TEH ACIT, CENTRAL CIRCLE-1(3), AHMEDABAD V. ASHISH P PATEL, AHMEDABAD

ITSSA 470/AHD/2019

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A) which had provided relief to the assessee, Ashish P. Patel, in the context of income tax assessments for the years 2001-02 and 2002-03. The primary issues revolved around the additions made by the Assessing Officer (AO) under Section 153A of the Income-tax Act, 1961, following a search operation. The Revenue contested the CIT(A)'s decision to delete certain additions related to interest income and disallowances under Section 14A, while the assessee challenged the additions made based on the undisclosed income and interest income. The Tribunal examined the legal interpretations of Sections 153A and 245D, the procedural adherence in issuing notices, and the substantive evidence required to substantiate the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41255 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Other Referred Cases: Anantnadh Constructions and Farms (P.) Ltd. Vs. DCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: VARTIKCHOKSHI; BIREN SHAH; ARS; WAY OF CROSSOBJECTION ARE
• Keywords: Set aside; Search and seizure; Notional interest; Validity of assessment
• Section: 250; 192; 153; 132; 153A; 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos. 192 & 194/Ahd/2019 (Assessment Years: 2001-02 & 2002-03) Assistant Commissioner of Income-tax, Central Circle-1(3), Ahmedabad Vs. Ashish P. Patel, 1st Floor, Chinubhai Chambers, B/h. City Gold Cinema, Off. Ashram Road, Ahmedabad [PAN : ACTPP 0045 R] (Appellant) .. (Respondent & Cross Objector) Assessee by : Shri Vartik Chokshi & Shri Biren Shah, ARs Revenue by: Shri B.P. Srivastava, Sr DR Date of Hearing 28.11.2024 Date of Pronouncement 20.02.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT : These appeals filed by the Revenue and the corresponding Cross- objections thereof filed by the assessee are directed against separate orders of the learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as \"CIT(A)\" for short), both dated 15.07.2019 passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as \"the Act\" for short) for the Assessment Years (AY) 2001-02 & 2002-03. 2. The Revenue has taken following grounds of appeal in IT(SS)A No.461/Ahd/2019 for AY 2001-02 :- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s. 153 has to be confined to the incriminating material found during IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 2– the course of search u/s. 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls, would not be applied where a search was initiated u/s 132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that addition of Rs.3,71,11,615/- being interest income and Rs.20,775/- being disallowance u/s 14A of the Act are beyond the scope of section 153A of the Act and thus deleting the said additions/disallowances. IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 3– 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,71,11,615/- made on account of interest on loans/advances even on merits without appreciating the materials facts and evidences brought on record by the AO. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 8. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” \\ 3. The grounds raised by the Revenue in in IT(SS)A No.470/Ahd/2019 read as under :- “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,55,72,662/- made on account of interest on loans/advances of Rs. 1,95,000/- on account of unexplained cash deposit and of Rs.21,566/- being disallowance u/s 14A. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in also holding that additions of Rs.3,55,72,662/- being interest income and Rs. 1,95,000/- being unexplained cash deposit & Rs 21,566/- being disallowance u/s 14A of the Act are beyond the scope of section 153A of the Act and thus deleting the said additions / disallowances. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that any addition during the assessment u/s. 153A has to be confined to the incriminating material found during the course of search u/s.132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 4– to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec.158BB falls, would not be applied where a search was initiated u/s.132 after 31/5/2003. 6. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in the case of the assessee, and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 8. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 4. The grievances raised by the assessee by way of Cross-Objection are as follows:- “1. On the facts and in the circumstances of the case, the CIT(A) erred in upholding the validity of Assessment Order passed under Section IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 5– 153A of the Act without appreciating the fact that such order is passed beyond the time limit prescribed under Section 153B of the Act. 2. On the facts and in the circumstances of the case, the CIT(A) erred in directing the AO to make addition of interest income of Rs.21,46,250 based upon loose paper found during the course of search and inventoried as page No. 84 of Annexure - A/1 without appreciating the fact that such loose paper is rough noting and jotting and even noting pertaining to interest income nowhere proves that such interest income is actually received by appellant. 2.1 On the facts and in the circumstances of the case, the CIT(A) ought to have appreciated that loose paper referred by AO while passing Assessment Order of AY 2003-04 itself contain noting that outstanding amount is not received by appellant till the date of noting and even such amount was not considered as income by AO while passing Assessment Order. 3. On the facts and in the circumstances of the case, the CIT(A) erred in upholding addition of Rs. 15,00,000 (AY 2001 & 2002) and Rs.15,50,000/- (AY 2002-03) based upon ad hoc disclosure made in Settlement Application which was subsequently rejected and such disclosure was made only to cover any discrepancies. 4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same.” IT(SS)A No.461/Ahd/2019 for AY 2001-02 : 5. We take IT(SS)A No.461/Ahd/2019 as the lead case. 5.1 The brief facts of the case are that the assessee is engaged in the business of real estate dealings and financing activities. During the AY 2001-02, assessee was running three proprietary concerns in his name which were (i) Abhyudaya Finance, (ii) Radhe Finance and (iii) Radhe Organiser. A search under Section 132 of the Act was carried out in case of IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 6– assessee/Radhe Group on 4thAugust, 2006. The search was finally concluded by drawing final panchnama in the name of Assessee on 29th September, 2006. The Assessee had filed return of income for the year under consideration on 24th May, 2007 in response to notice under Section 153A of the Act, dated 4th May, 2007. The Assessee had filed Settlement Application before Hon'ble Settlement Commission on 28thMay, 2007 for AY 2001-02 to 2007-08 but such settlement application was rejected by passing an order under Section 245HA on 4th October, 2007 on the ground that Assessee had not paid taxes for AY 2004-05 and 2006-07. In the settlement application the assessee has disclosed additional income of Rs. 15,00,000/- for the year under consideration. The assessee has challenged the order of Hon'ble Settlement Commission before Hon'ble Gujarat High Court. The Hon'ble High Court stayed operation of the Settlement Commission’s order vide order dated 12.05.2008 and directed the Assessing Officer not to proceed with framing of the assessment. Against this order of the Hon'ble High Court, the Revenue filed SCA praying for vacating the stay granted. The assessee meanwhile filed another SCA before the Hon'ble High Court and the Hon'ble High Court passed the order on 07.12.2009 disposing both the SCA i.e. filed by the Revenue & the Assessee. The Hon'ble High Court directed the Assessee to pay the admitted dues for A.Y. 2004- 05 & 2006-07 within period of 8 weeks. Subsequent to this, the assessee paid Rs. 24.20 lacs for A.Y. 2004-05 and Rs. 4,84,65,000/- for A.Y. 2006-07 on 02.02.2010. But the stay granted vide order dated 12.05.2008 by the Hon'ble High Court for A.Y. 2001-02 & 2007-08 continued. Meanwhile another search was conducted upon the assessee by the department on 07.10.2009 and final Panchnama was drawn on 01.12 2009. IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 7– In view of this second search upon the assessee, the pending assessment proceedings for A.Y. 2004-05 to 2007-08 affected in view of the second provisio to Sec. 153A(1) of the Act and got merged with last assessment proceedings to be initiated u/s 153A. The Assessing Officer issued fresh notice u/s 153A on 08.03.2011 for A.Y. 2004-05 to 2007-08 which was served upon the Assessee on 10.03.2011. 5.2 In response to second search, the Revenue filed SCA no. 10395 of 2011 before the Hon'ble High Court, which was disposed of by the court vide order dated 19 12.2011 restraining the Assessing Officer from further assessment proceedings for A.Y 2004-05 to 2007-08 initiated u/s 153 A of the Act. The Hon'ble High Court clarified that this order would be subject to final decision. On 07.09.2017, the Hon'ble High Court disposed of main SCA of the Assessee. The Hon'ble High Court set aside the order passed by the Settlement Commission u/s 245HA dated 04.10.2007 to a limited extent. As per the above order of the Hon'ble High Court, proceedings before the Settlement Commission revived for Α.Υ. 2001-02, 2002-03, 2003-04, 2005- 06 and 2007-08 in ITSC, hence proceedings for A.Y. 2004-05 & 2006-07 were affected. Hence, assessment for AYs 2004-05 & 2006-07 have been completed by the Assessing Officer vide order dated 03.11.2017 u/s 153A (1)(b) rws. 143(3). Further, the Settlement Commission passed order dated 16.11.2017 vide which application dated 28.05.2007 filed by the assessee was declared invalid u/s 245D(2C), hence assessment proceedings for A.Y. 2001-02, 2002-03, 2003-04, 2005-06 & 2007-08 got revived before the Assessing Officer. Consequently, the Assessing Officer passed the present Assessment Order, after making addition of Rs.15,00,000/- being income IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 8– disclosed in settlement application, interest income on loan for Rs. 3,71,11,615/- and disallowance under Section 14A for Rs. 20,775/-. 6. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT (A) who has given partial relief to the assessee. 7. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal against the relief given by the ld. CIT(A) while the assessee has filed Cross- Objection against the addition sustained by the CIT(A). 8. Heard both the parties and perused the material available on record. 9. At the time of hearing before us, the Ld. DR submitted that Ground No.1 for AY 2001-02 is not pressed, hence the same is dismissed as not pressed. IT(SS)A No. 461/Ahd/2019 – Revenue’s Appeal, AY 2001-02 IT(SS)A No. 470/Ahd/2019 – Revenue’s Appeal, AY 2002-03 Issue No.1 Interest income - Rs 3,71,11,615/- (AY 2001-02) & Rs.3,55,72,662/- (AY2002-03) 10. For the sake for ready reference, the entire part of the Assessment Order for AY 2001-02 on this issue is reproduced as under:- “7. Addition on account of interest income on loan given and shown as asset: On verification of balance sheet as on 31.03.2001 of following proprietorship concerns, it is noticed that assessee through his personal account and his proprietorship concern had given loans to others during the year under consideration as follows (list of parties is available on record to whom such loans and advances were given :- IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 9– Sr.No. Particulars Loans given (in Rs.) 1 Radhe Finance 15,42,12,417/- 2 Radhe Organiser 23,07,378/- 3 Abhyudaya Finance 49,63,863/- 4 Ashish P. Patel personal A/c 14,77,79,804/- / TOTAL 30,92,63,462/- 8.1 Interest expenses were debited but interest income in proportion to loans given was not offered to tax. Therefore, vide notice/show-cause dtd: 19.11.2018, assessee was requested to furnish the details w.r.t. to interest income earned on the loans/advance given to other. “On verification of balance sheet as on 31.03.2001 of following proprietorship concerns, it is noticed that you through your personal account and your proprietorship concern had given loans to others during the year under consideration as follows:- Sr.No. Particulars Loans given (in Rs.) 1 Radhe Finance 15,42,12,417/- 2 Radhe Organiser 23,07,378/- 3 Abhyudaya Finance 49,63,863/- 4 Ashish P. Patel personal A/c 14,77,79,804/- TOTAL 30,92,63,462/- 4.1 In this regard, you are requested to furnish the detailed explanation with documentary evidence of the interest income on the above mentioned loans/advances given & shown as assets in your books of account, if any. 4.2 In case of non-submission or partial submission regarding point no. 4 & 4.1, kindly treat this notice as show-cause notice as to why the addition of interest income @ of 12% i.e. market rate should not be made on loans/advances given and added to your total income for A.Y. 2001-02 and interest expense claimed for borrowed fund should not be disallowed, if any.” 8.2 In response to the said show-cause notice dtd: 19.11.2018, assessee has filed submission dtd: 24.11.2018 received in this office on 26.11.2018 at 05:30 PM where assessee submitted copy of ledger of parties to whom loans and advances were given. Assessee failed to provide reasonable explanation regarding interest earned on loans/advances given to others and also failed to substantiate the same with documentary evidence. Assessee only submitted those details which were already available on record as attachment to audit report submitted by assessee. Assessee IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 10– did not submit any details as to when such advances or loans were given or when it was received back. Assessee failed to justify why interest income was not charged and if not so, why the same is not brought into books of account. It may kindly be noted that assessee mentioned words like \"cash”, “Hawala”, “Lewana Chhe” etc. in seized material which indicates large amount of cash transactions. Hence, assessee’s reply is considered but not found acceptable. Therefore, interest income calculated @ 12% of of laon/advance given as under:- Sr. Particulars Loan given (in Rs.) Interest@12% 1 Radhe Finance 15,42,12,417/- Rs. 1,85,05,490/- 2 Radhe Organiser 23,07,378/- Rs. 2,76,885/- 3 Abhyudaya Finance 49,63,863/- Rs. 5,95,663/- 4 Ashish P. Patel personal A/c 14,77,79,804/- Rs. 1,77,33,576/- TOTAL 30,92,63,462/- Rs. 3,71,11,615/ 8.3 In view of the above, interest income of Rs. 3,71,11,615/- earned on loan/advances added to total income for A.Y. 2001-02.” 11. Aggrieved by the order of the Assessing Officer, the assessee has filed appeal before the ld. CIT(A) who allowed the appeal of the assessee. 12. Aggrieved, the Revenue filed appeal before the Tribunal. 13. Before us, the Ld. DR relied on the order of the Assessing Officer, while the Ld. AR supported the order of the Ld. CIT(A). 14. We have perused the material available on record. 14.1 We find that Assessing Officer made the addition as the assessee has not charged any interest on the loans given of Rs.30.92 crores from his proprietary concern to entities namely Radhe Finance, Radhe Organizers, Abhyudaya Finance and to his personal accounts, and determined notionally earned interest @ 12% on the loans. The pertinent facts for adjudication of the issue are that:- IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 11– • Assessing Officer has not proved that borrowed funds have been utilized; • It is not the case wherein the Assessing Officer has disallowed any interest paid u/s 36(1)(iii); • The Assessing Officer held that the assessee had to invariably earn money on the loans given, even though there was no claim of interest debited. 14.2 Keeping in view the facts mentioned above, we hold that the addition made on account of notional interest cannot be held to be sustainable in the eyes of law. In the result, the appeal of the Revenue on this issue is dismissed. Issue No. 2 Disallowance u/s 14A 15. Keeping in view the low quantum involved, the Ld. AR submitted that he would not like to press the issue; therefore, the ground relating to the disallowance u/s 14A of the Revenue’s appeal is allowed. In the result, the appeals of the Revenue are partly allowed. CO No. 192/Ahd/2019 – AY 2001-02 CO No. 194/Ahd/2019 – AY 2002-03 Issue No.1 Interest – Rs.21,46,250/- 16. The relevant part of the order of the Ld. CIT(A) on this issue is as under:- IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 12– “8 While, deciding appeal for the assessment year 2003-04, addition of Rs. 21,46,250/- have been confirmed considering accrued interest income, as written in the seized paper, pertain to this assessment year, hence AO should make additions of Rs. 21,46,250/- to the returned income, while giving appeal effect to this order. The AO should allow credit to the appellant from this addition to the extent of income offered before Settlement Commission & confirmed in previous paras, if it had not been allowed against any other items.” 16.1 On this issue, we find that the Ld. CIT(A) has not issued any enhancement notice to the assessee pertaining to this year. There was nothing in the order of the ld. CIT(A) with regard to affording an opportunity to the assessee while modifying the addition made by the Assessing Officer. The relevant provisions of the Act are as under:- Powers of the [* * *] [ Commissioner (Appeals)]. 251. (1) In disposing of an appeal, the [* * *] [Commissioner (Appeals)] shall have the following powers— ( a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; [* * *]; ( b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; ( c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The [* * *] [Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the [* * *] [Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [* * *] [Commissioner (Appeals)] by the appellant. IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 13– 16.2 Thus, we find that Section 251(2) mandates reasonable opportunity to the assessee which the Ld. CIT(A) defaulted. Further, we also find that the seized material mentions year 1998 & 1997; and there was no proof that the assessee had indeed received any amount during this year. Further, the direction of the ld. CIT(A) to set off this amount against the income offered before the Settlement Commission, if given effect, result in a negative balance of Rs.6,46,250/- which is beyond any acceptable rationale. Hence, we hold that the action of the Ld. CIT(A) enhancing the addition cannot be sustained. This ground of Cross-Objection is treated as allowed. Issue No. 2 Ad-hoc disclosure – Rs.15,00,000/- (AY 01-02) & Rs.15,50,000/- (AY 02-03) 17. In the settlement application filed by the assessee for A.Y. 2001-02, assessee has disclosed additional income of Rs. 15,00,000/- before ITSC which was not offered in his original return of income filed by the assessee on 24.05.2007 for AY 2001-02 in response to notice u/s. 153A of the Act. The Assessing Officer held that assessee did not offer the undisclosed income of Rs 15,00,000/- for tax as disclosed before ITSC and that the assessee has total disregard for the tax-authorities and is changing his stand every now and then regarding the quantum of income on which taxes were not paid. 17.1 Since the assessee has not offered the amount in the income-tax return and the same was accepted as additional income before the ITSC, Assessing Officer made addition of the amount of Rs.15,00,000/- towards undisclosed income. IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 14– 17.2 Before us, the assessee submitted that the amount was offered before the Hon’ble Settlement Commission to cover any omission, error and discrepancy. The Settlement Commission has rejected the application of the assessee and the matter has been revived by the Assessing Officer for assessment under Section 153A of the Act. Since the assessment has been conducted under section 153A, the rigors of provisions of Section 153A would be applicable. It was submitted that since there was no material evidence or seized material pertaining to the addition of Rs.15,00,000/-, the action of the Assessing Officer making the addition simply by the virtue that the assessee has offered same before the Hon’ble ITSC cannot be sustained. 17.3 On the other hand, Ld. DR argued that assessee is the best judge of his affairs and the factum of his offering the amount of Rs.15,00,000/- as additional income before the Settlement Commission proves without any doubt that the assessee has earned Rs.15,00,000/- as undisclosed income. It was argued that the ratio of statement recorded u/s 132(4) would be applicable as the statement given before the ITSC becomes statutory and binding in nature. 17.4 Rebutting the arguments of the Ld. DR, the assessee argued that the validity of statement recorded u/s 132(4) cannot be equated with the statement given before the ITSC. 17.5 Heard both the parties and perused the material available on record. The provisions of Section 132(4) are as under:- IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 15– (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. [Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.] 17.6 We have also gone through the circular of CBDT with regard to the disclosure made in the statement recorded u/s 132(4) sans seized material. CBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 Regarding confession of additional income during the course of search & seizure and survey operation is as reproduced herein under – “Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax department. Similarly, while recording statement during the course of search IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 16– and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely”. 17.7 The CBDT also instructed the field authority not to rely merely on the statement in the absence of credible evidence. In this case, the Assessing Officer has not brought any evidence, material, incriminating document to make addition of Rs. 15,00,000/-. Merely because the assessee has offered the same before the Hon’ble ITSC does not necessarily convert the same as undisclosed income in the proceedings u/s 153 of the Act. This issue has also been examined by the Co-ordinate Bench of Mumbai in the case of Anantnadh Constructions and Farms (P.) Ltd. Vs. DCIT (166 ITD 83). The Tribunal held that no addition can be made on the basis of income suo-moto offered by the assessee before the ITSC when settlement got aborted for one reason or the other mentioned in section 245HA(1). The fact that the disclosure made under section 245D(1) of the Act even if constructed as if no order under section 245D(4) has been passed, it will not give a license to the Assessing Officer to use the confidential information disclosed in an annexure to the application of the Settlement Commission. If the application is treated as not admitted under 245D(1) of the Act, then the provisions are clear that confidential information can never be passed on to the Assessing Officer nor can it be used in evidence against the assessee. Section 245D(4) has clearly held that admission of assessee's application under section 245(1) was incorrect. 17.8 In the instant case also the Assessing Officer has not brought any evidence or made any inquiry that assessee has earned additional income IT(SS)A Nos. 461 & 470/Ahd/2019 & CO Nos.192 & 194/Ahd/2019 - ACIT Vs. Ashish P Patel Asst. Year : 2001-02 & 2002-03 - 17– of Rs.15,00,000/-. The Assessing Officer had not made any inquiry and not examined the material which was before him that how this income was declared by the assessee and addition has been made simply relying upon the declaration made in the application before the Settlement Commission under section 245D. Hence, we hold that the addition made by the Assessing Officer, as confirmed by the Ld. CIT(A), cannot be upheld. This ground of Cross Objection is allowed. 18. In the result, the Cross Objections of the Assessee are allowed, 19. In the result, the appeals of the Revenue are partly allowed and the Cross-Objections of the assessee are allowed. The order is pronounced in the open Court on 20.02.2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 20/02/2025 **btk आदेश की \u0007ितिलिप अ\rेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b\tथ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड\u001f फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "