MAMTA AGARWAL,NEW DELHI vs. ACIT, CENTRAL CIRCLE-19, NEW DELHI

ORDER PER BENCH:

The captioned six appeals filed by the respective assessees are directed against the separate orders passed by the Ld. Commissioner of Income Tax (Appeals) - 27, New Delhi {CIT (A)}.

Since common issues have been raised in all these appeals, therefore, they were heard together and are being disposed of by this common order.

2.0 for Assessment Year (A.Y.)

2011-12 in the case of Shri Gopal Agarwal is taken as the lead case.

Facts of the case, in brief, are that search & seizure and survey operations under section 132/133A of the Income Tax Act, 1961 (hereinafter called ‘the Act’) were conducted on 8.7.2015 and subsequent dates in the case of assessee along with the other case of the M/s KR Pulp & Papers Ltd Group at various residential and business premises. In response to notice issued u/s 153A of the Income Tax Act, 1961 issued to the assessee on 26th September, 2016, the assessee filed the return of income on 2nd March, 2017 declaring total income at Rs.11,80,380/-. The Assessing Officer (AO) inter alia has observed that the assessee has claimed long term capital gain of Rs. 9,52,494/- as exempt u/s 10(38) of the Act. He has noted that Mr. Madho Gopal Agarwal, Managing Director of the group had admitted Rs. 25 crores on behalf of entire group on account of long term capital gain earned by the various family members. He further noted that the assessee is the brother of Shri Madho Gopal Agarwal but he has not considered the long term capital gain of Rs. 9,52,494/- in his return filed u/s 153A of the Act. Therefore, the case was assessed at an income of Rs. 35,30,874/- by denying the claim of exemption u/s 10(38) of the Act vide order passed u/s 153A/143(3) of the Act.

2.1 Before the Ld. CIT (A), the assessee, apart from challenging the addition on merit, challenged the assumption of jurisdiction u/s 153A of the Act. It was submitted that addition made was without jurisdiction since it was not based on any incriminating material found as result of search on the assessee, and, therefore, the Assessing Officer had no power to assume jurisdiction under the provisions of section 153A of the Act. It was submitted before the Ld. CIT (A) that on 1.8.2011, the assessee had filed a return u/s 139(1) of the Act declaring income of Rs. 11,80,381/- for the instant assessment year, wherein he had claimed exemption of Rs. 9,52,493.73/- u/s 10(38) of the Act. This exemption represented long term capital gain on sale of shares of M/s KGN Industries Ltd. The original return stood accepted as such. The AO, while denying the exemption in the impugned order, has not referred to any incriminating material as a result of search on the assessee. It was further submitted before the Ld. CIT (A) that the offer letter dated 31.7.2015 submitted by Shri Madho Gopal Agarwal was submitted during the post search proceedings. It was also submitted that no enquiry was made either in respect of the investment in shares or in respect of long term capital gain earned on disinvestment of shares. It was further submitted before the Ld. CIT (A) that the statement of Shri Madho Gopal Agarwal, who happens to be brother of the assessee, could not be the sole ground to draw any adverse inference against the assessee. In support of the aforesaid contentions, the assessee relied on the judgment in the case of Kabul Chawla reported in 380 ITR 573 and Pr. CIT v.

Meeta Gutgutia 395 ITR 526 along with several other decisions of the Hon’ble jurisdictional High Court as well as other Hon’ble High Courts.

2.2 However, the Ld. CIT (A) upheld the action of the Assessing Officer by observing as under:

“6.4 so far as the second addition of Rs.9,52,494/-, on account of disallowance u/s 10(38) of I T. Act, is concerned, I have considered the facts of the issue, basis of addition made by AO and submissions of appellant. As it is reflected from assessment order, a search and seizure operation was conducted by the Investigation Wing of the Department in the cases of M/s K. R, Pulp and Papers Ltd. Group and during the searches, the appellant's case was also covered u/s t32(1) of I.T. Act. It is also clear from the facts that the addition has been made on account of disclosure made by the Managing Director of the group namely, Sh. Madho Gopal Agarwal amounting to Rs.25.00 crores on behalf of entire group on account of long term capital gain in the hands of various family members. However, during the filing of return of income, various members of the group disclosed the long term capital gain and did not claim the exemption u/s 10(38) of I. T. Act and paid the taxes on that, but the appellant Sh. Shri Gopal Agarwal, did not pay the taxes on the long term capital gain of Rs.9,52,494/- for the year under consideration rather claimed exemption u/s 10(38) of the I.T. Act. However, neither during the assessment proceedings nor appellate proceedings, appellant could give any satisfactory reason for not disclosing the aforesaid long term capital gain as taxable in his hands. Despite of disclosure made during the search proceedings and long term capital gain shown as taxable in the hands of various persons of group while filing their returns of income, appellant has failed to disclose the long term capital gain of his part. The stand taken by appellant is self contradictory. Since the disclosure was made during the search proceedings and admission has been made by the group entities there is no reason for not disclosing the said long term capital gain of Rs. 9,52,494/-/- in the case of appellant. I, therefore, confirm the addition made by him and dismiss the grounds taken by appellant on this account.”

2.3 Aggrieved, the assessee is in appeal before this Tribunal and has raised the following grounds of appeal:

“1 That the learned Commissioner of Income Tax (Appeals)- 27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153A of the Act. 2 That learned Commissioner of Income Tax (Appeals) -27, New Delhi, has erred both in law and on facts in not disposing off the ground of appeal raised by appellant that approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, and therefore order of assessment made u/s 153A/143(3) is invalid and not in accordance with law.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs. 9,52,494/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act. 3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term ‘capital asset’ is not includible in total income of the assessee in view of section 10(38) of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the brother of the appellant, under no circumstance can be treated as incriminating material against the appellant. 3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable. 3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 36315/- under section 234A of the Act and interest of Rs. 5,88,305/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.”

3.0 Thus, all the aforesaid grounds essentially relate to the validity of disallowance of Rs. 9,52,494/- by denying the claim of exemption u/s 10(38) of the Act.

The Ld. Authorised Representative (AR) contended that the disallowance made and upheld was without jurisdiction since it was not based on any incriminating material found as a result of search on the assessee. He submitted that the addition on account of disallowance u/s 10(38) of the Act has been made and sustained by the Ld. CIT (A) only on the basis of disclosure made by the Managing Director of the group namely Shri Madho Gopal Agarwal amounting to Rs. 25 Crore. He further submitted that during the post search proceedings, Shri Madho Gopal Agarwal, vide letter dated 31.07.2015 had submitted as under:

“Sub: Investigation Proceedings under the Income Tax Act, 1961. M/s K.R. Pulp & Papers Ltd. (Group). Date of Search 08.07.2015.

This has reference to search in group at various premises. We hereby reiterate that we have been doing proper business and all the transactions are duly recorded and disclosed in various records maintained by us. However we offer a sum of Rs. 25.00 Crores (Twenty Five Crores) as additional income on behalf of the entire group for our mental peace. This additional Income of Rs. 25.00 Crores shall include income on account of long term capital gains in the hands of various family members, other assets including cash in hand and various other discrepancies, omissions and commissions. The details of the additional income and the assessment year will be submitted after going through the seized documents and records. The above additional income is being offered is subject to the consideration that no penal action will be taken / initiated.”

3.1 The Ld. AR also submitted that the assessee along with other group assessee had paid taxes in respect of long term capital gain earned/claimed as exempt u/s 10(38) of the Act aggregating to Rs. 19.02 crores in Assessment Year 2014-15 and 2015-16 in respect of two scrips M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures & Services Ltd, which were different from the scrip in the instant year, namely M/s KGN Industries Ltd. The Ld. AR also submitted that in absence of any incriminating material vis-a-vis the disallowance u/s 10(38) of the Act, the addition was uncalled for in light of the following judgments: i) CIT v. Kabul Chawla 380 ITR 573 (Del) ii) Pr. CIT vs. Meeta Gutgutia 395 ITR 526 (Del) iii) PCIT v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) iv) CIT v. Best Infrastructure Ltd. 397 ITR 82 (Del) v) CIT v. Harjeev Agarwal 290 CTR 263 (Del) vi) Pr CIT vs SMC Power Generation Ltd. ITA 406/2019 (Del) dated 23.07.2019 vii) 378 ITR 84 (Bom) CIT vs. Sinhgad Technical Education Society upheld by Apex Court in the case of CIT v. Sinhgad Technical Education Society reported in 397 ITR 344 4.0 The Ld. CIT-DR, on the other hand, relied upon the orders of the lower authorities.

5.0 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT (A) as well as the paper book filed on behalf of the assessee.

We have also considered the various decisions cited before us. A perusal of the assessment order shows that the disallowance made by the Assessing Officer is not based on any incriminating material found during the course of search from the premises of the assessee. The Assessing Officer, only on the basis of the disclosure made by the Managing Director of the group Shri Madho Gopal Agarwal amounting to Rs. 25 crores, made the impugned disallowance of Rs. 9,25,494/- on sale of shares duly sold on recognized stock exchange u/s 10(38) of the Act.

5.1 The Hon’ble Delhi High Court in the case of PCIT v.

Anand Kumar Jain (HUF) (supra) in an identical matter has held that such a statement does not constitute incriminating material found as a result of search. It has been held therein as under:

“7. The preliminary question under consideration before us is whether a statement under Section 132(4) constitutes incriminating material for carrying out assessment under S. 153(A) of the Act. A reading of the impugned order reveals that the statement of Mr. Jindal recorded under Section 132(4) forms the foundation of the assessment carried out under Section 153A of the Act. That statement alone cannot justify the additions made by the AO. Even if we accept the argument of the Revenue that the failure to cross-examine the witness did not prejudice the assessee, yet, we discern from the record that apart from the statement of Mr. Jindal, Revenue has failed to produce any corroborative material to justify the additions. On the contrary we also note that during the course of the search, in the statement made by the assessee, he denied having known Mr. Jindal. Since there was insufficient material to support the additions, the ITAT deleted the same. This finding of fact, based on evidence calls for no interference, as we cannot re-appreciate evidence while exercising jurisdiction under section 260A of the Act.

Chawla, [1] concerning the scope of assessment under Section 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. This court in Principal Commissioner of Income Tax, Delhi v. Best Infrastructure(India) P. Ltd.,[2] has inter-alia held that: ……… 10. Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.”

5.2 The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. (supra) has held that statements recorded u/s 132(4) of the Income Tax Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under:-

"38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts ITA No.7567/Del/2017 in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

5.3 Also the Hon’ble Delhi High Court in the case of Pr. CIT vs. SMC Power Generation in ITA 406/2019 (Del) dated 23.07.2019 has observed as under:

“3. The question sought to be raised by the Revenue is whether the ITAT was justified in quashing the assessment order framed under Section 153A of the Income Tax Act, 1961 (Act) on the ground that there is no incriminating material found qua the addition made on account of share application money in the course of the search? ….

5.4 In light of the aforesaid, it is apparent that the impugned disallowance is not based on any incriminating material found as a result of search. The Ld. CIT (A) has confirmed the addition on the ground that there is no explanation as to the contradictory stand in as much as surrender was made in Assessment years 2014-15 and 2015-16 but not in the instant year.

The Ld. AR has explained that the scrips in Assessment year 2014- 15 and 2015-16 were M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures & Services Ltd., which is different from the scrip in the instant year, namely M/s KGN Industries Ltd. 5.5 The Ld. DR has not been able to rebut the above factual submission and also not highlighted any incriminating material found as a result of search despite copies of ‘panchnamas’ having been again placed on record by the Ld. AR.

5.6 In view of the above, we hold that the Ld. CIT (A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the disallowance made by the Assessing Officer and as upheld by the Ld. CIT (A) in the 153A assessment proceedings being void ab initio is deleted.

5.7 Since the assessee succeeds on this legal ground, the grounds raised on merits are not adjudicated having become academic in nature.

6.0 In the result, ITA 5853/Del/2018 stands allowed.

7.0 ITA No. 5288/Del/2018, ITA No. 5858/Del/2018 and ITA No. 5280/Del/2018:

We find that identical grounds have been raised by the assessee in all these appeals challenging the disallowances made by the Assessing Officer which has been upheld by the Ld. CIT (A). For the sake of completeness, the respective grounds are being reproduced here in under:

Grounds of appeal in ITA No.5278/Del/2018 “1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act.

2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs. 9,64,481/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act.

3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term ‘capital asset’ is not includible in total income of the assessee in view of section 10(38) of the Act.

3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable.

3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable.

3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.

3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 16608/- under section 234A of the Act and interest of Rs. 269046/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.

It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”

Grounds of appeal in ITA No.5280/Del/2018 “1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act.

2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs. 3,61,496/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act.

3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term ‘capital asset’ is not includible in total income of the assessee in view of section 10(38) of the Act.

3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable.

3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable.

3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.

3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 4175/- under section 234A of the Act and interest of Rs.67,633/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.

It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”

“1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act.

2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs. 24,11,178/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act.

3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term ‘capital asset’ is not includible in total income of the assessee in view of section 10(38) of the Act.

3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable.

3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable.

3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.

3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 14,322/- under section 234A of the Act and interest of Rs.5,80,052,/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.

It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”

Grounds of appeal in ITA No.5858/Del/2018 “1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act.

2. That learned Commissioner of Income Tax (Appeals)-27, New Delhi, has erred both in law and on facts in not disposing off the ground of appeal raised by appellant that approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs.37,79,449/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act.

3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term ‘capital asset’ is not includible in total income of the assessee in view of section 10(38) of the Act.

3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable.

3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable.

3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.

3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”

Grounds of appeal in ITA No.5288/Del/2018 “1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act.

3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs.19,18,852/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act.

3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable.

3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant.

3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable.

3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.

3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share.

4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 33868/- under section 234A of the Act and interest of Rs.457,187/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.

It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”

8.0 We find the grounds raised by the assessees in 5278/Del/2018, 5288/Del/2018, 5284/Del/2018, 5858/Del/2018 and 5280/Del/2018 as reproduced above are identical to the grounds raised in the case of Shri Gopal Agarwal in ITA No. 5853/Del/2018. We have already decided the issue and the grounds raised by the assessee have been allowed in Para 5 above. Following similar reasoning, the grounds raised by the assessees in ITA Nos. 5853/Del/2018, 5278/Del/2018, 5288/Del/2018, 5284/Del/2018, 5858/Del/2018 and 5280/Del/2018 are also allowed.

9.0 In the final result, 5278/Del/2018, 5288/Del/2018, 5284/Del/2018, 5858/Del/2018 and 5280/Del/2018 are allowed.

Order pronounced on 30/06/2021.