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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
The present appeals have been filed by the assessee challenging the separate impugned orders even date 02/05/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–52, Mumbai, [“learned CIT(A)”], for the assessment years 2012-13 and 2013-14.
In its appeal, the assessee has raised the following grounds:– Atul Shamji Bharani ITA no.2021/Mum./2023 “The CIT(A) erred in law and on facts in upholding the action of the AO making the addition of Rs.1,01,35,369/- in the completed assessment, on account of sales proceeds of the listed equity shares resulting into the LTCG declared in the return of income and impugned estimated expenses thereon, where admittedly during the search on the no incriminating material showing the alleged undisclosed income was found and following the judgment dated 24/04/2023 of the Hon'ble Apex Court in PCIT v Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC), the same must be deleted.
3. The CIT(A) erred in law and on facts in confirming the estimated addition of Rs.3,04,061/- made u/s 69C of the Act alleging commission paid in cash for the alleged LTCG on equity shares; though no incriminating material at all was found during the search in the premises of the assessee. Thus, the same must be deleted.
The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”
3. The issue arising in ground no.1, raised in assessee’s appeal, is pertaining to the existence of incriminating material for making additions under section 153A of the Act.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and for the year under consideration filed its return of income on 27/09/2012 declaring a total income of Rs. 78,48,310. The return filed by the assessee was processed vide intimation issued under section 143(1) of the Act. Subsequently, a search/survey action under section 132/133A of the Act was carried out on 06/10/2017 in the case of Sunshine Group, M/s Sabari Developers LLP, and M/s Evergreen Enterprises and other entities including the assessee. Accordingly, notice under section 153A of the Act was issued to the assessee on 11/01/2019. In response to the aforesaid notice, the assessee filed its return of income on 14/02/2019 declaring a total income of Rs. 78,14,140. Thereafter, notices under section 143(2) as well as 142(1) along with a detailed questionnaire were issued and served on the assessee, which were Page | 2
Atul Shamji Bharani ITA no.2021/Mum./2023 responded to by the assessee. The Assessing Officer (“AO”) vide order dated 29/12/2019 passed under section 143(3) read with section 153A of the Act treated the long-term capital gains earned by the assessee out of sale of shares as non-genuine and denied the exemption claimed under section 10(38) of the Act. Further, the AO treated the sale consideration of Rs. 1,01,35,369 as unexplained cash credit under section 68 of the Act. The AO also made the addition under section 69C of the Act @3% on account of commission paid. Accordingly, the AO computed the total income of the assessee at Rs. 1,82,88,566.
In its appeal before the learned CIT(A), the assessee specifically raised the ground that since no incriminating material was found during the course of the search, no addition under section 153A of the Act can be made in the hands of the assessee. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that since the assessee did not discharge its onus during the course of search proceedings that would itself mean that this is incriminating in nature. It was further held that the absence of evidence and satisfactory explanation which are required to be present, itself would mean that they are incriminating in nature. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee filed its original return of income on 27/09/2012, which was processed vide intimation issued under section 143(1) of the Act. Further, it is also undisputed that the return filed by the assessee was not selected for Atul Shamji Bharani ITA no.2021/Mum./2023 scrutiny assessment and the time period for initiating scrutiny assessment by issuance of notice under section 143(2) of the Act also expired on 30/09/2013, i.e. 6 months from the end of the financial year in which the return is furnished as per the proviso to section 143(2) of the Act. Thus, on the date of search and seizure action under section 132 of the Act, i.e. 06/10/2017, no assessment for the year under consideration was pending and therefore the same was not abated as per the second proviso to section 153A of the Act. From the perusal of the assessment order passed under section 143(3) read with section 153A of the Act, we find that the AO placed reliance upon the report of Investigation Wing, Kolkata wherein the scrip, i.e. M/s DB International Stock Brokers Ltd was found to be used for providing bogus accommodation entry of long term capital gains and short-term capital loss. Further, the AO referred to the fluctuation in price of the aforesaid scrip. The AO on page no. 20 of the assessment order also placed reliance upon the statement of Shri RK Kedia, i.e. one of the entry operators, recorded on 13/06/2014 during the course of search carried out by the Directorate of Investigation, Kolkata, wherein he admitted to having provided accommodation entries in the aforesaid scrip. Apart from the above, the AO placed reliance upon the recommendations of the SIT on Black Money. During the course of search, the AO also recorded the statement of the assessee, wherein he claimed that the shares of the aforesaid scrip were purchased on the advice of a person who is now deceased.
Therefore, from the record, it is discernible that the additions made by the AO under sections 68 and 69C of the Act by treating the long-term capital gains earned by the assessee from the sale of shares of aforesaid scrip as Page | 4
Atul Shamji Bharani ITA no.2021/Mum./2023 bogus are not based on the material found during the course of the search in the case of the assessee, its associated concerns, directors, or related persons. It is evident from the record that the information relied upon by the AO is pursuant to the investigation by the Investigation Wing, Kolkata, which is much prior to the date of search, i.e. 06/10/2017, in the present case and the same cannot definitely be called as the material found during the course of the search in the case of the assessee. Further, we are of the considered view that the statement of the assessee recorded during the course of the search also cannot be treated as incriminating material merely for the reason that as per the Revenue, the assessee could not establish the genuineness of the transaction. Further, the recommendations of the SIT on black money and the price fluctuation of the scrip in which the assessee has transacted also cannot be held to be the material found during the course of the search. The statement of Shri RK Kedia, which has been placed reliance upon by the learned CIT(A) in paragraph 5.4 of the impugned order, was also recorded on 13/06/2014, i.e. much prior to the date of search action in the present case. Therefore, on the basis of material available on record, we are of the considered view that no incriminating material was found during the course of the search in the case of the assessee. We find that the Hon’ble Supreme Court in PCIT v/s Abhisar Buildwell (P.) Ltd., [2023] 149 taxmann.com 399 (SC), observed as under:-
“14. In view of the above and for the reasons stated above, it is concluded as under: i) to iii) …….. iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in Page | 5
Atul Shamji Bharani ITA no.2021/Mum./2023 respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”
Since, in the present case, it is undisputed that the assessment year under consideration is an unabated/concluded year, therefore, respectfully following the aforesaid decision, we are of the considered view that additions made by the AO under section 153A of the Act cannot be sustained in the absence of incriminating evidence found during the course of the search. As a result, ground no.1 raised in assessee’s appeal is allowed.
In view of the aforesaid findings, the issue arising in ground no. 2 needs no separate adjudication.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 20/11/2023