M/s Kundan Castings Pvt. Ltd., Kanpur V. Deputy Commissioner of Income Tax-CC-II, Kanpur

ITSSA 515/LKW/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1067 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 16-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Transfer pricing; Search and seizure; Document seized; Principle of natural justice; Opportunity of cross examination; International transaction; Deemed to accrue or arise in india; Question of law; Accommodation entries; Assessment record; Tax effect; Revised return; Documents seized; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 271(1)(c); 69C; 143(3); 142(1); 153A; 115JB; 143(1); 143(2); 64; 43; 48; 72; 13; 153; 22; 153C; 68; 148; 132; 139

Judgement Text

PAGE 1 OF 60 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.510 TO 512/LKW/2019 ASST. YRS:2013-14, 15-16 & 16-17 M/S SIGMA CASTINGS LTD., 122/235 PLOT NO. 17, FAZALGANJ, KANPUR. PAN:AAGCS8962C DY.C.I.T., CENTRAL CIRCLE-II, KANPUR. (APPELLANT) (RESPONDENT) ITA NOS.513 & 514/LKW/2019 ASST. YRS:2015-16 & 16-17 M/S PARAS CASTINGS & ALLOYS (P.) LTD., 122/235 PLOT NO. 17, FAZALGANJ, KANPUR. PAN:AACCP9180H DY.C.I.T., CENTRAL CIRCLE-II, KANPUR. (APPELLANT) (RESPONDENT) ITA NOS.515 & 516/LKW/2019 ASST. YRS:2013-14 & 15-16 M/S KUNDAN CASTINGS (P.) LTD., 122/235 PLOT NO. 17, FAZALGANJ, KANPUR. PAN:AAACK5601N DY.C.I.T., CENTRAL CIRCLE-II, KANPUR. (APPELLANT) (RESPONDENT) PAGE 2 OF 60 ITA NOS.517 & 518/LKW/2019 ASST. YRS:2013-14 & 16-17 M/S SHREE RADHEY RADHEY ISPAT (P.) LTD., 122/235 PLOT NO. 17, FAZALGANJ, KANPUR. PAN:AACCR7807B DY.C.I.T., CENTRAL CIRCLE-II, KANPUR. (APPELLANT) (RESPONDENT) ITA NO.526/LKW/2019 ASST. YR:2016-17 M/S QUALITY INDIA PVT. LTD., 133/1, JUHI CHAURAHA, KANPUR. PAN:AACCP9180H DY.C.I.T., CENTRAL CIRCLE-II, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR, C.A. SHRI SUDHINDRA KUMAR JAIN, C.A. RESPONDENT BY: SHRI S. K. MADHUK, CIT (DR) DATE OF HEARING: 05 11 2020 DATE OF PRONOUNCEMENT: 16 12 2020 O R D E R PER BENCH: THIS IS A GROUP OF TEN APPEALS RELATING TO DIFFEREN T ASSESSEES BELONGING TO SAME GROUP AND FOR DIFFERENT ASSESSMEN T YEARS. HOWEVER, THE GROUNDS OF APPEAL, TAKEN BY THE ASSESSEES IN TH ESE APPEALS, ARE IDENTICAL AND THESE WERE HEARD TOGETHER THEREFORE, F OR THE SAKE OF CONVENIENCE A COMMON AND CONSOLIDATED ORDER IS BEIN G PASSED. FOR THE SAKE OF COMPLETENESS, THE GROUNDS OF APPEAL IN I.T. A. NO.510 ARE REPRODUCED BELOW: PAGE 3 OF 60 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE TREATMENT OF PROFIT IN WHOLESALE TRADING IN CLOTH AM OUNTING TO RS.3,78,24,737/-, AS UNEXPLAINED CASH CREDIT BY THE LD. A.O., UNDER SECTION 68 R/W SECTION 115BBE OF THE INCOME TA X ACT, 1961. 2. THAT WHILE SUSTAINING THE PROFIT IN WHOLESALE TRAD ING IN CLOTH AS UNEXPLAINED CASH CREDIT, THE LD. COMMISSIO NER OF INCOME TAX (APPEALS)-4, KANPUR FAILED TO APPRECIATE THE FACT THAT EVEN IN THE COURSE OF SEARCH, NO INCRIMINATING DOCUMENT(S)/EVIDENCE, INDICATING OR SUGGESTING THAT THE BUSINESS OF WHOLESALE TRADING IN CLOTH WAS NOT GENUIN E, WAS FOUND. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN TREATING TH E BUSINESS OF TRADING IN CLOTH AS BOGUS, WITHOUT APPRECIATING T HE FACT THAT THE BUSINESS OF TRADING IN CLOTH WAS DULY ACCEPTED I N THE ORIGINAL ASSESSMENT(S) MADE UNDER SECTION 143(3) OF THE I.T. ACT, 1961, AND THUS THE A.O. CANNOT REVIEW HIS OWN O RDER PASSED EARLIER U/S 143(3) OF THE I.T. ACT, 1961 IN THE ASSESSMENT MADE U/S 153A OF THE INCOME TAX ACT, 196 1, WITHOUT ANY INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING T HE ADDITION OF RS.3,78,24,737/- IN ORDER PASSED BY LD. AO U/S 153A OF THE INCOME TAX ACT, 1961, MERELY ON THE BAS IS OF BORROWED SATISFACTION OF DY. C.I.T, CENTRAL CIRCLE-I I, KANPUR, WITHOUT THERE BEING ANY CORROBORATING MATERIAL OR EV IDENCE FOUND IN THE COURSE OF SEARCH, TO FORM A VALID REAS ON TO BELIEVE THAT THE BUSINESS OF WHOLESALE TRADING IN CL OTH WAS NOT GENUINE. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADVERSE INFERENCES DRAWN BY THE A.O. IN RESPECT OF B USINESS OF TRADING IN CLOTH, WITHOUT BRINGING ANY COGENT MATERI AL ON PAGE 4 OF 60 RECORD AND CONFRONTING THE SAME TO THE APPELLANT, T HUS, THE INFERENCES DRAWN ARE ARBITRARY, UNILATERAL AND ARE A LSO ILLEGAL AND UNSUSTAINABLE IN LAW AND ON FACTS. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ARBITRARY ADDITION/DISALLOWANCE MADE BY THE LD. AO A MOUNTING TO RS.7,56,495/-, BEING THE ALLEGED COMMISSION PAID @ 2% ON THE NET PROFIT IN WHOLESALE TRADING OF CLOTH TREATED AS UNEXPLAINED EXPENDITURE FROM UNDISCLOSED INCOME UND ER SECTION 69C OF THE I.T. ACT, 1961 IN THE ASSESSMENT PASSED U/S 153A OF THE INCOME TAX ACT,1961. 7. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ARBITRARY ADDITION OF RS.7,56,495/- MADE BY THE A.O . BEING UNEXPLAINED EXPENDITURE FROM UNDISCLOSED INCOME UND ER SECTION 69C OF THE I.T. ACT, 1961, MERELY ON SURMIS ES AND CONJECTURES, WITHOUT APPRECIATING THAT NO INCRIMINAT ING DOCUMENT(S)/EVIDENCE WAS FOUND IN THE COURSE OF SEAR CH RELATING TO THE ABOVE ADDITION IN THE ASSESSMENT PA SSED U/S 153 A OF THE INCOME TAX ACT, 1961. 8. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.7,56,495/- BEING THE ALLEGED COMMISS ION PAID @ 2% ON THE NET PROFIT IN TRADING OF CLOTH, MADE BY THE A.O., WITHOUT CONFRONTING ANY MATERIAL, EVIDENCE/INFORMATI ON TO THE APPELLANT, OBTAINED AT THE BACK OF THE APPELLANT AN D THUS IS UNWARRANTED, UNJUSTIFIED AND DESERVES TO BE DELETED. 9. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, KANPUR, HAS FAILED TO CONSIDER AND APPRECIATE THAT NO COGENT MATERIAL/EVIDENCE WAS BROUGHT ON RECORD BY THE LD. A.O. WHILE MAKING THE IMPUGNED ADDITION OR DISALLOWANCE, WI THOUT ANY PROPER BASIS AND CONSEQUENT ADDITION IN THE INC OME OF THE APPELLANT DESERVES TO BE DELETED. 10. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-4, KANPUR HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIA TING THE FACT THAT EVEN IF THE SEIZED DOCUMENT(S) WAS FOUND F ROM THE PAGE 5 OF 60 PREMISES OF THE 3 RD PARTY THEN, THE ASSESSMENT AND ADDITION ON THE BASIS OF THE SAID DOCUMENTS CAN ONLY BE MADE UNDER SECTION 153C OF THE INCOME TAX ACT, 1961, HENCE THE IMPUGNED ASSESSMENT/ADDITION(S) MADE U/S 153A OF TH E INCOME TAX ACT,1961 IS ILLEGAL, BAD IN LAW AND LIABL E TO BE QUASHED/DELETED. 11. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-4, KANPUR, HAS ERRED IN LAW AND ON FACTS AND FAILED TO APPRECIATE THAT THE APPROVAL GRANTED BY JOINT COMMISSIONER OF INCOME TAX UNDER SECTION 153D OF THE INCOME TAX ACT, 1961, BEFORE PASSING THE IMPUGNED ASSESSMENT ORDER, WAS MECHANICA L IN NATURE AND THUS, THE WHOLE ASSESSMENT IS LIABLE TO B E QUASHED. 12. THAT THE ORDER PASSED UNDER SECTION 127 OF THE INCOME TAX ACT, 1961 IS UNSUSTAINABLE IN LAW, THEREFORE THE IMPUGNED ASSESSMENT ORDER IS ILLEGAL, BAD IN LAW AND LIABLE T O BE QUASHED. 13. THAT THE IMPUGNED ASSESSMENT MADE U/S 153A OF T HE INCOME TAX ACT, 1961 IS UNSUSTAINABLE IN LAW AND ON FACTS AND LIABLE TO BE QUASHED. 14. THAT THE IMPUGNED ORDER UNDER APPEAL IS INSUPPO RTABLE IN LAW AND ON FACTS AND IS ALSO CONTRARY TO THE PRIN CIPLES OF NATURAL JUSTICE AND EQUITY THEREFORE, LIABLE TO BE QUASHED. 2. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WILL BE TAKING UP THE APPEAL IN I.T.A. NO.510 IN THE CASE OF SIGMA CA STING LTD. AND THE ARGUMENTS IN I.T.A. NO.510 WILL HOLD GOOD FOR REST O F THE APPEALS. EXPLAINING THE FACTS OF THE CASES, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT A SEARCH TOOK PLACE ON THE ASSESSEES ON 23/08/2016 WHEREIN NO INCRIMINATING MATERIAL WAS FOUND DURING TH E SEARCH. BUT THE ASSESSING OFFICER MADE THE ADDITIONS ON THE BASIS O F DOCUMENTS FOUND DURING SEARCH ON A DIFFERENT ASSESSEE AND IN THIS R ESPECT OUR ATTENTION WAS INVITED TO THE ORDER OF THE ASSESSING OFFICER SPECI FICALLY FROM PAGES 8 TO 11 PAGE 6 OF 60 WHERE THE ASSESSING OFFICER HAS REFERRED TO SEARCH & SEIZURE OPERATION CONDUCTED ON 28/04/2015 ON THE COMPANIES OF SHRI SH ASHWAT AGARWAL. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IN THE ORDER ITSELF HAS MENTIONED THAT A DIARY IDENTIF IED AS BK-2, CONTAINING LEDGER ACCOUNT OF DIFFERENT PARTIES, WAS FOUND AND S EIZED AT THE PREMISES OF SHRI SHASHWAT AGARWAL FROM WHERE HE OBSERVED THAT T HE SEARCHED GROUP WAS ENGAGED IN THE ACCOMMODATION ENTRIES OF LO NG TERM CAPITAL GAIN / UNSECURED LOANS TO VARIOUS PARTIES. IT WAS S UBMITTED THAT THE ASSESSING OFFICER IN THE CASE OF SHRI SHASHWAT AGARWA L OBSERVED THAT THE NAME OF NAVIN JAIN AND HIS FAMILY MEMBERS, BELONGIN G TO SIGMA GROUP OF COMPANIES, WAS ALSO FOUND IN THAT DIARY AND THEREFOR E, HE HELD THAT NAVIN JAIN AND HIS FAMILY MEMBERS HAD TAKEN ACCOMMODATION ENTRIES OF TAX EXEMPTION OF LONG TERM CAPITAL GAIN BY WAY OF PRE AR RANGED TRADING IN SHARES. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOWHERE IN THAT DIARY THE NAME OF THE ASSESSEES APPEARED AND THE NA MES WHICH APPEARED ARE INDIVIDUALS AND THE ASSESSEES BEING COMPANIES A RE DIFFERENT THAN THE INDIVIDUALS. THEREFORE, IT WAS SUBMITTED THAT ADDIT ION IN THE CASE OF THE ASSESSEES CANNOT BE MADE AS THE NAMES OF THE ASSESS EES DID NOT APPEAR IN THE IMPOUNDED DOCUMENTS AND THAT TOO WHICH WERE IM POUNDED IN THE CASE OF A THIRD PARTY. MOREOVER, IT WAS ARGUED THAT ADDITION IN THE CASE OF THE ASSESSEES WAS NOT MADE ON ACCOUNT OF LONG TERM C APITAL GAIN OR UNSECURED LOANS BUT IT WAS MADE BY TREATING AS BOGUS THE SALE AND PURCHASE OF CLOTH MADE BY THE ASSESSEES ON WHOLESALE BASIS FROM RICH GROUP OF COMPANIES MANAGED BY SHRI SHASHWAT AGARWAL. LEARNED COUNSEL FOR THE ASSESSEE THEREFORE, ARGUED THAT FIRST OF AL L THE ADDITION HAS NOT BEEN MADE ON THE BASIS OF DOCUMENTS RECOVERED DURIN G SEARCH ON THE ASSESSEES WHICH IS APPARENT FROM THE ASSESSMENT ORDE R ITSELF AND PAGE 7 OF 60 SECONDLY, THE ADDITIONS HAVE NOT BEEN MADE ON ACCOU NT OF LONG TERM CAPITAL GAIN OR ON ACCOUNT OF SHARE CAPITAL OR UNSE CURED LOANS FOR WHICH THE DOCUMENTS WERE FOUND AT THE PREMISES OF THE THIR D PARTY. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOR ASSESSM ENT YEAR 2013-14 AND 2015-16, THE ASSESSMENTS STOOD COMPLETED AND THEREF ORE, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL, THE ADDITION COULD N OT HAVE BEEN MADE. 2.1 RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLO WING CASE LAWS: (I) 395 ITR 526 PR. CIT VS. MEETA GUTGUTIA (II) 380 ITR 573 (DEL) CIT VS. KABUL CHAWLA (III) 380 ITR 571 (DEL) CIT VS. MURELE PAPER MILLS (IV) 352 ITR 493 (DEL) CIT VS. ANIL KUMAR BHATIA (V) 374 ITR 645 (BOM) CIT VS. CONTINENTAL WAREHOUS ING CORPN. (VI) 386 ITR 483 (BOM) CIT VS. GURINDER SINGH BAWA (VII) 392 ITR 501 (DEL) PR. CIT VS. SMT. ANIA RANI (VIII) 397 ITR 344 (SC) CIT VS. SINGHAD TECH. EDU. SOCIETY LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HON 'BLE SUPREME COURT HAS DISMISSED THE SLP IN THE CASE OF KABUL CHAWLA AN D MEETA GUTGUTIA. 2.2 WITHOUT PREJUDICE IT WAS SUBMITTED THAT THE ASSE SSING OFFICER DID NOT MAKE AVAILABLE ANY MATERIAL TO THE ASSESSEE FOR CRO SS EXAMINATION AND THEREFORE, THE ADDITIONS SUSTAINED BY LEARNED CIT(A ) ARE NOT IN ACCORDANCE WITH LAW AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCIS E 281 CTR 241 (SC) WHICH WAS FOLLOWED BY LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF MORNING GLORY INFRA LIMITED VS. DCIT IN I.T.A. NO.7 2/LKW/2018. 2.3 WITHOUT PREJUDICE TO THE ABOVE, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON MERITS ALSO THE ASSESSEE HAS A ST RONG CASE AS ASSESSEE WAS DEALING IN WHOLESALE CLOTH TRADING BUSINESS SINCE ASSESSMENT YEAR PAGE 8 OF 60 2011-12 AND IN NONE OF THE YEARS THE ADDITION WAS MA DE. IT WAS SUBMITTED THAT EVEN IN ASSESSMENT YEAR 2013-14 THE ASSESSMENT WAS COMPLETED U/S 143(3) AND NO ADDITION WAS MADE ON A CCOUNT OF TRADING IN WHOLESALE BUSINESS OF CLOTH. MOREOVER, IT WAS SUBMIT TED THAT HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ODEON BUILDERS PVT. LTD. [2019] 110 TAXMANN.COM 64 (SC) HAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF THIRD PARTY INFORMATION GATHERED BY THE INVESTIG ATION WING OF THE DEPARTMENT WHICH HAS NOT BEEN SUBMITTED TO FURTHER VERIFICATION BY THE ASSESSING OFFICER AND HE HAD NOT PROVIDED COPY OF S UCH STATEMENT TO THE ASSESSEE AND THUS, DENIED THE OPPORTUNITY OF CROSS EXAMINATION AND WHEREAS ON THE OTHER HAND THE ASSESSEE HAD PRIMA FAC IE DISCHARGED INITIAL BURDEN OF SUBSTANTIATING PURCHASES THROUGH CHEQUES, VAT REGISTRATION OF SELLERS AND THEIR INCOME TAX RETURNS. LEARNED COUN SEL FOR THE ASSESSEE SUBMITTED THAT IN THE PRESENT CASES ALSO THE ASSESS EE HAD REGISTRATION UNDER THE VAT REGISTRATION ACT WHEREIN THE TURNOVER FROM THE CLOTH TRADING WAS ALSO REPORTED AND FOR FINANCIAL YEAR 2012-13 THE ASSESSMENT WAS ALSO COMPLETED AND IN THIS RESPECT OUR ATTENTION WAS INVI TED TO PAGES 55-61 OF THE PAPER BOOK WHERE THE COPY OF ASSESSMENT ORDER WAS PLACED. IT WAS SUBMITTED THAT ALL THE PURCHASES AND SALES WERE MADE THROUGH BANKING CHANNELS AND IN THIS RESPECT LEARNED COUNSEL FOR TH E ASSESSEE HEAVILY RELIED ON THE SUBMISSIONS MADE BEFORE LEARNED CIT(A ) VIDE LETTER DATED 28/07/2019, COPY PLACED AT PAGES 62 TO 71 OF THE PA PER BOOK. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT ASS ESSING OFFICER HELD THE SALES AND PURCHASE OF THE ASSESSEE AS BOGUS AND MAD E THE ADDITION OF THE NET PROFIT U/S 68 OF THE ACT AND CHARGED THE INCOME TAX U/S 115BBE OF THE ACT THEREBY DISALLOWING THE ASSESSEE THE BENEFIT OF SET OFF. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HOWEVER THE LEARNED CIT(A) HAD PAGE 9 OF 60 ALLOWED RELIEF TO THE ASSESSEE BY ALLOWING SET OFF OF SUCH INCOME AGAINST THE OTHER INCOME OF THE ASSESSEE BUT HE DID NOT AG REE TO THE CONTENTIONS OF THE ASSESSEE THAT THE INCOME WAS FROM GENUINE BUS INESS ACTIVITY AND NEEDED TO BE INCLUDED UNDER THE HEAD INCOME FROM PR OFITS & BUSINESS INSTEAD OF IT HAVING BEEN TREATED AS UNEXPLAINED CR EDIT U/S 68 OF THE ACT, THEREFORE, IT WAS PRAYED THAT KEEPING IN VIEW THE ABO VE LEGAL ISSUES AND THE MERITS OF THE CASES, THE INCOME HELD BY THE AUT HORITIES BELOW TO BE TAXED U/S 68 BE TREATED AS BEING INCOME FROM BUSINE SS ACTIVITY. 3. LEARNED D. R., ON THE OTHER HAND, VEHEMENTLY ARG UED THAT ASSESSEE CANNOT TAKE THE ARGUMENT THAT NO INCRIMINATING DOCU MENT WAS FOUND. IT WAS SUBMITTED THAT THE DOCUMENTS RELIED ON BY THE AS SESSING OFFICER WAS THOUGH FOUND DURING THE SEARCH & SEIZURE OPERATION ON THE RICH GROUP OF COMPANIES BUT IN THAT DOCUMENT THE NAMES OF ITS PRO MOTERS EXISTED AND IF THE DOCUMENT FOUND AT THE PREMISES OF RICH GROUP IS INCRIMINATING AND THE ENTRIES RECORDED IN THE DIARY FINDS PLACE IN THE BO OKS OF ACCOUNT OF THE ASSESSEE, THE BOOKS OF ACCOUNT ITSELF ARE INCRIMINA TING IN THE CASE OF THE ASSESSEES AND THEREFORE, ON THAT BASIS THE ASSESSIN G OFFICER HAS RIGHTLY MADE THE ADDITION AND WHICH THE CIT(A) HAS RIGHTLY U PHELD. WITHOUT PREJUDICE IT WAS SUBMITTED THAT HON'BLE ALLAHABAD HI GH COURT IN THE CASE OF CIT VS. RAJ KUMAR ARORA [2014] 367 ITR 517 (ALL) HA S HELD THAT THERE IS NO REQUIREMENT OF INCRIMINATING MATERIAL FOR INVOKING THE PROVISIONS OF SECTION 153A. AS REGARDS THE RELIANCE PLACED BY LEARNED CO UNSEL FOR THE ASSESSEE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA [2016] 380 ITR 573 (DEL), LEARNED D. R. SUBM ITTED THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA AND MOREOVER THE SLP WAS DIS MISSED BY HON'BLE SUPREME COURT DUE TO LOW TAX EFFECT. AS REGARDS RELI ANCE PLACED BY PAGE 10 OF 60 LEARNED COUNSEL FOR THE ASSESSEE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MEETA GUTGUTIA, THE LEARNED D. R. SUBMITTED THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION AND HAS FI LED SLP IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION WHICH HAS BEEN A DMITTED AND THEREFORE, IT WAS SUBMITTED THAT THE JUDGMENT OF HON 'BLE ALLAHABAD HIGH COURT IN THE CASE OF RAJ KUMAR ARORA WILL APPLY. 3.1 AS REGARDS THE OTHER ARGUMENT OF LEARNED COUNSE L FOR THE ASSESSEE THAT THE ASSESSEE WAS NOT PROVIDED OPPORTUNITY TO CR OSS EXAMINATION, LEARNED D. R. SUBMITTED THAT HON'BLE ALLAHABAD HIGH COURT HAS ALREADY EXAMINED THIS ASPECT AND HAS HELD THE RICH GROUP OF COMPANIES TO BE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THEREFORE, THE TURNOVER GENERATED FROM THESE COMPAN IES AND ROUTED THROUGH DIFFERENT COMPANIES OF ASSESSEE WILL ALSO BE BOGUS AND THE ASSESSING OFFICER HAS SPECIFICALLY QUOTED THE ORDER OF HON'BLE HIGH COURT. IN THIS RESPECT THE LEARNED D. R. INVITED OUR ATTEN TION TO THE ORDER OF THE ASSESSING OFFICER WHEREIN HE HAS QUOTED THE ORDER OF HON'BLE ALLAHABAD HIGH COURT AND WHEREIN THE ENTITIES BELONGING TO RI CH GROUP WERE HELD TO BE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. 3.2 AS REGARDS THE MERITS OF ARGUMENTS, LEARNED D. R. SUBMITTED THAT ASSESSING OFFICER IN RESPECT OF REPLY TO QUERIES AF TER SPECIFICALLY CITING A NUMBER OF ADVERSITIES HELD THAT THE TURNOVER OF THE ASSESSEE FROM CLOTH BUSINESS WAS BOGUS AND HEAVILY RELIED ON THE FINDING S OF ASSESSING OFFICER. THEREFORE, IT WAS ARGUED THAT LEARNED CIT(A) HAS RIG HTLY CONFIRMED THE ADDITION TO BE U/S 68 OF THE ACT. 4. IN REJOINDER LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT IN THE ORDER OF HON'BLE ALLAHABAD HIGH COURT THERE ARE ONL Y OBSERVATIONS WITH PAGE 11 OF 60 REGARD TO THE COMPANIES BEING INVOLVED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF PROVIDING LONG TERM CAPITAL GAIN AND SHARE CAPITAL ETC. AND THERE IS NO WHISPER AS TO THE CLOTH BUSINES S BEING RUN BY THE COMPANIES AND ALSO THERE IS NO LONG TERM CAPITAL GA IN OR UNSECURED LOANS ENTRIES TAKEN BY ASSESSEES. IT WAS SUBMITTED THAT T HE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF TRADING IN CLOTH. ON THE CONCLUSION OF THE ARGUMENTS BY THE PARTIES, THE BENCH DIRECTED BOTH T HE PARTIES TO FURNISH WRITTEN SUBMISSIONS ALONG WITH THE COPY OF PANCHNAMA AND LIST OF DOCUMENTS ETC. SEIZED DURING THE COURSE OF SEARCH I N THE CASE OF THE ASSESSEES AND OTHER GROUP COMPANIES AND LATER ON WH ICH HAVE BEEN FILED BY BOTH THE PARTIES. FOR THE SAKE OF COMPLETENESS, THE WRITTEN SUBMISSIONS FILED BY BOTH THE PARTIES HAS BEEN MADE PART OF THIS ORDER AND WHICH ARE REPRODUCED BELOW: ASSESSEES WRITTEN SUBMISSIONS 1) BRIEF FACTS ARE THAT A SEARCH U/S 132(1) OF TH E IT. ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) TOOK PLACE AT THE BUSINESS PREMISE OF THE APPELLANT CO. AND THE RESID ENTIAL PREMISES OF THE DIRECTORS OF THE COMPANY, ON 23.08. 2016 WHICH CONTINUED UP TO 25.08.2016 AND AS A RESULT OF SEARCH, NOTICES U/S 153A WERE ISSUED IN THE CASE OF APPELLAN T FOR A/YS 2012-13 TO 2016-17. 2) THE APPELLANT IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND TRADING OF M S INGOTS AND ALSO WHOLESALE TRADING IN CLOTH. 3) ORIGINAL RETURN OF INCOME FOR A.Y. 2013-14 WAS FI LED BY THE APPELLANT ON 23.10.2013 DECLARING NET INCOME AT RS.25,70,020/-. 4) ASSESSMENT U/S 143(3) WAS FRAMED BY THE LEARNED ASSESSING OFFICER AT A TOTAL INCOME OF RS. 29,82,96 0/- VIDE PAGE 12 OF 60 ASSESSMENT ORDER DATED 22.03.2016. COPY OF ASSESSME NT ORDER HAS BEEN PLACED AT PAGES 51 TO 54 OF THE PAPE R BOOK. 5) RETURN OF INCOME FILED ALONG WITH AUDITED SET OF ACCOUNTS, COPY OF THE INCOME TAX RETURN AND TAX AUDIT REPORT HAVE BEEN PLACED AT PAGES 1 TO 50 OF THE PAPER BOOK. 6) A NOTICE U/S 153A WAS ISSUED BY THE A.O. ON 03.04 .2018, AND THEREAFTER ASSESSMENT U/S 153A R.W.S. 143(3) WAS MADE BY THE LEARNED ASSESSING OFFICER COMPUTING TOTAL IN COME AT RS.3,85,81,232/- AND PROVISION IN SEC. 115BBE OF TH E ACT WAS INVOKED TO TAX THE ASSESSED INCOME U/S 115BBE. 7) DURING THE RELEVANT ASSESSMENT YEAR, AS ALREADY SUBMITTED ABOVE, THE APPELLANT WAS ENGAGED IN THE BU SINESS OF MANUFACTURING AND TRADING OF M S INGOTS AND WHOLE SALE TRADING IN CLOTH. PROFIT IN THE TRADING OF CLOTH WAS DECLARED AT RS.3,78,24,737/-. 8) THE LEARNED ASSESSING OFFICER, WHILE FRAMING ASSE SSMENT, HAD NO DOUBT, BY WAY OF CURSORY REMARKS OBSERVED THA T THE TRADING RESULTS ARE NOT ACCEPTED. BUT FACT OF THE M ATTER IS THAT NEITHER ANY ITEM OF PURCHASE/SALE OR ANY EXPENDITUR E FOUND TO BE UNRELATED NOR ANY SPECIFIC DEFECT HAS BEEN POINT ED OUT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNTS. THE SYSTE M OF MAINTENANCE OF BOOKS OF ACCOUNTS CONTINUES TO BE TH E SAME AS WAS IN THE PAST YEARS, WHICH AS ALREADY SUBMITTED ABOVE, HAS BEEN ACCEPTED BY THE LEARNED ASSESSING OFFICER. OTHERWISE ALSO, THE LEARNED ASSESSING OFFICER, WHILE FRAMING ASSESSMENT, PROCEEDED TO COMPUTE THE TOTAL INCOME B Y ADOPTING THE FIGURES AS PROFIT & LOSS ACCOUNT AND T HE RETURN OF INCOME WHICH IS SOLELY BASED ON THE BOOKS OF ACCO UNTS MAINTAINED BY THE APPELLANT COMPANY. 9) IN ADDITION TO THE ABOVE TREATMENT OF PROFIT IN TRADING OF CLOTH, THE A.O. ALSO ESTIMATED AND ADDED AN AMOUNT OF RS.7,56,491/-, REPRESENTING 2% OF THE TOTAL PROFIT IN TRADING IN CLOTH, DECLARED BY THE APPELLANT, AS AN UNEXPLAINED EXPENDITURE TO OBTAIN THE ALLEGED ACCOMMODATION ENT RY BY RESORT TO PROVISIONS OF SECTION 69C OF THE ACT. PAGE 13 OF 60 10) WHILE COMPUTING THE TOTAL INCOME, THE LEARNED A SSESSING OFFICER DID NOT ALLOW THE SET OFF OF THE INCOME DECL ARED BY THE APPELLANT IN TRADING OF CLOTH AGAINST THE BUSINESS LOSSES IN THE SAME YEAR IN ACCORDANCE WITH THE PROVISION IN SECTIO N 71 AND 72 OF THE ACT. 11) THE APPELLANT PREFERRED AN APPEAL AGAINST THE S AID ASSESSMENT BEFORE THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS)-4, KANPUR. ON ADJUDICATION, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, KANPUR UPHE LD THE ACTION OF THE LEARNED ASSESSING OFFICER IN TREATING THE AMOUNT DECLARED AS PROFIT ON CLOTH TRADING AS AN UNEXPLAIN ED CREDIT AND ALSO UPHELD THE ACTION OF THE LEARNED ASSESSING OFFICER IN ESTIMATING THE ADDITION OF RS.7,56,491/- ON ACCOUNT OF ALLEGED EXPENDITURE REPRESENTING 2% OF THE AMOUNT OF TOTAL PROFIT OF TRADING IN CLOTH BUT ALLOWED THE SET OFF OF PROFIT O F TRADING IN CLOTH AGAINST LOSSES IN IRON & STEEL BUSINESS. 12) THE APPELLANT IS IN APPEAL BEFORE THE HON'BLE B ENCH AGAINST UPHOLDING OF THE ACTION OF THE LEARNED ASSE SSING OFFICER BY THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) (SUPRA). 13) WHILE FRAMING THE ASSESSMENT, THE LEARNED ASSES SING OFFICER HAS SOLELY RELIED ON CERTAIN COMMUNICATION RECEIVED BY HIM FROM THE DEPUTY COMMISSIONER OF INCOME TAX, CEN TRAL CIRCLE-1, KANPUR, VIDE LETTER NO. DCIT/CC-1/KNP/MIS C/18-19/ 699 DATED 06.12.2018 BEING THE ASSESSING OFFICER OF RICH GROUP OF CASES WHICH HAS BEEN REPRODUCED BY THE A.O. FROM PAGES 7 TO 12 OF THE ASSESSMENT ORDER. 14) THE A.O. HAS OBSERVED THAT DURING THE COURSE O F SEARCH OF RICH GROUP OF CASES, ON 28.04.2015, CERTAIN DOCU MENTS WERE FOUND PARTICULARLY, A REFERENCE HAS BEEN MADE T O A LEDGER, SEIZED AND INVENTORISED AS ANNEXURE BK-2, WH ICH ALLEGEDLY TRANSPIRES THAT RICH GROUP OF CASES ALONG WITH APPELLANT COMPANY WERE INVOLVED IN CIRCULAR TRADING OF CLOTH. 15) AS PER THE LEARNED ASSESSING OFFICER, THE TRANS ACTION(S) RELATING TO PURCHASE AND SALE OF CLOTH WERE ONLY IN THE NATURE OF BOOK ENTRIES AND THERE WAS NO ACTUAL BUSINESS TRA NSACTION PAGE 14 OF 60 AND FROM THIS HE INFERRED THAT THE PROFIT DECLARED BY THE APPELLANT COMPANY AS PROFIT IN TRADING IN CLOTH BUS INESS WAS NOT BUSINESS PROFIT BUT WAS ONLY AN UNEXPLAINED CASH CREDIT AND THE APPELLANT HAD ROUTED ITS UNACCOUNTED MONEY THROUGH M/S RICH GROUP OF COMPANIES. 16) AT THE OUTSET, THE SAID ANNEXURE BK-2 DOES NOT MENTION ANYTHING ABOUT CLOTH TRADING AND APART FROM MENTION ING OF THE ISSUE(S) UNDERTAKEN REFERRED TO HERE ABOVE SEIZED D OCUMENT BK-2, THERE IS NO MENTION OF ANY SEIZED/IMPOUNDED DOCUMENT, WHICH COULD BE SAID TO HAVE BEEN FOUND DUR ING THE COURSE OF SEARCH EITHER AT THE PREMISES OF THE APPE LLANT OR AT THE PREMISES OF RICH GROUP OF COMPANIES. 17) THE LEARNED ASSESSING OFFICER THUS FAILED TO MA KE REFERENCE OF ANY INCRIMINATING INFORMATION OR DOCUM ENT ETC. IN THE BODY OF THE ASSESSMENT ORDER. AS DIRECTED, COPY OF PANCHNAMA PREPARED BY THE LEARNED AUTHORIZED OFFICE RS DURING THE COURSE OF SEARCH U/S 132(1) OF THE INCOM E TAX ACT, 1961, AT THE PREMISES OF THE APPELLANT CO. IS ENCLO SED. 18) BEFORE GOING INTO THE VARIOUS LEGAL AND FACTUAL ISSUES, YOUR HUMBLE APPELLANT WOULD VERY VEHEMENTLY LIKE TO STATE THAT NEITHER ANY INCRIMINATING DOCUMENT WAS FOUND FR OM THE PREMISES OF THE APPELLANT DURING THE COURSE OF SEAR CH NOR THE LEARNED ASSESSING OFFICER HAS REFERRED TO ANY SUCH DOCUMENT IN THE BODY OF ASSESSMENT ORDER. 19) THE APPELLANT IS AGITATING THE ACTION OF THE LE ARNED ASSESSING OFFICER AND UPHOLDING OF THE SAME BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE GROUND THAT THE CASE OF THE APPELLANT IS THAT THE ASSESSMENT HA D BEEN FRAMED U/S 153A OF THE ACT AND IS NOT A REGULAR ASS ESSMENT. 20) IT IS WORTH NOTING THAT AN ADDITION OR ANY ADVER SE INFERENCE IN THE CASE OF THE ASSESSMENT U/S 153A OF THE INCOME TAX ACT, 1961 CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL WHEREAS, IN THE CASE OF THE A PPELLANT, NO INCRIMINATING MATERIAL WAS FOUND/NOTICED OR REFER RED TO IN THE ASSESSMENT ORDER. PAGE 15 OF 60 21) ENTIRE THRUST OF THE LEARNED ASSESSING OFFICER HAS BEEN ON THE DOCUMENTS/LEDGER FOUND AND SEIZED FROM THE PREM ISES OF RICH GROUP OF COMPANIES, WHICH WAS SEIZED BY THE DEPARTMENT WAY BACK ON 28.04.2015. THIS FACT IS AMPL Y CLEAR FROM READING OF THE ASSESSMENT ORDER FROM PAGE 4 ON WARDS. 22) PERUSAL OF THE ASSESSMENT ORDER WILL REVEAL THAT THE ONLY DOCUMENT REFERRED FOR DRAWING THIS ADVERSE INFERENCE IS A DIARY INVENTORISED AS BK-2 FROM THE PREMISES OF SH. SHASWAT AGGARWAL ON 28.04.2015. 23) ANY ADVERSE INFERENCE DRAWN ON THE BASIS OF THE DOCUMENT SEIZED FROM THE POSSESSION OF ANY THIRD PA RTY, EXCEPT BY RESORTING TO THE LAID DOWN PROCEDURE PROVI DED U/S 153C OF THE ACT, WHILE FRAMING ASSESSMENT U/S 153A OF THE INCOME TAX ACT, 1961 IS BAD IN LAW. YOUR HONOUR'S KI ND ATTENTION IS DRAWN TO THE RATIO PROPOUNDED IN THE F OLLOWING JUDGMENTS: - 395 ITR 526 PR. CIT VS MEETA GUTGUTIA 380 ITR 573 (DEL) CIT VS KABUL CHAWLA 380 ITR 571 (DEL) CIT VS KURELE PAPER MILLS 352 ITR 493 (DEL) CIT VS ANIL KUMAR BHATIA 374 ITR 645 (BOM) CIT VS CONTINENTAL WAREHOUSING CORPN. 386 ITR 483 (BOM) CIT VS GURINDER SINGH BAWA 392 ITR 501 (DEL) PR. CIT VS SMT. ANIA RANI 397 ITR 344 (SC) CIT VS SINGHAD TECH. EDU. SOCIETY THUS THE IMPUGNED ASSESSMENT IS ILLEGAL AND UNSUSTA INABLE IN LAW AND ON FACTS. 24) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE LEGAL ISSUE, THE INFERENCE DRAWN BY THE LEARNED ASSESSING OFFICER AN D UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -4, KANPUR THAT THE PROFIT DECLARED BY THE APPELLANT CO MPANY IN TRADING OF CLOTH IS UNEXPLAINED CASH CREDIT AND IS LIABLE TO BE TAXED U/S 68 OF THE ACT IS DEVOID OF ANY MERIT AND DESERVES TO BE NEGATED. 25) EVEN OTHERWISE, IT MAY RESPECTFULLY BE SUBMITTED THAT THE APPELLANT COMPANY HAS BEEN ENGAGED IN THE BUSINESS OF PAGE 16 OF 60 WHOLE SALE TRADING IN CLOTH IN THE EARLIER YEARS ALS O. A DETAILED CHART SHOWING THE TOTAL PURCHASES AND SALES IN RESPE CT OF CLOTH TRADING IN RESPECT OF A/YS 2012-13 TO 2017-18 HAS B EEN GIVEN BY THE LEARNED ASSESSING OFFICER IN HIS NOTICE, DAT ED 12.12.2018, PLACED AT PAGES 123 TO 125 OF THE PAPER BOOK. 26) ASSESSMENT FOR A/Y 2012-13 WAS FRAMED U/S 143(3) BY THE LEARNED ASSESSING OFFICER VIDE ORDER DATED MARC H 2015. ORIGINAL ASSESSMENT FOR A/Y 2013-14 WAS FRAMED BY TH E LEARNED ASSESSING OFFICER U/S 143(3) VIDE ORDER DAT ED 22.03.2016. COPY OF THE SAME APPEARS AT PAGES 51 TO 54 OF THE PAPER BOOK. 27) THE APPELLANT IS DULY REGISTERED UNDER U.P. VAT ACT AND THE APPELLANT HAS BEEN FILING VAT RETURNS REGULARLY . REGULAR ASSESSMENT FOR THE FINANCIAL YEAR 2012-13 HAS BEEN FRAMED VIDE ORDER DATED 05.03.2016 AND COPY OF ASSESSMENT ORDER UNDER VAT HAS BEEN ENCLOSED AT PAGES 55 TO 61 OF TH E PAPER BOOK. 28) ALL THE TRANSACTIONS OF PURCHASE AND SALE OF CL OTH ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS AND ALL PAYMENTS ARE ROUTED THROUGH NORMAL BANKING CHANNELS. 29) THE LEARNED ASSESSING OFFICER HAD SOUGHT VARIOU S DETAILS AND EXPLANATIONS VIDE DIFFERENT SHOW CAUSE NOTICES I N RESPONSE TO WHICH THE APPELLANT CO. FURNISHED DETAIL ED REPLIES TO EXPLAIN AND SUPPORT FULL FACTS RELATING TO TRADI NG OF CLOTH. COPIES OF ALL SUCH SHOW CAUSE NOTICES AND RELEVANT R EPLIES HAVE BEEN PLACED AT PAGES 72 TO 125 OF THE PAPER BO OK. 30) IT IS ALSO SIGNIFICANT TO POINT OUT THAT COMPLE TE DETAILS OF MONTH-WISE PURCHASES AND SALES OF CLOTH WERE ALSO FIL ED BEFORE THE A.O. VIDE REPLY DATED 27.08.2018 AND THE SAME ARE PLACED AT PAGES 72 TO 76 OF THE PAPER BOOK. 31) YOUR HONOUR'S KIND ATTENTION IS DRAWN TO THE RAT IO PROPOUNDED BY HON'BLE SUPREME COURT IN THE JUDGMENT OF CIT VS ODEON BUILDERS PVT. LTD. REPORTED 418 ITR 315, WH EREIN, THEIR LORDSHIPS HAVE HELD THAT WHERE ASSESSEE HAD SU BMITTED PURCHASE BILLS, TRANSPORTATION BILLS, CONFIRMED COP Y OF ACCOUNT PAGE 17 OF 60 AND VAT REGISTRATION OF SELLERS AND PAYMENTS WERE MA DE THROUGH CHEQUES, IMPUGNED PURCHASES COULD NOT BE DISALLOWED. 32) IN VIEW OF DETAILED SUBMISSIONS MADE THAT THE AC TION OF THE LEARNED ASSESSING OFFICER AND UPHOLDING THE SAM E THEREOF BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN TREATING THE PROFIT ON TRADING OF CLOTH AS AN ALLEG ED UNEXPLAINED CASH CREDIT LIABLE TO BE CHARGED TO TAX U/S 68 OF THE ACT IS ARBITRARY, UNJUSTIFIED, AGAINST LAW & FAC TS AND THE SAME DESERVES TO/BE TREATED AS INCOME FROM BUSINESS FROM AN ESTABLISHED SOURCE. 33) BEFORE I CLOSE, I WILL ONCE AGAIN LIKE TO REITER ATE THAT THERE IS NOT EVEN A WHISPER OF FINDING OF ANY MATERIAL REL ATING TO TRADING IN CLOTH, NOT TO SPEAK OF INCRIMINATING MAT ERIAL, FOUND AND SEIZED DURING THE COURSE OF SEARCH AT THE APPEL LANT'S PREMISES WHICH HAS BEEN DISCUSSED BY THE LEARNED ASS ESSING OFFICER IN COMING TO THE CONCLUSION THAT THE BUSINE SS OF PURCHASE AND SALE OF CLOTH BE TREATED AS ALLEGED UN EXPLAINED CASH CREDIT. 34) THE ONLY REFERENCE OF A DOCUMENT INVENTORISED A S BK-2 SEIZED FROM THE PREMISES OF RICH GROUP OF COMPANIES AND THAT TOO DOES NOT RELATE TO TRADING OF CLOTH THEREF ORE, IN MY HUMBLE VIEW CANNOT BE MADE AS A BASIS FOR DRAWING SUC H AN ADVERSE INFERENCE. 35) FACTS FOR A/Y 2015-16 ARE IDENTICAL TO THE FACT S FOR A/Y 2013-14. RETURN OF INCOME WAS FILED ON 27.10.2015 AN D INTIMATION US 143(1) WAS PASSED ON 03.05.2016. ASSES SMENT FOR THIS YEAR WAS ALSO AN ABATED ASSESSMENT. FOR A/Y 2016-17, THE RETURN OF INCOME WAS FILED ON 02.10.2017. IN THIS WAY, THIS WAS THE CASE OF UNABATE D ASSESSMENT YEAR AND SUCH WAS A CASE OF REGULAR ASSES SMENT. THE LEARNED ASSESSING OFFICER HAS SOLELY RELIED ON THE SAME SET OF FACTS AS FOR THE EARLIER YEARS. I HAVE ALREA DY MADE DETAILED SUBMISSIONS BOTH ON LAW AND ON FACTS AND AM RELYING ON THE SAME ACTION OF THE LOWER AUTHORITIES FOR THE A/Y 2016- 17 ALSO. PAGE 18 OF 60 IT IS, THUS, RESPECTFULLY PRAYED THAT THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN UPHOLDING T HE ACTION OF THE LEARNED ASSESSING OFFICER OF TREATING THE ADDITIONS AS A DEEMED INCOME RATHER THAN A NORMAL B USINESS INCOME IS TOTALLY UNWARRANTED, UNJUSTIFIED BOTH IN FACTS AND ON LAW AND DESERVES TO BE NEGATED. FURTHER, TO SUBMISSIONS MADE BY THE APPELLANT, FOL LOWING IS ALSO RESPECTFULLY SUBMITTED FOR YOUR HONOURS KIND CONSIDERATION AND NECESSARY ADJUDICATION UPON BY TH E HON'BLE BENCH:- 1) THE LD. ASSESSING OFFICER MADE THE ADDITION(S) B ASED ON ALLEGED FINDINGS GIVEN IN THE ORDER OF THE HON'B LE ALLAHABAD HIGH COURT IN THE CASE OF M/S. RICH UDYOG NETWORK LT D. AND M/S. CITYON NANO TECHNOLOGY PVT. LTD., WHICH INTER-A LIA REVEALED THAT THE GROUP WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRY BY ISSUING CHEQUES AND TAKING B ACK CASH AND ITS COMMISSION. 2) THE FINDING IN THE ORDER OF THE HON'BLE ALLAHABA D HIGH COURT DOES NOT RELATE TO TRADING IN CLOTH OR PURCHA SE AND SALE OF CLOTH BY THE COMPANIES OF SHASHWAT AGARWAL GROUP OF CASES. THE FINDING IS THEREFORE, NOT RELEVANT IN TH E PRESENT APPEALS BEFORE THE HON'BLE BENCH, BECAUSE THERE IS NO ADDITION OR ADVERSE INFERENCE IN THE PRESENT APPEAL RELATING TO ANY ACCOMMODATION ENTRY WHATSOEVER. 3) HOWEVER, DURING THE COURSE OF ENTIRE SEARCH ASSESSMENT, THE APPELLANT WAS NEITHER CONFRONTED WITH THE STATEMENTS RECORDED UNDER SECTION 132(4) OF THE INC OME TAX ACT, 1961 OR OTHERWISE OF SHRI SHASHWAT AGARWAL GROUP OF CASES NOR AN OPPORTUNITY OF CROSS EXAMINATION WAS AL LOWED TO THE APPELLANT TO ASCERTAIN CORRECT FACTS RELEVANT F OR THE SEARCH ASSESSMENT. 3) THE DENIAL OF CROSS EXAMINATION WAS WHOLLY ARBITRA RY AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE A ND EQUITY. IN PLETHORA OF CASES OF HIGH COURTS AND SUPREME COURT IT WAS HELD THAT BEFORE USING ANY INFORMATION OR EVIDENCE AGAINST THE PAGE 19 OF 60 ASSESSEE, HE MUST BE CONFRONTED WITH SUCH INFORMATION/MATERIAL AND ALLOWED OPPORTUNITY FOR CRO SS EXAMINATION. 4) LN THE PRESENT CASE, SPECIFIC REQUESTS WERE MADE BY THE APPELLANT FROM TIME TO TIME SEEKING CROSS EXAMINATI ON BUT THE SAME WAS DENIED COMPLETELY. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS:-. A)JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE 281 CTR 241 (COPY ENCLOSED), WHEREIN IT WAS HELD AS UNDER: '......NOT ALLOWING ASSESSEE TO CROSS-EXAMINE WITNESSES BY ADJUDICATING AUTHORITY THROUGH STATEMENTS OF THOSE WITNESSES WERE MADE AS BASIS OF IMPUGNED ORDER, AMOUNTED IN SERIOUS FLAW WHICH MAKE IMPUGNED ORDER NULLITY AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IT WAS TO BE BORNE IN MIND THAT ORDER OF COMMISSIONER WAS BASED UPON STATEMENTS GIVEN BY TWO WITNESSES. EVEN WHEN ASSESSEE DISPUTED CORRECTNESS OF STATEMENTS AND WANTED TO CROSS-EXAMIN E WITNESSES, ADJUDICATING AUTHORITY DID NOT GRANT OPPORTUNITY TO ASSESSEE. IN IMPUGNED ORDER PASSED B Y ADJUDICATING AUTHORITY IT WAS SPECIFICALLY MENTIONED THAT SUCH OPPORTUNITY WAS SOUGHT BY ASSESSEE, HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED. ASSESSEE CONTESTED TRUTHFULNESS OF STATEMENTS OF TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE OPPORTUNITY OF CROSS -EXAMINATION WAS SOUGHT. IN CAS E TESTIMONY OF TWO WITNESSES WAS DISCREDITED, THERE WOULD BE NO MATERIAL WITH DEPARTMENT TO JUSTIFY ITS ACTION, AS STATEMENT OF TWO WITNESSES WAS ONLY BASIS O F ISSUING SHOW CAUSE NOTICE. IMPUGNED ORDER AS PASSED BY CESTAT WAS SET ASIDE. APPEAL ALLOWED....' B)DECISION OF HON'BLE ITAT LUCKNOW BENCH IN THE CASE OF MORNING GLORY INFRA LIMITED VS. DCIT CENTRAL CIR CLE-LL, KANPUR IT(SS)A NO. 72/LKW/2018 (COPY ENCLOSED) FOR THE ASSESSMENT YEAR 2015-16, WHEREIN IT WAS HELD AS UNDER: PAGE 20 OF 60 '....... 16. THUS, ONE CANNOT BUT COME TO THE INEXO RABLE CONCLUSION THAT THE ORDER UNDER APPEAL SUFFERS FROM THE VICE OF NOT TAKING INTO CONSIDERATION THE ASSESSEE' S CONTENTION, WHICH CONTENTION ALSO DOES NOT STAND REBUTTED, THAT IT WAS NOT PROVIDED WITH ANY OPPORTUNI TY OF CROSS EXAMINING SHRI ANOOP ASTHANA. 17. IN VIEW OF THE ABOVE, WE HOLD THAT: (I) THE CASE OF THE ASSESSEE HAS BEEN PREJUDICED FO R WANT OF PROVIDING HIM OPPORTUNITY OF CROSS-EXAMINATI ON OF SHRI ANOOP ASTHANA, WHOSE UNILATERAL STATEMENT RECORDED EXPARTE QUA THE ASSESSES HAS BEEN MADE THE SOLE BASIS OF THE ADDITION, THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE; AND (II) THE OTHER M ATERIAL, I.E., THREE PAGES OF THE DIARY FOUND IN THE SEARCH DO NOT ESTABLISH ANY CASE FOR ADDITION IN THE HANDS OF THE ASSESSES, IN THE YEAR UNDER CONSIDERATION, AS NONE OF THESE DOCUMENTS RELATE TO THE YEAR UNDER CONSIDERAT ION, ONE OF THEM DOES NOT CONTAIN ANY DATE/YEAR AND THE OTHER TWO PERTAIN TO EARLIER YEARS, IN WHICH, NO ADDI TION BASED ON THESE DOCUMENTS WAS MADE. 18. THEREFORE, THE GRIEVANCE SOUGHT TO BE RAISED BY THE ASSESSE IS JUSTIFIED. IT IS ACCEPTED AS SUCH. ACCOR DINGLY, THE ADDITION MADE IS DELETED. NOTHING FURTHER SURVI VES FOR ADJUDICATION, NOR WAS ANYTHING ELSE ARGUED. 19. IN THE RESULT, THE APPEAL IS ALLOWED......' C) IN THE JUDGMENT OF C.I.T. VS. ODEON BUILDERS PVT . LTD; [2019] 110 TAXMANN.COM 64 (SC) (COPY ENCLOSED) , THE HON'BLE APEX COURT WHILE DISMISSING THE APPEAL OF THE REVENUE UPHELD THE ORDER OF THE LD.CIT(A), TRIB UNAL AS WELL AS HIGH COURT, AFFIRMED THE FINDING OF THE L D. CIT(A) (HEAD NOTE) '....CERTAIN PORTION OF PURCHASES MADE BY THE ASSES SEE WERE DISALLOWED-COMMISSIONER (APPEALS) FOUND THAT THE ENTIRE DISALLOWANCE WAS BASED ON 3 RD PARTY INFORMATION GATHERED BY THE INVESTIGATION WING OF DEPARTMENT, WHICH HAD NOT BEEN INDEPENDENTLY SUBJECTED TO FURTHE R PAGE 21 OF 60 VERIFICATION BY ASSESSING OFFICER AND HE HAD NOT PROVIDED COPY OF SUCH STATEMENTS TO APPELLANT, THUS , DENIED THE OPPORTUNITY OF CROSS EXAMINATION TO APPELLANT, WHO ON THE OTHER HAND HAD PRIMA FACIE DISCHARGED INITIAL BURDEN OF SUBSTANTIATING PURCHAS ES THROUGH CHEQUES, VAT REGISTRATION OF SELLERS AND TH EIR INCOME TAX RETURN -HE HELD THAT PURCHASES MADE BY THE APPELLANT WAS RESPECTFULLY AND DISALLOWANCE WAS TO BE DELETED.....' IN THE ABSENCE OF GIVING OF OPPORTUNITY TO CROSS EX AMINE, IT IS TO BE BELIEVED THAT THE ADDITION MADE BY THE LD. A. O. IS BASED MERELY ON PRESUMPTIONS, WITHOUT ANY INDEPENDENT ENQU IRY OR FINDING CONTRARY TO THE SUBMISSIONS MADE BY THE APP ELLANT. IT IS, THUS, RESPECTFULLY PRAYED THAT THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN UPHOLDING T HE ACTION OF THE LEARNED ASSESSING OFFICER OF TREATING THE ADDITIONS AS A DEEMED INCOME RATHER THAN A NORMAL B USINESS INCOME IS TOTALLY UNWARRANTED, UNJUSTIFIED BOTH IN FACTS AND ON LAW AND DESERVES TO BE NEGATED. DEPARTMENTS WRITTEN SUBMISSIONS AS REQUIRED, COPIES OF PANCHNAMA DRAWN IN ABOVE MEN TIONED GROUP OF CASES ARE ENCLOSED HEREWITH. FURTHER AS SEA RCH AND SEIZURE OPERATION U/S 132 OF THE I.T. ACT, 1961 WAS CARRIED OUT ON 23.08.2016 IN SIGMA GROUP OF CASES, PROCEEDINGS U/S 153A WERE INITIATED IN THE CASE OF THIS GROUP OF ASSESSEE FROM A. Y. 2011-12 TO 2016-17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A, SEIZED DOCUMENTS FOUND FROM T HE PREMISES OF THE THIRD PARTY WERE ALSO USED. A DETAIL ED NOTE ON THE SCOPE OF PROCEEDINGS U/S 153A VIS A VIS REQUIRE MENT OF INCRIMINATING MATERIAL AND OTHER ISSUE IS ATTACHED AS ANNEXURE TO THIS LETTER, WHICH MAY KINDLY BE PLACED BEFORE THE HON'BLE DELHI ITAT FOR REBUTTAL OF THE GROUND O F APPEAL TAKEN BY THE APPELLANT. BASED ON THE ABOVE NOTE, FO LLOWING CONCLUSIONS CAN BE DRAWN IN THE CONTEXT OF THE ISSUE S RAISED BY THE ASSESSEE BEFORE ITAT: PAGE 22 OF 60 1 THERE IS NO REQUIREMENT OF ANY INCRIMINATING MATERIAL FOR THE PURPOSE OF MAKING ASSESSMENT U/S 153 A, ONCE A VALID SEARCH HAS BEEN INITIATED IN THE CASE OF THE ASSESSEE. THE DECISION TAKING A CONTRARY VIEW BY NON- JURISDICTIONAL HIGH COURTS HAVE NOT BECOME FINAL AND FURTHER THEY HAVE NOT CONSIDERED THE ARGUMENTS RAISED IN ABOVE NOTE. DISMISSAL OF SLP IS NOT A BINDING PRECEDENT. 2 ON THE OTHER HAND, THE JURISDICTIONAL HIGH COURT OF ALLAHABAD ALSO FAVOUR THE VIEW THAT U/S 153A, THE ASSESSMENT OF TOTAL INCOME NEEDS TO BE MADE IRRESPECTIVE OF ANY INCRIMINATING SEIZED MATERIAL. 3 IN ABSENCE OF ANY SPECIFIC REQUIREMENT OF 'INCRIMINATING MATERIAL' U/S 153A, EVEN IF THERE IS REQUIREMENT OF SOME MATERIAL TO MAKE ADDITION U/S 153A OR UPSET ANY CONCLUDED ASSESSMENTS, SUCH MATERIAL SHOULD BE SUCH THAT IT FORMS THE BASIS OF THE ADDITIONS, IRRESPECTIVE WHETHER SUCH MATERIAL WAS SEIZED OR OBTAINED OTHERWISE. 4 AN ENTRY RECORDED IN BOOKS BUT FOUND FALSE LATER ON, WOULD BY ITSELF CONSTITUTE INCRIMINATING MATERIAL. 5 THE SCHEME OF THE ACT DOES NOT ENVISAGE MULTIPLE ASSESSMENT PROCEEDINGS, I.E. U/S 143(3)/147/153A/15 3C FOR SAME AY AT THE SAME POINT OF TIME IN CASE OF AN ASS ESSEE WHO HAS BEEN SUBJECTED TO SEARCH. IT IS FOR THIS VERY R EASON, THE SECTION 153A STARTS WITH NON-OBSTANTE CLAUSE OVERRID ING THE PROVISIONS OF 143 OR 147 ETC. FURTHER, THE EXISTENC E OF THE PROVISIONS FOR ABATEMENT OF ANY PENDING PROCEEDINGS ALSO REAFFIRM THE ABOVE VIEW AS ALSO INTERPRETED BY HIGH COURT IN CIT VS K.P. UMMER (KER)(RENDERED IN FEBRUARY 2019). 6 SECTION 153C IS A MECHANISM TO ASSESS THE INCOME OF 'OTHER PERSON' BASED ON ANY MATERIAL FOUND SOMEONE ELSE'S SEARCH, WHEN NO PROCEEDINGS U/S 153A COULD BE INITIA TED IN CASE OF SUCH 'OTHER PERSON'. THUS, 153C IS ONLY AN ALTERNATIVE MACHINERY TO INITIATE ASSESSMENT PROCEEDINGS BASED ON SEIZED MATERIAL IN CASE OF 'OTHER PERSON' WHERE THERE IS N O SEARCH PAGE 23 OF 60 INITIATED. BUT, ONCE SEARCH ITSELF IS INITIATED AND PROCEEDINGS U/S 153A ARE PENDING, THEN THE ALTERNATIVE MECHANIS M OF ASSESSMENT U/S 153C DOES NOT GET INVOKED EVEN IF AN Y MATERIAL IS FOUND IN RESPECT OF SEARCHED PERSON IN A SEARCH INITIATED IN CASE OF SOME THIRD-PARTY, BECAUSE THE SUBSTANTIVE PROVISION FOR MAKING ASSESSMENT U/S 153A IS ALREADY AVAILABLE TO ASSESS SUCH INCOME TOO. 7 EVEN SECTION 153C PROVIDES FOR ASSUMPTION OF THE JURISDICTION TO ISSUE NOTICE FOR ASSESSMENT OF TOTA L INCOME IN CASE OF OTHER PERSON' BUT THE ACTUAL ASSESSMENT HAS BEEN SPECIFICALLY PROVIDED TO BE IN THE SAME MANNER AS P ROVIDED U/S 153A. THIS MEANS THAT 153C IS ONLY A MACHINERY PROV ISION TO ASSUME JURISDICTION AND THE SUBSTANTIVE PROVISION F OR ASSESSMENT IS 153A ONLY. WHEN SUBSTANTIVE PROCEEDIN GS ARE ALREADY PENDING IN CASE OF ASSESSEE U/S 153A, THERE WOULD BE NO LOGIC TO INITIATE THE ALTERNATIVE NOTICE U/S 153 C ALSO WHEN ULTIMATELY THE ASSESSMENT HAS TO BE COMPLETED IN TH E MANNER PROVIDED U/S 153 A ONLY AND BOTH PROVISION TALK OF ASSESSMENT OF TOTAL INCOME ONLY. 8 THE PROCEEDINGS U/S 153C ARE TO BE CARRIED IN THE MANNER AS PROVIDED U/S 153A ONLY IS ALSO EVIDENT THAT U/S 153D, NO REQUIREMENT OF ANY SEPARATE APPROVAL OF ADDL. CIT IS PRESCRIBED FOR ASSESSMENT U/S 153C MEANING THEREBY THAT SUCH ASSESSMENTS AFTER BEING INITIATED U/S 153C ARE TO BE TREATED AT PAR WITH ASSESSMENTS 153A ONLY. 9 ANY MATERIAL/INFORMATION PERTAINING TO AN ASSESSEE COMING TO KNOWLEDGE OF AO FROM ANY SOURCE SUCH AS SE ARCH OR SURVEY OR ASSTT RECORDS OF ANY THIRD PARTY IN RE LATION TO THE SAME AYS FOR WHICH PROCEEDINGS ARE ALREADY PENDING B EFORE AO U/S 153A IN CASE OF SUCH ASSESSEE, THEN THERE WOU LD BE NO REQUIREMENT OF INITIATING A FRESH PROCEEDINGS U/S 1 53C/148 ETC AS THE CASE MAY BE. SUCH MATERIAL CAN BE VALIDLY CONSIDERED WHILE MAKING ASSESSMENT U/S 153A ITSELF IN CASE OF PRESENT ASSESSEE AS PER THE SCHEME OF THE ACT AS ALREADY EXPLAINED. THIS VIEW IS ALSO SUPPORTED BY DECISION IN CIT CHENNAI VS AJIT S KUMAR 93 PAGE 24 OF 60 TAXMAN.COM294(SC) AND PROVISIONS OF 153A ARE 158BB ARE PARI MATERIA. 10 THIS INTERPRETATION OF THE SCHEME OF THE ACT, GETS FURTHER STRENGTHENED BY THE FACT THE U/S 148 ALSO, ONCE THE JURISDICTION HAS BEEN VALIDLY ASSUMED, IT HAS BEEN SPECIFICALLY PROVIDED THEREIN THAT THERE IS NO NEED TO ISSUE ANO THER NOTICE U/S 148 FOR ANY OTHER ITEM OF INCOME. ON THE SAME L OGIC, WHEN THE PROCEEDINGS U/S 153 A TO ASSESS THE TOTAL I NCOME ARE VALIDLY INITIATED IN CASE OF ANY ASSESSEE AFTER THE SEARCH, THEN FOR ASSESSMENT OF ANY OTHER ITEM FORMING PART OF TOTAL INCOME BASED ON MATERIAL GATHERED FROM SOME OTHER S OURCE (THIRD PARTY SEARCH/SURVEY) ALSO NEEDS TO BE CONSID ERED DURING THE EXISTING PROCEEDINGS U/S 153A ITSELF, WITHOUT RE SORTING TO SEPARATE PROCEEDINGS U/S 153C. DETAILED NOTE 1. THE LANGUAGE OF SECTION 153A MAKES IT VERY CLE AR THAT THERE IS NO EXPLICIT OR INTENDED REQUIREMENT OF SEI ZURE OF INCRIMINATING MATERIAL DURING THE SEARCH U/S 132(1) BEFORE ISSUING THE NOTICES U/S 153A. THE JURISDICTION OF S ECTION 153A IS AUTOMATIC FROM THE MOMENT A SEARCH IS INITIATED. THERE IS NO REQUIREMENT OF EXAMINATION OF SEIZED MATERIAL OR RECORDING ANY SATISFACTION W.R.T AVAILABILITY OF SEIZED MATERI AL BEFORE ISSUE OF NOTICE U/S 153A. IN MY OPINION, THE INTENT ION OF LEGISLATURE IN ALLOWING SO COULD BE THAT THE INITIAT ION OF SEARCH ITSELF IS SUBJECT TO RECORDING OF SATISFACTION U/S 132(1) BY THE PDIT(INV) ON GROUNDS THAT: (I) UPON ISSUE OF SUMMONS U/S 131(1), THE ASSESSEE HAS FAILED TO PRODUCE OR WOULD NOT PRODUCE THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS SO REQUISITIONED; OR (II) THE ASSESSEE IS IN POSSESSION OF MONEY, BULLION JEWELLERY, ARTICLE OR THING WHICH REPRESENTS WHOLLY O R PARTLY IN COME HAS NOT BEEN OR WOULD NOT BE DISCLOSE D FOR THE PURPOSES OF THE ACT. 2. THE CONJOINT READING OF SECTION 153A AND 132(1 ) WOULD CLEARLY IMPLY THAT A SATISFACTION TO ISSUE NOTICE U /S 153A IS PAGE 25 OF 60 ALREADY DEEMED TO BE IMPORTED FROM THE SATISFACTION RECORDED BY PDIT(INV) AT THE TIME OF ISSUING WARRANTS U/S 132 (1). THE EXISTENCE OF SATISFACTION RECORDED BY PDIT(INV) IS LIABLE TO BE CHALLENGED BEFORE COURTS. HENCE, UNTIL SUCH SATISFA CTION FOR ISSUE OF WARRANTS U/S 132(1) ARE HELD INVALID BY ANY COURT, THE SATISFACTION RECORDED BY PDIT(LNV) SHALL CONTINUE T O HOLD THE FORT FOR PURPOSES OF 153A ALSO AND IT IS FOR THIS R EASON THERE IS NO FURTHER REQUIREMENT OF RECORDING ANY BELIEF OR S ATISFACTION BY AO FOR ISSUE OF NOTICE U/S 153A. 3. THE CONDITIONS OF RECORDING THE SATISFACTION O F PDIT(LNV), ONE OF THE CONDITIONS IS REGARDING BOOKS OR OTHER D OCUMENTS WHICH WERE NOT PRODUCED OR WOULD NOT HAVE BEEN PRODUCE D ON ISSUE OF SUMMONS. THEREBY IMPLYING THAT POST SEA RCH, WHILE THE AO IS MAKING ASSESSMENT, IT HAS TO EXAMINE THE CORRECTNESS OF INCOME DISCLOSED NOT ONLY BASED ON WH AT MATERIAL HAS BEEN GATHERED DURING SEARCH BUT ALSO B ASED ON THESE BOOKS OR DOCUMENTS WHICH IN THE OPINION OF PDL T(INV) WOULD NOT HAVE BEEN PRODUCED UPON ISSUE OF SUMMONS, WHETHER OR NOT SUCH BOOKS OF ACCOUNTS OR DOCUMENTS H AVE BEEN ACTUALLY FOUND DURING SEARCH. IN FACT, THERE ARE NUMEROUS INSTANCES WHEN EVEN THE BOOKS OF ACCOUNTS A S PER ALREADY FILED AUDIT REPORTS ARE NOT FOUND AT ANY OF THE PREMISES DURING SEARCH, MORE SO WHEN THE SEARCHED EN TITIES REPRESENT ONLY THE SHELL COMPANIES. SIMILARLY, THER E IS A REQUIREMENT OF SATISFACTION BY PDIT(INV) IN RESPECT OF INCOME BEING FULLY OR PARTLY NOT DISCLOSED FOR THE PURPOSE S OF THE ACT. HENCE, EVEN IF SOME INCOME/ ENTRY IS DISCLOSED IN B OOKS OR AUDITED ACCOUNTS, THE AO IS MANDATED TO EXAMINE WHET HER SUCH INCOME / ENTRY WAS DISCLOSED FULLY OR PARTLY AN D/ OR REPRESENTS ITS REAL NATURE AND SOURCE FOR THE PURPO SES OF THE ACT. THIS INTERALIA WOULD MEAN THAT EVEN THE ENTRIES DISCLOSED IN ACCOUNTS WHICH MIGHT REPRESENT INCOME FULLY OR P ARTLY WOULD IN ITSELF BE AN INCRIMINATING MATERIAL FOR WHI CH A SEARCH WAS INITIATED. WHEN THE NON-PRODUCTION OF BOOKS OR O THER DOCUMENTS CAN GIVE RISE TO A BELIEF FOR INITIATING SEARCH U/S 132(1), THEN IT MAY BE COUNTERPRODUCTIVE TO CONCLUD E THAT THE POWER OF AO IS RESTRICTED TO ASSESSMENT BASED ONLY O N INCRIMINATING MATERIAL FOUND IN SEARCH, IRRESPECTIV E OF ANY OTHER ITEM OF INCOME WHICH MIGHT HAVE REMAINED FULLY OR PAGE 26 OF 60 PARTLY UNDISCLOSED FOR THE PURPOSES OF THE ACT, BAS ED UPON THE ENTRIES ALREADY APPEARING IN SUCH BOOKS, IF ANY. 4. IT IS THE 'ASSESSMENT OF TOTAL INCOME' WHICH IS REQUIRED TO BE MADE U/S 153A. THE TOTAL INCOME AS DEFINED U/S 2 (45) WOULD BE THE TOTAL INCOME COMPUTED AS PER SECTION 5 OF THE ACT. THE WORD 'ASSESSMENT' CANNOT HAVE A DIFFERENT M EANING FOR DIFFERENT PURPOSES UNDER THE SAME ACT, UNLESS R ESTRICTED BY SPECIFIC PROVISIONS. THE PROCESS OF ASSESSMENT F OR THE PURPOSES OF THE ACT IS WIDE ENOUGH TO INCLUDE EVERY KIND OF ENQUIRY/EXAMINATION FOR DISCOVERY, QUANTIFICATION A ND ASSESSMENT OF ANY INCOME WHOLLY OR PARTLY FOR THE PU RPOSES OF THE ACT. HENCE, THE PROCESS OF 'ASSESSMENT OF TOTAL INCOME' U/S 153 A CAN NEITHER BE RESTRICTIVE NOR HAVE A DIF FERENT CONNOTATION FOR ASSESSMENT UNDER SECTION 153A VIS A VIS 143(3) OR 147.AS PER THE SCHEME UNDER THE ACT, THE SATISFACTION RECORDED U/S 132(1) AND THE RESULTS OF SEARCH ARE INTENDED TO BE BROUGHT TO A LOGICAL CONCLUSION BY I NITIATING THE PROCEEDINGS U/S 153 A WITHOUT ANY FURTHER ACT OF THE AO. HENCE IT IS IN THE SCHEME OF THE ACT THAT AFTER ISS UANCE OF NOTICE U/S 153 A, THE NEXT ACTION OF THE AO WHICH M UST FOLLOW IS THE EXAMINATION OF ALL ASPECTS, FOR WHICH A SEARC H HAS BEEN INITIATED. HENCE, IT CANNOT BE SAID THAT THE AO U/S 153A CANNOT PROCEED TO EXAMINE THE BOOKS OF ACCOUNTS OR DOCUMENTS, ENTRIES WHICH WERE PRODUCED BEFORE HIM SUBSEQUENTLY, WHEREIN MIGHT ALSO REPRESENT INCOME WH OLLY OR PARTLY, WHICH HAS NOT BEEN DISCLOSED FOR THE PURPOSE S OF THE ACT. IN THE CASE OF ACIT VS M/S A R ENTERPRISES 1 SCR 295(SC) THE COURT HELD THAT THE ONLY WAY OF DISCLOSI NG INCOME IS THROUGH FILING A RETURN AND THEREFORE AN UNDISCL OSED INCOME SIGNIFIES INCOME NOT STATED IN THE RETURN FILED. BA SED ON THIS DECISION IT CAN BE INFERRED THAT ANY INCORRECT CLAI M OF DEDUCTION OR ANY ENTRY OF INCOME WHICH WAS NOT OFFERE D AS INCOME IN RETURN FILED, WOULD ITSELF REPRESENT UNDIS CLOSED INCOME THEREBY CONSTITUTING SOMETHING WHICH IS INCR IMINATING AND HAVING A BEARING ON ASSESSMENT OF TOTAL INCOME. HENCE, IT MAY BE CONTRARY TO THE SCHEME OF THE PROVISIONS OF 132(1) R/W 153A, IF IT WERE TO BE HELD THAT POWER OF AO IS RESTR ICTED ONLY TO MAKE ASSESSMENT THE EVIDENCE FOUND DURING SEARCH . THE PROVISIONS OF 153A NOT ONLY REQUIRE ASSESSMENT OF U NDISCLOSED INCOME BUT TOTAL INCOME ALSO. THE EXPRESSION 'TOTAL INCOME' PAGE 27 OF 60 WOULD INCLUDE THE INCOME EMANATING FROM DISCLOSED IT EMS, INCOME EMANATING FROM PARTLY OR WRONGLY DISCLOSED IT EMS AS WELL AS INCOME EMANATING FROM UNDISCLOSED ITEMS. U/S 153A, NO DISTINCTION IS MADE FOR ASSESSMENT OF TOTAL INCO ME IN THE CASES WHICH WERE EARLIER COMPLETED U/S 143(1), THE CA SES WHICH WERE EARLIER COMPLETED U/S 143(3)/147 OR THE CA SES WHERE NO RETURN WAS FILED PRIOR TO SEARCH. THUS, IN A LL THE THREE CATEGORIES, IT IS AS PER THE SCHEME OF THE AC T THAT THE TOTAL INCOME OF THE ASSESSEE AS DEFINED U/S 2(45) N EEDS TO BE ASSESSED FOR ALL THE 6 AYS FOR WHICH THE AO IS MAND ATED TO ISSUE NOTICE U/S 153A. 5. FURTHER U/S 153A, THERE IS A PROVISION FOR ABA TEMENT OF PENDING ASSESSMENTS WHETHER OR NOT ANY EVIDENCES WERE FOUND FOR THAT YEAR. THERE CAN ALSO BE A SITUATION WHERE NEITHER ANY REGULAR ASSESSMENTS WERE MADE EARLIER NO R ANY PROCEEDINGS WERE PENDING, WHICH COULD BE ABATED. THE SECTION ALSO ENVISAGES THE ISSUE OF NOTICE U/S 153A WHETHER OR NOT ANY EVIDENCES WERE FOUND FOR THAT YEAR. IT IS A LSO IMPLICIT THAT U/S 153A, THE ITEMS OF TOTAL INCOME WHICH COULD BE ASSESSED U/S 153A IN ABATED PROCEEDINGS CANNOT BE D IFFERENT FOR THE CASES WHICH COULD NOT BE ABATED SUCH AS I) WHERE NO PROCEEDINGS WERE PENDING; OR II) WHERE EARLIER ASSESS MENTS WERE COMPLETED U/S 143(3)/147; OR III) WHERE EARLIER ASSESSMENTS WERE NOT MADE AT ALL. THE ONLY CAVEAT CO ULD BE THAT BEFORE MAKING ANY ADDITION TO THE TOTAL INCOME , THE AO MUST BRING ON THE RECORD HOW SUCH ITEMS ARE FALLING INTO THE CATEGORY OF TOTAL INCOME FOR THE PURPOSES OF THE AC T. 6. IF IT WERE TO BE HELD THAT NO ADDITION CAN BE M ADE WITHOUT ANY INCRIMINATING MATERIAL IN RESPECT OF THE YEARS COVERED BY SECTION 153A, THEN IT WOULD LEAD TO AN ABSURD CONSEQ UENCE WHEREBY THE POWERS GRANTED TO ISSUE NOTICES U/S 153A WOULD BE RENDERED OTIOSE IN CASES WHICH GOT ABATED FOR ANY PARTICULAR AY. IN THE ABSENCE OF ANY SEIZED MATERIA L, AO MAY NOT BE ABLE TO PROCEED TO MAKE ANY ASSESSMENT OF AN Y OTHER ITEM OF TOTAL INCOME IMPLYING THAT THE PROCESS OF M AKING ASSESSMENT OF TOTAL INCOME AS ENVISAGED IN SECTION 153A FAILS IN ABATED CASES. HOWEVER, A STATUTE CAN NEVER BE INT ERPRETED IN A MANNER TO MAKE IT REDUNDANT. PAGE 28 OF 60 7. FURTHER, THE COURT IN CASE OF CIT VS NEERAJ JI NDAL (2017) 393 ITR 1 (DELHI) HELD THAT THE PENALTY U/S 271(L)( C) CAN BE LEVIED ONLY ON THE INCOME ASSESSED OVER AND ABOVE T HE RETURN FILED U/S 153A EVEN WHEN THE ASSESSEE OFFERED ADDITI ONAL INCOME OVER AND ABOVE THE EARLIER RETURN .FILED U/S 139. WHILE HOLDING THE DELHI HIGH COURT OBSERVED IN PARA (IX) AS UNDER: (IX) THUS, IT IS CLEAR THAT WHEN THE A.O. HAS ACCEP TED THE REVISED RETURN FILED BY THE ASSESSEE UNDER SECT ION 153'A, NO OCCASION ARISES TO REFER TO THE PREVIOUS RETURN FILED UNDER SECTION 139 OF THE ACT. FOR ALL PURPOSE S, INCLUDING FOR THE PURPOSE OF LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT, THE RETURN THAT HAS T O BE LOOKED AT IS THE ONE FILED UNDER SECTION 153A. IN F ACT, THE SECOND PROVISO TO SECTION 153A(1) PROVIDES THAT 'ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO AN Y ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UND ER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. ' WHAT IS CL EAR FROM THIS IS THAT SECTION 153A IS IN THE NATURE OF A SECOND CHANCE GIVEN TO THE ASSESSEE, WHICH INCIDENT ALLY GIVES HIM AN OPPORTUNITY TO MAKE GOOD OMISSION, IF ANY, IN THE ORIGINAL RETURN. ONCE THE A.O. ACCEPTS THE R EVISED RETURN FILED UNDER SECTION 153A, THE ORIGINAL RETUR N UNDER SECTION 139 ABATES AND BECOMES NON-EST. NOW, I T IS TRITE TO SAY THAT THE 'CONCEALMENT' HAS TO BE SE EN WITH REFERENCE TO THE RETURN THAT IT IS FILED BY THE ASSESSEE. THUS, FOR THE PURPOSE OF LEVYING PENALTY UNDER SECTION 271(1)(C), WHAT HAS TO BE SEEN IS WHETHER THERE IS ANY CONCEALMENT IN THE RETURN FILED BY THE ASSESSEE UNDER SECTION 153A, AND NOT VIS-A VIS THE ORIGINAL RETURN UNDER SECTION 139. THE COURT IN CIT V. VIJAY INFRASTRUCTURE LTD. (2018 ) 402 ITR 363 (ALLD) ALSO WHILE ALLOWING A FRESH CLAIM OF DEDU CTION U/S 80-IA CLAIMED U/S 153A RETURN, HELD THAT THE RETURN UNDER S.153A IS NOT A REVISED RETURN BUT AN ORIGINAL RETU RN. IF THAT BE SO, THE DEDUCTION UNDER S. 80-IA, IF OTHERWISE ADMIS SIBLE, ALWAYS COULD HAVE BEEN CLAIMED. PAGE 29 OF 60 THE ABOVE OBSERVATIONS OF THE DELHI AND ALLAHABAD H IGH COURTS ONCE AGAIN SUGGEST THAT THE ASSESSEE GETS A SECOND CHANCE TO MAKE GOOD HIS OMISSIONS BY CLAIMING FRESH DEDUCTIONS/DISCLOSING SUCH INCOME IN RETURN FILED U /S 153A WHICH WAS NOT CLAIMED/OFFERED EARLIER IN RETURN FILED U/S 139 AND SUCH RETURN BECOMES FINAL GRANTING IMMUNITY FRO M PENALTY ALSO, WHETHER OR NOT IT IS EMANATING FROM SEIZED MAT ERIAL?. IF THAT BE SO, THEN WHY THE AO ONLY WOULD BE POWERLESS U /S 153A TO EXAMINE/REVISIT THE INCOMES/CLAIMS WHICH MAY OR MAY NOT BE EMANATING FROM THE SEIZED MATERIAL ONLY. IF THIS IS NOT INTERPRETED SO, THEN IT WILL LEAD TO AN ABSURD SITUA TION WHERE THE ASSESSEE HAS FREEDOM TO REVISE THE INCOME/CLAIM OF DEDUCTION WHICH MAY NOT BE EMANATING FROM SEIZED MAT ERIAL BUT THE AO IS POWERLESS IN PROBING/EXAMINING THE VER ACITY OF SUCH INCOMES/CLAIMS, EVEN THOUGH DECLARED IN RETURN FILED U/S 153 A AND THE AO HAS TO ASSESS THE TOTAL INCOME OF ASSESSEE INCLUDING THE ONE WHICH HAS NO NEXUS TO SEIZED MATE RIAL BUT CLAIMED FOR THE FIRST TIME IN RETURN U/S 153 A. 8. SECTION 153A DOES NOT SAY THAT ADDITIONS SHOUL D BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F SEARCH, OR ON THE BASIS OF ANY OTHER POST-SEARCH MATERIAL O R INFORMATION AVAILABLE WITH THE AO THOUGH SUCH ASSESS MENT CANNOT BE ARBITRARY. THE PROVISIONS SECTION OF 147 AND SECTION 153A, THOUGH HAVE DIFFERENT CONDITIONS TO ASSUME JU RISDICTION BUT BOTH OPERATE TO MAKE THE ASSESSMENT OF TOTAL IN COME ONLY. THE MEMORANDUM EXPLAINING THE PROVISIONS OF F INANCE (NO. 2) BILL OF 2009 WHILE INSERTING EXPLANATION 3 T O SECTION 147 READS AS UNDER: 'SOME COURTS HAVE HELD THAT THE ASSESSING OFFICER H AS TO RESTRICT THE REASSESSMENT PROCEEDINGS ONLY TO IS SUES IN RESPECT OF WHICH THE REASONS HAVE BEEN RECORDED FOR REOPENING THE ASSESSMENT. HE IS NOT EMPOWERED TO TOUCH UPON ANY OTHER ISSUE FOR WHICH NO REASONS HAVE BEEN RECORDED. THE ABOVE INTERPRETATION IS CONTRARY TO THE LEGISLATIVE INTENT. THEREFORE TO ARTICULATE THE LEGISLATIVE INTENT CLEA RLY, EXPLANATION 3 HAS BEEN INSERTED IN SECTION 147 TO PROVIDE THAT ASSESSING OFFICER MAY EXAMINE, ASSESS OR PAGE 30 OF 60 REASSESS ANY ISSUE RELEVANT TO INCOME WHICH COMES T O HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDING S UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAS NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUBSECTION(2) OF SECTION 148'. 9. EVEN IN ABSENCE OF ANY EXPLANATION U/S 153A AL SO SIMILAR TO THE EXPLANATION 3 U/S 147, THE INTENTION OF THE LEGISLATURE AND THE SCHEME OF THE ACT FOR MAKING ASSESSMENT U/S 153A WHERE SEARCH U/S 132 IS INITIATED, IS SAME I.E. IN O RDER TO MAKE ASSESSMENT OF TOTAL INCOME, AFTER HAVING ASSUMED TH E JURISDICTION TO ASSESS TOTAL INCOME, THE POWERS OF A O SHALL NOT REMAIN RESTRICTED TO MERE THOSE MATERIAL WHICH WERE S EIZED DURING SEARCH BUT SHALL ALSO INCLUDE THE ASSESSMENT OF INCOME BASED ON ANY ENTRY ALREADY RECORDED PRIOR TO SEARCH OR ANY CLAIM/RELIEF ALLOWED PRIOR TO SEARCH, WHICH HAS BEEN FOUND TO BE ERRONEOUS DURING THE PROCEEDINGS U/S 153A. 10. FURTHER, DUE TO NON-OBSTANTE CLAUSE U/S 153A, N O ACTION U/S 148 IS POSSIBLE IF THE EVIDENCE IS DIRECTLY OR INDIRECTLY LINKED TO SEARCH. EVEN OTHERWISE, ONCE THE PROCEEDIN GS U/S 153A FOR MAKING ASSTT OF TOTAL INCOME ARE PENDING B EFORE AO FOR RELEVANT AY AND IT COMES TO NOTICE OF AO OF ESC APEMENT OF A PART OF TOTAL INCOME FOR THE SAME RELEVANT AY THO UGH NOT DIRECTLY EMANATING FROM THE SEIZED MATERIAL, IT MAY BE DIFFICULT FOR AO TO RECORD A BELIEF SIMULTANEOUSLY ABOUT ESCA PEMENT OF INCOME FOR INITIATING PROCEEDINGS U/S 147, WHEN ANOT HER PROCEEDINGS U/S 153A WHEREIN ALSO AO CAN ASSESS THE TOTAL INCOME IS ALREADY PENDING BEFORE HIM. THAT BEING THE CASE, IF ANY INFORMATION OR EVIDENCE NOT DIRECTLY EMANATING FROM THE SEARCH/SEIZED EVIDENCE IS FOUND, THEN THERE CANNOT BE ONE ASSTT U/S 153A AND AT THE SAME TIME A SIMULTANEOUS ASSTT U/S 147 ALSO FOR SAME AY. IN FACT, THE SECOND PROVISO IS INTENDED AT KEEPING IN ABEYAN CE ANY PENDING PROCEEDING FOR ASSESSMENT IN A PARTICULAR Y EAR; IN WHICH THERE IS A PROCEEDING INITIATED UNDER SECTION 153A, PURSUANT TO A SEARCH UNDER SECTION 132. HENCE, WHEN A NOTICE IS ISSUED PURSUANT TO A SEARCH UNDER SECTION 132, F OR ASSESSMENT UNDER SECTION 153A, ALL PENDING PROCEEDI NGS WITH RESPECT TO A REGULARLY INITIATED ASSESSMENT OR RE-A SSESSMENT WOULD STAND ABATED. THIS WOULD CLEARLY REFLECT THE IN TENTION OF PAGE 31 OF 60 LEGISLATURE TO THAT TO AVOID PARALLEL PROCEEDINGS O F REGULAR ASSTT AS WELL AS SEARCH ASSTT, THE INCOME FROM ALL S OURCES ARE TO BE ASSESSED U/S 153A ITSELF. HENCE TO AVOID ANY ANOMALOUS SITUATION, THE ONLY VIEW COULD BE TAKEN IS THAT U/S 153A, THE TOTAL INCOME INCLUDING INCOME BASED ON SEIZED DOCUM ENTS AS WELL AS ANY OTHER SOURCE IS REQUIRED TO BE ASSESSED. 11. THERE IS DIVERGENCE OF JUDICIAL OPINION ON THE QUESTION OF WHETHER ASSESSMENT U/S 153A CAN BE RESTRICTED TO ONL Y THE INCRIMINATING MATERIAL SEIZED DURING THE SEARCH OR WHETHER THE AO CAN ALSO TAKE A VIEW BASED ON SOMETHING WHICH MIGH T BE NOTICED OTHERWISE DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A? SOME OF THE CONFLICTING OPINI ONS EXPRESSED IN JUDICIAL VERDICTS ARE AS UNDER: (A) ALLAHABAD HIGH COURT IN RAJ KUMAR ARORA 367 ITR 517 HAS HELD THAT THERE IS NO REQUIREMENT OF INCRIMINATING MATERIAL FOR INVOKING PROVISIONS OF 1 53A. (B) THE DELHI HIGH COURT IN KABUL CHAWLA 380 ITR 573(DEL) HELD THAT ASSESSMENT U/S 153A ON AN ISSUE COULD NOT HAVE BEEN MADE UNLESS BACKED BY SOME INCRIMINATING MATERIAL FOUND DURING THE SEARCH. THE DEPARTMENT HAS NOT ACCEPTED THE DECISION IN CASE OF KABUL CHAWLA AND THE SLP WAS FILED WAS SUBSEQUENTLY WITHDRAWN DUE TO LOW TAX EFFECT. (C) HOWEVER, THE SAME DELHI HIGH COURT IN CASE OF DAYAWANTI GUPTA VS CIT 390 ITR 496(DEL) IN PARA 16 HAS OBSERVED THAT: 'SECTION 153A, WHICH PROVIDES FOR AN ASSESSMENT IN CASE OF SEARCH, AND WAS INTRODUCED BY THE FINANCE AC T, 2003 WITH EFFECT FROM 1-6-2003, DOES NOT PROVIDE THA T A SEARCH ASSESSMENT HAS TO BE MADE STRICTLY ON THE BA SIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATAB LE TO THE EVIDENCE FOUND. THE EARLIER SECTION 158BB WHICH IS NOT APPLICABLE IN CASE OF A SEARCH CONDUCTED AFTER 31-5- 2003, PROVIDED THAT THE COMPUTATION OF THE UNDISCLO SED INCOME CAN ONLY BE ON THE BASIS OF THE EVIDENCE FOU ND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND MATERI ALS PAGE 32 OF 60 OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER, PROVIDED THEY ARE RELATED TO THE MATERIALS FOUND. SECTION 153A(L)(B) REQUIRES ASSESSMENT OR REASSESSMENT OF TOTAL INCOME OF THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH TO OK PLACE. THIS, HOWEVER, DOES NOT MEAN THAT THE ASSESSMENT UNDER SECTION 153A CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL.....'. (D) KERALA HC IN THE CASE OF CIT VS K.P. UMMER (KER)(RENDERED IN FEBRUARY 2019), HAS OBSERVED IN PARA 10 AND 12, IS QUOTED AS BELOW- 'HENCE, WHEN A NOTICE UNDER SECTION 153A IS ISSUED, IT ENABLES THE DEPARTMENT TO CARRY OUT RE-ASSESSMENT O R ASSESSMENT WITH RESPECT TO THE SIX IMMEDIATE PRIOR YEARS AND THE YEAR IN WHICH THE SEARCH IS CARRIED O UT. THIS DOES NOT REQUIRE ANY INCRIMINATING MATERIAL RECOVERED ON SEARCH RELATING TO THOSE PRIOR YEARS; IN WHICH THERE IS NO TIME LEFT, ON THE DATE OF SEARCH, FOR AN ASSESSMENT UNDER SECTION 143. THE PROVISION UNDER SECTION 153A IS A NON OBSTANTE CLAUSE HAVING OVERRIDING EFFECT OVER SECTIONS 139, 147, 158, 149, 151 AND 153. THE INTENTION OF THE LEGISLATURE IS TO ENABLE ASSESSMENT, IF IT HAS NOT BEEN REGULARLY DONE IN ANY OF THE PREVIOUS YEARS, O R TO RE-INITIATE ASSESSMENT IN CASE THERE IS ALREADY PROCEEDINGS PENDING OR TO RE-ASSESS IN THE CASE OF COMPLETED ASSESSMENTS; IF THE SEARCH UNDER SECTION 132 REVEALS MATERIAL POINTING TO A PRACTICE OF SUPPRESS ION OF INCOME FROM TAXATION. THESE MATERIALS NEED NOT NECESSARILY BE THAT RELEVANT TO THE PREVIOUS SIX YEARS SINCE A PRACTICE OF SUPPRESSION DETECTED IN THE SUBJECT YEAR PERMITS A LIKE PRESUMPTION TO BE DRAWN IN THE EARLIER SIX YEARS TOO; ON BEST JUDGMENT WITH REFERENCE TO THE BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE. WE HAVE ALSO HELD IN COMMISSIONER OF INCOME TAX V. ORMA MARBLE PALACE P(LTD) [ITA 19 OF 2011] THAT A DISHONEST PAGE 33 OF 60 ASSESSEE WOULD NOT KEEP EVIDENCE OF HIS DISHONESTY T O BE DISCOVERED AFTER A LONG TIME OR EVEN A SHORT TIM E. HENCE THERE IS NO ASSUMPTION POSSIBLE THAT IN ANY O F THE PRIOR YEARS IN WHICH ASSESSMENTS WERE NOT REGULARLY COMPLETED AND THE TIME FOR THE SAME HAS EXPIRED, TH ERE COULD BE ADDITIONS ONLY ON THE BASIS OF MATERIALS RECOVERED RELEVANT TO THOSE YEARS. THE RETURNS FILED IN PURSUANCE TO A NOTICE UNDER SECTION 153A IS ALSO TO BE TREATED AS A RETURN FILED UNDER SECTION 139.HENCE, WE CANNOT AGREE WITH THE TRIBUNAL THAT THE ASSESSMENTS CARRIED OUT UNDER SECTION 153A FOR THE PRIOR YEARS IN WHICH THE DUE DATE FOR NOTICE UNDER SECTION 143(2) HAS EXPIRED, CAN ONLY BE WITH REFERENCE TO INCRIMINATING MATERIALS RECOVERED ON SEARCH'. 'WE DO NOT THINK THAT THE INTENTION IN PROVIDING FO R ABATEMENT OF PENDING PROCEEDINGS AND THE REVIVAL OF THE SAME, IF THE PROCEEDINGS UNDER 153A(1) ARE EVENTUALLY SET ASIDE; WAS TO PROVIDE FOR A SEPARATE PROCEDURE FOR THE YEARS IN WHICH THE NOTICE PERIOD UNDER SECTION 143(2) HAS EXPIRED. IN FACT, THE SECO ND PROVISO IS INTENDED AT KEEPING IN ABEYANCE ANY PEND ING PROCEEDING FOR ASSESSMENT IN A PARTICULAR YEAR; IN WHICH THERE IS A PROCEEDING INITIATED UNDER SECTION 153A, PURSUANT TO A SEARCH UNDER SECTION 132. OTHERWISE, THERE WOULD BE PARALLEL PROCEEDINGS CONTINUED FOR THE SAME ASSESSMENT YEAR. HENCE, WHEN A NOTICE IS ISSUED PURSUANT TO A SEARCH UNDER SECTION 132, FOR ASSESSMENT UNDER SECTION 153A, ALL PENDING PROCEEDINGS WITH RESPECT TO A REGULARLY INITIATED ASSESSMENT OR RE-ASSESSMENT WOULD STAND ABATED. FOR THE SAID YEARS, THE PROCEEDINGS UNDER SECTION 153A WOULD BE CONTINUED AND THE ASSESSMENTS CONCLUDED ON THAT BASIS. HOWEVER, WHEN AND IF THE SAID ASSESSMENT PROCEEDED WITH AND CONCLUDED UNDER SECTION 153A, IS SET ASIDE BY THE STATUTORY AUTHORITIES OR BY THIS C OURT, THEN NECESSARILY THE ORIGINAL PROCEEDINGS WHICH STOO D ABATED WOULD REVIVE, WHICH IS THE ENABLING PROVISION UNDER SUB-SECTION (2) OF SECTION 153A. THERE CAN BE NO COROLLARY INFERRED FROM THE ABOVE PROVISIONS TO FIN D PAGE 34 OF 60 CERTAIN YEARS TO BE OF 'CONCLUDED ASSESSMENT' BEING POSSIBLE OF RE-ASSESSMENT ONLY ON INCRIMINATING MAT ERIAL RECOVERED IN SEARCH RELATABLE TO THAT YEAR. HENCE, WE, ON THE ABOVE REASONING AND RESPECTFULLY FOLLOWING TH E CITED DECISIONS OF ANOTHER DIVISION BENCH OF THIS C OURT, ANSWER THE QUESTION OF LAW AGAINST THE ASSESSEE AND I N FAVOUR OF THE REVENUE'. (E) IN COMMISSIONER OF INCOME-TAX-VII V. CHETAN DAS LACHMAN DAS 254 CTR 392 (DELHI)THE DELHI HIGH COURT HAS HELD AS BELOW: - SECTION 153A OF THE INCOME-TAX ACT, 1961 - SEARCH O R SEIZURE - ASSESSMENT IN CASE OF-ASSESSMENT YEARS 20 00- 01 TO 2006-07 - WHETHER THERE IS NO CONDITION IN SE CTION 153A THAT ADDITIONS SHOULD STRICTLY BE MADE ON BASI S OF EVIDENCE FOUND IN COURSE OF SEARCH OR OTHER POST-SE ARCH MATERIAL OR INFORMATION AVAILABLE WITH ASSESSING OFF ICER WHICH CAN BE RELATED TO EVIDENCE FOUND - HELD, YES - WHETHER SEIZED MATERIAL CAN ALSO BE RELIED UPON TO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTION S THROUGHOUT PERIOD OF SIX YEARS COVERED BY SECTION 1 53A - HELD, YES [IN FAVOUR OF REVENUE]. (F) FILATEX INDIA LTD VS CIT-IV 229 TAXMAN 555(DELHI) WHETHER DURING ASSESSMENT UNDER SECTION 153A, ADDITIONS NEED NOT BE RESTRICTED OR LIMITED TO INCRIMINATING MATERIAL FOUND DURING COURSE OF SEARC H AND, HENCE, ARGUMENT OF ASSESSEE THAT ADDITION UNDE R SECTION 115JB WAS NOT JUSTIFIED IN ORDER UNDER SECTI ON 153A AS NO INCRIMINATING MATERIAL WAS FOUND CONCERNI NG SAID ADDITION HAD TO BE REJECTED -HELD, YES. (G) SUNNY JACOB JEWELERS AND WEDDING CENTER VS DCIT362 ITR 664(KER) WHETHER THERE IS NO REQUIREMENT UNDER PROVISIONS OF ACT REQUIRING DEPARTMENT TO COLLECT INFORMATION AND EVIDENCE FOR EACH AND EVERY YEAR FOR SIX PREVIOUS Y EARS IN ORDER TO INITIATE PROCEEDINGS UNDER SECTION 153A - HELD, YES PAGE 35 OF 60 (H) CIT VS ANIL KUMAR BHATIA 352 ITR 493(DELHI) WHETHER EVEN IF ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESS MENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 14 3(3) PRIOR TO INITIATION OF SEARCH/REQUISITION, STILL AS SESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS UNDER SECTION 153A WITHOUT ANY FETTERS AND REASSESS TOTAL INCOME TAKING NOTE OF UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING SEARCH - HELD, YES. SIMILAR VIEW UPHELD IN E.N. GOPAKUMAR [2016] 75 TAXMANN.COM 215 (KERALA) (I) CIT-II VS CONTINENTAL WAREHOUSING CORPORATION 235 TAXMAN 568(SC) THE HIGH COURT BY IMPUGNED ORDER HELD THAT NO ADDIT ION CAN BE MADE IN RESPECT OF ASSESSMENTS WHICH HAVE BECOME FINAL IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH OR DURING 153A PROCEEDING - WHETHER SPECIAL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO B E GRANTED - HELD, YES (J) PRINCIPAL COMMISSIONER OF INCOME-TAX, DELHI-2 V . BEST INFRASTRUCTURE (INDIA) (P.)LTD. 256 TAXMAN 63( SC) 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 SEAR CH, SAID SUBMISSION COULD NOT BE SAID TO BE INCRIMINATI NG MATERIAL QUA EACH OF PRECEDING ASSESSMENT YEARS AND , CONSEQUENTLY, ASSUMPTION OF JURISDICTION UNDER SECT ION 153A AND CONSEQUENT ADDITIONS MADE BY ASSESSING OFFICER ON SAID BASIS WERE NOT JUSTIFIED - WHETHER S LP AGAINST SAID IMPUGNED ORDER WAS TO BE ALLOWED - HELD, YES. (K) THE DISMISSAL OF SLP BY SUPREME COURT IN CASE O F PCIT VS MEETA GUTGUTIA WHEREIN ALSO THE SAME VIEWS WERE EXPRESSED AS IN KABUL CHAWLA, WOULD ALSO NOT LEAD TO CONCLUSION THAT THE QUESTION DECIDED BY DELHI HI GH PAGE 36 OF 60 COURT AGAINST THE REVENUE IN MEETA GUTGUTIA IS SETT LED BECAUSE THE SLP HAS ALREADY BEEN ADMITTED BY SC FOR HEARING ON THE SAME QUESTION IN SEVERAL OTHER CASES SUCH AS CONTINENTAL WAREHOUSING, BEST INFRASTRUCTURE(SUPRA). (L) FURTHER, SUPREME COURT IN SINHGAD TECH EDU SOCI ETY 397 ITR 344(SC) HELD THAT NO NOTICE U/S 153C COULD BE INVOKED UNLESS THERE WAS INCRIMINATING MATERIAL IS A LSO OF NO CONSEQUENCE AS THE PROVISIONS OF SECTION 153C HAS BEEN AMENDED W.E.F 1/4/2005 AND THAT THE DECISIO N OF SINHGAD TECH EDU SOCIETY WAS FOR PERIOD PRIOR TO 1/4/2005. 12. THE SUM AND SUBSTANCE OF ALL THE DECISIONS ABOV E COULD ONLY INDICATE THAT THE QUESTION OF WHETHER THE AO HA S POWERS U/S 153A TO ASSESS TOTAL INCOME AS DEFINED U/S 2(45 ) DEHORS THE INCRIMINATING MATERIAL ALSO, HAS NOT AT ALL BEC OME FINAL AND THE SAME IS YET PENDING FINAL ADJUDICATION BEFORE T HE SC IN SLPS ADMITTED. HENCE THE ARGUMENTS MADE IN PRECEDIN G PARAGRAPHS CAN BE PITCHED UP TO SUPPORT THE REVENUE S' CONTENTION BEFORE COURTS. 13. FURTHER, THE 'INCRIMINATING MATERIAL' CAN BE IN ANY FORM. THE WORD INCRIMINATING CAN HAVE MULTIPLE MANIFESTATI ONS, SUCH AS (I) EVIDENCE IN THE NATURE OF A DOCUMENT, CONTEN T OF ANY DOCUMENT; II) AN ENTRY IN BOOKS OF ACCOUNT; III) AN ASSET; IV) A STATEMENT GIVEN ON OATH IN ABSENCE OF ANY FACT CLAI MED EARLIER BUT COMING TO NOTICE DURING SEARCH; VI)FALSITY OF N ATURE OF ENTRIES ALREADY RECORDED IN BOOKS OF ACCOUNTS, (VII ) ABSENCE OF BOOKS BEING FOUND DURING SEARCH MAKING THE CLAIMS M ADE IN RETURN ALREADY FILED AS SUSPICIOUS ;OR VIII) ABSENC E OF THE OFFICE/BUSINESS PREMISES AS CLAIMED DURING RETURNS FILED OR ANY OTHER DOCUMENTS, ETC. EVEN A STATEMENT GIVEN DURING SEARCH U/S 132(4) CAN BE INCRIMINATING. THE APEX COURT IN PCIT VS BEST INFRASTRUCTURE (INDIA) P LTD 94 TAXMANN.COM 11 5 (SC)HAS ADMITTED AN SLP BY REVENUE AGAINST THE ORDE R OF HIGH COURT WHEREIN THE HIGH COURT HAD HELD THAT THE STATE MENT OFFERING INCOME FOR ONE YEAR WOULD BE INCRIMINATING FOR THE YEAR FOR WHICH DISCLOSURE HAS BEEN MADE AND NOT THE SIX YEARS FOR THE PURPOSE OF SECTION 153A. IN THE CASE OF ACI T VS M/S A PAGE 37 OF 60 R ENTERPRISES 1 SCR 295(SC) ALSO THE COURT HELD THA T THE ONLY WAY OF DISCLOSING INCOME IS THROUGH FILING A RETURN AND THEREFORE AN UNDISCLOSED INCOME SIGNIFIES INCOME NO T STATED IN THE RETURN FILED. IN SHORT, ANY FACT/EVIDENCE WHICH COULD SUGGEST THAT THE DOCUMENTS/TRANSACTIONS CLAIMED OR SUBMITTED IN ANY EARLIER PROCEEDINGS WERE NOT GENUINE, OR RECO RDED UNSUBSTANTIATED FACTS/ TRANSACTIONS BEING ONLY A DE VICE/MAKE BELIEF BASED ON NON-EXISTENT FACTS OR SUPPRESSED/ MISREPRESENTED FACTS, WOULD CONSTITUTE AN INCRIMINAT ING MATERIAL SUFFICIENT TO MAKE ASSESSMENT FOR THE PURP OSES OF THE ACT. A MERE STATEMENT U/S 132(4) IS AN EVIDENCE FOR MAKI NG AN ASSESSMENT AS ALSO HELD BY APEX COURT IN B KISHORE KUMAR VS DCIT 234 TAXMAN 771(SC) AS UNDER: HIGH COURT BY IMPUGNED ORDER HELD THAT SINCE ASSESS EE HIMSELF HAD STATED IN SWORN STATEMENT DURING SEARCH AND SEIZURE ABOUT HIS UNDISCLOSED INCOME, TAX WAS TO BE LEVIED ON BASIS OF ADMISSION WITHOUT SCRUTINIZING DOCUMENTS - WHETHER SPECIAL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO BE DISMISSED - HELD, Y ES HENCE EVEN A STATEMENT U/S 132(4) SHALL ALSO CONSTI TUTE INCRIMINATING MATERIAL TO DISLODGE ANY EARLIER FIND ING FOR THE PURPOSE OF MAKING AN ASSESSMENT U/S 153A. 14. THE REQUIREMENT OF INCRIMINATING MATERIAL IS NO T SPECIFICALLY MENTIONED IN THE ACT. HOWEVER, W.E.F. 1/ 4/2005 THE PROVISIONS OF SECTION 153C HAVE BEEN AMENDED SO AS TO ALLOW THE INVOCATION OF PROCEEDINGS U/S 153C IF ANY DOCUMENT, AN ENTRY OR AN ASSET IS FOUND IN RELATION OR PERTAI NING TO A PERSON OTHER THAN THE SEARCHED PERSON, WHICH HAS A B EARING ON THE ASSESSMENT OF TOTAL INCOME AS PER THE PROVIS IONS OF THE IT ACT. HENCE THE WORD 'INCRIMINATING', AS USED BY THE COURTS IN CONTEXT OF SECTION 153A/C, NEEDS TO BE UNDERSTOO D IN THE CONTEXT OF EVENTS OF MISREPORTING AND UNDER REPORTI NG AS DEFINED U/S 270A. THE PROVISIONS OF SECTION 153A/153C ARE NOT THE NORMAL ASSESSMENT PROVISIONS LIKE 143(3); R ATHER THEY ARE CURATIVE PROVISIONS TO PLUG THE MISCHIEF OF MIS REPORTING OR UNDER REPORTING OF TAXABLE INCOME BASED ON EVIDENCE S FOUND PAGE 38 OF 60 IN PURSUANCE TO SEARCH. HENCE, IF ON ACCOUNT OF SEA RCH, THE FACTS AND CIRCUMSTANCES SUGGEST THAT ANY ENTRY ALRE ADY APPEARING IN BOOKS OR ACCEPTED IN EARLIER ASSESSMEN TS BASED ON DOCUMENTS SUBMITTED AT THAT POINT OF TIME, ARE CAMOUFLAGED OR MANIPULATED OR REFLECTED TO BE IN TH E NATURE OR FROM A SOURCE WHICH IS DIFFERENT FROM THE REAL N ATURE OR SOURCE AS APPEARING FROM THE EVIDENCES FOUND DURING A SUBSEQUENT SEARCH RESULTING IN MISREPORTING AS DEFI NED U/S 270A(10), THEN SUCH MATERIAL/ FACTS COMING TO FORE WILL DEFINITELY CONSTITUTE AN INCRIMINATING MATERIAL, EV EN IF DOES NOT GET DIRECTLY SEIZED FROM THE SEARCH OF THE ASSESSEE ITSELF. SECTION 270A(10) DEFINES UNDER REPORTING AND MISREP ORTING AS UNDER: 270A (10): THE CASES OF MISREPORTING OF INCOME REFERRED TO IN SUB-SECTION (8) SHALL BE THE FOLLOWIN G, NAMELY:- (A) MISREPRESENTATION OR SUPPRESSION OF FACTS; (B) FAILURE TO RECORD INVESTMENTS IN THE BOOKS OF ACCOUNT; (C) CLAIM OF EXPENDITURE NOT SUBSTANTIATED BY ANY EVIDENCE; (D) RECORDING OF ANY FALSE ENTRY IN THE BOOKS OF ACCOUNT; (E) FAILURE TO RECORD ANY RECEIPT IN BOOKS OF ACCOU NT HAVING A BEARING ON TOTAL INCOME; AND (F) FAILURE TO REPORT ANY INTERNATIONAL TRANSACTION OR ANY TRANSACTION DEEMED TO BE AN INTERNATIONAL TRANSACTI ON OR ANY SPECIFIED DOMESTIC TRANSACTION, TO WHICH THE PROVISIONS OF CHAPTER X APPLY. THUS, IF DURING ASSESSMENT PROCEEDINGS, THE AO FINDS EXISTENCE ANY OF THE ABOVE FACTS AS MENTIONED U/S 270A(10), THE INCIDENCE OF MISREPORTING WILL BE TRIGGERED THEREBY MAKING THE EARLIER RECORDED ENTRIES/EARLIER ADMITTED DOCUMENTS AND EVIDENCE ITSELF TO BE INCRIMINATING IN NATURE ON ACCOUNT OF SUCH ENTRIES BEING HIT BY MISREPORTING. THUS, THE EVENT OF MISREPORTING ITSELF IS INCRIMINATING. IF IT WERE HELD NOT TO BE SO, THEN THE PURPOSE OF 153A/153C WOULD BE DEFEA TED AS IT WOULD FAIL TO PREVENT THE MISCHIEF OF MISREPORTING I N SPITE OF PAGE 39 OF 60 SEARCH HAVING BEING CARRIED, WHICH IT SOUGHT TO PREV ENT JUST BECAUSE THE ENTRIES WERE ALREADY RECEDED IN THE BOOK S OR SOME DOCUMENTS HAD ALREADY BEEN ACCEPTED 15. APPLYING THE HAYDEN'S RULE OF MISCHIEF, THE MER E FACT THAT SUCH ENTRIES ARE RECORDED IN THE BOOKS OF ACCOUNTS OR SOME FABRICATED OR COLORFUL DOCUMENTS HAVE ALREADY BEEN ACCEPTED AS CORRECT, WILL NOT PREVENT SUCH MATERIAL OR ENTRY FROM BEING INCRIMINATING, IF THE CIRCUMSTANCES SUGGEST OTHERWIS E. THE HAYDEN'S RULE OF MISCHIEF HAS BEEN JUDICIALLY ACCEP TED AND APPLIED BY CALCUTTA HIGH COURT IN RECKITT COLMAN OF INDIA LTD. VS. ACIT (2001) 252 ITR 550 (CAL). 16. THE INCRIMINATING MATERIAL CAN BE FROM THE SEAR CH OR EVEN FROM SUBSEQUENT SURVEYS OR ANY OTHER ENQUIRIES. REC ENTLY IN CIT CHENNAI VS AJIT S KUMAR 93 TAXMAN.COM294(SC), THE COURT IN THE CONTEXT OF SECTION 158BB HAS UPHELD TH E USE OF INFORMATION COLLECTED IN A SURVEY IN CASE OF CONNEC TED PERSON CARRIED ALONG WITH SEARCH IN OTHER PERSON FOR THE PU RPOSE OF MAKING ASSTT. U/S 158BB. PROVISIONS OF 158BB ARE PA RI MATERIA TO SECTION 153A. THE DELHI HIGH COURT IN PCIT VS KABUL CHAWLA IN PARA 37(IV) OBSERVED AS UNDER: 'IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FO UND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH C AN 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. OBVIOUS LY, AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONL Y ON THE BASIS OF SEIZED MATERIAL' DELHI HIGH COURT HAS THUS EXPLAINED THE UNDERLYING PRINCIPLE THAT THOUGH THE ASSESSMENT MAY NOT BE BASED ON SEIZ ED EVIDENCE ONLY BUT THE ADDITION CANNOT BE ARBITRARY. THERE CAN BE NO DISPUTE ON THIS PROPOSITION. IT HAS TO BE BAS ED ON EVIDENCES FOUND DURING SEARCH, OR POST SEARCH OR IN FORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVI DENCE FOUND. THUS, ANY ENTRY ALREADY RECORDED IN THE BOOKS WHICH IS PAGE 40 OF 60 NOT TRUE IN ITS NATURE OR SOURCE AND ANY INFORMATIO N EVEN COMING TO THE AO POST SEARCH SHALL CONSTITUTE INCRI MINATING MATERIAL FOR THE PURPOSE OF MAKING AN ASSESSMENT U/ S 153 A 17. SINCE THE PROCEEDINGS UNDER THE ACT ARE CIVIL I N NATURE, EVEN THE CIRCUMSTANTIAL EVIDENCES BASED ON PREPONDE RANCE OF PROBABILITY WILL CONSTITUTE INCRIMINATING MATERIAL E NOUGH TO MAKE AN ASSESSMENT OF INCOME AND FASTEN THE TAX LIA BILITY AS HELD BY IN SUMATI DAYAL VS CIT 214 ITR 801(SC). IT WILL THEREFORE INCLUDE ANY CIRCUMSTANTIAL MATERIAL ALSO, WHICH DIRECTLY OR INDIRECTLY, PROVES THAT THE EARLIER EVI DENCE SUBMITTED WAS ONLY A MAKE BELIEF AND SUCH NEW MATERIA L HAS A BEARING ON THE ASSESSMENT OF TOTAL INCOME OF ANY ASSESSEE, EVEN IF SUCH INCOME WAS EARLIER ADMITTED AS CORRECT IN ABSENCE OF ANY SUCH ADVERSE FACTS AVAILABLE AT THE TIME OF EARLIER ASSESSMENT. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE FIRST ARGUMENT OF LEARNED COUNSEL FOR THE ASSESSEE WAS THAT IN CASE OF COMPLETED ASSESSMEN TS, THE ADDITION CANNOT BE MADE IF THERE IS NO INCRIMINATING MATERIA L. IN THIS REGARD LEARNED COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT IN THE YEAR 2013-14 AND 2015-16 THE ASSESSMENTS STOOD COMPLETED AND THE RE WAS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH. IN THIS RESPECT THE BENCH HAD ASKED BOTH THE PARTIES TO FURNISH THE MATERIAL WHICH WAS IMPOUNDED DURING THE SEARCH AND WHICH BOTH THE PARTIES HAD FIL ED WITH THE BENCH WHICH WE HAVE EXAMINED AND HAVE COMPARED WITH THE MATE RIAL USED BY ASSESSING OFFICER IN ASSESSMENT ORDER. WE FOUND TH AT NONE OF THE MATERIAL SEIZED DURING THE SEARCH WAS USED BY THE ASSESSING O FFICER FOR MAKING ADDITION AND INSTEAD HAD RELIED ON A DOCUMENT MARKE D AS BK-2, WHICH WAS SEIZED DURING A SEARCH OPERATION ON A DIFFERENT GR OUP OF COMPANY AND THAT TOO ON 28/04/2015 THAT IS MORE THAN ONE YEAR B EFORE THE DATE OF SEARCH ON ASSESSEES. THIS FACT IS FURTHER STRENGTH ENED FROM THE PAGE 41 OF 60 ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER, AT PAGE 8, HAS OBSERVED AS UNDER: IN THIS CONTEXT, IT IS NOTEWORTHY THAT A SEARCH & SEIZURE OPERATION U/S 132 OF THE I.T. ACT, 1961 CONDUCTED UPON THE COMPANIES OF SHMSHWAT AGARWAL ON 28.04.2015 BY THE INVESTIGATION WING, KANPUR. THE INCRIMINATING DOCU MENTS WHICH WERE FOUND AND SEIZED ARE THE PREMISES ALSO INC LUDE A DIARY IDENTIFIED AS BK-2, CONTAINING LEDGERS OF DIF FERENT PARTIES. ON GOING THROUGH PAGES OF THESE LEDGERS, IT WAS FOUN D THAT THE COMPANIES OF SRI SHASHWAT AGARWAL ARE PAPER COMPA NIES AND ARE ENGAGED IN PROVIDING THE ACCOMMODATION ENTR IES OF BOGUS LTCG, UNSECURED LOAN ETC, TO VARIOUS PARTIES BY ACCEPTING UNDISCLOSED CASH FROM BENEFICIARIES. NAME OF SUCH BENEFICIARIES, DATE-WISE RECEIPT OF CASH AND ISSUANC E OF CHEQUES FROM AND TO THEM, IS RECORDED IN THIS DIARY VERY VIVIDLY. THE NAME OF SRI NAVIN JAIN AND HIS FAMILY MEMBERS SUCH AS HIS FATHER SRI NARESH KIUNAR JAIN, NARESH K UMAR JAIN HUF, HIS MOTHER SMT. SHRIMATI JAIN AND HIS WIFE NEET U JAIN ALSO FIGURE IN THIS DIARY. SHRI NAVIN JAIN AND HIS AFOREMENTIONED FAMILY MEMBERS HAVE TAKEN ACCOMMODAT ION ENTRIES OF TAX EXEMPT LONG TERM CAPITAL GAIN BY THE WAY OF PRE-ARRANGED AND MANIPULATIVE TRADING IN THE SHARES CITYON SYSTEMS (INDIA) LIMITED. THIS SALE WAS STAGE MANAGE D BY SH. SHASHWAT AGARWAL AND HIS BROTHERS AS ALL THE SHARES WE RE PURCHASED BY THE COMPANIES CONTROLLED BY SH. SHASHWA T AGARWAL. 5.1 THE ABOVE OBSERVATIONS, NOTED BY THE ASSESSING OFFICER, CLEARLY DEMONSTRATE THAT A DIARY IDENTIFIED AS BK-2 WAS IMPO UNDED DURING SEARCH & SEIZURE OPERATION ON 28/04/2015 IN THE CASE OF SE ARCH ON THE COMPANIES BELONGING TO SHRI SHASHWAT AGARWAL WHEREIN THE NAME OF SHRI NAVIN JAIN AND HIS FAMILY MEMBERS WERE MENTIONED. THE ASSESSIN G OFFICER NOWHERE NOTED THAT THE NAMES OF THE ASSESSEES WAS ALSO MENT IONED IN SUCH DIARY. MOREOVER, FROM THE FINDINGS OF THE ASSESSING OFFICE R, WE FIND THAT THE COMPANIES OF SHRI SHASHWAT AGARWAL WERE ENGAGED IN PRO VIDING ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GA IN, UNSECURED LOANS PAGE 42 OF 60 ETC. TO VARIOUS PARTIES AND THERE IS NO MENTION OF BOGUS TRANSACTIONS OF CLOTH. MOREOVER, THE ABOVE FINDINGS CLEARLY INDICAT E THAT THE ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN AND UNSECURED LOANS WERE OBTAINED BY THE INDIVIDUALS MENTIONED IN THE AS SESSMENT ORDER AND THERE IS NO MENTION THAT THE ASSESSEES HAD TAKEN AN Y ENTRY OF LONG TERM CAPITAL GAIN OR UNSECURED LOANS FROM THE COMPANIES OF SHRI SHASHWAT AGARWAL. THIS FACT IS FURTHER CORROBORATED FROM THE FACT THAT THE ASSESSING OFFICER IN THE CASE OF THE ASSESSEES DID NOT MAKE A NY ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN OR UNSECURED LOANS BUT HE MADE THE ADDITIONS BY HOLDING THE SALE AND PURCHASE OF CLOTH WHICH WAS P URCHASED FROM RICH GROUP OF COMPANIES TO BE BOGUS. ALL THESE FACTS DE MONSTRATE THAT THE ASSESSING OFFICER HAD NOT MADE THE ADDITION ON THE BASIS OF ANY INCRIMINATING DOCUMENT BUT HAD MADE THE ADDITION ON ACCOUNT OF BOGUS SALE AND PURCHASE OF CLOTH FOR WHICH NO DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH. EVEN OTHERWISE, THE DOCUMENTS REL IED ON BY THE ASSESSING OFFICER WERE FOUND AT THE PREMISES OF THE COMPANIES OF SHRI SHASHWAT AGARWAL WHEREIN THE SEARCH WAS CARRIED OUT ON 28/04/2015 AND THERE TOO THE INCRIMINATING MATERIAL, AS MENTIONED IN THE ASSESSMENT ORDER, WAS A DIARY IDENTIFIED AS BK-2 WHEREIN THE NAM ES OF SOME PROMOTERS/DIRECTORS OF THE ASSESSEES WERE MENTIONED. NOWHERE THEREIN THE NAMES OF THE ASSESSEES HAVE BEEN MENTIONED. LE ARNED COUNSEL FOR THE ASSESSEE HAD RELIED ON A NUMBER OF CASE LAWS FOR THE PROPOSITION THAT IN CASE NO INCRIMINATING MATERIAL IS FOUND, THE ADD ITIONS CANNOT BE MADE IN THE CASE OF COMPLETED ASSESSMENTS. PARTICULAR RELI ANCE WAS PLACED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA) WHEREIN THE SLP FILED BY THE DEPARTMENT WAS DISMISSED BY HON'BLE SUPREME COURT. LEARNED COUNSEL FOR THE ASSESSEE HA D ALSO RELIED ON CASE PAGE 43 OF 60 LAW OF PR. CIT VS. MEETA GUTGUTIA (SUPRA), THE SLP O F WHICH HAS ALSO BEEN DISMISSED BY HON'BLE SUPREME COURT. THOUGH THE SLP IN THE CASE OF KABUL CHAWLA WAS DISMISSED DUE TO LOW TAX EFFECT BUT THE SLP IN THE CASE OF MEETA GUTGUTIA WAS NOT DISMISSED DUE TO LOW TAX EFFEC T BUT WAS DISMISSED ON MERITS. FOR THE SAKE OF COMPLETENESS, THE JUDGM ENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF MEETA GUTGUTIA IS REPRODU CED BELOW: A SEARCH AND SEIZURE UNDER SECTION 132 URNS CONDUC TED IN THE PREMISES OF THE FNP GROUP WHICH COMPRISED OF VARIOU S COMPANIES, PARTNERSHIPS AND PROPRIETORSHIP CONCERNS . THE STATEMENT OF AN EMPLOYEE PG WAS RECORDED ON OATH UNDER SECTION 133A. THE ASSESSEE WAS A DIRECTOR/PARTNER/SH AREHOLDER IN THE GROUP OF COMPANIES/CONCERNS. SHE WAS THE PROP RIETOR OF THE CONCERN FNP. ON THE BASIS OF DOCUMENTS RECOVERE D DURING THE SEARCH OPERATION, A NOTICE UNDER SECTION 153A WA S ISSUED TO THE ASSESSEE. THEREAFTER, A NOTICE AND QUESTIONN AIRE UNDER SECTIONS 143(2) AND 142(1) WERE ALSO ISSUED. THE ASS ESSING OFFICER PASSED SEPARATE ORDERS IN RESPECT OF THE AS SESSMENT YEARS 2000-01 TO 2003-04. FOR THE ASSESSMENT YEAR 2 004-05, AS IN THE PRECEDING YEARS, THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF FRANCHISEE COMMISSIONS PAID TO VARIOU S PARTIES. THE ASSESSING OFFICER HELD THAT THE ADDRESSES OF TH E FRAN- CHISEES WERE NOT REVEALED AND THAT THERE WERE DISCREP ANCIES IN THE DETAILS OF THE ACCOUNTS OF THE FRANCHISEES FILE D BY THE ASSESSEE. CONSEQUENTLY, THE FRANCHISEE COMMISSION P AYMENTS CLAIMED BY THE ASSESSEE WERE ADDED BACK TO HER INCOM E. FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER ALSO MADE AN ADDITION ON ACCOUNT OF STOCK. THE ASSESSING OFFI CER ESTIMATED THE UNDISCLOSED INCOME, ON ACCOUNT OF FRA NCHISEE FEE, AT A CERTAIN PERCENTAGE FOR THE ASSESSMENT YEA RS 2001-02 TO 2006-07. NO ADDITION WAS MADE FOR THE ASSESSMENT YEAR 2006-07, ALTHOUGH A DISCLOSURE WAS MADE. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE PRODUCED ADDIT IONAL EVIDENCE UNDER RULE 46A OF THE INCOME-TAX RULES, 19 62, WHICH INCLUDED COPIES OF FRANCHISEE AGREEMENTS. A REJOIND ER WAS FILED BY THE ASSESSEE. ON ANALYSIS OF THE ADDITIONAL EVID ENCE, THE COMMISSIONER (APPEALS) HELD THAT THE ACCOUNTS OF TH E ASSESSEE HAD BEEN TAX AUDITED AND THAT NO ADVERSE REMARKS HA D BEEN PAGE 44 OF 60 MADE BY THE TAX AUDITORS. HE FURTHER HELD THAT THE ASSESSING OFFICER HAD NOT REJECTED THE BOOKS OF ACCOUNT OF TH E ASSESSEE. ACCORDINGLY, HE HELD THAT THE DISALLOWANCE OF THE FR ANCHISEE COMMISSIONS PAID WERE UNSUSTAINABLE AND DELETED THE ADDITIONS MADE. HE DELETED THE ADDITIONS MADE ON AC COUNT OF PAYMENT OF RENT, NON-REFUNDABLE SECURITY, INCOME FR OM SELF- CONTROLLED OUTLETS AND REDUCED THE ADDITION MADE ON ACCOUNT OF CLOSING STOCK. HE ALSO DELETED THE ADDITIONS OF UNDISCLOSED INCOME, MADE ON ACCOUNT OF FRANCHISEE FEE, ACCEPTIN G THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO DISCLOS URE MADE FOR EARLIER YEARS, OR ANY EVIDENCE UNEARTHED DURING THE SEARCH BY THE DEPARTMENT THAT SUCH FRANCHISEE FEE INCOME WA S NOT DISCLOSED BY HER. BOTH THE DEPARTMENT AND THE ASSES SEE FILED APPEALS BEFORE THE APPELLATE TRIBUNAL. ACCEPTING TH E CONTENTION OF THE ASSESSEE THAT FOR THE ASSESSMENT YEARS 2000- 01 TO 2003-04, THERE WAS NO INCRIMINATING MATERIAL S EIZED DURING THE COURSE OF SEARCH, AND THEREFORE, THE ASS ESSMENT ORDERS IN RESPECT OF THOSE YEARS OUGHT TO BE QUASHE D, THE APPELLATE TRIBUNAL HELD THAT THE ASSUMPTION OF JURI SDICTION UNDER SECTION 153 A FOR THOSE ASSESSMENT YEARS WAS I LLEGAL. IN RESPECT OF THE ASSESSMENT YEAR 2004-05, THE APPELLA TE TRIBUNAL HELD THAT THE ADDITIONS MADE WERE BASED ON SEIZED DO CUMENTS AND, THEREFORE, THE ASSESSMENT UNDER SECTION 153A WA S VALID. IT DISMISSED THE APPEALS FILED BY THE DEPARTMENT IN RESPECT OF THE DELETIONS MADE BY THE COMMISSIONER (APPEALS) AN D DISMISSED THE ASSESSEE'S APPEAL FOR NON-PROSECUTION . ON APPEALS: HELD, DISMISSING THE APPEALS, (I) THAT IT WAS ONLY I F DURING THE COURSE OF SEARCH UNDER SECTION 132 INCRIMINATING MA TERIAL JUSTIFYING THE REOPENING OF THE ASSESSMENTS FOR SIX PREVIOUS YEARS WAS FOUND THAT THE INVOCATION OF SECTION 153 A QUA EACH OF THE ASSESSMENT YEAR WOULD BE JUSTIFIED. 5.2 THE ABOVE JUDGMENT OF HON'BLE DELHI HIGH COURT HAS BEEN UPHELD BY HON'BLE SUPREME COURT AS THE SLP FILED BY REVENUE H AS BEEN DISMISSED WHICH IS REPORTED AT 96 TAXMANN.COM 468. HON'BLE DE LHI HIGH COURT IN ABOVE CASE HAS DISTINGUISHED THE CASE LAW OF DAYAWANT I GUPTA VS. CIT 390 ITR 496 (DEL) WHICH LEARNED D. R. HAD HEAVILY RELIED . THE CASE LAW OF PAGE 45 OF 60 HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF RAJ KUM AR ARORA 367 ITR 517, THOUGH SUPPORTS THE CONTENTIONS OF THE REVENUE BUT SINCE HON'BLE SUPREME COURT HAS DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE IN THE CASE OF MEETA GUTGUTIA THEREFORE, THE JUDGMENT OF JURISD ICTIONAL HIGH COURT WILL NOT HELP THE REVENUE. THE CONTENTION OF THE REVENU E THAT SINCE THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KABUL CHAWLA AND MEETA GUTGUTIA AS SLP IN TH E CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION 235 TAXMAN 568 (SC) HAS BEEN ADMITTED IS ALSO OF NO HELP TO REVENUE. THEREFORE, IN VIEW OF THE ABOVE CASE LAWS, WE HOLD THAT IN CASE OF COMPLETED ASSESSME NTS, THE ADDITION CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATE RIAL FOUND DURING SEARCH. WE HAVE ALREADY HELD THAT NO INCRIMINATING MATERIAL WAS FOUND FROM THE PREMISES OF THE ASSESSEE THEREFORE, THE AD DITIONS CANNOT BE MADE IN THE CASE OF COMPLETED ASSESSMENTS WHICH IN THIS CASE IS APPEAL FOR ASSESSMENT YEAR 2013-14 WHEREIN IN I.T.A. NO.510 THE ASSESSMENT ORDER WAS ALREADY PASSED U/S 143(3) ON 22/03/2016 WH ICH IS BEFORE THE SEARCH DATE OF 23/08/2016, COPY OF ASSESSMENT ORDER IS PLACED AT PAGES 51 TO 54 OF THE PAPER BOOK. SIMILARLY IN I.T.A. NO . 515, THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 23/03/2016 , THE COPY OF WHICH IS PLACED AT PAGES 54 TO 57 OF THE PAPER BOOK. SIM ILARLY IN I.T.A. NO.517 RELATING TO ASSESSMENT YEAR 2013-14, THE ASSESSMENT ORDER U/S 143(3) DATED 30/03/2016, A COPY OF WHICH IS PLACED IN PAPER BOOK AT PAGES 52 TO 56. THEREFORE, THE ASSESSMENTS IN THESE CASES STOO D COMPLETED. LEARNED COUNSEL FOR THE ASSESSEE HAD THOUGH ARGUED THAT THE ASSESSMENT FOR ASSESSMENT YEAR 2015-16 ALSO STOOD COMPLETED BUT IN OUR OPINION THE APPEALS FOR ASSESSMENT YEAR 2015-16 CANNOT BE SAID TO BE COMPLETED AS TIME FOR ISSUE OF NOTICE U/S 143(2) WAS STILL AVAILA BLE TO THE DEPARTMENT PAGE 46 OF 60 WHICH WAS UPTO 30/09/2016 WHEREAS THE SEARCH TOOK PLAC E ON 23/08/2016 WHICH MEANS THAT THERE WAS TIME AVAILABLE TO THE DEPA RTMENT TO ISSUE NOTICE U/S 143(2) THEREFORE, THE APPEALS FILED FOR ASSESSMENT YEAR 2015-16 CANNOT BE SAID TO HAVE COMPLETED. IN VIEW OF THE AB OVE DISCUSSION, GROUND NO. 2 & 7 OF THE APPEALS IN I.T.A. NO.510, 5 15 & 517 ARE ALLOWED. 6. THE OTHER COMMON LEGAL GROUND ARGUED BY LEARNED COUNSEL FOR THE ASSESSEE IN ALL APPEALS IS THAT THE ASSESSING OFFIC ER HAS NOT PROVIDED OPPORTUNITY TO THE ASSESSEES FOR CROSS EXAMINATION OF THIRD PARTIES ON WHOSE STATEMENTS THE ADDITION WAS MADE AND SUSTAINED BY THE AUTHORITIES. 7. THE RELEVANT GROUNDS OF APPEALS COVERING THIS GR IEVANCE OF THE ASSESSEE IS CONTAINED IN GROUND NO. 5 OF ALL APPEAL S. IN THIS RESPECT WE FIND THAT ASSESSEES HAVE BEEN DECLARING BUSINESS F ROM CLOTH TRADING SINCE ASSESSMENT YEAR 2011-12 AND HAVE ALSO BEEN REPORTIN G SUCH TURNOVER WITH THE VAT AUTHORITIES. ALL THE ASSESSEES ARE REGISTE RED WITH VAT DEPARTMENT WHEREIN CLOTH HAS BEEN MENTIONED AS ONE OF THE COMMO DITY FOR TRADING. THE VAT DEPARTMENT HAS PASSED ORDERS ALSO AND HAS A CCEPTED THE TURNOVER OF CLOTH DECLARED BY THE ASSESSEES. THE R ELEVANT DOCUMENTS RELATING TO VAT ARE PLACED IN PAPER BOOKS AS DETAIL ED BELOW: S.NO. NAME OF ASSESSEE COPY OF VAT DOCUMENTS ------- ------------------------------------------ ------ --------------------------------- 1. SIGMA CASTINGS LTD. P.B. PAGES 55 TO 61 2. KUNDAN CASTINGS (P) LTD. P.B. PAGES 58 TO 63 3. PARAS CASTINGS & ALLOYS (P) LTD. P.B. PAGES 57 TO 69 4. SHRI RADHEY RADHEY ISPAT (P) LTD. P.B. PAGES 5 7 TO 63 5. QUALITY INDIA (P) LTD. P.B. PAGES 48 TO 52 ADMITTEDLY, THE PAYMENTS AND RECEIPTS FOR ALL THE P URCHASES AND SALES HAVE BEEN MADE THROUGH BANKING CHANNELS. THE ASSESSING OFFICER, VIDE SHOW PAGE 47 OF 60 CAUSE NOTICE DATED 12/12/2018, CONFRONTED THE ASSES SEE THE FOLLOWING QUESTIONNAIRE: SUB:SHOW CAUSE NOTICE FOR ASSESSMENT PROCEEDINGS U/ S 153A/143(3) OF THE I.T. ACT FOR THE ASSESSMENT YEAR 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2017-18 REG. PLEASE REFER TO THE ASSESSMENT PROCEEDINGS PENDING BEFORE THE UNDERSIGNED OF THE I.T. ACT FOR ASSESSMENT YEAR 2012-13 TO 2017-18. FROM THE PERUSAL OF RECORDS AND THE DE TAILS FURNISHED BY YOU, IT IS NOTICED THAT YOU HAVE CLAIM ED TO HAVE MADE PURCHASES AND SALES OF CLOTH AS PER DETAILS GI VEN BELOW: ASSESSMENT YEAR TOTAL PURCHASES (RS.) TOTAL SALES (RS.) 2012 - 13 39,84,04,295 48,75,48,301 2013 - 14 25,11,10,095 28,87,36,832 2014 - 15 26,90,31,480 32,17,14,504 2015 - 16 50,02,71,240 59,97,21,277 2016 - 17 49,99,04,843 61,30,18,425 2017 - 18 44,83,60,330 48,07,39,041 DURING THE COURSE OF ASSESSMENT PROCEEDINGS YOU HAV E BEEN ASKED TO SUBMIT VARIOUS INFORMATION, EXPLANATIONS A ND EVIDENCES ABOUT THE TRANSACTIONS OF PURCHASE & SALE OF CLOTH BUSINESS. FROM THE FACTS PROVIDED BY YOU, IT IS CR YSTAL CLEAR THAT ALLEGED CLOTH TRADING IS ORIGINATING FROM ONE OF THE RICH GROUP OF COMPANIES AND AFTER TRAVELLING THROUGH SIG MA GROUP OF COMPANIES, IT IS AGAIN MERGING INTO ANOTHER RICH GROUP OF COMPANIES. RICH GROUP OF COMPANIES CONSISTING OF 14 COMPANIES AND INDIVIDUALS NAMELY SHRI ASHISH AGRAWAL AND SHRI SHAS HWAT AGARWAL, HAVE BEEN ESTABLISHED TO ACCOMMODATION ENTR Y PROVIDER IN THE FORM OF PROFIT THROUGH BOGUS SALES AND PURCHASE TRANSACTIONS, UNSECURED LOANS, BOGUS LONG TERM CAPITAL GAIN AND SUBSCRIPTION OF SHARE CAPITAL AT P REMIUM TO THE PARTY BY ACCEPTING UNDISCLOSED CASH AND COMMISS ION. THE FACTS WERE ESTABLISHED DURING THE COURSE OF SURVEY/ SEARCH & SEIZURE OPERATION AS WELL AS ASSESSMENT PROCEEDINGS OF RICH GROUP OF CASES AND MOST IMPORTANTLY IT WAS ALSO HELD BY PAGE 48 OF 60 HON'BLE ALLAHABAD HIGH COURT DURING THE COURSE OF H EARING OF WRIT PETITIONS FILED BY RICH GROUP OF COMPANIES. T HE ALLEGED TRANSACTIONS IN CLOTH TRADING BY RICH GROUP OF COMP ANIES COULD NOT BE VERIFIED FROM THEIR BOOKS OF ACCOUNT AND SAL ES TAX DEPARTMENT AS WELL. FURTHER, YOU HAVE ALSO FAILED T O PROVE THAT GENUINENESS OF TRANSACTIONS IN CLOTH TRADING D URING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH IS EVIDENT F ROM THE FOLLOWING FACTS: ALL THE PURCHASES HAVE ORIGINATED FROM ONE OF RICH GROUP OF COMPANIES AND AGAIN THE SAME WAS SOLD TO RICH GROUP COMPANIES ONLY. THUS, IT IS JUST A CIRC ULAR TRADING FOR PROVIDING/GETTING ACCOMMODATION ENTRIES IN THE FORM OF BOGUS PROFIT. EVEN A LAYMAN CAN UNDERSTAND THAT THERE WAS NO LOGIC FOR MAKING PURCHASE FROM ONE OF THE RICH GROUP OF COMPANIES BY THE ASSESSEE AND AGAIN SELLING THE SAM E TO ANOTHER COMPANIES OF RICH GROUP DIRECTLY OR THRO UGH ITS SISTER CONCERN, WHEN THE MAIN BUSINESS OF ASSES SEE WAS OF MANUFACTURING AND TRADING IN IRON & STEEL. APPARENTLY, IF ONE COMPANY OF RICH GROUP WOULD HAVE REQUIRED CLOTH, IT COULD HAVE PURCHASED DIRECTLY FR OM ITS ANOTHER GROUP COMPANY, WHICH IN MOST OF THE CASES AR E SITUATED IN SAME CAMPUS, INSTEAD OF PURCHASING AND SELLING THE SAME FROM/THROUGH SIGMA GROUP OF COMPANIES. DURING THE ASSESSMENT PROCEEDINGS ASSESSEE HAS STAT ED THAT WHOLE SALE CLOTH BUSINESS DONE BY THE ASSESSEE WAS CONDUCTED AT LOWER GROUND FLOOR OF THE PROPERTY SITUATED AT 122/235, FAZALGANJ KANPUR. HOWEVER, DURING THE COURSE OF SEARCH & SEIZURE OPERATION IN SIGMA GROUP OF CASES AT THE PREMISES 122/235, FAZALGANJ, KANPUR, SHRI ANKUR GUPTA, EMPLOYEE OF M/ S SHRI RADHEY RADHEY ISPTAL PVT. LTD. AND ALSO ITS SIGNATORY, STATED THAT CLOTH TRADING HAS BEEN CONDU CTED IN SIGMA CASTING LTD. & SHREE RADHEY RADHEY ISPAT P VT. LTD. FROM FINANCIAL YEAR 2011-12 AND IN M/S KUNDAN CASTING LTD. DURING FINANCIAL YEAR 2012-13 AND 2013 -14 BUT FAILED TO GIVE ANY DETAILS AS TO WHERE STOCK OF CLOTH WAS BEING STORED AS NO TRACE OF ANY CLOTH WHATEVER WAS FOUND DURING THE SEARCH. THUS THE ASSESSEE COULD N OT PAGE 49 OF 60 SUSBSTANTIATE THE ALLEGED CLOTH TRADING DURING THE SEARCH & SEIZURE OPERATION. DURING THE SEARCH & SEIZURE OPERATION AT 122/235, FAZALGANJ, KANPUR NO STOCK OF CLOTH WAS FOUND AND EV EN SAMPLE OF CLOTH WAS ALSO NOT FOUND. THE ASSESSEE WAS ALSO ASKED TO SUBMIT NAME OF THE RETAILERS, WHERE THE CLOTH TRADED BY IT, IS AVAILABL E FOR END USERS, IT SIMPLY REPLIED THAT IT DID NOT DEAL WI TH RETAILERS. IT IS HIGHLY IMPROBABLE THAT THE ASSESS EE GROUP COMPANIES WHICH ARE HAVING HUGE TURNOVER OF AROUND 1000 CRORE FROM FINANCIAL YEAR 2011-12 TO 20 16- 17, DID NOT BOTHER TO KNOW WHERE CLOTHS TRADED BY IT ARE BEING SOLD TO END USERS (CUSTOMERS). A BUSINESS MA N CANNOT BE SO INDIFFERENT ABOUT THE PRODUCT, HE IS D EALING IN, WHEN HE IS EARNING NET PROFIT OF AROUND 15%. ASSESSEE WAS ALSO ASKED TO NAME THE DESCRIPTION OF GOODS TRADED INCLUDING ITS BRAND NAME ETC. IN ITS R EPLY ASSESSEE STATED THAT IT DEALT IN UNBRANDED GOODS AN D THE SAME WERE IDENTIFIED FROM RESOURCES POINT OR THE IR POPULAR NAME, BUT FAILED TO GIVE DETAILS OF RESOURC E POINT OR POPULAR NAME. THE RATE OF THE CLOTHS MENTIONED IN THE DIFFERENT INVOICES ARE UNREASONABLY HIGH AND SEEMS TO BE UNREALISTIC. THAT NO CORRESPONDENCE TRAIL THROUGH PAPER, E-MAIL, WHATSAPP OR PHONE ETC. HAS BEEN SEEN DURING THE COURSE OF SEARCH AS WELL AS ASSESSMENT PROCEEDINGS. THOUGH KANPUR IS THE OLDEST AND BIGGEST HUB (MANDI) OF WHOLE SALE CLOTH TRADING, IT IS SURPRISING TO NOTE T HAT ALL THE SUPPLIERS AND CUSTOMERS OF THE ASSESSEE ARE ONL Y COMPANIES OF RICH GROUP. FROM THE DETAILS PROVIDED BY YOU IT IS FOUND THAT N O MANPOWER HAS BEEN ENGAGED IN THE HUGE TRADING ACTIVITIES IN CLOTH, WHICH SHOWS THAT THE TRANSACTION CLAIMED IN CLOTH TRADING ARE ONLY PAPER/BOGUS TRANSACTIONS. IN VIEW OF THE ABOVE FACTS, IT IS CRYSTAL CLEAR THAT ALLEGED CLOTH TRADING SHOWN IN YOUR BOOKS OF ACCOUNT IS ONLY BOOK ENTRIES AND BOGUS IN NATURE. HENCE, YOU ARE REQUIR ED TO SHOW CAUSE AS TO WHY NET OF BOGUS SALE AND PURCHASE PAGE 50 OF 60 CREDITED IN YOUR BOOKS OF ACCOUNT BE NOT TREATED AS CASH CREDIT U/S 68 OF THE I.T. ACT AND COMMISSION PAID T HEREON BE NOT TREATED AS UNEXPLAINED EXPENDITURE FROM UNDISCLOSED INCOME U/S 69C OF THE I.T. ACT AND ACCO RDINGLY WHY THESE DEEMED INCOMES U/S 68 BE NOT TAXED U/S 115BBE OF THE I.T. ACT. THE DATE FIXED FOR COMPLIANCE IS 22/12/2018. 8. THE ASSESSEE VIDE LETTER DATED 21/12/2018 IN REP LY TO QUESTIONS RAISED IN THE QUESTIONNAIRE SUBMITTED THAT THE ASSE SSING OFFICER WAS USING THE INFORMATION ON THE BASIS OF STATEMENT OF THIRD PARTY WITHOUT CONFRONTING TO THE ASSESSEE WHICH WAS NOT IN ACCORDA NCE WITH LAW. IN THIS RESPECT THE ASSESSEE HAD ALSO REPLIED TO OTHER QUER IES OF THE ASSESSING OFFICER. FOR THE SAKE OF COMPLETENESS THE REPLY TO THE SHOW CAUSE NOTICE PLACED AT PAGES 120 TO 122 OF THE PAPER BOOK, IS RE PRODUCED BELOW: RE: SHOW CAUSE NOTICE DATED 12.12.2018 IN THE CASE OF M/S. SIGMA CASTINGS PVT LTD. IN CONNECTION WITH ASSESSMENT PROCEEDINGS UNDER SECTION 153 A OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2013- 14 EXPLANATION REGARDING. WITH REFERENCE TO YOUR NOTICE REFERRED ABOVE, WE WISH TO EXPLAIN AND SUBMIT AS UNDER: 1)PRE-CONCEIVED INFERENCES; A SEARCH WAS CONDUCTED ON 23.08.2016 (CONCLUDING ON 25.08.2016) AND DESPITE ALMOST 27 MONTHS PASSED FRO M THE SAID DATE, NO ENQUIRY EXCEPT FROM SHRI ANKUR GUPTA 2-3 QUESTIONS WERE ASKED DURING THE COURSE OF SEARCH AT THE OFFICE OF M/S. RADHEY RADHEY ISPAT PVT. LTD. GROUP, ABOUT THE CLOTH TRADING, NO MEANINGFUL ENQUIRY WAS DONE FROM ANY RES PONSIBLE PERSON OF THE ASSESSEE GROUP TILL NOW. HOWEVER, IN TH E SHOW CAUSE NOTICE BASED ON THIRD PARTY INFORMATION, THAT TOO NEVER CONFRONTED TO THE ASSESSEE FOR REBUTTAL/EXPLANATION , PRE- PAGE 51 OF 60 CONCEIVED INFERENCES HAVE BEEN DRAWN RELATING TO THE CLOTH TRADING DONE BY THE ASSESSEE. 2)TWISTING OF FACTS; CERTAIN FACTS MENTIONED IN THE SHOW CAUSE NOTICE ARE NOT PART OF ASSESSMENT RECORD OF THE ASSESSEE OR M/S. RADHEY RADHEY ISPAT PVT. LTD. GROUP OF CASES. FOR EXAMPLE CLOTH T RADING UP TO 30.06.2017 WAS NOT SUBJECTED TO ANY VAT/SALES TAX ST ILL INFERENCE HAS BEEN DRAWN BY SAYING THAT NO INFORMATI ON COULD BE OBTAINED FROM SALES TAX DEPARTMENT. FURTHER, THE ASSESSEE GROUP AS A WHOLE AND ASSESSEE IN PARTICULAR WAS DEALING IN WHOLESALE BUSINESS OF UNBRANDED CLOTH, WHI CH HAS HIGH MARGIN, COMPARED TO BRANDED CLOTH TRADING. WHE REAS, IN THE SHOW CAUSE NOTICE, FIRSTLY ADVERSE INFERENCE HAS ALREADY BEEN DRAWN BY PRESUMING THAT THE ASSESSEE HAD NO RET AIL OUTLET, SHOP OR RETAILERS TO DEAL WITH. SIMILARLY CE RTAIN QUESTIONS RELATING TO BUSINESS ACTIVITIES WERE ASKED FROM MANAGER (ACCOUNTS) MR. ANKUR GUPTA, WHO WAS NOT AT AL L CONCERNED WITH SALES, PURCHASES OR MANAGEMENT OF INV ENTORY ETC. OF THE CLOTH TRADING DONE BY THE ASSESSEE. ALL THESE ISSUES CLEARLY SHOW THAT FACTS IN THE PRESENT SHOW CAUSE HAV E BEEN TWISTED TO SUIT YOUR CONVENIENCE, WHIMS AND FANCIES. OVERALL, MANAGEMENT OF CLOTH TRADING ON WHOLESALE BASIS WAS D ONE BY SHRI NAVIN JAIN, DIRECTOR. 3)DENCNDENCE ON SEARCH IN THE CASE OF RICH GROUP OF COMPANIES: THE SHOW CAUSE NOTICE PRIMARILY RESTS ON/AROUND A SE ARCH AND HIGH COURT PROCEEDINGS OF SHRI ASHISH AGARWAL AN D SHRI SHASHWAT AGARWAL AND RICH GROUP OF COMPANIES. FIRSTLY THEIR REFERENCE IN THE PRESENT PROCEEDINGS IS UNCALLED FO R AND SECONDLY THE ORDERS, DOCUMENTS, OTHER INFORMATION R ELIED UPON AND MENTIONED IN THE SHOW CAUSE NOTICE AND LIKELY T O BE USED AGAINST THE NOTICEE WERE NEVER CONFRONTED TO THE ASS ESSEE IN ACCORDANCE WITH STANDARD OPERATING PROCEDURE FOLLOWED UNDER THE INCOME TAX LAW, THEREFORE, ALL THIS IS NON COGN IZABLE AND CANNOT BE MADE BASIS FOR COMPLETION OF ASSESSMENT I N THE PRESENT CASE. WITHOUT PREJUDICE, YOU ARE REQUESTED TO KINDLY CONFRONT ALL INFORMATION, DOCUMENTS, ORDERS PAGE 52 OF 60 REFERRED TO IN YOUR SHOW CAUSE NOTICE RELATING TO ANY THIRD PARTY TO THE ASSESSEE BY PROVIDING ORIGINAL OR CERTIFIED TRUE COPY FOR EXPLANATION/REBUTTAL AND TILL THEN THEY SHOULD NOT BE USED TO DRAW ANY ADVERSE INFERENCE IN THE CASE OF THE ASSESSEE. 4)POINTWISE EXPLANATION: I) SHRI ASHISH AGARWAL ARID SHRI SHASHWAT AGARWAL: AT THE OUTSET, IT IS EXPLAINED THAT THE ASSESSEE HAS NO DE ALINGS EITHER WITH SHRI ASHISH AGARWAL OR SHRI SHASHWAT AGARWAL, IN THEIR INDIVIDUAL CAPACITY. II) IT IS A COMMON UNDERSTANDING THAT AN INDIVIDUAL IS DIFFERENT FROM A JURIDICAL PERSON AND VISE VERSA. T HE ASSESSEE COMPANY HAD DEALINGS WITH CERTAIN COMPANIES BUT THOSE COMPANIES ARE DIFFERENT FROM THEIR SHAREHOLDERS AND/OR DIRECTORS, HENCE THE INFERENCES DRAWN IN THE INITIAL 2-3 PARAGRAPHS OF THE SHOW CAUSE NOTICE ARE UNFOUNDED AND UNWARRANTED. III) SALES TAX: THE ASSESSEE COMPANY IS REGISTERED UNDER UPVAT FOR TRADING IN CLOTH, HENCE THE INFERENCE RELATING TO S ALES TAX INFORMATION NOT RECEIVED FROM SALES TAX DEPARTMENT IN THE CASE OF THIRD PARTY REFERRED TO I N YOUR SHOW CAUSE NOTICE IS NEITHER RELEVANT NOR MEANINGFUL IN THE PRESENT CASE. FURTHER, A COPY OF VAT REGISTRATI ON, ANNUAL RETURN AND COPY OF ORDER ETC. OF THE ASSESSE E COMPANY HAS ALREADY BEEN FILED WITH EARLIER REPLIES. IV) GODOWN; THE ASSESSEE GROUP HAS TAKEN 2 GODOWNS AND 5 SHOPS O N RENT AS PER DETAILS GIVEN BELOW: GODOWN/SHOP NO. PREMISES NO. OWNER OF SHOP/GODOWN TENANT OF SHOP/ GODOWN PAGE 53 OF 60 1 TO 5 (FIVE SHOPS) 2 GODOWNS 122/325 PLOT NO. 17, FAZAL GANJ KANPUR SIGMA CASTING LTD., 122/225, PLOT NO. 17, FAZALGANJ, KANPUR L)SHREE RADHEY RADHEY ISPAT PVT. LTD. 2)KUNDAN CASTING (P) LTD. 3)PARAS CASTING & ALLOYS PVT. LTD. 4)SADAHARI SHAKTI PVT. LTD. THE ASSESSEE COMPANY WAS AUTHORIZED (LICENSED) USER OF GODOWN AND SHOPS FOR ITS CLOTH TRADING BUSINESS BESI DES USING THE SAME FOR OTHER BUSINESS ACTIVITY(IES), HENCE TH E SPACE REQUIRED FOR HOLDING OF STOCK FROM TIME TO TIME WAS SUFFICIENT AND HAVE BEEN UNNECESSARILY IGNORED TO DRAW ADVERSE INFERENCE IN THE SHOW CAUSE NOTICE. STOCK NOT EXISTENT AT THE TIME OF SURVEY/SEARCH: THE CLOTH TRADING WAS DISCONTINUED BY THE ASSESSEE A ND SOME OTHER ASSESSEE GROUP COMPANIES WITH EFFECT FROM 31.0 3.2016, BUT THE SEARCH/SURVEY WAS CONDUCTED IN M/S. RADHEY R ADHEY ISPAT PVT. LTD. GROUP ON 23.08.2016, I.E. ALMOST AF TER GAP OF 5 MONTHS, HENCE IN THE COURSE OF SEARCH, NO STOCK OF CLOTH WAS FOUND. AS AFORESAID THE ASSESSEE WAS ENGAGED IN WHOL ESALE TRADING OF CLOTH AND THEREFORE, QUESTION OF FINDING OUT SAMPLES OR SOME STOCK OF CLOTH, IS TOTALLY IRRELEVANT AS AL LEGED IN THE SHOW CAUSE NOTICE. MARGIN OF PROFIT; AS AFORESAID THE ASSESSEE AND OTHER GROUP COMPANIES WERE DEALING WITH UNBRANDED CLOTH ON WHOLESALE BASIS, WHICH HAD VERY GOOD AND HIGHER MARGIN THAN BRANDED CLOTH TRAD ING. IT IS NOT UNDERSTOOD HOW THE SAME WAS FOUND UNRELIABLE. STAFF IT IS ALSO NOT CORRECT THAT THE ASSESSEE COMPANY DI D NOT DEPLOY PROPER STAFF FOR WHOLESALE TRADING IN UNBRAND ED CLOTH DURING THE RELEVANT YEARS. FOLLOWING STAFF MEMBERS WE RE ENGAGED IN WHOLESALE TRADING OF UNBRANDED CLOTH: S.N. NAME OF THE STAFF WORK LOOKED AFTER DESIGNATION SALARY PAGE 54 OF 60 1. MR. ANKUR GUPTA ACCOUNTS DEPTT. MANAGER 35,500/- 2. MR. R.S. CHAUHAN MARKETING/SALES ACCOUNTANT 8,000/- 3. MR. ATUL SHUKLA PURCHASE/SALES ACCOUNTS CLERK 7,000/- 4. MR. RAM PRATAP SINGH GODOWN/STOCK ACCOUNTANT 8,000/- VIII) IT IS REITERATED THAT - A)WHOLE SALE TRADING IN UNBRANDED CLOTH DONE BY THE ASSESSEE IN F.Y. 2012-13 RELEVANT TO A.Y. 2013-14 FULLY MENT IONED IN THE ABOVE REFERRED SHOW CAUSE NOTICE IS GENUINE, CAR RIED ON IN THE ORDINARY COURSE OF BUSINESS AND FULL AND PROPER BILLS, VOUCHERS AND BOOKS OF ACCOUNT ARE MAINTAINED BY THE ASSESSEE AND ARE AMENABLE TO COMPLETE VERIFICATION. B)NO COMMISSION WAS PAID AS ALLEGED IN THE LAST PARA GRAPH OF YOUR NOTICE. IN VIEW OF THE FACTS AND CIRCUMSTANCES NARRATED ABOV E AND DETAILED EXPLANATION GIVEN ON EACH POINT RAISED IN THE SHOW CAUSE NOTICE PROPOSING TO INVOKE PROVISION IN SECTI ON 68 AND 69C OF THE INCOME TAX ACT, 1961 AND TO TREAT CLOTH TRADING AS BOGUS AND ALLEGED COMMISSION PAID THEREON AS UNEXPL AINED EXPENDITURE IS DEVOID OF MERITS, UNFOUNDED AND BASE D MERELY ON BALD HYPOTHESIS THEREFORE, NO ADVERSE INFERENCE DESERVES TO BE DRAWN ON THIS ACCOUNT. WE HOPE THAT THE ABOVE DETAILS/INFORMATION WILL MEET YOUR REQUIREMENT AND SATISFY YOUR GOODSELF IN TERMS OF Y OUR REFERENCED SHOW CAUSE NOTICE. 9. FROM THE ABOVE QUESTIONNAIRE AND REPLY TO THE QU ESTIONNAIRE, IT IS CLEAR THAT THE AUTHORITIES BELOW HAVE NOT CITED ANY STATEMENT OF THE PARTIES FROM WHOM THE PURCHASES AND SALES WERE MADE WHEREIN TH EY HAD DENIED THESE TRANSACTIONS AND IF THERE ARE ANY STATEMENTS OF THESE PARTIES WHEREIN THEY HAD DENIED THESE TRANSACTIONS, SUCH STATEMENTS WERE NOT MADE AVAILABLE TO THE ASSESSEE FOR CROSS EXAMINATION. TH E ASSESSEE IN PARA 3 OF PAGE 55 OF 60 THE ABOVE REPLY HAD SPECIFICALLY REQUESTED TO CONFR ONT ALL INFORMATION AND DOCUMENTS ETC. BUT NO SUCH OPPORTUNITY WAS GRANTED T O ASSESSEE. THE ARGUMENT OF LEARNED D. R. THAT SINCE THE HON'BLE AL LAHABAD HIGH COURT HAD HELD THE PARTIES TO BE BOGUS THEREFORE, THERE WA S NOTHING TO BE CONFRONTED TO ASSESSEES IS NOT HELPFUL TO THE REVEN UE AS OPPORTUNITY OF CROSS EXAMINATION OF THIRD PARTIES ON WHOSE STATEME NTS THE REVENUE IS RELYING IS A LEGAL RIGHT AVAILABLE TO THE ASSESSEE AND WHICH HAS BEEN HELD BY VARIOUS HON'BLE COURTS INCLUDING SUPREME COURT I N THE CASE OF ANDMAN TIMBER INDUSTRIES VS. CIT 281 CTR 241. MOREOVER, WE FIND THAT THE ASSESSING OFFICER HAD MADE THE ADDITIONS ON THE BAS IS OF A REPORT FROM THE ASSESSING OFFICER OF RICH GROUP OF COMPANIES AND HA S NOT CARRIED OUT ANY INDEPENDENT INVESTIGATIONS FOR HOLDING THE TRANSACT IONS OF CLOTH TRADING AS BOGUS. THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COU RT HAS BEEN PASSED ON THE WRIT PETITION FILED BY TWO COMPANIES BELONGIN G TO RICH GROUP. THESE COMPANIES HAD PRAYED TO THE HON'BLE HIGH COUR T TO QUASH THE SEARCH DUE TO WARRANT OF AUTHORIZATION, SATISFACTION NOTE AND INCRIMINATING MATERIAL ETC. THE HON'BLE COURT HAS DISMISSED THE WRIT PETITIONS BY HOLDING THAT THE COMPANIES WERE TAKING CASH FROM SOME PARTIE S AND WERE GIVING CHEQUES TO OTHER PARTIES AND THEREFORE, HON'BLE COU RT HAD HELD THAT THESE COMPANIES WERE DOING MONEY LAUNDERING IN THE FORM OF UNACCOUNTED CASH. IN THE FINDINGS THE HON'BLE COURT HAS NOWHERE COMMEN TED ON THE ACTIVITIES OF CLOTH TRADING BEING UNDERTAKEN BY THESE COMPANIE S. MOREOVER, THE FACT REMAINS THAT EITHER THERE WAS NO STATEMENT OF COMPAN IES DENYING CLOTH TRADING WITH THE ASSESSEES AND IF THERE WAS ONE THEN SAME HAS NOT BEEN CONFRONTED TO THE ASSESSEES FOR CROSS EXAMINATION D ESPITE SPECIFIC REQUEST OF THE ASSESSEE. THE ENTRIES OF PURCHASES AND SALE S ARE SUPPORTED BY INVOICES AND ARE FURTHER SUPPORTED WITH THE FACT THA T THESE WERE REPORTED PAGE 56 OF 60 TO VAT AUTHORITIES. THE PAYMENTS AND RECEIPTS ARE THROUGH BANKING CHANNELS. 10. THE ASSESSEE HAS RECORDED THE ENTRIES OF SALES AND PURCHASE IN ITS BOOKS OF ACCOUNT AND HAS DULY DISCLOSED THE ITEMS O F SALES AND PURCHASE IN THE PROFIT & LOSS ACCOUNT AND HAS DULY DISCLOSED TH E PROFIT EARNED ON THE TRADING IN THE PROFIT & LOSS ACCOUNT AND HAS OFFERE D THE SAME AS BUSINESS INCOME. THE ASSESSEE HAS FURNISHED AS MUCH INFORMA TION AS POSSIBLE TO JUSTIFY ITS CLAIM ABOUT THE TRANSACTIONS OF CLOTH B EING GENUINE. UNDER THESE CIRCUMSTANCES, HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ODEON BUILDERS PVT. LTD. [2019] 418 ITR 315 (SC) HAS DECI DED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 1. DELAY CONDONED. 2. WE HAVE PERUSED THE REVIEW PETITION AND FIND THAT THE TAX EFFECT IN THIS CASE IS ABOVE RS.1 CRORE, THAT IS, R S.6,59,27,298/-. ORDINARILY, THEREFORE, WE WOULD HAVE RECALLED OUR ORD ER DATED 17 TH SEPTEMBER, 2018, SINCE THE ORDER WAS PASSED ONLY O N THE BASIS THAT THE TAX EFFECT IN THIS CASE IS LESS THAN RS.1 CRORE. 3. HOWEVER, ON GOING THROUGH THE JUDGMENTS OF THE CI T, ITAT AND THE HIGH COURT, WE FIND THAT ON MERITS A DISALLO WANCE OF RS.19,39,60,866/- WAS BASED SOLELY ON THIRD PARTY I NFORMATION, WHICH WAS NOT SUBJECTED TO ANY FURTHER SCRUTINY. THUS , THE CIT (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE STATING : 'THUS, THE ENTIRE DISALLOWANCE IN THIS CASE IS BASED ON THIRD PARTY INFORMATION GATHERED BY THE INVESTIGATI ON WING OF THE DEPARTMENT, WHICH HAVE NOT BEEN INDEPENDENTLY SUBJECTED TO FURTHER VERIFICATION BY THE AO WHO HAS NOT PROVIDED THE COPY OF SUCH STATEMENTS TO THE APPELLANT, THUS DENYING OPPORTUNITY OF CROSS EXAMIN ATION TO THE APPELLANT, WHO HAS PRIMA FACIE DISCHARGED THE INITIAL BURDEN OF SUBSTANTIATING THE PURCHASES THRO UGH VARIOUS DOCUMENTATION INCLUDING PURCHASE BILLS, PAGE 57 OF 60 TRANSPORTATION BILLS, CONFIRMED COPY OF ACCOUNTS AN D THE FACT OF PAYMENT THROUGH CHEQUES, & VAT REGISTRATION OF THE SELLERS & THEIR INCOME TAX RETURN. IN VIEW OF T HE ABOVE DISCUSSION IN TOTALITY, THE PURCHASES MADE BY THE APPELLANT FROM M/S PADMESH REALTORS PVT. LTD. IS FO UND TO BE ACCEPTABLE AND THE CONSEQUENT DISALLOWANCE RESULT ING IN ADDITION TO INCOME MADE FOR RS.19,39,60,866/-, I S DIRECTED TO BE DELETED.' 4. THE ITAT BY ITS JUDGMENT DATED 16 TH MAY, 2014 RELIED ON THE SELF-SAME REASONING AND DISMISSED THE APPEAL OF THE REVENUE. LIKEWISE, THE HIGH COURT BY THE IMPUGNED JUDGMENT DA TED 5 TH JULY, 2017, AFFIRMED THE JUDGMENTS OF THE CIT AND I TAT AS CONCURRENT FACTUAL FINDINGS, WHICH HAVE NOT BEEN SHO WN TO BE PERVERSE AND, THEREFORE, DISMISSED THE APPEAL STATI NG THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE IMPUGNED ORDER OF THE ITAT. 5. IN THESE CIRCUMSTANCES, THE REVIEW PETITIONS ARE DISMISSED. 11. SIMILARLY WE FIND THAT HON'BLE SUPREME COURT IN THE CASE OF ANDMAN TIMBER INDUSTRIES VS. CIT, VIDE ORDER DATED 2 ND SEPTEMBER, 2015 ALLOWED RELIEF TO THE ASSESSEE BY HOLDING THAT RIGHT OF CROSS EXAMINA TION IS AN IMPORTANT RIGHT AVAILABLE TO THE ASSESSEE AND NOT PROVIDING OPPORTU NITY TO CROSS EXAMINE WILL AMOUNT TO VIOLATION OF PRINCIPLES OF NATURAL JUSTIC E. THE FINDINGS OF HON'BLE SUPREME COURT ARE REPRODUCED BELOW: INSOFAR AS THE PLEA OF THE APPELLANT THAT IT WAS NO T ALLOWED TO CROSS-EXAMINE THE DEALERS WHOSE STATEMENTS WERE RELIED UPON BY THE ADJUDICATING AUTHORITY IN PASSIN G THE ORDERS, THE TRIBUNAL REJECTED ITS PLEA IN THE FOLLO WING MANNER: '6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SI NCE THE EXAMINATION OF THE DEALERS WOULD NOT BRING OUT A NY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOL DING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER PAGE 58 OF 60 SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS.' CHALLENGING THE AFORESAID ORDER, THE PRESENT APPEAL IS PREFERRED BY THE APPELLANT-ASSESSEE. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUN SEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNA N, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS- EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDE R NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRI NCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS AD VERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPU TED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROS S- EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT T HIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT T O NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AU THORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUN ITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WIT H BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS C ONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENAB LE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION O F THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHIC H WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES T HE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION . THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPO N THE PRICE PAGE 59 OF 60 LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PR ICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WE RE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRIC E WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUB JECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJ UDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJ ECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARK S AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN E ARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN C IVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIR ECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED,, THE RE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESA ID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUS E NOTICE. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 12. THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF MORNING GLORY VIDE ORDER DATED 15/03/2019 IN I.T.A. NO.72/LKW/201 8, HAS ALLOWED RELIEF TO THE ASSESSEE WHEREIN AGAIN THE STATEMENTS OF THI RD PARTIES WERE NOT MADE AVAILABLE TO ASSESSEE FOR CROSS VERIFICATION. THE HON'BLE TRIBUNAL HAD FOLLOWED THE JUDGMENT OF HON'BLE SUPREME COURT IN TH E CASE OF ANDMAN TIMBER INDUSTRIES (SUPRA) BESIDES NOTING DOWN THE OT HER DECISIONS. THEREFORE, IN VIEW OF THE ABOVE, WE ALLOW GROUND NO. 5 IN ALL THE APPEALS. 13. HAVING ALLOWED GROUND NO. 5, THE ADDITIONS SUSTA INED BY LEARNED CIT(A) U/S 68 AND 69C ARE NOT SUSTAINABLE AND HENCE ARE DELETED. PAGE 60 OF 60 14. NOTHING WAS ARGUED ON OTHER LEGAL GROUNDS TAKEN BY THE ASSESSEE IN THE GROUNDS OF APPEALS. THEREFORE, SAME ARE DISMIS SED AS NOT PRESSED. 15. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE A SSESSEE ARE PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN ON 16/12/2020 IN ACC ORDANCE WITH RULE 34(4) OF I.T. ACT RULES) SD/. SD/. ( A. D. JAIN ) ( T. S . KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:16/12/2020 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW