O.P. Sharma, CIT DR for the Revenue. S.N. Soparkar, Sr. Adv. for the Assessee.

The present appeal at the instance of the Revenue is directed against the order passed by the Ld. CIT(A)-11, Ahmedabad dated 16.03.2018 arising out of the order passed by the Ld. DCIT, Central Circle-1(4), Ahmedabad dated 30.03.2016 under Section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2011-12. Upon receipt of the notice on Revenue’s appeal, the assessee also filed the aforesaid Cross Objection. Both are disposed of by this common order.

IT(SS)A No. 179/Ahd/2018 (A.Y. 2011-12):-

2. The department has challenged the instant appeal with following grounds:-

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's ground of appeal for quashing the order made u/s 153A when first proviso to section 153A clearly mandates AO to assess or re-assess total income or each year falling within section 153A(l)(a)?

2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that no addition which is not based on any incriminating material found during the course of search on the assessee's premises could be made u/s 153A in this case?

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni textiles & Engineering Ltd when the purchases were not through stock exchange, were off-market preferential allotment, the prices of scrip were raised exponentially and entire transaction was shown to be a non-genuine transaction?

4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni Textiles & Engineering Ltd when the sales made by assessee corroborates with cash and commission/angadiya charges' entries made in data seized from Shirish Chandrakant Shah, an accommodation entry provider who controlled scrip of Chandni Textiles & Engineering Ltd?

5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni Textiles & Engineering Ltd based upon assessee's plea of natural justice regarding statement of Damodar Attal (employee of Shirish Shah), when Ld.CIT(A) ought to have appreciated consistent, detailed statements of Shirish Shah at various points of time, and further could have, in his plenary capacity, provided the said statement to the assessee, if found necessary?

6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni Textiles & Engineering Ltd ignoring consistent, detailed statements of Shirish Shah at various points of time when accommodation entries arising from these statements & the material seized from Shirish Shah had been basis of admittance of undisclosed income by H.N. Safal Group (of which assessee's husband is a promoter) before the Hon'ble Settlement Commission?

7. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni Textiles & Engineering Ltd as per the decision in Shamim M. Bharwani [2016] 69 taxmann.com 65 (Mumbai Trib.) whose facts were not only similar to that of assessee but assessee’s case was even weaker since seized data from Shrish Shah corroborated exchange of unaccounted cash with commission for such transactions of assessee?

8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

9. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”

3. Further the assessee challenges the maintainability of the reassessment proceeding under Section 143(3) r.w.s. 153A of the Act on prural grounds. Since maintainability of the reassessment proceeding has been raised by the assessee, at the threshold of the matter, we would like to address the same. The short fact involved in the particular case is that the assessee engaged in the activity of purchase and sale of shares, also having income from other sources, claimed exempt long term capital gain under Section 10(38) of the Act to the tune of Rs. 12,18,35,125/-. Such gain has been derived from sale of shares of Chandni Textiles & Engineering Ltd. The assessee was allotted shares from company management on 03.11.2009 for a total consideration of Rs. 1,60,00,000/- which was held for a period of 15 months and finally sold during the period commencing from 29.01.2011 to 04.02.2011 for Rs. 13,78,35,125/- resulting into capital gain of Rs. 12,18,35,125/-.

In fact a search was carried out at the premises of H. N. Safal Group and at the premises of one Shri Shrish C Shah (hereinafter refer to Shri Shah), well known as accommodation entry providers.

Since the assessee belongs to the H. N. Safal Group consequential assessment proceeding under Section 153A of the Act was initiated for A.Y. 2008-09 to 2013-14. Notice under Section 153A of the Act was accordingly issued on 24.01.2014. The assessee in response thereof filed her return of income on 31.03.2014. According to Revenue such funds were routed to the beneficiaries in the guise of share capital, share premiums and unsecured loans. The evidences found during search revealed that shares of Chandni Textiles & Engineering Ltd. were managed to provide exempt long term capital gain. The e-data seized contained one “DV sheet”, the data of sale and purchase of shares of M/s. Chandni Textile & Engineering Ltd.

The entries have recorded therein for the period from 27.01.2011 to 06.04.2011. Statement of one Shri Damodar Attal, the key employee of Shirish Shah was recorded under Section 133A of the Act on 09.04.2013 during the course of survey where he deposed that he handled trading in shares on BOLT from his office at the instruction of Shirish Chandrakant Shah and the list of 143 companies was also provided by him where share trading were being done on instruction of the said Shri Shah. It was further stated by him that these companies are bogus companies formed for the purpose of executing trades through synchronized trading on the behest of Shri Shah. Further that the Directors of these companies are dummy and the entire activities of these companies are being managed by Shri Shah. Such alleged managed exempt capital gain purchased in lieu of cash had been treated as income from unaccounted source and added to the total income of the assessee by the Ld. Assessing Officer. The same was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us.

4. While raising the point of maintainability before us the Ld. Senior Counsel appearing for the assessee submitted that the provisions of Section 153A empowers the AO to assess or reassess the assessee’s case based on evidences unearth during the course of search or hinted by the incriminating material found during search. In the case in hand the reassessment was not based on any incriminating material. Since no incriminating material was found during the search proceeding the order under Section 153A of the Act is bad in law for A.Y. 2011-12 as also submitted by the Ld. AR. The AO though took into consideration various loose papers or statements recorded during the course of search/survey at the premises of Shirish C. Shah, never referred any single incriminating material found during the course of search at appellant’s premises as also pointed out by the Ld. AR. Further that it is an admitted position that the appellant had already filed her original return of income on 20th September, 2011 and the time limit for issuance of notice under Section 143(2) in this facts and circumstances of the case had already expired on 30th September 2012. The assessment indeed remained unabated. On the basis of the such fact the Ld. AR contended that in the absence of any incriminating material the completed assessment cannot be reassessed. In support of his argument the Ld. Senior Counsel relied upon the judgment passed by the Hon’ble Delhi High Court in the matter of Commissioner of Income Tax (Central)-III vs. Kabul Chawla reported in [2015] 61 taxmann.com 412 (Delhi). He further relied upon the judgment passed by the Hon’ble Jurisdictional High Court in the matter of CIT vs. Saumya Construction Pvt. Ltd. in Tax Appeal No. 24 of 2016 dated 14th March 2016. On the contrary the Ld. DR submitted that such funds were routed to the beneficiaries in the guise of share capital share premium and unsecured loans. Relying on the evidences found during search as narrated above, the reassessment proceeding was finalized by the Ld. AO with the observation that the assessee managed the exempt long term capital gain through various dubious and such managed events. The assessee has routed her unaccounted money which were invested into shares by the so-called accommodation entry providers only to fulfill the requirement of Section 10(38) and the shares purchased for Rs. 1,60,00,000/- was sold for Rs. 13,78,35,125/- within a span of just over an year resulting into exempt long term capital gain of Rs. 12,18,35,125/-. According to him the Ld. AO has exercised the jurisdiction conferred upon him by the provision under Section 153A of the Act and he ultimately relied upon the order passed by the Ld. AO.

5. The crux of the argument advanced by the Ld. AR is, therefore, if in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of power under Section 153A of the Act and the earlier assessment shall have to be reiterated. Since no incriminating material was unearth during search, no addition could be made to the income already assessed and consequentially impugned addition is liable to deleted as the case made out by the appellant. In support of his argument he further relied upon the following judgments:-

(i) Commissioner of Income Tax (Central)-III vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi)

(ii) CIT vs. Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016 dt. 14th March, 2016)

(iii) PCIT vs. Sunrise Finlease Pvt. Ltd. (89 taxmann.com 1)

(iv) Krishna Kumar Singhania vs. DCIT (88 taxmann.com 259(2017)

6. We have heard the rival submissions made by the respective parties and have also perused the relevant materials available on record.

7. In order to decide the issue as to whether in the absence of any incriminating material the completed assessment can be reiterated, we would like to consider the relevant statutory provision on this aspect. The provision of Section 153A deals with the issue in hand states as follows:-

“"153A. Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 3lst day of May, 2003, the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition uncfer section 132A, as the case may be, shall abate:

[Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in coses where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.] 1(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding,then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the [Principal Commissioner or] Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.]

Explanation.—For the removal of doubts, it is hereby declared that, — (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;

(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."”

Thus, it appears that the relevant provision reveals that pending assessment on the date of search in respect of preceding six assessment years abate as per the second proviso. But the same does not include those assessments which have already attained finality or wherein the assessment orders have already been passed. When pending assessment abate in case of a search, the AO retains the original jurisdiction as well as the one conferred upon him under Section 153A of the Act for which assessments shall be made for each of six assessment years separately. In case of non-abated assessment i.e. the assessment which are not pending in terms of said second proviso, the assessment therein under Section 153A will be made on the basis of incriminating material found in the course of search and undisclosed income or property discovered in course of search. In the absence of any incriminating material the completed assessment cannot be reassessed to make addition.

8. In this regard, we have considered the judgment relied upon by the Ld. AR in support of his case passed by the Hon’ble Delhi High Court in the case of CIT (Central)-III vs. Kabul Chawla reported in [2015] 61 taxmann.com 412 (Delhi) relevant portion whereof is as follows:-

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

Once a search takes place under section 132, 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.

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.

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'.

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’.

In the 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 complete assessment proceedings. Insofar as 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.

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. (Para 37]

The present appeals concern assessment years 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. (Para 38] The revenue's appeals are accordingly dismissed. [Para 40] "”

9. While discussing with the power to be exercised by the AO in the absence of any incriminating material found during the course of search the Hon’ble Court in the said judgment further discussed the following:-

“34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition.

The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under;

"26. 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.''”

10. The above judgments decided the issue to this effect that some incriminating material unearth during the course of search which was not produced or not already disclosed or not made known in course of original assessment only empowers the Assessment Officer to reassess.

11. We have further considered the judgment passed in the matter of Ld. CIT vs. Saumya Construction Pvt. Ltd. Tax Appeal No. 24 of 2016 passed by the jurisdictional High Court. While discussing the issue the Hon’ble Court has been pleased to observe as follows:-

“(i) The Decision of Hon'ble Gujarat High Court in case of CIT Vs. Saumya Construction Pvt. Ltd (Tax appeal No. 24 of 2016) dated 14th March 2016, the facts and findings of which are restated as under:

"18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person.

In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A,while computing the total income of the assessee under section 153A of the Act,additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search,however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.

19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration,no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment.

Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found,no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.

20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference.

The appeal, therefore, fails and is, accordingly, dismissed.”

Thus, it is held that if in relation to any assessment year, no incriminating material is found no addition or disallowance can be made in respect to that assessment year in exercise of powers under Section 153A of the Act and the earlier assessment shall have to be reiterated.

12. We have further considered the particular fact of non-finding of incriminating material at the premises of the assessee during search proceeding as submitted by the Ld. AR. The provision of Section 153A cannot be made applicable if the incriminating material is not found at the time of search proceeding. Neither addition under Section 153A is permissible on the basis of incriminating material found from the place of third person or after completion of search proceeding as also the case made out by the appellant before us. This particular aspect has also been taken care of by the Ld. CIT(A) as we found from the order impugned. He has further relied upon the judgment passed by the jurisdictional High Court in the case of PCIT vs. Sunrise Finlease Pvt. Ltd. reported in 89 taxmann.com 1 (Guj.) and the judgment passed by the Honb’ble Tribunal, Calcutta Bench in the case of Krishna Kumar Singhania vs. DCIT, reported in 88 taxmann.com 259(2017)(Kol Trib.).

13. We have further considered the said judgment passed by the jurisdictional High Court in the case of PCIT vs. Sunrise Finlease Pvt. Ltd. reported in 89 taxmann.com 1. The relevant portion whereof is as follows:- “Section 153A of the Income-tax Act, 1961 – Search and seizure – Assessment in case of (Condition precedent) – Assessment year 2007-08 – Whether where no incriminating evidence against assessee was found during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of material collected after search – Held, yes – Whether since no incriminating evidence against assessee was found or seized during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of statement of director of assessee company which was recorded.”

Thus it appears from the above judgment that the Tribunal has recorded the particular finding of fact that no incriminating material was found during the course of the search proceedings and that the statement of the director which was stated to have been recorded during the course of search under section 131 of the Act, and which forms the basis for the impugned addition, was recorded much later on 07.12.2009. Following the decision of Saumya Construction Pvt. Limited the Hon’ble Court held that it was not permissible for the Assessing Officer to make any addition under section 153A of the Act when no incriminating material had been found during the course of the search.

14. In the case of Krishna Kumar Singhania vs. DCIT reported in 88 taxmann.com 259(2017) the ITAT Calcutta Bench has been pleased observed as follows in the identical issue:-

“"It was not in dispute that there were no documents that were seized from the premises of the assessee except loose sheets vide seized document for which satisfactory explanation had been given by the assessee and no addition was made by the Assessing Officer on this seized document. The seized document used by the Assessing Officer for making the addition in section 153A assessment were seized only from the office premises of 'C group of companies in which assessee was a director. In this regard, it would be pertinent to note that as per section 292C, there is a presumption that the documents, assets, books of account etc. found at the time of search in the premises of a person is always presumed to be belonging to him/them unless proved otherwise. This goes to prove that the presumption derived is a rebuttable presumption. Then in such a scenario, the person on whom presumption is drawn, has got every right to state that the said documents does not belong to him/them. The Assessing Officer if he is satisfied with such explanation, has got recourse to proceed on such other person (i.e., the person to whom the said documents actually belong to) in terms of section 153C by recording satisfaction to that effect by way of transfer of those materials to the Assessing Officer assessing the such other person. This is the mandate provided in section 153C. In the present case,if at all, the seized documents referred to in is stated to be belonging to assessee herein, then the only legal recourse available to the department is to proceed on the assessee herein in terms of section 153C. In this regard, one would like to place reliance on the recent decision of the Delhi High Court in the case of CIT v. Pinaki Misra & Sangeeta Misra [2017] 392 ITR 347, wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. Hence, the said materials cannot be used in section 153A against the assessee. This opinion is given without going into the merits and veracity of the said seized documents implicating the assessee herein. [Para 10]

Hence now the only issue which is left to be addressed is the preliminary issue of whether the addition could be framed under section 153A in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search, the scheme of the Act provides for abatement of pending proceedings as on the date of search. It was not in dispute that the assessment for the assessment year 2009-10 was not selected for scrutiny and the time limit for issuance of notice under section 143(2) had expired and hence it false under concluded proceeding, as on the date of search. It is held that the legislature does not differentiate whether the assessments originally were framed under section 143(1) or 143(3) or 147. Hence unless there was no any incriminating material found during the course of search relatable to conclude year 2009-10, the statute does not confer any power on the Assessing Officer to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceeding was not pending on the date of search to get itself abated. [Para 10.1]

The provisions of section 132 relied upon by the revenue would be relevant only for the purpose of conducting the search action and initiating proceedings under section 153A. Once the proceedings under section 153A are initiated, which are special proceedings, the Legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, it was stated that in respect of abated assessments (i.e., pending proceedings on the date of search), fresh assessments are to be framed by the Assessing Officer under section 153A which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the Legislature had conferred powers on the Assessing Officer to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. This would be the correct understanding of the provisions of section 153A, as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A would become redundant and would lose its relevance. Hence, the arguments advanced by the revenue in this regard deserves to be dismissed, [Para 10.7]

In view of the aforesaid findings and respectfully following the judicial precedents relied upon here in above, the assessment already deemed to have been completed for the assessment year 2009-10, which was unabated/concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and, accordingly, no fresh addition could be made thereon without the existence of any incriminating materials found in the course of search from the premises of the assessee. Since the issue is addressed on preliminary ground of absence of incriminating materials, one refrains to give findings on the merits of the additions for the assessment year 2009-10. Accordingly, the preliminary ground raised by the assessee in this regard is allowed. [Para 10.8]”

15. The Ld. Tribunal thus has been pleased to observe that in the absence of any incriminating material found from the premises of the assessee during the course of search, addition made by the AO under Section 153A of the Act in unwarranted and the same deserve to be deleted.

16. After taking into consideration the entire facts we find that the addition has been made based upon the search carried out at the premises of Shirish C. Shah and documents found during such search. Thus, such documents as relied upon by the Ld. AO found from the premises of Shri Shah and not from the assessee are the dumb documents and addition on such basis in the garb of Section 153A is not sustainable in the eye of law. We further note that the loose papers or statement recorded during the course of search/survey at Shri Shah as only relied upon; no reference of any single incriminating material found during the course of search at appellant’s premises has been made by the Ld. AO while making addition under Section 153A of the Act.

On this aspect we have further considered the judgment passed by the jurisdictional High Court in the case of CIT vs. Saumya Construction Pvt. Ltd. (Supra). The relevant portion whereof is as follows:-

“15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act,it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition.

However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assessee the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Subsection (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment failing within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.

16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.

17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee.

The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K, Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question.

18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the opposed addition of Rs. 11,05,51,000/- on the basis of material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A,while computing the total income of the assessee under section 153A of the Act,additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search,however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.

19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration,no incriminating material is found. It would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment.

Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. It in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of income-tax-1 v. Jayaben Ratiiai Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however,there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.

20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference.

The appeal, therefore, fails and is, accordingly, dismissed."

It is observed that in case before Hon'ble Gujarat High court, facts of the case were as under:

"During the course of assessment proceedings, it was noticed that the assessee had paid Rs.11,05,51,000/- to one Shri Rohit Modi in respect of the land situated at Shilaj, Taluka Daskroi (known as Tapovan land) (which was transacted by The Sandesh Ltd. as confirming party, M/s Saumya Construction Pvt. Ltd- as third party and Aryaman Co-operative Housing Society Ltd. as purchaser from Shri Rohit P. Modi and Pareshaben K. Modi) through a sale deed dated 01.06.2006. Shri Rohit Modi, in his assessment, admitted receipt of Rs.11,05,51,000/- as on-money received in cash in the transaction of land. The Assessing Officer held that the on- money has been paid by the assessee in the transaction for the purchase of land from Shri Rohit P. Modi and Pareshaben K. Modi and accordingly, added an amount of Rs.11,05,51,000/- to the total income of the assessee under section 68 of the Act in respect of the unexplained investment for purchase of land.."”

17. The Ld. CIT(A) took into consideration the categorical observation made by the Hon’ble High Court at Paragraph 18 of the said order crux of which is this that if no incriminating material is found during such from assessee’s premises no addition can be made on the basis of the material collected after search. In the case in hand before us the search was conducted in the case of Shri Shah on 09th April, 2013 and in case of the appellant was on 04th September 2013. The so-called incriminating documents as relied upon by the Ld. AR was admittedly not found from the premises of the assessee but from the premises of Shirish Shah; the third party. As we found that the similar set off facts the Hon’ble High Court in the case of Saumya Construction Pvt. Ltd. (supra) has been pleased to upheld the order passed by the Ld. Tribunal in deleting addition made by the Ld. AR under Section 153A of the Act.

18. Thus, it appears that all along and all through the Ld. CIT(A) considered the relevant judgments applicable to the instant case as discussed here in above and rejected the decision made by the Ld. AO in treating the exempt long term capital gain as undisclosed income not sustainable under Section 153A of the Act and finally deleted the addition made by the AO based upon no incriminating documents found during the course of search at appellant’s premises without any ambiguity so as to warrant interference.

19. We, therefore, upon being satisfied on the maintainability point itself reject such appeal preferred by the Revenue relying upon the judgments discussed above find no merit in usurping the jurisdiction confirmed by the provision of Section 153A of the Act by the Ld. AO to reassess the year under considerations in the absence of any incriminating materials found during the search proceeding from the premises of the appellant in the unabated assessment proceeding. In the absence of any merit found in the appeal preferred by the Revenue we reject the same by upholding the order passed by the Ld. CIT(A). Since the matter has been decided on the maintainability point itself in favour of the assessee issues on merit become academic, and need not to be addressed. The Revenue’s appeal is, thus,dismissed.

20. The C.O. preferred by the assessee challenging the decision of the Ld. AO in relying upon the judgment passed by the Hon’ble Mumbai High Court in the case of Shamim M. Bharwani [2016] 69 taxmann.com 65 has no consequences at all, since the appeal preferred by the Revenue stands dismissed. The C.O. is accordingly dismissed.

21. In the combined results, both the appeal preferred by the Revenue and C.O. preferred by the assessee are dismissed.

This Order pronounced in Open Court on 08/12/2020

Sd/- Sd/-

(AMARJIT SINGH) (Ms. MADHUMITA ROY)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 08/12/2020

TANMAY, Sr.