filed by the assessee has been dismissed. 5 Without prejudice to the above, it is submitted that a search action was conducted in the case of directors of Gemini Commerce Pvt Ltd and statement of director Sh Arpit Khandelwal was recorded u/s 132(4) of the Act. In the said statement Sh. Arpit Khandelwal has admitted that he was even not aware about the full name of the company and all transactions were done on the directions of Sh. Harsh Agrawal. It is to be noted that in the case of Kabul Chawla or any other case following the same ratio decidendi, it has never been held that incriminating material should be found from the premises of the assessee itself These judgements only talk about the ' incriminating material' which was not available at the time of original assessment. The statement of the director of the party from with ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 15 transactions have been done is definitely an incriminating material, if such statement recorded during the course of search. If this is not admitted as incriminating material' then all the transactions done by the syndicate of the taxpayers in collusion with one another in a systematic manner to evade the taxes would not be within the purview of scrutiny by the Income-tax Department and will defeat the purpose of search action itself. Reliance is placed on the judgement of Hon'ble Delhi Tribunal in the case of MGF Automobiles Ltd v ACIT in ITA Nos 4212 & 4213/DEL/2011dated 28.06.2013, wherein the hon'ble co- ordinate Bench has observed that in their view if during the course of search some statement is recorded u/s 132(4) and, in that statement certain facts are recorded from the interpretation of which Assessing Officer could conclude that there was some undisclosed income, then the statement can be considered as incriminating material. In view of the above judicial pronouncements, it is humbly submitted that appeal of the department may please be allowed and these cases may be set aside to the file of the ld. CIT(A) for deciding appeal on merits.” Submission dated 23.08.2022 “In continuation of my submissions dated 20.04.2022, it is submitted that there was 'incriminating material' in this case also. The AO in her remand report has observed that there was no incriminating material as per her construction of phase 'incriminating material', as there was no seized documents or books of account which could be considered as 'incriminating material'. The definition of incriminating material cannot be confined to only tangible material. This is a purely legal issue, which cannot be decided on the basis of the observation of the AO, she gave her finding only on the basis of her understanding. Hence, much importance should not be given to the report of the AO, as this is purely a legal issue to be decided by the Hon'ble Bench. The Hon'ble Rajasthan High Court in the following cases has held that statement u/s 132(4) has strong evidentiary value even in the cases wherein it has been retracted after unreasonable time period and without cogent reasons- 1. CIT, Bikaner v Ravi Mathur, 2017(1) WLC (Raj) 387 2. PCIT (Central) v Roshan Lal Sancheti, 306 CTR 0140 (Raj) 3. Bannalal Jat Constructions (P) Ltd v ACIT, 106 taxmann.com 127(Raj) In the case of Bannalal Jat Constructions, the Hon'ble Supreme Court has also dismissed the SLP of the assessee. 2. With the above background, it is submitted that purchases were made in this case from Gemini Commerce Pvt Ltd. The name of Gemini is mentioned in the list of shell companies received from the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 16 Serious Fraud Investigation Office (SFIO). During the course of search operation, simultaneous search operation was also conducted in the case of Sh. Arpit Khandelwal who was Director in Gemini Commerce Pvt. Ltd. His statement u/s 132(4) was recorded on 05.08.2017 and therein he admitted that it is a paper company. Sh Khandelwal stated that he was just a dummy director and Sh Harsh Agrawal made him the dummy director. He even could not tell the full name of the company. The statement of Sh Khandelwal is placed at page no. 1-11 of the DPB. Further, statement of Sh Harsh Agrawal was also recorded u/s 131 on 05.08.2017 simultaneously with search operation in the assessee group. Sh Harsh Agrawal who was controlling many shell companies, Gemini Commerce Pvt Ltd being one of such companies. The statement of Sh Harsh Agrawal is placed at page no. 12-19 of the DPB. Sh Harsh Agrawal also could not tell anything about actual business of Gemini Commerce Pvt Ltd. The Hon'ble Madras High Court in the case of B. Kishore Kumar v DCIT, 52 taxmann.com 449 has held that- "When there is a clear and categoric admission of the undisclosed income by the assessee himself, in our considered opinion, there is no necessity to scrutinize the documents. The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assessee that the admission made by him was incorrect or there is mistake. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence for the Revenue." The Hon'ble Supreme Court has dismissed the SLP of the assessee against the above judgement in 62 taxmann.com 215. 3. Further, physical inquiries were also conducted in the case of Gemini Commerce Pvt Ltd simultaneously in post- search proceedings. However, the entity was not found during the course of inquiries and there was a grocery shop on the given address. It was also found that there was no office of any company at the given address. The Inspector also took a picture of the premises. The report of the Inspector is mentioned at page-7 of the assessment order. 4. It is very important to now discuss what is the definition of incriminating material. Incriminating material can be: • A document, content of a document; • An asset; • Entry in the books of accounts; • Statement given on oath by the assessee or by any other person during search proceedings or any other connected search operation; • Absence of any book being found during search; ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 17 • Absence of any fact claimed earlier but came to notice during the course of search; • Absence of office/business premises of the assessee or counter- party as claimed during the returns filed or any other documents; • Documents or material seized from a different person and not from the assessee. • The Hon'ble Kolkata Tribunal in the case of Mani Square Ltd. V Assistant Commissioner of Income Tax, CC-3(2), Kolkata, 118 taxmann.com 452 has held that- "18. Before we proceed to examine the contents of the seized documents referred to by the AO, it is first relevant to understand as to the meaning of the expression "incriminating material" or evidence. There can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary lbr the AO to establish that the information, document or material, whether tangible or intangible, is of such nature which incriminates or militates against the person from whom it is found. Some common forms of incriminating material, inter alia, are for instance, where the search action u/s. 132 of the Act reveals information (oral or documented) that the assets found from the possession of the assessee in- form of land. building, jewellery, deposits or other valuable assets etc, do not corroborate with his returned income (which includes earlier Ars return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the hooks of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible which suggests or leads to an inference that the assessee is conducting transactions outside the regular hooks of account which are not disclosed to the Department. Incriminating material may also comprise of document or evidence found in search which demonstrates or proves that what is apparent is not real or what is real is not apparent . In other words, let us assume that an assessee has recorded transactions in his hooks or other documents maintained in the ordinary course of business, then it is discovered in the search certain material or evidence in such an event then, in order to hold the discovered material or evidence to be incriminating in nature, only when the discovered/seized material/evidence/document should affect the veracity of the entries made in the books of the assessee and thus lead to the conclusion that the entries made regularly/maintained kV the assessee do not represent true and correct state of affairs. Rather the evidence unearthed or found in the course of search would go on to show that the real transaction of the assessee was something different than what was recorded in the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 18 regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the hooks of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regularly maintained or the returns filed with the authorities from lime to time is not true etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should he of such nature which would prima facie show that the real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. Thus, it is clear from the above observations of the co-ordinate Bench that not only tangible, but intangible material can also be incriminating material. In this case not only the Director accepted that supplier company was a paper entity, but thereafter there was corroborating evidence gathered during the simultaneous physical inquiries at Kolkata, wherein it was gathered that the entity was non-existent and there was a grocery shop. Furthermore, the categorisation of the supplier company by the apex fraud investigation agency of the country SFIO as 'shell company' is in itself an incriminating material. The Hon’ble Supreme Court in the case of CIT v S. Ajit Kumar, 93 taxmann.com 294 has held that: The power of survey has been provided under section133A.Therefore, any material or evidence found/collected in a survey which has been simultaneously made at the premises of a connected person can be utilized while making the block assessment in respect of an assessee under section 158BB, read with section 158B; the same would fall under the words "and such other materials or information as are available with the Assessing Officer and relatable to such evidence" occurring in section 158BB. In the present case, the Assessing Officer was justified in taking the adverse material collected or found during the survey or any other method while making the block assessment. [Para 15] It is to be noted that in the provisions related to block assessment, there was specific requirement to assess undisclosed income on the basis of the evidence found during the course of search or relatable material. In that scenario also, the Hon'ble Supreme Court held that findings of simultaneous survey operation can be used in the search assessment. The assessment under section 153A of the Act is a better case scenario, where there is no such requirement in the Act. ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 19 Therefore, the finding of the Hon'ble Supreme Court will be applicable with more force in such cases. Thus, it is clear from the above discussion that there was incriminating material in this case and the Hon'ble Bench should not sway away by the observation of the AO in the remand report and should decide the legal issue in correct perspective, as the observation of the AO on a legal issue is her interpretation. The appellate authorities should not decide a legal issue only on the basis of the interpretation of the AO. This may lead to dangerous consequences. Suppose in a case, the AO interprets some provision in a manner which is straight away wrong and defeats the purpose of the provision, then the Hon'ble Bench cannot take a stand that, as the AO has interpreted in such manner, therefore, they cannot interfere in the matter. The duty of the appellate authority is to interpret the provisions of the Act and judicial pronouncements in correct perspective. Therefore, the Hon'ble Bench is requested to set-aside the order of ld. CIT(A) and confirm the additions made by the AO.” 8. The ld. AR in addition to the above two submission also relied upon the following judicial decisions:- • CIT vs. ST. Francis Clay Décor Tiles (2016) 70 taxmann.com 234 (Kerala. • E.N. Gopakumar vs. CIT (2016) 75 taxmann.com 2015 (Kerala) • Commissioner of Income-Tax-I v. MGF Automobiles Ltd. (2016) 72 taxmann.com 240(SC) • Commissioner of Income-Tax, Trichur v Dr. P. Sasikumar (2016) 73 taxmann.com 173 (Kerala) • Canara Housing Development Co. v. Deputy Commissioner of Income-Tax, Central Circle-1(1), Bangalore (2014) 49 taxmann.com 98 (Karnataka) • Commissioner of Income-Tax, Central, Kanpur v. Raj Kumar Arora (2014) 52 taxmann.com 172 ( Allahabad) • B. Kishore Kumar vs. Deputy Commissioner of Income-Tax, Central Circle-IV(1), Channai (2014) 52 taxmann.com 449 (Madras) • Principal Commissioner of Income-Tax, Delhi-2 v Best Infrastructure (India) (P.) Ltd. (2018 94 taxmann.com 115 (SC) • Dr. A.V. Shreekumar v Commissioner of Income-Tax, Kochi (2018) 90 taxmann.com 355 (Kerala) ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 20 • Principal Commissioner of Income-Taxv. Gahoi Foods (P.) Ltd. (2020) 117 taxmann.com 118 (SC) • Sunny Jacob Jewellers And Wedding Centre vs. Deputy Commissioner of Income-Tax (2014) 48 taxmann.com 347 (Kerala) • Orma Marble Palace P. Ltd. v. Commissioner of Income-Tax-1 (2019) 110 taxmann.com 436 (SC) MGF Automobiles ltd. v ACIT ITA No. 4212 & 4213/DEL/2011 dated 28.06.2013 (Del-ITAT) Decision relied upon in the submission dated 23.08.2022 • CIT vs. Ravi Mathur, 2017 (1) WLC (Raj) 387 • PCIT v Roshan lal Sancheti 306 CTR 140 (Raj) • Bannalal Jat Constructions (P.) Ltd. vs. ACIT 106 taxmann.com 128 (Sc) • B. Kishore Kumar v. DCIT 52 taxmann.com 449 ( Madras)] • B. Kishore Kumar vs. DCIT 62 taxmann.com 2015 (SC) • Mani Square Ltd. v ACIT 118 taxmann.com 452 • CIT vs. s. Ajit Kumar 93 taxmann.com 294. 9. The ld. DR in addition to the above submission during the course of hearing submitted that during the year under consideration the assessee has accepted unsecured loan to the extent of Rs. 22,16,60,000/- . In the search carried out in the Kiran Fine Jewellers group the assessee is also covered. The information related to Gemini Commerce Private Limited, lender company was examined and it is found that the company is one of the company out of 16794 companies which has been declared as a shell company by the Serious Fraud Investigation ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 21 Office [ SFIO ] which is a fraud investigating agency in India. The list is mostly comprised of real estate, finance and entertainment companies. He further submitted that the ld. AO has already on perusal of the Balance Sheet and Profit & Loss Account of the said lender company found that the company is not involved in any business activity. The lender company is showing its income mainly from interest, dividend , commission and capital gains only. Despite this the company has advanced substantial amount of loan to the assessee. These companies are showing high share premium and are almost exclusively utilizing all this capital for extending loans and advances or investing in unlisted company equality and these are the paper companies indulge in accommodative transactions. A search u/s. 132(1) of the act was conducted at the residence of one of the directors of M/s. Gemini Commerce Private Limited Shri Arpit Khandelwal on 05.08.2019 as member of search group of M/s. Kiran Fine Group. Statement of Shri Arpit Khandelwal was recorded u/s. 132(4) of the Act wherein he categorically admitted that he was not aware about the full name of the company. He is only dummy director in M/s. Gemini Commerce ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 22 Private Limited and he has done all this as per the directions of Shri Hash Agarwal. This fact establish that the lender company is shell company which provide accommodation entry in the guise of unsecured loans. The inspector of the department asked to make the report on the company at the address and the inspector has reported that at the address a small grocerary item shop, where no sign board of the company and on making enquiry from the local people. Even the letter issued u/s. 133(6) dated 16.12.2019 was not replied this further strengthen the fact that the company is only a suit case company. Thus, based upon this fact the addition of Rs. 22,16,60,000/- made u/s. 68 of the Act is duly supported by the facts placed on record. The ld. CIT(A) has not decided the appeal on merits but has only decided the appeal on technical ground and considering the merits of the case he should have considered the merits of the case. The ld. CIT(A) has relied upon the remand report where in the contention of the ld. AO contradict to the finding recorded in the assessment order. There is a judgment of the Kerala High Court against the assessee. In the decision of the Kabul Chawala or in the Jai Stell decision relied upon there is not ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 23 reference as to what constitute the incriminating material. The enquiry conducted by the AO in the assessment proceeding thus be an incriminating material which is based on the SFIO report, statement of assessee and director and the physical enquiry based on the financial statement be considered on merits of the case. The ld. DR further relying on the judgment of Rajasthan High Court in the case of Banalal Jat Construction P. Ltd. and Roshan Lal Sancheti submitted that the statement of Shri Arpit Khandelwal is not retracted and his version is required to be considered. Based on these arguments he supported the order of the ld. AO and prayed that the order of the ld. CIT(A) be set a side and order of the AO be upheld. 10. Per contra, the ld. AR appearing on behalf of the assessee has reiterated its arguments as advanced before CIT(A) and supported the findings recorded in the order of the ld. CIT(A). The ld. AR in addition also submitted his written submission which is reproduced here in below:- “The case laws relied upon by the Department in the written submissions dated 19.04.2022 are on some different issues and are distinguishable from the facts of the assessee's case. The assessee submits facts of every case as follows :- ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 24 1. CIT vs. ST. Francis Clay Decor Tiles - (2016)(Kerala 11C) 2. E.N. Gopalkumar vs. CIT (Central)- (2016) (Kerala (HC) 3. CIT vs. Dr. P. Sasikumar — (2016) (Kerala HC) 4. Sunny Jacob Jewellers and W edding Centre vs. DCIT- (2014) (Kerala HC) In all these cases, the Hon'ble High Court has decided the validity of notice issued under section 153A of the IT Act, 1961 for 6 years and the Hon’ble Court held that for issuing the notice under section 153A there is no requirement of any incriminating material with the Department. It is also held by the Hon’ble Court that once the notice is issued under section 153A, the AO may conduct enquiry on merits of the case without reference to any incriminating material and the matter was referred back to the Hon’ble Tribunal for reconsideration. In this regard it is also submitted that all the judgments are mainly based on judgment of ST. Francis Clay Decor Tiles - (2016)(Kerala HC) and the issue decided in one judgment is followed in other judgments. 5. CIT vs. MGF Automobiles Ltd. - (2016)(Delhi HC) In this case the Hon'ble Delhi High Court decided the issue that in the absence of incriminating material no addition can be made in case of completed assessment and/or abated assessment. The Hon’ble Supreme Court has only granted SLP against the said order. 6. Canara Housing Development Co. vs. DCIT — (2014)(Kar. HC) In this case the Hon’ble Karnataka High Court held that initiation of proceedings are not dependent on any undisclosed income being unearthed during search. In this case the Hon’ble Court has decided the issue on the same footings as decided by Hon’ble Kerala High Court. 7. CIT vs. Raj Kumar Arora- (2014) (Allahabad HC) The issue decided by the Hon'ble High Court is based on Anil Kumar Bhatia's case as discussed in the order of Hon’ble Delhi High Court. 8. Kishore Kumar vfs. DCIT- (2014)(Madras HC) The Hon'ble High court in this case decided the issue regarding sworn in statement and the initiation of proceedings were on account of some seized incriminating material unearthed/found during the course of search. Thus the facts of this case are distinguishable from the assessee's case. 9. PCIT vs. Best Infrastructure (India) Pvt. Ltd. - 2018)( SC) In this case Hon’ble Delhi High Court in the year 2017 given a finding that without any incriminating material no addition can be made in case of unabated assessment. Further, the issue involved in this case was different and the Hon’ble Supreme Court has only granted SLP against the said order because there was some different issue in this case. 10. Dr. A.V. Sreekumar vs.CIT- (2018)(Kerala HC) ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 25 In this case incriminating material was found and seized during the course of search and accordingly the facts of the case are distinguishable from the assessee's case. 11. PCIT vs. Gahoi Foods P. Ltd. - (2020)(Supreme Court) In this case the Hon'ble M.P. High Court has held that in the absence of incriminating document no addition can be made in the unabated or completed assessment. The Hon'ble Supreme Court has only granted SLP. 12. Orma Marble Palace P. Ltd. vs.CIT - (2019)(Supreme Court) In this case additions have been made on the basis of incriminating document in the assessment completed under section 158BB of the IT Act 1961. Thus the facts of this case are distinguishable from the facts of the assessee's case. 13. MGF Automobiles Ltd. vs. ACIT - (ITAT Delhi Bench 'E) The ld. D/R has submitted a copy of the order for the reason that any statement recorded under section 132(4) of the Act, is an incriminating document. Although the Hon'ble ITAT has decided the issue that in case of no incriminating material, no addition can be made in case of completed assessment. 2(i) In this regard it is submitted that now it is a settled position of law that merely a statement without any supporting corroborative material has no legal evidentiary value. The submissions are supported by the Hon'ble Jurisdictional High Court judgment in case of PCIT vs. Mantri Share Brokers Pvt. Ltd. The SLP filed by the revenue against the said judgment, has been dismissed by the Hon'ble Supreme Court vide SLP No. 1646 of 2018. 2(ii) The assessee has submitted number of case laws decided in favour of the assessee after 2016 by the Hon'ble Supreme Court, Hon'ble High Courts including jurisdictional High Court and Hon'ble ITAT including jurisdictional ITAT Jaipur Bench. It is prayed that the issue decided in the said judgments may kindly be considered. In this regard, the assessee also submits and place on record that in the latest judgment of June 2022 the Hon'ble ITAT Jaipur Bench has decided the issue in favour of the assessee in the case of ACIT Vs. Glorious Build Home Pvt. Ltd. (ITA NO. 437/JP/20I9) A copy of the said order is enclosed herewith. Further the Ld. AO has herself admitted in writing that there was no incriminating documents in appellant's case.” In support, reliance was placed on the following decisions: • PCIT vs. Vimal Kumar Rathi 115 taxmann.com 220 (SC) • PCIT vs. Meeta Gutgutia 96 taxmann.com 468 (SC) • Jai Steel (India), Jodhpur vs. ACIT 36 taxmann.com 523 (Raj) ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 26 • CIT vs. Kabul Chawla 61 taxmann.com 412 (Delhi HC) • M/s Vijayeta Buildcon Pvt. Ltd. vs. ACIT ITA No. 980/JP/2018 dated 27.10.2020 • CIT vs. Deepak Kumar Agarwal 86 taxmann.com 3 (Bombay) • M/s Bitthal Das Parwal HUF • Mangilal Agarwal vs. ACIT 163 Taxman 399 (Raj) • CIT vs. Jai Kumar Bakliwal 45 taxmann.com 203 ( Raj. HC) • ITO vs. Smt. Ratan Kanwar ITA No. 334/JP/2014 dated 16.06.2017 11. In addition to the above written submission the ld. AR of the assessee submitted that in the case of Smt. Ratan Kanwar the transaction is already reflected in the regular books of account and the assessment proceeding were not pending when the search was conducted. Thus, the addition can only be made with respective incriminating material which is not there and the AO disturbed the completed assessment without placing on record any incriminating material found at the time of search no addition cannot be made on the completed assessment. The provision of law and Indian Constitution does not confer power on the assessing officer to review his own order which are completed. The purpose of the search as held in various cases laws that the addition can only be made on the completed assessment with respect to the incriminating material and the ld. AO and DR while argument in this appeal failed to establish that ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 27 the whether any incriminating document is found or not. The Ld. AO after taken into consideration the facts of the M/s Gemini Commerce Pvt. Ltd. and the statement of Shri Arpit Khandelwal given in writing that no incriminating document(s) were found during the course of search neither in physical record seized nor in digital data lying seized. The said finding of non-incriminating document(s) was confirmed by the Add. CIT and Principal CIT, Jaipur. Thus, the arguments of Ld. CIT(DR) that a statement of Shri Arpit Khandelwal, is an incriminating document is without jurisdiction. Not only that No question was asked from Arpit Khandelwal regarding assessee Shri Mahendra Singh Ratnawat. In the statement of the assessee not a single question was asked/raised regarding Gemini Commerce Pvt. Ltd. and/or statement of Shri Arpit Khandelwal. Shri Arpit Khandelwal referred the name of Shri Harsh Agarwal, and Shri Harsh Agarwal stated that he is advancing loan to M/s Gemini Commerce Pvt. Ltd. which prove that M/s Gemini Commerce Pvt. Ltd. is an existing company. All the cash laws were relied upon by Ld. CIT (DR) are altogether on different facts. In all the said cases there were incriminating documents and or ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 28 unexplained amounts found during the course of search and later on the concerned persons retracted. The ld. AR of the assessee drawn attention to the ledger of the Gemini Commerce Private Limited appearing in the books of the assessee from there he submitted that Rs. 22,16,60,000/- is accepted on various dates and Rs. 18,79,00,000/- was repaid on various dated therefore, even on merits the amount is derived purely on arbitrary and has considered the amount already repaid by the assessee for the year under consideration itself. Thus, in the case of assessee there was neither incriminating document nor unexplained amount was found no addition can be made. Not only that for A.Y. 2016-17 the ld. CIT(A) has decided the appeal of the assessee on merits also as the said assessment was an abated assessment this it self shows that there are no merits in arguments of the revenue. Thus, relying on the judgement of Rajasthan High Court in the case of Mantri Share Brokers P. Ltd. where in the court has held that “merely on the statement that too also was taken in view of threat given in question no. 36 as narrated by Mr. Gupta and the same sought to have been relied upon there is no other material either in the form of cash, ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 29 bullion, jewellery or documents in any other form which can come to the conclusion that the statement made was supported by some documentary evidence.” The SLP in this case is also dismissed by the Supreme Court and thus the finding of the jurisdictional High Court becomes final so far as the fact that merely the addition based on the statement will not survive and therefore, the order of the ld. CIT(A) is reasoned order be sustained. At last the ld. AR of the assessee for his arguments on incriminating material relied upon the remand report submitted through JCIT dated 12-11.2021 where in the ld. AO specifically accepted that in this case there is no incriminating material found during the course of search. The same is extracted here in below: “To, The Commissioner of Income Tax (Appeal)-4, Jaipur. Submitted through: The Jt. CIT, Central Range, Jaipur Sub:- Calling Remand Report in the case of Shri Mahendra Singh Ratnawat (PAN: AFBPR0768Q) for AY 2015—regarding- Respected Mandam, ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 30 Kindly refer to your office letter no. 227 dated 09.11.2021 calling for remand report in the case of Shri Mahendra Singh Ratnawat for AY 2015-16. As requested, issue-wise comments are as follows: a) In this case no incriminating documents were found during the course of search proceedings. Seized digital record has also been operated/examined and nothing adverse has been found. Without prejudice to the above, it is mentioned that during the course of search, statement of one of the directors of M/s Gemini Commerce Pvt. Ltd. (lender Company in the instant case), namely Shri Arpit Khandelwal was recorded u/s 132(4) wherein he admitted that M/s Gemini is a shell company providing only accommodation entries to various persons in the guise of unsecured loans. b) As per para 7.4 of the assessment order, search u/s 132 of the I.T. Act was conducted at the residence of one of the directors of M/s Gemini Commerce Pvt. Ltd. It was not conducted on the company M/s Gemini Commerce Pvt. Ltd. but on one of its directors, namely Shri Arpit Khandelwal. And search on the director Shri Arpit Khandelwal was conducted on 05.08.2017 and that was the day when his statement was recorded. The mention of search on him on 05.08.2019 in the Assessment Order is apparently a typographical error. With regard to the reference to incriminating material it is mentioned that the comments offered in para (a) may be referred to.” It is beyond doubt the assessee has taken unsecured loans from M/s Gemini Commerce Pvt. Ltd. (reference para 7.2 of the Assessment Order) and this is also beyond doubt that M/s ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 31 Gemini Commerce Pvt. Ltd. was a shell company (reference para 7.3, 7.4, 7.5 & 7.6 of the Assessment Order).” 12. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. We have also gone through the various judicial ruling placed before us by both the parties to drive home to their contentions. The main grounds of the appeal raised by the revenue in this appeal that SLP is admitted is admitted in Gahoi Foods P Ltd and in case of Dhananjay International Ltd. wherein the addition was made based on the statement recorded at the time of search and the second ground raised by the revenue is that the ld.CIT(A) should have decided the case on merits instead on technical ground. The bench noted that in A.Y. 2016-17 even on merits having similar set of fact the appeal of the assessee was allowed and the addition was deleted. We have also noted that there is no incriminating material unearth in the search proceeding to substantiate the addition as made in the assessment order even in the appellate proceeding this fact is confirmed by the ld. AO in his remand report. Not only that even though the assessee filed ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 32 the confirmation, bank statement, ITR, Balance Sheet of these companies and AO failed to point out any error on these evidences filed by the assessee and the addition was made on the total amount taken on various dates and was also repaid on various dates. He has in his order merely without any corroborative evidence concluded that this company is shell company engaged in providing bogus accommodation entries in the shape of unsecured loans and the assessee has made shame transactions with this shell company under grab of unsecured loan to introduced the unaccounted income which is held unexplained cash credit u/s. 68 of the Act. The ld.AO has even not appreciated the fact that the assessee has entered into so many transaction and the total of the same cannot be added as income of the assessee even on ignoring all the arguments. This shows the causal approach taken by the ld. AO while completing the assessment of search cases. It is held by various courts and Tribunals that when the assessee has primarily discharged the initial onus casted upon them in terms of section 68 by providing details to establish genuineness of transaction, identity and creditworthiness of depositors then the assessee is not expected to prove the source of credits in his ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 33 books of account but not the source of source. The ld. DR has also not controverted the arguments of the ld. AR of the assessee that out of the total addition of Rs. 22,16,60,000/-, Rs. 18,79,00,000/- is repaid and Rs. 3,14,00,000/- is comprising of opening balance thus effectively there is not money which is in real terms accepted by the assessee in the year under consideration. We found from the records that assessee have filed the copy of accounts, confirmation, bank statement and ITR of the loan creditors and the same is not disputed by the AO. The DR also did not controvert these basic facts. Thus, as held in the case Dy. CIT v. Rohini Builders [2003] 127 Taxman 523/[2002] 256 ITR 360 (Guj.), the Hon'ble Gujarat High Court held that when the assessee has primarily discharged the initial onus laid on him in terms of section 68 by providing details to establish genuineness of transaction, identity and creditworthiness of depositors then the assessee is not expected to prove genuineness of cash deposited in bank account of those creditors because under the law the assessee can be asked to prove the source of credits in his books of account but not the source of source. The assessee had furnished all the documentary evidences supporting identity, creditworthiness and ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 34 genuineness of transactions of the loan creditor in question. However, ld. AO without considering the explanation/ evidences adduced by the assessee and without carrying out any further enquiries in support of confirmation of loan. The ld. AO in his order stated that the arguments of the assessee that the creditor company is filling return and active at ROC record have no substance as in the various enquiry and investigation it has been found that the company does not exist and no business activity is carried out and based on these fact he concluded that the company is mere paper company and providing accommodation entry. This finding itself suggested the AO own his own nothing appreciated that has been placed on record and no cross verification were conducted merely relying the statement of Shri Arpit Khandelwal. The ld. AO has not appreciated the arguments of the ld. AR of the assessee that loan from M/s. Gemini Commerce Private Limited has been accepted as genuine in the cash of Harsh Share Portfolio Private Limited as principle of res judicata is not applicable under the income tax proceedings. The cross examination request of the assessee to verify the version of Shri Arpit Khandewal was not granted. Thus, based on the SFIO ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 35 investigation the ld. AO categorized these various transaction of loan with M/s. Gemini Commerce P Ltd. as sham transaction and added the whole amount taken by the assessee in the year under consideration u/s. 68 of the Act. But on perusal of provision it is evident that assessing officer can very well make addition u/s 68 but for that two circumstances/condition must be satisfied i.e.: • assessee does not offer any explanation about nature and source of such credit or • explanation offered by assessee is not upto the satisfaction of AO. In other words, whenever assessee tenders explanation, before rejecting the same AO has to record dissatisfaction as to why the explanation furnished by assessee is not acceptable and while doing so documents/ explanation furnished cannot be rejected arbitrarily and summarily without commenting upon it. But the ld. AO did not examine the evidence and did not bring anything controvert the evidence filed by the assessee but based on some report of SFIO additions were made. ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 36 13. In the instant case, assessee has not only offered explanation regarding nature and source of credits but also substantiated the same with documentary evidences in the shape of ITRs, Confirmations and bank statements. Further, Ld. AO has not pointed out any discrepancy in the details furnished, rather has made addition solely on the basis of some investigations carried out in some other unrelated/ unknown parties, and it was alleged that the loans taken by assessee are bogus and accordingly addition was made u/s 68 of the Act. Apart from above investigation of some unknown parties there was no material available with the Ld. AO or referred to by him in the assessment order found as a result of search or gathered during the course of assessment proceedings in support of the impugned addition made by him. It is also a matter of fact that no report of the alleged investigation carried out in other cases were supplied to the assessee. 14. The bench noted the arguments of the ld. AR of the assessee that as on the date of search, the time limit for service of notice u/s. 143(2) was not available for A.Y. 2015-16 and thus ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 37 the assessment for that year was not pending on the date of search. In search no incriminating material was found, this fact is not only appreciated by the ld. CIT(A) but also confirmed by the ld.AO in his remand report in the proceeding before the ld. CIT(A) even the ld. DR did not controvert the report of the ld. AO in the remand proceedings but has merely stated that the statement recorded can be considered as incriminating material. Based on these facts the ld. AR of the assessee vehemently argued that the assessment already completed can only be done qua incriminating material and thus the law did not permit to again relook the assessment already completed. To support this contention he relied on the various judgements high courts and Supreme Courts amongst them same are of the jurisdictional high court also. In this case the search was carried out on 02.08.2017 and on that the assessment for AY 2015-16 in the case of the assessee was not pending and even the time limit for issue notice u/s. 143(2) was also passed. Thus, based on these set of facts the assessing officer would reassess the total income of the assessee as per the provisions of section 153A in respect of assessment year 2015-16. As the assessee objected ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 38 to the proposed addition on the ground that during the search no incriminating material indicating any undisclosed income for the year under consideration was found, which is also apparently clear from the assessment order itself and from the order of the ld. CIT(A) when he called for the remand report before deciding the appeal of the assessee. Thus, the revenue cannot take a plea that they have not received fair change to represent their verdict before CIT(A). The ld. AO in the remand report categorically confirmed that in this case there is no incriminating material found in the course of search. Based on this fact non disputed fact the ld. AR of the assessee contended that since there is no incriminating material found during the course of search and seizure action, the ld. AO is not empowered to make any addition in the total income of the assessee. It is a settled position of law that there cannot be a review under the garb of reassessment proceeding under section 153A of the Act. Therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 39 possession/knowledge of the AO during the course of search proceedings. Since the assessment for the assessment year 2015- 16 was not pending as on the date of search and there is no incriminating material found or seized during the course of search, then the AO is bound to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality. Therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for and an addition can only be made on the basis of undisclosed income derived from material/documents seized as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 40 incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of any incriminating material found or seized during the course of search and seizure proceedings, the additions made by the AO during the course of reassessment under section 153A of the Act are without jurisdiction and liable to be deleted and it is nothing but a review by the same rank of officer and the same is not permitted under the law. After appreciating such facts, ld. CIT(A) accepted the contentions of the assessee and held that no addition could be made as no incriminating material was found with respect to the unsecured loan by alleging the same as non-genuine and taken from the shell company. We have gone through the grounds of appeal raised by the revenue and it appears that the revenue has not challenged the findings of the ld. CIT(A) on the very legal ground decided by ld. CIT(A) against the revenue. Thus, it is clear that this legal aspect of the decision is not challenged by the revenue before us. Thus, it is undisputed that when there is no incriminating material was found ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 41 no addition could be made in the order passed u/s. 153A of the r.w.s. 143(3) of the Act. 15. The provisions of section 132 read with section 153A of the Act stipulate two types of situations - one where the assessment of any assessment year falling within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under : ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 42 "37. 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 153 A(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. 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. I 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 153 A 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 153 A 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 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 43 produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYS, 2002-03, 2005-06 and 2006- 07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 16. Thus, the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the 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 document 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. This view is supported by the decision of Hon'ble Jurisdictional High Court in ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 44 the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon'ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the Id. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under : "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 45 17. Thus, the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under : "23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 46 undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time- limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 47 that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of hose six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total Income and such orders subsistig at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the tal income. In such a case, to reiterate, there is no question ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 48 of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating. material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 49 and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under: "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re- assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 50 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made." 18. The Id. CIT (A) thus following the legal proposition on this issue, accepted the Contention of the assessee and allowed the appeal of the assessee. The relevant part of the finding of the Ld. CIT (A) are as under: The present appeal concerns AY 2015-16. On the date of the search, the said assessment already stood completed u/s 143(3) of the Act, as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of loan obtained from M/s Gemini Commerce Pvt. Ltd. is without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2015-16 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if any, found as a result of search. It is observed that the addition is neither based on any single loose paper found/seized as also admitted by the AO in her remand report nor on any statement recorded during the course of search conducted in the case of the appellant which can be considered as incriminating as is evident from the order of the AO. Further the reference made by the AO to the statement of Shri Arpit Khandelwal cannot be considered as incriminating in view of the fact that Shri Arpit Khandelwal has ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 51 never stated that M/s. Gemini Commerce Pvt. Ltd. is a shell company and providing only accommodation entries. In fact no such question was ever put to him. On the contrary the fact being that the appellant has filed all documentary evidences with reference to the loan advanced by the company to the appellant and also the fact being that the genuineness of the company M/s. Gemini Commerce Pvt. Ltd. has also been accepted in the past by the A.O. and also by the Hon'ble ITAT Jaipur in other cases. Therefore in view of the aforesaid discussion and respectfully following the binding decision of the Hon'ble Jurisdictional High Court, decision of various other High Courts and the decision of Hon’ble Supreme Court as discussed supra, it is observed that the aforesaid addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable, not being based on any incriminating document/ evidence found in the course of the search and hence is not liable to be sustained. Accordingly, the Ground of Appeal No. 1 is treated as allowed. 19. As it is evidently clear that not only in the assessment order there is no mention, reference or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee but in the remand proceeding the ld. CIT(A) has specifically raised the issue in remand proceeding AO categorically confirmed that “In this case no incriminating documents were found during the course of search proceedings. Seized digital record has also been operated/examined and nothing adverse has been found.” ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 52 20. Whereas the ld. DR argued that as per provision of section 153A AO has to issue notice u/s. 153A for all the six years immediately preceding the assessment year relevant to the previous year in which search was Conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore, in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found during the course of search. Further, even otherwise, if a return of income was filed u/s 139 of the Act, which was processed u/s 143(1)(a) of the Act and no assessment order was passed u/s 143(3)/144, the AO can made addition to the total income of the assessee in pursuance to notice issued u/s 153A even in the absence of incriminating material as the said processing/intimation u/s 143(1)(a) is not an assessment order as held by the Hon'ble Apex Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) and subsequently reiterated in Dy. CIT v. Zuari Estate Development & Investment Co. Ltd. [2015] 63 taxmann.com 177/[2016] 236 ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 53 Taxman 1 (SC). Thus, in view of the above, it is submitted that if no scrutiny assessment u/s 143(3)/144 of the Act was made earlier, then the AO is duty bound to assess the total income of the assessee, whether it is based on incriminating material found during the course of search or on the basis of information available on record or comes to his notice during the assessment proceedings. Otherwise, in the case of assessee, in whose case a search was conducted and there was no assessments u/s 143(3) or 144 in respect of six assessment years for which notice u/s 153A have to be issued, there would be no assessment order and the revenue would not get any opportunity to assess such income, which could not be the intention of the legislature. The ld. DR further submitted that the definition of incriminating material cannot be confined to only tangible materials and argued that the case is purely legal issue which was not be decided on the basis of the observation of the AO, she gave her finding only on the basis of her understanding. The ld. DR relied upon the statement of Sh. Arpit Khandelwal on 05.08.2017 and Sh. Harsh Agrawal 05.08.2017, the ld. DR submit that assessee has taken unsecured loan from Gemini Commerce Pvt. Ltd. whereas Gemini Commerce ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 54 Pvt. Ltd., is mentioned in the list of shell company received from the Serious Fraud Investigation Office (SFIO) and submitted that during the course of search operation was conducted in the case of Sh. Arpit Khandelwal who was Director of Gemini Commerce Pvt. Ltd. His statement U/s 132(4) was recorded on 05.08.2017 and therein he admitted that it is a paper company and he was just a dummy director and Sh. Harsh Agarwal made him as dummy director. The ld. DR submits that does not even know full name of the company and Arpit Khandenwal submits that Harsh Agrawal only was controlling many shell companies, Gemini Commerce Pvt. Ltd. being one of such companies. The statement of Arpit Khandenwal is submitted by the ld. DR in the paper book from page no. 1 to 11 from page 10 in question 11 was raised that whether you are director and partner of the company, the answer given that he does not remember the name of the company. Further in question no. 13 in paper book at page no. 11 & 12 has been taken into record as crucial document. Simultaneously the statement of Harsh Agrawal has been recorded from page 17 to 24 at page 19 of paper book in question Nos. 5,6,8 and 10 were brought to our notice by the ld. DR from the above question and ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 55 answer coming to the conclusion that this company are shell from the statement of Arpit Khandelwal and Harsh Agrawal. It is clear that these paper company and where the both of them could not tell anything about actual business of the Gemini Commerce Pvt. Ltd.. He submits that the nature of evidence or information gathered during the search should be of such nature that it should not be merely raise doubt or suspicion but should be of such nature which would prima facie show that the real and true nature of transaction between the parties for the definition of incriminating material. Further, ld. DR has placed on the following judgment in the case of Mani Square Ltd. vs. ACIT reported in 118 taxmann.com 452 (Kolkata Trib.). On the other hand the ld. AR for the assessee submits that the assessments were completed that the ld. AO and Pr.CIT has accepted the submissions made by the assessee and all the books of account were there for perusal, returns were filed and entire records was verified by the AO and ld. PCIT also. The ld. AR for the assessee submits that the evidentiary value should be supported with the Corroborative evidence, where the ld. DR cannot only relied upon the statements of Arpit Khandenwal and Harsh Agrawal as there is no ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 56 corroborative evidence and the ld. DR contentions is full and totally incorrect During the assessment proceedings the ld. AO has passed a detailed order and recorded the submission made by the assessee and the AO has made the findings which is contrary and has applied his power only on presumption as passed the order. During the course of entire proceedings, we come across that the AO has not recorded in finding that there is no incriminating material available or found during course of search proceeding not only that he has not rebutted the evidence filed by the assesee. In the present case considering the findings and circumstances evidence, the AO in remand report it is observed that there is no incriminating documents found during the course of search has also been accepted by the CIT (A). The Assessing Officer observed that Gemini Commerce Pvt. Ltd. is the shell providing accommodation to various persons and in view of the statement of Arpit Khandenwal recorded u/s 132(4) of the Act the assessee contended that no question was asked regarding the list and advances made by Gemini Commerce Pvt. Ltd. to the assessee and that Arpit Khandenwal in his statement as never stated that Gemini Commerce Pvt. Ltd. is a shell company and providing only ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 57 accommodation entries to various persons in the case to guise unsecured loans. The statement of Arpit Khandenwal if found correct then no question was asked to Arpit Khandenwal in his statement regarding providing entry to various persons in cash of loans and he never even admitted that Gemini Commerce Pvt. Ltd. is shell company. We are of the opinion that on the basis of the statement of Arpit Khandelwal and Harsh Agrawal the AO has no jurisdiction to make the additions and that in the proceedings u/s 153A of the Act when the assessment was not pending. The Assessing Officer failed to note that merely on the statement without any corroborative evidence to a conclusion that the AO to make the addition which is not sustainable in law. 21. We observed that when the Assessing Officer and ld. CIT(A) has accepted that the assessments were completed and books of account were verified, returns were filed, the entire record are persuaded by the AO and the ld. CIT(A) when there is no incriminating material found then the statements recorded during the assessment proceedings has no evidentiary value when it is not supported with corroborative evidences. The ld. AR for the ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 58 assessee has made the submissions which are supported by the Hon’ble Jurisdictional High Court judgmentas reported in his submission and in the case of CIT vs. M/s Mantri Share Brokers (P) Ltd. in D.B. Income Tax Appeals No. 502/2011 vide order dated 05.09.2017. Subsequently the SLP filed by the Revenue against the said judgment has been dismissed by the Hon’ble Supreme Court vide SLP No. 1646 of 2018. Whereas, the ld. DR has supported his submissions by the Hon’ble Supreme Court in the case of Bannalal Jat Constructions (P) Ltd. Vs. ACIT reported in (2019) taxmann.com 128 and in jurisdictional High Court decision in the case of Pr.CIT vs. Roshan Lal Sancheti in D.B. Income Tax Appeal No. 47/2018 dated 30.10.2018. We have noted that the facts of the case law relied upon by the ld. DR are on the facts difference with the case of the assessee. 22. The fact remains that the Revenue itself is not disputing that in respect of the unsecured loan taken by the assessee no incriminating documents were found in the search proceedings and the finding of the ld. CIT(A) on this very fact is not challenged before us in any of the grounds raised by the revenue. The ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 59 requirement that the incriminating material to have the co-relation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently, in our considered view we do not find any error having been committed by the ld. CIT(A) in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the unsecured loan accepted and reflected in the return of income filed by the assessee. Therefore, the jurisdictional requirement of Section 153A of the Act was not satisfied. In view of the above and for the reasons stated above and considering the binding decisions of various High Courts and findings of the apex court on the decision cited here in above, we see no reason to interfere with the impugned judgment and order passed by the learned CIT(A). I.T.A No(s). 322 & 323/JP/ 2021 (Assessment Year: 2012-13 & 2013-14) 23. As the facts and the issues involved in the captioned appeals remain the same as were involved in the aforementioned appeal in ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 60 ITA No. 30/JPR/2022, therefore, our order therein passed shall apply mutatis mutandis for the purpose of disposal of the captioned appeals. 24. In respect of the issues involved in appeal no. 31/JPR/2022 for assessment year 2016-17 the arguments on facts were almost similar and since the this year assessment was not completed the same was decided by the ld. CIT(A) on merits and we have also decided in 14 & 15 above and based on these findings in our considered view we do not find any error having been committed by the ld. CIT(A) in accepting the plea of the Assessee and thus the appeal of the revenue in terms of these observation stands dismissed in ITA no. 31/JPR/2022. In the result, the appeals of the Revenue are dismissed and upholding the order of the ld. CIT(A) in all the four years. Order pronounced in the open Court on 18/10/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@ Jaipur fnukad@Dated:- 18/10/2022. *Santosh ITA No. 30 & 31 /JP/2022 & 322 & 323/JP/2021 ACIT vs. Mahendra Singh Ratnawat & Ors 61 vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- ACIT, Central Circle-2, Jaipur. 2. izR;FkhZ@ The Respondent- Sh. Mahendra Singh Ratnawat, Jaipur. Smt. Ratan Kanwar Ratnawat, Jaipur 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 30 & 31/JP/2022 and ITA No. 322 & 323JP/2021} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar