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Facts
A search and seizure operation was conducted on the assessee, leading to a notice under Section 153A. The Assessing Officer (AO) made an addition of Rs. 73,46,75,000/- on account of unexplained cash payment for the purchase of farm land, based on a loose sheet found from a third party. The assessee contended that the document was not incriminating and did not pertain to the relevant assessment year.
Held
The Tribunal held that for completed assessments, additions under Section 153A can only be made if incriminating material is found during the search. In this case, the loose sheet was from a third party, undated, and not directly related to the assessee or the relevant assessment year. Therefore, the assumption of jurisdiction by the AO under Section 153A and the subsequent addition were unsustainable.
Key Issues
Whether additions can be made under Section 153A in the absence of incriminating material found during search for a completed assessment, especially when the material is from a third party and not directly related to the assessee and the assessment year.
Sections Cited
132, 127, 153A, 143(3), 143(2), 142(1), 69B, 115BBE, 147, 148, 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY & SHRI NAVEEN CHANDRA
The instant appeal filed by the Revenue is directed against the order dated 15.01.2024 passed by the CIT(A)-28 New Delhi, arising out of the Assessment Order dated 20.04.2021 passed by the DCIT, Central Circle-25, New Delhi under Section 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2010-11.
Brief facts leading to the case are that a search and seizure operation under Section 132 of the Act was carried out in the case of the assessee on 05.10.2017. Thereafter by and under the order under Section 127 of the Act jurisdiction was transferred from Circle 13(1), New Delhi to Central Circle – 25, New Delhi and notice under Section 153A of the Act dated 05.08.2019 was issued upon the assessee asking him to file a return of income within 15 days from the date of receipt of the said notice. The return of income was filed on 03.10.2019 declaring income at Rs.43,60,580/-. Upon issuing notice under Section 143(2) along with notice under Section 142(1) of the Act both dated 06.11.2019 along with the questionnaire were served upon the assessee. The assessment was ultimately finalized upon making addition of Rs.346,75,000/-. Facts remains that during the course of search documents were seized and from those documents it revealed that the assessee purchased 4 Bigha 16 Biswa land of Khasra No. 1384/02 and 1389 at village Chhattarpur by and under the agreement dated 18.12.2009 for a consideration of Rs.54 lakhs from one Sh. Satish Verma. Further that the assessee purchased 12 Bigha 6 Biswa farm land of Khasra No. 1384/02 and 1385/02, 1388 & 1389 at Village Chhattarpur for a consideration of Rs.75 lakhs by and under the agreement dated 02.09.2009 from one Smt. Seema Sethi. Apart from that the search conducted under Section 132 of the Act at the resident of Sh. Punit Gupta and Sh. Amit Gupta at farm house No.4 & 5, Gupta Farms, Church Road, Vasant Kunj, New Delhi, wherefrom loose papers were found and seized containing the working of flat on the plot of land situated at Gadaipur, Bandh Road, Mehrauli, New Delhi. It was found that the land of 2900 sq. yard was either been purchased or proposed to be purchased in the range of Rs.60,000/- to Rs.70,000/- per sq. yard. Applying the rate of Rs.60,000/- per sq. yard the total value of the land came to Rs.29,04,00,000/- per acre in the vicinity of Gadaipur, Bandh Road, Mehrauli, New Delhi and applying the rate of Rs.70,000/- per sq. yard the total value of the land came to Rs.33,88,00,000/- per acre. On the basis of the same the Ld. AO came to a finding that the assessee must have paid huge unaccounted cash for purchase of the said 2.375 acre of farm of land from the said Sh. Satish Verma & Smt. Seema Sethi.
Show cause were issued to the assessee on 02.04.2021 as to why the actual investment made by the assessee for purchase of 2.375 acre farm land cannot be determined on the basis of the evidence found regarding the actual market rates from the residence of Sh. Punit Gupta and therefore, the difference in the value of land may not be considered as unexplained investment made by the assessee. The assessee filed its reply which was not found to be acceptable and with the following observation the addition of Rs. 73,46,75,000/- made under Section 69B of the Act on account of unexplained cash payment tax has also been charged under Section 115BBE of the Income Tax Act.
“9. I have considered the reply furnished by Ld. A/R on behalf of the assessee. I have verified the contents of the reply with reference to the facts discussed in the questionnaire cum show cause dated 02.04.2021 and other material place on record. The assessee have made no efforts to defend the allegation of making payment in cash for purchase of farm house which is clearly proved with the evidences found during the course of search. 9.1 Further the assessee has also submitted that as per the noting page no.92 found from the residence of Sh. Punit gupta, the said sheet is related to land at Gadaipur Vilage and is not related to land at Satbari. However, the fact is that the said document related to rate land in the vicinity of Gadaipur - Bandh Road, Chanhanhulla. It will not be out of place to mention here that SH. Surendra Kumar Arya had purchased land in the same locality and on the same road from Pristine Gupta Group as well as from Sh. Yog Raj Arora (M/s Aarone Infrastructure Pvt. Ltd). Further assessee is saying that the document seized from the residence of Sh. Punit Gupta is not related to assessee and is a third party document and from the perusal of said sheet (Page no. 92) it may also be observed that in this sheet projections / budget is mentioned and the nothings mentioned in the sheet has nothing to do with the actual. However, such reply of the assessee cannot be accepted as the documents contains actual value of the land and seized from the residence of Sh. Punit Gupta who is a property dealer and the working was done as per actual the market rates. Accordingly as per the sheet wherein Rs. 60,000/- to Rs. 70,000/- per acre rate was mentioned the total value of the property comes to Rs. 74,71,75,000/- However, the registered value of the property is Rs. 1,25,00,000/-
In view of the evidence found during the course of search and the discussion made in this order, it is clear that the assessee had made payment in cash of Rs. 73,46,75,000/- for purchase of farm house at village Chhattarpur from undisclosed source of income Accordingly total addition of Rs. 73,46,75,000/- is made to the total income of assessee on account of unexplained cash payment u/s 69B of the Income tax Act, 1961. On this amount tax to be charged u/s 115BBE of the I.T. Act.”
Before the Ld. CIT(A) apart from the merit assessee raised objection to this effect that in case of unabated assessment reopening is only permissible and addition thereto under Section 153A could be done only on the basis of incriminating material unearthed/gathered during the course of search with regard to the respective assessment year. Further that addition out of assessment under Section 153A of the Act cannot be made on the documents found from third parties, post search inquiries by investigating team or by inquiries made Ld. AO during the course of search assessment. In support of same plethora of judgments were relied upon by the assessee which is reproduced as under:
a) PCIT vs Abhisar Buildwell (P) Ltd. (SC) reported in 454 ITR 212 b) Judgment of the High Court of Delhi in the case of CIT vs. Kabul Chawla reported in 380 ITR 573. c) Judgment of High Court of Delhi in the case of PCIT vs Jaypee Financial Services Ltd. reported in 280 Taxman 147. d) Judgment of the High Court of Delhi in the case of PCIT Meeta Gutgutia reported in 395 ITR 526. e) Judgment of the Supreme Court of India in the case of CIT vs Singhad Technical Education Society reported in 397 ITR 344. f) Order of ITAT Delhi in the case of ACIT vs Moon Beverages Ltd. in to 118/Del/2018. g) Order of ITAT Delhi in the case of DCIT vs Sundaram IT Parks Pvt. Ltd. in ITA No. 5166/Del/2018. h) Order of ITAT Delhi in the case of ACIT vs M/s Five Vision Planners Pvt. Ltd. in ITA No. 4460/Del/2014. i) Judgment of High Court of Delhi in the case of PCIT vs M/s Dreamcity Buildwell Pvt. Ltd. in ITA No. 1152/2017. j) Order of ITAT Delhi M/s TDI Infrastructure Ltd. vs DCIT in 4409, 4410 and 5072/Del/2012. k) Order of ITAT Delhi ACIT vs. Realtech Construction Pvt. Ltd. (ITAT Delhi) in ITA No. 6569/Del/2016.
The Ld. CIT(A) allowed the appeal preferred by the assessee. Hence, the instant appeal before us.
The Ld. DR vehemently argued in support of the order passed by the Ld. AO.
Under this facts and circumstances of the matter, the Ld. Senior Counsel Mr. Salil Agarwal submitted before us that the date of search was 05.10.2017 and the notice under Section 153A of the Act was issued to the assessee on 05.08.2019. The Assessment Year 2010-11 is beyond the period of six assessment years from the relevant assessment year i.e. AY: 2018-19. The date of assessment order is 20.04.2021 addition whereof was made alleging unexplained cash payment. It was further pointed out by him that the Ld. CIT(A) allowed the appeal on the point of maintainability; incriminating material, having not been found during the course of assessment in the case of the assessee before us. It was argued by him that annexure A of page 92 as referred was found from the residence of Sh. Punit Gupta and not from the assessee on the basis of which the addition was made by the AO as it is evident from the paragraph 9.1 of the AO’s order. Such document having no date, no name of the assessee neither any transaction pertaining to the assessee cannot be presumed to be correct. Furthermore, Assessment Year 2018- 19 having no relevance with the year under consideration i.e. Assessment Year 2010-11 which is also taken into consideration of the Ld. CIT(A) as observed in paragraph 5.4 to 5.4.4 of the CIT(A). Apart from that the land purchased by the assessee at Chhatarpur has no relevance of the flat in dispute lying and situated Gadaipur, Bandh Road found and seized from the search conducted on Sh. Punit Gupta. The assessee has not purchased any property of that place admittedly, moreso, having no relation with the transaction undertaken by the assessee for the year under consideration. It was further submitted by him that the DVO’s finding of valuation of the property purchased by the assessee at the same fair market value has wrongly been rejected by the Ld. AO and the AO made the addition based on assumptions without conducting any inquiry whatsoever from the said Sh. Punit Gupta who has found to be the author of the document and therefore the AO failed to discharge its burden cast upon him under Section 69B of the Act. He mainly relied upon the judgment passed by the jurisdictional High Court in case of CIT Vs. Bajrang Lal Bansal reported in 335 ITR 572 and the judgment passed in the case of PCIT Vs. Abhisar Buildwell (P) Ltd. reported in 454 ITR 212.
Heard both the parties and perused the materials available on record. It appears that under the facts and circumstances of the case the Ld. CIT(A) while deleting addition observed as follows:
5.4 1 have considered the facts of the case and the submission of the appellant placed on record. The facts of the case can be summarized as under: a) In the impugned order, the AO mentioned about the agreement dated 18/12/2009 with regard to purchase of 4 Bigha 16 Biswa land at Village Chhattarpur from Sh. Satish Verma for the consideration of Rs 54 lakh and agreement dated 02/09/2009 with regard to purchase of 12 Bigha 6 Biswa farm land at village Chhattarpur from Smt. Seema Sethi for the sum of Rs 75 lakh found during the course of search from the premise of the appellant. However, it has been found that the sald agreement are registered agreement to sale and on the basis of agreement dated 18/12/2009 and agreement dated 02/09/2009, the appellant purchased the property at Chhatapur, Delhi. b) The consideration of Rs 54 lakh and consideration of Rs 75 lakh mentioned as per agreement to sale dated 02/09/2009 and agreement to sale dated 18/12/2009 respectively are part of books of accounts. As such agreement to sale dated 02/09/2009 and agreement to sale dated 18/12/2009 are not Incriminating in nature. c) An undated loose sheet noting being page no -92, Annexure A- 2 found during search from the residence of Shri Punit Gupta and Shri Amit Gupta at Farm house no 4 & 5 Gupta Farms, Church Road, Vasant Kunj, New Delhi. d) This loose sheet is an estimate of cost of land and other costs such as registry, boundary wall etc. which cannot be said to be incriminating since no such transactions has been found to be happen either in the case of Shri Punit Gupta and Shri Amit Gupta or in the case of Smt. Neelam Arya. e) Further, the agreement of purchase was done in Sept.2009 by Smt. Neelam Arya, however, the date of search is 05.10.2017. Therefore, in case no date is mentioned on the loose document found, it is presumed that it pertains to the search year. Thus, the price of the land cannot be treated as same for the year 2009 and 2017. f) It has been admitted by AO that this noting contains the working of the flat on the plot of land situated in Gadaipur, Bandh Road, Mehraull, New Delhi and it has also been mentioned by AO that the land of 2900 sq. yards has either been purchased or proposed to be purchased in the range of Rs. 60,000/- to Rs. 70,000/- per sq. yards.
The AO, made the estimation of the value of Rs. 33,88,00,000/- per acre by applying the rate of Rs. 70,000/- per sq. yard. g) The contention of the appellant that the said noting is not related to appellant and the name of the appellant is nowhere mentioned in the noting is correct. It has been found that in the said noting nowhere date Is mentioned and as such it does not appear that the noting is with regard to A Y 2010-11. Further, the estimate made on the seized document does not pertain to the same property either. h) Further, the AO had referred the matter to the District Valuation Officer of Income Tax department to find out the market value of the land purchased by the appellant. As per the report submitted by the DVO, the value has been estimated at RS.1,29,00,000/- which is same as declared by the appellant assessee, however, the same was not accepted by the AO, In the valuation report the DVO has observed that a civil writ was filed challenging the acquisition proceedings, which was pending adjudication before the Hon'ble Supreme Court of India during agreement to sale of the subject land. Under such condition the agriculture land doesn't attract buyers and accordingly its fair market value get reduced. In view of the above circumstances, the value declared by the assessee which was purchased at prevailing circle rate seems fair and just. i) The AO in the assessment order has mentioned that the report of the DVO is not considered in view of the fact that there are various incriminating documents which were found and seized and statement recorded during the course of search which indicate to a higher acquisition cost than claim by the assessee. The DVO has not taken into account each item separately (as available in seized excel sheets) to arrive at cost of construction and also what scientific method he has applied to determined actual year of construction. However, from the perusal of the assessment order, it is apparent that the AO has not brought on record any evidence other than the rough noting found from the premise of third person (Mr. Punit Gupta) which does not relate to the appellant. j) The ground taken by the AO for rejection of DVO valuation report is also not appears correct as the AO has mentioned that DVO has applied scientific method of construction and estimated rates of construction. However, this ground for rejecting the report of DVO is contrary to facts as valuation is with regard to fair market value of the land and is not related to construction. k) Further apart from rough noting there is no other evidence like MOU, cash receipt etc. pertaining to the appellant to substantlate the unaccounted investment by the appellant. Thus, there is no corroborative or direct evidence to presume that the appellant made unaccounted investment. l) From the Satisfaction Note recorded by the AO for assuming jurisdiction U/s153A, it has been observed that the AO has not mentioned any document which can be said to be pertaining to the assessee. The AQ has formed opinion only on the basis of an undated rough estimate about a project which was found from the premises of a third person Sh. Punit Gupta. m) Hence, admittedly there is no document of whatsoever nature in respect of alleged unaccounted payment in respect of purchase of land has been found during search. The addition was done by estimating unaccounted investment on the basis of a loose document which was neither incriminating in nature nor pertaining to the appellant since it was an undated estimate which was found from the premises of a third party, Mr. Punit Gupta.
5.4.1 In view of the above, it is obvious that apart from the above mentioned loose sheet, no material of whatsoever nature have been found during the course of search to assume jurisdiction u/s 153A of the Income Tax Act. It is a well settled law that, when no incriminating material/evidence is found during the course of search and the assessment in the relevant year Is a completed assessment, then no proceedings can be initiated u/s 153A/ 153C of the Act. The relevant issue has been dealt with and answered by Hon'ble Jurisdictional High Court in the case CIT vs. Kabul Chawla. Hon'ble Court has taken a view in such cases that although section 153A/ 153C does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information avallable with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material.
As per Hon'ble Court, such assessment has to be made under the section 153A/153C only on the basis of the seized material. It is further opined by Hon'ble Court that completed assessment can be interfered with by the Assessing Officer while making the assessment in the section 153A / 153C only on the basis of some Incriminating material found during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
5.4.2 In the subsequent decisions also, Hon'ble Court has reiterated their aforesaid views, In the case of Pr, CIT vs Ram Avtar Verma 395 ITR 252, Hon'ble Delhi High Court has supported the aforesaid view that if the assessments are completed on the date of search and no. incriminating material Is found during the search, assessment u/s 153A / 153C of the Act is invalid. Similar view has been taken by Hon'ble jurisdictional Court In the case of Pr. CIT vs Meeta Gutgutia 395 ITR 526 also wherein assessments were completed on the date of search but no incriminating material pertaining to those completed assessment years were found during search. Hon'ble Court held that invocation of section 153A / 153C for those years was invalid. Most Importantly, the Honble Supreme Court of India in the case of in the case of Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell P. Ltd. (CIVIL APPEAL NO. 6580 OF 2021) (2023) Hon'ble Supreme Court has held that no addition can be made in the case of completed / unabated assessment if no Incriminating material is found/unearthed during search, the relevant Para of the same has been reproduced below:
"13, For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) 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.
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 Section132A, the AO assumes the jurisdiction for block assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated; CA No.6580/2021 Etc. Page 55 or 59;
(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 (v) 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 fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”
5.4.3 It is also settled position of law that documents found during search from the possession of third person cannot be used in the proceeding u/s 153A of the Income Tax. Act and such documents, if at all relevant, should be considered in proceedings u/s 153C as held by the jurisdictional High court in the case of PCIT (Central) - 3 vs Anand Kumar Jain (HUF) ITA no 23/2021. In the case of the appellant a search and seizure action was conducted on 05.10.2017, hence, the proceedings U/s 153A should have been initiated for last six assessment years i.e. AY 2012-13 to AY 2017-18. The relevant assessment year I.e. 2010-11 falls beyond 6 years and the proceedings U/s153A could have been initiated only If any Incriminating material would have been found during search from the appellant. In the case of the appellant nothing incriminating was found during search relevant to the AY 2010-11, however, the AO has made the estimated addition on the basis of an undated rough noting found from the premise of third person during search conducted on 05.10.2017.
5.4.4 In view of the above, it is obvious that there has not been any Incriminating document related to the appellant was found during search, relevant to the AY 2010-11. The AO has assumed the jurisdiction u/s 153A of the Income Tax Act on the basis of a rough noting found from the premise of third person (Mr. Punit Gupta) which does not relate to the appellant. In the case of the appellant no other evidence was found which can be said to be Incriminating in nature and hence no adverse inference can be drawn on the basis of such rough noting found from the premise of third person. Therefore, considering the above facts and current judicial position as laid down by the Hon'ble Supreme Court In the case of Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell P. Ltd. [2023] 150 taxmann.com 257 (SC) and Hon'ble Delhi High court in the case of PCIT (Central) - 3 vs. Anand Kumar Jain (HUF) the assumption of jurisdiction U/s 153A and subsequently the addition made by the AO is found to be unsustainable, hence it is held that the proceedings initiated U/s 153A was invalid and thus the addition made by the AO is deleted. Accordingly, the grounds raised by the Appellant are allowed.”
Thus, having regard to the impugned order we find that the argument advanced by the Ld. Senior Counsel that unabated assessment cannot be reopened in the absence of any incriminating material unearthed during the course of search found to have been taken care in its proper perspective by the Ld. CIT(A). The addition has admittedly on estimated basis on alleging unaccounted investment made by the assessee and mainly on the basis of loose documents unearthed during the course of search of the third party namely Sh. Punit Gupta which cannot be said to be incriminating nature nor pertaining to the assessment year under appeal as we have discussed hereinabove and therefore, having regard to the judgment passed by the Hon’ble Apex Court in the case of Abhisar Buildwell (supra) the addition made in completed/unabated assessment in the absence of incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act has rightly found to be invalid and deleted by the said order; according to us the same is just and proper so as not to warrant interference. The appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed.
The appeal of the Revenue is dismissed.
Order pronounced in the open court on 30.05.2025