Addition of unexplained investment deleted in absence of substantive evidence

POONAM GANDHI 10 Dec 2022 1,830 Views 0 comment Print Income Tax | Judiciary

Case Law Details

Case Name : Smt. Anita Jain Vs ACIT (ITAT Jaipur)

Appeal Number : ITA No. 96,97,98,99,100,101 & 102/JP/2022

Date of Judgement/Order : 15/06/2022

Related Assessment Year : 2010-11

Courts : All ITAT ITAT Jaipur

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Smt. Anita Jain Vs ACIT (ITAT Jaipur)

ITAT Jaipur held that additions on account of LIC Premia treated as unexplained investment deleted as merely based on rough notings without any substantive evidence.

Facts-

The appeal has been filed by the assessees against the orders of Commissioner of Income Tax (CIT), dated 28-01-2022. The Income Tax Appellate Tribunal (ITAT), Jaipur recognized the rough noting by the assessees as actual transactions and deletes additions on LIC Premium.

It is submitted that, the LIC Premium has been paid from drawings from Cash Funds and that the Assessing Officer (AO) has relied solely upon unsigned hand written notings which have neither been corroborated nor found from the possession or control of the assessee. Further, the various notings indicate that it’s a summary of LIC and other instruments of the various members of the joint family. The basis of how the AO has derived the alleged number for premia for a given Assessment Year has not been stated by the AO and in case the veracity of the said hand-written loose sheets of papers is suspect.

It is also contended that the AO/CIT has not brought any substantive material on record to establish that the appellants actually contributed any amount more than the number of drawings as submitted by the assessees and that the Orders of the AO and CIT are bad in law per se. The Counsels also submitted that the alleged “incriminating material” relied upon by the AO/CIT does not belong to the assessees and there is no corroborative evidence to establish that the assessees had any undisclosed incomes for the years under consideration. Thus, the impugned assessment orders are void ab initio having regard to settled law as the same are not emanating from any “incriminating” material. It is settled law that assessments u/s.153A of the Act should be confined to incriminating material only for years where the assessments have concluded and/or time limit for issue of notice u/s.143(2) of the Act has lapsed.

Conclusion-

In any case and also noted rightly by the Hon’ble ITSC, the said documents are merely rough scribblings. Accordingly, in the absence of any corroborative material brought on record by the Department in making the following specific additions in the case of the Appellants, the same are contrary to settled law and the order of the Hon’ble ITSC and hence deleted.

Held that accordingly, having regard to accepted facts for AY 2009-10 concerning cash balances available with the appellants and the absence of any substantive evidence brought on record by the AO/ CIT(A) that the rough notings relied upon were actual transactions carried out by the appellants, we delete the additions on account of LIC Premia treated as unexplained investment.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

These appeals have been filed by the above mentioned assessees against three different orders of ld. CIT(A)-4, Jaipur dated 28-01-2022 for the assessment years mentioned hereinabove. The grounds of appeals raised by the different assessees are as under:-

Anita Jain (A.Y. 2010-11 to 2016-17)

2.1 In the case of Smt. Anita Jain for the A.Y. 2010-11 to 2016-17, the ground No. 1 is common which is as under:-

1. That on the facts and circumstances of the case and in law, the order dated 28-01-2022 passed u/s 250 of Income Tax Act, 1961 by CIT(A) confirming the order dated 30-12-2017 passed by the AO is bad in law.

2.2 In the case of Smt. Anita Jain for the A.Y. 2010-11 to 2016-17, the ground No. 2 is common but amount of confirming addition u/s 68 and confirming the part addition on account unexplained investment by the ld. CIT (A) are different which is mentioned as under:-

A.Y.	Addition confirmed on account of unexplained cash credit u/s 68	Part addition confirmed on account of unexplained investment
2010-11	Rs.55,55,000	Rs. 59,535
2011-12	–	Rs.59,535
2012-13	–	Rs.59,535
2013-14	Rs.15,00,000	Rs.42,331 (LIC)
2014-15	–	Rs.42,331
2015-16	Rs.20,47,575	Rs.10,812 (LIC) Rs.3,00,000Cash investment
2016-17	–	Rs.6,38,000

Usha Jain (A.Y. 2010-11 to 2016-17)

3.1 In the case of Smt. Usha Jain for the A.Y. 2010-11 to 2016-17, the ground No. 1 is common which is as under:-

3.2 In the case of Smt. Usha Jain for the A.Y. 2010-11 to 2016-17, the ground No. 2 is common but amount of confirming addition u/s 69A and confirming the part addition on account unexplained investment by the ld. CIT (A) are different which is mentioned as under:-

A.Y.	Addition confirmed on account of unexplained money u/s 69A or cash credit u/s 68	Part addition confirmed on account of unexplained investment u/s 69
2010-11	Rs.26,00,000 (the AO made this addition u/s 68)	Rs.45,888
2011-12	–	Rs.45,888
2012-13	–	Rs.45,888
2013-14	–	Rs.7,05,000 Rs 45,888
2014-15	Rs.10,00,000 & Rs 39,46,800 unexplained investment in immovable properties	Rs.45,888
2015-16	Rs.21,30,700 (STCG) Rs.20,47,575 unexplained investment	Rs.18,00,000
2016-17	Rs.2,61,000 unexplained cash credit	–

Sunita Jain (A.Y. 2010-11 to 2015-16)

4.1 In the case of Smt. Sunita Jain for the A.Y. 2010-11 to 2015-16, the ground No. 1 is common which is as under:-

4.2 In the case of Smt. Sunita Jain for the A.Y. 2010-11 to 2015-16, the ground No. 2 is common but amount of confirming addition u/s 68 and confirming the part addition on account unexplained investment by the ld. CIT (A) are different which is mentioned as under:-

A.Y.	Addition confirmed on account of unexplained cash credit u/s 68	Part addition confirmed on account of unexplained investment
2010-11	Rs.35,05,000	Rs. 45,888
2011-12	–	Rs.45,888
2012-13	–	Rs.45,888
2013-14		Rs.45,888
2014-15	39,46,800 Unexplained investment	Rs.10 lacs (AO) Rs.45,888 (CIT(A)
2015-16	Rs.21,30,000 Unexplained investment	Rs.2l,00,000

5. Brief facts of the case are that the subject appeals arise from the orders dated 28.01.2022 passed by the Ld. Commissioner of Income Tax (Appeals) – 4, Jaipur (“Ld. CIT(A)”) to the extent confirming/upholding the orders dated 30.12.2017 passed u/s.143(3) r.w.s.153A of the Income Tax Act, 1961 (“Act”) by the ACIT, Central Circle-1, Jaipur (“Ld. AO”) in the case of Usha Jain, Anita Jain and Sunita Jain for the years AY 2010-11 to AY 2016-17, AY 2010-11 to AY 2016-17 and AY 2010-11 to AY 2015-16, respectively.

6. In first appeal, the CIT(A) order dated 28.01.2022 has combined all the assessment years of each appellant being common issues in appeal. The lead case considered is Usha Jain and similar comparable facts of Anita Jain and Sunita Jain have been addressed wherein the ld. CIT(A) made various additions as under:-

extent confirming

extent confirming 2

extent confirming 3

extent confirming 4

During the course of hearing, the ld. AR submitted that Search and seizure proceedings u/s.132 of the Act were conducted in the cases of RT Industries Group of Tonk, Rajasthan on 10.12.2015 on various residential and business premises of the partners of the appellants and other connected persons. The appellant are middle-aged women and part of the joint business family of the RT Industries Group.It is a matter of record that the appellants have regularly filed income tax returns along with Statement of Affairs since 2001. They have invested in family business through partnership firms and earn interest from the partnership firms and the bank. From time to time the assessees make small investments in immovable properties, besides paying premia towards LIC policies. The assessees maintain a cash book. As the assessees are individuals and not engaged in any active business or profession, they are not required to maintain accounts in terms of provisions of S.44A of the Act, nor required to get their accounts audited u/s.44AB of the Act. As submitted by the AR, the common key issues in the present appeals are:

S.No.	Addition on account of	Document/Basis	Reasons
1.	LIC Premia treated as unexplained investment (AY 2010-11 to AY 2014-15 for Usha & Sunita Jain AY 2010-11 to AY 2015-16 for Anita Jain)	Seized Material – Dumb Document (reproduced at pages 141- 148 of the AO’s order for AY 2015-16 Usha Jain)	Does not belong to the assessees Not found from their control or possession Not in the hand-writing of the assesseess but of Rajesh Kumar Jain (AO’s finding at Para 9.6.1. Pg 89 of AO’s order for AY 2015-16 Usha Jain) Not signed by the assessees No corroborative evidence brought on record by the AO to substantiate the alleged transactions
2.	Cash Deposit treated as unexplained u/s.68/69A [AY 2010-11 for Usha Jain (Rs.26L and Anita Jain Rs.55.55L)]	NO Seized Material Based on the Individual Transaction Statement (ITS)	As assessments for AY 2010-11 stood concluded, materials extraneous to the Search are not contemplated for 153A assessments as per settled law
3.	Cash Purchases of Immovable Property treated as unexplained investment (AY 2013-14 to AY 2015-16 for Usha AY 2013-14 & AY 2015-16 Anita Jain AY 2014-15 & AY 2015-16 for Sunita Jain)	Seized Material – Registries/Sale Deeds	Purchased from Cash Funds Similar transaction in AY 2009-10 upheld by CIT(A) against order u/s.147 Concerns the same Cash Book as examined in 153A proceedings Assessees have demonstrated historical cash balances, accepted by CIT(A) Thus, being explained documents, the same are not incriminating
3.	Alleged “on-money” over and above the purchase consideration of immovable properties treated as unexplained investment (AY 2014-15 to AY 2015-16 for Usha AY 2015-16 Anita Jain AY 2014-15 & AY 2015-16 for Sunita Jain)	Seized Material –Hand- written loose sheets admitted before & adjudicated upon by Hon’ble ITSC	Dumb documents, viz., undated, unsigned loose sheets, for e.g., Jottings by seller, only name of RT Industries & some rough calculation (Page 58 of AO’s order for AY 2015-16) Only rough calculation (Page 87 of AO’s order for AY 2015-16) Only Khasra numbers (Page 88 of AO’s order for AY 2015-16) No substantive/ corroborative evidence brought on record ITSC Finding that the documents cannot be relied upon and further that the other than the commission transactions as admitted, no other transaction (like, on-money) concerning these properties is tenable as Revenue has failed to substantiate its conjectures and surmises.
4.	Alleged STCG on sale of immovable properties at conjectured purchase & sale value (AY 2015-16 Usha Jain & AY 2015-16 Sunita Jain)	Same as in row 3 above	Same as in row 3 above. First the purchase price is assumed/conjectured basis the dumb documents and then sale price too is conjectured basis the same

Shri Trilok Chand Jain, one of the key searched persons and co-head of the Group, made a statement u/s 132(4) of the Act accepting that all the seized materials i.e., Exhibits 1-40 of Panchnama dated 12.12.2015, were found and recovered from his residential and office premises at Shastri Nagar, Kidavai Park, Hemukalani Circle, Tonk, Rajasthan. The Exhibits 1-40 comprise hand-written loose sheets, notepads and sale deeds. It is noted that the seized material was not in the control and possession of the appellants. Further, it is the AO’s finding, in para 9.6.1. at page 89 of the order for AY 2015-16, that said rough scribblings were not in the hand-writing of the appellants. The following five entities of the RT Group filed settlement applications u/s 245C of the Act on 28.04.2017 before the Hon’ble Income Tax Settlement Commission, New Delhi (‘ITSC’):

M/s R.T Industries
Trilok Chand Jain
Gyan Chand Jain
M/s Rajesh Kumar Jain HUF
M/s Ashok Kumar Jain HUF

The Settlement Applications were initially rejected by the Hon’ble ITSC but allowed to be proceeded with pursuant to the order dated 08.05.2017 of the Hon’ble High Court of Delhi. The AR further submits that the Hon’ble ITSC heard the matters arising from the seized material admitted before and gave its findings vide order dated 20.03.2020 passed u/s.245(D) of the Act. The findings of the Hon’ble ITSC with respect to the seized materials and key contentions of the Revenue thereupon are:

a. Seized material unreliable being uncorroborated as no substantive evidence brought on record by Revenue, hence the loose papers/hand-written jottings are “dumb documents”

i. (Para 54 Page 38 of the Paperbook): seized material (which includes “rough scribblings”) cannot be used to tax Trolok Chand Jain “without bringing substantive evidences on record which the Department has failed to do so during the course of hearing”.

ii. (Para 66 Page 48 of the Paperbook): “there has not been any concrete finding brought on record by the Department except suspicion and surmise and we hold that there has not been sufficient material presented before us nor argued to draw any adverse inference from the Department’s computation of Rs.7.52 crores as Shri Gyan Chand Jain’s undisclosed income. ……….”.

b. Inferences by Revenue that rough estimates represent on-money/capital gains transactions concerning immovable property appearing in seized registries are untenable being merely conjectures and surmises:

i. (Para 73 at Page 55 of the Paperbook): After noting and considering the argument of Revenue that not merely commission income was earned with respect to the transactions in the seized registries, the ITSC has given its finding at Para 77 as under:

“COMMISSION’S FINDING

(In the case of the Two HUFs)

After careful consideration, we are of the view that the earlier returns filed by the two HUFs had included income earned by way of commission from sale and purchase of property. There is no case of the Department that the two HUF applicants has not owned up certain documents seized from their possession wherein “2%” has been explicitly mentioned and had been computed on certain values. The Department’s suspicion is rather hypothetical and to expect someone to maintain accounts for its undisclosed income is too stubborn a presumption to be considered as even any legal requirement or a logical cause for the claim. In our opinion, the Department cannot expect the Applicants to incriminate themselves further only to prove the Department’s conjecture as true. There has been no inquiry after the Search. If the seized documents had not been able to reveal anything, then the Department should gracefully accept whatever the Applicants have offered from their end, based on their owned-up documents and on their calculation.”

Accordingly, the matter of on-money/Capital Gains concerning seized registries (AS-2) in the case of the appellants stands dealt with by the Hon’ble ITSC (ref: PB pg.51, 53-54) in the case of Applicants Ashok Kumar Jain HUF and Rajesh Kumar Jain HUF. It is noted that while the AO/CIT(A) were aware of the settlement proceedings concerning the Search and materials seized therefrom, the same were pending before the Hon’ble ITSC during the course of the assessment/appellate proceedings before them. The AR has submitted that Section 245-I of the Income-tax Act, 1961 (the Act) expressly provides that every order of settlement passed u/s. section 245D(4) of the Act “shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force”. The AR has placed reliance on the decision of the Hon’ble High of Delhi in Commissioner of Income-Tax (C)-III vs. Gopal Gupta (2014) 46 Taxmann.com 312 (Delhi) wherein it was held that the findings of the ITSC (including the interpretation of a document) cannot ordinarily be interfered with even by a superior court The relevant excerpt of the Hon’ble High Court’s decision is reproduced as follows:

“15. From the above it is evident that the Supreme Court observed that the High Court ought not to gone into a factual issue while exercising writ jurisdiction and should not have substituted its opinion against the opinion of the Settlement Commission. From all these decisions it is abundantly clear that the scope of review under Article 226 of the Constitution insofar as an order passed by the Settlement Commission under Section 245 D (4) of the Income Tax Act is concerned, is a very limited one. This Court certainly cannot substitute its view in place of the Settlement Commission particularly on point of interpretation of a particular document. Interference can only be made if there is a fault in the decision making process and not with the decision itself. Even if this Court feels that it would have arrived at a different decision, it cannot interfere with the conclusion arrived at by the Settlement Commission because this Court does not sit in appeal over the decision of the Settlement Commission.”

Similarly, the Hon’ble Supreme Court in Nirmal And Navin P. Ltd. And Ors. v. D. Ravindran AIR 2002 SC 3576, has also held that even a Court cannot go behind the ITSC’s order on account of the protection statutorily provided by the Act. All the seized material (i.e. Exhibit 1 to 40) during search on the RT Industries Group and related persons on 10.12.2015 have admittedly been recovered from the control and possession of Shri Trilok Chand Jain vide statement u/s. 132(4) of the Act on 10.12.2015 and 05.01.2016. All these seized materials (which includes registries of sale/purchase of immovable properties) and (undisclosed) income pertaining to the same for the search assessment years AYs 2010-11 to 2016-17 were then admitted before the Hon’ble ITSC vide application u/s. 245C of the Act on 27.04.2017 by the Applicants, Trilok Chand Jain, Ashok Kumar Jain HUF and Rajesh Kumar Jain HUF. Therefore, the conclusiveness is “matter” specific and not limited by the applicant(s) before the ITSC. Further, the detailed findings of the ITSC with regards to the seized materials and alleged undisclosed income therefrom, too are conclusive against Revenue and cannot be used against the assessees vide decision of Hon’ble High Court of Delhi in Gopal Gupta supra.

7. During the course of hearing, the ld. DR strongly placed reliance on ld. CIT(A)’s order We have heard both the parties and perused the materials available on record. From the submissions of the ld. AR, we are inclined to agree with the AR that the ITSC order u/s.245(D) of the Act is conclusive, with no authority permitted to re-visit the findings and conclusions therein. While the present appellants were not Applicants before the ITSC, the materials admitted before the ITSC and matters arising therefrom have been dealt with by the ITSC and the same are conclusive and taxes thereupon have been paid by the respective applicants before ITSC. Regarding the above, the AR has rightly pointed out that the alleged “on-money” is (a) based on dumb documents, viz., undated, unsigned, not in the hand-writing of the appellants and not found from the possession and control of the appellants; and (b) unsubstantiated by the Department that the appellants paid/received any alleged on-money. Further, the ITSC has given a clear and categorical finding that in the absence of any substantive material placed on record by the Revenue, the averment that the rough scribblings indicate transactions involving on-money is a mere conjecture. In the case of the Appellants, we find that the Revenue has placed similar reliance on such dumb documents and alleged various transactions which are unsubstantiated and are at best, conjectures. The “dumb” documents being relied upon by the Department as reproduced in the order of the CIT(A) at page 35 from the AO’s order are as under:

Jain HUF Is to be considered rejected by the ITSC till any decision to the contrary comes from the Hon’ble Deihl High Court.”

Therefore, as directed by the Addl. CIT, Central Range, Jaipur, the applications u/s 245C(1) filed by Rajesh Kumar Jain HUF and Ashok Kumar Jain HUF are to be considered rejected till any decision to the contrary is received from the Delhi High Court.

8.6 Inquiries conducted to corroborate the seized records at Page No. 30, 31 & 32, Exhibit – 2, Party No. 1:

During the assessment proceedings, the entire seized records were analysed and inquiries were conducted to corroborate the entries recorded in the seized documents at Page No. 30, 31, 32 of Exhibit – 2, Party No. 1, To begin with, the page nos, 30, 31 & 32 of Exhibit – 2, Party No. 1 are being scanned here for reference (the relevant words and numbers written on these pages have been encircled):

seized records

seized records 2

seized records 3

The Ld. DR has placed reliance on the decision of the Hon’ble High Court of Delhi in Gupta Perfumers (P) Ltd. v. ITSC in WP(C) No.4368 of 2010, citing the decision of the Hon’ble Supreme Court in ITO v. Ch. Atchaiah 1996 SCC (1) 417, is inapplicable to the facts of the Appellants and issue for determination before this Tribunal. In Gupta Perfumers supra, the distinguishable issue was whether persons other than the applicants before the ITSC can be proceeded against on the basis of documents belonging to them and income disclosed therein, not being documents belonging to the applicants before the ITSC. In the present case all the seized materials/documents, that were also adjudicated on by the ITSC, have been owned up by the applicants and belong to them, and not the appellants. Furthermore, the findings of the ITSC with respect to these materials/documents are covered by Section 245-I of the Income-tax Act 1961 and the later decision of the Hon’ble High Court of Delhi in Commissioner of Income-Tax (C)-III vs. Gopal Gupta [(2014) 46 Taxmann.com 312 (Delhi) wherein it was held that the findings of the ITSC, including the interpretation of a document, cannot ordinarily be interfered with even by a superior court, let alone ignored by the AO/CIT(A) vide impugned search assessment/appellate order. The present cases before us do not involve a situation where the seized documents submitted before ITSC for consideration belong to persons other than the Applicants. In the present cases, the seized documents, viz., rough scribblings, have been owned up by the Applicants and seized from their control & possession. Such rough scribblings are dumb documents as held by ITSC and Deptt has not brought any substantive evidence to hold that any “on-money” was actually involved in the purchase/sale of immovable properties, if any, referenced therein. Thus, we are unable to find any applicability of the decision in the Gupta Perfumers supra to the present case of the appellants. In any case and also noted rightly by the Hon’ble ITSC, the said documents are merely rough scribblings. Accordingly, in the absence of any corroborative material brought on record by the Department in making the following specific additions in the case of the Appellants, the same are contrary to settled law and the order of the Hon’ble ITSC and hence deleted:

specific additions

Accordingly, the grounds as noted in the assessee -wise AY-wise Table above, are allowed to the respective appellants.

9. The next issue of the assessees in all the appeals are regarding Cash purchases of Immovable Properties treated as unexplained investment. The ld. AR submitted that the alleged cash transactions involving purchase of immovable property and payment of LIC Premia, the AR has submitted that the appellants had sufficient historical cash balances that have been a matter of record. The Income Tax Returns of the appellants for AY 2009-10 were subjected to reassessment proceedings u/s.143(3)/147 of the Act based on the registry of a plot found during the Search for the reason that the same was “undisclosed”. This case involved the same Cash Book and similar transactions involving purchase of immovable properties. On appeal, the Ld. CIT(A) via a detailed and speaking appellate order dated 13/26.02.2018 deleted the addition. The findings of Ld. CIT(A) at Para 4 are reproduced as under:

unexplained investment unexplained investment

unexplained investment 2

33. The Ld. DR has relied on the CIT(A) order. The relevant paras are reproduced as under:

relevant paras

(ii) On perusal of the aforesaid registries, as per page 96 to 105 of Exhibit 38, the AO observed that the appellant Smt. Anita Jain alongwith Smt. Usha Jain has made investment in cash in the agricultural land admeasuring 2 Bigha 13 Biswa at Khasra No. 908 & 909 at Village Bharni, Tonk, Rajasthan. The aforesaid property was purchased by them on 27.11.2014 Le. in the AY 2015-16 from Shri Shiv Narain Saini at a total consideration of Rs. 24,00,000/- paid in cash. Accordingly, the AO considered the cash investment by the appellant in the said property as per the registry at Rs. 12,00,000/-, being her half share in the property. Regarding the source, the appellant has contended to have paid Rs. 3,00,000/- in cash and balance of Rs. 9,00,000/- by cheque. An amount of Rs. 4,50,000/- each was paid by cheque no. 113343 from RT Industries and cheque no. 113181 from Rajesh Products dated 27.11.2014, ICICI Bank. Tonk, the detail of which is at page no. 99 of Exhibit 38.

Industries and cheque

Industries and cheque 2

Industries and cheque 3

10. After hearing both the parties and perusing the materials available on record, we find that in the case of Usha Jain, the CIT(A) -4, Jaipur held that S.44AB of the Act was inapplicable to the assessee and the source of her funds for making the investment in immovable property in question was proved, accepting the significant cash balances of Rs.97,68,047/- as on 31.03.2009 and of the preceding two years (AY 2007 -08 and AY 2008-09) as the assessee had regularly filed her ITRs enclosing Statement of Affairs that evidenced the cash funds since 2001. The [d. CIT(A) expressly rejected the factually unsustainable arguments of the Revenue that the cash book was not audited and that the assessee could not have such significant cash balance with a low amount of returned income. The AR submits that the decision of the [d. CIT(A) and findings made therein have attained finality and protected by the Hon’ble Supreme Court’s decision in Radhasoami Satsang v. Commissioner of Income-Tax [1992] 193 ITR 321 (SC). According to Section 2(12A) of the Act, books or books of account, include ledgers, daybooks, cash books, account-books and other books, whether kept in the written form or as electronic data. Section 145 does not specify any set of accounts to be maintained by an assessee. Also, Rule 6F of Income Tax Rules, 1962 prescribes certain set of books only for professionals and not for other assessees or businesses or traders. The cash book submitted has been treated as bogus in complete disregard of the facts on record and provisions of law. In rejecting the cash book, the AO/Ld. CIT(A) have predominantly relied upon the Statement and Re-examination of the CA, particularly when (a) the CA did not point out any mistake, defect or error in the cash book and balance sheet reviewed and signed by him; (b) the AO/Ld. CIT(A) for some reason best known to them, chose not to summon the lawyer who allegedly prepared and provided the cash book and balance sheet to the CA.The cash books for the relevant search assessment years have been rejected as being bogus, not genuine, unaudited and unauthentic by the AO, as confirmed by the Ld. CIT(A), vide impugned search assessment orders and impugned common appellate order, contrary to the Act and case laws thereon, which is legally unsustainable for the following reasons:

AO/Ld. CIT(A)’s principal reliance on the uncorroborated and self-incriminatory E-IC statement of the CA on 16.12.2017 u/s 131 of the Act, despite contradictory statements by the CA during cross-examination on 26.12.2017 at 4.30 pm;
AO’s further reliance on a hurried re-examination of the CA on 26.12.2017 immediately after the cross examination, behind the assessee’s back;
AO’s failure to note that the CA never stated that the assessees cash books etc. were found by him to be bogus, false incorrect, incomplete etc.;
AO’s failure to summon and examine the tax Advocate, who purportedly prepared and presented the assessee’s books of accounts etc. to the CA;
AO’s failure to give effect, in subsequent search assessment years, to the assessee’s huge cash balance of Rs. Rs.97,68,047/- as on 31.03.2009 which has reached finality via appellate order dated 13.02.2018 passed by the Ld. CIT(A) for AY 2009-10, as the same has not been challenged in further appeal;
AO’s failure to appreciate that the assessee is not required by the Act to maintain regular or prescribed books of accounts or for the same to be audited;
AO’s failure to make a specific finding, based on cogent evidence, that the assessee’s cash books, as provided for the search assessment years, are not correct or complete;
AO’s perverse reasoning that absence of physical cash, as claimed by the assessee via books of accounts, during search at the searched premises justifies rejection of the cash in hand balances stated therein;
AO’s failure to give effect to the huge investment of the assessee in M/s RT Industries in AY2010-11;
AO’s reliance of suspicion, conjecture and surmises to justify the rejection of the assessee’s cash book by referring to non-recording in cash book of alleged cash sales by the assessee vide purported registries dated 18.02.2015 pertaining to land in Jankipura in Tehsil Malpura, allegedly procured by the AO during investigation from Sh.Rajesh Kumar Saini and Sh.Gopal Lal Saini (collectively the “alleged buyers”), despite the Ld.AO’s failure to produce the alleged buyers for cross-examination and failure to produce the said registries for verification by the assessee. It may also to be noted that the AO has made no addition in respect of such purported sale (pages 53-55 of AO’s order).

Accordingly, we hold that the rejection of the assessee’s cash books by the AO/Ld. CIT(A) vide the impugned search assessment/appellate order for the search assessment years, is contrary to the facts on record and legal position and the findings of the ld. CIT(A) in the assessee’s own case for AY 2009-10 concerning the same cash book and relating to the registry of immovable property found in the same Search. We find that the following additions have been made disregarding the CIT(A) order dated 13.02.2018 for AY 2009-10 and erroneously holding the CA’s statement as evidence that the books are fake. At best, the CA’s statement reveals professional negligence as the CA has not made a single comment that the books were fake, false or fabricated. The CIT(A)/AO have not been able to controvert the findings in the CIT(A) orders for AY 2009-10. We note that the above mentioned CIT(A) orders also gives the summary of the cash balances of the assessees is as under and the same are relied upon in the absence of any cogent material brought on record by the AO/CIT(A):

cash balances

Thus, we are inclined to agree with the order dated 13.02.2018 of the CIT(A) -4, Jaipur wherein the Cash Book and antecedents of disclosure by the appellants have been examined. We are not inclined to agree with the following conclusion of the CIT(A) at page 28 of the impugned order wherein the CIT(A) distinguishes the facts merely on the premise that there is no CA’s statement available for AY 2009-10, hence facts are distinguishable. Hence, We are of the view that the hurried statement and re-examination of the CA is not an issue that establishes any defects in the cash book but merely professional negligence on his part to verify the books before signing. It is also odd that while being in the know of it, yet the AO/Ld. CIT(A) chose not to summon the lawyer who allegedly prepared the books for signing by the CA. In any case, the appellants are not under any statutory obligation to get their accounts prepared u/s.44AA or even audited u/s.44AB of the Act. As the AO/Ld. CIT(A) have relied predominantly on the CA’s statement not highlighting any defect in the books, the same is not sufficient basis to deny or distinguish with the findings of the CIT(A) in order dated 13.12.2018 for AY 2009 -10. Accordingly, we delete the following additions, as per the assessee-wise AY-wise Table below:

sufficient basis

11. The next ground of the assesseee is regarding Payment of LIC Premia from Drawings held as Unexplained Investment.

12. During the course of hearing, the ld AR submits that likewise, the LIC Premia has been paid from drawings from Cash Funds. The AO has relied solely upon unsigned hand written notings which have neither been corroborated nor found from the possession or control of the assessee. Further, the various notings indicate that it’s a summary of LIC and other instruments of the various members of the joint family. The basis of how the AO has derived the alleged number for premia for a given AY has not been stated by the AO and in case the veracity of the said hand-written loose sheets of papers is suspect. The AO/CIT(A) has not brought any substantive material on record to establish that the appellants actually contributed any amount more than the amount of drawings as submitted by the assessees. The ld. AR further submits that that the impugned orders are per se bad in law. AR pleads Ground No.1: That on the facts and circumstances of the case and in law, the order dated 28.01.2022 passed u/s. 250 of the Income Tax Act, 1961 (“Act”) by the Commissioner of Income Tax (Appeals) Jaipur-4 [“Ld. CIT(A)”] confirming/upholding the order dated 30.12.2017 passed by the ACIT, Central Circle-1, Jaipur (“AO”) is bad in law. The AR further submits that the assumption of jurisdiction by the Ld. AO u/s 153A r.w.s.132 of the Act is unlawful and erroneous for the following reasons:

a. Absence of any “incriminating material” that belonged to the assessees or found in their control and possession

b. Every seized material is not “incriminating”

45. Assessment orders passed for AY 2010-11 in Usha Jain and Anita Jain where the Ld.AO/CIT(A) while making the additions of Rs.26L and Rs.55.55L respectively, in respect of cash deposit into Bank, based on extraneous materials on the misplaced appreciation of settled law that assessment need not be confined to incriminating (seized) material qua each assessment year. The AR’s submissions are reproduced as under: “Settled Law on S.153A erroneously disregarded. The impugned orders are void ab initio being devoid of any finding based on incriminating material. The AO/Ld. CIT(A) have relied on cases that are:

(a) contrary to the settled law on this issue by the order of the Hon’ble Supreme Court in [2018] 96 com 468 (SC), copy placed at pages 27-28 of the Case Law Compilation, which approved/affirmed the decision of the Hon’ble High Court of Delhi in the case of Meeta Gutgutia [2017] 248 Taxman 384 (Delhi) copy placed at pages 2973; and, in any case

(b) distinguishable on facts

The alleged “incriminating material” relied upon by the AO/Ld. CIT(A) does not belong to the assessees and there is no corroborative evidence to establish that the assessees had any undisclosed incomes for the years under consideration. Thus the impugned assessment orders are void ab initio having regard to settled law as the same are not emanating from any “incriminating” material. It is settled law that assessments u/s.153A of the Act should be confined to incriminating material only for years where the assessments have concluded and/or time limit for issue of notice u/s.143(2) of the Act has lapsed. In this regard, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Meeta Gutgutia in 96 Taxman.com 468 (SC), copy placed at pages 27-28 of the Case Law Compilation, confirming the view of the Hon’ble Delhi High Court in PCIT-2 v. Meeta Gutgutia 82 taxman.com 287 (Delhi).It is further submitted that on the scope of S.153A of the Act, the Hon’ble Delhi High Court in Meeta Gutgutia supra has elaborately discussed decisions of various High Courts, the relevant extracts of the decision are reproduced as under for ready reference:

“59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT[2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in para 34 reads as under:

34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was “not borne out from the scheme of the said provision” which was in the context of search and/or requisition. The Court also explained the purport of the words “assess” and “reassess”, which have been found at more than one place in Section 153A of the Act as under:

60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd.[2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act.

……

62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Courtreiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court held that:

“6. . . . . . once an assessment has attained finality for a particular year, i.e.,it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.”

……

71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 200001 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.”

Some of the cases dealt with extensively by the jurisdictional Hon’ble Delhi High Court in Meeta Gutgutia supra are:

Jai Steel (India) v. Asstt. CIT [2013] 36 com 523/219 Taxman 223 (Raj.)
CIT(C)-III v. Kabul Chawla 61 com 412 (Delhi), copy placed at pages 74-96 of the Case Law Compilation
CIT v. Sinhgad Technical Education Society 84 Com 290 (SC);
CIT v. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj);
CIT-1 v. Devangi alias Rupa 2017-TIOL-319-HC-AHM-IT;
CIT v. IBC Knowledge Park Pvt. Ltd. (2016) 385 ITR 346 (Kar);
CIT-2 v. Salasar Stock Broking Ltd. 2016-TIOL-2099-HC-KOL-IT
CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom)
Dayawanti v. CIT SLP No. 20559/2017 dated 03.10.2017 wherein it was observed by the High Court that AO is entitled to pass the assessment order beyond the documents found during the search. This view was discussed by the Delhi High Court in the case of Meeta Gutgutia supra and reversed. The Hon’ble Supreme Court has confirmed the view taken by the Delhi High Court in Meeta Gutgutia’s case that the AO cannot travel beyond incriminating material found during search. The Hon’ble Supreme Court has also stayed the order of the Delhi High Court in Dayawanti’s case. Copy of SC stay order placed at pages 97-99 of the Case Law Compilation.

The ratio decidendi of the aforesaid judgments is that the assessment u/s.153A of the Act must be based on incriminating materials found during Search proceedings in case of an assessee and qua each assessment year or there should be some nexus with the seized materials.The decision of the Hon’ble Delhi High Court in the case of Meeta Gutgutia supra has reversed the view taken in Smt. Dayawanti v. CIT ITA No. 357/2015 dated 27.10.2016, that the additions can be made even in absence of any incriminating materials qua that particular year. The Delhi High Court in Meeta Gutgutia supra been confirmed by the Hon’ble Supreme Court in 96 Taxman.com 468 (SC). Thus, the view taken by the Hon’ble Delhi High Court in Meeta Gutgutia’s case supra, that additions cannot be made in absence of any incriminating materials qua that particular year, is settled law.That Kabul Chawla (supra) and Meeta Gutgutia (supra) is now binding law vide Article 141 of the Constitution on account of dismissal of revenue’s SLP against the decisions by the Hon’ble Supreme Court in Meet Gutgutia, including on merits in the latter. Additionally, the Hon’ble Court in Kabul Chawla had relied on the decision of the jurisdictional Hon’ble Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT [2013] 36 Taxmann.Com 523 (Raj) which had expressly held so previously. Cases relied on by AO/Ld. CIT(A) are contrary to settled law and/or distinguishable on facts.

Case relied upon by Ld. AO	Material facts distinguishable from appellant’s case	Implication for the assessee
CIT v. Anil Kumar Bhatia (2013) 352 ITR 493 (Del)	Hon’ble High Court left the question open as to whether Section 153A could be invoked where no such incriminating material was found by stating: “23. We are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.”	Decision inapplicable to present appellant’s facts since no incriminating material against the appellant was seized or recovered during search; all seized material recovered from control and possession of Shri Trilok Chand Jain, the same was also surrendered before Hon’ble Income Tax Settlement Commission (ITSC) and covered by ITSC order dated 20.03.2020 u/s 245-I
CIT v. Chetan Das Lachman Das [2012] 254 CTR 392 (Del)	Like in Anil Bhatia (supra), in this case too the judgement notes that it is only on the basis of the material unearthed that the AO made additions (suppressed sale value of Hing and compound Hing)	Same as above
Commissioner of Income Tax v. M/s.Hotel Meriya [2011] 332 ITR 537	Non-jurisdictional decision of the Hon’ble Kerala High Court deals with the erstwhile Chapter XIVB of the Act i.e. Block Assessment scheme	Decision inapplicable to the appellant’s case as search assessment has been made under Chapter XIV, which is materially different to the defunct Chapter XIVB
Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 362 ITR 664 (Ker.)	Non-jurisdictional decision of the Hon’ble Kerala High Court cites and applies its previous decision in Hotel Meriya (supra); incriminating material also found against the searched assessee	Decision inapplicable to the appellant’s case as it relies on the inapplicable decision of Hotel Meriya (supra); furthermore there is no incriminating material seized or recovered from/against the appellant; all seized material recovered from control and possession of Shri Trilok Chand Jain, the same was also surrendered before Hon’ble Income Tax Settlement Commission (ITSC) and covered by ITSC order dated 20.03.2020 u/s 245-I

13. On the other hand, the ld. DR supported the order of ld. CIT(A)

14. Accordingly, having regard to accepted facts for AY 2009-10 concerning cash balances available with the appellants and the absence of any substantive evidence brought on record by the AO/ CIT(A) that the rough notings relied upon were actual transactions carried out by the appellants, we delete the additions on account of LIC Premia treated as unexplained investment as per the assessee-wise AY-wise Table below:

concerning cash balances

concerning cash balances 2

Cash Deposits in AY 2010 -11 treating as unexplained investment based on extraneous information

15. The AO/CIT(A) have relied on the ITS for Ay 2010 -11 to treat as unexplained the cash deposit of Rs.26 lakhs and Rs.55.55 lakhs in the hands of Usha Jain and Anita Jain respectively. The information as per ITS is extraneous and not part of any seized material found during search. The assessments for AY 2010 -11 are concluded/unabated assessments and cannot be disturbed except to the extent of any incriminating material found during search.

16. Accordingly, as per settled law, discussed in subsequent paragraphs, we delete the addition of Rs.26 lakhs in the case of Usha Jain for AY 2010 -11 and Rs.55.55 lakhs in the case of Anita Jain for AY 2010-11 are deleted.

Orders u/s.153A bad in law (ground no. 1)

17. The AR submits that the impugned orders are per se bad in law. AR pleads Ground No.1: That on the facts and circumstances of the case and in law, the order dated 28.01.2022 passed u/s. 250 of the Income Tax Act, 1961 (“Act”) by the Commissioner of Income Tax (Appeals) Jaipur-4 [“Ld. CIT(A)”] confirming/upholding the order dated 30.12.2017 passed by the ACIT, Central Circle-1, Jaipur (“AO”) is bad in law. The AR submits that the assumption of jurisdiction by the AO u/s 153A r.w.s.132 of the Act is unlawful and erroneous for the following reasons:

c. Absence of any “incriminating material” that belonged to the assessees or found in their control and possession

d. Every seized material is not “incriminating”

e. Assessment orders passed for AY 2010-11 in Usha Jain and Anita Jain where the Ld.AO/CIT(A) while making the additions of Rs.26L and Rs.55.55L respectively, in respect of cash deposit into Bank, based on extraneous materials on the misplaced appreciation of settled law that assessment need not be confined to incriminating (seized) material qua each assessment year

The AR’s submissions are reproduced as under: “Settled Law on S.153A erroneously disregarded. The impugned orders are void ab initio being devoid of any finding based on incriminating material. The AO/Ld. CIT(A) have relied on cases that are:

(b) distinguishable on facts

The alleged “incriminating material” relied upon by the AO/Ld. CIT(A) does not belong to the assessees and there is no corroborative evidence to establish that the assessees had any undisclosed incomes for the years under consideration. Thus the impugned assessment orders are void ab initio having regard to settled law as the same are not emanating from any “incriminating” material.It is settled law that assessments u/s.153A of the Act should be confined to incriminating material only for years where the assessments have concluded and/or time limit for issue of notice u/s.143(2) of the Act has lapsed. In this regard, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Meeta Gutgutia in 96 Taxman.com 468 (SC), copy placed at pages 27-28 of the Case Law Compilation, confirming the view of the Hon’ble Delhi High Court in PCIT-2 v. Meeta Gutgutia 82 taxman.com 287 (Delhi).It is further submitted that on the scope of S.153A of the Act, the Hon’ble Delhi High Court in Meeta Gutgutia supra has elaborately discussed decisions of various High Courts, the relevant extracts of the decision are reproduced as under for ready reference:

……….

……

“6. . . . . . once an assessment has attained finality for a particular year, i.e.,it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.”

……

Some of the cases dealt with extensively by the jurisdictional Hon’ble Delhi High Court in Meeta Gutgutia supra are:

Jai Steel (India) v. Asstt. CIT [2013] 36 com 523/219 Taxman 223 (Raj.)
CIT(C)-III v. Kabul Chawla 61 com 412 (Delhi), copy placed at pages 74-96 of the Case Law Compilation
CIT v. Sinhgad Technical Education Society 84 Com 290 (SC);
CIT v. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj);
CIT-1 v. Devangi alias Rupa 2017-TIOL-319-HC-AHM-IT;
CIT v. IBC Knowledge Park Pvt. Ltd. (2016) 385 ITR 346 (Kar);
CIT-2 v. Salasar Stock Broking Ltd. 2016-TIOL-2099-HC-KOL-IT
CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom)
Dayawanti v. CIT SLP No. 20559/2017 dated 03.10.2017 wherein it was observed by the High Court that AO is entitled to pass the assessment order beyond the documents found during the search. This view was discussed by the Delhi High Court in the case of Meeta Gutgutia supra and reversed. The Hon’ble Supreme Court has confirmed the view taken by the Delhi High Court in Meeta Gutgutia’s case that the AO cannot travel beyond incriminating material found during search. The Hon’ble Supreme Court has also stayed the order of the Delhi High Court in Dayawanti’s case. Copy of SC stay order placed at pages 97-99 of the Case Law Compilation.

The ratio decidendi of the aforesaid judgments is that the assessment u/s.153A of the Act must be based on incriminating materials found during Search proceedings in case of an assessee and qua each assessment year or there should be some nexus with the seized materials.The decision of the Hon’ble Delhi High Court in the case of Meeta Gutgutia supra has reversed the view taken in Smt. Dayawanti v. CIT ITA No. 357/2015 dated 27.10.2016, that the additions can be made even in absence of any incriminating materials qua that particular year. The Delhi High Court in Meeta Gutgutia supra been confirmed by the Hon’ble Supreme Court in 96 Taxman.com 468 (SC). Thus, the view taken by the Hon’ble Delhi High Court in Meeta Gutgutia’s case supra, that additions cannot be made in absence of any incriminating materials qua that particular year, is settled law. Kabul Chawla (supra) and Meeta Gutgutia (supra) is now binding law vide Article 141 of the Constitution on account of dismissal of revenue’s SLP against the decisions by the Hon’ble Supreme Court in Meet Gutgutia, including on merits in the latter. Additionally, the Hon’ble Court in Kabul Chawla had relied on the decision of the jurisdictional Hon’ble Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT [2013] 36 Taxmann.Com 523 (Raj) which had expressly held so previously. Cases relied on by AO/Ld. CIT(A) are contrary to settled law and/or distinguishable on facts

*Case relied upon by Ld. AO*	*Material facts distinguishable from appellant’s case*	*Implication for the assessee*
*CIT v. Anil Kumar Bhatia* (2013) 352 ITR 493 (Del)	Hon’ble High Court left the question open as to whether Section 153A could be invoked where no such incriminating material was found by stating: “23. We are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.”	*Decision inapplicable* to present appellant’s facts since no incriminating material against the appellant was seized or recovered during search; all seized material recovered from control and possession of Shri Trilok Chand Jain, the same was also surrendered before Hon’ble Income Tax Settlement Commission (ITSC) and covered by ITSC order dated 20.03.2020 u/s 245-I
*CIT v. Chetan Das Lachman Das* [2012] 254 CTR 392 (Del)	Like in Anil Bhatia (supra), in this case too the judgement notes that it is only on the basis of the material unearthed that the AO made additions (suppressed sale value of Hing and compound Hing)	*Same as above*
Commissioner of Income Tax v. M/s.Hotel Meriya [2011] 332 ITR 537	Non-jurisdictional decision of the Hon’ble Kerala High Court deals with the erstwhile Chapter XIVB of the Act i.e. Block Assessment scheme	*Decision inapplicable* to the appellant’s case as search assessment has been made under Chapter XIV, which is materially different to the defunct Chapter XIVB
Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 362 ITR 664 (Ker.)	Non-jurisdictional decision of the Hon’ble Kerala High Court cites and applies its previous decision in Hotel Meriya (supra); incriminating material also found against the searched assessee	Decision inapplicable to the appellant’s case as it relies on the inapplicable decision of Hotel Meriya (supra); furthermore there is no incriminating material seized or recovered from/ against the appellant; all seized material recovered from control and possession of Shri Trilok Chand Jain, the same was also surrendered before Hon’ble Income Tax Settlement Commission (ITSC) and covered by ITSC order dated 20.03.2020 u/s 245-I

The AO’s reliance on CIT v. Chetan Das Lachman Das [2012] 254 CTR 392 (Del) and CIT v. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) is misguided as these decisions have been considered, minutely explained and distinguished by the Hon’ble High Court of Delhi in Kabul Chawla and Meeta Gutgutia, which now hold the field on the issue of law. The Ld.AO’s reliance on the ratio of the non-jurisdictional Hon’ble Kerala High Court in CIT v. Meriya Hotel (332 ITR 537)* and Sunny Jacob Jewellers and Wedding Centre v. DCIT (2014) 362 ITR 664 (Ker.)* is unsustainable in law for being contrary to the decision of Meeta Gutgutia as affirmed by the Hon’ble Supreme Court, the latter now being the binding precedent/law of the land vide Article 141 of the Constitution of India. Furthermore, the said decisions of the Hon’ble Kerala High Court were based on the provisions of erstwhile Chapter XIVB of the Act, which is inapplicable to the facts of the appellant. Even the binding precedent set by the jurisdictional Hon’ble Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT [2013] 36 Taxmann.Com 523 (Raj) had previously held that incriminating material is sine qua non for legally sustaining an addition with respect to completed assessments, which has been cited and relied on in Kabul Chawla (supra) and Meeta Gutgutia (supra). The perverse finding of the Ld.AO/Ld.CIT(A) that the above discussed ratio of Kabul Chawla and Meeta Gutgutia is inapplicable to completed AYs with respect to which admittedly no incriminating material has been seized is further established by the express findings of a co-ordinate Bench of this Hon’ble Tribunal vide Shri Vijay Pal Gag v. ACIT in ITA. Nos. 4985-4988/Del/2018 as recently decided on 27.01.2022 (copy placed at pages 100-106 of the Case Law Compilation), wherein it has been held:

“5. After hearing both the parties and on perusal of the impugned order, we find that there is undisputed fact that the assessee had originally filed his return of income on 12.09.2005. The said return had attained finality and the income stood assessed on the return of income disclosed at Rs.2,06,730/-. At the time of search on 7.01.2010, the assessment for the assessment year 2004-05 had attained finality and, therefore, it should be reckoned as ‘unabated assessment’ in terms of second proviso to Section 153A of the Act. It is an admitted fact that no incriminating material was found from the search which could form the basis of the addition as made in the assessment order. The Assessing Officer had made routine disallowance of expenses based on information already disclosed along with the return of income. It is now well-settled law that in the case of unabated assessment, where the assessments have become final before the date of search, no addition can be made without any incriminating material or documents found during the course of search. This has been held so by the Hon’ble jurisdictional High Court in the case of CIT Vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT Vs. Meeta Gutgutia reported in 395 1TR 526.

6. This fact has also not been challenged by the ld. CIT (Appeals) and that the addition cannot be based on the material found during the course of search. Accordingly, the additions made by the Assessing Officer are beyond the scope of assessment proceedings under Section 153A of the Act.”

* It may kindly be noted that this decision of the Hon’ble Kerala High Court preceded the decision of the Hon’ble Supreme Court in the case of Meeta Gutgutia in 2018, which subsequentty settled the law on Section 153A on account of conflicting views of various High Courts.

Hon’ble Supreme Court’s order in Meeta Gutgutia is a binding precedent Attention is invited to the decision of the Hon’ble Supreme Court in Kunhayammed & Ors vs State Of Kerala & Anr [2000] 113 Taxman 470 (SC). The relevant extract is reproduced as under:

“Mere rejection of the special leave petition does not take away the jurisdiction of the Court, Tribunal or forum whose order forms the subject-matter of petition for special leave to review its own order if grounds for exercise of review jurisdiction are shown to exist. Even where the order rejecting a special leave petition is a speaking order, that is,where reasons have been assigned by the Court for rejecting the petition for special leave and are stated in the order, the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate jurisdiction of the Supreme Court. Here also the doctrine of merger would not apply. But the law stated or declared by the Supreme Court in its order shall attract applicability of article 141. The reasons assigned by the Supreme Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other Court, Tribunal or authority to express any opinion in conflict with or in departure from the view taken by the Supreme Court because permitting to do so would be subversive of judicial discipline and an affront to the order of the Supreme Court. However, this would be so not by reference to the doctrine of merger.”

Meeta Gutgutia case is binding precedent pan-India vide decision of the Hon’ble Supreme Court in Kunhayammed (supra), which has been recently cited and affirmed by the Hon’ble Supreme Court in Khoday Distilleries Limited v. Shri Mahadeshwara (2019) 4 SCC 376, copy placed at pages 107-138 of the Case Law Compilation, wherein the following was held:

“44. To sum up, our conclusions are:

(i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.

(ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is upto the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal.

…………………

(vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.”

In view of the above, one may have regard to the issues raised in SLP by the Revenue and the order of the SC on such issues in Meeta Gutgutia as under:

I. Section 153A of the Income-tax Act, 1961 – Search and seizure (General principles) – Assessment years 2001-02 to 2003-04 and 2004-05 – High Court in impugned order held that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year – Whether SLP against said decision was to be dismissed – Held, yes [Para 2] [In favour of assessee]

II. Section 69, read with sections 132 and 153A, of the Income-tax Act, 1961 – Undisclosed investment (Franchise fees) – Assessment years 2001-02 to 200405 – During course of search, assessee made a disclosure on account of change in method of accounting of franchise fee and undisclosed franchise fees for relevant year – On basis of said statement, Assessing Officer opined that number of outlets for which franchise fee was received had more or less remained same in all assessment years from 2001-02 to 2006-07 and estimated undisclosed income at a certain percentage of amount of disclosure made by assessee in her statement under section 132(4) – High Court in impugned order held that since no incriminating material was unearthed to show that there was failure by assessee to disclose franchise income, addition made by Assessing Officer was unjustified – Whether SLP against said decision was to be dismissed – Held, yes [Para 2] [In favour of assessee]

“Order

1. Delay condoned.

2.We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.

3. Pending application stands disposed of.”

Thus, it clear that the law regarding assessment u/s.153A to be necessarily based only on “incriminating material” qua each assessment year under 153A proceedings, as held by the High Court of Delhi in Meeta Gutgutia, has been approved as the Department’s appeal has been dismissed as being without merits.

18. The ld DR relied on the order of the ld. CIT(A).

19. After hearing both the parties and perusing the materials available on record, we find that the Ld. CIT(A)’s dismissal of the objections raised on the above ground against additions made by the AO by relying on seized material (Exhibit 2, 32 to 40) is therefore unsustainable in law as:

The seized material (Exhibit 32 to 40) do not belong to the assessee, nor were they in the possession or control of the Appellant when seized, therefore the statutory presumption u/s 132(4A) of the Act is inapplicable to the assessees, as erroneously presumed by the AO/ Ld. CIT(A) to draw an erroneous/non-existing link between the documents and the assessees;
That it is an admitted fact that the above said documents were seized from the possession and control of TCJ;
That with regards to Exhibits 1 to 40, the Hon’ble ITSC has made a clear finding that the same are “dumb documents” as the same are not corroborated or substantiated by the Revenue;
That with regards to Exhibit 2 pp.30 to 32, apart from the fact that the said material is covered by the ITSC order in the case of RKJ (HUF), the assessee has provided detailed information/facts which cogently establishes that the said Exhibits do not belong to the assessee nor have any link to the assessee, and finding of such nonexistent link is blatant conjecture and surmise of the Ld.AO/CIT(A) which is legally unsustainable;
The above said documents also cannot be used against the Appellant via operation of the statutory bar u/s 245-I of the Act vide ITSC order and findings therein with respect to the said documents and matters therein, including owning of the documents and purported transactions recorded therein via registries by TCJ, Ashok Kumar Jain (HUF) and Rakesh Kumar Jain (HUF);
The conclusion of the Ld. CIT(A) that additions can be made for the block of AY 2010-11 to AY 2016-17 even if there is no incriminating material qua each assessment year, is perverse and blatantly erroneous as binding precedent of Meeta Gutgutia (supra) and other authorities make it patently clear that assessment has to be made u/s 153A of the Act only on the basis of seized incriminating material qua each assessment only, where the assessments have concluded and/or time limit for issue of notice u/s.143(2) of the Act has expired.
Additions have been made merely on surmises and conjectures without resorting to the provisions of section 131(1) and 133A, despite being specifically asked for. It is trite law that if the authority rejects such request and proceeds to complete the assessment or finalise the proceeding,such action shall be not in accordance with the law. Reliance in this regard is placed on the following decisions [E.M.C (Works) P. Ltd. v. ITO,(1963) 49 ITR 650,654 (All); MunnalalMurlidhar v. CIT, (1971) 79 ITR 540 (All); Addl. CIT v. RadheyShyamJagdish Prasad, (1979) 117 ITR 186 (All). Cf. NathuramWeljibhaiVyas v. Mrs. LaxmibaiLunkaranjiChandak, (1983) 139 ITR 948 (Bom). The authority empowered under section 131 should exercise all his powers to collect all evidence and collate all material before coming to proper conclusion. That is the legal duty of such authority. It would be failure to exercise the jurisdiction particularly when a party to the proceedings requests for summoning evidence from a particular person [Cf. Food Corporation of India v. Provident Fund Commissioner, (1990) 1 SCC 68,71(SC)]. The Assessee should not to be blamed or penalized if the Assessing Officer does not, on prayer, take action.- [Nathu Ram Premcand v. CIT, (1963) 49 ITR 561 (All)]. In this regard, the Appellant is also referring to the judgment of Hon’ble High Court in the case of CIT v. N. P. Garodia [2009] 310 ITR62 (Punjab and Haryana); CIT v. Brij Pal Sharma [2009] 179 Taxman 467; ITO v. M/s Rakam Money Matters P. Ltd.In this view of the matter, the assessment order passed, is bad in law.
Reliance is also placed on the recent decision of the Hon’ble Delhi High Court in the case of CIT v. Pinaki Misra and Sangeeta Misra reported in (2017) 392 ITR 347 (Del) dated 3.3.2017, wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. In this case, the AO has made many additions which are extraneous and is not based on the incriminating material.

Based on the registries seized during the course of the search proceedings, the AO has made additions on account of “undisclosed investment in properties”. In doing so, the AO/Ld. CIT(A) have grossly failed to consider that there is a difference between “seized document” and “incriminating document”. It is not necessary that the documents which is found in Search and seized by the Department is always incriminating. Where the assessee has the valid explanation for the same, it is not an “incriminating” material. In this case, the assessees have valid explanation of the registries and the same was offered before the AO. The seized documents mainly pertain to the registered sale/purchase deed(s) of immovable properties which the assessees have purchased from cash funds available to them. In this regard, the kind attention is invited to the decision of ITAT Pune Bench in the case of M/s Bharati Vidyapeeth Medical Foundation Vs. Asstt. CIT Cir.2(2), Pune dated 28th April, 2011, wherein the Hon’ble ITAT has allowed the appeal of the assessee and has quashed the proceedings u/s 153C initiated in the case of the assessee. The ITAT has appreciated the arguments of the assessee that the materials (which in this case is a copy of ledger account) was merely a “seized document” and not a “incriminating document” and hence proceedings U/s 153C cannot be initiated in the case of the assessee. The ratio of the said decision shall be squarely applicable in case of the assessees.” The Ld. DR has placed reliance on case laws that are either distinguishable on facts and/or predate the decision of the Hon’ble Supreme Court in Meeta Gutgutia supra. The decisions of the Hon’ble High Court of Delhi’s in CIT v. Kabul Chawla (2016) 380 ITR 573 (Del) and Pr. CIT vs. Meeta Gutgutia [2017] 395 ITR 526, echo the decision of the jurisdictional Hon’ble Rajasthan High court in the case of Jai Steel limited vs. ACIT (88 DTR 1) and these have settled the law i.e., presence of incriminating material is sine qua non for passing a valid search assessment order u/s 153A and that completed/non-abated assessments cannot be reopened thereunder in the absence of incriminating material pertaining to the AY in question. These decisions have been confirmed as good law by the Hon’ble Supreme Court by dismissing the SLP filed by the Income Tax Department against the said orders of the Hon’ble High Court of Delhi. The case laws cited by the Ld. DR do not help revenue’s case as they are unable to establish to the contrary and are therefore inapplicable to the present facts of the appellants where no incriminating material qua appellants or AYs in question has been seized. The additions made u/s 153A without such incriminating material cannot therefore be legally sustained, as has been consistently held by this Tribunal, recently by the “A” Bench vide Deputy Commissioner of Income Tax v. M/S Ksheer Sagar Developers Pvt. in ITA Nos. 1158 to 1162/JP/2019 and other co-ordinate Benches, recently by Hon’ble Tribunal Delhi Bench “F” Bench at New Delhi vide Shri Vijay Pal Gag v. ACIT in ITA. Nos. 4985-4988/Del/2018 and Hon’ble Tribunal Lucknow Bench “B” Bench at Lucknow vide Manoj Kumar Agarwal v. Dy.CIT in I.T.(SS)A. No. 411/Lkw/2019.In view of the above discussions, we find that impugned orders do not also meet the settled law criteria regarding assessments u/s.153A of the Act. Considering the totality of the facts and circumstances of the case, we find that the additions made and sustained by the AO/CIT(A) concerning alleged “on-money” on property transactions are conjectures based on unsubstantiated dumb documents. This has also been the finding of and held so by the Hon’ble ITSC in the case of the applicants who have owned up to the same and were in any case not found in the control & possession of the appellants before us. The other additions pertain to purchase of immovable property, including the payment of LIC premiums, from cash funds available with the appellants, which are a matter of record and disclosed. The AO/CIT(A) have relied principally on the CA’s statement u/.131 which firstly has no evidentiary value and in any case, which at best demonstrates professional negligence as the CA has nowhere said that the cash book/ledgers were bogus or fabricated. The additions in AY 2010-11 for Usha Jain & Anita Jain of cash deposits into bank is based on ITS which is an extraneous material. In any case, the CIT(A) order dated 13.02.2018 for AY 2009-10 has accepted the closing balance of Rs.97,68,047/- as at 31.03.2009 which the AO/CIT(A) have not been able to controvert. Hence, we delete the additions made on account of LIC Premium and unexplained cash deposits. In view of the above, the assessee-wise and AY-wise relief on the additions is as per the Tables below:

Usha Jain