Income Tax Appellate Tribunal – Lucknow
Acit, Cc-I, Lucknow vs M/S. Lucknow Mall Developers Pvt. … on 21 October, 2021 I.T.(SS)A. No.237/Lkw/2020
1
Assessment Years:2013-14
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH ‘B’, LUCKNOW
(THROUGH VIRTUAL HEARING)
BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
I.T.(SS)A. No.237/Lkw/2020
Assessment Years:2013-14
A.C.I.T., Vs. M/s Lucknow Mall Developers Pvt.
Central Circle-1, Ltd., 426, T.G. Civil Lines,
Lucknow. New Hyderabad,
Lucknow.
PAN:AABCL2066P
(Appellant) (Respondent)
Appellant by Smt. Sheela Chopra, CIT, D.R.
Respondent by Shri Rakesh Garg, Advocate
Date of hearing 02/09/2021
Date of pronouncement 21/10/2021
ORDER
PER T. S. KAPOOR, A.M.
This is an appeal filed by the Revenue against the order of learned
CIT(A), dated 17/06/2020 pertaining to assessment years 2013-14. In this
appeal the Revenue has raised the following grounds:
“1. On facts and circumstances of the case and in law, the
Ld. CIT(A) while annulling the asstt order on grounds that in
absence of any incriminating material being found during
search, the conditions for issue of notice u/s 153A were not
satisfied, erred and misread the relevant facts and
circumstance as well as legal provisions under 153A/153Cof
the I T Act,1961.
2. On the facts and circumstances of the case and in law,
the Ld. CIT(A), erred in relying upon the dismissal of
I.T.(SS)A. No.237/Lkw/2020
2
Assessment Years:2013-14
revenue’s SLP in case of Meeta Gutgutia to conclude that the
binding jurisdictional Allahabad high court in Raj Kumar Arora
stands overruled without appreciating that it was already held
by a 3 Judge bench of SC itself in its decision in case of
Khoday Distilleries Ltd in Civil appeal no. 2432 of 20J9
affirming the earlier 3 Judge bench decision in case of
Kunhayammed & Ors vs. State of Kerala & Anr. 245 ITR 360
that in limine dismissal of SLP at threshold itself neither
constitutes declaration of law nor a binding precedent.
Hence, the reliance by CIT(A) on dismissal of SLP in Meeta
Gutgutia to override the binding jurisdictional high court
decision in Raj Kumar Arora was an apparent and patent
mistake.
3. On facts and circumstances of the case and in law, the
Ld. CIT(A) erred in importing & applying the ratio of Delhi
High court decision in case of Kabul Chawla as well as other
decisions, ignoring the judicial discipline and law of binding
precedent as the jurisdictional High Court in the case of Raj
Kumar Arora 367 ITR 517 (Alld.) has already held that there
was no requirement of asstt u/s 153A being based only on thy
basis of ‘incriminating material’ found during search.
4. Without prejudice to above grounds, on facts and
circumstances of the case and in law, the Ld. CIT(A) erred in
annulling the asstt order on grounds of absence of
incriminating material without appreciating that the term
incriminating used by Courts has not been defined under 153A
and therefore its meaning is required to be inferred
harmoniously with other provisions of the Act dealing with
search assessment or levy of penalty in cases of search
assessments such as 153C, clause (ii) of 271AAB(c) etc.
5. On facts and circumstances of the case and in law, the
Ld. CIT(A) failed to appreciate that in absence of specific use
of term ‘incriminating’ u/s 153A, the meaning of the ‘term’
‘incriminating’ needs to be inferred as akin to the expression
‘bearing on the assessment of income’ as appearing u/s 153C
for asstt of other person based on material found during
search. This expression has very wide connotation and
envisages that such material should be in the nature of prima
facie material only having live nexus to the belief of it having
bearing on assessment of income and not in the nature of
I.T.(SS)A. No.237/Lkw/2020
3
Assessment Years:2013-14
absolute incriminating evidence, which by itself could
suggest/divulge the undisclosed income without any further
act investigation/examination. The detailed examination of
such material for different asstt years finally
representing undisclosed material or not, was the step
envisaged only after the issue of notice u/s 153A for six asstt
years.
6. On facts and circumstances of the case and in law, the
Ld. CIT(A) failed to appreciate that after amendment u/s 153C
w.e.f. 01.04.2005, it is the test of ‘bearing on the assessment
of income’ only which needs to be applied in place of the test
of ‘presence of incriminating material’ u/s 153A and the
decision of apex court in Sinhgad Technical Education Society
which was rendered for period prior to amendment
w.e.f. 1/4/2005 is therefore distinguishable in law.
7. On facts and circumstances of the case and in law, the
Ld. CIT(A) while evaluating as to what can be ‘incriminating’,
failed to take a note of clause (ii) of 271AAB(c) which defines
undisclosed income.: as “any income based on entry in books
of accounts wholly or partly false and would not have been
found to be so, had the search not been conducted implying
thereby that unsupported entries appearing in books of
accounts can also fall within the sweep of being incriminating
under the other provisions of the Act and hence the meaning
of term ‘incriminating’ was required to be inferred
harmoniously w.r.t such statutory provisions.
8. On facts and circumstances of the case and in law, the
Ld. CIT(A) while evaluating as to what can be ‘incriminating’,
again failed to take a note that even the penalty is attracted
u/s 270A(10) when there is misreporting based on recorded
entries in books of accounts, once again implying that entries
recorded in books of accounts may still represent undisclosed
income having bearing on the assessment of income or being
Incriminating’, if they are partly recorded or camaflouged or
shown to be from a source which is not the real source and
hence the meaning of term ‘incriminating’ was required to be
inferred harmoniously w.r.t such statutory provisions.
9. On facts and circumstances of the case and in law, the
Ld. CIT(A) erred in applying the ratio of Delhi High Court
I.T.(SS)A. No.237/Lkw/2020
4
Assessment Years:2013-14
decision in case of Kabul Chawla which was rendered in
context of 153A and not 153C wherein the requirement of
issue of notice has been clearly linked to presence of any
material belonging/relating to assessee found during search
which has a bearing on the assessment of total income of
other person and as such the decision of Delhi High Court
could not have been read into to assessment made u/s 153C.
10. On facts and circumstances of the case and in law, the
Ld. CIT(A) erred in reffering only to the statement of Santosh
Choudhary whose statement was recorded admitting to have
provided with bogus LTCG from penny stocks and Security
premium through Shell Cos not exiting at given addresses,
while ignoring the statement of some other persons recorded
was on oath u/s 131(1 A) such as Shri Virendra Keshri ex
director of the Shell Cos who admitted that M/s Anirudh motor
and general finance Pvt Ltd, M/s Fantastic Merchandise P Ltd
etc was a paper Co wherein the individuals of Fortuna group
became directors and also confirmed the statement of
Santosh Chaudhary and another person Shailendra Gupta CA,
auditor of Techmech Developer Pvt Ltd also admitted on oath
u/s 131(1 A) that Co did not have any business activity and
that its accounts were partially certified on the basis of bills,
vouchers and bank statements, which did satisfy the condition
of ‘incriminating’ as well as having bearing on the asstt of
income as provided u/s 153A/153C w.r.t bogus loans taken by
assessee from such shell co.
11. On facts and circumstances of the case and in law, the
Ld. CIT(A) erred in holding that the statement of Santosh
Choudhary recorded by DDIT Kolkata could not be termed as
‘incriminating’ on ground that statement recorded u/s 133A
was not on oath without appreciating that in the asstt order it
was clearly mentioned that the statements of other two
persons i.e. Shri Virendra Keshri and Shri Shailendra Gupta CA
were recorded on oath by the DDlT(lnv) u/s 131(1A) in the
capacity of the authorised officer u/s 132(1) in connection
with the search in the fortuna group wherein they had
admitted that M/s Anirudh Motor Finance P Ltd and M/s
Techmech Developer P Ltd were merely paper Cos without
actual economic activities, even though the no survey could
be done as these Cos were found non-existent at the given
addresses. In C/T Chennai vs Ajit S Kumar 93 Taxman.com
I.T.(SS)A. No.237/Lkw/2020
5
Assessment Years:2013-14
294(SC), the court in the context of section 158BB has also
upheld the use of information collected in a survey in case of
connected person carried along with search in other person
for the purpose of making asstt. u/s 158BB.
12. On facts and circumstances of the case and in law, the
Ld. CIT(A) also erred in not appreciating that the mere fact
that the bogus credit entries are found to be recorded in
books of accounts cannot by itself take such entries out of the
sweep of being incriminating or having a bearing on the asstt
of income. Accordingly, when it was already admitted by Ex
director and CAs of shell Cos that they provided
accommodation entry, the burden u/s 68 could not be said to
have been discharged by assessee and this fact itself not only
had bearing on asstt of correct income even if recorded in
books of accounts but also was incriminating in itself as the
lender entities admittedly lacked economic substance also,
more so when the CIT(A) having himself confirmed tre
addition on account of bogus LTCG credit entries in the cases
of some individual assessees of the same searched group in
the asstt u/s 143(3) r/w 153A in AY 2017-18.
13. On facts and circumstances of the case and in law, the
learned CIT(A) in law while deleting the addition made by the
Assessing Officer u/s 68 without considering the merits that in
view of the amended provisions w.e.f 1/4/2013, the burden
u/s 68 could not have been said to be discharged by assessee
just by filing confirmations/financial statement of shell Cos
which did not have any economic substance nor found
existing at given addresses, in view of the ratio of decision in
case of N R Portfolio Pvt Ltd 264 CTR 258(Delhi), Nova
promoters & fin lease Pvt Ltd 252 CTR 187(Delhi), Seema Jain
406 ITR 411 (Delhi), Chetan das Lachman Das 294 ITR
497(Delhi).
14. On the facts and circumstances of the case and in law,
the CIT(A) failed to allude to the relevant facts &
circumstances and misread the legal provisions to arrive at the
conclusion.”
2. The assessee has also filed a petition under Rule 27 whereby it has
taken a ground that approval given by Jt. CIT u/s 153D of the Act to the
I.T.(SS)A. No.237/Lkw/2020
6
Assessment Years:2013-14
order passed u/s 153C is without application of mind and hence the order
passed u/s 153C is nonest and void ab initio and same may be quashed.
However, during the course of hearing, Learned counsel for the assessee
did not press the same and therefore, learned CIT, D.R. was asked to
proceed with her arguments on the grounds of appeal.
3. Learned CIT, D.R. submitted that a search had taken place on
21/04/2016 on the Fortuna Group and whereby the case of the assessee
along with cases of other assessees were reopened u/s 153C of the Act and
Assessing Officer had made certain additions which the learned CIT(A) has
deleted by holding that the assessments in this case stood completed and
therefore, the additions, if any, could have been made only on the basis of
incriminating material. Learned CIT, D.R. in this respect submitted that
while holding so, learned CIT(A) has not taken into account the judgment of
Hon’ble jurisdiction High Court in the case of Raj Kumar Arora wherein the
Hon’ble court has held that during proceedings u/s 153A, the Assessing
Officer is all empowered to make addition or make reassessment, even
without the incriminating material. It was submitted that such judgment of
Hon’ble Allahabad High Court was a binding judgment as it was delivered by
jurisdictional High Court. Learned CIT, D.R. further submitted that learned
CIT(A) has annulled the assessment without appreciating that the term
incriminating has not been defined u/s 153A of the Act and therefore, its
meaning is required to be inferred harmoniously with other provisions of the
Act. It was argued that unsupported entries appearing in the books of
account can also fall under the term ‘incriminating documents’ and hence,
the meaning of term ‘incriminating’ was required to be inferred
harmoniously with respect to the such statutory provisions. Learned CIT,
D.R. argued that the assessee had earned bogus Long Term Capital Gain
from penny stock through shell companies and the Director of shell
I.T.(SS)A. No.237/Lkw/2020
7
Assessment Years:2013-14
companies had admitted to be engaged in providing accommodation entries.
It was submitted that learned CIT(A) has not appreciated that the bogus
entries even recorded in the books of account cannot by itself take such
entries out of the sweep of being incriminating and the burden u/s 68 of the
Act could not said to have been discharged by the assessee in view of the
fact that Directors of the company had admitted that they were engaged in
providing accommodation entries. It was also submitted that the provisions
of section 153C got amended with effect from 01/04/2005 and therefore,
unlike section 153A, test of bearing on the assessment of income was
required to be made instead of presence of incriminating material and
therefore, the reliance placed by learned CIT(A) on the order of Singhad
Technical Education Society is misplaced. It was submitted that learned
CIT(A) had himself confirmed the addition on account of Long Term Capital
Gain in the case of some individual assessees in the same group and
therefore, it was argued that the order passed by learned CIT(A) be
reversed and that of the Assessing Officer be restored.
4. Learned counsel for the assessee, on the other hand, submitted that
learned CIT(A) has passed a very elaborate order wherein the order of
Hon’ble Supreme Court in the case of Singhad Technical Education Society
has been relied for the proposition that addition can be made on the basis
of incriminating material in the year to which that material belonged. It was
submitted that learned CIT(A) has relied on this case law only to strengthen
his findings that in case of completed assessments, addition can only be
made on the basis of incriminating material. It was submitted that Hon’ble
Delhi High Court in the case of Kabul Chawla has clearly held that in the
case of completed assessments, the additions can only be based on
incriminating documents. It was further argued that Hon’ble Supreme Court
in the case of Meeta Gutgutia has upheld the decision of Hon’ble Delhi High
I.T.(SS)A. No.237/Lkw/2020
8
Assessment Years:2013-14
Court in the case of Meeta Gutgutia. Therefore, it was argued that there is
no perverse finding in the order of learned CIT(A). As regards the ground
taken by the Revenue regarding non application of decision of Apex Court in
the case of Singhad Technical Education Society as this decision was before
the amendment in section 153C, it was submitted that the assessment in
the present case has though been completed u/s 153C of the Act but the
learned CIT(A) has not decided the issue on the basis of decision of Hon’ble
Supreme Court in the case of Singhad Technical Educational Society only
but has taken support from this order of Hon’ble Supreme Court for the
proposition that addition has to be made only on the basis of incriminating
documents therefore, such amendment to section 153C does not help the
Revenue. As regards the argument of learned CIT, D.R. that unsupported
entries appearing in the books of account can also fall into being
incriminating, Learned counsel for the assessee submitted that the entries,
which are recorded in the books of account, cannot be said to be
incriminating. It was submitted that though the word ‘incriminating’ has not
been defined in the I.T. Act but in general terms, it can be inferred that the
word ‘incriminating’ is something which has a bearing on the total income of
the assessee and which has not been recorded in the books of account. As
regards the arguments of learned CIT, D.R. regarding onus u/s 68 of the
Act, Learned counsel for the assessee submitted that learned CIT(A) has
allowed relief to the assessee only on a legal issue that the addition in the
case of completed assessment can only be made on the basis of some
incriminating material found during search and therefore, it was prayed that
the order of learned CIT(A) be upheld.
5. We have heard the rival parties and have gone through the material
placed on record. We find that a search took place on the Fortuna Group of
cases on 21/04/2016 and six assessment years, preceding assessment year
I.T.(SS)A. No.237/Lkw/2020
9
Assessment Years:2013-14
in which search took place, were reopened for various assessees and the
present assessee is one of the group cases. The original return of income
was filed on 29/09/2013, the evidence of which has been filed in the form of
acknowledgement of return. Such return of income was revised on
08/10/2013. The time limit for issue of notice u/s 143(2) expired on
30/09/2014, which is much before the date of search which happened on
24/04/2016. It is also an undisputed fact that addition has not been made
on the basis of any incriminating material but has been made on the basis of
entries in the books of account. The Lucknow Bench of the Tribunal, in a
number of cases, has held that for completed assessments, the additions
u/s 153A or u/s 153C can only be made on the basis of some incriminating
material. The argument of learned CIT, D.R. that unsupported entries,
recorded in the books of account, also comes under the definition of
incriminating material, is of no force as these entries cannot be called
incriminating as the assessee had recorded such transactions in the books of
account and which are properly supported by documentary evidences, such
as bank statements, Demat statements and real time transactions through
screen based trading on recognized stock exchanges. Simply because
certain persons have admitted to have provided these entries as
accommodation entries, cannot make these entries incriminating unless such
persons are subjected to cross examination by the assessee. The argument
of learned CIT, D.R. that section 153C got amended with effect from
01/04/2005 and therefore, the reliance placed by learned CIT(A) on the
order of Singhad Technical Education Society is misplaced we find that
learned CIT(A) has relied on the order of Apex Court in the case of Singhad
Technical Education Society for strengthening his findings that for making
additions in the case of completed assessments, existence of incriminating
material is a must. The Hon’ble Apex Court in that case has even held that
addition can only be made in the year to which incriminating material
I.T.(SS)A. No.237/Lkw/2020
10
Assessment Years:2013-14
relates. In the case before us, it is undisputed fact that addition is not
based upon any incriminating material therefore, this argument of learned
CIT, D.R. has no force. As regards the argument of learned CIT, D.R. that
the assessee had not discharged its onus under section 68, we find that
learned CIT(A) has allowed relief to the assessee on the basis of a legal
issue and has not gone into the merits of the case. As regards the
arguments of learned CIT, D.R. that the decision in the case of Raj Kumar
Arora, rendered by Hon’ble Allahabad High Court, was applicable, we find
that such decision was based on the judgment in the cases of Anil Kumar
Bhatia, rendered by Hon’ble Delhi High Court and Hon’ble Delhi High Court
in the case of Kabul Chawla has followed the judgment of Hon’ble Delhi
High Court in the case of Anil Kumar Bhatia and has decided the issue in
favour of assessee by holding that in case of completed assessments, the
additions can only be made on the basis of incriminating material and which
has been upheld by Hon’ble Supreme Court and further Hon’ble Delhi High
Court’s decision in the case of Meeta Gutgutia has also been upheld by
Hon’ble Supreme Court and moreover, these decisions have been rendered
after the decision of Raj Kumar Arora by Hon’ble Allahabad High Court.
Therefore, learned CIT(A) has rightly not followed the decision of Hon’ble
Allahabad High Court in the case of Raj Kumar Arora. The learned CIT(A)
has clearly held that there is a difference between a statement recorded
under section 133A and that recorded u/s 132(4) of the Act. The
statements which have been relied by Assessing Officer have been recorded
u/s 133A of the Act and not u/s 132(4) of the Act. The statement recorded
u/s 133A has been held to be not conclusive piece of evidence by itself by
various Hon’ble High Courts as has been noted by learned CIT(A). In the
present case, the only material in the possession of the Department is the
statements of Shri Santosh Choudhary and Shri Virender Kumar which have
been recorded post search on the assessee and during the survey u/s 133A
I.T.(SS)A. No.237/Lkw/2020
11
Assessment Years:2013-14
of the Act. The learned CIT(A) has passed an elaborate order discussing all
the aspects relating to grounds of appeals. The relevant findings of learned
CIT(A) are contained in para 8.6 to 8.11, which for the sake of
completeness has been made part of this order and is reproduced below:
“8.6 The above submission of the appellant has been
considered. A perusal of the provisions of the section 153C of
the Act shows that Section 153C of the Income Tax Act allows
the jurisdictional Assessing Officer to enquire about the
undisclosed income of the seized asset and in case there is no
seized material related to that assessment year no addition
can be made. The above provision is reproduced below:-
“Assessment of income of any other person.
153C[(1)] [Notwithstanding anything contained in section
139, section 147, section 148, section 149, section 151 and
section 153, where the Assessing Officer is satisfied that,–
(a) any money, bullion, jewellery or other valuable
article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or
requisitioned, pertains or pertain to, or any information
contained therein, relates to,
a person other than the person referred to in section 153A,
then, the books of account or documents or assets, seized or
requisitioned shall be handed over to the Assessing Officer
having jurisdiction over such other person] [and that
Assessing Officer shall proceed against each such other
person and issue notice and assess or reassess the income of
the other person in accordance with the provisions of section
153A, if, that Assessing Officer is satisfied that the books of
account or documents or assets seized or requisitioned have a
bearing on the determination of the total income of such other
person [for six assessment years immediately preceding the
assessment year relevant to the previous year in which search
is conducted or requisition is made and]* for the relevant
assessment year or years referred to in sub-section (1) of
section 153A]:]
(*) inserted by the Finance Act, 2017
I.T.(SS)A. No.237/Lkw/2020
12
Assessment Years:2013-14
8.7 Thus a bare perusal of the provisions of the section
makes it clear that addition to the total income can be made,
where the Assessing Officer is satisfied that the books of
account or documents or assets or requisitioned have a
bearing on the total income of the Assessee for a particular
AY. The operation of section 153C has been very well
summarized in the case of SSP Aviation Ltd Vs Deputy
Commissioner of Income Tax [2012] 20 taxmann.com 214
(Delhi). It has been held in Para 17 of the order that:-
“The section merely enables the revenue authorities to
investigate into the contents of the document seized,
which belongs to a person than the person searched so
that it can be ascertained whether the transaction or
the income embedded in the document has been
accounted for in the case of the appropriate person. It
is aimed at ensuring that income does not escape
assessment in the hands of any other person merely
because he has not been searched under Section 132 of
the Act. It is only a first step to the enquiry, -which is
to follow. The Assessing Officer who has reached the
satisfaction that the document relates to a person other
than the searched person can do nothing except to
forward the document to the Assessing Officer having
jurisdiction over the other person and thereafter it is for
the Assessing Officer having jurisdiction over the other
person to follow the procedure prescribed by Section
153A in an attempt to ensure that the income reflected
by the document has been accounted for by such other
person. If he is so satisfied after obtaining the returns
from such other person for the six assessment years,
the proceedings will have to be closed. If the returns
filed by the other person for the period of six years
does not show that the income reflected in the
document has been accounted for, additions will be
accordingly made after following the procedure
prescribed by law and after giving adequate opportunity
of being heard to such other person. That, in sum and i
substance, is the position.”
8.8 Hon’ble Delhi High Court in case of Commissioner of
Income-tax-7 v. RRJ Securities Ltd. [2015] 62 taxmann.com
I.T.(SS)A. No.237/Lkw/2020
13
Assessment Years:2013-14
391 (Delhi) has further elaborated the procedure of section
153C of the Act, which is reproduced below:-
“36. The decision in SSP Aviation Ltd. (supra) cannot be
understood to mean that the AO has the jurisdiction to
make a reassessment in every case, where seized
assets or documents are handed over to the Assessing
Officer. The question whether the documents/assets
seized could possibly reflect any undisclosed income has
to be considered by the AO after examining the seized
assets/documents handed over to him. It is only in
cases where the seized documents/assets could possibly
reflect any undisclosed income of the Assessee for the
relevant assessment years, that further enquiry would
be warranted in respect of those years. Whilst, it is not
necessary for the AO to be satisfied that the
assets/documents seized during search of another
person reflect undisclosed income of an Assessee before
commencing an enquiry under Section 153C of the Act,
it would be impermissible for him to commence such
enquiry if it is apparent that the documents/assets in
question have no bearing on the income of the
Assessee for the relevant assessment years.”
8.9 The Hon’ble Apex Court has held in case of
Commissioner of Income-tax-III, Pune v. Sinhgad Technical
Education Society, [2017] 84 taxmann.com 290 (SC) has held
that as per the provisions of section 153C, incriminating
material has to pertain to the assessment years in question.
The relevant extract of the judgment is given below:-
“18. The I.T.A.T. permitted this additional ground by
giving a reason that it was a jurisdictional issue taken
up on the basis of facts already on the record and,
therefore, could be raised. In this behalf, it was noted
by the ITAT that as per the provisions of Section 153C
of the Act, incriminating material which was seized had
to pertain to the Assessment Years in question and it is
an undisputed fact that the documents which were
seized did not establish any co-relation, document-wise
with these four Assessment Years. Since this
requirement under Section 153C of the Act is essential
for assessment under that provision, it becomes a
I.T.(SS)A. No.237/Lkw/2020
14
Assessment Years:2013-14
jurisdictional fact. We find this reasoning to be logical
and valid, having regard to the provisions of Section
153C of the Act. Para 9 of the order of the ITAT
reveals that the ITAT had scanned through the
Satisfaction Note and the material which was disclosed
therein was culled out and it showed that the same
belongs to Assessment Year 2004-05 or thereafter.
After taking note of the material in para 9 of the order,
the position that emerges therefrom is discussed in para
10. It was specifically recorded that the counsel for the
Department could not point out to the contrary. It is for
this reason the High Court has also given its imprimatur
to the aforesaid approach of the Tribunal. That apart,
learned senior counsel appearing for the respondent,
argued that notice in respect of Assessment Years
2000-01 and 2001-02 was even time barred.
8.10 Besides the above,- it has been held through a number
of judgment that the A.O. while making assessment in search
cases shall restrict addition only to incriminating material
found during the search. Reliance is placed on the judgment
of Hon’ble Delhi High Court dated 28-08-2015 (ITA No. 707,
709 and 713 of 2014, A.Y. 2002-02, 2005-6 and 2006-07) in
the case of CIT Vs.”Kabul Chawla”. Furthermore in the case of
case Meeta Gutgutia (ITA No. 06 TO 310 OF 2017 for A.Y.
2000-01 to 2004-05), the High Court of Delhi vide order dated
25.05.2017, goes one step ahead of Kabul Chawla case by
concluding that where there is no incriminating material,
invoking of 153 A is not justified. Revenue filed SLPs against
this order and The Hon’ble Supreme Court vide order dated
02.07.2018 has dismissed the SLP filed by the Revenue on
merit in case of Principal Commissioner of Income-tax, Central
IT, New Delhi v. Meeta Gutgutia, [2018] 96 taxmann.com 468
(SC).
“8.11 In this case the incriminating material discussed in the
satisfaction note pertained to assessment year 2016-17 which
neither had any relation to the assessment year under
consideration, nor had any relation to the subject matter on
which addition was made by the Assessing Officer. In view
of discussion made in the preceding paragraphs and
respectfully following the ratio of binding judicial
pronouncements discussed above, I find that the invoking of
I.T.(SS)A. No.237/Lkw/2020
15
Assessment Years:2013-14
section 153C for the assessment year 2013-14 is legally and
factually unsustainable.
6. The analysis of provisions of section 153C read with various case
laws, relied on by learned CIT(A), leads us to the following facts which are
necessary to make the additions in the hands of other person:
(a) There must be some incriminating documents which should
belong to other person and which should have a bearing to the
determination of total income in the case of other person.
(b) That incriminating documents should be handed over to the
Assessing Officer of other person.
(c) The Assessing Officer, after recording his satisfaction, will
require the other person to file returns u/s 153C of the Act.
(d) The Assessing Officer of the other person then record a finding
that such document was an incriminating document having
bearing to the determination of total income of the other
person.
6.1 Therefore, from the above, it is absolutely clear that existence of
incriminating material relating to or belonging to other person is a must and
which should have been seized during search on a searched person and if
such circumstances do not exist, the provisions of section 153C can not be
triggered.
6.2 In the present case before us, it is undisputed fact that addition has
not been made on the basis of any incriminating documents relating to or
belonging to the assessee which were seized during search on the searched
person. The only document relating to the assessee, found during search,
was a franchise agreement which is apparent from the findings of Assessing
Officer in Para-I which for the sake of completeness is reproduced below:
“A search and seizure operation u/s 132 of the Income-tax
Act, 1961 (herein after referred to as the ‘Act’) was carried out
on Fortuna Group on 21.04.2016. Unexplained cash jewellery
and incriminating documents were found and seized during
I.T.(SS)A. No.237/Lkw/2020
16
Assessment Years:2013-14
operation. Though, no warrant was issued in the name of M/s
Lucknow Mall Developers, but incriminating documents in the
form of Franchise Agreement were found which had bearing
on determination of taxable income of assessee M/s Lucknow
Mall Developers. Hence, the case was proposed to be
scrutinized u/s 153C and case has been centralized u/s 127(2)
of the Act, vide order dated 01.08.2016 of Pr. CIT-2,
Lucknow.”
6.3 Further the fact that addition has not been made on the basis of any
incriminating material is also apparent from the findings of Assessing Officer
as contained in Para 7.1 where he admits that addition has not been made
on the basis of incriminating material and he held that existence of
incriminating material was not necessary and relied on the judgment of
Hon’ble Allahabad High Court in the case of Raj Kumar Arora. For the sake
of completeness, his findings at para 7.1 has been made part of this order
and are reproduced below:
“7.1 Considering all the facts as discussed above reply of
assessee is not found satisfactory. As the lender company M/s
Aniruddha Motor & General Finance Pvt. Ltd is not genuine for
the reasons already discussed, the unsecured loan received
from it to the tune of Rs. 4,40,00,000/- (6,40,00,000 –
2,00,00,000) is treated as unexplained cash credit u/s 68 of the
Act.
In para 4, the objection raised by assessee has been
quoted according to which “case of assessee company has
already been assessed under regular assessment proceeding
and under the circumstances the completed assessment can not
be disturbed unless incriminating material has a bearing on the
assessment of the assessee company “and relied on Delhi high
court Judgement in the case of commissioner of income tax -7
vs RRJ securities Ltd. 380 ITR 612.
With regard to this objection, though there is no addition
on the basis of seized documents, as mentioned in the
satisfaction note, but this information regarding M/s
AnirudhMoter and General Finance Pvt Ltd providing funds to
I.T.(SS)A. No.237/Lkw/2020
17
Assessment Years:2013-14
M/s Lucknow Mall Developers Pvt Ltd, in the form of unsecured
loan and investment was available at the time of search. Sec.
153C(1) (b) reads that:
(b) any books or documents seized or requisioned, pertains or
pertains to, or any information contained therein refers to…..
As the information was already available regarding funds
diversion from M/s Anirudh to group companies of Fortuna
Group, M/s Lucknow Malls being one of them, the addition
made above is justified as per provisions of the Act.
Allahabad high Court in Raj Kumar Arora 367 ITR 517 has held
that there is no requirement of incriminating material for
invoking provisions of Sec. 153A. Since the proceedings under
section 153C are identical to Sec. 153A except the fact that the
person assessed under this section is not the searched one but
the related person, the above decision of Allahabad High Court
is also applicable in case of invoking the provisions of S. 153C.”
6.4 Further we find that franchise agreement found during search related
to assessment year 2016-17 and therefore, the assessee took the ground
before learned CIT(A) that additions, if any, could be made only in
assessment year 2016-17 and relied on the judgment of Hon’ble Supreme
Court in the case of Singhad Technical Education Society and which the
learned CIT(A) rightly appreciated and relying on the judgments of Kabul
Chawla and Meeta Gutgutia has rightly allowed relief to the assessee.
7. In view of these facts and circumstances and in view of judicial
precedent, relied on by the assessee, the learned CIT(A) has rightly allowed
relief to the assessee.
8. The Lucknow Bench of the Tribunal, has also taken similar view, in
the following cases that in case of completed assessments, the additions can
only be made on the basis of incriminating material.
I.T.(SS)A. No.237/Lkw/2020
18
Assessment Years:2013-14
(i) Shri Balaji Betal Nuts Pvt. Ltd. vs. DCIT & Ors. in
I.T.(SS)A. Nos.105 to 108/Lkw/2019 & Ors.
(ii) Shri Navin Jain vs. DCIT & Ors. in I.T.(SS)A. Noss
639 to 641/Lkw/2019 & Ors.
(iii) Kundan Castings Pvt. Ltd. vs. DCIT & Ors. in I.T.A.
Nos. 630 & 631/Lkw/2019 & Ors.
(iv) Shri Surendra Kumar Gupta vs. DCIT in I.T.(SS)A.
No.125/Lkw/2019
7. Respectfully following the judgment of Hon’ble Supreme Court in the
case of Meeta Gutgutia and Kabul Chawla and that of Singhad Technical
Education Society and the judgments of Lucknow Benches in the above
cases, we do not find any infirmity in the order of learned CIT(A).
Therefore, the appeals filed by the Revenue are dismissed.
8. In the result, appeal of the Revenue stands dismissed and the petition
filed by assessee under Rule 27 is dismissed as not pressed.
(Order pronounced in the open court on 21/10/2021)
Sd/. Sd/.
( A. D. JAIN ) ( T. S. KAPOOR )
Vice President Accountant Member
Dated:21/10/2021
*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
Assistant Registrar
Comments