Income Tax Appellate Tribunal - Delhi
Ito Ward-18(3), Delhi vs Nitin Johari , Delhi on 22 January, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E': NEW DELHI
BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
and
SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA No.1243/DEL/2022
(Assessment Year: 2011-12)
ITO, Ward 18 (3), vs. Nitin Johari,
Delhi. 15, Sadhna Enclave, 2nd Floor,
New Delhi - 110 017.
(PAN : AAJPJ4136D)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri V.K. Agarwal, CA
REVENUE BY : Ms. Baljeet Kaur, CIT DR
Date of Hearing : 22.01.2025
Date of Order : 22.01.2025
ORDER
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
1. The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)-23, New Delhi (for short 'ld.
CIT (A)') dated 19.03.2021 for Assessment Year 2011-12 raising following grounds of appeal :-
"l. The Ld. CIT(A) has erred in deleting addition of Rs.2,21,95,652/- made by AO on account of LTCG amounting to Rs.2,09,39,295/- and commission expenses @ 6% amounting to Rs.12,56,357 / - ignoring the facts and circumstances of the case.
2. The Ld CIT(A) has erred in ignoring the fact that the tally data revealing the cash payment by the assessee for obtaining 2 ITA No.1243/DEL/2022 bogus LTCG was enearthed during the search proceedings on Raj Kumar Kedia. That during the pre-search enquiries, it was gathered that Bhushan Steel Limited Group had taken huge accommodation entries of bogus L TCG with the help of Shri R K Kedia and hence, the Search and Seizure action was carried out on Bhushan Group & other related entities/persons and on Sh. Raj Kumar Kedia simultaneously on 13.06.2014.
3. The Ld CIT(A) has erred in not considering the fact that Section 153A mandates to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made [and for the relevant assessment year or years]. Nowhere it is mentioned that addition should be only limited to the incriminating material found during the search for each assessment year."
2. At the time of hearing, it is brought to our notice by the ld. AR of the assessee that a search and seizure proceedings under section 132 of the Income-tax Act, 1961 (for short 'the Act') were conducted in the case of Bhushan Steel Limited (BSL) Group and its group concerns and residential premises/factory of partners, directors and proprietors of the Group on 13.06.2014. The case of the assessee was also covered u/s 132 of the Act. The notice u/s 153A of the Act dated 02.05.2016 was issued and duly served on the assessee for furnishing return of income. In response, assessee filed return of income on 04.10.2016 at an income of Rs.60,48,850/-. The original return of income was filed by the assessee on 28.07.2011. The ld. AR submitted that during assessment proceedings, certain documents were found relating to AY 2014-15 and 3 ITA No.1243/DEL/2022 there is no material found relevant for the present assessment year since there was no pending appeals at the time of search the current assessment year being unabated assessment year without there being any incriminating material, no addition can be made. Further he submitted that the Assessing Officer proceeded to make the addition which is based on post-search enquiry and documents and in this regard, He brought to our notice findings of the ld. CIT (A) which is reproduced below :-
"4.1 I have considered the material on record including written submission of the AR of the appellant filed in course of appellate proceedings. I' have also perused the assessment order 153A r.w.s 143(3) of the Income Tax Act, 1961 of the Act for A Y 2011-12 and A Y 2012-13. In both the appeals, similar additions have been made. The appellant has filed similar grounds of appeal and also filed similar replies. Hence, both the appeals are being considered together.
Appeal No: CIT (A), Delhi- 23/10199/2016-17 CAY 2011-12) 4.2.1 In Ground No.2, the appellant has contended that the assessment order dated 30-12-2016 passed u/s 153A r.w.s 143(3) of the Income-tax Act, 1961 by the Asstt Commissioner of Income Tax, Central Circle-3, New Delhi is against law and facts on the file in as much as he has erred in not appreciating the fact that the order passed by him is without jurisdiction and bad in law as the jurisdiction u/s 153A is vitiated since no incriminating document pertaining to A/Y 2011-12 had been found during the course of search.
4.2.2 A search and seizure action u/s 132 of the Income Tax Act, 1961, were conducted in the case of M/s Bhushan Steel Ltd. (BSL) Group on 13.06.2014. The case of the assessee was also covered in operation u/s 132 of the Income Tax Act, 1961. The original return of income was filed by the assessee for A Y 2011-12 on 28.07.201/ and for A Y 2012-13 on 20.07.2012. In response to notice u/s 153A, the returns were filed on 04.10.2016 disclosing same income. The appellant has disclosed L TCG in its returns as follows:
S.No. Name of the Script Amount of capital gain as per information with this office (in Companies Its.) 2011-12 2012-13 2013-14 2014-15 1 Prraneta Industries 2116943 -- -- --
2 Splash Media Infra 18822352 5073133 - -
Limited 3 Sequent Scientific - - 372163 -
4 ITA No.1243/DEL/2022 4 Anukaran - - 12547408 26888321 Commercial Enterprises TOTAL 20939295 5073133 12919571 26888321 4.2.3 The Assessing Officer observed that appellant had reaped
exempt LTCG from various penny stock companies which were operated by various entry operators. By investing only a miniscule amount, appellant had earned huge amount of exempt LTCG. On pages 9 to 11 of the assessment order, the Assessing Officer has reproduced statement on oath of Sh. Manish Arora, an employee of Sh. Raj Kumar Kedia. From the statement, the Assessing Officer observed that Sh. R K Kedia is an accommodation entry provider who takes cash from various persons in order to provide them accommodation entry of bogus L TCG. On pages 11 to 15 of the assessment order, statement on oath of Sh. R K Kedia is reproduced from which the Assessing Officer observed that Sh. R K Kedia received unaccounted cash of various beneficiaries, including promoters of BSL group, in order to provide them accommodation entries such as that of bogus LTCG. From the statement of Sh. R K Kedia it was also clear that Sh. Pankaj Tewari, an employee of BSL, was delivering cash to him. Some data found from the back office premises of Sh. R K Kedia was seized relating to BSL group in the records of accommodation entries provided by him. Decoding of ledgers by Sh. Manish Arora showed that the accommodation entries were taken by the Sh. Nitin Johari, who is employee of Bhushan Steel Limited, and who was delivering the cash to Sh. R K Kedia.
4.2.4 On pages 16 to 18 of assessment order, statement on oath of Director of MIs Anukaran Commercial Enterprises Limited, Sh. Kashal Praveen Shah, recorded during survey u/s 133A on 10.06.2015 is reproduced as per which he has accepted that manipulative trading in the shares has been done on the direction of Sh. Suresh Jajodia. On pages 19 to 21 of assessment order, statement on oath of Sh. Suresh Jajodia recorded during survey u/s 133A on 10.06.2015 is reproduced in which he has accepted his role in providing bogus L TCG to various beneficiaries through this company.
4.2.5 During the course of search on Kedia group of cases, a tally maintained by Sh. Manish Arora, employee of the assessee in coded form, was seized in which accounts of various beneficiaries were maintained by him. The account of Sh. Nitin Johari extracted from this tally containing his transaction of shares and cash payments to Sh. Raj Kumar Kedia is reproduced on pages 23 to 26 of assessment order. On pages 27 to 30 of the assessment order, Assessing Officer has analysed financials of one penny stock company, M/s Splash Media Infra Limited (now known as M/s Luharuka Media & Infra Limited), during the period from which Assessing Officer concluded that there was no reason to support the sharp rise & fall in the price of the shares of this company other than manipulative trading. On pages 30 to 36 of assessment order, the Assessing Officer has analysed some exit providers, including statement of one exit provider Sh. Devesh Upadhvav recorded on 30.12.2014, and concluded that many of the dummy buyer companies were buying shares of-listed scrips at-elevated prices in order to provide bogus L TCG and 5 ITA No.1243/DEL/2022 profitable exit to initial preferential allottees of these penny stock scrips. On pages 37 to 52 of assessment order, cash trail in the form of bank statements of purchaser companies has been analysed. On pages 52 to 60 of assessment order, role of various share brokers in arranging/providing bogus LTCG accommodation entries has been pointed out. On pages 60 to 64 of assessment order, the Assessing Officer has pointed out to findings of investigation by SEBI in various listed paper scrips viz-a-viz family members of BSL Group which includes scrip of MIs Prraneta Industries Ltd. in which investment was made by the appellant.
4.2.6 Thereafter, the Assessing Officer considered submissions of the appellant and concluded that that the appellant had indulged in "SHAM"
transactions to receive back his/her unaccounted money in the garb of exempt LTCG. Accordingly, the total LTCG of the appellant against these bogus/sham transactions amounting to Rs. 2,09,39,295/- was treated as unexplained income of the appellant. 6% of Rs. 2,09,39,295/- amounting to Rs. 12,56,357/- was added back as unaccounted commission expenditure for arranging these entries.
4.2.7 During appeal proceedings, vide letter dated 20.07.2017, the appellant submitted that during the course of search, no incriminating document was found regarding these additions. As on the date of search, no assessment proceeding was pending as assessment had already been completed u/s 143(3) on 24/01/2014. Since, no incriminating document was found during the course of search and no asstt proceedings were pending as on !he date of search, see 153A could not be invoked for the impugned assessment year. Reliance was placed, upon following judgments:
(i) Pr. CITvs. MeetaGutgutia, 2017-TIOL-1000-HC-DEL-IT
(ii) CIT vs. Jackson Engineers Ltd., 20 15-TIOL-2789-HC-DEL
(iii) D. S. Doors Pvt. Ltd. vs. ACIT, 2015-TIOL-428-ITAT-DEL
(iv) CIT vs. Kabul Chawla, ITA No.707/2-14, Delhi High Court, order dated 28.08.2015
(v) ACIT vs. Vikrant Puri, ITA No.3375/Del/2011, order dated 30.03.2016
(vi) ACIT vs. PACL India Ltd. 2013-TIOL-734-ITAT-DEL
(vii) CIT vs. All Cargo Losgistics Ltd. 2015-TIOL-1294-Hon'ble High Court-MUM
(viii) M/s. Jai Steel (India) vs. ACIT, (2013) 88 DTR 0001 (Raj.) 4.2.8 Vide letter dated 18.08.2017, the appellant submitted that the appellant had declared long term capital gain on sale of shares at Rs.
2,09,85,845/- which was claimed exempt. This amount was duly declared in the original return of income (Pg 111, PB). Original assessment was completed u/s 143(3) on 24.01.2014 after considering all the facts and figures. As regards Splash Media, 40000 shares were preferentially allotted in two tranches, one being 10000, on 2211 0/2009 and the other being 30000 on 30112/2009 as is evident from opening balance in demat account attached herewith (Pg. 21, PB). These 40000 shares were split in the ratio of 1 : 10 on 02108/2010 and the name of the company was changed to Luharuka Media 6 ITA No.1243/DEL/2022 and Infra Ltd. They are duly credited in the demat statement of the appellant at 4,00,000 in the new name. Out of 400000 shares, 2,65,000 were sold on various dates (Pg. 21,PB) during this year indicated in the details of LTCG. All these sales were made through the regular broker, M/s Shrink Investment Solutions Pvt. Ltd., a company belonging to Shri R. K. Kedia as is evident from the broker's contract (Pg. 22-93, PB) notes attached herewith. Shri R K Kedia is the regular broker of the appellant and the transactions through him were not only in respect of shares of M/s Splash Media but shares of many other companies also. The Ld. AO has accepted the capital gain as genuine in respect of other shares while for Splash Media it has been considered as bogus LTCG. These 2,65,000 shares are duly debited in the demat statement of the appellant on various dates. The sale proceeds were received by account payee cheque which are duly credited in the bank account of the appellant with ICICI bank (Pg. 94-96, PB). All these documents clearly establish the genuineness of the transactions and therefore, there is no question of any accommodation entry in respect of LTCG on the sale of shares of M/s Splash Media.
4.2.9 The appellant further submitted that As regards Prraneta Industries, these shares were purchased on 20105/2009 in the open market. Subsequent to the purchase, the name of the company was changed to Aadhar Ventures India Ltd (Pg. 3, PB). These 50000 shares are duly credited in the demat statement of the appellant (Pg. 4, PB). The purchase has never been held as bogus in any of the years. These shares were sold on 16/0712010 as is evident from the broker's ledger account attached herewith. These 50000 shares are duly debited in the demat statement of the appellant (Pg. 14, PB). The sale proceeds of Rs. 23,81,685/- alongwith other credits totalling Rs. 25,00,000/- were received through ECS which is duly credited on 22/07/2010 in the bank account of the appellant with ICICI bank (Pg. 20, PB). The transactions pertaining to M/s Prraneta Industries were made through M/s Alankit Assignments Ltd., share broker, which has nothing to do with Sh. R K Kedia, the share broker and his concerns. The Ld. AO has made the addition by referring to the activities of Sh. R K Kedia and connected persons. He has not referred to any activity of Mis Alankit Assignments Ltd. which could indicate that this concern is involved in giving accommodation entries. Therefore, the Ld. AO has treated the capital gain in respect of M/s Prraneta Industries as bogus L TCG without bringing any material on the record. All these facts and documents clearly establish the genuineness of the transactions and therefore, there is no question of any accommodation entry in respect of L TCG on the sale of shares of M/s Prraneta Industries.
4.2.10 With regard to various statements on oath mentioned in the assessment order, the appellant submitted as follows:
f) Shri Manish Arora, employee of Sh. Rajkumar Kedia, the broker. He has not named the appellant as the beneficiary of bogus entries of LTCG in his statement u/s 132(4). (Page 9 of assessment order) 7 ITA No.1243/DEL/2022
g) Shri Rajkumar Kedia, the broker. He was given a list of 34 companies by the Authorised Officer while recording statement u/s 132(4), which included the name of Splash Media but no other company relating to the appellant, asking him to stake his interest in these companies. He replied that most of the companies are paper companies. He has nowhere stated that Splash Media is a paper company. He has also not stated that all the 34 companies are paper companies. When he was asked to name the beneficiaries of bogus LTCG, he did not name the appellant. Though he named Bhushan Steel Limited, there group companies and their promoters but did not name the appellant who is the CFO of the Bhushan Steels Limited.
(Page 11 of assessment order)
h) Shri Manish Arora during his statement u/s 131 on 0810712014 stated that Shri Nitin Johri made some payment on 2610512014 to Shrim Investment Solutions Pvt. Ltd. of Shri R K Kedia. However he did not spell out the purpose of the payment. He further stated that Shri Nitin Johri, on 0210612014, invested in the shares of Action Financial Services for reaping bogus LTCG in future. (Page 15 of assessment order) During this year there is no LTCG from Action Financial Services. Moreover, these facts pertain to A.Y 2015-16 and therefore, will be considered there and not here in A. Y 2011-12.
i) Shri Kushal Praveen Shah, Director of Mis Anukaran Commercial Enterprises Limited. He has not named the appellant as the beneficiary of bogus entries of LTCG in his statement u/s 131. (Page 16 of assessment order)
j) Shri Suresh Jojodia, Operator of Mis Anukaran Commercial Enterprises Limited. He has not named the appellant as the beneficiary of bogus entries of LTCG in his statement u/s 131. (Page 19 of assessment order)
k) Shri Devesh Upadhyay, Exit Provider. He has not named the- appellant as the beneficiary of bogus entries of LTCG in his statement U/S 131. (Page 33 of assessment order) 4.2.11 It was stated that none of the persons whose statement was recorded named Shri Nitin Johri as the beneficiary for the current A, Y. The AO in the assessment order has mostly discussed the modus oprendi of the entry operators and there is no specific reference to the appellant in any of the discussions.
4.2.12 The appellant submitted that the AO was requested to provide cross examination of Shri Rajkumar Kedia and Shri Manish Arora. He fixed the date for cross examination on 06/12/2016 at 4 PM and accordingly issued letters dated 01/12/2016 to the parties concerned. On 06/12/2016 the appellant was present alongwith his counsel Shri Sanjeeva Narayan in the office of the AO but Shri Rajkumar Kedia and Shri Manish Arora did not appear. The 8 ITA No.1243/DEL/2022 absence of these 2 persons was taken by the AO as nexus of these two persons with the appellant. In fact, these two persons were the witness of the department and it was the duty of the AO to enforce their attendance for cross examination. Further as regards no response from Shri Rajkimar Kedia and Shri Manish Arora, it is submitted that the appellant does not have any authority to force anybody to appear before the Ld. AO. The Ld. AO has all the authority under law to enforce the attendance of anybody. In fact, it was the duty of the Ld. AO to enforce the attendance of the person, he wanted to examine. Since the Ld. AO did not exercise his powers to enforce the attendance of the witnesses, no adverse view could be taken against the appellant. Reliance was placed upon following decisions:
(i) Mahesh Gulabri Joshi vs. CIT (2005) 95 ITD 300 (Mumbai)
(ii) CIT vs. Makhni & Tyagi (P) Ltd. (2004) 267 ITR 433 (Del.) 4.2.13 The appellant submitted that the AO, having failed to provide cross examination of the concerned persons, observed that cross examination is not necessary. It is judicially settled that if the authorities want to use the statement against an assessee, cross examination has to be provided in the interest of natural justice. Reliance was placed on the following case laws:
(i) Sunita Jain vs. ITO, 2017- TIOL-493-ITA T-AHM
(ii) CIT vs. Dharampal Prem Chand Ltd., 2010-TIOL-91-SC-IT
(iii) Kishmichand ChellaRam vs. CIT, 125 ITR 713 (SC)
(iv) Sona Electric Co. vs. CIT, (1985) 152 ITR 0507 (Del)
(v) Optitech Software cP) Ltd. vs.ITO,2015-TIOl.r394-ITAT-DEL 4.2.14 It was submitted that the appellant had not taken any accommodation entry because all the possible evidences were filed before the AO which includes necessary particulars about the broker and the transactions made through him. Reliance was placed upon following decisions:
i) CIT vs. Ganeshwari Metals Pvt. Ltd., 20 13-TIOL-96-HC-
DEL-IT
ii) CIT vs. Kamdhenu Steel & Alloys Ltd., 20 12-TIOL-236-HC-
DEL-IT
iii) CIT vs. Oasis Hospitalities Pvt. Ltd., 2011-TIOL-69-HC-DEL-
IT 4.2.15 Vide letter dated 10.01.2019, the appellant submitted that the appellant had filed all possible evidences for the sale 1 purchase of the shares in the form of Brokers Contract Notes, Demat account statement, bank account etc. Sh. Rajkumar Kedia might have been providing accommodation entries to others but he has never stated that he has provided any accommodation entry to the appellant. Therefore, the evidence on record clearly proved that the sale of the impugned shares was genuine and the appellant had rightly claimed LTCG on the sale of shares. Reliance was placed on the following decisions:
9 ITA No.1243/DEL/2022 i) SunitaJain Vs ITO, 2017-TIOL-493-ITAT-AHM
ii) SMT Saroj Damani Vs ACIT; 2017-TIOL-1363-ITAT- MUM
iii) Pro CIT vs. Hitesh Gandhi, 2017-TIOL-80 I-HC-P&H
iv) Navneet Agarwal, Llh Late Kiran Agarwal vs. ITO, ITA No. 2281 /Kol/2017, order dated 20107/2018
v) Vivek Agarwal vs. ITO, ITA o. 292/JP/2017, order dated 06/04/2018
vi) ITO vs. Shaleen Khemani, ITA o. 19451K0V2014 order dated 18/10/2017
vii) Kiran Kothari vs. ITO, ITA o. 4431K0V20 17 order dated 15/11/2017 4.2.16 Vide letter dated 17.01.2019, the appellant submitted that material found during the course of search from the premises of one assessee, cannot be termed as material found during the course of search of another assessee for making addition u/s 153A. Reliance was placed on the following decision:
(i) Brahmaputra Finlease P Ltd Vs DCIT; 2018-TIOL-215-ITAT-
DEL 4.2.17 Vide letter dated 25.02.2021, the appellant submitted that the seized document reproduced on page 23 of the assessment order pertained to A. Y. 2014-15 and hence, it could not be used in any other year. This view was fully supported by the judgement of Hon'ble Delhi High Court in the case of Mrs. Meeta Gutgutia 2017-TIOL-I000-HC-DeJ which has been confirmed by the Hon'ble Apex Court as reported in 257 Taxman 441 SC. It was also submitted that seized documents from third party could not be used in the case of the assessee u/s 153A. Reliance was placed on the following decisions:
(i) Mr. Trilok Chand Chaudhary Vs ACIT; ITA 0.5870/De1l2017 dt.
20/08/2019
(ii) M/s. S.R. Credits Pvt. Ltd. Vs DCIT; Cross Objection 0.86/Dell 2019 (Arising out of ITA 0.52161De1l20 15) dt. 2610512020
(iii) Brahmaputra Finlease P Ltd Vs DCIT; 2018-TIOL-215-ITAT-DEL
(iv) DCITVs ShayonaLand Corporation; 2020-TIOL-1625-ITAT-AHM 4.2.18 Vide letter dated 26.02.2021, the appellant placed reliance upon the following decisions:
(i) POT Vs SMTKRISHNA DEVI; 2021-TIOL-309-HC-DEL-IT
(ii) Shri Anoop lain Vs ACIT; ITA No. 6703IDELl20]9 dt. 10/01/2020
(iii) Riaz Munshi Vs ACIT; ITA 83141 DEL 12018 dt. 11/03/2020 4.2.19 I have considered facts of the case as well as written submissions of the appellant. I have perused the assessment orders. From perusal of the assessment orders, it is evident that neither any incriminating material was unearthed during course of search from premises of the appellant, nor any adverse statement on oath of the appellant recorded at the time of search. The 10 ITA No.1243/DEL/2022 appellant had filed original returns of income before the date of search as follows:
A.Y. Original Date of Order Last Date for Date of
Return filing u/s 143(3) issue of Search
date notice u/s
143(2)
2011-12 28.07.2011 24.01.2014 - 13.06.2014
2012-13 20.07.2012 - 30.09.2013 13.06.2014
4.2.20 Various courts have held that no addition could be made in the hands of the appellant since no incriminating material was unearthed during course of search and the assessment of the appellant stood completed on the date of search. From perusal of assessment orders, it is evident that no incriminating material was seized from the premises of the appellant. The issue that now arises is whether any incriminating materia) found during search of some other person can be used to make additions in the hands of the appellant. The following evidences have been relied upon by the Assessing Officer for making addition in the hands of the appellant:
(i) Copy of ledger account of Sh. Nitin Johari extracted from tally maintained by Sh. Manish Arora for the period 01.04.2013 to 31.03.2014.
(ii) Statements on oath of Sh. R K Kedia and Sh. Manish Arora recorded on date of search i.e. 13.06.2014
(iii) Statements on oath of Sh. Kushal Praveen Shah and Sh. Suresh Jajodia recorded during survey u/s 133A in the case of Mis. Anukaran Commercial Enterprises Ltd.
(iv) Statement of exit provider Sh. Devesh Upadhyay recorded on 30.12.2014.
4.2.21 It is observed that ledger account of Sh. Nitin Johari extracted from tally maintained by Sh. Manish Arora pertains to the period 01.04.2013 to 31.03.2014. It does not pertain to AY 2011-12 and A Y 2012-13. Hon'ble Delhi High Court in the case of Pr CIT vs Meeta Gutgutia [2017] 395 ITR 526 (Delhi) held that invocation of section 153A by revenue for assessment years 2000-01 to 2003-04 was without any legal basis where there was no incriminating material qua each of those assessment years. The operative part of judgment is reproduced below:
"69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being 11 ITA No.1243/DEL/2022 any incriminating material qua the AY for which he sought to make additions of franchisee commission.
70. The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
71. For all of the aforementioned reasons, the Court is of the view that the lTAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.
Conclusion
72. To conclude:
(i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153 A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04. "
SLP was dismissed by Hon'ble Supreme Court in above case of Pr CIT vs Meeta Gutgutia [2018] 96 taxmann.com 468 (SC) vide order dated 02.07.2018.
4.2.22 Hon'ble Delhi High Court in the case of Pr CIT vs Best Infrastructure (India) (P.) Ltd. [2017] 397 ITR 82 (Delhi) held that where during search proceeding one of directors of assessee- company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years. The operative part of judgment is reproduced below:
"Analysis and reasons
31. In Meeta Gutgutia (supra), this Court had considered the entire gamut of case law on the assumption of jurisdiction under Section 153A of the Act. In Meeta Gutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the said decision in Smt. Dayawanti Gupta (supra) is being again discussed herein.
32. In Smt. Dayawanti Gupta (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of 12 ITA No.1243/DEL/2022 accounts. Secondly, they also admitted that the papers recovered during the search contained "details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside books of accounts" and they were "actually unaccounted transactions made" by two of the firms of the Assessees. Thirdly, the Court found as a matter of fact that the Assessees were "habitually concealing income" and that they were "indulging in clandestine operations" and that such persons "can hardly be expected to maintain meticulous books or records for long. " As pointed out by this Court in Meeta Gutgutia (supra) the decision in Smt. Dayawanti Gupta (supra), therefore, turned on its own facts and did not dilute the law explained in Kabul Chawla (supra).
33. At this stage, it requires to be noticed that the decision of this Court in Kabul Chawla (supra) took note inter alia of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374ITR 645, wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and 153C of the Act. The decisions of this Court in Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012] 25 taxmann.com 227/211 Taxman 61 (Delhi) were extensively discussed in Kabul Chawla (supra). The Court in Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [20l3} 36 taxmann.com 523/219 Taxman 223 which had held that the assessment in respect of each of the six assessment years, preceding the year of search "is a separate and distinct assessment. " It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. "
34. In Kabul Chawla (supra) the legal position was summarised ....
35. As noted in Meeta Gutgutia (supra), several other High Courts have also come to a similar conclusion either by following Kabul- Chawla (supra) or otherwise. This includes the decisions of the Gujarat High Court in Pro CIT V. Soumya Construction (P.) Ltd. [2016] 387 ITR 529/[2017} 81 taxmann.com 292 (Guj.); Pro CIT V. Devangi alias Rupa [Tax Appeal Nos. 54, 55 to 57 of 2017, dated 2-2-2017]; the Karnataka High Court in CITv. lBC Knowledge Park (P.) Ltd. [2016} 385ITR 346/69 taxmann.com J08 (kar.); the Kolkata High Court in Pro CIT V. Salasar Stock Broking Ltd. [GA No. 1929 of 2016, dated 24-8- 2016} and the Bombay High Court in CIT v. Gurinder Singh Bawa [2016] 386ITR 483/[2017] 79 taxmann.com 398. In Meeta Gutgutia (supra) the entire gamut of the case law had been analysed and the 13 ITA No.1243/DEL/2022 legal position was reiterated that unless there is incriminating material qua each of the AYs in which additions are sought to be made, pursuant to search and seizure operation, the assumption of jurisdiction under Section lS3A of the Act would be vitiated in law. This is one more occasion for the Court to reiterate that legal position.
36. Turning to the facts of the present case, it requires to be noted that the statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A- 1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs.
37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement.
38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.
39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section I53A of the Act qua the Assessees herein was not justified in law. "
14 ITA No.1243/DEL/20224.2.23 In view of the above judicial decisions, it is held that ledger account of Sh. Nitin Johari extracted from tally maintained by Sh. Manish Arora pertained to the period 01.04.2013 to 31.03.2014 could not be used for making addition in A Y 2011-12 and A Y 2012-13 since it does not pertain to that period.
4.2.24 The next issue that arises for consideration is whether the statements on oath relied upon in the assessment order could form the basis for assuming jurisdiction u/s 153A of Income Tax Act. Hon'ble Delhi High Court in the case of PCIT Vs Subhash Khattar (ITA o. 60/2017) dated 25.07.2017 held that in the absence of incriminating material in a completed assessment, seized material found in some other search could not be utilized for making addition. The operative part of the judgment is reproduced below:
"5. Thereafter, on 29th October, 2013, a notice was issued to the Assessee under Section I53A of the Act. In compliance thereof, the Assessee filed the return of income which he had originally filed and which had already been scrutinized by the AO under Section 143 (3) of the Act for the AY in question i.e. AY 2006-07. By the assessment order dated 27th March, 2014, the AO came to the conclusion that the Assessee had failed to explain the nature and the source of the investment made in cash and consequently, added the sum of Rs.3.21 crores to the Return Income.
6. The assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the assessee before the ITAT. The ITAT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153 (A) of the Act, in the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016J 380 ITR 573.
7. A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of if, that the notice to the Assessee under Section 153A of the Act was misconceived since the so-called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not under Section 153A. This goes to the root of the matter.
8. Consequently, the impugned order of the ITAT calls for no interference of this Court. The question framed by this Court on 7th 15 ITA No.1243/DEL/2022 February, 2017 is answered in negative, that is, in favour of the Assessee and against the Revenue.
9. The appeal is accordingly dismissed. "
4.2.25 It is observed that statements on oath of Sh. Kushal Praveen Shah and Sh. Suresh Jajodia were recorded during survey u/s 133A in the case of M/s. Anukaran Commercial Enterprises Ltd. on 10.06.2015. The statement of exit provider Sh. Devesh Upadhyay was recorded or 30. I 2.20 I 4. In view of above decision of Hon 'ble Delhi High Court in the case of PCIT vs. Subhash Khattar (IT A No. 60/2017) dated 25.07.2017, it is held that statements of Sh. Kushal Praveen Shah, Sh. Suresh Jajodia and Sh. Devesh Upadhyay could not be relied upon to assume jurisdiction u/s 153A of Income Tax Act since these statements were recorded much after the date of search i.e. 13.06.2014.
4.2.26 The next issue that arises for consideration is whether statement on oath of Sh. R K Kedia and Sh. Manish Arora recorded on date of search i.e. 13.06.2014 could be relied upon to make .addition u/s 153A of Income Tax Act. Hon'ble Delhi High Court in the case of PCIT vs. Anand Kumar Jain (HUF), Satish Dev Jain, Sajan Kumar Jain 2021 (3) TMI 8 - Delhi High Court held that if no incriminating material is found during search of an assessee and incriminating material is found in search conducted in the case of a third party, then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act. In these cases, search was conducted on 18.11.2015 at the premises of the Assessee {being Anand Kumar Jain (HUF), its coparceners and relatives} as well as at the premises of one Pradeep Kumar Jindal. During the search, statement of Pradeep Kumar Jindal was recorded on oath u/s. 132(4) on the same date, wherein he admitted to providing accommodation entries to Anand Kumar Jain (HUF) and his family members through their Chartered Accountant. Addition was made in the hands of Anand Kumar Jain (HUF) relying upon statement on oath of Pradeep Kumar Jindal. The operative part of the judgment is reproduced below:
"10. Now, coming to the aspect viz the invocation of section I53A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section I53C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 1 53A), then the only legal recourse available to the department was to proceed in terms of Section I53C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section I53A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the 16 ITA No.1243/DEL/2022 mandatory procedure under section I53C has not been followed. On this count alone, we find no perversity in the view taken by the ITA T. Therefore, we do not find any substantial question of law that requires our consideration.
11. Accordingly, the present appeals, along with all pending applications, are dismissed. "
4.2.27 Hon'ble ITAT Delhi in the case of Trilok Chand Chaudhary vs. ACIT in ITA o. 5870IDell2017 vide order dated 20.08.2019 held as follows:
"5.6 In our opinion, the finding of the Ld. CIT(A) is not based on correct appreciation of law. The reasoning of the Ld. CIT(A) is that there cannot be two simultaneous assessment under section I53A and other under section I53C of the Act. This reasoning is faulty. The assessment under section I53C could have been made after completion of the assessment under section I53A of the Act. The Act has provided separate provisions for making assessment in case of material found in the course of the search from the premises of the assessee as well as the material found in the course of search at the premises of the third party. The Assessing Officer is required to follow the procedure laid down in the Act for making the assessment and he cannot devise his own procedure for shortcut methods. In our considered opinion, when the case of the assessee is covered under the provision of section 153 of the Act and if reliance is placed on the incriminating material found during the course of search of third-party, then provision of section I53C of the Act would be applicable and have to be adhered to. Thus, in the instant case, the Assessing Officer was required to first complete the proceedings under section I53A in hand, which were initiated by way of notice dated 3010612014 and thereafter, he was at liberty to take action under section I53C of the Act for bringing the material found from the premise of Sh. Ashok Chaudhri to tax in the hands of the assessee."
4.2.28 Hon'ble ITAT Delhi in the case of DCIT Vs. Smt. Shivani Mahajan [ITA No.5585/DeIl2015] (pronounced on 19.03.2019) held as follows:
"9. We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and the rival submissions, we find that in these appeals, following two questions arise for our consideration:
(i) Whether any material found in the search of any other person than the assessee in appeal can be considered in the assessment under 153A of the assessee.
"14. From a reading of the above decisions of Hon'ble Jurisdictional High Court, it is evident that completed assessment can be interfered with by the Assessing Officer on the basis of any incriminating 17 ITA No.1243/DEL/2022 material unearthed during the course of search. If in relation to any assessment year no incriminating material is found, no addition or disallowance can be made in relation to that year in exercise of power under Section 153 of the Act. Obviously, the reference to the incriminating material in the above decisions of Hon'ble Jurisdictional High Court is in regard to incriminating material found as a result of search of the assessee's premises and not of any other assessee. The legislature has provided Section 153C by invoking the same the Revenue can utilize the incriminating material found in the case of search of any other person to the different assessee, Section 153C is reproduced below for ready reference .....
15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We, respectfully following the above decisions of Hon'ble Jurisdictional High Court, hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person. "
4.2.29 The search u/s 132 of Income Tax Act in the case of the appellant took place on 13.06.2014 alongwith search in the case of M/s. Bhushan Steel Ltd. as well as its directors. In the hands of its directors, similar addition was made on account of bogus Long Term Capital Gain based on statement on oath of Sh. R K Kedia as well as Sh. Manish Arora. The entire addition on account of bogus LTCG has been deleted by Hon'ble ITAT in the case of Brij Bhushan Singal vs. ACIT in ITA No. 1415 to 1417/De1l2018 vide order dated 07.12.2018 as reported in 2019-TIOL-170-ITAT-DEL The facts in the case of the appellant are very similar to this case.
4.2.30 It is held that no incriminating material was seized from premises of the appellant during the course of search nor any adverse statement on oath of the appellant recorded. The addition has been made on the basis of statements on oath of other persons recorded in another search. In view of above decisions, it is held that in the absence of any incriminating material. found from premises of the appellant, the only legal recourse available to the department was to proceed in terms of Section 153C of the Act in respect of incriminating statement on oath of Sh. R K Kedia, Sh. Manish Arora as well as other persons. No cross examination has been allowed to the appellant. Moreover, facts of the case are similar to the case of Brij Bhushan Singal vs. ACIT in ITA No. 1415 to 1417/De1l20 18 where such additions have. been 18 ITA No.1243/DEL/2022 deleted. Hence, addition of Rs.2,21,95,652/- (Rs.2,09,39,295 + Rs. 12,56,357) in A Y 2011-12 is hereby deleted and Ground No.2 of appeal is allowed."
3. On the other hand, ld. DR of the Revenue fairly accepted that ledger account of Nitin Johari extracted from tally maintained by Manish Arora pertaining to 01.04.2013 to 31.03.2014. Therefore, there is no incriminating material found relating to current assessment year under consideration.
4. Considered the rival submissions and material available on record. We observed that ld. CIT (A) has analysed the issue under consideration in detail and we observed that he gave a categorical finding on the issue of incriminating material at para 4.2.30 and the same are extracted above.
Based on the information submitted before us, we observed that there is no incriminating material found during the search relating to unabated assessment year. Respectfully following the decision of Hon'ble Apex Court in the case of Pr. CIT v. Abhisar Buildwell (P) Ltd. reported in 454 ITR 212, we are inclined to dismiss the appeal filed by the Revenue.
5. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 22nd day of January, 2025.
SD/- SD/- (SATBEER SINGH GODARA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22.01.2025 TS 19 ITA No.1243/DEL/2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI