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Smart Summary

Structured Summary of the Tribunal Order (selected appeals arising from search under section 132)

Factual and Procedural Background

This set of consolidated orders arises from a search and seizure operation conducted under section 132 of the Income-tax Act, 1961, at the residence of Shri Prakash H. Savla on January 17, 2008. The search led to seizure of documents relating to a firm (M/s. Mahavir Builders) and to declarations/surrenders by persons connected to the searched person (including Shri Prakash H. Savla and Shri Pankaj Gangar) offering undisclosed income for certain assessment years (notably offers for assessment year 2007-08). Notices under section 153C were issued to other connected persons, including Ms. Chhaya P. Gangar, who filed returns in response.

Several appeals and cross-objections were heard together because they raised common legal issues. The main contested assessments involved additions made by the Assessing Officer (AO) under proceedings taken in the aftermath of the search (under sections 153A/153C). The material facts repeatedly noted in the orders include that certain additions were made by the AO in the absence of seized incriminating documents specifically linking the addition to the assessee for the assessment year in question. The Tribunal heard counsel for the assessees and departmental representatives and considered lower authorities' orders and numerous precedents.

Legal Issues Presented

  1. Whether the Assessing Officer can make additions to completed assessments under section 153A/section 153C in the absence of any incriminating material discovered during the course of the search (i.e., whether additions not based on seized/incriminating material are sustainable).
  2. Whether jurisdiction under section 153C could be validly assumed where no incriminating material was found against the person on whom notice under section 153C was issued.
  3. Whether specific additions (examples in the record: gift of Rs. 2,00,000 treated as unexplained cash credit; capital gains treated as income from other sources; unexplained loans under section 68; unexplained jewellery under section 69B; certain expenditures based on jotting seized) are sustainable where they are not connected to incriminating material seized during the search.
  4. Whether the practice of "telescoping" unaccounted income against amounts offered by an assessee is permissible in the particular facts where the Assessing Officer and the Commissioner (Appeals) have not demonstrated a clear nexus.

Arguments of the Parties

Assessees' Arguments (represented collectively in the orders)

  • No jurisdiction under section 153C could have been assumed in cases where nothing incriminating linking the assessee to undisclosed income was found during the search at Shri Prakash H. Savla's premises.
  • Additions made in the assessment orders are illegal/without basis because there was no incriminating material found during the search to support those additions.
  • Specific to Ms. Chhaya P. Gangar: the assessee had explained the gift of Rs. 2,00,000 by discharging onus as to identity, creditworthiness and genuineness; no material was found during the search to justify adding that amount.
  • Some assessees contended that declared/offered amounts (e.g., an offer for AY 2007-08) were confined to that year and did not justify additions in other assessment years; thus there was no pending assessment abated by the search for those years.
  • In cases of alleged loans or investments (e.g., unsecured loan Rs. 50,000; diamond jewellery), the assessees relied on bank passbooks, confirmations, and section 132(4) declarations/surrenders to explain the items and discharge the onus under the relevant provisions.

Revenue's (Department's) Arguments

  • The Department pointed to surrenders/declarations by persons connected to the searched person and subsequent inclusion of "offered" income in returns as evidence that incriminating material or admissions existed against other persons; therefore jurisdiction and additions under section 153C were justified.
  • The Department acknowledged, in at least one instance, that particular additions were not based upon incriminating material seized, but argued that section 153C/153A proceedings do not require that every addition be strictly based on seized incriminating material and compared these proceedings to reassessment powers under section 147.
  • On telescoping, the Department argued that the Commissioner (Appeals) had no basis to grant telescoping where the assessee had not established a nexus between the specific unaccounted entry and amounts already offered.
  • On specific factual points (e.g., jewellery and loan claims), the Department relied upon the Assessing Officer's factual conclusions that explanations were unsatisfactory (e.g., no item-wise tally of jewellery; creditors not having PAN), and sought to sustain additions on those bases.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Vimal Kumar Rathi v. Dy. CIT (ITA Nos. 3094-3096 (Mum.) of 2013, dated 16-10-2015) That no addition can be made in the absence of any adverse/incriminating material found during the search. The Tribunal relied on this co-ordinate Bench decision to support the proposition that additions not linked to seized incriminating material are unsustainable and deleted such additions (e.g., Rs. 2,00,000 gift addition).
CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom) Proposition that no addition can be made under section 153A in the absence of incriminating material. Referred to and relied on as authority for the proposition that completed assessments cannot be disturbed absent incriminating material; used to support deletion of additions.
Govind Agarwal v. Asst. CIT (ITA No. 3389/Mum/2011 dated January 10, 2014) Where there is no incriminating material, additions in section 153A assessments made on accounted transactions are unsustainable. Extracts from the decision were reproduced; the Tribunal used the reasoning to conclude that routine additions not based on seized material are legally unsustainable.
All Cargo Global Logistics Ltd. v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mumbai) [SB] Distinguishes abated assessments (where AO retains original jurisdiction) from completed assessments; in non-abated (completed) assessments additions under s153A should be based on incriminating material found in search. Adopted as a foundational Special Bench proposition: the Tribunal applied its rule that completed assessments may be interfered with only on the basis of incriminating material.
SKS Ispat and Power Ltd. v. Deputy CIT (ITA Nos. cited) Discussed in the context of co-ordinate Bench decisions supporting the need for incriminating material for additions to completed assessments. Referenced along with other Tribunal decisions to show consistency of approach relied upon by the Tribunal in deciding the appeals.
Jai Steel India v. Asst. Commissioner of Income Tax [2013] (Rajasthan High Court) That assessment/reassessment under section 153A must be read in context of sections 132/132A: if nothing incriminating is found, reassessment of concluded assessments does not arise. The Tribunal treated this High Court decision as directly covering the legal issue and concluded that, for completed assessments, additions could be made only on the basis of incriminating material; followed it in allowing deletions.
Gurinder Singh Bawa v. Deputy CIT [2012] (Mumbai-Trib.) Assessment under section 153A made without reference to incriminating material and where no assessment was abated was to be quashed as made without jurisdiction. Relied upon as another co-ordinate Bench authority that supports quashing of assessments not based on incriminating material; applied to the facts.
Madugula Venu v. DIT [2013] (Delhi High Court) Explained provisions in plain language but, per the Tribunal's discussion, did not deal with the relevance or factum of incriminating material. The Tribunal considered and found this authority distinguishable for the present proposition; it was not treated as contrary authority.
Gopal Lal Bhadruka v. Avadesh Bhadruka [2012] 346 ITR 106 (AP) A decision noted to be pronounced in context of notices under section 153C rather than section 153A. The Tribunal observed that this decision was not directly on section 153A notice issues and thus not determinative of the present legal point.
Scope (P) Ltd. v. Deputy CIT [2013] (Mumbai-Trib.) A co-ordinate Bench order that granted relief to assessee though notice under section 153A was upheld. Noted as distinguishable on facts; did not alter the Tribunal's reliance on the line of authorities requiring incriminating material for interfering with completed assessments.
Asst. CIT v. Pratibha Industries Ltd. [2013] (Mumbai-Trib.) Relevant for the proposition that completed assessments may not be disturbed in the absence of incriminating material specific to the assessee. Referenced among co-ordinate Bench decisions supporting the Tribunal's conclusion that absent incriminating material, additions are not sustainable.
CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) Held that since no incriminating material was unearthed during search, no additions could have been made to the income already assessed. Referred to as a recent authoritative restatement of the proposition; the Tribunal cited it in support of deleting additions not based on incriminating material.
CIT v. RRJ Securities Ltd. [2016] 380 ITR 612 (Delhi) Affirmed that concluded assessments cannot be interfered with under section 153A unless incriminating material belonging to the assessee has been seized; examined the need to see if seized documents could possibly reflect undisclosed income of the assessee. Quoted and applied to reinforce that the AO must examine seized material for nexus to assessee's undisclosed income before interfering with completed assessments; used to support deletions and to reject arbitrary interference.
Ssp Aviation Ltd. v. Deputy Commissioner Of Income Tax [2012] 346 ITR 177 (Delhi) Stated that the question whether seized documents could reflect any undisclosed income must be considered by the Assessing Officer; concluded assessments cannot be interfered with absent incriminating material. Quoted within the RRJ Securities discussion and relied upon by the Tribunal to emphasise the requirement of a connection between seized material and the assessee's income before reassessment.

Court's Reasoning and Analysis

The Tribunal's analysis proceeded in these principal steps (as reflected in the orders):

  1. Identification of the central legal question: whether additions to completed assessments under section 153A/section 153C may be made in the absence of incriminating material discovered during the search. The Tribunal expressly noted that this issue "is no more res-integra" and proceeded to examine binding and persuasive authorities on the point.
  2. Examination of factual matrix: the Tribunal recited factual findings from the lower authorities — e.g., documents seized from the searched person's premises related to a firm, declarations by the searched persons offered undisclosed income for certain years (notably AY 2007-08), notices under section 153C were issued to third parties, and in many impugned assessment years the additions were made though the seized material did not contain incriminating material specifically linking the assessee for those years. The Tribunal also recorded that the Department, in response to a Bench query, fairly conceded in at least one matter that the specific additions were not based upon any incriminating material.
  3. Survey and application of authorities: the Tribunal reviewed a line of Tribunal and High Court decisions (including Special Bench decisions) culminating in Delhi and Rajasthan High Court authorities which establish the legal proposition that completed assessments can be disturbed under section 153A only where there is incriminating material linking the assessee for the relevant years. The Tribunal reproduced and relied on passages from several decisions (e.g., Govind Agarwal, All Cargo Global Logistics (SB), Jai Steel, Kabul Chawla, RRJ Securities) which consistently held that additions not connected to seized material are unsustainable.
  4. Application to the appeals before it: applying the settled legal position, the Tribunal concluded that where the Assessing Officer made additions (examples: gift of Rs. 2,00,000; capital gains re-characterised as income from other sources; certain loans treated as unexplained) in the absence of seized/incriminating material specific to the assessee, such additions were beyond jurisdiction and unsustainable. Accordingly, those additions were deleted. The Tribunal expressly followed earlier decisions and respectfully adopted their reasoning.
  5. Evaluation of factual findings where the Commissioner (Appeals) had considered details: where the Commissioner (Appeals) made detailed factual findings supported by material — for example, accepting that seized entries were accounts of a shop and that the amounts had been offered by a partnership and taxed (Vividham Sweets and Snacks Shop entries), or accepting that a section 132(4) declaration covered seized diamond jewellery — the Tribunal upheld those factual conclusions. Conversely, where the AO relied upon non-speaking documents (e.g., a jotting listing a name and amount) without making it a "speaking" document by inquiry or evidentiary stepping-stones, the Tribunal found the addition unsustainable and deleted it.
  6. On issues of procedure (condonation of delay): the Tribunal considered petitions for condonation of delay in filing cross-objections (noting explanations and affidavits) and, where there was no objection from the Department, condoned delays and admitted the cross-objections for adjudication in the interest of justice.
  7. On telescoping: the Tribunal scrutinised the Commissioner (Appeals) order granting telescoping of a Rs. 6,00,000 entry against an aggregate offer of Rs. 30,00,000 and found no reasoning demonstrating a nexus. The Tribunal reversed the Commissioner (Appeals) on that point and upheld the AO's addition where the nexus was not established.

Holding and Implications

Core Holding: Additions made in completed assessments under section 153A/section 153C which are not based on or connected to incriminating material discovered during the course of the search are unsustainable and beyond the jurisdiction of the Assessing Officer.

Direct consequences for the parties (as recorded by the Tribunal):

  • In ITA No. 1753/Mum/2011 (Ms. Chhaya P. Gangar, AY 2003-04) the Tribunal deleted the addition of Rs. 2,00,000 treated as unexplained cash credit and partly allowed the assessee's appeal.
  • Cross-objections filed by Ms. Chhaya Gangar for subsequent years were admitted after condonation of delay; where facts were identical (i.e., additions made without incriminating material), the Tribunal directed deletion of those additions and held the Revenue's appeals to be infructuous or dismissed.
  • For Pankaj Gangar and other co-ordinate appeals with identical facts, the Tribunal similarly condoned cross-objection delays where applicable, allowed cross-objections in part, and dismissed Revenue appeals where additions were made in absence of incriminating material.
  • The Tribunal upheld certain findings of the Commissioner (Appeals) where the Commissioner (Appeals) had provided cogent factual reasons supported by material — e.g., deletion of rent additions where seized documents were interpreted as firm accounts and the amount was already offered by the firm; deletion of unsecured loan addition where bank evidence and confirmations sufficed; deletion of jewellery-related addition where section 132(4) declaration covered the seized jewellery.
  • The Tribunal reversed the Commissioner (Appeals) on the telescoping of Rs. 6,00,000 where no nexus was shown between the entry and the aggregate offer; that portion of the Revenue's appeal was allowed.

Broader implications: The Tribunal's decision follows and applies an existing line of authorities (Tribunal Special Bench and High Courts) reiterating that completed assessments may be interfered with under section 153A/153C only if incriminating material linking the assessee for the relevant years has been discovered in the search. The Tribunal did not purport to lay down a new legal principle; it applied established precedents to the facts of the appeals before it.

Show full summary ...

    Ms. Chhaya P. Gangar v. Deputy Commissioner of Income-tax

    ORDER

    1. These appeals arise as a result the orders passed in pursuance of search and seizure operation under section 132 of the Income-tax Act, 1961, conducted in the case of Shri Prakash H. Savla on January 17, 2008. Since common issues are involved, therefore, these appeals have been decided together.

    First, we shall take up the appeals pertaining to Ms. Chhaya P. Gangar

    ITA No. 1753/Mum/2011 for the assessment year 2003-04 (assessee's appeal)

    Following grounds have been raised by the assessee in the appeal memo:

  • 1. The Commissioner of Income-tax (Appeals) erred in upholding the Assessing Officer's order dated under section 153C not to be bad in law, without jurisdiction and void ab initio.
  • 2. The Commissioner of Income-tax (Appeals) erred in upholding the Assessing Officer's order of treating the gift of Rs. 2,00,000 as unexplained cash credit, as no material was found during the search for such addition and under the facts and circumstances of the case.

    • 2. During the course of hearing, Shri Harshad J. Shah and Shri Ashok Kumar Suthar, learned counsel on behalf of the assessee and Shri L. K. S. Dahia, Departmental representative (learned Commissioner of Income-tax-Departmental representative) on behalf of the Revenue, argued the case.

    3. During the course of hearing, it has been argued by the learned counsel appearing on behalf of the assessee that in this case no jurisdiction as per law could have been assumed under section 153C because nothing incriminating was found against the assessee, in the case of search carried out at the premises of Shri Prakash H. Savla. It has been submitted that in any case additions made in the assessment order are illegal on the ground that these have been made without there being any incriminating material. Thus, additions are without any basis and without there being any adverse material against the assessee, and, thus, the addition made by the Assessing Officer is not only beyond the jurisdiction but contrary to law and facts on the merits also.

    3.1 In support of his claim, the learned counsel has placed copy of the judgment in the case of Vimal Kumar Rathi v. Dy. CIT [IT Appeal Nos. 3094-3096 (Mum.) of 2013, dated 16-10-2015] passed by the honourable Mumbai Bench of the Income-tax Appellate Tribunal. He has also placed reliance on various judgments which have been relied upon in the case of Vimal Kumar Rathi (supra). Reliance has also been placed on the judgment of the honourable Bombay High Court in the case of CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 for the proposition that no addition can be made under section 153A in the absence of any incriminating material. Detailed arguments have been made by the learned counsel on the merits of the addition also by contending that the assessee has discharged its onus in explaining identity, creditworthiness and genuineness of the gift of Rs.2,00,000 received by the assessee, which has been added by the Assessing Officer in the assessment order. It was, lastly, submitted by him that no assessment or appeal was pending as on the date of search, and, therefore, no assessment/appeal has abated as a result of the search action, and, therefore, neither action under section 153C was justified nor the addition made in the assessment order within the periphery of jurisdiction assigned by the Legislature upon the Assessing Officer.

    3.2 On the other hand, the learned Commissioner of Income-tax-Departmental representative drew our attention on the surrender made by the assessee admitting the undisclosed income and contended that the jurisdiction has been rightly assumed by the Assessing Officer under section 153C. It has been submitted by him that when the assessee herself has admitted earning of undisclosed income and these facts were reconfirmed by her by including the "offered" income in the return of income filed by the assessee, and, therefore, under these circumstances, it cannot be said that nothing was found against the assessee. In response to the query of the Bench that whether the additions made in the assessment order were based upon any incriminating material, the response of the learned Commissioner of Income-tax-Departmental representative was very fair. It was clarified that the additions were not based upon any incriminating material. But he argued that it is not necessary that in the assessment order framed under section 153C additions could be made only qua incriminating material. According to him, these proceedings are akin to the proceedings carried out under section 147, wherein the Assessing Officer is permitted to make additions/disallowances in the reassessment even beyond the scope of reasons recorded by him for reopening of the case. In a nutshell, he justified the action of the lower authorities in framing the assessment and making the impugned additions.

    3.3 We have heard both the sides very carefully and gone through the material placed, the orders of the lower authorities as well as the judgments relied upon before us. The brief facts as culled out from the orders of the lower authorities are that during the search conducted at the residence of Shri Prakash H. Savla, documents related to the firm, M/s. Mahavir Builders, were found and seized. Subsequently, Shri Prakash H. Savla and Shri Pankaj Gangar (husband of the assessee) gave some declarations offering undisclosed income of some connected persons including the assessee, as per the chart given in the order of the learned Commissioner of Income-tax (Appeals), wherein an amount of Rs. 24.30 lakhs has been offered in the name of the assessee for the assessment year 2007-08 on account of some undisclosed share purchase transactions. Subsequently, notices were issued to the assessee by the Assessing Officer under section 153C, in pursuance of which the assessee filed the return on August 28, 2009. In the return filed for the impugned assessment year, no disclosure was made by the assessee, as the same was made only for the assessment year 2007-08. During the course of assessment proceedings the Assessing Officer made additions of Rs. 2,00,000 on account of gift received by the assessee. The admitted facts on record are that the addition has been made in the absence of any seized documents. It is noted that the declaration was made by the assessee only for the assessment year 2007-08, and has been accepted as such by the Department. The facts on record suggest that nothing incriminating has been found indicating any undisclosed income for the year under consideration. Thus, the primary issue to be decided here by us is that whether an addition could be made under the law by the Assessing Officer in the absence of, or unconnected to, any material found during the course of search. It is noted by us that this issue is no more res-integra.

    3.4 Learned counsel has placed before us copy of the judgment of the honourable co-ordinate Bench in the case of Vimal Kumar Rathi (supra) wherein it has been held that no addition can be made in the absence of any adverse material found during the search. We are reproducing hereunder the relevant paragraphs of this judgment :

    "9. We have heard both the parties and perused the orders of the Revenue authorities as well as the cited decision of the Tribunal in the case of Govind Agarwal v. Asst. CIT (ITA No. 3389/Mum/2011 dated January 10, 2014) ; All Cargo Global Logistics v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mumbai) [SB] ; SKS Ispat and Power Ltd. v. Deputy CIT (ITA No. 8746/M/12 and ITA No. 8747/M/12) as well as the judgment of the honourable Bombay High Court in the cases of CIT v. All Cargo Global Logistics Ltd. [2015] 374 ITR 645 (Bom) , copies of which are placed on record. On a perusal of the said decisions, we find they are relevant for the proposition that 'when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law'. In this regard, we find it relevant to extract the relevant paragraphs from the decision of the Tribunal in the case of Govind Agarwal (ITA No. 3389/Mum/2011, dated January 10, 2014) and the same is as follows :

    '12. We have heard the parties and their divergent stands on the legal issue and the validity of the instant assessment/reassessment with the routine additions under section 68 and section 14A of the Act based on the accounted transactions. The instant case for the assessment year 2002-03 deals with the case of disturbing the "completed assessment". Earlier the assessment was completed under section 143(1) of the Act. Completeness of the summary assessment is considered and held in favour of the assessee, vide many judgments cited above. In the assessment under section 153A, the Assessing Officer made (i) addition under section 68 on account of artificially inflated investment in house duly disclosed in the balance-sheet of the assessee Rs. 31,33,070 ; and (ii) disallowance under section 14A : Rs. 23,31,469. Admittedly, there is no incriminating material before the Assessing Officer to support the above additions. The valuation report, which is garnered by the authorities, constitutes mere estimates and the provisions of section 132 is not required to obtain such report from the DVO. As such, for making the aforesaid additions of Rs. 31,33,070, the Assessing Officer has not used even the said valuation report and the Assessing Officer disallowed what is reported in the books. Similar is the case with the additions under section 14A of the Act. Therefore, undisputedly, the impugned quantum additions are made merely based on the entries in the accounted books and certainly not based on either the unaccounted books of account of the assessee or books not produced to the Assessing Officer earlier or the incriminating material gathered by the Investigation wing of the Revenue. Considering the legal propositions placed before us by the assessee's counsel, we are of the opinion, such assessments or additions are unsustainable in law.

    13. For the sake of completeness, we insert here some of the extracts from relevant judgments and they are :

    "A. [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) in the case of Jai Steel India v. Asst. Commissioner Of Income portion :

    '. . . The requirement of assessment or reassessment under the said section has to be read in the context of section 132 or section 132A inasmuch as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under the second proviso which is required to be assessed. . . .

    Para 30 of the judgment (page 384) : The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words "assess" or "reassess" have been used at more than one place in the section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word "assess" has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.'

    B. [2012] 28 taxmann.com 328 (Mumbai-Trib.) in the case of Gurinder Singh Bawa v. Deputy CIT.

    '. . . Whether since assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A-Held, yes (paragraph 6.2) (In favour of assessee)

    Para 6.1 of the order : The Special Bench in the case of All Cargo Global Logistics Ltd. [2012] 18 ITR (Trib) 106 (Mumbai) [SB] ; [2012] 137 ITD 287 (Mum) ; [2012] 23 taxmann.com 103 (Mum.) [SB] , has held that the provisions of section 153A come into operation if a search or requisition is initiated after May 31, 2003, and on satisfaction of this condition, the Assessing Officer is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus, in case where assessment has abated the Assessing Officer can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time-limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search.'

    C. All Cargo Global Logistics Ltd. v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mumbai) [SB] ; [2012] 137 ITD 287 (Mum) ; [2012] 23 taxmann.com 103 (Mum.) [SB]

    Paragraph 59 of the Special Bench decision (page 154) : Thus, question No. 1 before us is answered as under :

  • (a) In the assessments that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately ;
  • (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means-(i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search."

    • 14. Thus, in case of the completed assessments either under section 143(1) or 143(3), the above extracts are uniform in advocating against making additions in routine manner in the assessments made under section 153A of the Act when there is no incriminating material gathered in the search action. Statutory notice under section 153A of the Act can also be issued to reiterate the returned income or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further, for the sake of completeness of the order, we have perused the orders/judgments relied upon by the learned Departmental representative for the Revenue and found they are distinguishable on facts for one reason or other. To start with, we have perused the judgment of the honourable Delhi High Court in the case of Madugula Venu v. DIT [2013] 29 taxmann.com 200 (Delhi) , and find that, though explained the provisions in plain language, it does not dealt with the relevance or factum of incriminating material. Further, the judgment of the Andhra Pradesh High Court in the case of 1. Gopal Lal Bhadruka v. 2. Avadesh Bhadruka [2012] 346 ITR 106 (AP) ; [2012] 27 taxmann.com 167 (AP) is not on the notices issued under section 153A of the Act and the same is pronounced in the context of the notice under section 153C of the Act. Further, also, the co-ordinate Bench decision in the case of Scope (P) Ltd. v. Deputy CIT [2013] 33 taxmann.com 167 (Mumbai-Trib.) has granted relief to the assessee though the notice issued under section 153A of the Act was upheld. However, this order has not considered the then existing decision of the co-ordinate Bench decision in the case of Asst. CIT v. Pratibha Industries Ltd. [2013] 23 ITR (Trib) 766 (Mumbai) ; [2012] 28 taxmann.com 246 (Mumbai-Trib.) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit from the Special Bench decision in the case of All Cargo Global Logistics Ltd. [2012] 18 ITR (Trib) 106 (Mumbai) ; [2012-TIOL-391-ITAT-Mum-SB], which is relevant for the proposition that the assessment under section 153A will be made on the basis of incriminating material such as books of account, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search. . . .

    16. In these circumstances, we have no doubt about the absence of any seized material which are incriminating in nature to back the additions under section 68 or section 14A of the Act made in the assessment made under section 153A of the Act for the assessment year under consideration. Regarding the DVO's report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the Assessing Officer for making additions and such additions, if any, cannot be sustained legally. As such, we find that the Assessing Officer has not used the said report of the DVO also for making additions of Rs. 31,33,007, the difference between accounted amount of Rs. 46,13,007, claimed as the amount spent on construction of house and acquisition of land as on March 31, 2002, minus Rs. 14.8 lakhs, the investment made on the land plots. The Assessing Officer made addition for the assessee's failure to provide evidences/bills in support of the claim of expenditure on the construction. If the presumption of the Assessing Officer that the plots since acquired only by July 2001, the assessee would not have spend Rs. 31,33,007 by March 31, 2002. This is merely a presumption rather conclusion based on any evidences. Such additions are unsustainable in law in the assessments made under section 153A read with section 143(3) of the Act.

    17. Rajasthan High Court judgment in the case of Jai Steel (India) [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) , vide para 21, it is categorically mentioned that 'the requirement of assessment or reassessment under the said section (153A) has to be read in the context of sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration . . . .' Thus, the judgment of the honourable High Court in the case of Jai Steel (India) [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) and above decisions of the Tribunal are categorical in concluding that, in case of the concluded assessments like the present one, the additions are made only based on the incriminating material discovered during the search action. The facts of the Jai Steel (India) [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) are identical to the present one, i.e., Assessing Officer made additions by reassessing under section 153A on the completed assessment under section143(1) of the Act. Thus, considering the judgment in the case of the Jai Steel (India) [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) , the arguments on the legal issue raised before us stands covered. Therefore, considering the Rajasthan High Court's judgment in the case of Jai Steel (India) [2013] 1 ITR-OL 371 (Raj) ; [2013] 36 taxmann.com 523 (Raj) , we have no difficulty in (i) upholding the issue of notice under section 153A of the Act, and (ii) in disapproving the making of the impugned additions under section68 and section 14A of the Act, which are not backed by the incriminating materials. In the absence of incriminating material, the role of the Assessing Officer is only to reiterate the returned income filed in response to the notice under section 153A of the Act. Accordingly, in substance, the common legal issue raised in the grounds for both the appeals of the assessee (ITA Nos. 3389 and 3390/M/2011) is allowed.'

    10. Further, in the recent past, similar issue was adjudicated by the honourable Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) , vide ITA Nos. 707/2014 and others, dated August 28, 2015, wherein the honourable Delhi High Court has reiterated the above settled legal proposition that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. In this case it was held that (headnote) :

    'Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.'

    11. Further, we find it relevant to mention here that on perusal of the paper book filed before us, page 23 of the said paper book shows the accounted nature of the transactions in respect of the disputed gift amount of Rs. 4 crores. It is also noted that the additions were made not on account of 'gifts' but on account of 'source of funds for repayment of loans'. In this regard, we find the said loans are repaid through journal entries. Therefore, the Revenue authorities are not supposed to make such additions in the assessment. Considering the factual matrix of the case as well considering the above settled legal position of the issue that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same. Considering our decision on the legal issue in favour of the assessee, the other grounds demand no specific adjudication. Thus, on the legal ground the assessee succeeds and rest of the grounds are dismissed as academic."

    3.5 The honourable Delhi High Court in the case of CIT (Central) v. Kabul Chawla [2016] 380 ITR 573/[2015] 234 Taxman 300/61 taxmann.com 412 has held that completed assessments could only be interfered with by the Assessing Officer on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In the absence of any incriminating material, the Assessing Officer does not have any jurisdiction to interfere in the concluded assessments. The honourable court has summarised the legal position in respect of section153A of the Act as under (page 589) :

    "On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under :

  • (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.
  • (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise.
  • (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six assessment years 'in which both the disclosed and the undisclosed income would be brought to tax'.
  • (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material'.
  • (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in section 153A is relatable to abated proceedings, (i.e., those pending on the date of search) and the word 'reassess' to the completed assessment proceedings.
  • (vi) In so far as the pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer.
  • (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."

    • 3.6 Similar view has been taken by the honourable Delhi High Court in a very recent judgment passed in the case of CIT v. RRJ Securities Ltd. [2016] 380 ITR 612/[2015] 62 taxmann.com 391 . The relevant portion of the order is reproduced as under (page 636) :

    "The decision in Ssp Aviation Ltd…. v. Deputy Commissioner Of Income Tax [2012] 346 ITR 177 (Delhi) cannot be understood to mean that the Assessing Officer has the jurisdiction to make a reassessment in every case, where seized assets or documents are handed over to the Assessing Officer. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the Assessing Officer after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the Assessing Officer to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an assessee before commencing an enquiry under section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the assessee for the relevant assessment years.

    As expressly indicated under section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of section 153A of the Act. The concluded assessments cannot be interfered with under section 153A of the Act unless the incriminating material belonging to the assessee has been seized."

    3.7 Coming back to the facts of the case, it is noted that undisputed facts are that the impugned addition has been made in absence of any adverse material. Under these circumstances we have no other option but to respectfully follow the aforesaid judgments relied upon by the learned counsel. No contrary judgments have been brought to our notice by other side. Thus, respectfully following the aforesaid judgments we hold that the addition made in the assessment order on account of gift of Rs. 2,00,000 is illegal and deserves to be deleted and therefore we delete the same. Since, this issue has been decided in favour of the assessee on primary legal ground, we find that other grounds do not require adjudication at this stage. Thus, these are treated as infructuous.

    4. Accordingly, appeal of the assessee is partly allowed.

    Ms. Chhaya Gangar: ITA No. 163/Mum/2012 (Revenue's Appeal) and C. O. No. 34/Mum/2013 for assessment year 2005-06

    5. In this case there is a delay of 54 days in filing the cross objections by the assessee before the Tribunal. In the petition for seeking condonation of delay for filing of cross objections, the assessee has, inter alia, explained the following reasons for explaining delay :

    "It is submitted that the respondent/cross objector briefed that counsel about the filing of the appeal by the Department as against the order of the learned Commissioner of Income-tax (Appeals) which was far beyond the due date for filing the cross objection. Then the counsel opined that a cross objection be filed and instructed the respondent/cross objector to do so. Soon after obtaining the professional advice from the counsel the respondent/cross objector has within reasonable time filed this cross objection before this honourable Tribunal.

    It is submitted that the respondent/cross objector, inadvertently, due to lack of proper professional advice on this issue, could not filed the cross objections before this honourable Tribunal well in time, i.e., on or before December 26, 2012, and by the time the respondent/ cross objector sought the counsel's advice, there arose 54 days delay in filing the cross objection before the honourable Tribunal."

    5.1 The aforesaid petition is also supported with an affidavit from the assessee. We have heard the learned counsel as well as the learned Commissioner of Income-tax-Departmental representative. After taking no objection from the learned Commissioner of Income-tax-Departmental representative we find it appropriate to condone the delay in filing of cross objections, in the interest of justice. Therefore, the cross objection is admitted for adjudication.

    5.2 It is noted by us that the primary legal issue raised by the assessee is the same in this year also. The assessee has filed revised and concise grounds of appeal with its cross objections :

    Ground Nos. 4 and 5 of C.O. read as under :

    "4. The additions deleted by the learned Commissioner of Income-tax (Appeals) is just and proper under the facts and circumstances of the case.

    5. Without prejudice the additions made in a section 153C proceedings should be based only upon the seized material and in the instant case these impugned additions which stands deleted by the learned Commissioner of Income-tax (Appeals) based on the facts are in violation of the provisions of section 153C inasmuch as the said impugned additions deleted by the Commissioner of Income-tax (Appeals) do not constituted part of the seized material found at the time of search under the facts and circumstances of the case."

    5.3 It is noted that in the assessment order the addition has been made by the Assessing Officer by treating the long-term capital gain earned by the assessee on the sale of shares as income from other sources. The facts involved are identical in the sense that the impugned addition has been made in the absence of any incriminating material found during the course of search. Thus, following our order for the assessment year 2003-04 (supra), we find that additions are not sustainable. Accordingly, the same are hereby directed to be deleted. Thus, ground Nos. 4 and 5 of the cross objection are allowed.

    5.4 Since, we have found that the additions are not sustainable on the jurisdictional ground, therefore, we are not deciding this issue on merits, and therefore appeal of the Revenue become infructuous.

    6. As a result, the cross objection filed by the assessee is partly allowed and appeal filed by the Revenue is dismissed as infructuous.

    Ms. Chhaya Gangar : ITA No. 164/Mum/2012 (Revenue's appeal) and Cross Objection No. 35/Mum/2013 for assessment year 2006-07

    7. We note that the facts involved in this year are identical to the facts of the assessment year 2005-06. Accordingly, following our order, the delay in filing of the cross objection is condoned, and cross objection is admitted for adjudication, and ground Nos. 4 and 5 of the cross objection of assessment year 2006-07 are allowed. Therefore, appeal of the Revenue becomes infructuous.

    8. As a result, cross objection filed by the assessee is partly allowed and appeal filed by the Revenue is dismissed.

    Appeals in the case of Mr. Pankaj Gangar

    ITA No. 159/Mum/2012 (Revenue's appeal) and C. O. No. 36/Mum/2013 for assessment year 2005-06

    9. In these appeals also there is a delay of 54 days in filing cross objection before the Tribunal by the assessee. The facts are identical to that of Ms. Chhaya Gangar for the assessment year 2005-06 above, thus following our order, the delay is condoned and cross objection is admitted for adjudication.

    9.1 It is further noted that ground Nos. 4 and 5 of the cross objection are identical to the case of Ms. Chhaya Gangar and, therefore, these are allowed. The cross objection is treated as partly allowed.

    9.2 In the Revenue's appeal, grounds Nos. 1, 2, 3 deal with the action of the Assessing Officer in treating the amount of capital gain earned by the assessee as a result of sale of shares, as "income from other sources". This addition has been made without any incriminating material and, therefore, the facts being identical with the case of M/s. Chhaya Gangar for the assessment year 2005-06, following our order, we hold that the addition was beyond the jurisdiction, and, therefore, the same is hereby deleted.

    10. In ground No. 4 of the Revenue's appeal, the Assessing Officer is aggrieved with the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 1,50,000 made on account of unexplained cash receipts by holding that these cannot be rental receipts when the Assessing Officer had never held that these receipts were rental receipts.

    10.1 Brief facts are that the Assessing Officer found that some of the documents found during the course of search were relating to M/s. Vividham Sweets and Snacks Shop, Borivali (W), and held on the basis of these documents that the assessee had earned a rent of Rs. 50,000 per month from January, 2005, to December, 2007, and, accordingly he made addition in the four years as follows :

    Assessment year Amount of addition (Rs.)
    2005-06 1,50,000
    2006-07 6,00,000
    2007-08 6,00,000
    2008-09 4,50,000

    10.2 During the course of hearing before the learned Commissioner of Income-tax (Appeals), it was explained by the assessee that the impugned documents have already been considered while making the offer of income of Rs. 30,00,000 by the assessee and the same has been included in the return of income for the assessment year 2007-08, and has been accepted as such by the Department, and, therefore, no further addition was called for.

    10.3 The learned Commissioner of Income-tax (Appeals) considered the submissions of the assessee in detail, and after considering entire incriminating material and details of surrender made by the assessee, it was concluded by him that the entries contained in these documents have been misunderstood by the Assessing Officer, and in any case the same has been covered in the surrender made by the assessee's firm. The finding recorded by the learned Commissioner of Income-tax (Appeals) are reproduced hereinbelow for sake of ready reference :

    "3.4 From the perusal of these entries, it is noticed that the entries are relating to the payment and receipt and the balance amount shown by the appellant with Vividham Sweets and Snacks Shop. The entries of Rs. 50,000 given at page 25 of July, 2005, and page 32 of March, 2006, against which expense of Rs. 14,169 and Rs. 73,670 has been mentioned and the balance of Rs. 35,831 and minus Rs. 23,670 has been given. Similarly other entries are mentioned on various dates and the total amounts of Rs. 1,88,555 against which the expense of Rs. 1,32,135 and the balance of Rs. 56,420 has been shown. The interpretation of these entries shows that the assessee has made payment of Rs. 1,88,555 against the expenses of Rs. 1,32,135 and the balance of Rs. 56,420 due from M/s. Vividham Sweets and Snacks Shop. It is also mentioned that the seized material notings are related to wedding of the daughter of Shri Prakash Savla and the declaration has been made under section 132(4) in the hands of the partnership firm where Shri Prakash Savla and the appellant is a partner. The expenditure incurred shown on these loose papers have been offered to tax in the hands of the partnership firm and due tax have been paid on this amount. On the other hand, the Assessing Officer has assumed that Vividham Sweets and Snacks Shop is belonging to the assessee and the assessee has received rent of Rs. 50,000 from M/s. Vividham Sweets and Snacks Shop and treated it unexplained rent received by the assessee and treated it as unexplained income for the assessment years 2005-06 to 2008-09. The Assessing Officer has not made any enquiry from Vividham Sweets and Snacks Shop that whether the shop is belonging to the appellant nor any other corroborative evidence found and seized during the course of search to prove this fact that the entries of Rs. 50,000 is representing the rental income not shown by the assessee. The perusal of the seized document entries as stated above clearly shows that it is an account of Vividham Sweets and Snacks Shop where the receipt, payment of expenses and the balance amount has been mentioned on these pages which was duly declared by the appellant in the case of the firm and due tax have been paid on this amount. The presumption of the Assessing Officer that it was a rental income is not based on any cogent reason or documentary evidence. The interpretation made by the Assessing Officer is based on the presumption and conjectures only which cannot be sustained as per the provisions of the Act. Keeping in view all these facts and circumstances that there was not even any iota of evidence to prove that the assessee has received rental income of Rs. 50,000 from Vividham Sweets and Snacks Shop, therefore, the addition made by the Assessing Officer on account of rental income for the year under consideration is not sustainable, hence deleted. Ground of appeal is allowed."

    10.4 We have carefully gone through the submission made by the learned Commissioner of Income-tax-Departmental representative vis-a-vis the aforesaid findings and note that the findings recorded by the learned Commissioner of Income-tax (Appeals) are well reasoned. After analysing the facts it has been rightly held by the learned Commissioner of Income-tax (Appeals) that the entries contained in the seized documents clearly shows that it is an account of Vividham Sweets and Snacks Shop wherein receipts, payment of expenses and the balance amount has been mentioned on these pages which have been duly declared by the assessee in the case of partnership firm of which the assessee is a partner and due tax has been paid on this amount. We do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) and nothing wrong could be pointed out by the learned Commissioner of Income-tax-Departmental representative in the detailed factual findings of the learned Commissioner of Income-tax (Appeals), and, therefore, we uphold the same. Accordingly, ground No. 4 of the Department's appeal is dismissed.

    11. As a result, cross objection filed by the assessee is partly allowed and the appeal filed by the Revenue is dismissed.

    ITA No. 160/Mum/2012 (Revenue's appeal) and C. O. No. 37/Mum/2013 for assessment year 2006-07

    12. It is noted that in this year also the facts are identical and, therefore, the cross objection is admitted for adjudication condoning the delay, following our order for the assessment year 2005-06.

    12.1 Further, in consistency with our order for the assessment year 2005-06, ground Nos. 4 and 5 of the revised and concise grounds of cross objections filed by the assessee are allowed.

    13. Grounds Nos. 1, 2, 3, of the Revenue's appeal are identical to grounds Nos. 1, 2 and 3 of the assessment year 2005-06, and, therefore, following our order, these grounds are dismissed.

    14. Ground No. 4 is identical to ground No. 4 of the assessment year 2005-06 and, therefore, following our order this ground is also dismissed.

    15. In ground No. 5, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition of Rs.3,75,000 made under section 68 of the Act.

    15.1 The brief facts are that during the course of assessment proceedings, the Assessing Officer found that the assessee has received a loan of Rs. 4,25,000, and the same was added under section 68 of the Act. The learned Commissioner of Income-tax (Appeals) deleted it on the ground that the assessee has discharged its onus under section 68 of the Act.

    15.2 Being aggrieved, the Revenue has filed an appeal before the Tribunal.

    15.3 It is noted by us that this addition has been made in the absence of any incriminating material. We have already held in the earlier part of this order no addition could have been made under the law in the absence of incriminating material. Therefore, the impugned addition was beyond jurisdiction. Thus, respectfully following our order, we find that the learned Commissioner of Income-tax (Appeals) is rightly deleted this addition. Therefore, this ground of the Revenue's appeal is dismissed.

    16. As a result, cross objection filed by the assessee is partly allowed and the appeal filed by the Revenue is dismissed.

    The Revenue's appeal in ITA No. 1784/Mum/2011 for the assessment year 2007-08

    17. In ground No. 1, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition of Rs.6,00,000 made by the Assessing Officer on account of rent received from M/s. Vividham Sweets and Snacks Shop. It is noted by us that this ground is identical to ground No. 4 of the Revenue's appeal for the assessment year 2005-06, and, therefore, respectfully following our order for the assessment year 2005-06, we dismiss ground No. 1 raised by the Revenue.

    18. Ground No. 2 : In this ground, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in granting telescoping of the unaccounted brokerage and commission income against the amount offered in the return by the assessee.

    18.1 Brief facts are that during the course of assessment proceedings it was noted by the Assessing Officer that during the course of search certain print out from accounting software were found and seized, showing that in the ledger account under the name of commission and brokerage, there was an entry of cash received of Rs. 6,00,000 on March 31, 2007, in the books of account of the assessee. The assessee submitted that this entry has already been considered in the offer of income made by the assessee for an aggregate amount of Rs. 30,00,000, and, therefore, it should be adjusted with that. Being not satisfied, the Assessing Officer made the addition. In the appeal before the learned Commissioner of Income-tax (Appeals) detailed arguments were made wherein the assessee reiterated its stand and requested for telescoping of this amount against the income offered.

    18.2 In the order passed by the learned Commissioner of Income-tax (Appeals), he accepted the claim of the assessee and granted the benefit of telescoping.

    18.3 Being aggrieved, the Revenue filed an appeal before the Tribunal. It has been argued by the learned Commissioner of Income-tax-Departmental representative that there were no basis with the learned Commissioner of Income-tax (Appeals) to grant the benefit of telescoping.

    18.4 We have carefully gone through the order of the learned Commissioner of Income-tax (Appeals). It is noted by us that in the assessment proceedings before the Assessing Officer, the assessee claimed that the entry of commission and brokerage of Rs. 6,00,000 received in cash is covered in the declaration made on account of amount spent on renovation of house of the assessee. This claim was not accepted by the Assessing Officer on the ground that no co-relation could be shown between the two by the assessee. But the learned Commissioner of Income-tax (Appeals) accepted it and granted the benefit of telescoping. It is noted by us that no reasoning has been given by the learned Commissioner of Income-tax (Appeals) as to how and in what manner the amount of Rs. 6,00,000 earned on account of some brokerage and commission income is covered within the offer of Rs. 30 lakhs made by the assessee. The learned Commissioner of Income-tax (Appeals) has discussed in detail the entire law on telescoping but failed to discuss that how and in what manner, the impugned amount was covered in the income offered by the assessee. We find that the grievance of the Revenue that the assessee was not able to establish any nexus between the two amounts is justified. We further find that no proper reasoning on facts has been given by the learned Commissioner of Income-tax (Appeals) while giving the benefit of tele-scoping. Thus, the action of the learned Commissioner of Income-tax (Appeals) in deleting this addition is reversed and addition made by the learned Assessing Officer on this ground is upheld.

    19. As a result, appeal filed by the Revenue is partly allowed.

    ITA No. 1782/Mum/2011 (Revenue's appeal) for the assessment year 2008-09

    20. Ground No. 1 : This ground is identical to ground No. 1 of the Revenue's appeal of the assessment year 2007-08, and, therefore, following our order, this ground is dismissed.

    21. Ground No. 2 : It is identical to ground No. 2 of the assessment year 2007-08 and, therefore, following our order we allow this ground.

    22. As a result, the appeal of the Revenue is partly allowed.

    Now, we take up appeals of Mr. Prakash H. Savla (assessee's appeal) ITA No. 1754/Mum/2011 for the assessment year 2008-09

    23. Ground No. 1 : In this ground the assessee has challenged the action of the learned Commissioner of Income-tax in making addition of sum of Rs.2,58,000 being undisclosed expenditure under section 69C on the basis of jottings in seized material.

    24. The brief facts are that during the course of assessment proceedings the Assessing Officer found that there was jotting on a document found during the course of search page, i.e., No. 16 of annexure GS4/A2. The assessee explained that he did not know Mr. Arun Bhai whose name was mentioned in the seized document, and that he had nothing to do with this document. But the Assessing Officer made addition of the same.

    24.1 Being aggrieved, the assessee contested the matter before the learned Commissioner of Income-tax (Appeals) wherein the assessee made detailed submissions reiterating its stand but the learned Commissioner of Income-tax (Appeals) did not agree with the submission of the assessee on the ground that the assessee failed to produce Mr. Arunbhai before the Assessing Officer for his examination and also failed to submit any documentary evidences to explain this entry, and, accordingly, he confirmed the addition.

    24.2 Before us, the learned counsel has vehemently argued that there is no evidence to show that the impugned document belongs to the assessee and it was not clear that whether the amount represents income or expenditure, and that it was merely a noting, and, therefore, nothing more could be proved from it. The alternative argument of the learned counsel was that it should be telescoped against the income offered.

    24.3 On the other hand, the learned Commissioner of Income-tax-Departmental representative has opposed the submissions made by the learned counsel and submitted that the assessee did not bring on record any evidence in support of its claim and he placed reliance on the orders of lower authorities.

    24.4 We have heard both the sides and gone through the material placed before us. It is noted by us that following scribbling has been made on page16 of the aforesaid annexure GS4-A2 :

    Arunbhai-9967437348

    5,58,000

    24.5 It is noted from the above that this document is half a dumb and half a speaking document. Before it could be used for making addition in the hands of the assessee, there was a legal obligation on the shoulders of the Assessing Officer, to make it as fully speaking document since he wanted to make addition on the basis of this document. There are no indications or observations in the assessment order showing that whether the Assessing Officer made any efforts to contact Mr. Arunbhai. It has not even been mentioned in the assessment order that whether he asked the assessee to produce Mr. Arunbhai. It is not even coming out that whether this amount has been received or given or whether this amount shall be received or shall be given. Whether it is income or expense ? Nothing is coming out from the perusal of this document, and, therefore, in our considered view, no addition could have been made simply relying on the basis of this document that too without bringing any material on record to explain and substantiate this document. Therefore, addition was wrongly made by the Assessing Officer, and, therefore, the same is hereby deleted.

    25. In the result, the appeal of the assessee is allowed.

    ITA No. 1781/Mum/2011 (Revenue's appeal) for the assessment year 2008-09

    26. Ground No. 1 : This ground is with regard to the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition on account of unsecured loan of Rs. 50,000.

    26.1 Brief facts are that during the course of assessment proceedings it was noted that the assessee has received various loans in different years including a loan of Rs. 50,000 received in the impugned year from Mr.Dhara M. Bahuva. The assessee submitted a copy of bank pass book in support of identity and financial capacity and genuineness of the loan. The Assessing Officer was not satisfied and, therefore, addition was made. Before the learned Commissioner of Income-tax (Appeals), the assessee made detailed submissions. The Commissioner of Income-tax (Appeals) has deleted this addition by recording detailed findings which are reproduced hereunder :

    "I have considered the submissions of the appellant, the order of the Assessing Officer and the facts of the case carefully, it is noticed that the appellant has received loans and advances in the year under consideration. The Assessing Officer has asked to submit the confirmations of the creditors to prove the genuineness of the transactions. The confirmations and the bank pass book of the creditors was filed before the Assessing Officer but it was not accepted with the argument that the creditors were not having permanent account number because they were not income-tax assessees. On the other hand, the authorised representative of the appellant has submitted that the loans received were disclosed in the income-tax returns filed before the search operation. No incriminating document was found and seized during the course of search to establish that the loans were bogus. The loans were received through cheque and the bank pass book of the creditors was submitted before the Assessing Officer regarding the loan of Rs. 50,000 received from Shri Dhara M. Bahuva the appellant submitted that confirmation and the bank pass book of the creditor was furnished before the Assessing Officer. I have perused the confirmation and the bank pass book and noticed that loan of Rs. 50,000 was given through cheque debited in this account. Only argument of the Assessing Officer that the creditor is not the income-tax assessee and having no permanent account number cannot be taken the single criteria for making disallowance. Keeping in view these facts and circumstances, it is held that the Assessing Officer has erred in making disallowance of Rs. 50,000. Thus, the addition made is deleted and the ground of appeal is allowed."

    26.2 It is noted that the learned Commissioner of Income-tax (Appeals) has given proper reasoning while deleting this addition. In our considered view, the assessee has discharged its onus under section 68. Even otherwise, the impugned addition was made in the absence of incriminating material, and keeping in view all the facts and circumstances of the case, the addition being illegal, has rightly been deleted by the learned Commissioner of Income-tax (Appeals). Ground No. 1 of the Revenue's appeal is dismissed.

    27. Ground Nos. 2 and 3 : These grounds deal with the addition with regard to unexplained jewellery of Rs. 16,58,750 as unexplained investment.

    27.1 The brief facts are that during the course of search, jewellery worth Rs. 31,29,480 was found as per annexure "3" of the panchnama. Out of this, diamond jewellery of Rs. 16,58,750 was seized. During the assessment proceedings, the assessee submitted that the diamond jewellery which was found during the course of search was fully disclosed in the return and even the additional declaration of Rs. 31.50 lakhs on this account has duly covered the amount of diamond jewellery found and seized. After considering the explanation of the assessee, the Assessing Officer treated it as unsatisfactory because the assessee could not give item-wise tally of the diamond jewellery worth Rs. 16,58,750, hence, it was treated as unexplained investment under section 69B of the Income-tax Act and added back to the taxable income.

    27.2 Being aggrieved, the assessee carried the matter before the learned Commissioner of Income-tax (Appeals) and filed detailed submission. The learned Commissioner of Income-tax (Appeals) was satisfied with the submissions of the assessee and, accordingly, he deleted the addition after recording the following detailed findings :

    "I have considered the submissions of the appellant, the order of the Assessing Officer and the facts of the case carefully, it is noticed that during the course of search jewellery of Rs. 31,29,480 was found out of which the diamond jewellery of Rs. 16,58,750 was seized. The Assessing Officer has given opportunity to the assessee to explain the source of jewellery. The appellant has submitted that as per the seized documents, the diamond jewellery of Rs. 31,50,000 was mentioned and payment of Rs. 10,00,000 each was shown as made and balance of Rs. 11,50,000 was pending. The appellant has accepted the payment of Rs. 20 lakhs and also to avoid litigation the diamond jewellery worth of Rs. 31,50,000 was declared under section 132(4) which covers the diamond jewellery worth of Rs. 16,58,750 found and seized during the course of search. This amount was duly declared in the return of income and tax was paid on it. This explanation was submitted before the Assessing Officer which was not accepted with the argument that the assessee could not submit item-wise tally of diamond jewellery worth of Rs. 16,58,750 found and seized during the search operation. I have perused the seized documents and declaration made by the appellant under section 132(4) of Rs. 31,50,000 on account of diamond jewellery on the basis of the seized documents. It is noticed that the appellant has declared an amount of Rs. 31,50,000 on account of diamond jewellery mentioned on the seized paper and claimed that the diamond jewellery found and seized during the course of search amounting to Rs. 16,58,750 was fully covered by the declaration made of Rs. 31,50,000. Since the appellant has declared Rs. 31,50,000 on account of diamond jewellery based on the seized papers and taken the argument that the diamond jewellery found and seized of Rs. 16,58,750 is fully covered by this disclosure has to be accepted as there was no other diamond jewellery found and seized during the course of search. The argument taken by the Assessing Officer that it was not tallied item-wise cannot be treated as logical conclusion because date-wise and valuation-wise the appellant has declared Rs. 31,50,000 on account of diamond and jewellery out of which Rs. 16,58,750 was found and seized. Keeping in view these facts and circumstances, it is held that the diamond jewellery of Rs. 16,58,750 is covered by the disclosure made of Rs.31,50,000 under section 132(4). Therefore, the addition made on this account is not sustainable, hence deleted. Ground of appeal is allowed."

    27.3 We have considered the submissions made and material placed before us and also gone through the aforesaid findings of the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) has given detailed findings accepting the claim of the assessee that the impugned investment in jewellery is covered under the offer made by the assessee under section 132(4) of Rs. 31,50,000 on account of diamond jewellery on the basis of seized documents. The learned Commissioner of Income-tax (Appeals) has taken holistic view of the matter while accepting the claim of the assessee. Before us nothing contrary could be brought on record by the learned Commissioner of Income-tax-Departmental representative and the reasons/findings given by the learned Commissioner of Income-tax (Appeals) could not be controverted. Therefore, keeping in view all the facts and circumstances of the case, we find that the order of the learned Commissioner of Income-tax (Appeals) is in accordance with law and facts, and, therefore, no interference is called therein, and the same is upheld. Ground Nos. 2 and 3 of the Revenue's appeal are dismissed.

    28. As a result, the appeal of the Revenue's appeal is dismissed.

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