If Incriminating material not found during search Sec 153A can not be invoked : ITAT

ORDER

Pradip Kumar Kedia, Accountant Member. – The captioned appeals directed at the instance of two different assessees arise from the respective orders of the Commissioner of Income Tax (Appeals) (‘CIT(A)’) for different assessment years as tabulated below:

2. The captioned appeals concern AYs. 2009-10 to 2015-16 in the case of captioned assessees who are stated to be having transactions with Padam Kumar Jain Group. In view of the simultaneous search conducted on both the assessees and issues being interlinked and similar, all the captioned appeals of both assessees have been heard together and are being disposed of by common order.

3. For the sake of convenience and to begin with, we shall first take up the appeal concerning M/s. Rajat Minerals Pvt. Ltd. concerning AY 2009-10 in IT(SS)A No. 41/Ran/2019 for appreciation of facts and adjudication of the common issues involved.

IT(SS)A No. 41/Ran/2019-AY-2009-10 (in case of M/s. Rajat Minerals Pvt. Ltd.)

4. Ground of appeal raised by the assessee are reproduced hereunder:

5. The assessee has also moved additional grounds raising certain legal objections which are also recorded as under:

6. The prayer for admission of additional grounds noted above which are not set forth in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional grounds are legal in nature for which relevant facts are stated to be emanating from existing records.

7. Turning to the facts, a search and seizure operation under s.132(1) of the Act was carried out in the business and residential premises of Padam Kumar Jain Group of cases at Ranchi, Chaibasa, Barbil, Chennai etc. on 03.07.2014 and subsequent dates. A search and seizure operation was also carried out at the transit/branch office/site office of the assessee and his group consisting of M/s. Rajat Minerals Pvt. Ltd., K. D. S. Contractors Pvt. Ltd., K. D. Sharma & Smt. Tripta Sharma. No search action was stated to be carried out at the registered office of assessee or any other place of business. This search was said to be a part of the main search conducted in Padam Kumar Jain group of cases and M/s. Core Minerals. As noted, simultaneous searches were also carried out on the captioned assessees namely M/s. Rajat Minerals Pvt. Ltd. and M/s. K. D. S. Constructions Pvt. Ltd. Padam Kumar Jain Group was mainly controlled/managed by Shri Padam Kumar Jain and his two sons Shri Anand Jain and Shri Rohit Jain. The group is mainly engaged in the business of iron ore or mining at Barbil, Orissa. M/s. Rajat Minerals Pvt. Ltd. is, engaged in mining/transportation and operating from Barbil, Orissa and having business association with Padam Kumar Jain. Consequent upon search, a notice under s.153A of the Act was issued on the captioned assessee and consequent thereto, the assessee filed its return of income for AY 2009-10 declaring total income of Rs. 8,05,88,600/-. The return of income filed by the assessee was subjected to detailed scrutiny after issuance of various notices. Before the AO, it was contended on behalf of the assessee at the very outset that no incriminating documents were found from the premises of assessee in the course of search action under s. 132(1) of the Act and accordingly completed assessment should not be disturbed. As per written submission filed by the assessee before the AO, the assessee was doing business of purchase and sale of iron ore and did not hold any shares in any company of Shri Padam Kumar Jain and the transactions of sale and purchase with Shri Padam Kumar Jain and his associate company was in ordinary couse of business between the entities. It was pointed out that copy of seized documents primarily contains copy of invoices so raised for FY 2008-09, 2009-10, 2010-11 & 2011-12. The business of company came almost to halt from January 2012. It was thus submitted that no incriminating document was found for 4 years i.e. AYs. 2008-09 to 2011-12. It was further asserted that no document relating to AY 2012-13 to 2015-16 was either found or seized whether incriminating or non-incriminating. It was thus contented that in the absence of any document of incriminating matter found (AYs. 2008-09 to 2011-12) and in the absence of any document found or seized at all for AYs. 2012-13 to 2015-16, the unabated and concluded assessments should not be disturbed. It was submitted that the assessee has merely traded through Padam Kumar Jain Group of companies in the course of mining business and has no other association. The AO however proceeded on the premise that discovery of any incriminating document is not a sin qua non to make assessments under s.153A of the Act. The AO observed that issue of warrant of search and search under s.132 of the Act is sufficient for initiation of proceedings under s.153A of the Act and only condition for initiation of proceedings under s.153A of the Act is occurrence of search under s.132 of the Act. It was further observed that section 153A of the Act does not provide that assessment/re-assessment should be based on ‘incriminating material’ alone and the AO is empowered to assess or re-assess the ‘total income’ of the six financial years covered under search regardless of presence of incriminating material. The AO also took extensive note of Tax Evasion Petition dated 21.11.2016 received in the course of assessment by him alleging incriminating information against the assessee. The AO proceeded to assess the income on the basis of such Tax Evasion Petition. It was noted that as per the balance sheet of the assessee company, sundry creditors / current liability to the tune of Rs. 11,37,79,828/- remains unpaid for AY 2009-10 in question. It was pointed out that the assessee has failed to discharge the onus placed upon it to prove the identity/creditworthiness/genuineness of the creditors. The AO invoked section 68 of the Act and added the same to the total income of the assessee in the absence satisfactory explanation on such credits/liabilities.

8. The AO further noted with reference to the balance sheet and depreciation chart that the assessee has shown to have invested Rs. 4,84,70,106/- in fixed assets during the AY 2009-10 in question. The nature and source of such investment was doubted by invoking section 69 of the Act. In the absence of onus remaining allegedly undischarged, the AO added Rs. 4,84,70,106/- to the total income of the assessee. The AO further disallowed expenses aggregating to Rs. 11,05,71,212/- under various heads, such as, picking expenses, scanning expenses, stacking expenses, dumper repair and maintenance, breaking & seizing expenses etc. as noted the in the assessment order. The AO accordingly assessed the taxable income of Rs. 35,34,09,745/- as against the returned income of Rs. 8,05,88,600/-.

9. Aggrieved by the aforesaid action of the AO, the assessee preferred appeal before the CIT(A). The CIT(A) passed a consolidated appellate order passed under s.250(6) of the Act for all the assessment years i.e. AYs. 2009-10 to 2015-16 in question and rejected the submissions made on behalf of the assessee. The action of the AO was affirmed by the CIT(A) and the additions made by the AO were upheld.

10. Further aggrieved, the assessee preferred appeal before the Tribunal seeking to impugn the action of the Revenue authorities.

10.1 Learned Counsel for the assessee adverted to the additional grounds filed by the assessee at the outset and submitted that certain legal objections of overriding nature to the assessment proceedings under s.153A of the Act are involved in the instant case.

10.2 Delineating on such objections, the learned counsel referred to the assessment order and pointed out that all the assessment orders providing genesis to captioned appeals are stated to be passed on a singular date i.e. 28.11.2016. This is also incidentally the date on which the compliance was also parallelly sought by the AO with reference to a detailed questionnaire dated 21.11.2016 as appearing at page no.16 of the paper book. The assessee was directed by the questionnaire to submit its reply in a span of hardly 5 days. Statedly, the assessee did submit its reply to the said questionnaire dated 21.11.2016 but however on 29.11.2016 instead of 28.11.2016 i.e. after a delay of one day. The learned counsel paused here to submit that the assessment order was purportedly passed without waiting for the compliance even till the end of the appointed day. This act of AO frustrated whatever little opportunity was provided for compliance to assessee. Agitating the issue, the learned counsel pointed out that instant appeals pertain to search matters where substantial complexities are ordinarily involved. The AO was making assessments in as many as 28 cases pertaining to assessee group for which the AO purportedly passed orders (in all 28 cases on the same very date) without waiting for the compliance from the captioned assessees so enjoined with onerous burden to respond in all cases in mere 5 days, till even the end of day. It was pointed out that not only the action of the AO without waiting even till the end of the day of the compliance in as many as 28 cases is malafide and repugnant, the whole action of the AO towards purported completion of assessments of 28 cases in one single day is humanly improbable given the nature of complexity and magnitude of additions/disallowances involved. The whole of the action of the AO smacks of blatant prejudice and is without authority of law.

10.3 Adverting further, the learned counsel pointed out that the assessment of the assessee under s.153A of the Act was subject matter of approval of the senior authority namely JCIT as provided under s.153D of the Act. The AO has claimed that he has obtained the approval of the JCIT (in all 28 such cases) on the same day i.e. 28.11.2016 for which the draft order was also admittedly placed before the JCIT on that very day. The learned counsel contented that the entire act is beset with un-natural and unholy speed on the face of it. The learned counsel further asserted that the purported act of approval of the JCIT on assessment orders placed before him on that day itself and obtained on the same day (in as many as 28 cases) relating to search is highly improbable and a near impossibility. It is not humanly possible to look into assessment records as well as draft assessment orders thereon and apply its own mind objectively by a senior designated authority involving such complex matters and grant approval as contemplated under s.153D of the Act in a spur. The approval granted by the JCIT, if any, on the same date as noted is thus illusory tantamounting to no approval; rendering the entire assessment process void and a nullity. The approval of the JCIT naturally would arise after the lapse of time compliance on 28.11.2016. Ordinarily, it is after a lapse of time of compliance, an officer would be expected to draft an assessment order and thereafter would send the same to the office of the JCIT for its review and approval together with case records. The reading of case records and approval of the draft order thereon by a senior authority would naturally take some minimum time howsoever efficient and in promptu, the whole process may be. Expecting an officer to draft as many as 28 assessment orders in a span of few hours and send it to the JCIT and, in turn, obtain approval thereon in toto is implausible, if the date of order on 28.11.2016 is to be believed as sacrosanct. It was thus contended that the date of assessment order is ‘antedated’ as the circumstances clearly suggests.

10.4 Continuing further, the learned counsel contended that approval of the JCIT on the same day within a span of few hours/minutes clearly underline total non-applicability of mind and a mechanical step by the senior authority in abdication of its statutory responsibilities, even if, the date of order i.e. 28.11.2016 is momentarily taken as sacrosanct. The learned counsel made a reference to the decision of the co-ordinate bench in Geetarani Panda v. ACIT [IT(SS)A No. 01/CTK/2017, dated 05-07-2018; Rishabh Buildwell (P.) Ltd. v. DCIT [IT Appeal No. 2122 (Delhi) of 2010, dated 4-7-2019] AAA Paper Marketing (P.) Ltd. v. ACIT [IT Appeal No. 167 (LKW) of 2016, dated 28-04-2017] and Indra Bansal v. ACIT [IT Appeal Nos. 514-516 (Jodh) of 2015] for the unequivocal proposition that the approval given by the Joint Commissioner in an utmost hasty manner and in a mechanical manner does not tantamount to approval contemplated under s.153D of the Act. The learned counsel accordingly submitted that the assessment orders passed under s.153A of the Act with reference to the captioned appeals grossly suffer from lack of statutory approval envisaged under s.153D of the Act and therefore orders of assessment are clearly bad in law and thus unsustainable in law.

10.5 To prop up its contention that the assessment order as well as approval of the JCIT thereon are antedated and without prejudice and in the alternative, the approval of the JCIT is without application of mind, the learned counsel once again adverted to the assessment order under s.153A r.w.s. 143(3) of the Act dated 28.11.2016 appealed against. The learned counsel made reference to the assertions made by the AO in para 5.4 of the assessment order which is read in verbatim as follows:

“5.4 From the P&L account, following expenses are disallowed keeping in view the information contained in the TEP and show cause in this context issued to the assessee on 21.11.2016 and the assessee’s reply thereto.”

[underline is ours]

The learned counsel pointed out that as can be seen from records placed, the assessee actually filed reply on 29.11.2016 against the questionnaire of AO dated 21.11.2016 referred hereinabove. Thus, a question would arise as to how could the reply of the assessee be considered by the AO while framing the draft assessment order on 28.11.2016. By necessary implication, the assessment order was actually drafted after 29.11.2016 and is antedated on 28.11.2016. The approval of the Joint Commissioner on such assessment order (on 28.11.2016) without consideration of reply of the assessee is therefore, on the other hand, is either mechanical (if reply not available) or antedated (if reply available). In either situation, the assessment order is not legally sustainable. On a query from the bench, the learned counsel referred to the copy of the order sheet prepared in the course of the assessment as appearing at page no.174 to 180 listing date-wise events and occurrences and pointed out that no reply could be seen to have been filed by the assessee between the date of the questionnaire i.e. 21.11.2016 and the date of order i.e. 28.11.2016. Thus, no reply was filed by the assessee in the intervening period as asserted in the Bar. The only reply to the questionnaire was on 29.11.2016 on which date, the assessment order was supposedly already passed. Thus, the observations of the AO that the reply of the assessee in response to questionnaire was considered, are not in sync with date of the assessment. The assessment order is thus clearly antedated. The approval of the JCIT is thus also antedated. To provide room for the aforesaid contention, the learned counsel further pointed out that the assessment order was served on the assessee by speed post on 14.12.2016 which clearly shows that the assessment order was dispatched some time in 2nd week of December. An inexplicable delay of about 10 days in dispatch of the assessment order so hurriedly framed within a few hours (in as many as 28 cases) with approval of JCIT also on same day again indicate that assessment orders in captioned appeals are antedated and thus such antedated assessment orders are required to be stuck down as void at the threshold.

10.6 The learned counsel for the assessee next pointed out that he does not require to independently argue Ground No.2 of the additional ground which is merely an extension of the first additional ground.

10.7 Adverting to main grounds of appeal, the learned counsel for the assessee raised yet another legal contention of invalidity of additions/disallowances in the assessment proceedings under s.153A of the Act in the absence of any ‘incriminating material’ found in the course of search under s.132 of the Act. In this regard, the learned counsel adverted to its immediate response before the AO (as recorded in the assessment order itself at page no.3 of the assessment order itself) to submit that no incriminating document was found in the course of search for four years i.e. AYs. 2008-09 to 2011-12 as claimed before AO at the very outset. Similarly, no document relating to AYs. 2012-13 to 2015-16 was either found or seized.

10.7.1 The learned counsel also adverted to the copy of the order sheet recorded by the AO (placed at page nos. 174 to 180 of paper book) and submitted that the AO has also recorded the contention of the assessee on hearing dated 15.11.2016 that no incriminating document was found during the search and hence, assessments which stood completed/time barred prior to search could not be disturbed under s.153A of the Act proceedings. The learned counsel further pointed out that the sole basis for substantial additions/disallowance is a vague and non-descript alleged Tax Evasion Petition (TEP) report received by the AO dated 21.11.2016 in the course of assessment proceedings under s.153A of the Act, which cannot be branded as incriminating material found in the course of search against the assessee in respect of unabated assessments. It was contended that without going into aspects of merits of wild and unsubstantiated allegations in TEP, the AO was not entitled to refer to TEP for the purposes additions/disallowance in respect of unabated and already concluded assessments in the assessment proceedings in terms of section 153A of the Act in contemplation.

10.7.2 The learned counsel thereafter referred to the remand report obtained by the first appellate authority from the AO in the course of appellate proceedings before him and submitted that certain seized documents referred to in the remand report has no relevance with the additions made as well as the reference made in the seized documents are coded, unintelligible, vague and non-descript. Delving deeper, the learned counsel referred to the copy of ‘panchnama’ (page no.181 of the paper book) as well as the ‘list of inventory’ of documents seized along with pages on which identification marks were placed (page no.186 of the paper book). The learned counsel submitted that the identification marks noted in these documents are in the style of KDS-1 to KDS-6. The remand report, on the other hand, mainly talks of TEP received by the AO in the course of assessment proceedings on 21.11.2016 wherein incriminating nature of information has been allegedly received by the AO. Neither the assessment order nor the remand report makes any reference to documents found as per the ‘list of inventory’. It was submitted that in the course of search, business documents executed in ordinary course will be naturally found but that would not mean that such documents are ‘incriminating’ in nature per se. In the above factual scenario, the learned counsel submitted that AYs. 2009-10, 2010-11, 2011-12 & 2012-13 (for both the appellants) stood completed/time barred at the time of initiation of search on 03.07.2014 and thus could not be disturbed by making further additions/disallowances de hors reference to any incriminating material found or seized in the course of search.

10.7.3 Building up the contention on legal principles, the learned counsel submitted that assessment of income under s.143(3) r.w.s. 153A of the Act must have nexus to the incriminating material, if any, found in the course of search in respect of unabated assessment as continuously held by various High Courts and approved by the Hon’ble Supreme Court (by way of dismissal of SLP). To buttress the legal position that presence of incriminating material discovered in the course of search as a sine qua non for additions/disallowances in respect of unabated assessment, the learned counsel for the assessee relied upon the decision rendered in the case of CIT v. Kabul Chawla [2015] 380 ITR 573 (Delhi) Pr.CIT v. Meeta Gutgutia [2018] 96  (SC). In the backdrop of facts noted above, the learned counsel submitted that in the absence of any incriminating material found in the course of search, the action of the AO to make additions arising from balance sheet and P&L account of the assessee annexed to a TEP is a complete non-starter. The learned counsel submitted that the issue is no longer res integra and there are plethora of judicial precedents to canvass the legal point that where no incriminating material was found during the course of search in respect of assessment for relevant AY which already stood completed/time barred on the date of search (and it did not abate in terms of 2nd proviso to section 153A of the Act), no addition can be made on the basis of re-appreciation of regular account of the assessee. It was thus asserted that the legal position is crystal clear. In the same vein, it was submitted that documents found or acquired post search in the course of assessment cannot be used against the assessee while framing assessment of unabated assessment orders under s.153A of the Act. On facts, the learned counsel submitted that the return was earlier filed prior to search and the assessment proceedings in pursuant thereof is deemed to have been concluded on expiry of time limit as provided for initiation of assessment proceedings. The time limit for issuance of notice under s.143(2) of the Act stood expired at the time of search and in the absence of any pending assessment at the time of search, the assessment for AYs. 2009-10 to 2012-13 (in respect of both the assessee herein) pursuant to the original return has achieved finality. The learned counsel accordingly submitted that in the absence of any reference to any incriminating material discovered in the course of search in the assessment order, action of the AO/CIT(A) in making adjustments of routine nature in the course of search assessment under s.153A of the Act is impermissible and without sanction of law in view of several decisions of Hon’ble High Court of different jurisdiction including Kabul Chawla (supra); &Meeta Gutgutia (supra).

10.7.4 The learned counsel pointed out that the AO has inter alia invoked section 68 of the Act for certain additions. section 68 of the Act necessarily enjoins presence of entries in the books of accounts. Such additions in the spheres of section 68 of the Act is not permissible in the absence of evidence in contradicting bonafides of credits as found in the course of search. The learned counsel contented that the action of the Revenue in making additions under s.68 of the Act (on account of sundry creditors/bogus liability) on the basis of regular books of account, disallowance of various expenditures, additions towards investment in fixed assets shown in the balance sheet under s.69 of the Act (in the alleged absence of satisfactory explanation towards nature and source investment) is totally uncalled for as per the schematic interpretation of scheme of assessment under s.153A of the Act. The learned counsel for assessee thus professed that the aforesaid additions/adjustments to the return of income is a subject matter of regular assessment under normal provisions and such action under specified provisions in the course of search assessment is bad in law and thus requires to be set aside and quashed.

11. The learned CIT.DR, on the other hand, heavily relied upon the orders of the AO and CIT(A) as well as written submission dated 25.10.2019 placed on behalf of the AO in this regard. Another submission dated 05.11.2019 was also relied upon. The learned CIT.DR mainly convassed that in search cases, the assessment are continuously monitored by the superior authorities and thus, impliedly, it is to be assumed that JCIT was kept abreast of all the facts emerging in the course of the assessment on an ongoing basis. The AO also frames and continually updates the draft assessment order on the basis of ongoing happenings subject to the suitable modifications on the basis of replies and evidences coming on record. Therefore, it will be misconceived to say that the AO was not capable of preparing the draft orders of 28 numbers in a short span after the lapse in compliance of time and date of hearing. In the circumstances, it was contended that there is no strength in the plea of the assessee on the grounds of implausibility of AO and JCIT and the order/approval being allegedly antedated. It was further pointed out that it is not uncommon in the department to post the order after a gap of 10 to 15 days having regard to the low key infrastructure and limited capacity. It was submitted that no adverse inference should be drawn against the Revenue for such purported delinquency, if any.

12. The learned CIT-DR next referred to the scheme of the assessment under s.153A of the Act and submitted that once a search has been initiated under s.132 of the Act, what is required to be assessed is total income of the assessee. It was further contended that present scheme under s.153A of the Act is in departure with the old scheme of block assessment where the additions/adjustments could be made only on the basis of incriminating documents found in the course of search. No such legal requirement of presence of incriminating document per se could be read in the present scheme of search assessment in operation. The learned CIT-DR referred to the judicial precedents in the case of Canara Housing Development Co. v. Dy. CIT (Kar); Filatex India Ltd. v. CIT [2014]  CIT v. Raj kumar Arora [2014]  367 ITR 517 (All.) & CIT v. Kesarvani Zarda Bhandar, Lucknow [IT Appeal No. 270 of 2014, dated 06-09-2016 to buttress the aforesaid contention on behalf of the Revenue. The learned CIT.DR accordingly contented that no merit in the claim of the assessee could be drawn that additions/disallowance in unabated assessments are unsustainable in the absence of incriminating material. It was thus submitted that the preliminary legal grounds raised on behalf of the assessee are totally devoid of any legitimacy.

13. We have carefully considered the rival submissions and legal grounds raised. Before we deal with additions on merits, it will be desirable to adjudicate wide ranging legal objections of overwhelming nature raised on behalf of the assessee which goes to the root of the matter. Broad contours of the appeal of the assessee hinges around following pertaining legal issues emanating in the case: (i) Whether the AO was justified in passing the assessment order hurriedly without waiting for expiry of at least the date on which a compliance to the questionnaire issued was sought; (ii) whether the preparation of draft assessment orders of as many as 28 cases was plausible in a span of few hours given the complexity involved in search matters and whether the approval of 28 draft orders by the Joint Commissioner is also plausible in a span of few hours on the same day; (iii) whether such purported approval of the Joint Commissioner is to be regarded as mechanical and perfunctory and without application of mind having regard to the functions entrusted under s.153D of the Act; (iv) whether the assessment order and approval thereon by the JCIT is to be regarded as antedated as alleged in view of the circumstances shown to be existing on behalf of the assessee; & (v) whether while making assessment under s.153A of the Act, the Revenue is entitled to interfere with already concluded (and not abated) assessment passed either under s.143(1) or under s.143(3) of the Act and not pending at the time of search in the absence of any incriminating documents unearthed as a result of search or not ?

14. First four legal objections raises concerns over propriety of the assessment orders itself on the grounds of alleged predating of assessment orders in tandem with token and perfunctory approval of the draft assessment orders by superior authority without fulfillment of pre-requisites of section 153D of the Act. The first and foremost objection of the assessee throughout is that assessment orders were not really made on 28.11.2016 when it was ostensibly made but it was made on a later date. The respective assessment orders were thus challenged as void on the ground of such orders being antedated. It is the case of the assessee that a questionnaire raising substantial points was issued to the assessee in the course of assessment proceedings under s.153A of the Act on 21.11.2016 which required the assessee to make compliance thereof at a very short notice on 28.11.2016 at 11:30 a.m. On this date and time, the assessee was directed to furnish replies on various points. Admittedly, the assessee could not turn up on this date appointed for compliance. A reply to questionnaire was however filed on next day i.e. 29.11.2016. The AO however claimed to have passed the assessment order under s.153A of the Act in the meanwhile i.e. on 28.11.2016 itself (appointed date of hearing) after taking necessary approval of Joint Commissioner under s.153D of the Act (involving 28 cases including 14 captioned appeals). In this context, it is the case of the assessee that firstly; the AO ought to have waited at least till the closure of the date of compliance i.e. 28.11.2016 and he could have passed only after that date; secondly, it is difficult to fathom that the AO would be able to prepare 28 draft orders in a span of 2-3 hours involving complex issues in search matters; and thirdly, it is yet more difficult to fathom that the superior authority could plausibly go through the assessment records and the draft assessment orders and grant an informed approval with objective application of mind to such draft orders in search matters (involving contentious and complex legal and factual issues) on the same day in a further squeezed time available to the JCIT. In short, it is the case of the assessee that the time available at the disposal of the AO is hardly 5-6 hours of the day after the lapse of the appointed time on the date of hearing. In this very short period, apart from all other routine work carried out, the AO has purportedly drafted 28 assessment orders and forwarded the same to the JCIT (superior authority) together with case records and the JCIT, in turn, has perused such voluminous case records and granted approval contemplated under s.153D of the Act to enable the AO to pass a formal final assessment order.

14.1 At the first look itself, we find considerable weight in the aforesaid plea of the assessee towards implausibility of such overzealous actions in a span of few hours. The unrealistic swiftness in the action of the AO in preparing 28 cases of such large stake and magnitude (without waiting for any time for compliance of a very short notice) and approval thereon by the superior authority in a spur of moment is totally beyond any comprehension and does not accord with normal conduct of a responsible statutory functionary. The presence of any countervailing circumstances for passing orders without providing minimum opportunity to assessee to meet the allegations is not shown by the Revenue. It is a classic example of AO acting in subterfuge and cavalier manner while conducting the whole affairs.

14.2 Pertinent here to say, the proceedings before AO are quasi-judicial proceedings and all the incidents of such proceedings was expected to be observed without laxity before the result of the proceedings were determined. The Revenue Officers must realize that statutory duties conferred on them are in the nature of a trust. They hold office as trustees of the public at large while dealing with public revenue and public money. We are unable to visualize as to how such long and complex assessment orders could be prepared and finalized for the approval of superior authority in few hours even if some ongoing draft works were assumed to be available in this regard. A natural question would arise as to what was the hurry for doing so? When seen in conjunction, it is yet more difficult to perceive that any superior authority, expected to keep a strict vigil on the actions of AO under s.153D of the Act, can possibly grant approval to such longish and high staked matters of as many as 28 cases in virtually no available time and remit the same to the AO on the same day for passing final order. Such inordinate and extravagant speed smacks of pretense and provokes us to think of colossal abnormality in conduct of the authorities concerned.

14.3 Needless to say, provision of section 153D of the Act casts onerous responsibility on the superior authority to look into the draft assessment framed by the subordinate officer with some degree of objectivity. Apparently, the whole exercise of the AO in claiming to have prepared assessment orders in as many as 28 cases within a short time available (after 11:30 a.m.) and approval thereon by the JCIT and closure of the assessment on the same day is not judicially palatable. As also observed earlier, the AO has prepared the draft assessment order without even waiting for completion of that date of hearing is gross sub-version of the quasi-judicial process and such ipse-dixit conduct deserves to be deprecated. The superior authority performing the solemn duty to supervise the action of the AO claimed to have approved such large staked search matter in a spur of moment does not inspire any confidence in such hawkish supervisory process. When sequence of events are integrated and collated, the plea of the assessee that the whole exercise of the aforesaid revenue authorities are antedated cannot be refuted to be without any substance. The stand of the assessee that the assessment order in all probability is antedated to avoid consideration of reply of the assessee filed on 29.11.2016 also clinches for two more reasons; (i) the assessment order itself assertively refers to the reply of the assessee in response to the questionnaire dated 21.11.2016 as per para 5.4 of the assessment order. The order sheet, as a matter of record, clearly shows that no reply was filed till the date of passing of the order to such questionnaire i.e. till 28.11.2016. The reply to questionnaire was filed on 29.11.2016. If the reply has been considered as asserted by the AO then a natural presumption would arise that assessment was kept open till at least 29.11.2016 and therefore the assessment order dated 28.11.2016 is clearly antedated; & (ii) the assessment order has been sent by speed post on 14.12.2016 which clearly shows that the assessment orders which were passed with lightning speed but was languishing thereafter and dispatched after about two weeks from the date of passing the order.

14.4 The allegation of assessee is thus based on number of facts established by evidence and circumstances. Hence, whether the allegation made is sound or not must be determined by attaching weight to all facts cumulatively and by applying the test of preponderance of probabilities. The assessee is not expected to prove its case of antedating the order with mathematical precision where it is otherwise evident to a demonstrable degree. All that is required in such cases is the establishment of such a degree of probability that a reasonable person may, on its basis, believe in the existence of facts in issue. The conduct of Assessing Officer cannot be countenanced, howsoever soft stance we may incline to take. The conduct, when seen in totality, is unprecedented and casts infallible impression that the assessment orders giving rise to the captioned appeals are antedated indeed and thus a nullity in the eyes of law. All the assessment orders are required to be cancelled at the threshold in such sordid circumstances.

14.5 It would however be also pertinent to delineate whether the so-called approval of JCIT under s.153D of the Act meets legal requirement or not. As repeatedly observed above, the JCIT purportedly carried out the exercise of granting approval in a baffling haste. The order sheets recorded by the AO shows that what was sent to the JCIT were only draft assessment orders seeking approval thereon. No reference to the assessment records also being sent together with the draft assessment orders is found in the order sheet. Communication/approval letter from JCIT is not placed before us by either side to examine this aspect. Considering these facts, the JCIT has presumably given approval while remaining oblivious of the assessment records. Notwithstanding aforesaid, the JCIT was expected to enquire into reply of the assessee in response to the questionnaire dated 21.11.2016 which was crucial and of utmost significance in the context of the allegations made by AO. JCIT however has summarily endorsed the action of the AO presuming no substance in replies allegedly filed without looking at it nor he could have seen such non-existent reply on 28.11.2016. Apparently, the approval granted by the JCIT, if any, suffers from inherent lack of application of mind on the draft assessment order and consideration of relevant assessment records. The purported approval so granted by the JCIT has been clearly reduced to an empty ritual rendering such approval to be invalid in the eyes of law. We also cannot loose sight of the fact that no minimal enquiry into the issues of substantial nature arising from the draft assessment orders have been made by the JCIT defeating the salutary purpose of section 153D of the Act.

14.6 On appraisal of the facts and circumstances of the case and peculiarities of the instant case and having regard to the long line of judicial precedents in similar circumstances including Pr.CIT v. Shreelekha Damani [IT Appeal No. 668 of 2018, dated 27-11-2018] Geetarani Panda (supra), Rishabh Buildwell (P.) Ltd. (supra), AAA Paper Marketing Ltd. (supra) and Indra Bansal (supra), we find no hesitation to hold that the action of the JCIT under s.153D of the Act is to be regarded as perfunctory and mechanical in subversion of the spirit of section 153D of the Act. Such symbolic approval is unfounded in law. As a corollary, in the absence of any valid approval under s.153D of the Act, the respective assessment orders giving cause of action in the form of captioned appeals requires to be quashed on this score also.

15. We shall now venture to delineate on yet another legal objection of assessee towards proposition (v) carved out in para 13 above. As per the aforesaid proposition, the controversy that arises for adjudication is on the scope and ambit of assessment proceedings in search cases under s.153A of the Act. section 153A of the Act provides for the procedure for completion of assessment where a search is initiated under s.132 of the Act or books of accounts or other documents or any assets are requisitioned under s.132A of the Act. The case propounded on behalf of the assessee is that additions/disallowances made in section 153A of the Act proceedings has no rational connection with incriminating material, if any, discovered as a result of search and in the absence of any speaking material against the assessee found as a result of search, the AO is estopped from exercising unfettered powers in the matter of unabated and already concluded assessments. It is further case of the assessee that the assessment order also does not make any reference to any incriminating material found as a result of search while making additions/disallowances. The additions/disallowances were made by taking cognizance of some TEP received in the course of the assessment proceedings under s.153A of the Act which mainly refers to the financial statement of the assessee. Noticeably, one of the major additions have been made under s.68 of the Act which is not permissible unless the entries are found to be credited in the books maintained by the assessee. Once the entries are found to be entered in the books of assessee, the addition under s.68 of the Act could not be made in unabated assessments in the absence of any contradictions emerging from incriminating documents unearthed in the course of search. No such reference has been made in the assessment order. The additions under s.68 of the Act has been made on the basis of credits appearing in financial statement annexed to TEP only which petition was received at a much later stage in the course of assessment post search. It was pointed out that a reference was, however, made to certain documents in the ‘remand proceedings’ before the CIT(A) at belated stage. The AO is not entitled to make radical changes in basis of assessment in the remand proceedings at belated stage. Without prejudice, a reference was made to the incriminating documents ‘CMB-24’ in the remand report is admittedly seized from the possession of other searched person namely ‘Core Minerals’ at Barbil. Seized documents marked as ‘AK-01’ was admittedly seized from ‘Padam Kumar Jain’. Document marked (CMB-1) was seized from ‘Core Minerals’. Documents bearing identification mark ‘UKD-1’ was also seized from third party which is unknown and no reference to such documents are found in the ‘list of inventories’ prepared at the time of search. No reference of such documents is also found in the statement recorded under s.132(4) of the Act. It was contended that alleged incriminating nature of information against the assessee as contented in TEP dated 21.11.2016 was obtained post search at a very belated stage after time limit for assessment in relation to AYs. 2009-10, 2010-11, 2011-12 & 2012-13 stood expired and thus remained unabated and achieved finality. It was however fairly conceded that assessments for AYs. 2013-14; 2014-15 & 2015-16 were pending assessment at the time of search and therefore normal assessments under s.153A r.w.s. 143(3) of the Act would be possible in accordance with law subject however to the findings on plea towards all assessment orders being antedated are bad in law and non-est.

15.1 It is further case of the assessee that reference made to the alleged seized documents in the course of the remand has no relevance with that of additions made and such reference by the AO are very unintelligible and vague nevertheless. The documents seized from third party were stated to be without any co-relation with the addition and were never confronted to the assessee. It was further pointed out that assessment on the basis of documents seized from third parties is dictated by different provision i.e. section 153C of the Act.

15.2 On perusal of the case records, we find merit in the legal proposition canvassed on behalf of the assessee. It is not in dispute that the assessment pertaining to assessment years in question viz. AYs. 2009-10, 2010-11, 2011-12 & 2012-13 stood concluded either under s.143(1) or under s.143(3) of the Act and not eventually pending at the time of search. Thus, assessment for these 4 years will not get abated in consequence of search. In the backdrop of these pertinent facts, we straightway notice that the scope of assessment under s.153A of the Act in respect of concluded and unabated assessments is circumscribed by the condition that additions/ disallowances must have some rational connection with the incriminating material against the assessee detected in the course of search.

15.3 The scope of assessment under s.153A of the Act in respect of concluded and unabated assessment is thus narrower in its sweep as held in long line of judicial precedents of different jurisdictions.

15.3.1 We shall first refer to the decision of Hon’ble Delhi High court in the case of Meeta Gutgutia (supra) The Hon’ble Delhi High Court referred to the judgment in the case of Kabul Chawla (supra) Pr.CIT v. Saumya Construction (P.) Ltd. [2017] 81 [2016] 387 ITR 529 (Guj); Dr. CIT v. Devangi alias Rupa [2017] 610/394 ITR 184 (Guj.); CIT v. IBC Knowledge Park (P.) Ltd. [2016] 385 ITR 346 (Kar.); Pr. CIT-2 v. Salasar Stock Broking Ltd. [ITAT No. 264 of 2016, dated 24-8-2016] and CIT v. Gurinder Singh Bawa [2017]  386 ITR 483 (Bom.), Reference was also made to another two decisions of Hon’ble Delhi Court in Pr. CIT v. Mahesh Kumar Gupta [IT Appeal No. 810 of 2016, dated 22-11-2016] and the in the Pr, CIT v. Ram Avtar Verma [2017] 395 ITR 252 (Delhi)where the decision in Kabul Chawla (supra) was followed. The Hon’ble Delhi High Court made an exhaustive reference to the decisions noted above and held that invocation of section 153A of the Act to reopen concluded assessments of earlier assessment years was not permissible in the absence of incriminating material found during search qua each such earlier assessment years. While holding so, the Hon’ble Delhi High Court also distinguished the co-ordinate bench decision of the same Court in the case of Smt. Dayawanti Gupta v. CIT [2016] 390 ITR 496 (Delhi).It was noted that in Dayawanti Gupta (supra), a chart prepared indicated that there had been a year-wise non-recording of transactions. The inferences drawn in respect of undisclosed income were premised on the material found and statement recorded thereon. As stated, there is no such statement in the present case which could be said to constitute admission by assessee on failure to record any transaction in accounts of the assessee for assessment years in question. Eventually, the Hon’ble Delhi High court in Meeta Gutgutia (supra)held that additions based on appreciation of facts de hors incriminating material are not sustainable in law. The SLP of the Revenue against the aforesaid decision of the Hon’ble Delhi High court was dismissed by the Hon’ble Supreme Court in Meeta Gutgutia (supra) Contextually, we also observe that the Hon’ble Supreme Court has stayed the operation of judgment of Hon’ble Delhi High Court in Smt. Dayawanti Gupta (supra) vide order dated 3rd October, 2017 in SLP Petition No.20559/2017.

15.3.2 Similar view that no additions could be made on the basis of material collected after search and in the absence of any incriminating evidence found or seized during search has been endorsed by the Hon’ble Gujarat High Court in Pr.CIT v. Sunrise Finlease (P.) Ltd. [2018] (Guj.).

15.3.3 The Hon’ble Gujarat High Court in Saumya Constructions (P.) Ltd. (supra)also declined to agree with the plea on behalf of the Revenue that the new procedure provided under s.153A of the Act is different from earlier procedure provided under s.158BC r.w.s. 158BB of the Act and consequently, the plea of the Revenue that there is no condition in section 153A of the Act that additions should be made strictly on the basis of evidence found during the course of search was not approved. The Hon’ble Gujarat High Court analyzed the position of law and took note of several judicial precedents and concluded that completed assessments can be interfered with by the AO while making the assessment under s.153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents etc. The Hon’ble Gujarat High Court noted that the trigger point for exercise of powers under s.153A of the Act is a search under s.132 of the Act or a requisition under s.132A of the Act. Once a search or requisition is made, the mandate is cast upon the AO to issue notice under s.153A of the Act and complete the assessment of 6 assessment years. The Hon’ble Gujarat High Court took note of the fact that object of scheme legislated for assessment in search cases is to bring to tax the undisclosed income which is found during the course of or pursuant to search or requisition and therefore additions/disallowances must be linked with search/requisition. It was noted by the Hon’ble Court that additions made on the basis of some materials collected by the AO much subsequent to the search is not permissible.

15.3.4 Similar view has been expressed in catena of decisions viz; Pr.CIT v. Deepak Jashvantala Panchal [2017] 397 ITR 153 (Guj); Chetnaben J. shah v. ITO [2017]  CIT v. Continental Warehousing Corpn. (Nhava Sheva Ltd. [2015]  374 ITR 645 (Bom.); Pr.CIT v. Desai Construction (P.) Ltd. [2016] 387 ITR 552 (Guj.); Gurinder Singh Baba (supra); & CIT v. Deepak Kumar Agarwal [2017] 398 ITR 586 (Bom.).

15.3.5 The Hon’ble Delhi High Court in Pr.CIT v. Subhash Khattar [IT Appeal No. 60 of 2017, dated 25-07-2017] also held against the Revenue in similar circumstances where search did not result in discovery of any incriminating material qua assessee. It was observed by the Hon’ble Delhi High Court that entire case against the assessee was based on what was found during the search of the premises of other parties and thus, it is apparent on the face of it that notice to assessee under s.153A of the Act was misconceived since the so-called incriminating material was not found during the search of assessee’s premises.

15.3.6 On the conspectus of aforesaid judgments of different courts, the position of law is loud and clear that additions/disallowances under s.153A of the Act towards unabated assessments are permissible only where incriminating materials are found in search showing unaccounted income.

15.4 However, at this juncture, we simultaneously take note of various decisions referred to and relied upon on behalf of the Revenue for the proposition that presence of incriminating material discovered during the course of search is not a condition precedent for making additions/disallowances under s.153A of the Act. We do not consider it necessary to re-visit the judgments cited. The objections raised on behalf of the Revenue has been dealt with in the judicial precedents quoted in favour of the assessee. The decision cited in the case of Canara Housing Development Co. (supra) as well as Filatex India Ltd. (supra) has been taken note of by the Hon’ble Gujarat High Court in Saumya Constructions (P.) Ltd. (supra) while adjudicating the issue in favour of the assessee. Filatex India Ltd. (supra) was also considered in Meeta Gutgutia (supra). The decision rendered by the Hon’ble Allahabad High Court in Raj kumar Arora (supra) is rendered without taking note of the judicial view expressed by other High Courts prevailing at the relevant time. The decision rendered in Kesarvani Zarda Bhandar, (supra) is only reiteration of the decision of Hon’ble Allahabad High Court in case of Raj kumar Arora (supra).

15.5 In summation, in the light of the aforesaid overwhelming legal precedents as laid down by the Hon’ble Bombay High Court, Delhi High Court & Gujarat High Court as also various benches of Tribunal, the correct legal position in respect of the assessments under s.153A of the Act may be summarized as follows: (i) the scope of assessment under s.153A of the Act is limited to the incriminating evidence found during the search and no further in so far as unabated assessments are concerned; & (ii) unless there is incriminating material qua each assessment years to which additions are sought to be made in respect of concluded assessments, the assessment under s.153A of the Act by making additions/disallowances would be vitiated in law.

15.6 As discussed in length, the issue has been dynamic and a matter of legal interpretation. We are governed by the schematic interpretation given to provisions of section 153A of the Act by different Hon’ble Courts. In the light of judicial fiat reading down the scope and spectrum of assessment under s.153A of the Act in narrower compass, the position of law is explicitly clear. In the absence of any connection with the incriminating material unearthed in search proceedings of assessee, additions / disallowances in respect of concluded assessment i.e. AYs. 2009-10 to 2012-13 in instant appeals, are not permissible in law. The additions were made by the AO solely on the basis of some TEP received in November 2016 as against search conducted in July 2014. The assessment for AY 2009-10 to 2012-13 were stood concluded on the date of search. Thus, such alleged incriminating information, if any, unconnected to the search would not render the additions under s.153A of the Act as valid in so far as concluded assessments are concerned. The burden of proof towards existence of undisclosed income discovered as a result of search is on the Revenue. No evidence is stated to have been found at search of assessee to suggest existence of undisclosed income as perceived by the AO. The Revenue has failed to rebut the factual assertions made on behalf of the assessee towards non-discovery of incriminating material at the time of drastic action of search on assessee and reference thereto in assessment order. Vague reference made to various seized material in the course of remand proceedings are also found to be unconnected to the search on the assessee. There is nothing on record that information contained in seized documents as per list of inventory were not recorded or reflected in the books of accounts found during search. The seized documents referred to in the remand proceedings at a later stage post search are admittedly found to be from the possession of third parties parallely searched. Be it as it may, in the absence of any reference to such seized documents in the assessment order and in view of the overwhelming reference to unsubstantiated tax evasion petition obtained in November 2016 post search, the action of the AO towards making additions in respect of concluded assessments towards undisclosed income is contrary to the judicial dicta. Accordingly, we are of the view that various additions/disallowances made by the AO are clearly beyond the scope of authority vested under s.153A of the Act owing to absence of any incriminating material or evidence deduced as a result of search in so far as completed assessments are concerned. As noted, no reference of such incriminating material, if any, is found in any of the assessment orders for the purposes of making various additions/disallowances. Additions/disallowances made in assessments framed under s.153A of the Act in respect of captioned assessees pertaining to AYs. 2009-10 to 2012-13 are thus required to be quashed on this score too. The assessments/re-assessments pending on the date of search i.e. AY 2013-14 to 2015-16 which stood abated by operation of law will however be governed by normal assessment powers under s.153A of the Act.

16. We shall now advert to the correctness of various additions made in AYs. 2013-14 to 2015-16 on merits.

16.1 Notwithstanding the view expressed in para 14 (supra) that the assessment order is predated and therefore no maintainable coupled with the observations that the assessment orders are not maintainable also on the ground that the approval of the JCIT is mechanical and perfunctory and further observations in para 15 (supra) that the additions/disallowances made in each unabated assessments for AY 2009-10 to 2012-13 are also not maintainable otherwise due to failure of the Revenue to discharge its burden towards presence of incriminating material as result of search on assessee, we are however also inclined to deal with the additions on merits for the sake of completeness. This is so having regard to stakes involved where there is reasonable possibility of present order of ITAT being placed before Hon’ble High Court for its judicial review. We however make it abundantly clear that all the assessment orders in the captioned appeals are liable to be quashed for diverse and independent reasons cited above.

16.2 One of the issues on merits relates to application of section 2(22)(e) of the Act in respect of receipt of loans and advances by the assessee from K. D. S. Contractors (P.) Ltd. in which both the Directors of the assessee company viz; Tripta Sharma & K. D. Sharma holds substantial interest in both the companies. The AO has held the amount of loans / advances received from K. D. S. Contractors P. Ltd. by assessee (Rajat Minerals) as deemed income of the assessee by applying section 2(22)(e) of the Act. The assessee claimed that the amounts were received pursuant to commercial transaction and thus could not be assessed as deemed dividend under s.2(22)(e) of the Act. It was further argued on behalf of the assessee (Rajat Minerals) that the assessee being a registered shareholders of lender company, the provisions of section 2(22)(e) of the Act has no application in view of the decision of the Hon’ble Delhi High Court in the case of CIT v. Ankitech (P.) Ltd. [2012] 340 ITR 14 (Delhi). The legal proposition in Ankitech (P.) Ltd. (supra) has been confirmed by the Hon’ble Supreme Court in the case of CIT v. Madhur Housing and Development Company in [Civil Appeal No. 3961 of 2013, dated 05-10-2017.

16.3 It was also pleaded in the alternative and without prejudice to other submissions in this regard that once a loan paid by the lender company has been treated as deemed dividend in the manner set out in section 2(22)(e) of the Act, it is to be treated as a payment out of accumulated profits of the company. Thus, as a logical conclusion, the disallowances made in the earlier years is required to be adjusted against the lender companies accumulated profits to the extent it has been treated as deemed dividend while including accumulated profits of the company.

16.4 We find merit in defence raised by the assessee of legal nature i.e. recipient assessee not being a registered shareholder cannot be taxed under the deeming fiction of section 2(22)(e) of the Act. Having regard to the decision of Hon’ble Gujarat High Court in the case of CIT v. Daisy Packers (P.) Ltd. [2013] ; Ankitech (P.) Ltd. (supra) and Madhur Housing and Development (supra) the additions under the deeming fiction of section 2(22)(e) of the Act requires to be deleted on this first parameter itself i.e. the assessee not being shareholders of the lender company cannot be taxed under s. 2(22)(e) of the Act.

16.5 We also observe here that there is a considerable force in the alternative argument raised on behalf of the assessee that while considering accumulated profits of the company for the purposes of additions under s.2(22)(e) of the Act for the assessment years in question, the payment made by the lender company which stood disallowed in the earlier years is required to be adjusted and consequently, accumulated profits of the lender company would stand reduced to the extent of disallowances carried out by the AO in the earlier assessment years. When a loan by a company to a shareholder in the manner set out in section 2(22)(e) is treated as a deemed dividend, it is to be treated as payment out of accumulated profits of the company. Any legal fiction will have to be carried to its logical conclusion. If the payment under section 2(22)(e) is treated as a deemed dividend and is required to be so treated to the extent the company possesses accumulated profits, the logical conclusion is that this payment must be considered as adjusted against the company’s accumulated profits to the extent it is treated as deemed dividend while calculating accumulated profits of the company. Whenever accumulated profits of the company are required to be determined, such an adjustment will have to be made. This view was expressed by the Hon’ble Supreme Court in the case of CIT v. G. Narasimhan [1999]  (SC). Hence, the addition under s. 2(22)(e) of the Act for a given assessment year is required to be made having regard to the adjusted accumulated profits available with the lender company. The issue is decided on first principles and we do not intend to expand the scope of deliberation on this alternative arguments in view of our observations in para 16.4 above.

16.6 Other additions/disallowances on merits are factual in nature where only TEP has been relied upon. The defense of the assessee on factual aspects requires to be considered. We find that the singular opportunity of 5-6 days given to the assessee for compliance was grossly inadequate and the additions/disallowances made in view of such inadequacy is bad in law. The reference may be made to the decision of Sona Builders v. UOI [2001] 251 ITR 197 (SC) in this regard. Thus, all additions/disallowances other than addition under s. 2(22)(e) of the Act are liable to be set aside and remitted back to the file of the AO when examined on the touch stone of factual matrix. Hence, the additions when tested on merits will be governed by these observations. We however once again reiterate that our observations on merits will not come into play as the assessment orders itself are found to be devoid of legitimacy and bad in law as discussed in great length the earlier paragraphs.

17. In the result, the appeal of the assessee in IT(SS)A No. 41/Ran/2019 is allowed.

18. As pointed out in chorus by both sides, the issues involved in all other captioned appeals are identical. In parity, the observations and findings made in IT(SS)A No. 41/Ran/2019 (supra) shall apply mutatis mutandis to common issues in all cases. Consequently, all other captioned appeals are also allowed in the same pattern.

19. In the combined result, all the appeals filed by both the assessees are allowed.