Revision order u/s. 263 sustained as assessment made without proper enquiry: ITAT Delhi

Naveen Narang Vs PCIT (Central) (ITAT Delhi)

ITAT Delhi held that error of bringing an amount of Rs.12,10,692/- to tax instead of the undisclosed amount of Rs.27,00,00,000/- is assessment made without proper enquiry and hence assessment order is erroneous and prejudicial to revenue so revision order u/s. 263 sustained.

Facts- Original return of income u/s 139 of the Income-tax Act, 1961 was filed on 30/07/2016 declaring income of Rs 57,91,510/-. A search and seizure action u/s 132 of the Act was carried out in the case of the assessee on 14/10/2020. Notice u/s 153A of the Act was issued by the AO on 4/6/2021 in response to which the assessee filed the return of income declaring the same income of Rs 57,91,510/- as was originally declared in the return of income filed u/s 139 of the Act. The assessing officer completed the assessment u/s 153A/143(3) on 30/03/2022 at income of Rs 14,93,82,868/- after making certain additions against which the assessee has filed appeal before CIT(A) which is pending on the additions made.

PCIT issued notice dated 26/03/2024 u/s 263 of the Act asking the assessee to show cause as to why the aforesaid assessment order dated 30/03/2022 should not be revised as the same was erroneous and prejudicial to the interest of the revenue. PCIT did not agree with the contentions of the assessee and passed order dated 30/03/2024 u/s 263 of the Act. Being aggrieved, the present appeal is filed.

Conclusion- Held that assessment made without proper enquiry is erroneous and prejudicial to revenue and CIT can revise the Assessment Order u/s 263. In the present case, the Assessing Officer considered an amount of Rs.15,58,96,355/- as bogus billing provided by Sh. Naveen Narang and calculated and taxed only the commission income of Rs.12,10 ,692/- in the hands of Sh. Naveen Narang. Thus, it can be concluded that the AO has committed an error of bringing an amount of Rs.12,10,692/- to tax instead of the undisclosed amount of Rs.27,00,00,000/-. Thus, the Assessment Order passed is erroneous as well as pre judicial to the interest of revenue and hence, we decline to interfere with the order passed u/s 263 by the ld. PCIT(Central)-3.

FULL TEXT OF THE ORDER OF ITAT DELHI

The present appeal has been filed by the assessee against the order of ld. PCIT(Central)-3, Delhi dated 31.03.2024.

2. Following grounds have been raised by the assessee:

“1. On the facts and circumstances of case and in law, the Id. PCIT, Central – 3, New Delhi erred in initiating proceedings under section 263 of Income Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the Ld. CIT under section 263 of Act is bad in law, without jurisdiction and barred by limitation.

2. On the facts and circumstances of case and in law, the Id. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 153A/143(3) of Act was erroneous and prejudicial to the interest of the revenue.

3. On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed.

4. On the facts and circumstances of case and in law, the order passed under section 263 of the Act by the Ld. PCIT is bad in law as the same has been passed without application of mind and deserves to be quashed.

5. On the facts and circumstances of the case and in law, the Id. PCIT erred in setting aside the assessment order without appreciating the fact that the same was passed after taking due approval u/s 153D of JCIT.

6. On the facts and circumstances of the case and in law, the Id. PCIT erred in stating that the assessment passed by the assessing officer was without making inquiries or verification which should have been made

7. On the facts and circumstances of case and in law, the Ld. PCIT erred in invoking the provisions of section 263 of the Act, and thereby directing the Assessing Officer to re-examine the issue of Rs. 27,00,00,000/- of alleged cash loan/investment.

8. On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as it is arbitrary and against the principles of natural justice

9. On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as the original assessment order itself is bad in law and without jurisdiction

10. On the facts and circumstances of case and in law, order passed by PCIT u/s 263 is liable to be quashed as the directions given by PCIT are beyond the scope of provisions of section 153A of the Act.”

3. Original return of income u/s 139 of the Income-tax Act, 1961 was filed on 30/07/2016 declaring income of Rs 57,91,510/-. A search and seizure action u/s 132 of the Act was carried out in the case of the assessee on 14/10/2020. Notice u/s 153A of the Act was issued by the AO on 4/6/2021 in response to which the assessee filed the return of income declaring the same income of Rs 57,91,510/- as was originally declared in the return of income filed u/s 139 of the Act. The assessing officer completed the assessment u/s 153A/143(3) on 30/03/2022 at income of Rs 14,93,82,868/- after making certain additions against which the assessee has filed appeal before CIT(A) which is pending on the additions made.

4. The Ld PCIT issued notice dated 26/03/2024 u/s 263 of the Act asking the assessee to show cause as to why the aforesaid assessment order dated 30/03/2022 should not be revised as the same was erroneous and prejudicial to the interest of the revenue. The assessee was asked to submit its reply on 27/03/2024. The assessee submitted its reply on 27/03/2024 explaining that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Ld PCIT did not agree with the contentions of the assessee and passed order dated 30/03/2024 u/s 263 of the Act.

5. Against this order u/s 263 of the Act, the assessee is in appeal before us.

6. During the hearing before us, the ld. AR argued that the issue on which the ld. PCIT has passed the order u/s 263 is beyond the scope of provisions of section 153A of the Act and, therefore, the underlying Assessment Order passed u/s 153A of the Act, by not making the addition on the issue raised in order u/s 263, was beyond the scope of provisions of section 153A cannot be said to be erroneous in so far as it is prejudicial to the interest of the revenue. The ld. AR argued that as per the show cause notice and order u/s 263 of PCIT, during the course of search action u/s 132 of the Income Tax Act, 1961 in case of Shri Devesh Singh/Manoj Kumar Singh certain excel sheets were found and seized from laptop and pen drive of Shri Devesh Singh and the ld. PCIT held that, as per the aforesaid seized excel sheets the assessee had advanced a sum of Rs. 27 crores as investment/loan. It was argued that the ld. PCIT wrongly held that the Assessing Officer has made addition of Rs.11,41,03,645/- only without appreciating/inquiring the facts of the case and ignored the evidence of Rs. 27 crores as loan/investment found during the course of search action. The ld. AR argued that even the addition of Rs. 11,41,03,645/-made by the AO is erroneous leave alone the question of making addition of Rs.27 crores and that underlying assessment order has been made u/s 153 A of the Act and since the excel sheet have not been found or seized during the course of search in the case of the appellant, the same cannot be used for making addition u/s 153A in the case of the appellant. It was argued that for using such excel sheets seized from third person, the compliance to provisions of section 153C of the Act had to be made. Accordingly, neither the addition of Rs. 11,41,03,645/-as made by the AO nor the addition of Rs. 27,00,00,000/- as alleged by ld. PCIT can be made u/s 153A of the Act. The ld. AR relied on the judgment of Hon’ble High Court in the case of PCIT (Central) – 3 Vs. Anand Kumar Jain (HUF) 2021 (31 TMI 8). The ld. AR referred to the relevant finding of the Hon’ble Court which is as under:

“10. Now, coining to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under section 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.”

7. At this juncture, we find that the invocation of proceedings u/s 153C on the statement of the third person and the statement was construed as an incriminating material.

8. The ld. AR further argued that the Assessment Order has been passed by the AO after making due inquiries. It was argued that recourse to Section 263 of the Income Tax Act, 1961 cannot be taken if the impugned order is erroneous but not prejudicial to the interest of revenue or if it is prejudicial to the interest of revenue but not erroneous. It was argued that if Assessing Officer acting in accordance with law makes a certain assessment, the same cannot be branded as “erroneous” by the ld. PCIT merely because, according to him, the order should have been written differently or more elaborately. The provisions of Section 263 of the Act do not visualize the substitution of the judgment of the Commissioner for that of the AO unless his order is not in accordance with law. There again every erroneous order cannot be the subject matter of revision because the second requirement has also to be fulfilled.

9. On the other hand, the ld. DR supported the order of the PCIT passed u/s 263 of the Act.

10. Heard the arguments of both the parties and perused the material available on record.

11. For the sake of ready reference and completeness, the order of the ld. PCIT is reproduced as under:

‘A search and seizure action under section 132 of the Income-tax Act, 1961 was carried out on 14.10.2020 in the case of Sh. Manoj Kumar Singh, his associates and various transacting parties. During the course of search proceedings, it was found that Sh. Manoj Kumar Singh entered into unaccounted cash transactions with the various persons/entities. The premise/locker of the assessee Sh. Naveen Narang was also covered during the search operation. Due to search action, proceedings u/s 153A of the Act was initiated vide issuing notice dated 04.06.2021 in the case of Sh. Naveen Narang, In response to the notice, the assessee filed return of income declaring income of Rs.57,91,510/-. During the course of search action, certain excel filed namely ‘Mydata.xlsx, Sunny.xlsx etc. were found and seized from Laptop & Pendrive of Sh. Devesh Singh, a trusted and key employee of Sh. Manoj Kumar Singh. These excel files contain record of cash transactions maintained by Devesh Singh (employee of Sh. Manoj Kumar Singh who was controlling and managing GD Goenka Public School, Dwarka). Thereafter, the assessment proceedings were completed in the case of the assessee at total income of Rs. 14,93,82,868/- u/s 153A/143(3) of the Act on 30.03.2022 after making following additions:

S. No.	Particular	Amount of addition (Rs.)
1.	Addition made u/s 68 of the Act on account of LTCG	Rs. 2,02,77,021/-
2.	Addition made u/s 59 of the Act on account of unaccounted investment	Rs. 80,00,000/-
3.	Addition made u/s 69A of the Act on account of unaccounted commission	Rs. 12,10,692/-
4.	Addition made u/s 69 of the Act on account of cash loan	Rs, 11,4103,645/-

2. The assessment records of this case have been examined including the questionnaire issued and the compliances made by the assessee. We have carefully perused all these details along with the assessment order passed in the case. On perusal of assessment records following relevant points are emerged.

2.1 Evidence found and seized showing unaccounted loan/investment made by Sh. Naveen Narang to the tune of Rs.27 crores.

2.1.1 During post search analysis of seized materials, an excel file by the name ‘Narang (01-01-2016).xlsx was found from the laptop of Sh. Devesh Singh at three different locations and the same was extracted. The said excel file i.e. ‘Narang (01-01-2018).xlsx’ contains three sheets namely Billing(GDGPS), Narang and ’Summary’. On analysis of excel sheet “Narang”, it was noticed that it has three portions:

i. Interest Ledger of Mr. Narang (School Share A/c) from 01-01-2016 to 31-03-2016

ii. Interest Ledger of Manoj K Singh

iii. Interest Free Ledger of Narang (School share A/c) from 01.01.2016

2.1.2 As the name suggest, the first portion i.e. ‘ Interest Ledger of Mr. Narang (School Share A/c) from 01-01-2016 to 31-03-2016′ pertain to transactions between Sh. Naveen Narang and Sh. Manoj Kumar Singh on account of the investment made by Sh. Naveeh Narang in G. D. Goenka Public School, Dwarka, New Delhi (School controlled and managed by Sh. Manoj Kumar Singh). The screenshot of the said excel sheet is given hereunder:

FIRST PORTION

–

2.1.3 On perusal of the above sheet, it can be seen that Sh. Naveen Narang had advanced a sum of Rs. 27 Crore (as investment/loan) on 01.02.2016 on account of School share A/c. Against the said investment/loan, amount of Rs.3,26,50,248/- has been repaid upto 31.03.2016.

2.1.4 Since, the above said transactions were carried out in the name of G.D. Goenka Public School, Dwarka, its books of accounts for the relevant period were verified. On such verification, it was found that these transactions have not been recorded in the regular books of accounts. The relevant copy of account of Sh. Naveen Narang in the books of G.D. Goenka Public School, Dwarka is reproduced hereunder:

2.1.5 The said loan was being repaid in cash or through bogus billing from the school with the narration ‘transfer from billing A/c. ” The screenshot of the narration showing the repayment of Rs.3,26,50,248/- is produced below for reference:

S. No.	Date	Repayment Amount in (Rs.)	Narration
1	05 February 201 6	50, 00 ,0 00	Transfer from Billing A /c
2	15 February 201 6	50, 00 ,0 00	Transfer from Billing A /c
3	01 March 20 16	26, 53 ,5 01	Transfer from Billing A /c
4	01 March 20 16	1,0 0, 00 ,0 00	C t o M r. Na ran g
5	02 March 20 16	4,0 2, 00 7	Transfer from Billing A /c
6	03 March 20 16	3,3 2, 22 5	Transfer from Billing A /c
7	04 March 20 16	13, 07 ,0 75	Transfer from Billing A /c
8	05 March 20 16	9,5 3, 53 8	Transfer from Billing A /c
9	07 March 20 16	22, 10 ,3 00	Transfer from Billing A /c
10	08 March 20 16	11, 98 ,4 26	Transfer from Billing A /c
11	14 March 20 16	16, 42 ,5 59	Transfer from Billing A /c
12	15 March 20 16	9,7 0, 00 0	Transfer from Billing A /c
13	16 March 20 16	9,8 0, 56 7	Transfer from Billing A /c

2.1.5 From the above sheet it can be seen that most of the repayments have been done through Billing a/c, barring an entry wherein the payment has been made in cash. The said entry has been given in the first portion of the excel sheet as C to Mr. Narang’. When the said cash payment entry was compared with the excel files ‘Mydata.xlsx and Sunny.xlsx which contain details of unaccounted cash transactions carried out by Sh. Manoj Kumar Singh, it was found that the said entries matched. Further, it was also noticed that the cash receipt entry of Rs. 1 Crore dated 05.03.2016 in the excel sheet ‘ Narang’ also matched with the relevant entry given in the excel files MyData.xlsx’ and Sunny.xlsx’. The Details of the same are given hereunder:

Cash transactions as per Excel Sheet named ‘ Narang ’				Cash transactions as per Excel Shee tnamed ‘ My Data . xlsx ’ , ‘ Sunny .xlx ’
S . No .	Date	Received (in Rs.)	Paid (in Rs.)	Date	Particulars	Recd.	Payment	Cum. Bal
1	1.3 . 2016	–	1 , 0 0 , 0 0 , 0 0 0	1.3.2016	N a v e e n N a r a n g J i	–	10,000	16, 897 , 85
2	5.3. 2016	1,00,00,000	–	5 .3. 2016	Naveen Narang Ji	10000	–	11, 223, 505

2.1.6 Further, with regard to remaining payments done through hilling, referred as ‘ Transfer from billing a/c. ’, it has been found that they have been done through bogus bills booked in G. D. Goenka Public School, Dwarka (as verified from the books of accounts of the School).

2.1.7 There is another excel sheet named ‘ Billing (GDGPS)’ maintained in the same excel file Narang (01-01-2016).xlsx’ which contains the details of bogus bills booked in the name of School. The said bills have been duly reflected in the books of G.D. Goenka. However, the summary of billing till 18.03.2016 given in the said excel sheet duly matches with the entries found in the screen shot of first portion inserted above. For the sake of clarity and ready reference, the scanned image of relevant portion of the said excel sheet is inserted hereunder:

Summary of Bill in g till 16. 03. 2016

2.1.8 it is evident from the discussion made above and perusal of the relevant portion of the different excel sheets inserted above that M/s G. D. Goenka Public School, Dwarka run by Lakhmi Chand Charitable Society has received unaccounted investment/loan in cash of Rs.27 Crore during the F.Y. 2015-16 relevant to A.Y. 2016-17. It is further seen that this amount was returned back in different ways i.e. partly in cash and partly by way of bogus billing.

2.1.9 The above discussed facts and evidences found during the course of search proceedings clearly establish that Sh. Naveen Narang has given loan/investment of Rs. 27,00,00,000/- during the AY 2016-17.

2.2 Perusal of assessment records, replies of the assessee & seized materials reveal following lapses on the part of AO which indicate under-assessment of income on this issue:

2.2.1 From the above discussed facts and seized excel file ‘Narang (01-01-2016).xlsx” which contains a sheet ‘Narang” whose 1st portion pertains to the ‘Interest Ledger of Mr. Harang (School share a/c)” from 01.01.18 to 31.03.18. From the said excel sheet. It is evident that Sh. Naveen Narang has given cash of Rs.27,00,00,000/- in the form of loan/investment on account of school share account during the AY 2016-17. However, the AO made addition of Rs.11,41,03,645/- only without appreciating/enquiring the facts of the case and ignored the evidences of Rs. 27,00,00,000/- as loan/investment found during the course of search action.

2.2.2 Sh. Naveen Narang had given loan/investment of Rs. 27 crores to Sh. Manoj Kumar Singh on account of school share account during FY 2015-18, the unaccounted loan/investment amounting to Rs. 27 Crores is the opening balance and the same was to be required to be added in the income of the assessee during the year under consideration.

2.2.3 The AO considered the amount of Rs. 15,58,96,355/- of bogus billing provided by Sh. Naveen Narang and calculated commission income of Rs. 12,10,692/- for the A.Y. 2016-17 to A.Y. 2020-21 in hands of Sh. Naveen Narang. Thus, the AO concluded that the bogus billing have been arranged by Sh. Naveen Narang from A.Y. 2018-17 to A.Y. 2020-21. The excel sheet found during the search & seizure action clearly depicts that the unaccounted loan/investment of Rs. 27 Or in school share a/c has been made during A.Y. 2016-17 by Sh. Naveen Narang. Thus, there is no logic behind reducing the total amount of bogus billing arranged Sh. Naveen Narang till A.Y. 2020-21 from the unaccounted loan/investment made by Sh. Naveen Narang during A.Y. 2016-17. As per the evidences found, the said bogus billing from school was used for repaying the liabilities of loan/investment of Rs. 27,00,00,000/- given by Sh. Naveen Narang. As such the action of the AO was not correct in reducing the amount of bogus billing from unaccounted cash loan/investment made by Sh. Naveen Narang.

2.2.4 Further, the seized excel sheet not only mentioned cash Investment of Rs.27 Cr. on 01.02.2016 but the very same ledger a/c also mentioned loan-repayment of Rs.3.28 Cr. during that period itself which proves that this investment was not a singular transaction. Thus, there was no scope of ambiguity that as per the seized material, the amount of Rs. 27 Cr. was a distinct & unaccounted loan/investment by Sh. Naveen Narang to Manoj Singh as part of ‘school share a/c”. However, the AO failed to investigate the issue of investment of Rs. 27 crore.

2.2.5 The AO have claimed in the assessment order that ‘after verification of facts”, instead of Rs.27 Crores, addition of Rs.11,41,03,845/- was made as unaccounted cash for the A.Y. 2018-17 and an amount of Rs. 15,56,98,355/-, commission income was added in assessment years, but the ‘enquiry/ diligence” which supposedly led to the above conclusion is neither available in assessment records/assessment order. There is absolutely no justification or factual evidence as to why an addition of Rs.11.41 Cr. was made instead of Rs.27 crores on account of unaccounted loan/investment.

2.2.6 It is clearly mentioned in the information that the issue of the ‘cash investment/loan of Rs.27 Crores by Naveen Narang in School share a/c of Manoj Singh” is clearly distinguishable from “commission on bogus billing” by Naveen Narang. The AO has converged the two distinct issues suo-moto resulting into under assessment of the case to the extent of Rs.15,58,98,355/- on account of unaccounted loan/investment. As such, the order passed by the AO is erroneous and prejudicial to the interest of revenue.

2.2.7 A perusal of para 48 of relevant assessment order reveals that the AO has without any basis/findings concluded that out of this Rs.27 Crores, amounting to Rs. 15,58,98,355/- were identified bogus bills arranged by Sh. Naveen Narang for G.D. Goenka School on which commission was received by Sh. Naveen Narang. It is clear that Rs.27 Cr. was cash loan/investment made by Sh. Naveen Narang, it had no correlation whatsoever with bogus billing. It is further noticed that while the transaction of Rs.27 Cr. was ‘Cash payment” recorded in excel sheet for A.Y. 2018-17. Further, the bogus bills worth Rs.15,58,98,355/- belong to 5 subsequent Assessment Years, so firstly, it is illogical & beyond all human probability to presume that the unexplained cash ‘payment” in A.Y. 2016-17 had any correlation with “bogus bills to be raised in 5 future years”. In fact, ‘commission” on bogus billing was being earned by Sh. Narang as a separate transaction which has been separately added by the AO. Thus, bogus billing had absolutely no correlation with the cash loan given by Narang to M.K Singh on a/c of investment in school.

2.2.8 It is noticed that not even bare minimum preliminary enquiry was conducted by the AO by issuing Sum mons/ show cause to the concerned parties, i.e., Sh. Naveen Narang and Sh. Manoj Singh regarding the Unaccounted cash investment of Rs.27 Cr. despite it being integral part of seized material, Further, the AO also failed to add the interest accrued on the said investment/loan during the year under consideration. As such the order passed by the AO is erroneous and prejudicial to the interest of revenue.

3. Keeping m view of the above facts, the addition was to he made solely in the hands of Sh. Naveen Narang who had made cash investment/loan transaction of Rs.27 Crore since it was an unrecorded & unaccounted cash investment made by Sh. Naveen Narang in G. D. Goenka school. However, the AO failed to thoroughly enquire/investigate the information available with him and passed the order without verifying the facts. As such, the assessment order passed by the AO, in this case for A.Y. 2016-17 is not only erroneous but also prejudicial to the interest of the Revenue in terms of section 263 of the income-tax Act, 1961.

4. Accordingly, show cause notice u/s 263(1) of the IT. Act, 1961 for the A.Y. 2016-17 dated 26.03.2024 was issued to the assessee through ITBA Portal asking it as to why the assessment order so passed should not be revised as the same was erroneous & prejudicial to the interest of the revenue. In response, the assessee filed part reply vide letter dated 27.03.2024 and requested time for filing reply. Considering the request, the assessee was requested to file complete reply by 28.03.2024 as the case is getting barred by limitation for completing the proceedings as on 31.03.2024. In response, the assessee again requested 15 days time for filing reply vide his letter dated 28.03.2024, Despite of multiple opportunity, one mere final opportunity was given to the assessee for filing complete reply vide letter dated 28.03.2024 for filing reply by 29.03.2024. The specifically informed that the proceedings is getting barred by limitation as on 31.03.2024. Despite having knowledge of the fact of time limitation, the assessee, vide his reply dated 29.03.2024, once again sought time of 15 days stating as under:-

“As earlier requested, please grant me time of 15 days as it will take time for preparation and submission of reply by my counsel/advocate who is presently not in town”.

4.2 The above discussed facts shows that the assessee responded with a partial reply on 27.03.2024, requesting additional time to submit u complete response. Considering the request of the assessee and time limitation for completion of the proceedings as on 31.03.2024, the assessee was granted opportunity for filing complete reply by 28.05 2024. However, the assessee sought a further extension of 15 days through a letter dated 28.03.2024. Again final opportunity was given to the assessee for filing reply by 29.03.2024 but once again the assessee sough time of 15 days. The repeated adjournments of the assessee shows that the assessee has nothing to submit apart from reply already submitted vide letter dated 27.03.2024 on the issue under consideration. The request of the assessee, for granting further time, cannot be accepted as the matter is getting barred by limitation as on 31.03.2024. therefore, the reply filed by the assessee vide letter dated 27.03.2024 has been considered for conclude the proceedings. The relevant portion of the reply filed by the assessee vide letter dated 27.03.2024 is reproduced below for reference:

“3. Without prejudice to the above, in order to make compliance to the captioned show cause notice, the assessee is hereby submitting the below reply in part. Please note that the below reply is incomplete and is being filed to make compliance to the notice; considering the time constraint, it is not possible for the assessee to file proper reply. It is reiterated that the notice is illegal and in gross violation of principle of natural justice.”

4. As per your captioned show cause notice, during the course of search action u/s 132 of the Income Tax Act 1961 in case of Shri Devesh Singh/Manoj Kumar Singh certain excel sheets were found and seized from laptop and pen drive of Shri Devesh Singh, in the captioned show cause notice, it has been alleged that as per the aforesaid seized excel sheets the assessee had advanced a sum of Rs. 27 crores as investment/loan. According to your captioned SCN, the assessing officer has made addition of Rs. 11,41,03,645/- only without appreciating/inquiring the facts of the case and ignored the evidence of Rs. 27 crores as loan/investment found during the course of search action. Vide para 3.3 of your captioned notice you have stated that “The order is passed without making inquiries or verification which should have been made.”

5. In this regard, it is humbly submitted that even the addition of Rs.11,41,03,645/- made by the Assessing Officer is erroneous leave alone the question of making addition of Rs.27 crores. It is pertinent to point out that underlying assessment order has been made u/s 153A of the Act. The so called excel sheet have not been found or seized during the course of search in my case. The so called excel sheets seized/found from Shri Devesh Singh during the course of search in his case cannot be used for making addition u/s 153A in my case. For using such excel sheets seized from third person, the compliance to provisions of section 153C of the Act had to be made. Accordingly, neither the addition of Rs. 11,41,03,645/-(as made by the AO) nor the addition of Rs. 27,00,00,000/- (as alleged in your captioned SCN) can be made in my case. Once an addition cannot made in the assessment order passed under section 153A itself, resort cannot be made to 263 proceedings for the said purpose. It is a settled law that what cannot be done directly cannot be done indirectly.

6. Further, the various allegation made/doubts raised in your captioned show cause notice about alleged bogus billing and/or materials seized from third party are erroneous and accordingly denied. I have neither made any loan nor any investment of Rs.27 crores as alleged/doubted in your captioned show cause notice.

7. Without prejudice to above, it is submitted that there is no applicability of the provisions of section 263 of the Act in the present case of mine. For ready reference of your honour, the provisions of section 263 of the Act are reproduced as under:

………………………….”

4.3 The assessee has submitted that the excel sheet found during the search action could not be used without compliance of section 153C of the Act, 1961 and denied Involvement in bogus billing and investment of Rs. 27 crores without any supporting evidences/explanation. The assessee has also cited certain case laws in support of his claim. The reply filed by the assessee has been considered but the reply of the assese has not been found tenable due to the following reasons:

(i) During the course of search action the assessee Sh. Naveen Narang was covered, therefore, the proceedings u/s 153A of the Income-tax Act, 1961 was initiated as warranted by the Income-tax Act, 1961 for the persons covered during the search. During the course of search action evidence of Unaccounted Loan/Investment of Rs. 27 crores was found in the seized excel file, “Narang (01-01-2016).xlsx” maintained by Sh. Devesh Singh, clearly establishes the investment of fund by Sh. Naveen Narang regarding the investment made in G. D. Goenka Public School, Dwarka. The excel sheet shows that Sh. Naveen Narang advanced a sum of Rs. 27 crores as investment/loan on 01.02.2016, and received repayments of loan on such investment totaling Rs. 3,26,50,248/- till 31.03.2016 through bogus billing for G.D. Goenka Public School. Furthermore, the Loan/investment transactions were not found reflected in the financial/ITR of Sh. Naveen Narang and the repayments were made through bogus billing from G.D. Goenka Public School as well as repayment in cash, which is evidenced from the seized materials found and seized during the course of search action.

(ii) It is pertinent to mention here that Sh. Devesh Singh is the key employee of Sh. Manoj Kumar Singh who control and manage the affairs of G.D. Goenka Public School. Sh. Naveen Narang is the business partner of Sh. Manoj Kumar Naveen Narang Singh, Sh. Naveen Narang also in vested funds in various business entities of Sh. Manoj Kumar Singh. During the course of search action u/s 132 of the Income-tax Act, 1961, the residential premise of Sh. Devesh Singh was covered on 14,10.2020 wherein statement of Sh. Devesh Singh was recorded on oath u/s 132(4) of the Income-tax Act, 1961 on 14.10.2020 wherein Sh. Devesh Singh gave his statement on oath u/s 132(4) of the IT Act, 1961 that the data found and seized from his possession contain record of cash transactions which was maintained on the instructions of Sh. Manoj Kumar Singh. He also told about the cash transactions between Sh. Naveen Narang and Sh. Manoj Kumar Singh. The evidences found from the possession of Sh. Devesh Singh is of unaccounted loan/investment to the tune of Rs. 27 crores as discussed in para 2.1.2 and 2.1.3. It clearly tells that an amount of Rs. 27,00,00,000/- was given by Sh. Naveen Narang to Sh. Manoj Kumar Singh on 01 February 2016. The relevant portion of the excel sheet discussed in para 2.1.2 of this order is given as under again:

–

(iii) Despite having evidence of this loan/investment the Assessing Officer only added Rs.11,41,3, 645/- to the income without proper investigation or consideration of the evidence .The AO attributed Rs. 15,58,96,355/- of bogus billing to Sh. Naveen Narang and calculated commission income from A.Y. 2016- 17 to A.Y. 2020-21. The seized excel sheet indicated that the unaccounted loan/investment of Rs. 27 Cr. was made during A.Y. 2016-17, and the bogus billing was utilized to repay this loan/investment from A.Y. 2016-17 to 2020-21. Thus, there was no basis for reducing the bogus billing from the unaccounted cash investment during the year under consideration. The amount of Rs. 27 crores is the first event of extending loan/investment in G.D. Goenka Public School, Dwarka during the A.Y. 2016-17 after that in subsequent years the ban/investment was paid off via bogus billing from School. Thus the total investment of Rs. 27 Crores made by Sh. Naveen Narang during A.Y. 2016-17 is required to be taxed during A.Y. 2016-17.

(iv) The perusal of assessment record shows that he AO tailed failed to investigate the issue of loan/investment of Rs. 27 crores despite having the documentary evidences. The AO adjusted the amount of bogus billing against the unaccounted loan/investment made by Sh. Naveen Narang, demonstrating lack of his investigation as the bogus billing is separate from the investment made by Sh. Naveen Narang. The AO has calculated commission income of Rs. 12,10,692/-on the bogus billing arranged by the assessee during A.Y. 2016-17 to A.Y. 2020­21.

(v) The seized excel sheet not only recorded the cash investment of Rs. 27 Cr. on 01 February 2016 but also mentioned a loan repayment of Rs.3.26 Cr. during the financial year 2015-16, indicating that this investment was not a one-time transaction. However, the AO failed to investigate the issue of the Rs. 27 Cr. in vestment thoroughly. No factual evidence was presented in the assessment order which support the decision to limit the addition to Rs. 11.41 Cr. instead of the full Rs. 27 Cr. as unaccounted loan/investment. As discussed earlier that the amount of Rs. 27 crores represent the first event of extending loan/investment as School Share Account during the A.Y. 2016-17. Hence, Rs. 27 Crore should have been added during the year.

(vi) The AO failed to conduct requisite enquiry/investigation regarding the unaccounted cash investment of Rs. 27 Cr made by Sh. Naveen Narang in ‘School Share a/c” on 01 February 2016. The seized material shows that this cash investment was made in A.Y. 2016-17 and the repayment through bogus billing has been received in subsequent years by Sh. Naveen Narang. Therefore, the order passed by the AO is erroneous and prejudicial to the interests of revenue in terms of section 263 of the Income-tax Act, 1961.

4.4 Keeping in view of the above discussed facts, during the course of search action an excel file titled ‘Narang (01-01-2016).xlsx,” maintained by Sh. Devesh Singh, was found which contain record of unaccounted loan/investment of Rs. 27 crores by Sh. Naveen Narang in G. D. Goenka Public School, Dwarka. Further, the excel sheet contain repayments totaling Rs.3,26,50,248/- were made through bogus billing and cash payments, till 31.03.2016, Further the seized material shows bogus billing to the tune of Rs. 15,58,96,355/- during the A.Y. 2018-17 to A.Y. 2020-21. However, despite having clear evidence, the Assessing Officer only added Rs. 11,41,03,645/- to the income of the assessee during the year under consideration without proper investigation. The AO reduced the amount of Rs. 15,58,96,355/- of bogus hilling attributed to subsequent event while passing the assessment order in the case of Sh. Naveen Narang for the A.Y. 2016-17 without considering the full extent of the unaccounted loan/investment of R. 27 crores which is the first event of unaccounted cash transactions and warranted full amount of addition during the year under consideration as unexplained money/investment of Sh. Naveen Namag. The AO’s failure to thoroughly investigate the Rs. 27 Cr. investment, shows that the order passed by the AO for the A.Y. 2016-17 in the case of Sh. Naveen Narang is erroneous and prejudicial to the interests of revenue in terms of section 263 of the Income Tax Act, 1961.

5. In view of the above, the assessment completed in this case u/s 153A/143(3) of the Income Tax Act, 1961 dated 30.03.2022 clearly attracts the provisions of section 263 of the Income Tax Act, 1961 and needs to be rectified accordingly.

5.2 Hence, the provisions of clause (a) of Explanation 2 to section 283 of I. T, Act. 1981 are clearly applicable in this case. For ready reference, the Explanation 2 to section 263 of I. T. Act, 1961 are reproduced as under:

“Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to the erroneous in so far as it is prejudicial to the interests of the revenue, it in the opinion of the Principal Commissioner or Commissioner—

(a) the order is passed without making Inquiries or verification which should have been made;

(b) the order is passed allowing any relief without inquiring into the claim;

(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

(d) the order has not been passed in accordance with any decision which is prejudicial to the assesses, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person….”

6. Thus, in the present case, the Assessing Officer not only failed in verifying and calling for adequate information but also failed in conducting proper enquiries/investigation upon the information available with him and just relied upon the submission filed the assessee without verifying the facts of the case and case law presented by the assessee. There are several judgments of Hon’ble Courts wherein it has clearly been held that the AO is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further enquiry, it is also his duty to ascertain truth of the facts. Thus, on all the above issues, the AO’s order is cryptic and not a self-contained order giving the relevant facts and reasons for coming to conclusion based on those facts and law and the order does not indicate the briefest of reasons for accepting the income declared by the assessee.

6.1 In the case of Malabar Industrial Co Ltd. Vs. CIT [(2000) 109 Taxman 86 (SC)/[2000] 243 ITR 83 (SC)/(2000] 159 CTR 1 (SC)], Hon’ble Supreme Court has held that, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified.

6.2 in the case of Deniel Merchants Pvt. Ltd. vs. ITO [2017-TIOL-455-SC-IT], Hon’ble Supreme Court has upheld that decision of Hon’ble Calcutta High court in which it was held that CIT is entitled to revise the assessment order u/s 283 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned cannot be interfered with. The relevant extracts of the decision of Hon’ble Supreme Court is being reproduced as under:

“In all these cases, we find that the Commissioner of income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer; simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court, We see no reason to interfere with the order of the High Court.”

………………..

7. In view of above-mentioned facts and circumstances of the case, it can clearly be concluded that the assessment order for A.Y. 2018-17 was passed without inquiry and it can also be held that this action of the Assessing Officer is not only erroneous but also prejudicial to the interest of revenue. Therefore, the assessment order passed in the ease of the assessee for the A.Y. 2016-17 u/s 153A/143(3) of the Income-tax Act, 1961 on 30.03.2022 is required to be revised by virtue of the provisions of Section 263 of the Income Tax Act, 1961. For the sake of clarity, the relevant portion of Section 263 of the Income Tax Act, 1961 is reproduced as under:

“…..263(1) The (Principal Commissioner or) Commissioner may call for and examine the record of any proceeding under (his Act, and if he considers that any order passed therein by the (Assessing) Officer Is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be’ made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment….”

8. Hence in view of foregoing, I am satisfied and hold the assessment order for A.Y. 2016-17 passed by the Assessing Officer u/s 153A/143(3) of the Income Tax Act, 1961 dated 30.03.2022 as erroneous and prejudicial to the interest of Revenue and therefore, set aside it for fresh adjudication by the Assessing Officer with the directions to carry out thorough and detailed enquiries in the light of discussion made in above paras on the issue cash loan/investment of Rs. 27,00,00,000/- made by the assessee Sh. Naveen Narang (PAN: AADPN0344D) during the A.Y. 2016-17 after giving an opportunity of being heard to the assessee.”

21. The main arguments of the ld. Counsel was that the details of excel sheets found from the pendrive of Sh. Devesh Singh. Sh. Devesh Singh is the key employee of Sh. Manoj Kumar Singh. Sh. D. Singh and Sh. M. K. Singh were searched along with the assessee Sh. Naveen Narang on 14.10.2020 in consequence to the same satisfaction note which led to action u/s 132 of the Income Tax Act, 1961. The Section 132 of the Income Tax Act, 1961 reads as follows:

“Search and seizure.

(1) Where the 59[Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that—

(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or

(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property),

then,—

(A) the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or

(B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer,

(the officer so authorised in all cases being hereinafter referred to as the authorised officer) to—

(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;

(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;

(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;

(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;

(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:

Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;

(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;

(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing :

[Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, but such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the 65[Principal Chief Commissioner or] Chief Commissioner or 65[Principal Commissioner or] Commissioner] having jurisdiction over such person may be prejudicial to the interests of the revenue :

Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):

Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:

Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.

[(1A) Where any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the [Principal Director General or] Director General or 68[Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub­section (1), such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.]

(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition.

(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section.

Explanation.—For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).

(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed —

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true ; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

(5) [***]

(6) [***]

(7) [***]

(8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained :

Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [Principal Director or] Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.

(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order.

(9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.

(9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub­section (8) or sub-section (9) shall be exercisable by such Assessing Officer.

(10) If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub-section (1A) objects for any reason to the approval given by the 72[Principal Chief Commissioner or] Chief Commissioner, 72[Principal Commissioner or] Commissioner, 72[Principal Director General or] Director General or 72[Principal Director or] Director under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.

(11) [***]

(11A) [***]

(12) [***]

[(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).]

(14) The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer—

(i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ;

(ii) for ensuring safe custody of any books of account or other documents or assets seized.

Explanation 1.—For the purposes of sub-section (9A), “execution of an authorisation for search” shall have the same meaning as assigned to it in Explanation 2 to section 158BE.

Explanation 2.—In this section, the word “proceeding” means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.”

13. A comprehensive reading of the Section elucidate that the warrant of authorization would be issued by the DGIT/PDIT/CIT on any premises/person on whom the warrant issuing authority has a reason to believe that the unaccounted income /document of the assessee are kept at. The person who has been searched can have an immediate possession of the evidences leading to undisclosed income in his own custody or the same may be available in a mediate possession with somebody else who is having an association with the person searched and such person is also covered under the same action u/s 132 of the Act. What is to be observed whether the material found and seized reveals the undisclosed income or not? For example, in case of an assessee “ABC” who is a founder, promoter and Director of the company and he keeps the second set of books of accounts to be kept with his manager on day to day basis, the manager is only in constructive possession of the documents but the manager is neither the owner of the documents nor has any say in such second set of books of accounts. It is the documents of the assessee which were believed to be in the possession of the manager by the revenue authorities and based on that belief, the revenue authorities have issued warrant of authorization on the manager as per the provisions of Section 132 of the Act. Even the legislative intention was not to burden an assessee with 7 assessments u/s 153A, 7 assessments u/s 153C and some more assessments u/s 148. The purpose of legislation is to aid its citizens with least possible procedural hitches to pay the right taxes but not to entangle in own citizens by subjecting them with plethora of assessments under various Sections as a result of one single action taken u/s 132 of the Act.

14. The seized material available reads as under:

FIRST PORTION

15. This seized material clearly denotes that the assessee Sh. Naveen Narang had advanced a sum of Rs.27 Cr. and received back an amount of Rs.3,26,50,248/-. Further, the seized material mentioned above in the order of the ld. PCIT clearlyproves that the said loan was being repaid in cash to the extent of Rs.3,26,50,248/-.

16. We have further examined another seized material available on record mentioned in the order of the ld. PCIT which is as under:

S. No.	Date	Repayment Amount in (Rs.)	Narration
1	05 February 201 6	50, 00 ,0 00	Transfer from Billing A /c
2	15 February 201 6	50, 00 ,0 00	Transfer from Billing A /c
3	01 March 20 16	26, 53 ,5 01	Transfer from Billing A /c
4	01 March 20 16	1,0 0, 00 ,0 00	C t o M r. Na ran g
5	02 March 20 16	4,0 2, 00 7	Transfer from Billing A /c
6	03 March 20 16	3,3 2, 22 5	Transfer from Billing A /c
7	04 March 20 16	13, 07 ,0 75	Transfer from Billing A /c
8	05 March 20 16	9,5 3, 53 8	Transfer from Billing A /c
9	07 March 20 16	22, 10 ,3 00	Transfer from Billing A /c
10	08 March 20 16	11, 98 ,4 26	Transfer from Billing A /c
11	14 March 20 16	16, 42 ,5 59	Transfer from Billing A /c
12	15 March 20 16	9,7 0, 00 0	Transfer from Billing A /c
13	16 March 20 16	9,8 0, 56 7	Transfer from Billing A /c

17. From the above sheet, it can be found that the repayments have been made through the billing account and cash of Rs.1 Cr. was also paid to the assessee on 1^st March 2016.

18. Reliance is being placed on the judgment of Hon’ble Courts wherein the Hon’ble Courts have held that assessment made without proper enquiry is erroneous and prejudicial to revenue and CIT can revise the Assessment Order u/s 263:

> CIT Vs. Pushpa Devi, 173 ITR 445 (Patna)

> Addl. CIT Vs. Mukur Corporation, 111 ITR 312 (Guj.)

> Swamp Vegetable Products Industries Ltd. Vs. CIT, 187 ITR 412 (All.)

> Thalibai F. Jain & others Vs. UO & Anr. (Kar.) 101 ITR 1

> Tejinder Singh Makker Vs. ACIT (ITAT, Mum-TM) 61 ITD 67

> Rampyari Devi Saroogi Vs. CIT, 67 ITR 34 (SC)

> CIT Vs. McMillan Co., 33 ITR 182 (SC)

> Lajja Wati Singhal Vs. CIT, 226 ITR 527(All.)

> Gee Vee Enterprises Vs. Addl. CIT & Ors., 99 ITR 375 (Del.)

> Jai Bharat Tanners Vs. CIT, 264 ITR 673 (Mad)

> Ashok Leyland Ltd. Vs. CIT, 264 ITR 599 (Mad)

19. In the backdrops of these facts and the jurisprudence , the Assessing Officer considered an amount o f Rs.15 ,58,96,355/- as
bogus billing provided by Sh. Naveen Narang and calculated and taxed only the commission income o f Rs.12,10 ,692/- in the
hands of Sh. Naveen Narang. Thus, it can be concluded that the AO has committed an error of bringing an amount of Rs.12 ,10,692/- to tax instead o f the undisclosed amount of Rs.27 ,00,00 ,000/-. Thus, the Assessment Order passed is erroneous as well as pre judicial to the interest o f revenue and hence, we decline to interfere with the order passed u/s 263 by the ld. PCIT(Central)-3 .

20. In the result, the appeal of the assessee is dismissed.

Order Pronounced in the Open Court on 03/10/2024.