ACIT, CENTRAL CIRCLE-3(1), HYDERABAD vs. VIRENDER KUMAR GUPTA, HYDERABAD

Facts of the case, in brief, are that the assessee is an individual having income from house property, capital gains, share income as partner in firms and other sources. He filed his return of income for the A.Y 2012-13 on 22.12.2012 declaring total income of Rs.26,07,520/-. Subsequently, a search operation u/s 132 was conducted on 2.5.2018 in the business premises of M/s. Jatinder Roller Flour Mills wherein the assessee is a partner. Notices u/s 153A was issued to the assessee for the subject A.Y and was duly served upon the assessee by e-mail and speed post. In response to the notices, the assessee filed his return of income admitting income of Rs.26,07,520/- on 23.04.2019. Later, the assessee filed his objections for issuing notice u/s 153A for the relevant A.Y being the 7th year from the search year which was disposed of by the Assessing Officer vide letter dated 31.07.2019. Thereafter, statutory notices u/s 143(2) and 142(1) were issued to the assessee to which the AR of the assessee appeared before the Assessing Officer and filed the requisite details.

The assessee is a partner in M/s. Jatinder Roller Flour Mills and has purchased 1200 shares of M/s. Dignity Suppliers Ltd for Rs.400/- each on 13.10.2009. Subsequently, as per amalgamation schedule, 1200 shares of M/s. Dignity Suppliers Ltd were converted into 45600 shares of M/s. Twenty First Century Pvt Ltd. Out of 45600 shares of M/s. Twenty First Century Pvt Ltd, the assessee has sold 33500 shares on different dates relevant to A.Y 2012-13 for Rs.1,08,34,445/- and claimed Page 2 of 23 the resultant Long-Term Capital Gain of Rs.1,04,81,814/- as exempt u/s 10(38) of the I.T. Act.

The Assessing Officer disallowed the claim of Long Term Capital Gain u/s 10(38) and assessed the same as unexplained cash receipt u/s 68 of the I.T. Act Accordingly, the amount of Rs.1,04,81,814/- introduced/credited by the assessee against the sale of scripts of above mentioned Twenty First Century India Ltd during the financial year 2011-12 (A.Y 2012-13) in his capital account as his income being unexplained cash credit u/s 68 of the Act. The Assessing Officer also initiated separate penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income.

In appeal, the learned CIT (A) upheld the action of the Assessing Officer by observing as under:

Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal by raising the following grounds:

The learned Counsel for the assessee while drawing our attention to Grounds 2 to 6 contended that in the appellate proceedings the assessee had raised a specific ground with respect to absence of incriminating documents and submitted that no addition can be made in absence of any incriminating documents u/s 153A of the Act. For the above proposition, the assessee has taken ground No.2 to 6 before the learned CIT (A). He further submitted that the learned CIT (A) in para 3 of his order has duly recorded this fact. However, the learned CIT (A) dismissed the grounds raised by the assessee on legal ground as well as on merit.

The learned Counsel for the assessee drew our attention to the return of income filed for the A.Y 2012-13 to page 3 wherein it was pointed out that the assessee has claimed exemption u/s 10(38) for the Twenty First Century India Ltd shares (3350 shares).

The learned AR further relied upon the decisions of the Hon'ble Delhi High Court in the case of Chintels India Limited (397 ITR 416) and Punjab & Haryana High Court in the case of Vipin Khanna wherein it was observed that no addition can be made after a period of 4 years since no notice u/s 143(2) was issued within a period of 4 years. He further submitted that the search took place in the business premises of M/s. Jatinder Roller Flour Mills on 2.5.2018 and during the course of search, the team has drawn a panchanama at page 38 of the paper book which was found and seized are duly mentioned.

The learned AR submitted that after the search, the statement of the assessee was duly recorded by the Investigation Wing wherein the assessee had clarified that no bogus Long Term Capital Gain claim was claimed by the assessee and the transaction was genuine and through proper banking channels. He also drew our attention to page 30 (Question No.47 & Answers) to that effect.

The learned AR fairly submitted that thereafter under the duress and pressure, the assessee was forced to forego the claim u/s 10(38) in the statement recorded on 14.6.2018 and our attention was drawn to question No.9 which is to the following effect.

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.”

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 Page 19 of 23 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 :