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Judgment
PER S.RIFAURRAHMAN,AM:
These appeals are filed by the assesseeagainst the order passed by the ld. Commissioner of Income-tax (Appeals)-3, Gurgaon [for short ‘ld. CIT (A)] dated 17.09.2026 and dated 21.11.2025 for the Assessment Years 2011-12, 2013-14 to 2020-21.
Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order.
At the time of hearing, ld. AR of the assessee with the permission of the Bench brought to our notice relevant facts on record and his submissions. He submitted that the present appeals have been filed by the assessee against the order passed by CIT(A) arising from the order passed by AO under section 153A of the Act. The order passed for all 9 assessment years (AY 2011-12, AY 2013-14 to AY 2020-21) are unsustainable on the following grounds-
Firstly, the assessment order passed for AY 2011-12 is without jurisdiction, as the said assessment year falls beyond the permissible block of assessment prescribed under section 153A of the Act. The search was conducted on 15.01.2021 and, consequently, the outer limit of ten assessment years counted from the search assessment yearextends only up to AY 2012-13. Accordingly, AY 2011-12 falls outside the block period envisaged under section 153A and, therefore, the impugned assessment is liable to be quashed.
Secondly, the assessment orders for AYs 2013-14 and 2014-15 are also without jurisdiction, as the conditions prescribed under the fourth proviso to section 153A are not satisfied. The alleged escaped income pertains to unsecured loans and foreign travel expenses, which are not "assets" within the meaning of Explanation 2 to the fourth proviso to section 153A and, therefore, these assessment years cannot be brought within the extended block of assessment beyond six years.
Thirdly, the assessment orders for AY 2013-14 to AY 2019-20 are unabated/completed assessment year and no addition can be made in the absence of any incriminating material, as is evident from the assessment order itself where no addition has been made on account of incriminating material.
The assessment order passed on 30.05.2022 is barred by limitation as the same was passed after the expiry of the time limit prescribed u/s 153B of the Act, which expired on 31.03.2022.
He submitted that a search action was conducted on the assessee on 15.01.2021. During the course of search, no incriminating material has been found. He submitted that consequent to the search, the AO has issued notice u/s 153A of the Income-tax Act, 1961 (for short ‘the Act’) on 14.10.2021. In compliance thereof, the assessee filed the returns of income and furnished detailed replies along with supporting documents from time to time in response to the various notices and questionnaires issued by the learned AO.
He further submitted that the AO, however, without appreciating the explanations and evidences furnished by the assessee, completed the assessments under section 153A read with section 143(3) of the Act by making the following additions:
| S. No. | Issues | AY 2011-12 | AY 2013-14 | AY 2014-15 | AY 2015-16 | AY 2016-17 | AY 2017-18 | AY 2018-19 | AY 2019-20 | AY 2020-21 |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Foreign travel | 69,87,629 | 53,12,840 | 30,36,196 | 25,51,628 | 4,50,252 | 4,38,249 | 2,53,931 | - | 48,58,433 |
| 2 | Unsecured Loan | - | 13,65,00,000 | 19,01,50,000 | 11,39,00,000 | 2,75,00,000 | 7,72,00,000 | - | 6,92,00,000 | - |
| 3 | Share Capital | - | - | - | - | 44,00,00,000 | - | - | - | |
| 4 | Addition u/s 56(2)(viia)/ (x) | - | - | - | - | 3,36,40,000 | 1,16,50,01,175 | 15,31,06,632 | - | - |
| 5 | Payment made to Dr. Hutarew and Partners | 2,75,87,342 | - | - | 18,56,060 | 61,20,835 | - | - | - | - |
| 6 | Payment made to M/s MD Earthmovers | 7,35,06,500 | - | - | - | - | - | - | - | - |
| 7 | Payment to EDCL Infrastructure | - | - | - | - | - | - | - | - | 28,00,000 |
| 10,80,81,471 | 14,18,12,840 | 19,31,86,196 | 11,83,07,688 | 50,77,11,087 | 1,24,26,39,424 | 15,33,60,563 | 6,92,00,000 | 76,58,433 |
Aggrieved by the assessment order passed by ld. AO, the assessee preferred an appeal before CIT(A) who has confirmed the abovesaid additions/disallowance.
Aggrieved by the above order, the assessee is in appeal before us.
(A) Assessment Order for AY 2011-12 falls beyond the period of permissible block of assessment under section 153A of the Act.
At the outset, Ld AR submitted that the AO lacked jurisdiction to issue notice under section 153A of the Act for AY 2011-12. The search in the case of the assessee was conducted on 15.01.2021. Consequently, the block of ten assessment years prescribed under Explanation 1 to section 153A extends only up to AY 2012-13. The same has been explained as below :-
| Date of Search | 15.01.2021 |
|---|---|
| Search Assessment Year 1st AY | AY 2021-22 |
| 2nd AY | AY 2020-21 |
| 3rd AY | AY 2019-20 |
| 4th AY | AY 2018-19 |
| 5th AY | AY 2017-18 |
| 6th AY | AY 2016-17 |
| 7th AY | AY 2015-16 |
| 8th AY | AY 2014-15 |
| 9th AY | AY 2013-14 |
| 10th AY | AY 2012-13 |
| 11th AY (No Jurisdiction) | AY 2011-12 |
He submitted that AY 2011-12 falls beyond the permissible period of assessment under section 153A and, therefore, the notice issued and the assessment framed for the said year are without jurisdiction, barred by limitation and liable to be quashed.
He submitted that the above proposition is squarely supported by the following judicial pronouncements:
Pr. Commissioner of Income Tax (Central)-1 v. Ojjus Medicare Pvt. Ltd. & Others, 2024 (4) TMI 268 (Delhi High Court).
A.R. Safiullah v. Assistant Commissioner of Income Tax, Central Circle-1, Trichy, 2021 (6) TMI 867 (Madras High Court).
ACIT, Central Circle-1(3), Chennai v. Shri V. Durai & Others, 2022 (9) TMI 70 (ITAT Chennai).
Deputy Commissioner of Income Tax, Central Circle-32, New Delhi v. RNB Leasing and Financial Services, 2024 (12) TMI 634 (ITAT Delhi).
Accordingly, he submitted that the assessment order passed under section 153A read with section 143(3) of the Act for AY 2011-12 deserves to be quashed as being without jurisdiction and barred by limitation.
Assessment Orders for AYs 2013-14 and 2014-15 are without jurisdiction as the conditions prescribed under the fourth proviso to section 153A are not satisfied
It is submitted that the assessment orders passed for AYs 2013-14 and 2014-15 are wholly without jurisdiction and liable to be quashed since the mandatory conditions prescribed under the fourth proviso to section 153A of the Act are not fulfilled.
The fourth proviso to section 153A provides as under:
"Provided also that no noticefor assessment or reassessment shall be issued by the Assessing Officerfor the relevant assessment year or years unless—
(a)the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; ………”
He submitted that Explanation 2 to the fourth proviso defines the expression "asset" as under:
"For the purposes of the fourth proviso, 'asset' shall include immovable property being land or building or both, shares and securities, loans and advances, and deposits in bank account."
He submitted that thus, a plain reading of the fourth proviso read with Explanation 2 makes it abundantly clear that the extended jurisdiction for assessment beyond 6 years (7th to 10th assessment years) can be exercised only where the Assessing Officer possesses material revealing escapement of income represented in the form of an asset as specifically defined in Explanation 2.
He further submitted that in the present case, however, the additions made in the impugned assessment orders are as under:
| Particulars | AY 2013-14 | AY 2014-15 |
|---|---|---|
| Disallowance of Foreign Travel Expenses | 53,12,840 | 30,36,196 |
| Addition on account of Unsecured Loans | 13,65,00,000 | 19,01,50,000 |
It is submitted that neither of the aforesaid additions represents an "asset" within the meaning of Explanation 2 to the fourth proviso to section 153A.
It is submitted that neither the disallowance of foreign travel expenditure nor the addition on account of unsecured loans constitutes an "asset" within the meaning of Explanation 2 to the fourth proviso to section 153A. Foreign travel expenditure is an item of expenditure, whereas unsecured loans are liabilities and not assets.
He thus submitted that the alleged escaped income in AYs 2013-14 and 2014-15 is not represented in the form of an asset as contemplated under the fourth proviso to section 153A. Consequently, the jurisdictional condition for invoking the extended block of assessment beyond six years is not satisfied.
He further submitted that in ACIT v. Goldstone Cements Ltd.2021 (12) TMI 1459, the ITAT, Guwahati held that the existence of escaped income represented in the form of an "asset", as defined in Explanation 2, is the jurisdictional fact for invoking the fourth proviso to section 153A. The Tribunal further held that liabilities and expenditure do not fall within the definition of "asset" and, therefore, cannot confer jurisdiction for initiating proceedings for the extended assessment years.
He submitted that since the additions made in AYs 2013-14 and 2014-15 relate only to unsecured loans and foreign travel expenditure, the mandatory conditions prescribed under the fourth proviso to section 153A are not fulfilled. Accordingly, the assessment orders for these years are without jurisdiction and liable to be quashed.
Assessment orders for AYs 2013-14 to 2019-20 are without jurisdiction as the said assessment years were unabated/completed assessments and no addition could have been made in the absence of incriminating material found during the course of search.
Without prejudice to the aforesaid submissions, it is submitted that the assessment orders passed for AYs 2013-14 to 2019-20 are also liable to be quashed as the said assessment years were unabated/completed assessments on the date of search and, therefore, no addition could have been made in the absence of incriminating material found during the course of search.
He submitted that in the present case, the search under section 132 of the Act was conducted on 15.01.2021. As on the date of search, no assessment proceedings for AYs 2013-14 to 2019-20 were pending before the AO and/or time-limit to issue notice u/s 143(2) has already expired.
He submitted that it is now well settled that in respect of unabated/completed assessments, the jurisdiction under section 153A is confined to assessment of undisclosed income based on incriminating material unearthed during the course of search. In the absence of any incriminating material, the completed assessment cannot be disturbed. The aforesaid proposition has been authoritatively settled by the Hon'ble Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell (P.) Ltd.2023 (4) TMI 1056 (SC).
Now coming to the additions made by ld. AO for AY 2013-14 to AY 2019-20, he submitted that the additions comprise only five issues, namely,
Foreign Travel Expenses,
Unsecured Loan,
Share Capital,
Addition under section 56(2)(viia)/(x), and
Payment made to Dr. Hutarew and Partners.
He submitted that the year-wise details are summarized below:
It is submitted that none of the aforesaid five issues is based on any incriminating material found or seized during the course of search. The assessment orders themselves do not identify any seized material forming the basis of the above additions. He submitted that the issue-wise submissions demonstrating the absence of incriminating material are set out hereinafter.
(a) Disallowance of Foreign Travel Expenses
Ld. AR submitted that the disallowance of foreign travel expenses has been discussed by the learned AO at Pages 33 to 35 of the assessment order for AY 2016-17. The opening paragraph of Para 10 reads as under:
"During the search proceedings, it was found that huge expenses were booked on account of foreign travel expenses by EDCL. Accordingly, relevant records were requisitioned and it was found that expenses of foreign travel were booked in profit and loss account of the company. The assessee in its reply submitted that incentive trips were provided various staff and other persons who were not even staff of the company. It was found that such expenses are personal in nature and not related to business of the company. The year-wise details of foreign travel are as under: ………………."
He submitted that a plain reading of the aforesaid paragraph itself demonstrates that the AO has merely examined the foreign travel expenses debited in the Profit & Loss Account and the details furnished by the assessee during the assessment proceedings. The AO has not referred to any seized document, books of account or other material found during the course of search while making the impugned disallowance. Thus, he submitted that the disallowance has been made solely on the basis of the regular books of account and financial statements already available on record.
(b) Unsecured Loans Received
He submitted that the addition on account of unsecured loans has been discussed by the learned AO in Para 9 (Pages 22 to 32) of the assessment order for AY 2016-17.A perusal of Para 9 of the assessment order shows that the learned AO has alleged that the assessee had received unsecured loans from Kolkata-based shell concerns.However, the AO has not referred to any incriminating material found or seized during the course of search conducted on 15.01.2021 in support of the said allegation. Instead, the entire addition has primarily been founded upon the statements of Sh. Anjani Banka and Sh. Arun Nanglia (Pg. 25 of Asst. order), recorded by the Investigation Wing in connection with an earlier search conducted at Kolkata.
It is submitted that the statement of Sh. Anjani Banka was recorded on 29.03.2014, whereas the statement of Sh. Arun Nanglia was recorded on 14.11.2014. Thus, both the statements were recorded almost seven years prior to the search conducted in the case of the assessee on 15.01.2021.
It is submitted that statements recorded in an independent investigation conducted several years prior to the present search cannot, by any stretch of imagination, constitute incriminating material found or unearthed during the course of the search conducted in the case of the assessee on 15.01.2021. Such pre-existing investigation material was already in possession of the Department and is wholly dehors the present search proceedings.
He further submitted that in fact, the assessment order itself reveals that no seized document, books of account or other incriminating material discovered during the course of the search has been identified or relied upon by the learned AO while making the impugned addition.Accordingly, the addition on account of unsecured loans has not been made on the basis of any incriminating material found during the course of search.
(c) Share Capital received
He submitted that the addition on account of share capital has been discussed by the learned AO in Para 8 (Pages 16 to 21) of the assessment order for AY 2016-17.
At the outset, he submitted that the AO has referred to a seized document, namely, a Certified True Copy of the Minutes of the Meeting of the Board of Directors held on 20.11.2015, whereby it was resolved to allot 2 crore equity shares of the company to various persons at ₹22 per share.It is submitted that the aforesaid document is merely a copy of the Board Resolution recording the allotment of shares. The allotment of shares was duly recorded in the statutory books of the company and reflected in its audited financial statements. Thus, the said document is only a regular corporate record and does not reveal any undisclosed income or constitute incriminating material. Reliance is placed on Delhi High Court judgements in the case of PCIT Vs. Param Diary Ltd. 2021 (2) TMI 764, and PCIT Vs. Victory Apartments Pvt. Ltd, 2023 (11) TMI 809.
He further submitted that thereafter, the AO has once again relied upon the statement of Sh. Arun Nanglia, which, as submitted hereinabove, was recorded on 14.11.2014, much prior to the search conducted on 15.01.2021, in connection with an independent investigation. Such pre-existing material cannot be regarded as incriminating material found during the course of the present search.
He submitted that apart from the aforesaid Board Resolution and the earlier statement of Sh. Arun Nanglia, no other seized material or incriminating document has been referred to or relied upon by the learned AO while making the impugned addition. Accordingly, the addition on account of share capital is not based on any incriminating material found during the course of search and, therefore, could not have been made in the unabated assessment year in view of the law laid down by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd.
(d) Addition under section 56(2)(viia)
He submitted that this addition has been discussed by the AO in Para 6 (Pages 3 to 10) of the assessment order for AY 2016-17. He submitted that the AO has referred to Annexure A-4 (Pages 65 to 120) seized during the course of search. The said annexure is merely an Agreement dated 09.11.2015 executed between the assessee, M/s Arunachal Hydra Power Ltd., M/s Startrack Vinimay Pvt. Ltd., M/s Sarvottam Caps Pvt. Ltd. and M/s Essel Infraprojects Ltd. relating to transfer of shareholding in the subsidiary companies.
It is submitted that the aforesaid agreement is only a regular commercial document evidencing a business transaction duly entered into between the parties. The transaction recorded therein was duly reflected in the books of account and financial statements of the assessee. The agreement, by itself, neither evidences any undisclosed income nor contains any incriminating material.Reliance is placed on Delhi High Court judgements in the case of PCIT Vs. Param Diary Ltd. 2021 (2) TMI 764, and PCIT Vs. Victory Apartments Pvt. Ltd, 2023 (11) TMI 809.
He further submitted that the AO has merely drawn an inference from the aforesaid agreement that the preference shares were acquired below their fair market value and, on that basis alone, invoked the provisions of section 56(2)(viia) of the Act. The remaining discussion in the assessment order relates only to computation of the alleged difference, issuance of show cause notice and rejection of the assessee's explanation. Thus, the impugned addition is founded only on the interpretation of a disclosed commercial agreement and not on any incriminating material unearthed during the course of search. He pleaded that consequently, this addition could not have been made in the unabated assessment year in view of the law laid down by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd.
(e) Payment made to Dr. Hutarew and Partners
He submitted that the same has been discussed by the learned AO in Para 7 (Pages 10 to 15 of the assessment order for AY 2016-17) and the AO has alleged that payments made to Dr. Hutarew& Partners were not for business purposes but represented funds siphoned off for making investments in offshore assets of the promoters. For this purpose, the learned AO has relied upon the statement of Ms. Navnita Dev, the statement of Shri Lalit Kumar Sadani, e-mail dated 21.01.2019 and Annexure A-13, Page 69.
It is submitted that none of the aforesaid material belongs to or pertains to the assessee company. The e-mail dated 21.01.2019 itself bears the subject "Re: EDCL Arunachal - pending payments", which clearly establishes that the correspondence relates to M/s. EDCL Arunachal Hydro Power Limited, a separate legal entity, and not the present assessee. Similarly, Annexure A-13, Page 69 merely contains the year-wise payments made to Dr. Hutarew & Partners. It nowhere establishes that the said payments were made by the assessee
Further, he submitted that in her statement, Ms. Navnita Dev has categorically stated that the funds were allegedly siphoned out from M/s. EDCL Arunachal. The statement of Shri Lalit Kumar Sadani merely reiterates that the payments were made. Thus, both the statements unmistakably relate to another company and not to the assessee.
It is, therefore, submitted that the seized material relied upon by the learned AO belongs to and pertains to M/s. EDCL Arunachal Hydro Power Limited, which is a separate taxable entity. The expenditure in question was capitalised in the books of M/s. EDCL Arunachal Hydro Power Limited and not in the books of the assessee. Nevertheless, the learned AO has proceeded to disallow the same in the hands of the assessee under section 37 of the Act, which is wholly untenable even on merits.
He submitted that accordingly, the material relied upon by the AO neither belongs to nor pertains to the assessee and, therefore, cannot constitute incriminating material against the assessee so as to justify the impugned addition in the unabated assessment year.
In view of the aforesaid submissions, it is submitted that none of the five additions made by the AO, namely, (i) disallowance of foreign travel expenses, (ii) addition on account of unsecured loans, (iii) addition on account of share capital, (iv) addition under section 56(2)(viia)/(x), and (v) disallowance of payment made to Dr. Hutarew & Partners, is based upon any incriminating material found or seized during the course of search. The additions have either been made on the basis of regular books of account, audited financial statements, disclosed corporate records, pre-existing investigation material already available with the Department, or documents and statements pertaining to another legal entity.
He submitted that thus, the jurisdictional condition for making additions in respect of unabated assessment years is conspicuously absent. Accordingly, in view of the law laid down by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd., all the impugned additions are wholly without jurisdiction and liable to be deleted.
Accordingly, he pleaded that the impugned addition made by the AO in AY 2013-14 to AY 2019-20, in absence of any incriminating material, is wholly without jurisdiction, unsustainable in law and liable to be deleted.
All the assessment order passed on 30.05.2022 is barred by limitation as the same was passed after the expiry of the time limit prescribed u/s 153B of the Act, which expired on 31.03.2022
The assessment order dated 30.05.2022 is barred by limitation and liable to be quashed as the same has been passed beyond the time limit prescribed under section 153B of the Act.
He further submitted that in the present case, a search under section 132 of the Act was conducted on 15.01.2021, i.e., during the Financial Year 2020-21. As per section 153B, the assessment order was required to be passed within twelve months from the end of the financial year in which the search was conducted. Accordingly, the statutory period of limitation expired on 31.03.2022, whereas the impugned assessment order has been passed only on 30.05.2022, i.e., after the expiry of the prescribed limitation period.Consequently, the assessment order dated 30.05.2022 is barred by limitation and deserves to be quashed.
On the other hand, ld. DR of the Revenue submitted that with regard to foreign travel and payment made to Dr. Hutarew & Partners, he submitted that these materials are incriminating material found during the search, therefore, he objected to the submissions of the assessee that there is no incriminating material. In this regard, he brought to our notice assessment order for the AY 2014-15 and in particular, he brought to our notice statement recorded u/s 132(4) of the Act from Navneeta Dev and specifically brought to our notice Question No.8 and answers. He submitted that it clearly shows that the firm was used to siphon off the funds for making investment in offshore properties. It clearly establishes dealings of Dr. Hutarew & partners with the assessee group are suspicious transaction. He also submitted that during search, an email was found with the above communication. There, it establishes that there is incriminating material found during the search and he relied on the findings of the lower authorities.With regard to jurisdictional issues raised by the assessee in the other AYs, he relied on the detailed findings of lower authorities.
Considered the rival submissions and material placed on record. With regard to AY 2011-12, we observed that the assessment year 2011-12 under consideration clearly falls outside the scope of application of section 153C of the Act, for the reason that the search was conducted on 15.01.2021 and consequently, the outer limit of ten assessment years counted from the search assessment year extends only upto AY 2012-13 and accordingly, AY 2011-12 falls outside the block period envisaged u/s 153A. Further, we observed that the impugned assessment order is beyond the limitation prescribed under section 153C of the Act, and therefore, the jurisdiction assumed by the Assessing Officer is not tenable in the light of aforesaid legal positions in view of the decision of Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh - [2023| 155 taxmann.com 155 (SC) and Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd. For the sake of brevity, we reproduce the relevant findings of the aforesaid decisions:-
“CIT vs Jasjit Singh-[2023| 155 taxmann.com 155 (SC)
“9.It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.
10.This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials – of the search party, under Section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.”
PCIT Vs Ojjus Medicare (P.) Ltd- [2024] 161 taxmann.com 160 (Delhi)
94.Similarly, and in light of what has been held by us hereinabove, the relevant block of ten AYs' when computed for the period 01 April 2022 - 31 March 2023, and where the Satisfaction Note was drawn by the AO of the non-searched person between those two dates, would be as under:-
Computation of the ten-year block No. of years period as provided under Section 153C read with Section 153A of the Act
95.The relevant block of ten AYs' when computed for the period 01 April 2023 – 31 March 2024, with the date of the Satisfaction Note drawn by the AO of the non-searched person falling within that period, would come to be identified as under:
Computation of the ten-year block No. of years period as provided under Section 153C read with Section 153A of the Act.
96.To recall, the petitions forming part of List I pertain to AYs' 2010-11, 2011-12 and 2012-13. So far as the aforenoted writ petitions are concerned, undisputedly AY 2010-11, 2011-12 and 2012-13 fall beyond the maximum period of ten AYs'. Since the ten AYs', when computed from the end of AY 2022-23 would terminate upon AY 2013-14, AYs' 2010-11, 2011-12 and 2012-13 would clearly fall outside the block period of ten AYs' and cannot legally or justifiably be reopened under Section 153C read with Section 153A of the Act.
97.Proceeding then to List II, we find that the petitions placed in that list pertain to cases where the hand over occurred in FYs 2022-23 and 2023-24. Consequently, the relevant AYs' would be AY 2023-24 and AY 2024-25 respectively. In light of the principles enunciated by us and which explain how the period of six and ten AYs' is liable to be computed, the reopening of assessments pertaining to AYs' 2010-11, 2011-12, 2012-13 and 2013-14 would clearly fall beyond the ambit of ten AYs' as provided under Section 153C read with Section 153A. We note in this behalf that all of the writ petitions forming part of List II pertain to the aforenoted AYs' 2010-11, 2011-12, 2012-13 and 2013-14.
98.We are therefore of the opinion that the Section 153C notices issued against the writ petitioners placed in List I and insofar as they pertain to AYs' 2010-11, 2011-12 and 2012-13 would not sustain being beyond the "relevant assessment year" which could have possibly formed the basis for initiation of action under that provision. Similarly, the Section 153C notices impugned by the writ petitioners placed in List II and insofar as they pertain to AYs' 2010-11, 2011-12, 2012-13 and 2013-14 and which have been found to fall outside the net of "relevant assessment year", being the ten year block, would be liable to be set aside on this score alone.”
Respectfully following the aforesaid decisions, we are inclined to quash the assessment order for the AY 2011-12 and allow the appeal for AY 2011-12.
With regard to AYs 2013-14 and 2014-15, we observed that the assessment orders passed for AYs 2013-14 and 2014-15 are wholly without jurisdiction and liable to be quashed since the mandatory conditions prescribed under the fourth proviso to section 153A of the Act are not fulfilled. We observed that a plain reading of the fourth proviso read with Explanation 2 makes it clear that the extended jurisdiction for assessment beyond 6 years (7th to 10th assessment years) can be exercised only where the Assessing Officer possesses material revealing escapement of income represented in the form of an asset as specifically defined in Explanation 2. We further observed that neither of the additions in AYs 2013-14 and 2014-15 represents an "asset" within the meaning of Explanation 2 to the fourth proviso to section 153A. We find that neither the disallowance of foreign travel expenditure nor the addition on account of unsecured loans constitutes an "asset" within the meaning of Explanation 2 to the fourth proviso to section 153A. Foreign travel expenditure is an item of expenditure, whereas unsecured loans are liabilities and not an asset. Accordingly, we are of the opinion that alleged escaped income in AYs 2013-14 and 2014-15 is not represented in the form of an asset as contemplated under the fourth proviso to section 153A. Consequently, the jurisdictional condition for invoking the extended block of assessment beyond six years is not satisfied. Further, we find force from the decision of ITAT, Guwahati Bench decision in the case of ACIT v. Goldstone Cements Ltd. (supra) wherein it isheld that the existence of escaped income represented in the form of an "asset", as defined in Explanation 2, is the jurisdictional fact for invoking the fourth proviso to section 153A. The Tribunal further held that liabilities and expenditure do not fall within the definition of "asset" and, therefore, cannot confer jurisdiction for initiating proceedings for the extended assessment years. In view of the above, the assessment orders for these years i.e. 2013-14 and 2014-15 are without jurisdiction and accordingly quashed.
With regard to AYs. 2013-14 to 2019-20, we observed from the facts on record that the above AYs are unabated for the reason thaton the date of search there were no pending assessmentsand also time for issue of notice u/s 143(2) was already expired. Therefore, in the above AYs which are unabated/completed assessments, the jurisdiction to make addition only confined to undisclosed income based on incriminating material found during the search. It is settled position of law that in the absence of incriminating material, the completed assessment cannot be disturbed as held in the case of Abhisar Buildwell (P) Ltd (supra). Coming to the additions proposed by the AO in the AYs under consideration, we noticed that the AO had made additions on the following five issues, we shall deal witheach of the issues whether they are falling under the term incriminating material or not.
a. With regard to Foreign Travel Expenses, we noticed that during the search proceedings, it was noticed that the assessee had claimed huge expenses on account of foreign travel expenses, based on the information collected from the assessee on the above expenses only during the search proceedings, the officers were of the view that these foreign travel are nothing but incentive trips provided to various staff and other persons, in their view, who are not staffs of the company, it was observed that these expenses are personal in nature and not related to business. It was only based on claim of expenses by assessee in their books and not that they have unearthed any relevant material to substantiate or to suggest that the assessee had actually claimed any bogus expenses or unrelated business expenses. It was only suspicious belief that it may be for personal in nature/unrelated to the business. In the absence of any cogent material, nothing was unearthed during the search. Therefore, in our view, the above information found during the search cannot be classified as incriminating material. Therefore, the additions made under this issue cannot be treated as incriminating material.
b. With regard to unsecured loans received, we observed that this issue was also found and enquired from the financial records available on the date of search, it was observed that these were received from the Kolkata based shell companies, it was treated as bogus only on the basis of the statement of Sh. Anjani Banka, which was recorded on 29.03.3014 and Sh Arun Nanglia recorded on 14.11.2014. These statements were recorded during the search conducted earlier by the Investigation Wing,it was only relied. All the materials relating to this issue wasreferred back to the earlier search and the same was inferred that these loans are bogus or accommodation entries. The issue is, can the AO rely on materials not related to the present search and can he treat the statements recorded during the earlier search as incriminating material. After considering the facts brought on record, in our view, there was no material or statement recorded that relates to the present search proceedings, therefore, the statement recorded in the earlier search cannot be treated as incriminating material. Therefore, the additions made by the AO solely on the basis of statement and treated the unsecured loans as bogus, in our view, it cannot be treated as incriminating material.
c. With regard to Preference Share capital transfer, we noticed that during search proceedings an annexure named A-4 was seized from EDCL house, Kolkatta. From the pages 65-120 of the above annexure, it was found that EDCL, AHPL, Startrack Vinimay P Ltd and Sarvottam Caps P Ltd mutually signed an agreement on 09.11.2015 with Essel Infra Projects Limited and further it was noticed that 76% shareholding of Uttarakhand subsidiaries namely Eastern Ramganga Valley Hydel Projects, Sarju Valley Hydel were also transferred to Essel Group Concerns. It was found that EDCL purchased the above shares @ Rs. 88.40/-. When the assessee was asked to substantiate the above transaction by issue of separate notice u/s 142(1) of the Act, the assessee had submitted that it is commercial transaction duly reflected in the books and all the documents are already part of regular documents, the assessee had purchased the above scrips from the group entity as part of transfer of shareholding within the group, it cannot be treated as incriminating material, we also observed that it is only the AO had interpreted as deemed profit. It is fact on record that the above commercial agreements were verified during the search and found that the assessee had acquired the above preference shares during the year in which the assessee had benefitted by acquiring the above shares in discount. Since the above commercial agreements were unearthed only during the search proceedings, this is only a commercial transaction which was part of transaction within the group. This issue will certainly not fall within the meaning of incriminating materialfor the reason that this transaction was already recorded in the books and only the AO had applied the deeming provisions under section 56(2)(via) of the Act. Therefore, we are not inclined to accept the submissions of Ld DR, accordingly we are inclined to accept the submissions from the assessee.
d. With regard to payments made to Dr. Hutarew and Partners, we noticed that during the search proceedings it is observed that funds were diverted and siphoned off thru the above method as such the payments were made to the consultants to avail their services. The above transaction was unearthed during the search proceedings and based on the statement recorded from the key management personnel, it was found that the funds were diverted and siphoned off. It was submitted before us that the email dated 21.01,2019 bears the subject "Re: EDCL Arunachal - pending payments", therefore, it belongs to other entities not the assessee company. After careful consideration, we noticed that the above transaction was found to be inappropriate transaction carried in order tosiphon off the funds, this findingswas solely based on the statements recorded during or post search. Further, Ld AR submitted that the transaction referenced in the statement not related to the assessee, it is related to another group entity. We observed from the facts on record, it is accepted fact from the submissions of the assessee that this transaction may be involved in the siphoning off of the funds in another entity of the group and the assessee is not involved as the assessee has not made any payments to them during the year. It is established fraud and modus of operandi was also brought on record by inferring from the statement recorded. What is relevant is whether the assessee actually made any payments to them during the year. We are aware that the statement itself cannot be considered as incriminating material as held in the case of PCIT v. Best Infrastructure Pvt. Ltd. and CIT v. Harjeev Aggarwal by the Hon’ble Delhi High Court. Whether the same was carried on in the other entity or not, the same cannot be treated as incriminating material. In our view, the disallowance may be restricted to the extent of expenses claimed by the assessee towards the consultancy charges paid to Dr. Hutarew and Partners only when the same is treated as incriminating material. Therefore,the disallowance is solely on the basis of statement recorded, the same cannot be considered as incriminating material.
Therefore, all the additions made by the AO in the unabated assessment years under consideration, hence, we are inclined to allow the grounds raised by the assessee in above terms.
With regard to AY 2020-21, at the time of hearing, it was brought to our notice that the assessment order was passed on 30.05.2022, whereas the search was conducted on 15.01.2021 and panchnama was closed on 18.01.2021 as per the closure report submitted before us. As per the provisions of section 153B, any search concluded on or after 01.04.2019, the assessment u/s 153A/153C must be completed within a period of twelve months from the end of the financial year in which the last of the authorization for search was executed. That being the case, the assessment in this case should have been completed on or before 31.03.2022 whereas the actual assessment was completed only on 30.05.2022, which is beyond the period of limitation specified in the Act. Therefore, the assessment completed is deserves to be quashed and accordingly, quashed.
In the result, appeals filed by the assessee for all the assessment years under consideration are allowed.