Sigma Castings Ltd. Vs DCIT (ITAT Lucknow)
The assessee has recorded the entries of sales and purchase in its books of account and has duly disclosed the items of sales and purchase in the profit & loss account and has duly disclosed the profit earned on the trading in the profit & loss account and has offered the same as business income. The assessee has furnished as much information as possible to justify its claim about the transactions of cloth being genuine. Under these circumstances, Hon’ble Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. [2019] 418 ITR 315 (SC) has decided the issue in favour of assessee by holding as under:
“1. Delay condoned.
2. We have perused the review petition and find that the tax effect in this case is above Rs.1 crore, that is, Rs.6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs.1 crore.
3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance o f Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating:
“Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration o f the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted. “
4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order o f the ITAT.
5. In these circumstances, the Review Petitions are dismissed. ”
Similarly we find that Hon’ble Supreme Court in the case of Andman Timber Industries vs. CIT, vide order dated 2nd September, 2015 allowed relief to the assessee by holding that right of cross examination is an important right available to the assessee and not providing opportunity to cross examine will amount to violation of principles of natural justice. The findings of Hon’ble Supreme Court are reproduced below:
“Insofar as the plea of the appellant that it was not allowed to cross-examine the dealers whose statements were relied upon by the Adjudicating Authority in passing the orders, the Tribunal rejected its plea in the following manner:
“6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. “
Challenging the aforesaid order, the present appeal is preferred by the appellant-assessee.
We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue.
According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter o f cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civi l Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
In view the above, we are of the opinion that if the testimony of these two witnesses is discredited,, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause notice.
We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. ”
The Lucknow Bench of the Tribunal in the case of Morning Glory vide order dated 15/03/2019 in I.T.A. No.72/Lkw/2018, has allowed relief to the assessee wherein again the statements of third parties were not made available to assessee for cross verification. The Hon’ble Tribunal had followed the judgment of Hon’ble Supreme Court in the case of Andman Timber Industries (supra) besides noting down the other decisions. Therefore, in view of the above, we allow ground No. 5 in all the appeals.
Having allowed ground No. 5, the additions sustained by learned CIT(A) u/s 68 and 69C are not sustainable and hence are deleted.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
This is a group of ten appeals relating to different assessees belonging to same group and for different assessment years. However, the grounds of appeal, taken by the assessees in these appeals, are identical and these were heard together therefore, for the sake of convenience a common and consolidated order is being passed. For the sake of completeness, the grounds of appeal in I.T.A. No.510 are reproduced below:
“1. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the treatment of profit in wholesale trading in cloth amounting to Rs.3,78,24,737/-, as unexplained cash credit by the Ld. A.O., under section 68 r/w section 115BBE of the Income Tax Act, 1961.
2. That while sustaining the profit in wholesale trading in cloth as unexplained cash credit, the Ld. Commissioner o f Income Tax (Appeals)-4, Kanpur failed to appreciate the fact that even in the course of search, no incriminating document(s)/evidence, indicating or suggesting that the business of wholesale trading in cloth was not genuine, was found.
3. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in treating the business of trading in cloth as bogus, without appreciating the fact that the business of trading in cloth was duly accepted in the original assessment(s) made under section 143(3) of the I.T. Act, 1961, and thus the A.O. cannot review his own order passed earlier u/s 143(3) of the I.T. Act, 1961 in the assessment made u/s 153A of the Income tax Act, 1961, without any incriminating documents found during the course of search.
4. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur has erred in law and on facts in sustaining the addition of Rs.3,78,24,737/- in order passed by Ld. AO u/s 153A of the Income Tax Act, 1961, merely on the basis o f borrowed satisfaction of Dy. C.I.T, Central Circle-II, Kanpur, without there being any corroborating material or evidence found in the course of search, to form a valid reason to believe that the business of wholesale trading in cloth was not genuine.
5. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the adverse inferences drawn by the A.O. in respect of business o f trading in cloth, without bringing any cogent material on record and confronting the same to the appellant, thus, the inferences drawn are arbitrary, unilateral and are also illega l and Unsustainable in law and on facts.
6. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the arbitrary addition/disallowance made by the Ld. AO amounting to Rs.7,56,495/-, being the alleged commission paid @ 2% on the net profit in wholesale trading of cloth treated as unexplained expenditure from undisclosed income under section 69C of the I.T. Act, 1961 in the assessment passed u/s 153A of the Income Tax Act,1961.
7. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the arbitrary addition of Rs.7,56,495/- made by the A.O. being unexplained expenditure from undisclosed income under section 69C of the I.T. Act, 1961, merely on surmises and conjectures, without appreciating that no incriminating document(s)/evidence was found in the course of search relating to the above addition in the assessment passed u/s 153 A of the Income Tax Act, 1961.
8. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the addition of Rs.7,56,495/- being the alleged commission paid @ 2% on the net profit in trading of cloth, made by the A.O., without confronting any material, evidence/information to the appellant, obtained at the back of the appellant and thus is unwarranted, unjustified and deserves to be deleted.
9. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has failed to consider and appreciate that no cogent material/evidence was brought on record by the Ld. A.O. while making the impugned addition or disallowance, without any proper basis and consequent addition in the income of the appellant deserves to be deleted.
10. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur has erred in law and on facts by not appreciating the fact that even if the seized document(s) was found from the premises of the 3rd party then, the assessment and addition on the basis of the said documents can only be made under section 153C of the Income Tax Act, 1961, hence the impugned assessment/addition(s) made u/s 153A of the Income Tax Act,1961 is illegal, bad in law and liable to be quashed/deleted.
11. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts and failed to appreciate that the approval granted by Joint Commissioner of Income Tax under section 153D of the Income Tax Act, 1961, before passing the impugned assessment order, was mechanical in nature and thus, the whole assessment is liable to be quashed.
12. That the order passed under section 127 of the Income Tax Act, 1961 is unsustainable in law, therefore the impugned assessment order is illegal, bad in law and liable to be quashed.
13. That the impugned assessment made u/s 153A of the Income Tax Act, 1961 is unsustainable in law and on facts and liable to be quashed.
14. That the impugned order under appeal is insupportable in law and on facts and is also contrary to the principles o f natural justice and equity therefore, liable to be quashed. ”
2. Learned counsel for the assessee submitted that he will be taking up the appeal in I.T.A. No.510 in the case of Sigma Casting Ltd. and the arguments in I.T.A. No.510 will hold good for rest of the appeals. Explaining the facts of the cases, Learned counsel for the assessee submitted that a search took place on the assessees on 23/08/2016 wherein no incriminating material was found during the search. But the Assessing Officer made the additions on the basis of documents found during search on a different assessee and in this respect our attention was invited to the order of the Assessing Officer specifically from where the Assessing Officer has referred to search & seizure operation conducted on 28/04/2015 on the companies of Shri Shashwat Agarwal. Learned counsel for the assessee submitted that the Assessing Officer in the order itself has mentioned that a diary identified as BK-2, containing ledger account of different parties, was found and seized at the premises of Shri Shashwat Agarwal from where he observed that the searched group was engaged in the accommodation entries of Long Term Capital Gain / unsecured loans to various parties. It was submitted that the Assessing Officer in the case of Shri Shashwat Agarwal observed that the name of Navin Jain and his family members, belonging to Sigma Group of companies, was also found in that diary and therefore, he held that Navin Jain and his family members had taken accommodation entries of tax exemption of Long Term Capital Gain by way of pre arranged trading in shares. Learned counsel for the assessee submitted that nowhere in that diary the name of the assessees appeared and the names which appeared are individuals and the assessees being companies are different than the individuals. Therefore, it was submitted that addition in the case of the assessees cannot be made as the names of the assessees did not appear in the impounded documents and that too which were impounded in the case of a third party. Moreover, it was argued that addition in the case of the assessees was not made on account of Long Term Capital Gain or unsecured loans but it was made by treating as bogus the sale and purchase of cloth made by the assessees on wholesale basis from Rich Group of companies managed by Shri Shashwat Agarwal. Learned counsel for the assessee therefore, argued that first of all the addition has not been made on the basis of documents recovered during search on the assessees which is apparent from the assessment order itself and secondly, the additions have not been made on account of Long Term Capital Gain or on account of share capital or unsecured loans for which the documents were found at the premises of the third party. Learned counsel for the assessee submitted that for assessment year 2013-14 and 2015-16, the assessments stood completed and therefore, in the absence of any incriminating material, the addition could not have been made.
2.1 Reliance in this respect was placed on the following case laws:
(i) 395 ITR 526 Pr. CIT vs. Meeta Gutgutia
(ii) 380 ITR 573 (Del) CIT vs. Kabul Chawla
(iii) 380 ITR 571 (Del) CIT vs. Murele Paper Mills
(iv) 352 ITR 493 (Del) CIT vs. Anil Kumar Bhatia
(v) 374 ITR 645 (Bom) CIT vs. Continental Warehousing Corpn.
(vi) 386 ITR 483 (Bom) CIT vs. Gurinder Singh Bawa
(vii) 392 ITR 501 (Del) Pr. CIT vs. Smt. Ania Rani
(viii) 397 ITR 344 (SC) CIT vs. Singhad Tech. Edu. Society
Learned counsel for the assessee submitted that Hon’ble Supreme Court has dismissed the SLP in the case of Kabul Chawla and Meeta Gutgutia.
2.2 Without prejudice it was submitted that the Assessing Officer did not make available any material to the assessee for cross examination and therefore, the additions sustained by learned CIT(A) are not in accordance with law as held by Hon’ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise 281 CTR 241 (SC) which was followed by Lucknow Bench of the Tribunal in the case of Morning Glory Infra Limited vs. DCIT in I.T.A. No.72/Lkw/2018.
2.3 Without prejudice to the above, Learned counsel for the assessee submitted that on merits also the assessee has a strong case as assessee was dealing in wholesale cloth trading business since assessment year 2011-12 and in none of the years the addition was made. It was submitted that even in assessment year 2013-14 the assessment was completed u/s 143(3) and no addition was made on account of trading in wholesale business of cloth. Moreover, it was submitted that Hon’ble Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. [2019] 110 Taxmann.com 64 (SC) has held that no addition can be made on the basis of third party information gathered by the Investigation Wing of the Department which has not been submitted to further verification by the Assessing Officer and he had not provided copy of such statement to the assessee and thus, denied the opportunity of cross examination and whereas on the other hand the assessee had prima facie discharged initial burden of substantiating purchases through cheques, VAT registration of sellers and their income tax returns. Learned counsel for the assessee submitted that in the present cases also the assessee had registration under the VAT Registration Act wherein the turnover from the cloth trading was also reported and for financial year 2012-13 the assessment was also completed and in this respect our attention was invited to pages 55-61 of the paper book where the copy of assessment order was placed. It was submitted that all the purchases and sales were made through banking channels and in this respect Learned counsel for the assessee heavily relied on the submissions made before learned CIT(A) vide letter dated 28/07/2019, copy placed at pages 62 to 71 of the paper book. Learned counsel for the assessee further submitted that Assessing Officer held the sales and purchase of the assessee as bogus and made the addition of the net profit u/s 68 of the Act and charged the income tax u/s 115BBE of the Act thereby disallowing the assessee the benefit of set off. Learned counsel for the assessee submitted that however the learned CIT(A) had allowed relief to the assessee by allowing set off of such income against the other income of the assessee but he did not agree to the contentions of the assessee that the income was from genuine business activity and needed to be included under the head income from profits & business instead of it having been treated as unexplained credit u/s 68 of the Act, therefore, it was prayed that keeping in view the above legal issues and the merits of the cases, the income held by the authorities below to be taxed u/s 68 be treated as being income from business activity.
3. Learned D. R., on the other hand, vehemently argued that assessee cannot take the argument that no incriminating document was found. It was submitted that the documents relied on by the Assessing Officer was though found during the search & seizure operation on the Rich Group of companies but in that document the names of its promoters existed and if the document found at the premises of Rich Group is incriminating and the entries recorded in the diary finds place in the books of account of the assessee, the books of account itself are incriminating in the case of the assessees and therefore, on that basis the Assessing Officer has rightly made the addition and which the CIT(A) has rightly upheld. Without prejudice it was submitted that Hon’ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora [2014] 367 ITR 517 (All) has held that there is no requirement of incriminating material for invoking the provisions of section 153A. As regards the reliance placed by Learned counsel for the assessee on the judgment of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla [2016] 380 ITR 573 (Del), Learned D. R. submitted that Department has not accepted the decision of Hon’ble Delhi High Court in the case of Kabul Chawla and moreover the SLP was dismissed by Hon’ble Supreme Court due to low tax effect. As regards reliance placed by Learned counsel for the assessee on the judgment of Hon’ble Supreme Court in the case of Meeta Gutgutia, the Learned D. R. submitted that Department has not accepted the decision and has filed SLP in the case of Continental Warehousing Corporation which has been admitted and therefore, it was submitted that the judgment of Hon’ble Allahabad High Court in the case of Raj Kumar Arora will apply.
3.1 As regards the other argument of Learned counsel for the assessee that the assessee was not provided opportunity to cross examination, Learned D. R. submitted that Hon’ble Allahabad High Court has already examined this aspect and has held the Rich Group of companies to be engaged in the business of providing accommodation entries and therefore, the turnover generated from these companies and routed through different companies of assessee will also be bogus and the Assessing Officer has specifically quoted the order of Hon’ble High Court. In this respect the Learned D. R. invited our attention to the order of the Assessing Officer wherein he has quoted the order of Hon’ble Allahabad High Court and wherein the entities belonging to Rich Group were held to be engaged in providing accommodation entries.
3.2 As regards the merits of arguments, Learned D. R. submitted that Assessing Officer in respect of reply to queries after specifically citing a number of adversities held that the turnover of the assessee from cloth business was bogus and heavily relied on the findings of Assessing Officer. Therefore, it was argued that learned CIT(A) has rightly confirmed the addition to be u/s 68 of the Act.
4. In rejoinder Learned counsel for the assessee submitted that in the order of Hon’ble Allahabad High Court there are only observations with regard to the companies being involved in providing accommodation entries in the form of providing Long Term Capital Gain and share capital etc. and there is no whisper as to the cloth business being run by the companies and also there is no Long Term Capital Gain or unsecured loans entries taken by assessees. It was submitted that the Assessing Officer has made addition on account of trading in cloth. On the conclusion of the arguments by the parties, the Bench directed both the parties to furnish written submissions along with the copy of Panchnama and list of documents etc. seized during the course of search in the case of the assessees and other group companies and later on which have been filed by both the parties. For the sake of completeness, the written submissions filed by both the parties has been made part of this order and which are reproduced below:
ASSESSEE’S WRITTEN SUBMISSIONS
“1) Brief facts are that a search u/s 132(1) of the IT. Act, 1961 (hereinafter referred to as Act) took place at the business premise of the appellant Co. and the residentia l premises of the Directors of the Company, on 23.08.2016 which continued up to 25.08.2016 and as a result of search, notices u/s 153A were issued in the case of appellant for A/Ys 2012-13 to 2016-17.
2) The appellant is engaged in the business of manufacturing and trading of M S Ingots and also wholesale trading in cloth.
3) Original return of income for A.Y. 2013-14 was filed by the appellant on 23.10.2013 declaring net income at Rs.25,70,020/-.
4) Assessment u/s 143(3) was framed by the Learned Assessing Officer at a total income of Rs. 29,82,960/- vide assessment order dated 22.03.2016. Copy of assessment order has been placed at pages 51 to 54 of the paper book.
5) Return of income filed along with Audited set of accounts, copy of the income tax return and Tax Audit Report have been placed at pages 1 to 50 of the paper book.
6) A notice u/s 153A was issued by the A.O. on 03.04.2018, and thereafter Assessment u/s 153A r.w.s. 143(3) was made by the Learned Assessing Officer computing total income at Rs.3,85,81,232/- and provision in Sec. 115BBE of the Act was invoked to tax the assessed income u/s 115BBE.
7) During the relevant assessment year, as already submitted above, the appellant was engaged in the business of manufacturing and trading of M S ingots and wholesale trading in cloth. Profit in the trading of cloth was declared at Rs.3,78,24,737/-.
8) The Learned Assessing Officer, while framing assessment, had no doubt, by way of cursory remarks observed that the trading results are not accepted. But fact of the matter is that neither any item of purchase/sale or any expenditure found to be unrelated nor any specific defect has been pointed out in the maintenance of the books of accounts. The system o f maintenance of books of accounts continues to be the same as was in the past years, which as already submitted above, has been accepted by the Learned Assessing Officer. Otherwise also, the Learned Assessing Officer, while framing assessment, proceeded to compute the total income by adopting the figures as Profit & Loss Account and the return of income which is solely based on the books of accounts maintained by the appellant company.
9) In addition to the above treatment of profit in trading o f cloth, the A.O. also estimated and added an amount o f Rs.7,56,491/-, representing 2% of the total profit in trading in cloth, declared by the appellant, as an unexplained expenditure to obtain the alleged accommodation entry by resort to provisions of Section 69C of the Act.
10) While computing the total income, the Learned Assessing Officer did not allow the set off of the income declared by the appellant in trading of cloth against the business losses in the same year in accordance with the provision in Section 71 and 72 of the Act.
11) The appellant preferred an appeal against the said assessment before the Learned Commissioner of Income Tax (Appeals)-4, Kanpur. On adjudication, the Learned Commissioner of Income Tax (Appeals)-4, Kanpur upheld the action of the Learned Assessing Officer in treating the amount declared as profit on cloth trading as an unexplained credit and also upheld the action of the Learned Assessing Officer in estimating the addition of Rs.7,56,491/- on account of alleged expenditure representing 2% of the amount of total profit o f trading in cloth but allowed the set off of profit of trading in cloth against losses in iron & steel business.
12) The appellant is in appeal before the Hon’ble Bench against upholding of the action of the Learned Assessing Officer by the Learned Commissioner of Income Tax (Appeals) (supra).
13) While framing the assessment, the Learned Assessing Officer has solely relied on certain communication received by him from the Deputy Commissioner of Income Tax, Centra l Circle-1, Kanpur, vide letter No. DCIT/CC-1/KNP/Misc/18-19/ 699 dated 06.12.2018 being the Assessing Officer of Rich Group of cases which has been reproduced by the A.O. from pages 7 to 12 of the assessment Order.
14) The A.O. has observed that during the course of search of Rich Group of cases, on 28.04.2015, certain documents were found particularly, a reference has been made to a ledger, seized and inventorised as Annexure BK-2, which allegedly transpires that Rich Group of cases along with appellant company were involved in circular trading of cloth.
15) As per the Learned Assessing Officer, the transaction(s) relating to purchase and sale of cloth were only in the nature of book entries and there was no actual business transaction and from this he inferred that the profit declared by the appellant company as profit in trading in cloth business was not business profit but was only an unexplained cash credit and the appellant had routed its unaccounted money through M/s Rich Group of companies.
16) At the outset, the said Annexure BK-2 does not mention anything about cloth trading and apart from mentioning of the issue(s) undertaken referred to here above seized document BK-2, there is no mention of any seized/impounded document, which could be said to have been found during the course of search either at the premises of the appellant or at the premises of Rich Group of Companies.
17) The Learned Assessing Officer thus failed to make reference of any incriminating information or document etc. in the body of the assessment order. As directed, copy o f Panchnama prepared by the Learned Authorized Officers during the course of search u/s 132(1) of the Income Tax Act, 1961, at the premises of the Appellant Co. is enclosed.
18) Before going into the various legal and factual issues, your humble appellant would very vehemently like to state that neither any incriminating document was found from the premises of the appellant during the course of search nor the Learned Assessing Officer has referred to any such document in the body of assessment order.
19) The appellant is agitating the action of the Learned Assessing Officer and upholding of the same by the Learned Commissioner of Income Tax (Appeals) on the ground that the case of the appellant is that the assessment had been framed u/s 153A of the Act and is not a regular assessment.
20) It is worth noting that an addition or any adverse inference in the case of the assessment u/s 153A of the Income Tax Act, 1961 can be made only on the basis o f incriminating material whereas, in the case of the appellant, no incriminating material was found/noticed or referred to in the Assessment Order.
21) Entire thrust of the Learned Assessing Officer has been on the documents/ledger found and seized from the premises o f Rich Group of Companies, which was seized by the Department way back on 28.04.2015. This fact is amply clear from reading of the assessment order from page 4 onwards.
22) Perusal of the assessment order will reveal that the only document referred for drawing this adverse inference is a diary inventorised as BK-2 from the premises of Sh. Shaswat Aggarwal on 28.04.2015.
23) Any adverse inference drawn on the basis of the document seized from the possession of any third party, except by resorting to the laid down procedure provided u/s 153C of the Act, while framing assessment u/s 153A of the Income Tax Act, 1961 is bad in law. Your Honour’s kind attention is drawn to the ratio propounded in the following judgments: –
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