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Facts
A search and seizure operation uncovered details of expenditures incurred by the assessee and three other individuals on real estate projects. The Assessing Officer (AO) made additions based on these expenditures, treating a portion as unexplained income on a protective basis. Additionally, a cash deposit in the assessee's bank account was added.
Held
The Tribunal held that the alleged expenditures were already recorded in the books of account of associated companies and that no incriminating material was found concerning the cash deposit for a completed assessment year. The deletion of additions by the CIT(A) was upheld.
Key Issues
Whether additions made on a protective basis on account of alleged unexplained expenditure found during a search, when such expenditure is recorded in the books of associated entities, are valid. Also, whether additions can be made for cash deposits in a completed assessment year without incriminating material.
Sections Cited
250, 69A, 132, 132A, 153A, 147, 148
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL
Assessee by Shri Charitra Gupta, CA and Shri Deepak Garg, CA Department by Shri Dayainder Singh Sidhu, CIT-DR Date of Hearing 19/05/2025 Date of Pronouncement 06/06/2025 O R D E R PER MANISH AGARWAL, AM: These four appeals are filed by the revenue against separate orders of ld. CIT(A) in the case of Shri Harjeet Singh and Shri Joginder Singh for AY 2013-14 and AY 2014-15. Assessee in the case of Shri Harjeet Singh also filed cross objections for both the assessment years. Since the issues involved in all the appeals and cross objections are common thus, these are taken together and are decided by a common order.
2. First, we take revenue’s appeal in for Assessment Year 2013-14 and Cross objection No. 153/Del/2022 in the case of Shri Harjeet Singh.
3. This appeal is filed by the Revenue against the order of learned Commissioner of Income Tax (Appeals)-30, New Delhi [ld. CIT(A), in short], dt. 31.08.2021 in appeal No. 10339/2019-20 for Assessment Year 2013-14 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short).
Brief facts of the case are that assessee is an individual and filed his return of income on 05.08.2013 declaring total income of Rs.15,26,340/-. A search and seizure operation was carried out on14.09.2017 at various places belonging to SRC group of companies, its directors and other related entities and assessee is & Ors. DCIT Vs. Harjeet Singh also one of them whose business/residential premises was also covered. The assessee is engaged in the business of Real Estate and was doing various projects at Dudhola, Sector 49, Part-1, Project, Mirapur-Bhagola Project etc. The AO observed that assessee alongwith Sh. Rajesh Chaudhary, Joginder Singh and Sh. Manish Goyal had incurred total expenses of Rs. 99,69,66,479/- on these projects out of which Rs.43,55,23,594/- were recorded in the books of account and the balance Rs.55,14,42,885/- were incurred by the four persons namely Sh. Harjeet Singh (assessee) Rajesh Choudhary, Manish Goyal and Joginder Singh out of undisclosed sources. The AO also make reference loose papers found and seized during the course of search bearing No.15,17,18,19,29,32-35 of Annexure A-6 found and seized during the course of search at 333, Sector -15, Faridabad. The assessee stated that all these expenses were incurred by Shri Subhash Chaudhary whose case of pending before the hon’ble Income Tax Settlement Commission (ITSC), therefore no addition is required to be made in the case of the assessee. After considering the submissions, the AO concluded that assessee alongwith three individuals as named above has incurred expenditures of Rs.55,14,42,885/- out of unaccounted/undisclosed sources which were not recorded in the books of account and therefore, 25% of the same i.e. Rs.14,03,60,721/- was added in the hands of the assessee on protective basis. The AO further observed that assessee has made cash deposit of Rs.16 lacs in his bank account with Axis Bank on 31.12.2012 out of undisclosed sources and, therefore, the addition of this amount of Rs.16 lac was also made u/s 69A of the Act to the total income of the assessee. Against such order, the assessee preferred the appeal before the Ld. CIT(A) who vide impugned order dated 31 st August, 2021 have partly allowed the appeal wherein both the additions made were deleted & Ors. DCIT Vs. Harjeet Singh by Ld. CIT(A). Against which the Revenue is in appeal before the Tribunal.
The Revenue has taken following grounds of appeal:-
1. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 14,19,60,721/- made by the AO.
2. The Ld. CIT(A) has erred in law or facts in giving relief to the assessee inasmuch as the contents of impugned seized material has been considered by Ld. CIT(A) in the hands of group entities instead of the assessee i.e. Sh. Harjeet Singh whereas the impugned seized documents clearly show that the total expenditure amounting to Rs. 55,14,42,885/ - were incurred by the four persons namely Sh. Harjeet Singh, Sh. Rajesh Chaudhary, Manish Goyal, and Joginder Singh.
3. The Ld. CIT(A) has failed to appreciate that Shri Subhash Chaudhary, in his affidavit filed before ITSC, owned up the impugned seized material to explain the same, but in contradiction, the same has been explained in reference to his group entities and the unexplained expenditure has not been included in his income offered before ITSC and the application is still pending for adjudication before the Hon'ble Income Tax Settlement Commission.
4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.16,00,000/- made by the AO on account of unexplained cash deposited by the assessee in his bank account by the assessee.
5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition relying on the decision of Kabul Chawla, without appreciating the fact that the Hon'ble Supreme Court of India has admitted SLP vide Diary No. 37848/2015 in the case of APAR Industries Ltd. decided by Hon'ble Bombay High Court in of 2013 dated 08.05.2015 which is a led cases tagged with more than 115 issues on the issue of restriction of additions only to incriminating materials found during search. Therefore, withdrawal of SLP in the case of Kabul Chawla on account of Low Tax Effect leading to reporting of dismissal SLP by Hon'ble Supreme Court is mitigated by admission SLP by Hon'ble Supreme Court in the case of APAR Industries Ltd as mentioned above, tagged with 115 cases as a lead case.
6. That the order of Ld. CIT(A) is perverse, erroneous and is not tenable on facts and in law.
7. That the grounds of appeal are without prejudice to each other.
8. The appellant craves leave to add, alter or forgo any ground(s) of appeal either before or at the time of the hearing of the appeal.”
6. The assessee has also filed Cross Objections where the assessee has challenged the assessment order on the issue of DIN, however, during the course of hearing, the Ld. AR has not pressed
In support of the grounds of appeal Nos. 1 to 3 taken by the revenue, the Ld. CIT-DR vehemently supported the order of AO and submitted that the matter was subjudice before the Hon’ble ITSC and, therefore, the additions made by AO deserves to be restored.
8. At the outset, the Ld. AR of the assessee drew our attention to para 9.10 and 9.11 of the appellate order wherein the Ld. CIT(A) has referred the remand report of the Assessing Officer accepting the fact that the expenses under dispute were duly recorded in the books of accounts of companies namely M/s SRC Builtech Pvt. Ltd., SRC Realtech Pvt. Ltd., Pyramid Buildtech Private Limited and SRC International Private Limited. The Ld. CIT(A) further observed that these expenses were verified that the stage of Income Tax Settlement Commission (ITSC) by the revenue and, thereafter no negative interference was drawn. The relevant observations of Ld. CIT(A) in para 9.10 and 9.11 are as under: “9.10 Reference is also invited to the remand report of the AO as reproduced above, where in the AO had stated that the AO made detailed verification of the said said pages i.e. Page -15, 17, 18, 29, 32-35 of Annexure A-6 found and seized from the premises at 333, Sector-15, Faridabad during the course of verification done under Sec 245D(3) of the Act and a report dated 07/01/2021 was submitted to the Income Tax Settlement Commission (ITSC), which also forms part of the remand report. As per the said remand report, the AO has reproduced the relevant part of the verification done by him in respect of the impugned page wherein Mr Subhash Chaudhary has stated that the said pages forms part of the books of account of the SRC Buildtech Private Limited, SRC Realtech Private Limited, Pyramid Buildtech Private Limited and SRC International Private Limited and also filed ledger accounts for the same. AO in the said remand report had further stated that the submission filed with this office had already been verified at the verification stage of the ITSC and that after verification no negative inference was drawn in respect of the said page. On perusal of the said remand report, the ledger accounts and other documents, it is apparent that the impugned transactions as appearing in the Page-15, 17, 18, 29, 32-35 of Annexure A- 6 are recorded in the regular books of M/s SRC Buildtech Private Limited, SRC Realtech Private Limited, Pyramid & Ors. DCIT Vs. Harjeet Singh Buildtech Private Limited and SRC International Private Limited. It is thus evident that firstly the impugned pages i.e. Page-15, 17, 18, 29, 32-35 are not related to Mr. Rajesh Chaudhary and secondly the transactions mentioned in the seized material were duly recorded and explained in the hands of regular books of M/s SRC Buildtech Private Limited, SRC Realtech Private Limited, Pyramid Buildtech Private Limited and SRC International Private Limited. Thus, the AO in correctly added the impugned amounts without proper verification as undisclosed income in the hands of the Appellant. 9.11 From the analysis of the facts gathered during the course of search, submissions filed by the Appellant during the appellate proceedings, it is clear that 1. The impugned pages i.e. 15, 17, 18, 29, 32-35 as discussed above belongs to the respective entities and not to the Appellant.
The figures appearing in the said impugned pages are part of the books of account of respective entities.
The working of unexplained expenditure as done by the AO in the Assessment Order is not correct.”
The Ld. AR further submitted that in the case of company M/s SRC Realtech Private Limited, M/s Pyramid Buildtech Pvt. Ltd. and M/s SRC Builtech Pvt. Ltd. for Assessment Year 2012-13 in 1312/Del/2021 and 1315/Del/2021 respectively, the additions were made on the basis of same documents which stood deleted by ld. CIT(A) and such orders of ld. CIT(A) stood confirmed by the Co-ordinate Bench of the Tribunal vide its order dated 07.03.2025 by making following observations: “5. We have heard the rival submission in the light of material available on record. We have noted that Ld. CIT(A) has comprehensively analysed the entries found in the seized incriminating documents with the, agreements entered and books of account of the assesse. He has also considered the remand report of the Ld. AO as well as communication made by the PCIT (Central)-3, New Delhi, before the settlement commission, before concluding that no case of any addition of an unaccounted income is made out against the assesse. Thus, seen no blame of any erroneous decision, of deleting the addition of Rs. 2,74,40,000/-made by the Ld.AO, for A.Y. 2012-13, in respect of M/s SRC Buildtech Pvt. Ltd, SRC Realtech Pvt. Ltd. and Pyramid Buildtech Pvt. Ltd., can be placed upon the Ld. CIT(A). Accordingly, we are of the considered view that there is no case for any interference to be made to the order of Ld. CIT(A). Accordingly, the action of Ld. CIT(A) in deleting the addition of Rs. 2,74,40,000/- made by the Ld.AO, for A.Y. 2012-13, in respect of M/s SRC Buildtech Pvt. Ltd, SRC Realtech Pvt. Ltd. and Pyramid Buildtech Pvt. Ltd., challenged by the revenue vide & Ors. DCIT Vs. Harjeet Singh ITA No.- 1307/Del, 1312/and 1315/ is confirmed and the ground of appeal
raised by the Revenue are dismissed.”
10. The Ld. AR thus prayed that since the additions made on account of alleged undisclosed expenditure of Rs.14,03,60,721/- were already recorded in the books of accounts of the aforesaid four companies which fact has already been examined and verified by the Assessing Officer during remand proceedings and no adverse interference was called for with respect to the same, therefore, the Ld. CIT(A) has rightly deleted the additions and he prayed for the confirmation of the order of Ld. CIT(A).
11. After considering the arguments of both the parties and perusing the material available on record. In the instant case, we find that the additions were made by the AO based on the basis of loose papers found and seized during the course of search which contained the details of expenditure incurred at various worksite by the assessee along with three other persons totaling to Rs. 99,69,66,479/- out of which Rs.43,55,23,594/- were recorded in the books of account and the balance Rs.55,14,42,885/- were incurred out of undisclosed sources by the assessee alongwith three other persons namely Shri Rajesh Chaudhary, Shri Manish Goyal And Shri Joginder Singh. The AO by alleging that assessee is having 1/4th share in such expenses and thus made the addition of Rs.14,03,60,721/- (being 25% of total alleged undisclosed expenditure) as unexplained expenditure in the hands of the assessee on protective basis.
12. The Ld. CIT(A) by observing that those expenses were duly recorded in the books of accounts for four entities namely M/s SRC Buildtech Private Limited, M/s SRC Realtech Private Limited , M/s Pyramid Buildtech Private Limited and M/s SRC International Pvt. Ltd. deleted this additions. The Ld. CIT(A) made this finding on the basis of remand report submitted by the Assessing Officer wherein it is observed by the AO that the necessary verification & Ors. DCIT Vs. Harjeet Singh was made at the stage of ITSC and no negative interference was drawn with respect to the transactions noted in these papers which were duly recorded and unexplained by the abovesaid companies. It is further seen that in the case of three companies namely M/s SRC Buildtech Private Limited, M/s SRC Realtech Private Limited and M/s Pyramid Buildtech Private Limited, the Co-ordinate Bench of the ITAT has dismissed the appeals of the Revenue by observing that this expenditure were duly recorded by in the books of those companies and, therefore, separate additions is not required to be made. The Revenue has failed to controvert these findings of the Ld. CIT(A) and the Co-ordinate Bench of Tribunal, thus, we find no infirmity in the order of the Ld. CIT(A) in deleting the addition s made, therefore, the order of Ld. CIT(A) is hereby upheld on this count. Ground Nos. 1 & 3 of the Revenue are dismissed.
13. Ground No.4 & 5 are relation to the deletion of addition of Rs.16,00,000/- made by the AO towards the cash deposited into bank account maintained in the regular course by the assessee. The Ld. CIT(A) by observing that it is regular bank account duly disclosed in the return of income filed and therefore could not be held as incriminating material and by relying upon the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawala reported in 380 ITR 573 has deleted the additions.
14. Heard both the parties. In this regard, the Hon’ble Supreme Court in the case of Pr. Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd. dated 24.04.2023 has settled this issue by holding that where no incriminating material were found as a result of search with respect non abated years, no addition could be made. The relevant observations of the hon’ble court are as under: "14. 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; & Ors. DCIT Vs. Harjeet Singh 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. 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."
Since the assessment year under appeal i.e. Assessment Year 2013-14 is completed year and no incriminating material is referred by the Assessing Officer for making addition of Rs.16,00,000/-, no addition could be made in view of the aforesaid judgement of Hon’ble Supreme Court in the case of Abhisar Buildwell (supra). In view of above facts and in the circumstances of the case, we find no infirmity in the order of Ld. CIT(A), which is hereby upheld. Accordingly, the grounds of appeal
No.4 & 5 of the Revenue are dismissed.
16. Ground No.6 & 7 general in nature, therefore, the same are dismissed.
17. In the result, the appeal of the Revenue is dismissed and C.O. of the assesse is also dismissed. for Assessment Year 2014-15.
During the course of hearing, both the parties agreed that the facts and the issues involved in the present appeal are identical with the revenue’s appeal for AY 2013-14 wherein we have already dismissed the appeal of & Ors. DCIT Vs. Harjeet Singh the revenue after making details discussions on both the issues involved hereinabove. Thus following the observations made in for AY 2013-14 in assessee’s own case which are mutatis mutandis applied to the present appeal, the present appeal preferred by the revenue is dismissed.
As a result, the appeal of the Revenue is dismissed.
In the C.O. assessee has objected the order being issued without DIN, however, during the course of hearing, the ld. AR of the assessee not pressed the cross objections, therefore, the same is hereby dismissed as not pressed. [ 21. In the result, appeal of the revenue in and C.O. No.154/Del/2022 are dismissed.
Now we take the appeals of the revenue in the case of Shri Joginder Singh in for AY 2013-14 and AY 2014-15.
In both the appeals the Revenue has challenged the first appellate order of Ld. CIT(A) in Appeal No.25/10548/2019-20 dated 02.06.2023 for Assessment Year 2013-14 and in Appeal No.10552/2019-20 dt. 02.06.2023 for Assessment Year 2014-15 respectively.
In both the appeals, only issue involved is with respect to the deletion of additions deleted by Ld. CIT(A) made on protective basis on the basis of entries found recorded in the loose papers found and seized during the course of search containing details of expenditure incurred by the assessee along with three persons namely Sh. Rajesh Chaudhary, Sh. Manish Goyal and Sh. Harjeet Singh at various projects. Before us, both the parties fairly admitted that the facts of the present appeals are identical to the & Ors. DCIT Vs. Harjeet Singh facts in the revenue’s appeal in case of Shri Harjeet Singh in I TA No.1683/Del/2021 for AY 2013-14.
Since the facts as existed in the present appeals are identical with the facts in thus the observations made therein in ITA No.1683/Del/2021 are mutatis mutandis applied to the both the appeal in the case of Shri Joginder Singh in present appeals. Therefore, by following the said observations, both the appeals of Revenue are dismissed.
In the result, both the appeals of the Revenue in and 2479/Del/2023 are dismissed.
To sum up, these revenue’s appeals in and and assess’s cross objection Nos. 153/Del/2022 and 154/Del/2022 in the case of Shri Harjeet Singh are dismissed. Revenue’s appeal in ITA Nos. 2478/Del/2023 and 2479/Del/2023 in the case of Shri Joginder Singh are dismissed. A copy of this common order be placed in the respective case file. Order pronounced in open court on 06/06/2025.