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Facts
A search and seizure operation was conducted on Brij Gopal Construction Company Pvt. Ltd. and others, but not on the assessee's registered office. The assessee sold shares, and the revenue sought to add the sale consideration as unexplained cash credit, along with commission expenditure, under Section 153A of the Income-tax Act.
Held
The Tribunal held that proceedings under Section 153A were initiated without valid jurisdiction as no search was conducted at the assessee's premises and no incriminating material was found. The additions were based on data from a third party's survey.
Key Issues
Whether the assumption of jurisdiction under Section 153A of the Income-tax Act is valid when no search was conducted at the assessee's premises and no incriminating material was found?
Sections Cited
153A, 143(3), 153C, 153D, 68, 69C, 132, 133A, 133(6), 147, 148, 143(1)(a)
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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI YOGESH KUMAR U.S.
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal filed by the revenue in Cross Objection filed by the assessee in CO No. 43/Del/2024 for AY 2017-18, arise out of the order of the Commissioner of Income Tax (Appeals)-23, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. CIT(A), Delhi-23/10403/2016-17 dated 29.07.2023 against the order of assessment passed u/s 153A of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 11.04.2022 by the Assessing Officer, DCIT, Central Circle-3, New Delhi (hereinafter referred to as „ld. AO‟).
The assessee has raised the following grounds of appeal in its cross objection:-
“1. That the learned Commissioner of Income Tax (Appeals)-23. New Delhi has grossly erred both in law and on facts in upholding the validity of notice issued u/s 153A of the Act and assessment order passed u/s 153A/143(3) of the Act which were without jurisdiction and therefore deserved to be quashed as such.
2. That in any case the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the validity of notice issued u/s 153A and assessment order passed u/s 153A of the Act in absence of any search was conducted at the registered office of the appellant and therefore assessment framed u/s 153A of the Act is illegal and invalid.
That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that addition made in the hands of appellant u/s 153A of the Act based upon the documents/data found in the premises of other person during the course of alleged search is not in accordance with law and even on the basis of assumption of revenue, at best section 153C of the Act was applicable to the facts of the case of the assessee company and not section 153A of the Act and therefore the action of learned Assessing Officer was assuming jurisdiction u/s 153A of the Act is otherwise too illegal, invalid and untenable.
That the additions made are without jurisdiction since they are not based on any incriminating material found as a result of search on the appellant.
That since approval obtained u/s 153D of the Act was mechanical, illegal and invalid approval, order of assessment made u/s 153A/143(3) of the Act is invalid and without jurisdiction.
That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that order of assessment dated 11.4.2022 framed u/s 153A of the Act is barred by limitation and deserves to be quashed as such.
7. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that moreover in absence of cross examination of Sh. Gopal Bansal the statement recorded of Sh. Gopal Bansal or material collected or allegedly gathered could not be relied upon as they have no evidentiary value.” Page | 2
3. We have heard the rival submissions and perused the material available on record. A search and seizure operation u/s 132 of the Act was conducted on 11.02.2021 in the case of Brij Gopal Construction Company Pvt. Ltd and others. Some premises were covered under survey u/s 133A of the Act. The registered office of the assessee company is 14 Maria, Plot No. 7P, Sector-47, Urban Estate, UE029 Gurgaon 122001, Haryana, India, wherein search was not conducted. The assessee company sold its shares in Brij Gopal Construction Company Pvt Ltd to 7 companies namely Symbiox Investment & Trading Co. Ltd., Emerald Commercial Limited, Castle Realcon (P) Ltd., Supreme Realtech (P) Ltd., Sunshine Infra Project (P) Ltd., Venkateshwara Industrial Promotion Co. Ltd, Progyan Construction & Engineering Pvt Ltd @200/ share. Since, the sale price is equal to purchase price of share, no capital gain/loss was disclosed in the return of income of the assessee. The regular return of income was filed by the assessee on 29.10.2017 declaring total income of Rs. 3,09,760/-. Even though search was not conducted on the assessee at the registered office address mentioned supra u/s 132 of the Act, notice u/s 153A of the Act stood issued to the assessee on 16.12.2021. In response to the said notice, it filed its return on 24.12.2021 declaring same total income of Rs. 3,09,760/-. The assessment was finally framed u/s 153A of the Act on 11.04.2022 in the case of the assessee determining the total income at Rs. 129,34,74,760/-. As stated earlier, the assessee company sold the shares of Brij Gopal Construction Company Pvt. Ltd @200/ share to 7 entities for total sale consideration of Rs. 125,55,00,000/-. The above said 7 investors company were examined by the revenue on the basis of their financials, business, income tax returns, information collected u/s 133(6) of the Act and statements of various related persons and other related information available with the department. Based on the same, it was concluded by the revenue that the said 7 investors company are not genuine investors and the mere entry providing vehicles which were controlled and used by various entry providers. From the document impounded from the premises of Shri Gopal Bansal, it was sought to be established by the revenue that the sale consideration received from these 7 entities were mere accommodation entries against which cash was being provided by Brij Gopal Group. Hence, in the assessment of the assessee, this sum of Rs. 125,55,00,000/- was sought to be added as unexplained cash credit u/s 68 of the Act by the ld AO together with commission expenditure incurred for earning such accommodation entry @3% amounting to Rs. 3,76,65,000/-. Hence, the total addition came to Rs. 129,31,65,000/- (Rs. 125,55,00,000/- +Rs. 3,76,65,000/-). The ld CIT(A) deleted the aforesaid additions by giving a detailed 4. finding and held that the sale consideration received on sale of shares of Brij Gopal Construction Company Pvt. Ltd from the said 7 entities cannot be treated as unexplained cash credit u/s 68 of the Act and cannot be treated as accommodation entries. Consequentially the estimated commission expenditure @3% on account of alleged accommodation entries was also deleted by the ld CIT(A). The revenue is in appeal against the deletion of addition made by 5. the ld CIT(A) and assessee is in appeal in cross objection on the legality of the assessment framed u/s 153A of the Act on the grounds already reproduced hereinabove. It was submitted that the addition sought to be made is based on 6. tally data impounded from the premises of Shri Gopal Bansal during the survey proceedings u/s 133A of the Act. No search per se was conducted on the assessee on 11.02.2021 at its registered office address. It was Page | 4 submitted that accordingly issuance of notice u/s 153A of the Act to the assessee and consequential framing of assessment u/s 153A of the Act on the assessee is to be declared illegal and void ab initio. Further, there was no incriminating material found during the course of search in the premises of Brij Gopal Construction Company Pvt. Ltd qua the subject mentioned addition made in the hands of the assessee. Hence, the additions have been made without the existence of any incriminating material. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Abhisar Buildwell reported in 454 ITR 212(SC). It is not in dispute that the year under consideration is unabated assessment year as on the date of search. The ld AO in its assessment order had also categorically stated that the tally data was recovered from the premises of the entry provider Shri Gopal Bansal that entries have been provided to Haryana Constructions from Castle Realcom Pvt. Ltd. This goes to prove that no documents were found from the premises of the assessee or from the premises of M/s. Brij Gopal Construction Company Pvt. Ltd. This also goes to prove that no incriminating material was found as a result of search action conducted on anyone. Hence, the additions were made merely based on the survey material. The ld DR before us could not controvert the factual and legal 7. observation made by the ld CIT(A) and by the ld AR before us. The ld DR vehemently relied on the orders of the ld AO. The ld AR submitted that the issue in dispute is clearly covered by the coordinate bench decision of this Tribunal in the case of Brij Gopal construction company Pvt. Ltd & Anr vs DCIT in to 2773/Del/2023, ITA Nos. 2751 to 2754/Del/2023 dated 04.09.2024. On perusal of the said judgment, we find that the revenue had raised the following grounds before the Tribunal reads as under:-
1 The Id. CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 27,23,39,640/-made by the Assessing Officer u/s 68 of the Act. 2 The Id. CIT(A) has erred on facts in law in deleting the disallowance of Rs. 81,70,189/-made by the Assessing Officer u/s 69C of the Act 3 The Id. CIT(A) has erred on facts and in law in holding that the impounded material in the form of tally data did not pertain to Gopal Bansal. 4 The Id. CIT(A) has erred is not regarding the fact that the impounded data in the form of tally data was authentic as it contained the name of the assessee, transactions through banking channels as well as cash transactions. 5 The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
On perusal of the order passed by this Tribunal on 04.09.2024 in the 8. case of Brij Gopal Construction Company Pvt. Ltd, we find in that case also additions were made by the ld AO by placing reliance on the tally data impounded from Shri Gopal Bansal in the survey proceedings. The grounds raised by the revenue in the case of Brij Gopal Construction Company Pvt. Ltd were disposed of by this Tribunal by making the relevant observations which are reproduced below:-
18. Considered the rival submissions and material placed on record. We observe that the addition was made in the hands of the assessee without their being any incriminating material found and merely relied on the material found in the premises of Shri Gopal Bansal in the survey proceedings. We observe that the Hon'ble Supreme Court in the case of Abhisar Buildwell [supra] has set at rest the entire quarrel revolving around the assessments devoid of incriminating material. The relevant findings read as under: "In view of the above and for the reasons stated above, it is concluded as under:- i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A, Page | 6 ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO wald assume the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and 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 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 Section 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. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.
Insofar as the aforesaid Civil Appeals pr. erred by the assessee - M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 06.09.2016 passed in 269/2014, 15/2015, 16/2015, 268/2014 and 17/2015, as also, against the order dated 21.09.2017 passed in the review application It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under Section 143(1)(a) or 143(3) of the Act, 1961 and to re- assess the total income taking notice of undisclosed income even found during the search and seizure operation. 15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating materia! during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was available at the time of original assessment does not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee M/s Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs."
Considering the facts on record in totality, we are of the considered view that the additions in the hands of assessee company has been made without there being any incriminating material found from their premises at the time of search. Therefore, following the decisions of the Hon'ble Supreme Court in the case of Abhisar Buildwell [supra], we delete the addition which has no relevance of any incriminating material.
Application u/r 27 of the ITAT Rules in the case of the assessee is allowed and accordingly, appeal filed by the revenue is dismissed.”
Further, we find that this Tribunal in the case of DCIT Vs. Rudbera 9. Yadav Developers Pvt Ltd in 2758/Del/2023 dated 28.02.2025 had also considered the addition made by the ld AO u/s 68 of the Act based on impounded material in the form of tally data of Gopal Bansal, wherein, the Tribunal by placing reliance on its decision rendered in the case of Brij Gopal construction company Pvt. Ltd dated 04.09.2024 referred (supra) dismissed the grounds of revenue.
Respectfully following the aforesaid decisions, the Ground No. 4 raised by the assessee in the instant cross objection before us is hereby allowed and the additions made are hereby deleted. Further, we find that the assessee had also taken a plea that no 11. search u/s 132 of the Act was conducted at the registered address of the assessee company. In absence of search being conducted on the assessee, proceeding u/s 153A of the Act could not be initiated on the assessee. Accordingly, any action as could be proposed on the assessee Page | 8 could only be u/s 153C of the Act if there is any incriminating material found during the course of search of 3rd person wherein, certain documents/ information belong, relate and pertain to the assessee were found. We have already held in the previous ground that the additions were made based on the impounded tally data of Shri Gopal Bansal during survey proceedings, which goes to prove that there was no incriminating material found as a result of search proceedings. Since, there is no incriminating material found as a result of search there cannot be any initiation of proceedings on the assessee even u/s 153C of the Act. The ld AR also placed on record the copies of Panchnama drawn on 12. various entities in the Paper Book which are as under:-
Sr. Premises Name of entities as per Date of Pages of Paper No. panchnama panchna ma Book-IV Shop No. 201-206, 2nd Floor, Vikas 0 14.2.2021 M/ Brij Gopal Construction 787-801 Surya Shopping Mall, Rohini, Plot Company (P) Ltd. 14.4.2021 802-807 NO. 18, Manglam Pice, Sector-3, Rohini 4th Floor, Vikas Surya Shopping Mall, ii) 14.2.2021 808 - 820 Plot NO. 15, Manglam Place, Sector- 11.4.2021 821 -826 3, Rohini, New Dlehi iii) Sikandra Rao, Near Aligarh, U.P. Brij Gopal Constrution 13.2.2021 827 - 836 Company Site Office 9.4.2021 837 - 844 iv) Kali Mata Mandir, Ashok Vihar, 13.2.2021 845 - 855 Phase-2, New Delhi 10.4.2021 856 - 862 v) 12.2.2021 E-3/73, Second Floor, Arera Colony, Yogesh Agarwal (Supervisor 865 - 870 Bhopal MP in Brij Gopal Construction 8.4.2021 871 - 874 Group) vi) R.U. 432, Pitampura Mohit Dave (In the case of 13.2.2021 875 - 890 M/s Brij Gopal Construction Company (P) Ltd.) vii) 11.2.2021 Main Entrance gate/Door of A- 7/2, Order u/s 132(3) of the Act at 883 - 885 Shivaji Apartment Sector- 14, Rohini, Main Entrance gate/Door of Delhi M/s Brij Gopal Construction Company (P) Ltd.) viii) A-7/4, Shivaji Apartment Sector-14, 11.2.2021 886 - 890 Rohini, Delhi ix) 144, Bhera Enclave, Paschim Vihar, 14.2.2021 891 - 931 New Delhi 10.4.2021 932 - 944 x) Penthouse- 2 A Block Sagar Premium 13.2.2021 945 - 959 Towers, Phase-II Bhopal xi) C-8/8, Sector-85, Faridabad, Haryana 12.2.2021 960 - 972 xii) Locker No. 59, Indian Overseas Bank, 25.3.2021 971-972 NHPC Branch, Sector-33 Faridabad 9.4.2021 973 - 975 xiii) Sector-12, Sonipat, Haryana 976 - 980 xiv) 325, TF, Block-B, Plot-7, Vardhman 12.2.2021 981-1002 Grand Plaza, Manglam Place, Sector- 3, Rohini, Delhi xv) LD-36, Shalimar Bagh, Pitampura, 13.2.2021 1003-1013 Delhi xvi) LD-36, Shalimar Bagh, Pitampura, 5.4.2021 1014-1021 Delhi xvii) Locker No. 326, Bank of Baroda, 23.3.2021 1022-1029 Vishaka enclave, Pitampura, Delhi 9.4.2022 1030 -1033 xviii) Locker No. 126 ICICI Bank, Sector - 12.4.2021 1034-1037 14, Rohini xix) Locker No. 130 ICICI Bank, Sector - 12.4.2021 1038-1041 14, Rohini xx) Locker No. 148 ICICI Bank, Sector - 12.4.2021 1042 -1045 14, Rohini xxii) Locker No. 529 Punjab National 9.4.2021 1046 - 1050 Banbk, Prashant, Vihar, Sector-14, Rohini On perusal of the above, it could be noticed that there was no 13. search carried out / conducted in pursuance of the warrant issued in the name of assessee. As stated earlier, the registered office address of the assessee company is 14 Maria, Plot No. 7P, Sector-47, Urban Estate, UE029 Gurgaon 122001, Haryana, India where all the books of account and other documents were kept. No search operation were carried/ conducted in the said registered office address of the assessee and no panchnama was drawn in the name of the assessee for the said address. It is pertinent to note that the aforesaid address of the registered office has been duly mentioned by the assessee company and by the revenue in all the statutory documents such as regular income tax returns filed, income tax assessment orders, various notices issued by the ld AO in the course of assessment proceedings, records of Ministry of Corporate Affairs, Govt. of India etc. Hence, we hold that there is no valid assumption of jurisdiction u/s 153A of the Act by the ld AO. Reliance in this regard has been rightly placed on the decision of the Hon‟ble Jurisdictional High Court in the case of CIT Vs. Sarvamanglam Builders & Developers Pvt. Ltd Vs. ACIT in ITA 943/2015 dated 11.12.2015 wherein, it was observed as under:-
"6. The short point arises for consideration whether the ITAT erred in holding that the proceedings under Section 153A of the Act initiated against the Assessee was bad in law since the premises which were searched under Section 132 were not of the Assessee.
The ITAT has noted as a matter of fact that the premises that was searched i.e. 3rd floor, Global Arcade, M.G. Road, Gurgaon was not of the Assessee. There was nothing on record to connect the Assessee with the premises searched. Therefore, qua the Assessee, the proceedings under Section 153A was invalid. This being a factual aspect, no question of law arises.”