Gauhati High Court
ITA/5/2023 on 13 March, 2025
Page No.# 1/22
GAHC010031852023
2025:GAU-AS:2649-DB
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : ITA/5/2023
1.THE PRINCIPAL COMMISSIONER OF INCOME TAX,
OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX,
AAYAKAR BHAWAN, G.S. ROAD, GUWAHATI- 781005.
2: THE ASSISTANT COMMISSIONER OF INCOME TAX,
CIRCLE-1, GUWAHATI, OFFICE OF THE ASSISTANT COMMISSIONER
OF INCOME TAX, CIRCLE-1, AAYAKAR BHAWAN,
G.S. ROAD, GUWAHATI- 781005.
.....Appellants
-VERSUS -
ROHIT KARAN JAIN,
402, 4TH FLOOR, RAHEJA HEAVEN PRANANJALI,
10TH ROAD, JVPD SCHEME, JUHU
MUMBAI- 400049, MAHARASTRA.
.....Respondent
-B E F O R E -
HON'BLE THE CHIEF JUSTICE MR. VIJAY BISHNOI
HON'BLE MR. JUSTICE KAUSHIK GOSWAMI
For the Appellant(s) : Mr. S.C. Keyal, Advocate.
For the Respondent(s) : Ms. P. Jain, Advocate (through video-
conferencing), Mr. H. Betala and Ms. P.K.
Khakolia, Advocates.
Date of Hearing : 11.03.2025.
Date of judgment : 13.03.2025.
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JUDGMENT & ORDER (CAV)
(Vijay Bishnoi, CJ)
This appeal is preferred on behalf of the appellants being
aggrieved with the order dated 07.04.2022 passed by the Income Tax
Appellate Tribunal, Guwahati Bench, Guwahati (hereinafter referred to as
"ITAT") in I.T.A. No.324/GAU/2019 for the Assessment Year 2014-2015 in
respect of the sole respondent.
2. This Court, vide order dated 09.10.2023, has admitted this
appeal on the following substantial questions of law:
"1. Whether on facts and circumstances of the case, the Hon'ble
Tribunal was justified in confirming findings of the Ld. CIT (appeal) that
the assessment for A.Y. 2014-2015 is not abated ?
2. Whether on facts and circumstances of the case, the Hon'ble
Tribunal was correct in law holding that the assessment for a
Assessment Year is not abated when no assessment order was passed
prior to passing order u/s 153A of the Income Tax Act?"
3. The brief facts of the case are that the sole respondent submitted
Income Tax Returns under Section 139(1) of the Income Tax Act, 1961
(hereinafter referred to as "the Income Tax Act") on 31.07.2014 declaring
income of Rs.2,00,080/-. However, a search and seizure operation under
Section 132 of the Income Tax Act was conducted on the residential
premises of the sole respondent on 02.06.2016 and thereafter, in
continuation of that, on 11.07.2016 again a search was conducted. On the
basis of the search results, the case was selected for scrutiny under
Section 153A of the Income Tax Act and a notice was issued to the sole
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respondent to file Return of Income within 15 days. In compliance of the
notice under Section 153A of the Income Tax Act, the respondent e-filed
his return of income and thereafter, proceedings were carried out and
ultimately, the Assessing Officer has issued Assessment Order dated
31.12.2018 and assessed the income of the assessee at Rs.4,25,30,080/-.
4. The relevant portions of the impugned Assessment Order dated
31.12.2018 are reproduced hereunder:
"12. As stated above, a search and seizure operation was conducted in
the CMJ Group of cases on 02/06/2016. In the course of search,
statement of Shri Karan Jain was recorded on oath on 02.06.2016,
wherein in reply to Q. No.7 to 16, he also admitted the fact of routing the
unaccounted cash of the family by way of bogus LTCG/STCG in the
regular books of account. Further, Shri Rohit Jain, the chairman of the
CMJ group also accepted the fact of routing unaccounted cash of the
family by the way of accommodation entry of LTCG/STCG in his
statement on oath u/s 132(4) of the Act dtd. 11/07/2016. In this regard,
Shri Rohit Jain, Chairman of the group also disclosed
Rs.14,21,00,000/- on account of pre-arranged bogus capital
gain/loss in the hands of various family members in the
respective years vide his disclosure petition dated 29/08/2016 as
detailed below:
Financial year Name of the Amount (Rs.)
assessee
Reshmi Jain 4,30,20,000
2013-14 Karishma Jain 4,23,20,000
Karan Jain 4,23,30,000
Reshmi Jain 37,00,000
2014-15 Karishma Jain 90,10,000
Karan Jain 17, 20,000
Total: 14,21,00,000
Shri Karan Rohit Jain also accepted the disclosure of Rs.4,40,50,000/- is
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his hand in his sworn statement u/s 131 of the Act on 09/09/2016.
13. However on perusal of the Return of Income for the period under
consideration, it is seen that the disclosed amount of Rs.4,23,30,000/-
for the financial year 2013-14 relevant to the assessment year 2014-15
was neither incorporated in the Return nor offered for tax during period
under consideration. As such, vide show cause notice dtd. 05/11/2018,
Shri Rohit Jain, Chairman of the CMJ Group was show caused as to
why the Rs.4,23,30,000/- should not be added to the total income of the
assessee as disclosed by him vide disclosure petition dtd. 29/08/2016.
In reply, Shri Rohit Jain, Chairman of the CMJ Group submitted a
retraction petition dtd. 07/12/2018 along with an affidavit stating that
the disclosure was made under coercion and threat.
However, the assessee has not been able to produce any evidence,
documentary or circumstantial, in support of the averment of
coercion, threat etc.
In this regard reliance is made on the decision of various hon'ble judicial
authorities as under:
In the case of the KTMS Mohammed, 197 ITR 196 (1992), the SC
while throwing further light on the evidentiary value of the retracted
statement said that retracted statement has to be seen with great
circumspection. The statement, if obtained by any inducement, threat,
coercion or by any improper means, must be rejected. At the same time, it
is to be noted that, merely because a statement is retracted, it cannot be
recorded as in-voluntary or unlawfully obtained. It is only for the maker
of the statement who alleges inducement, threat, promise, etc. to
establish that such improper means have been adopted.
In P.S. Barkathali v. Directorate of Enforcement, New Delhi AIR
1981 KER 81, the hon'ble High Court observed as under:
"Even though the statement was subsequently retracted, the significance
of admission in the first place cannot be under-mined. It is well
established that mere bald retraction cannot take away the importance
and evidentiary value of the original confession, specially in view of the
fact that in this case, the deponent of the statement had provided the
minute details relating to the transactions. It appears that the retraction
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statement was made purely to avoid clutches of law which had caught
up with him and laid bare his nefarious activities."
14. It is thus clear that even in criminal jurisprudence, the retracted
statement shall not carry the evidentiary value, unless it is shown by
independent evidence that the original statement was obtained under
coercion, duress or influence, mistaken belief of law or facts or otherwise
proved erroneous by the deponent.
As such a rebuttal letter along with para wise reason for the non
acceptance of the retraction petition was issued and served to Shri Rohit
Jain, Chairman of the CMJ Group on 07/12/2018.
However considering the principle of natural justice, summon u/s 131 of
the Act dtd. 17/12/2018 was issued to Shri Karan Rohit Jain to explain
the transactions along with supporting documents. In reply, Shri Rohit
Jain, Chairman of the CMJ Group appeared on behalf Shri Karan Jain
and his statement was recorded on oath u/s 131 of the Act on
21/12/2018 relevant part of the same is reproduced below:
Q. No.11:- I am showing you the statement of Shri Karan
Jain recorded on oath u/s 132(4) of the Income Tax Act, 1961
wherein he admitted that your family member has booked
bogus LTCG by pre arranged manner to route the unaccounted
income. The same was also admitted in your statement u/s
132(4) of the Income Tax Act, 1961 dtd. 11/07/2016. Please
offer your comment.
Ans. It was a force submission as such I stand by my
affidavit and retraction petition submitted to your office on
07/12/2018. Further my family members Shri Karan Jain,
Smt. Reshmi Jain and Miss Karishma Jain have also submitted
their affidavit dtd. 15/11/2016 in this regard as on today
which denies the forced statements taken from them by the
department.
However the deponent has not been able to produce any evidence,
documentary or circumstantial, in support of the averment of coercion,
threat etc.
It has been discussed in earlier paras why a scrip is considered to be
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penny stock. The value as well as the trend of trading that determines a
scrip whether it is penny stock or not. In the instant case, the details in
regard to scrip, trend of trading, prices of shares over a certain period,
background of the company etc. all these features are well discussed to
show that the shares are nothing but penny stock.
Summing up the above facts, it appears that the assessee is basically a
salaried person and does not bear even minimum interest and
information in regard to the share trading. In his statement recorded on
oath u/s 132(4) on 02.06.2016, he has admitted the fact of routing the
unaccounted income of the family by way of pre-arranged long term
capital gain in the regular books of the account of the assessee. The
same had also been accepted by Shri Rohit Jain, Chairman of the CMJ
Group. Further unaccounted income of Rs.4,23,30,000/- had also been
disclosed in the hand of the assessee as tabulated above vide disclosure
petition dtd. 29/08/2016 which was subsequently admitted by the
assessee in his statement on oath.
15. CONCLUSION
15.1. In view of the discussion made above and considering the
facts and circumstances of the case, the following facts become
manifestly clear:-
i) That some unscrupulous operators in the capital market were
running a scheme of providing entries of LTCG for a commission.
ii) The financial result of the Penny Stocks used for the purpose
clearly indicate that its quoted price at the peak was the result of
rigging.
iii) The above mentioned facts have been independently also
been confirmed by SEBI.
iv) That such schemes are prevalent for converting black money
into white is common knowledge, independently confirmed by SEBI.
v) That a large number, brokers/sub-brokers and individuals
availed of the benefits of the scheme and took entries of LTCG ores.
vi) Many such individuals have voluntarily without any enquiry
by any authority have voluntarily withdrawn their claim and filed
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revised return.
vii) As per the Investigation Report of the Directorate of
Income Tax (Investigation), Kolkata statements of brokers,
operators, director of paper companies that has bought these
shares, directors of Penny stock companies all confess to
such a scheme with detailed modus operandi which tallies
with actual transactions.
viii) The assessee is one such beneficiary who has taken entry of
LTCG.
ix) The assessee as well as the Key Person of Comfort
Securities Ltd Shri Anil Agarwal, admitted the fact of
booking pre-arranged LTCG in their sworn statement.
x) Exactly similar entries have been taken by other family
members of the assessee for the period under consideration whose
cases are under scrutiny under the same Range.
xi) Further from data received from BSE India (As per
annexure-A) it is evident that the trading in these shares are
at a pre-determined time between pre-determined brokers at
a pre-determined price; there is virtually no scope of any
genuine trader in share to buy or sell these shares.
xii) Thus whoever has benefitted from transaction in these shares
have transacted in accordance with the scheme and has admittedly
converted his unaccounted cash equal to the sale proceeds of share
in to while in the guise of exemption under section 10(38) of the
Income Tax Act, 1961.
xiii) With so much of evidence against the assessee, the onus was
on assessee to prove that his transactions were genuine and that he
had not availed benefit of the aforementioned scheme to convert
black money into white.
xiv) In Sumati Dayal vs. Commissioner of Income Tax .... the
Supreme Court observed and I quote,
"It is no doubt true that in all cases in which a receipt is sought
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to be taxed as income, the burden lies on the Department to prove that it
is within the taxing provision and if a receipt is in the nature of income,
the burden of proving that it is not taxable because it falls within
exemption provided by the Act lies upon the assessee. [See: Parimisetti
Seetharamamma (supra) at P.5361. But, in view of Section 68 of the Act,
where any sum is found credited in the books of the assessee for any
previous year the same may be charged to Income tax as the income of
the assessee of that previous year if the explanation offered by the
assessee about the nature and source thereof is, in the opinion of the
Assessing Officer, not satisfactory. In such case there is, prima facie,
evidence against the assessee, viz. the receipt of money, and if he falls to
rebut, the said evidence being un-rebutted, can be used against him by
holding that it was a receipt of an income nature. While considering the
explanation of the assessee the Department cannot, however, act
unreasonably."
15.2. In the case the assessee has shown credit exempt income of
Rs.4,23,23,713/- on sale of share of M/s Rutron International
Limited, as is evident from the investigation the actual source of this
credit is the unaccounted cash of the assessee. The assessee was
asked to explain the source of this credit. The explanation offered
that it is sale proceeds of shares are found to be not satisfactory.
The assessee did not even furnish the purchase details of the
shares, copy of demat account, contract notes. The background of
the scheme given in the beginning of the order clearly shows that
both the requirements are in-built in the scheme and does not ipso
facto prove genuineness of transaction. The SEBI after thorough
investigation has certified that such transactions are rigged and are
carried out to convert Black money into white. That being so, the
credit in the bank account of the assessee cannot be treated as
explained and is therefore, liable to be added under section 68 of the
Act. The evidence gathered has to be evaluated in the background of
what the hon'ble Supreme Court referred to as the test of
preponderance of human probability judged on the basis of
surrounding circumstances. That there was a scheme is not in doubt
and that the assessee is a beneficiary is also an admitted fact. The
onus was therefore, on the assessee to prove that either there was
no such scheme and even if there was one, the benefit to the
assessee was as a result of genuine transaction. The assessee has
miserably failed to discharge this onus and therefore, the only
inescapable conclusion is that like many other individuals assessee
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has also taken entry of LTCG by paying cash.
It is obvious that the assessee himself knows his assets and
liabilities and considering all the factors Shri Rohit Jain,
Chairman of the group disclosed Rs.14,21,00,000/- on
account of pre-arranged bogus capital gain in the hands of
various family members in the respective years vide his
disclosure petition dated 29/08/2016 which was subsequently
confirmed by the assessee in his sworn statement.
In view of the above the amount of Rs.4,23,30,000/- as
disclosed by Shri Rohit Jain on account of so called Long
term capital gain is added to Total income of the assessee
within the meaning of section 68 of the Income tax Act, 1961.
As the assessee has deliberately and wilfully concealed her
unaccounted income, a conclusion which is obvious from the
discussion made in the order, penalty under section 271(1)(c)
is also initiated.
16. The total income of the assessee is computed as under in light
of the discussions made in the foregoing paras:-
Returned income: Rs. 2,00,080/-
Add: As discussed in para 15.2 Rs.4,23,30,000/-
Assessed Income : Rs.4,25,30,080/-"
5. Being aggrieved with the Assessment Order dated 31.12.2018,
the respondent preferred an appeal before the Commissioner of Income
Tax (Appeals), Guwahati under Section 250 of the Income Tax Act, raising
as many as 16 grounds.
6. The Commissioner of Income Tax (Appeals), vide order dated
08.04.2019, allowed the said appeal while recording a finding of fact that
the Assessing Officer had invoked the jurisdiction under Section 153A of
the Income Tax Act without there being any incriminating material
whereas the law is well settled that in the absence of incriminating
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material, a completed assessment cannot be opened invoking the powers
under Section 153A.
7. The relevant portions of the judgment passed by the
Commissioner of Income Tax (Appeals) are reproduced hereunder:
"The present legal position is that, in an assessment under Section
153A, in absence of any "incriminating material", the completed
assessment has to be reiterated. In other words, the completed
assessment connot be disturbed in the absence of "Incriminating
material". Even if documents are available pertaining to the
assessment year in question, but they have to additionally satisfy the
requirement of law that "there must be incriminating material " and
not merely some material. Hence, there can be no addition under Section
153A for a particular assessment year, in which the assessment is
complete and is not pending, without there being some "incriminating
material" qua that assessment which would justify such an addition.
From the above observation/averment of the AO as is clear from his
letter dated 07/12/2018, which letter was written by the AO to Sh.
Rohit Jain with regard to his retraction letter dated even date, it is
crystal clear that the AO has not been able to refer to any material, much
less any incriminating material as would even remotely indicate that
there was any documentary evidence in the possession of the revenue,
other than the department's own database or the confessional statement
of the father of the Appellant.
Per Contra, during the course of appellate proceedings, the Appellant has
vehemently stressed that in this case, there was no incriminating
material with regard to the above addition. Thus, in the absence of
any reference to any incriminating material by the AO in the
impugned order and considering the submissions of the Appellant
as also the ratio of the above judgments, it has to be held that
the impugned addition as not based on any incriminating
evidence found during the course of search on the Appellant.
I note that there is absolutely no corroborative evidence found in the
course of search by the search team or material evidence brought on
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record by the Ld. AO in order give credence to the statement recorded
during search. Hence, I hold that no addition could be made merely by
placing reliance on the statement recorded during search and also
without reference to any incriminating document or material.
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For the above assessment year, I note that the Appellant had filed a
return of income under Section 31/07/2014 wherein the Appellant had
duly disclosed the impugned capital gain and claimed the exemption
accordingly. Admittedly there was no regular assessment made on the
Appellant for the above assessment year. Also the time limit for
issuance as well as service of notice under Section 143/2) of the
Act in the case of the Appellant for the above assessment year had
already expired on 30/09/2015. Thus as on the date of Search in
the case of the Appellant, i.e. on 02/06/2016, the assessment for the
above assessment year 2014-15 was a completed assessment and
therefore following the ratio of the above judgments as discussed earlier,
in the absence of any incriminating documents or material, the
already completed assessment cannot be disturbed unless any
incriminating material is found during the course of search. In this
case, it is vivid that the AO has not referred to any such
incriminating material found during the course of search in the
impugned order. Thus, it is clear that the above addition has been made
without reference to any incriminating material.
Even at the cost of repetition, it is clear from the ratio of the above
judgments, that the law is trite that in assessments under Section 153A,
with regard to years where the assessment have been completed i.e.
unabated assessment year, the scope of addition is to be restricted only
to the extent of incriminating material found and there is no scope for
any general or routine addition or disallowance. In view of the above
facts, and in the absence of any reference to any incriminating material
as regards the impugned addition, found during the course of search, I
have no hesitation in holding that the impugned addition which has been
made solely on the basis of a retracted statement and without reference
to any incriminating material or document found during the course of
search is outside the realm of the assessment proceedings under Section
153A of the Act.
In view of the above discussion, I find no hesitation in deleting
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the impugned addition of Rs. 4,23,30,000/- as the same has been
made for a year whose assessment stood already completed by
virtue of expiration of time limit to issue a notice under Section
143(2) of the Act and without there being any reference to any
incriminating material or document. The above grounds of
appeal are, hereby, allowed.
While adjudicating the above grounds of Appeal, my decision has been
rendered solely on the basis of the facts and observations stated by the
AO in the impugned assessment order, submissions of the Appellant and
the ratio of judgments relied upon and referred above. As is evident my
above adjudication is purely legal in nature In this case, since the
Appellant has not furnished the copies of Dmat Account, Contract Notes
etc. as averred in the impugned order, these evidences filed before me
have not been considered as these are additional evidences which have
been filed without any petition under Rule 46A My above decision is
based on the fact that the AO has not referred to any incriminating
material or document while making the impugned addition in the hands
of the Appellants and thus the impugned addition, in the absence of
reference to any incriminating material and considering that in view of
the ratio of the judgment in the case of Kabul Chawla, discussed per
supra, the proceedings for the impugned assessment year were
completed and could not have been disturbed."
8. Being aggrieved with the order dated 08.04.2019 passed by
the Commissioner of Income Tax (Appeals), the appellant preferred an
appeal, being ITA No.324/GAU/2019 before the ITAT.
The ITAT noted the grounds of appeal in para No.3 of the
impugned order dated 07.04.2022, which are reproduced hereunder :
"3. The grounds of appeal raised by the revenue are as under :
"1. That in the fact and circumstances of the case and the law in this matter, the
Ld. CIT(A) is not justified in deleting the addition stating that the assessment for the Ay
2014-15 is non-abated and stood already completed despite the fact that the original
assessment in this case for Ay 2014-15 against the return filed on 31.07.2014 was
abated and the assessment u/s 153A r.w.s. 143(3) on 31.12.2018 is an abated
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assessment..
2. The Ld. CIT(A) was not justified in deleting the addition stating that in
absence of any incriminating material the addition made by the AO in the impugned
order is deleted while the original assessment in this case for Ay 2014-15 was abated."
9. The ITAT rejected both the above referred grounds vide
impugned judgment dated 07.04.2022 and affirmed the findings of the
Commissioner of Income Tax (Appeals).
10. The relevant portions of the impugned order dated 07.04.2022
passed by the ITAT are reproduced hereunder:
"11. The next issue is with regard to the Ld. CIT(A)'s finding that since
there was no incriminating material and since the assessment year
2014-15 is an unabated proceeding, no addition was warranted without
any incriminating material. The Id. AR drew our attention to the fact that
the AO has made the addition only on the basis of a statement given by
the assessee's father which was retracted within ten days. And the Ld.
AR drew our attention to pages 96 to 105 of the paper book wherein the
affidavit of the assessee retracting the statement is found to be
reproduced wherein he alleged coercion and duress to obtain it. The Ld.
AR drew our attention to the decision of the Hon'ble Delhi High court in
the case of Pr. CIT, Delhi-2 Vs. Best Infrastructure (India) P. Ltd. (2017)
84 taxmann.com 287 (Delhi) (Paper book pages 73 to 93 to be checked)
wherein the Hon'ble High Court has held that on the sole basis of the
statement of the assessee when retracted subsequently, no addition
should be made unless there is any material to support the addition.
And in this case in hand, other than the retracted statement, no other
evidence/material was relied upon by AO to make the addition in all the
three appeals. In the light of the aforesaid facts, and by relying on the
decision of the Hon'ble Delhi High Court in Kabul Chawla (supra) the Ld
CIT(A) held that since there was no incriminating material against the
assessee in respect the share transaction in question, no addition could
have been made and deleted the addition. This action of Ld. CIT(A) has
been challenged by the Revenue.
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"14. Turning to the facts of the case, it is noted that only on the basis of
retracted statements, the AO has made the addition. From a perusal of the
assessment order, it is noted that there is no other incriminating material
seized during search. Other than the retracted bald statement of
assessee's father addition has been made by AO [which has been
retracted within few days wherein assessee's father/assessee has
alleged coercion/duresse obtaining it (refer page 19 of paper book)]. It is
noted that other than the statement of his father which has been obtained
under threat/coercion/duress [which has been retracted within few days]
the AO has made the addition as undisclosed income the assesser's LTCG
to the tune of Rs.4,40,50,000/-. However we find that other than the
retracted statement there was no iota of evidence/material to substantiate
the impugned additions. The Id. CIT(A) has given a finding of fact that
other than the assessee's father's statement regarding the LTCG of
assessee, there was no incriminating material found during search qua
the assessee qua the AY 2014-15. In such a scenario, no addition was
legally sustainable as held by the Hon'ble Delhi High court in Kabul
Chawla (supra) and in this context it is noted that similar ratio was
agreed upon in the case of Meeta Gutgutia (supra) Delhi High Court. And it
is noted that several other High Courts have also come to similar
conclusion either by following Kabul Chawla (supra) or otherwise. This
includes the decisions of the Hon'ble Gujarat High Court in Pr CIT v.
Soumya Constructions (P.) Ltd. [2016] 387 ITR 529[2017]
81 taxmann.com 292 (Guj); Pr. CIT v. Devangi alias Rupa [Tax Appeal Nos
54. 55 to 57 of 2017, dated 2-2-2017]; the Hon'ble Karnataka High Court
in CIT v. IBC Knowledge Park (P) Ltd. [2016] 385 ITR
346/69 taxmann.com 108 (kar.); the Hon'ble Calcutta High Court in Pr. CIT
v. Salasar Stock Broking Ltd. [GA No. 1929 of 2016, date 24-8-2016] and
the Hon'ble Bombay High Court in CIT v. Gurinder Singh Bawa 12016]
386 ITR 483/12017] 79 taxmann.com 398. In Meeta Gutgutia (supra) the
Hon'ble Delhi High Court has considered the entire gamut of the lis in
hand and has analysed and the aforesaid legal position was reiterated
that unless there is incriminating material qua each of the A Ys in which
additions are sought to be made, pursuant to search and seizure
operation, the assumption of jurisdiction under Section 153A of the Act
would be vitiated in law for an unabated assessment.
15. In the light of the aforesaid facts and the law discussed, we do not
find any infirmity in the impugned order passed by the Ld CIT(A), so we
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are inclined to dismiss the revenue appeal ITA No.324/GAU/2019."
11. During the course of hearing, learned counsel for the sole
respondent has submitted that now it is well settled that in the absence of
incriminating material, no addition can be made in respect of a completed
assessment. It is contended that in the present case, the assessment was
completed but the Assessing Officer without there being any incriminating
material has passed the Assessment Order by invoking the provisions of
Section 153A of the Income Tax Act, however, the same is not in
accordance with law and therefore, the Commissioner of Income Tax
(Appeals) as well as the ITAT has not committed any illegality in passing
the impugned orders. It is further argued that the Commissioner of
Income Tax (Appeals) as well as ITAT has recorded a finding of fact that
no incriminating material was available on record and in the absence of
the same, the Assessing Officer has erred in passing the Assessment Order
while invoking the provisions of Section 153A of the Income Tax Act and
the said finding of fact recorded by the Commissioner of Income Tax
(Appeals) and ITAT is not liable to be interfered with and in such
circumstances, no substantial question of law arises in this appeal and
therefore, the present appeal is liable to be dismissed.
12. Learned counsel for the sole respondent has placed reliance on
the decision of the Hon'ble Supreme Court rendered in (i) Principal
Commissioner of Income tax, Central 3 Vs. Abhisar Buildwell (P)
Ltd., reported in [2023] 149 taxmann.com 399 (SC); (ii) Principal
Commissioner of Income -tax Vs. Saroj Sudhir Kothari , reported in
[2023] 154 taxmann.com 360 (SC); (iii) Principal Commissioner of
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Income-tax (Central) 2 Vs. Jay Ambey Aromatics , reported in [2023]
156 taxmann.com 691 (SC) and (iv) Principal Commissioner of
Income-tax Central 2 Vs. S.S. Con Build (P) Ltd ., reported in [2023]
151 taxmann.com 317 (SC).
13. The Hon'ble Supreme Court, in Abhisar Buildwell (P) Ltd.
(supra), while affirming the view taken by the Delhi High Court in the case
of Commissioner of Income Tax, Central III CIT Vs. Kabul Chawla,
[2015] 61 taxmann.com 412/234 Taxman 300/ [2016] 380 ITR 573
(Delhi) as well as by Gujarat High Court in the case of Pr.CIT Vs.
Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292/[2016]
387 ITR 529 (Guj.) has held as under:
"8. For the reasons stated hereinbelow, we are in complete agreement
with the view taken by the Delhi High Court in the case of Kabul Chawla
(supra) and the Gujarat High Court in the case of Saumya Construction
(supra), taking the view that no addition can be made in respect of
completed assessment in absence of any incriminating material.
9. While considering the issue involved, one has to consider the object
and purpose of insertion of Section 153A in the Act, 1961 and when there
shall be a block assessment under Section 153A of the Act, 1961.
9.1 That prior to insertion of Section 153A in the statute, the relevant
provision for block assessment was under Section 158BA of the Act, 1961.
The erstwhile scheme of block assessment under Section 158BA
envisaged assessment of 'undisclosed income' for two reasons, firstly that
there were two parallel assessments envisaged under the erstwhile
regime, i.e., (i) block assessment under section 158BA to assess the
'undisclosed income' and (ii) regular assessment in accordance with the
provisions of the Act to make assessment qua income other than
undisclosed income. Secondly, that the 'undisclosed income' was
chargeable to tax at a special rate of 60% under section 113 whereas
income other than 'undisclosed income' was required to be assessed
under regular assessment procedure and was taxable at normal rate.
Therefore, section 153A came to be inserted and brought on the statute.
Under Section 153A regime, the intention of the legislation was to do away
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with the scheme of two parallel assessments and tax the 'undisclosed'
income too at the normal rate of tax as against any special rate. Thus,
after introduction of Section 153A and in case of search, there shall be
block assessment for six years. Search assessments/block assessments
under Section 153A are triggered by conducting of a valid search under
Section 132 of the Act, 1961. The very purpose of search, which is a
prerequisite/trigger for invoking the provisions of sections 153A/153C is
detection of undisclosed income by undertaking extraordinary power of
search and seizure, i.e., the income which cannot be detected in ordinary
course of regular assessment. Thus, the foundation for making search
assessments under Sections 153A/153C can be said to be the existence
of incriminating material showing undisclosed income detected as a result
of search.
10. On a plain reading of Section 153A of the Act, 1961, it is evident
that once search or requisition is made, a mandate is cast upon the AO to
issue notice under Section 153 of the Act to the person, requiring him to
furnish the return of income in respect of each assessment year falling
within six assessment years immediately preceding the assessment year
relevant to the previous year in which such search is conducted or
requisition is made and assess or reassess the same. Section 153A of the
Act reads as under:
'153A. Assessment in case of search or requisition - (1)
Notwithstanding anything contained in Section 139, Section 147,
Section 148, Section 149, Section 151 and Section 153, in the case of
a person where a search is initiated under Section 132 or books of
account, other documents or any assets are requisitioned under
Section 132-A after the 31st day of May, 2003, the Assessing Officer
shall--
(a) issue notice to such person requiring him to furnish within such
period, as may be specified in the notice, the return of income in
respect of each assessment year falling within six assessment years
referred to in clause (b), in the prescribed form and verified in the
prescribed manner and setting forth such other particulars as may
be prescribed and the provisions of this Act shall, so far as may be,
apply accordingly as if such return were a return required to be
furnished under Section 139;
(b) assess or reassess the total income of six assessment years
immediately preceding the assessment year relevant to the previous
year in which such search is conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the
total income in respect of each assessment year falling within such
six assessment years:
Page No.# 18/22
Provided further that assessment or reassessment, if any, relating
to any assessment year falling within the period of six assessment
years referred to in this sub-section pending on the date of initiation
of the search under Section 132 or making of requisition under
Section 132-A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or
reassessment made under sub-section (1) has been annulled in
appeal or any other legal proceeding, then, notwithstanding
anything contained in sub-section (1) or Section 153, the assessment
or reassessment relating to any assessment year which has abated
under the second proviso to sub-section (1), shall stand revived with
effect from the date of receipt of the order of such annulment by the
Commissioner:
Provided that such revival shall cease to have effect, if such order of
annulment is set aside
Explanation.--For the removal of doubts, it is hereby declared that,
--
([) save as otherwise provided in this section, Section 153-B and
Section 153-C, all other provisions of this Act shall apply to the
assessment made under this section;
(ii) in an assessment or reassessment made in respect of an
assessment year under this section, the tax shall be chargeable at
the rate or rates as applicable to such assessment year.’
11. As per the provisions of Section 153A, in case of a search under
section 132 or requisition under section 132A, the AO gets the jurisdiction
to assess or reassess the ‘total income’ in respect of each assessment
year falling within six assessment years. However, it is required to be
noted that as per the second proviso to Section 153A, the assessment or
re-assessment, if any, relating to any assessment year falling within the
period of six assessment years pending on the date of initiation of the
search under section 132 or making of requisition under section 132A, as
the case may be, shall abate. As per sub-section (2) of Section 153A, if any
proceeding initiated or any order of assessment or reassessment made
under sub-section (1) has been annulled in appeal or any other legal
proceeding, then, notwithstanding anything contained in sub-section (1) or
section 153, the assessment or reassessment relating to any assessment
year which has abated under the second proviso to sub-section (1), shall
stand revived with effect from the date of receipt of the order of such
annulment by the Commissioner. Therefore, the intention of the legislation
seems to be that in case of search only the pending
assessment/reassessment proceedings shall abate and the AO would
Page No.# 19/22
assume the jurisdiction to assess or reassess the ‘total income’ for the
entire six years period/block assessment period. The intention does not
seem to be to re-open the completed/unabated assessments, unless any
incriminating material is found with respect to concerned assessment year
falling within last six years preceding the search. Therefore, on true
interpretation of Section 153A of the Act, 1961, in case of a search under
Section 132 or requisition under Section 132A and during the search any
incriminating material is found, even in case of unabated/completed
assessment, the AO would have the jurisdiction to assess or reassess the
‘total income’ taking into consideration the incriminating material collected
during the search and other material which would include income
declared in the returns, if any, furnished by the assessee as well as the
undisclosed income. However, in case during the search no incriminating
material is found, in case of completed/unabated assessment, the only
remedy available to the Revenue would be to initiate the reassessment
proceedings under section 147/48 of the Act, subject to fulfillment of the
conditions mentioned in section 147/148, as in such a situation, the
Revenue cannot be left with no remedy. Therefore, even in case of block
assessment under section 153A and in case of unabated/completed
assessment and in case no incriminating material is found during the
search, the power of the Revenue to have the reassessment under section
147/148 of the Act has to be saved, otherwise the revenue would be left
without remedy.
12. If the submission on behalf of the Revenue that in case of search
even where no incriminating material is found during the course of search,
even in case of unabated/completed assessment, the AO can assess or
reassess the income/total income taking into consideration the other
material is accepted, in that case, there will be two assessment orders,
which shall not be permissible under the law. At the cost of repetition, it is
observed that the assessment under section 153A of the Act is linked with
the search and requisition under sections 132 and 132A of the Act. The
object of Section 153A is to bring under tax the undisclosed income which
is found during the course of search or pursuant to search or requisition.
Therefore, only in a case where the undisclosed income is found on the
basis of incriminating material, the AO would assume the jurisdiction to
assess or reassess the total income for the entire six years block
assessment period even in case of completed/unabated assessment. As
per the second proviso to Section 153A, only pending
assessment/reassessment shall stand abated and the AO would assume
the jurisdiction with respect to such abated assessments. It does not
provide that all completed/unabated assessments shall abate. If the
submission on behalf of the Revenue is accepted, in that case, second
proviso to section 153A and sub-section (2) of Section 153A would be
redundant and/or rewriting the said provisions, which is not permissible
under the law.
Page No.# 20/22
13. For the reasons stated hereinabove, we are in complete agreement
with the view taken by the Delhi High Court in the case of Kabul Chawla
(supra) and the Gujarat High Court in the case of Saumya Construction
(supra) and the decisions of the other High Courts taking the view that no
addition can be made in respect of the completed assessments in absence
of any incriminating material.
14. In view of the above and for the reasons stated above, it is
concluded as under:
(I) that in case of search under section 132 or requisition under
section 132A, the AO assumes the jurisdiction for block
assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/ unearthed, even,
in case of unabated/completed assessments, the AO would
assume the jurisdiction to assess or reassess the ‘total income’
taking into consideration the incriminating material unearthed
during the search and the other material available with the AO
including the income declared in the returns; and
(iv) in case no incriminating material is unearthed during the
search, the AO cannot assess or reassess taking into
consideration the other material in respect of completed
assessments/unabated assessments. Meaning thereby, in
respect of completed/unabated assessments, no addition can
be made by the AO in absence of any incriminating material
found during the course of search under Section 132 or
requisition under Section 132A of the Act, 1961. However, the
completed/unabated assessments can be re-opened by the AO
in exercise of powers under Sections 147/148 of the Act,
subject to fulfilment of the conditions as envisaged/mentioned
under sections 147/148 of the Act and those powers are
saved.
The question involved in the present set of appeals and review
petition is answered accordingly in terms of the above and the
appeals and review petition preferred by the Revenue are
hereby dismissed. No costs.”
14. Mr. S.C. Keyal, learned counsel appearing for the appellants
has frankly admitted that now the law is well settled that in the absence of
incriminating material, no addition can be made in respect of a completed
Page No.# 21/22
assessment. However, Mr. Keyal has submitted that in the present case,
the Assessing Officer has invoked Section 153A of the Income Tax Act on
the basis of the incriminating material only and not otherwise. It is
contended that the finding recorded by the Commissioner, Income Tax
(Appeals) as well as by the ITAT to the effect that no incriminating
material was available to the Assessing Officer to invoke the power
provided under Section 153A is perverse and therefore, the same is liable
to be interfered with.
15. We have considered the submission made on behalf of the
learned counsel for the appellants and perused the material available on
record.
16. On a perusal of the material available on record, we are of the
view that the Commissioner of Income Tax (Appeals) as well as ITAT, after
carefully scrutinizing the material collected by the Assessing Officer, has
recorded a finding of the fact that other than the retracted statement no
other evidence/material was relied upon by the Assessing Officer to invoke
the addition. The Commissioner of Income Tax (Appeals) and the ITAT
were of the view that the said piece of evidence, i.e. retracted statement
cannot be termed as incriminating material.
17. Taking into consideration the above fact, we are of the view
that the said finding of fact recorded by the Commissioner of Income Tax
(Appeals) as well as ITAT is not liable to be interfered with in this appeal
since this Court can only exercise jurisdiction when any substantial
Page No.# 22/22
question of law arises.
18. In view of the above discussion, it is held that the present
appeal does not involve any substantial question of law and therefore, the
same is dismissed, being devoid of merit.
JUDGE CHIEF JUSTICE Comparing Assistant
