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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
सुिवधई की तधरीख/Date of hearing: 27.09.2023 घोर्णध की तधरीख/Pronouncement on: 30.10.2023 O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee feeling aggrieved by the order of Commissioner of Income Tax (Appeals) – 11, Hyderabad invoking proceedings under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short, “the Act”).
The grounds raised by the assessee read as under :
“1. That Ld CIT(A) erred in law and on facts in confirming the assessment order and dismissing the appeal filed against the assessment order.
2. That Ld.. CIT(A) erred in not holding that the notice issued u/s. 153A by the Ld. AO is bad in law as the proceeding initiated by issue of notice u/s. 148 was pending as on the date of issue of notice u/s 153A.There cannot be two assessment proceeding for the same assessment year on the same issue.
3. That Ld.CIT(A) erred in not holding that the issue of notice u/s 153A is bad in law as no incriminating material was found during the search.
4. That Ld.CIT(A) erred in upholding disallowance of claim of exemption and adding the same u/s 68 in the proceeding u/s 153A read with sec. 143(3) though no incriminating materials were found in course of search.
5. That Ld.CIT(A) without appreciation of facts and without proper application of law erred in upholding denial of exemption of Rs.1,19,53,375/ claimed u/s 10(38) and conforming addition of the same u/s 68 of the Act.
6. That Ld.CIT(A) erred in holding the entire capital gain as unexplained cash credit u/s 68 though the appellant with documentary evidence has discharged onus of proving the identity, genuineness of transaction and credit worthiness of the appellant.
7. That Ld. CIT(A) ought to have appreciated the fact that in the given fact and circumstances of the case the unaccounted cash income alleged to have been brought in the form of exempt Long Term Capital Gain cannot be taxed in AY 2012-13.
8. That Ld. CIT(A) erred in upholding the order of the AO which was passed without issuing a show cause notice when the AO has not found anything wrong in the documentary evidence filed in support of the transaction and claim of exemption u/s. 10(38).
9. That Ld.CIT (A) erred in holding that transactions of purchase and sale of shares by the Appellant are bogus and aimed at taking benefit of exemption of long term capital gain.
10. That Ld CIT(A) erred in holding that the statements recorded on oath from different persons in respect of transaction by other beneficiaries without any reference to the appellant are evidence against the appellant 11. That Ld. CIT(A) erred in rejecting the claim of the Appellant on the basis of certain finding by the Investigating Officers in respect of other persons and not in respect of the appellant. The statement of persons which form basis for disallowance of claim of exemption and addition u/s. 68, were not against the appellant. there is absolutely no reference to the appellant in their statement or in the report of the investigation wing. 12. That Ld. CIT(A) erred in upholding disallowance of the claim of the appellant on the basis of statement of some unconnected persons without allowing the appellant opportunity of cross-examining them. The order of assessment denying the claim of exemption and adding the same u/s. 68 is bad in law as held by Hon'ble Supreme Court in the case of Andaman Timbers Industries vs CCE. 13. That Learned CIT(A) erred in law and on facts in upholding order of the AO which was based merely on suspicion, surmise, and conjecture without any iota of corroborative evidence against the appellant as against all the documentary evidence filed by the Appellant in support of his claim which have not been found to be wrong of fabricated. On this ground the 14 CIT(A) ought to have allowed the claim and deleted the addition.”
Facts of the case, in brief, are that the assessee filed his return of income for AY. 2012-13 on 29.09.2012 declaring total income of Rs.21,11,590/-. Search and seizure operations under Section 132 of I.T. Act was carried out in the case of M/s. Clarion Agro Products Pvt Ltd and others on 02.05.2018 in which the assessee was a Director. Consequent to search, the assessee’s case was centralized and a notice u/s 153A dt.02.04.2019 was issued to the assessee and in response to the notice u/s 153A, the assessee filed his return of income on 02.03.2020 declaring total income of Rs.21,11,590/-. Thereafter, the Assessing Officer had completed the assessment u/s 143(3) r.w.s. 153A by denying the claim of exemption u/s 10(38) of the Act amounting to Rs.1,19,53,365/- and adding the same as unexplained cash credit u/s 68 of the Act and thereby assessed the total income of the assessee at Rs.1,40,64,965/-.
Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who dismissed the appeal of assessee by observing as under :
“The ground no.2 pertains to contention of the appellant that 2 assessment proceedings were pending for the same year on same issue. In this regard, it is to be noted that notice u/s 148 was issued to the appellant based on information received regarding bogus claim of LTCG u/s 10(38). Subsequently, the case "was centralised and accordingly the notice u/s 153A was issued to the appellant following due procedure as the search was conducted on the appellant. Further, it is also to be noted that there is no prejudice caused to the appellant on account of pursuing only assessment proceedings u/s 153A. The Assessing Officer has a1s0 clearly brought this to the notice of the appellant and stated that the proceedings u/s 148 is abated. Further, the appellant has also contended in ground no.2 and 3 that there is no incriminating material found during search. In this regard, it is important to note that the execution of warrant makes it obligatory on the part of the. Assessing Officer to initiate proceedings u/s. 153A. It is also important to note that initiation of Search proceedings results in an automatic initiation of notice u/s 153A and there is no mention of the seized material by the legislature in the Section 153A. Further, there is no mention of the concept of undisclosed income in Section 153A as it was in the case of Section 158B. The procedure for Search assessments has been introduced in the form of Section 153A and section 158B and others as mentioned in Chapter XIV-B which was a special procedure is no longer applicable. The Section 158B to 158BI had the concept of undisclosed income and which was further based on document's or incriminating material. The legislature has introduced the new provision u /s. 153A w.e.f. 01.06.2003 which mandates assessment for the stipulated years Without drawing any satisfaction and only on the basis of initiation of search action u/s 132. The concept of undisclosed income has been made consciously absent as can be seen on the comparison of both the provisions and procedure, the same thus implies that the Assessing Officer is mandated to complete assessment per law and is not bound or limited to undisclosed income or seized material.
Anything which is clearly absent in the provision and importing the same without any reference or justification is completely arbitrary and beyond the scope of the provision especially when the concept of abatement of pending proceedings have been provided in the Act. There is no mention that whatever has been seized has to be only used in the proceedings u/s 153A, once there is nothing of this sort mentioned, then it is only an imaginary belief that the reliance has to be only placed on seized material. The Assessing Officer is duty bound to issue notice u/s 153A, irrespective of seizure. It is also mentioned that all pending proceedings of the above years shall abate and the proceedings are to be initiated afresh u/s. 153A. The above implies that once a search warrant is executed, the assessment as provided u/s. 153A is mandatory and all other assessment years pending for those years shall abate. Thus, if there was a notice u/s. 148 issued in any of the above years prior to the date of issue of notice u/s. 153A (obviously the reasons as are, prior to Search, are not based on seized material) then the reasons so recorded leading to any addition in the reopened years naturally has to be made u/s. 153A, as the proceedings u/s 148 has abated and therefore seized material cannot be a limiting factor of Assessing Officer's jurisdiction to assess u/s 153A. The section 153A(2) makes it further explicit that in case of 153A getting annulled then the pending proceedings u/s. 148 or any other section will revive. Thus, it is clear that the pending proceedings which were not based on seized material are to be merged for the assessment years mentioned u/s.153A and the assessment has to be made considering the same to be an open proceedings based on seized material and any other material. The section 153A does not limit the jurisdiction of the Assessing Officer to the seized material rather it very clearly provides from the abatement of pending proceedings as a kind of assessment which could be made based on records and seized material or either. It is very clear that the parliament did not desire that two proceedings for the two assessment years to be continued in the case of any appellant causing hardship and also confusion. Therefore it has been very clearly provided that the pending assessment proceedings to abate and only one proceeding to continue as provided u/s. 153A. The above also implies that if there is any subsequent information received pending the completion of assessment proceedings u/s. 153A or information other than seized material available before the initiation of notice u/s. 153A for which the. Assessing Officer was contemplating issue of notice u/s. 148 would also merge with the proceedings u/s. 153A. Otherwise, it would be an exercise of initiating u/s. 148 and then issuing u/s. 153A and dropping the initiated proceedings .u/s. 148 which would be a just unnecessary paper work. However, the above discussion has been made just for explanation, the section 153A is very clear and it is an obligation on the part of the Assessing Officer to initiate 'proceedings without any discretion or judgment. it is mandatory on the part of the Assessing Officer to initiate the proceedings as provided u/s. 153A as it is mentioned the Assessing Officer shall in the said section, which leaves no room for interpretation. Thus, the Assessing Officer is empowered and rather obliged to make additions as a regular assessment also while completing the assessment proceedings. Further, without prejudice to the above contention, in the present case, there is incriminating material in the form of the various statements and documents gathered by the Investigation Wing along with the SEBI report and also the fact that during the course of Search the appellant, in the statement recorded could not even give basic details of the transaction which resulted in the claim of exempt income u/s 10(38) as already discussed while disposing the grounds above. The Assessing Officer, during the course of assessment proceedings, has used the report of the Investigation Wing regarding the fraudulent activity of tax evasion by the appellant and also it is worthwhile to note that the. same was also one of the reasons which lead to the Search action u/s 132 on the appellant and during the course of Search proceedings, the appellant's statement was recorded regarding the same and the appellant could not reply to the transaction entered into by its own individual name. The incriminating act done by the appellant was brought out because of the report of the Investigation wing and thus would constitute, through the statement recorded as incriminating material in the case of the appellant by default. The Assessing Officer has used the same in the assessment order to reach the conclusion which has already been discussed in detail. The appellant further has stated that all the details about share transactions were recorded in the books would not constitute as incriminating material. The above contention is bizarre and silly as the transactions recorded in the books are not bonafide and are sham transactions and the Assessing Officer has proved the same beyond doubt on the basis of evidences gathered. The Act on the part of the appellant to project a sham.. transaction as a bonafide transaction not liable for tax is an incriminating act and also an incriminating presentation of the transaction and therefore would surely constitute incriminating material in the case of the appellant, Therefore, the ground nos. 2 and 3 are dismissed. The part dismissal of ground no.3 regarding addition u/s 68 has already been dealt within the above discussion regarding ground nos.4, 8 and 9.”
The learned AR for the assessee has drawn our attention to the written submissions filed by the assessee (placed at Page 17 of Paper Book – I) wherein it was submitted that no incriminating evidence was found or seized during the course of search on 02.05.2018 pertaining to the Long-Term Capital Gain for A.Y. 2012-13 and therefore, no addition can be made in the hands of the assessee. For the above said proposition, ld. AR had relied upon decision of the Hon'ble Delhi High Court in the case of CIT, Central – III Vs. Kabul Chawla reported in (2016) 380 ITR 573 and also various decisions mentioned at page 17 of his written submissions.
5.1. With respect to disallowance of claim of exemption u/s 10(38) and confirming addition of the same u/s 68 of the Act, ld. AR of the assessee has drawn our attention to his written submissions (placed at page No.19 of Paper Book – I) and submitted that assessee has filed all the documentary evidence mentioned at page 19, however the Assessing Officer has rejected the claim of exemption without finding any defect in the documentary evidence filed by the assessee and the Assessing Officer relied only on the statements of some persons in respect of transaction by other beneficiaries, recorded by the Investigation Wing at Kolkata and held that the shares are not genuine and preplanned with the help of entry operators. Ld.CIT(A) confirmed the action of Assessing Officer in this regard relying upon various decisions like CIT Vs. Durga Prasad More, Sumati Dayal Vs. CIT reported in 214 ITR 801 (SC) etc.
On the other hand, ld. DR submitted that the learned DR submitted that the statement recorded by the Investigation Team are binding and is an incriminating material as held by the learned CIT (A). Ld. DR further submitted that the order passed by the Assessing Officer as well as the Ld.CIT(A) are in accordance with law and no interference is required.
We have heard the rival submissions of the parties and perused the material on record. The Assessing Officer in paragraph 8.0 had noted that survey action u/s 133A of the Act was conducted by the Directorate of Investigation, Kolkata on various share brothers during which the share-brokers has accepted the role in providing the accommodation entries. In table reproduced at para 8.0, the name of the assessee namely, Shri Kanishk Gupta has not been mentioned, in the statement so recorded by the Assessing Officer and reproduced in the assessment order. In fact, during the course of search, no incriminating material pertaining to the Long Term Capital Gain was found in the premises of the assessee and the entire addition made by the Assessing Officer were based on the report of the Investigation Wing, Kolkata pursuant to the survey action carried out in the premises of the broker.
Recently, we had an occasion to examine an identical issue in the case of Jitender Kumar Gupta and another Vs. A.C.I.T Central Circle 3(1), Hyderabad in dated 17.10.2023 wherein we have held as under:
“17. We have heard the rival submissions and perused the material available on record. The Assessing Officer in paragraph 18 had noted that survey action u/s 133A of the Act was conducted at the premises of the share-broker and the share- broker has accepted the role in providing the accommodation entries. In table reproduced at para 8, the name of the assessee namely Shri Jitender Kumar Gupta and Shri Virender Kumar Gupta have not been mentioned, in the statement so recorded by the Assessing Officer and reproduced in the assessment order. In fact during the course of search, no incriminating material pertaining to the Long Term Capital Gain was found in the premises of the assessee and the entire addition made by the Assessing Officer were based on the report of the Investigation Wing, Kolkata pursuant to the survey action carried out in the premises of the broker.
Recently, we had an occasion to examine an identical issue in the case of Mahesh Reddy and others vs. ACIT in to 43/Hyd/2023 dated 1.8.2023 wherein we have held as under: 10. We have heard the rival submissions and perused the material available on record. It is an admitted fact that there is no reference to any incriminating material either by the Assessing Officer or by the ld.CIT(A) in their orders. The whole addition was made in the hands of the assessee on the basis of the search conducted by the Director of Investigation, Kolkata, in the premises of the Kolkata based share brokers wherein they have admitted that they were allegedly providing accommodation entries to various persons. However, the fact remains that no incriminating material was found during the course of search in the premises of the assessee. 10.1. In Paragraph 1.4 of the assessment order, assessee has categorically mentioned that no incriminating material constituting the tangible assets were found in the premises of the assessee. In our view, in the absence of any incriminating material, no addition can be made in the hands of the assessee. For the above said purposes, we may fruitfully reply upon the decision of Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra). The co-ordinate Bench of the Tribunal has an occasion to examine the applicability of the decision in the case of Abhisar Buildwell Pvt. Ltd. (supra) in the case of Preranaa Agarwal ITA 458/Hyd/2021 wherein the co-ordinate Bench of the Tribunal in Para 8.2 to 9.1 had held as under : “8. We have gone through the record in the light of the submissions made on either side. Insofar as the facts and figures are concerned, there is not much dispute. The return of income filed by the assessee for the assessment year 2013-14 on 27/07/2013 was processed under section 143(1) of the Act and notice under section 143(2) of the Act was never issued. By the date of search on 15/11/2018, four years elapsed after the last date for issuance of notice under section 143(2) of the Act in this case. It is also not the case of the Revenue that any incriminating material was found during the search that was considered by the learned Assessing Officer, but made the assessment. In these circumstances, the question that arises for consideration is whether any interference could be made with the concluded assessments while assessing the income under section 153A of the Act, when no incriminating material was found.
As stated earlier, the return of income filed by the assessee for the assessment year 2013-14 on 27/07/2013 was processed under section 143(1) of the Act by 30/09/2014. Neither notice under section 143(2) of the Act was issued nor any proceedings were pending as on the date of search. Though the divergent views taken on this aspect are brought to our notice by both the counsel, the Hon'ble Supreme Court put a quietus to the issue by the decision in the case of PCIT vs. Abhisar Buildwell P. Ltd. (supra). While in complete agreement with the view taken by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, (2015) 61 taxmann.com 412 (Delhi) and the Hon'ble Gujarat High Court in the case of PCIT Vs. Saumya Construction (2016) 387 ITR 529 and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material, Hon’ble Apex Court concluded that-
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; 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 would 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 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. 9.1. This decision applies to the facts of the case on all fours and respectfully following the same, we hold that since no incriminating material found in the case of assessee for the assessment year 2013-14, the concluded assessment cannot be disturbed and the addition made by the learned Assessing Officer and sustained by the learned CIT(A) cannot be upheld. We accordingly allow the appeal of assessee.”
11. In the present case, admittedly, no incriminating material was referred to by the Assessing Officer in the assessment order and the same is also in the case of ld.CIT(A). Therefore, in our view, no addition can be made in the hands of the assessee in view of the law laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra).
Further, the question that arises is as to whether the information collected by the Director, Investigation from the Brokers in the form of statement etc. form the basis for making the addition in the hands of the assessee or not ? In our view, the answer to that is also No, as no material has been brought to our notice either in the assessment order or in the order of ld.CIT(A) showing that the said brokers in their respective statements have indicated that they had provided the accommodation entries to the assessee. Ironically, the Assessing Officer in Para 7 of his order referred to the statement of Shri Kailash Prasad Dhyawala and also of Anil Kumar. However, in none of the said statements, the name of the assessee or the firm of AMR is reflected. Further, even if we assume that some information was found during the course of search at the broker’s premises at Kolkata showing that the assessee was beneficial with those accommodation entries, then the said material only can form basis for making the addition in the hands of the assessee under section 153C of the Act and not under section 153A. For the purposes of making addition u/s 153A of the Act, it is essential and sine qua non that during the course of search, some incriminating material must have been found from the premises of the assessee which shows the escapement of income. In the present case, no incriminating material was found during the course of search. Therefore, no addition can be made in the hands of the assessee. Furthermore, the 4th provision to section 153A reads as under : '(4) Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for 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; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.
Explanation 1.—For the purposes of this sub- section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.'.
The reading of 4th proviso to Section 153A of the Act, make it abundantly clear that the revenue officials shall not issue notice beyond a period of six years unless (1) Assessing Officer is in possession of books of accounts and (2) there are other documents or evidence which reveal that income reflected in the form of assets was escaped from assessment.
In the present case, the Assessing Officer was neither in possession of books of accounts nor other documents or evidence, at the time of reassessment which shows any escapement of amount reflected in the assets head. Admittedly, the term ‘Asset’ was defined under Explanation 2, which include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. In the present case, the assessee has purchased 5000 shares on 27.10.2009 and 14.12.2009 of M/s. Astha Tradelink Private Limited for Rs.400/- each. Thereafter, those 5000 shares were converted into 1,90,000/- shares of M/s. Twenty First Century Private Limited and the assessee sold part of the shares in A.Y. 2011-12 relevant to A.Y. 2012-13 and earned capital gains of Rs.5,96,11,906/-. Thus, during the assessment year, the column ‘Asset’ does not show either the investment in the immovable property being land or building or both, shares and securities, loans and advances. In the absence of any asset being in possession of the assessee, the Assessing Officer shall not have issued the notice to the assessee for making the addition u/s 153A of the Act. In view of the above, the addition made in the hands of the assessee is liable to be deleted.
There is one more reason to come to the conclusion that the Assessing Officer should have made more efforts to bring on record some tangible material besides the statement of the assessee namely, A. Mahesh Reddy to show that the assessee has agreed to pay the profit during the assessment year under consideration and would be ready to forego the claim made by the assessee at assessment stage during the course of original assessment proceedings.
In our view, the statement given by the assessee or the director of M/s. Twenty First Century Securities Limited, does not bind the assessee unless it is duly supported by the cogent incriminating material and we find merit in the arguments of the ld.AR who had relied on the decision of Hon’ble High Court of Andhra Pradesh in the case of CIT vs. Shri Ramdas Motor Transport Limited reported in (2015) 55 taxmann.com and also the decisions of hon’ble Delhi High Court in the case of PCIT Vs. Best Infrastructure (India) Pvt. Ltd., (supra), and CIT Vs. Harjeev Aggarwal reported in (2016) 70 taxmann.com 95 (Delhi), wherein at Paragraph 21, it was held as under : “21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other
evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded.” 16.1. In view of the above, all the legal grounds raised by the assessee are decided in favour of the assessee. We further note that we have not adjudicated the other grounds on merit as the assessee gets the relief on legal grounds. Thus, the appeal of the assessee is allowed.”
9. We find no reasons to divert from our findings as the facts of the present case are identical to that of Shri Jitender Kumar Gupta (supra) and further our above said decision is not stayed or over-ruled by any of the higher Judicial Forums.
In view of the above circumstances, we respectfully following the decision of the co-ordinate Bench of the Tribunal passed in the case of wherein we have already decided the issue in favour of the assessee, we allow the appeal of assessee. Accordingly, the appeal of assessee is allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the Open Court on 30th October, 2023.