ACIT, NEW DELHI vs. SH. PARMINDER SINGH KALRA, NEW DELHI

Per Bench:

The present appeals have been filed by the Revenue against the orders of ld. CIT (A)-XXVI, New Delhi for the A.Ys. 2007-08, 2009-10, 2010-11, 2011-12 & 2012-13 dated 18.07.2016 and by the assessed against the orders of ld. CIT (A)-XXVI, New Delhi for the A.Ys. 2006-07 & 2007- 08 dated 18.07.2016 &22.09.2017 confirming the penalty. The assessee has also filed Cross Objections for AY 2009- 10 to AY 2012-13.

ITA No. 4575/Del/2016: Assessement Year 2006-07 ITA No. 4576/Del/2016: Assessement Year 2007-08

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 3 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) {CIT(A)} is bad both in the eye of law and on facts.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 4 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra in rejecting the contention of the assessee that the assessment order passed without issue of statutory notice under Section 143(2) by the learned AO is bad in law and liable to quashed.

(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessment order passed by the learned AO is bad in law and liable to be quashed as the same has been passed in gross violation of the principles of natural justice and without providing the opportunity to the appellant for cross examination.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 5 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra and that it was refracted when the coercion was lifted by the ADI (Inv.).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 6 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 4. In ITA No. 4576/Del/2016 for the assessment year 2007-08, following grounds have been raised by the assessee:

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) {CIT(A)} is bad both in the eye of law and on facts.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 7 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed without issue of statutory notice under Section 143(2) by the learned AO is bad in law and liable to quashed.

7.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the learned AO has made the additions on the basis of material collected at the back of the assesse without establishing the authenticity of the document relied upon and without providing a copy of the same and an opportunity to rebut the same and without taking the investigation and the enquiry to the logical end.

(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessment order passed by the learned AO is bad in law and liable to be quashed as the same has been passed in gross violation of the principles of natural justice and without providing the opportunity to the appellant for cross examination.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 8 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra the appellant u/s 132(4) of the Act, had no evidentiary value as it was made under coercion and that it was retracted when the coercion was lifted by the ADI (Inv.).

Facts of the case:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 9 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra notice, the assessee filed the return on 17.01.2014. During the course of the assessment, the AO raised the issue of the assessee having account with HSBC Bank. The assessee was confronted with a 6 page document containing personal and financial details of the assessee’s account in HSBC.

Arguments taken up by the assessee before the revenue authorities:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 10 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra It was contended that the statement given was factually incorrect and made under duress. It was contended that the statement so given was neither voluntary nor true.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 11 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra apparently is a photocopy not legible without any reference to the original of such document and the person who was in possession of such original document.

Contentions of the Assessing Officer:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 12 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra AO also held that information obtained under information exchange mechanism is credible information and the same can be used against the assessee.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 13 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 7784.47 minus the peak of USD 2,791.19 considered in the preceding year by applying a USD rate of 45.50 which comes to Rs.2,27,194/-. Thus, in total the addition of Rs.61,22,916/- was also made u/s 69 in AY 2007-08 as unexplained investment.

Proceedings before the ld. CIT (A):

i. That no incriminating document has been found during the course of search and hence, no addition could be made in the year under consideration in view of the judgment of the Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla (2016) 380 ITR 573.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 14 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ii. The assessment was time barred as no notice has been issued u/s 143(2) after filing of the return by the assessee. iii. The time limit for completion of assessment has been taken as 31.03.2015 on the basis of the Explanation 8 below Section 153B iv. Information received under information exchange mechanism through DTAA/DTAC. The specific basis of the conclusion reached in assessment order for making addition.

i. It was stated that the information was received by the Indian competent authority from the respective competent authority as per which, the assessee was having an account with HSBC Bank, Zurich, Switzerland. It was stated that the information received has provided the details of the assessee, address, date of birth etc. This information also provided month wise balance in this HSBC Account at Zurich for a certain period. It was also stated in the remand report that the assessee has given a statement on oath wherein he himself has accepted

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 15 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra to have a foreign bank account. Thus, the identity of the assessee and genuineness of the document stands established. ii. As regards the non-issuance of notice u/s 143(2), the AO in the remand report stated that is not mandatory to issue notice u/s 143(2) for finalizing assessment u/s 153A in view of the judgment of the Hon’ble Delhi High Court in the case of Ashok Chadha Vs ITO 327 ITR 399. iii. On the issue of time limit for completion of assessment, the AO stated that this contention has already been rejected during the course of assessment. The first reference for complete information by the competent authority was made on 21.02.2012 and till the date of passing the assessment order i.e. on 09.03.2015, information was not received.

i. The AO has not brought any incriminating material so as to give jurisdiction to the AO for making reassessment u/s 153A in respect of an assessment year where assessment has not abated.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 16 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ii. On the issue of non-issuance of notice u/s 143(2) post filing of return, the assessee relied upon the judgment of Hon’ble Supreme Court in the case of ACIT Vs Hotel Blue Moon 321 ITR 362 and few other judgments. iii. On the issue of assessment having been framed after expiry of the time limit prescribed u/s 153B, the assessee in its rejoinder pointed out that this reference to FTD was made on 21.02.2012 i.e. even before the initiation of the assessment proceedings on 21.11.2012 and hence, no extension will be available for this reference. The assessee also raised the issue that the AO has not submitted any evidence of such reference being made on 21.02.2012. It was raised that the contention of the AO that no reply has been received for over 3 years till the passing of the assessment order on 09.03.2015 from a sovereign Government is unbelievable. The AO has not brought any correspondence or evidence so as to substantiate its contention off extended period. The assessee also raised the issue that extension in this case, if any, will be available for 6 months not 12 months as was the law at the time reference was made.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 17 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra iv. The AO in the remand report has admitted that it was the information received not the bank statement. v. The observation by the AO that information provided that the assessee has opened HSBC account in the name of various foundations is incorrect as there is no mention of HSBC in the 6 page document referred to by the AO. vi. Such information nowhere states that the assessee has opened HSBC account at Zurich in the name of various foundations. vii. The observation by the AO that the month wise balances in the alleged documents are balance in the bank account is factually incorrect as can be seen from documents which apparently are of investment and not the month wise balances in the bank account. viii. On the issue of statement of the assessee, the AO in the remand report has ignored the preliminary statement recorded at the beginning of the search where the assessee has categorically denied of having bank account outside India. ix. The AO has also not referred to the letter dated 30.08.2011 where the assessee has brought on

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 18 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra record that the statement recorded on the date of search was under coercion, duress and tutored. x. The AO has not rebutted the allegation that the statement was extracted from the assessee by showing a false document and hence, the same cannot be considered. xi. The AO in the remand report has stated that the deposit in the account belongs to the assessee but he has neither provided the copy of bank statement showing deposit of such alleged amount nor clarified whether these are the deposits in the bank account or are something else. xii. In the rejoinder, the assessee also pointed out that a cursory look at the documents shows that it is not a bank account or bank statement on the assumption of which the addition has been made.

i. The AO to confirm whether the 6 pages document referred to in the remand report was with the search party and consequently with the AO before assessment was started.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 19 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ii. On the issue of assessment being barred by limitation, in view of Section 153(4), Explanation 1 Clause (viii), the AO was asked to clarify when the last reference was made and the result thereof. iii. AO to clarify, if no reply has been received at all from the competent authority. iv. Copy of letter received from the competent authority from whom information was received by CBDT and subsequently the AO. v. AO to clarify with respect to observation in the assessment order and authorized representative’s objection whether the document is an extract of bank account. vi. AO to clarify on the issue that information not in Swiss language, where allegedly the account is maintained. vii. AO to clarify whether the information means- photocopy of original or extracted from another document. viii. AO to clarify whether the amount shown is in US Dollar. ix. AO to clarify whether the amount shown has to be taxed in this year, not in any earlier year.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 20 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra x. AO to clarify how the entities Bunfield Invests/Nine on Ten Foundation are linked/operated by the assessee. xi. AO to clarify how assessee could be treated as beneficial owner. xii. AO to respond on the issue that assessment order has been passed on direction of higher authorities with reference to the order sheet of the AO dated 20th February, 2015 and 24th February, 2015.

i. That the 6 page document containing the extract of bank account maintained by the assessee in HSBC, Zurich was very well with the search party and the same was confronted to the assessee. ii. On the issue of no reply having been received from the competent authority, the AO admitted that the assessment has been framed on the basis of the information received from the competent authority of France. iii. The AO submitted the details of the chain of information received by CBDT and consequently by the AO.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 21 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra iv. In response to the question whether the 6 page document is an extract of bank account, the AO submitted that 6 page document was having the conclusive details of bank account. v. In response to the question that information was not in Swiss language, the AO stated that the language in which information was received is not material and the contents are important for disposal off the case. vi. On the issue of assessment order having been passed on the directions of higher authorities, the AO stated that in view of the seriousness of the matter, the directions given by the CIT.

i. The assessee stated that it is apparent from the 6 page document which is being relied upon by the AO as a bank statement is not a bank statement. These pages are carrying just some balances over a certain period and are definitely not a bank statement. ii. On the issue of limitation, in the rejoinder, the assessee again raised the issue that no evidence has

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 22 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra been submitted by the AO regarding the reference made in the reply received. iii. As regards the chain of information, it was pointed out that this was all internal correspondence within the Department. Further, this correspondence establishes that the information used by the AO to frame the alleged assessment is not authentic as the same has been just passed on by the France Government. iv. On the issue of language of the document, the assessee pointed out that this issue is with regard to the authenticity of the document and whether the document relied upon for making addition is a true copy of the bank account. v. It was pointed out that the AO admitted in the remand report that this is not a bank account but the information received and if so, the issue which arises is who has provided the information, from where the information was picked up. The AO’s reply on the specific issue whether this is a copy of bank statement or the information jotted down from some document is silent. vi. The assessee also raised the issue whether the information means photocopy of original or something written from another document.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 23 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra vii. The assessee also pointed out that the AO has not clarified whether the amount stated in the alleged document is in US dollars and whether the amount shown has to be taxed in this year. The information apparently being incomplete, it cannot be said that the amount is to be taxed in the year under consideration and for this purpose, it becomes important to find out the author of the person who jotted down this information and the source from which he jotted down this information. viii. It was also pointed out that the extension of one year completing assessment u/s 153B on the basis of reference being made will not be available in this case as per the facts emerging from remand report.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 24 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Swiss authorities and not one year as has been assumed by the AO. In this, the assessee also brought to the notice of ld. CIT (A) that the refusal to provide information to India is on the ground that the source is not authentic.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 25 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra e. If this is not bank statement how additions have been made assuming the figures stated therein as the balances in the bank account? f. If this is not bank statement, then what is the basis for making additions have been made in the year under consideration? ii. On the issue of assessment order having been passed beyond the period of limitation, the assessee raised the following specific issues: a. The date on which the AO made reference to the Indian Competent Authority for each of the assessment year. b. Copy of such letter written by the AO to the Indian Competent Authority for each of the assessment year. c. The date when the Indian Competent Authority made a reference to the competent authority of the Switzerland, for each of the assessment year. d. Copy of the letter written by the Indian competent authority to the competent authority of the Switzerland for each of the assessment year. e. The date and reply received by the Indian competent authority from the Switzerland competent authority for each of the assessment year.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 26 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra f. The date and reply received by the AO from the Indian competent authority. g. The basis on which the AO in the remand report has stated that no reply has been received from the Swiss authorities. h. Copy of any other evidence/letter received by the AO from the Indian competent authority.

iii. On the issue that the 6 page document is not a bank account, the assessee raised following specific issues: a. Whether this 6 page document is a bank statement or not? b. If not, what this document is? c. How this document came into the possession off the French authorities which has been stated in the assessment order/remand report? d. Identity of the person who has authored this document and cross examination of the person who has authored such document? e. If this is not bank statement how additions have been made assuming the figures stated therein as the balances in the bank account?

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 27 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra f. If this is not bank statement, then what is the basis for making additions have been made in the year under consideration?

iv. On the issue of language of this 6 page document, it was again pointed out that the allegation is that this bank account is maintained with HSBC, Switzerland and how come the document is in French Language. The AO has not made any effort to find out whether HSBC is maintaining its accounts in French language. v. On the issue of order having been passed on the direction of CIT, it was contended that AO has admitted because of the seriousness of the case, the order has been passed on the direction of CIT and hence, the order stands vitiated placing reliance in the judgment of Hon’ble Supreme Court in the case of Greenworld Corporation 314 ITR 008.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 28 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

i. It was pointed out that in this remand report, the AO has admitted that the 6 page document on the basis of which addition has been made presuming it to be a copy of the bank account is not a bank account. Further, the contention of the AO that this is an extract of the bank statement is also not correct as is apparent from the alleged 6 page document where certain figures mentioned are regarding investment. There is neither any credit nor debit of any money withdrawn which is in a bank statement. It was pointed out that the second question as to what this document is, the AO has simply has stated “not applicable” meaning thereby he doesn’t want to commit anything about the nature of this document. Having replied the first question that it is not a bank statement, the answer to the second question clearly shows a confirmation by the AO that this is not a bank statement. ii. As regards the issue how this document has come to the possession of French Authority, the AO stated that the Indian Authority got it from the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 29 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra French Authority it so as to establish its authenticity. The AO has not answered it because he himself did not know from where the Government of France obtained this document. iii. On the query no. 4 regarding the identity of the person who has authored this document, the AO stated that the information was provided by the Competent Authority of France. He has not answered the specific question who has authored this document. Identity of this person has not been found out. The AO is also silent on the cross examination of such person. iv. On the issue that the 6 page document is not a bank statement, then how the addition has been made, by assuming the figures stated therein as balance in the bank account, the AO has simply stated “not applicable”. This is again admission that this being not a bank statement, then the addition made assuming the figures stated therein as balance in the bank account is incorrect. v. In this remand report, the assessee also pointed out that other specific issues raised in its rejoinder dated 19.02.2016 have not been answered by the AO.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 30 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 29. Thereafter, the AO submitted another report dated 04.05.2016 wherein he enclosed letter dated 13.01.2012 written by Director of investigation to JS, FT &TR-I, CBDT, requesting him to seek information from Switzerland Tax Authority and letter dated 21.02.2014 written by Under Secretary to CCIT, Central – Delhi, informing that the first reference was made as per the enclosure i.e. on 21.02.2012.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 31 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Excerpts from the order of the Ld. CIT(A):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 32 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra on record an unambiguous clarification that no information had been received in reference to the impugned reference till the date of assessment will suffice for extending the period by one year and hence, the assessment was completed within the extended period of limitation.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 33 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 36. On the merit off the addition, the ld. CIT (A) held that the information relied upon by the AO has been handed over by competent authority of French Government and hence, the contention of the assessee that information is not authentic or reliable was not acceptable.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 34 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra account during the year. The evidences highlighted by the AO have to be appreciated in the light of the period of limitation of domestic tax authorities to access the information of banking authorities abroad. Thus, the onus was on the assessee which he has failed to discharge and hence, the AO was justified in making the addition. On this basis, the ld. CIT (A) upheld the order of the AO.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 35 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Arguments of the Ld. AR before the Tribunal:

A) On the issue of limitation-Section 153B:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 36 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra The ld. AR submitted that in absence of any explicit declaration that such amendment is retrospective in operation, such amendment has to be considered as prospective in nature and it is only the references made on or after 01.07.2012 which can be eligible for the extended period of one year. The ld. AR submitted that wherever legislation prescribes a date of applicability of a provision to be date other than 1st April off the year, it is with reference to transaction that takes place after such date. He argued that this is normal in the case of amendment to provision of TDS, etc. In the case in hand as well, the amendment has been made applicable w.e.f. 01.07.2012 and the benefit of extended period of one year vide the amendment made vide Finance Act 2012 will only be available qua references made on or after 01.07.2012. He accordingly argued that at best, 6 months extension can be considered to be available in the case in hand in which case, the assessment order should have been passed by 30.09.2014. He argued that since the order was passed on 09.03.2015, the same is barred by limitation and liable to be quashed.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 37 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra of one year or the period between the date on which the first reference is made by the competent authority and the date on which information is last received, whichever is less. To compute such period, onus is on the Department to bring copies of the letter exchanged. In absence thereof, the benefit of extended period cannot be considered. He submitted that the ld. CIT(A) erred in holding that the internal communication placed on record should be sufficient to settle the issue of having made the reference for exchange of information and that the clarification from AO that no information has been received till date of assessment order is sufficient. He submitted that the AO must produce authentic document /correspondence on record to demonstrate that he is entitled to extended period of limitation.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 38 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra upon by the ld. CIT(A), the assessment order needs to be quashed as being barred by limitation.

B) Non-issue of notice u/s 143(2):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 39 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessee in the said judgment, however, the said judgment is no longer a good law in view of the subsequent judgments of the Hon’ble Delhi High Court on the subject matter of issuance of notice u/s 143(2).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 40 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra decision has been reviewed by the Hon’ble Delhi High Court in revenue Petition No. 441/2011 vide order dated 17.08.2011. This fact has been noted by the Hon’ble High Court in the case of Pr. CIT Vs Shri Jai Shiv Shankar Traders Pvt. Ltd. (2016) 383 ITR 448 dated 14.10.2015 and it has been held that it is mandatory to issue notice u/s 143(2) in proceedings u/s 147 of the Act as well. Further, he submitted that a number of judgments have been pronounced by the Hon’ble Delhi High Court wherein the Court has taken a view that it is mandatory to issue notice u/s 143(2) in proceedings u/s 147 of the Act as well.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 41 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra the provision of Section 148 and 153A and accordingly, the requirement to issue notice u/s 143(2) should be seen as mandatory for assessment u/s 153A as well.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 42 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

C) No incriminating material seized during search:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 43 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra of search. Second is the statement of assessee recorded during the search through coercion which was subsequently retracted. With regard to 6 page document, the ld. AR submitted that the said document was available prior to the date of search itself. This is an undisputed fact. The same is evident from the communication between the Director of Investigation Wing and the Pr. CIT placed in the paper book. The said document accordingly cannot constitute incriminating material found during the course of the search.

D) Statement u/s 132(4):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 44 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra as such no cognizance of such statement can be taken. It is a settled law that a statement obtained under coercion and a statement which was tutored cannot be used against the assessee.

 Pr. CIT Vs Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82 (Del.)  CIT VsHarjeev Aggarwal (2016) 290 CTR 263 (Del.)  Vascroft Design Pvt. Ltd. Vs ACIT in IT(SS)A Nos. 129 & 130/Ahd./2015  Shri Nirmal Kumar KediaVs DCIT in ITA Nos. 124 to 126/JP/2019  Shri BrijBhushanSinghalVs ACIT in ITA No. 1412/Del/2018  Krishan Kumar Modi Vs ACIT in ITA No. 2892/Del/2017  AnuragDalmiaVs DCIT in ITA Nos. 5395 & 5396/Del/2017  Shri BishwanathGarodiaVs DCIT in ITA Nos.853 to 856/Kol/2016

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 45 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra statement recorded u/s 132(4) does not constitute incriminating material and no addition can be made on the basis of statement alone without any reference to material gathered during the course of search operations.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 46 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra constitutes incriminating material, addition can be made only in the year to which the incriminating material pertains. In this regard, the ld. AR placed reliance on the judgment of Hon’ble Supreme Court in the case of CIT Vs Singhad Technical Education Society (2017) 397 ITR 344 and the judgment of Hon’ble Delhi High Court in the case of PCIT Vs M/s SMC Power Generation Ltd. in ITA No. 406/2019.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 47 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra as incriminating material, it does not constitute incriminating material qua the year under consideration. Consequently, addition cannot be made during the year under consideration in view of the aforesaid position of law laid down by the Hon’ble Apex Court in the case of Singhad Technical Education Society (supra) and as has been echoed by the Hon’ble Delhi High Court in the case of SMC Power Generation Ltd. (supra).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 48 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 67. He submitted that merely because the information is received from France under the DTAC agreement does not make the information credible. He submitted that the French Competent Authority has just worked like a courier and that too without knowing from where and from whom it received such information. He submitted that if SBI receives an anonymous letter containing certain information about various people of ICICI bank account, that information is passed on to the Income Tax Department, the mere fact that such information has been received by the Income Tax Department from the SBI will not make itself make the information as a credible evidence unless ICICI bank confirms the same as true.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 49 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra CIT(A). The ld. AR invited attention to the correspondence shared by the AO during the hearing before the ld. CIT(A) to demonstrate that what is being tried to establish is the pen drive having been received from the French Authority. There is no link brought on record about this pen drive with any bank account with HSBC, Switzerland.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 50 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra has been stated in the 6 page document. There is no debit or credit as is normal in a bank statement. The ld. AR took us through the 6 pages document to demonstrate that the word “HSBC” is not appearing anywhere in this 6 page document. On this basis, he contended that it is not understood on what basis it is being assumed that this is HSBC bank account. He further pointed out that the revenue has been seeking information from Swiss authorities about HSBC Bank account, Geneva as is evident from page 5 to 7 of paper book filed by the ld. DR. he submitted that the fact that the revenue is seeking the bank statement confirms that the AO is not having bank statement and hence it is asking the bank statement from Swiss Authorities.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 51 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 74. Second, in case evidences were not sufficient, whether the AO has been able to obtain any further evidence or not.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 52 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra stated that print out from the content of the pen drive pertaining to Delhi Region were handed over to DGIT(Inv.) on 14.07.2011. The print out so received contained base sheets of account of the assessee of HSBC Bank, Geneva, Switzerland. The ld. AR invited attention to the paper book filed by the ld. DR where in the proforma regarding request for information, the information has been sought from HSBC Bank, Geneva at page 6 of the first paper book filed by the ld. DR. Thus, allegation as per the pen drive is of bank account of HSBC bank at Geneva, Switzerland falls flat. However, he pointed out that in the assessment order, addition has been made by the AO of HSBC Bank at Zurich. Geneva and Zurich are two different cities and hence, the very basis of making the addition by the AO itself is contradictory. The ld. AR contended that addition is being made on the basis of account with HSBC Bank, Geneva or HSBC Bank, Zurich itself is not clear. The ld. AR contended that in the case of ITO Vs PradipBurman, CC No. 5257922/16, the ACMM has expressed that such inconsistencies leads to grave doubt on the authenticity of the USB drive and its contents and the prosecution charges were dropped.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 53 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra that suspicion however strong, cannot take the place of evidence and that addition cannot be made on the basis of suspicion and in this regard, the ld. AR placed reliance on various judgments forming part of its case law compilation.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 54 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra addition has been made by the AO. As per this section, in case of any unexplained investment, the addition has to be made in the year in which such investment has been made. This section does not give any discretion to the AO to make the addition in the year of his choice. The ld. AR on the basis of the above contention invited attention to the statement. He submitted that the response to question no. 7 and 18 are very clear. As per this statement, the investment has been made in 2002. He submitted that the AO himself has not considered statement as the basis though he is referring to in the assessment order. Thus, addition on the basis of statement in the year under consideration is unsustainable.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 55 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

Submissions of the Ld. DR:

A) On the issue of limitation-Section 153B:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 56 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra admitted position of the AO that no reply has been received by him till date of passing the assessment order. Accordingly, the limitation period shall be extended by a period of one year. The ld. DR referred to her paper book page 8 which is letter dated 26.05.2015 from Under Secretary (FT&TR Division) to Pr. CIT (Central-II) wherein a reference was made to a letter dated 22.04.2015 received from Swiss Government where it has been stated that the correspondence with the Swiss Government is going on and the Swiss Government has informed that the basis of which information was sought do not sufficiently demonstrate that the sources/evidences are independent from the HSBC list. Further, the Swiss Government sought an explanation to substantiate the link between certain companies/entities mentioned in request letter with the Taxpayer concerned. She submitted that such letter is proof that no reply was received prior to date of passing of assessment order on 09.03.2015 and accordingly, the extended period of one year shall be available. Therefore, she submitted that the assessment order has been passed within the extended period of limitation.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 57 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra “2. The issue referred is with regard to the assessment order passed by the AO and the assessee alleging that the same is barred by the limitation in view of clause (viii) of Explanation 1 of Sub-Section 3 of Section 153B of the IT Act.

5.1 A search and seizure operation was carried out in the case of Mr. Parminder Singh Kalra and Consortium Security

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 58 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Pvt. Ltd. and other associated concerns on 28.07.2011. In the normal circumstances as per the provisions of Sec. 153B(1) the assessment in the search and seizure operation cases was required to be completed within the period of 2 years from the end of the financial year in which the last of the authorization for search u/s 132 or requisition u/s 132(A) was executed. As in this case, search was conducted on 28.07.2011 and all the warrants have been executed within FY 2011-12 only, accordingly, in the normal circumstances the limitation date for competing assessment u/s 153A was 31.03.2014.

5.2 Further, as during the course of search and seizure operation, it was found out that the assessee was having foreign accounts/ foreign assets, accordingly, a reference was made by the Director of lnvestigation-2, New Delhi vide letter no. DIT Inv.-11/FB/11-12/72 (copy enclosed) dated 13.01.2012 to FT&TR Division to request for the information about the assessee from the Switzerland Tax Authority. Further, the competent authority of India for exchange of information i.e. Joint Secretary(FT&TR-I) has made the first reference to Switzerland Tax Authority vide letter F.No. 504/0070/2012-FTD-I dated 21.02.2012 [copy of letter of FT&TR vide F.No. 504/70/2012-FTD-I dated 21.02.2014 to "this effect is enclosed). In response to the reference made

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 59 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra by the JS (FT&TR), no information has been received till the passing of the order i.e. 09.03.2015.

Explanation (ix) of Sub-Sec. 3 of Sec. 153B

"(ix) the period commencing from the date on which a reference or first of the. references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one gear, whichever is less;”

6.1 From the plain reading of the explanation, it is crystal clear that the period starting from the date on which the competent authority of India, i.e. JS(FT&TR-I) in the instant case, makes a reference to the foreign authority i.e. 21.02.2012 in the instant case, under the agreement i.e. DTAA between India and Switzerland and the period would be completed only when the information of the last reference is received by the Pr. Commissioner i.e. Pr. Commissioner of

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 60 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Income lax (Central)-2 in the instant case and the completion date is extended to maximum 01 (One) year if no information is received i.e. 31,05.2015 in the instant case as mi information is received.

6.2 Thus, in the instant case, as the reference was made by the JS(FT&TR-2) on 21.02.2012 and no information has been received for a one year period, accordingly, period of maximum of one year is excluded from the lime barring date or in other words, the time barring date of 31.03.2014 in the instant case gets extended by 12 months i.e. 31.03.2015.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 61 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessment years and the year in which search and seizure takes place has to be completed mandatorily. 7.1 Further, the sec. 153A also provides that the proceeding gets abated from the date of search in all the years in the case of a person where search is initiated u/s 132 or 132A of the IT Act. Thus, in the instant case, as the search was initiated on 28.07.2011, accordingly, from that date onwards, the AO was duty bound to complete the assessment and the re-assessment proceedings in the last 6 years as per the provisions of Section 153A and accordingly, during the pendency of the assessment proceedings, a reference was made by the Director of lnvestigation-2 to JS(FT&TR-II) for providing information so that the same can be used in the case of assessee for the assessment or re- assessment proceedings.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 62 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 9. Further, as per the section 153B it is not important who makes the reference whether it Investigation authorities or the Central charge authority, but the time limit gets extended only from the day the reference was made by the competent authority i.e. JS(FT&TR). In the instant case, it is established beyond doubt that the reference was made by JS(FT&,TR) on 21.02.2012 and as no information was received, accordingly, one year extension was available to the AO for completion of assessment i.e. till 31.03.2015 which is time barring/ limitation date of the assessment in the instant case.

9.1 Accordingly, the AO passed an order on 09.03.2015 which is well within the limitation date.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 63 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 31.03.2015, accordingly, the assessee’s contentions are totally devoid of merits and are baseless. Accordingly, the same may be rejected.”

B) Non-issue of notice u/s 143(2):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 64 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra consequent to issue of notice u/s 143(2). She submitted that the AO assumes jurisdiction for reassessment consequent to the search and not consequent to the issue of notice u/s 143(2).

C) No incriminating material seized during search:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 65 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra u/s 153A and relied on the various judgments of Hon’ble High Court of Allahabad, Hon’ble High Court of Kerala wherein it was held that the assessment need not be restricted to the seized material only. She argued that the word “incriminating material” has a wide connotation and cannot be interpreted narrowly. She argued that the bank statement was more than incriminating in nature. She relied on the ratio given by the Ld.CIT(A) which has been mentioned above in this order.

D) Statement u/s 132(4):

“It is humbly submitted that the following submission may kindly be considered in this case 1. Submission regarding the statement recorded of assessee on 28.07.2011, and his subsequent retraction on 30.08.2011 i.e. after 32 days, 2. it is respectfully submitted that the following case laws which are in favour of Revenue may kindly be considered: a) Decision of Hon’ble Gujarat High Court in the case of Arti Gases vs. DIT (Inv.) 248 ITR 55 has held that notice u/s

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 66 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 131(1A) can be issued after completion of search u/s 132 of the IT Act.

It observed

With regard to the petitioner’s contention that the summon issued under section 131(1A) was bad in law and beyond jurisdiction of the issuing authority, notices under section 131(1A) can also be issued after completion of the search undertaken under the provisions of section 132; it would be absolutely logical to call for information so as to have better particulars or to have complete idea about the material seized during the search. If some material is seized at the time of the search and the authorised officer wants to have some details so as to understand the nature of the documents, he may issue notice under section 131(1A). In a given case such a notice may not only help the department but can also help the assessee. If the assessee is in a position to give more explanation so as to satisfy the authorised officer that the documents seized by him do not reveal any undisclosed income, but the income or transactions referred to in the documents had been duly shown by him in his books of account or if the assessee gives any information to the effect that the first impression of the authorised officer with regard to the nature of the documents was not correct, such a notice would help the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 67 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessee himself. If the assessee is called upon to give some information or to explain certain documents or writings seized during the process of search, no harm can be caused to the assessee and such particulars can be helpful not only to the department but to the assessee also. The Court, therefore, could not agree that such a notice could be issued only before the initiation of proceedings under section 132. Moreover, even under the provisions of section 133, the Assessing Officer or the officers referred to in the said section are having power to call for information. So issuance of such a notice during or after the search could not be said to be bad in law.

b) Decision of Hon’ble P&H High Court in the case of Bachitar Singh vs. CIT 328 ITR 400 (Punjab and Haryana) additions on the basis of statement recorded during the course of survey u/s 133(A) of IT Act was upheld even when the assessee retracted it after a couple of months.

c) Decision of Hon’ble Delhi High Court in the case of DayawantiVs CIT [2016] 390 ITR 496 (Delhi)where Hon’ble Delhi High Court held that where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 68 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified.

d) In the case of B. Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) has held that where Hon’ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents.

B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed.

e) Decision of Hon’ble Supreme Court of India in the case of M/s Pebble Investment and Finance Ltd Vs ITO (2017- TIOL-238-SC-IT)has held that where Hon’ble Supreme Court dismissed SLP challenging the judgment, whereby the High Court had held that statement made u/s 133A could be relied upon for purposes of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible.

M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL- 188-HC-MUM-IT) Bombay High Court confirmed.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 69 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra f) Decision of Hon’bleGauhati High Court in the case of Greenview Restaurant vs. ACIT [2003] 263 ITR 169 (Gauhati) thatupheld validity of statement on oath despite retraction since the assessee failed to prove that there was any threat, inducement or coercion.

“9. The primary facts pertaining to the search of the premises of the appellant-firm and its other groups on September 22, 1993, and the recording of statements of Baban Singh, its partner, are admitted. The appellant’s objection is that the statements were recorded by using force and coercion on its said partner. This was on September 23, 1993, in the presence of two witnesses. The retraction of the statement came only on December 24, 1993, followed by a reiteration on the part of the appellant on February 20, 1995, in the course of the assessment proceeding. There is evidently a delay on the part of the appellant and its partners in retracting the statements re-corded. The attention of this Court has not been drawn to any material on record to establish that any attempt was made on behalf of the appellant to prove the allegation of inducement threat or coercion through the witnesses. We have examined the impugned orders rendered by the learned Tribunal with the reasonings in support of its finding against the complain of threat, inducement or coercion and we find no good and sufficient reason to differ

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 70 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra from it. In our view, in the facts and circum-stances of the case, having regard to the materials on record, the appellant has failed to establish that the statements of its partner, Baban Singh, had been recorded in the course of the search by using coercion, threat or inducement. We, therefore, dismiss the contentions advanced by the learned senior Counsel for the appellant in this regard and affirm the conclusion on the learned Tribunal on this count.”

Landmark decision on the issue of retraction of confessional statements, Hon’ble Supreme Court in the case of Surjeet Singh ChhabraVs. Union of India 1 SCC 508, wherein the Hon'ble Supreme Court has held that “confessional statements” made before Customs Officer though retracted within six days is an admission and binding since Custom Officers are not Police Officers. g) CIT VsMukundray K. Shah [2007] 160 Taxman 276 (SC)/[2007] 290 ITR 433 (SC)/[2007] 209 CTR 97 (SC)

A search conducted at assessee’s premises led to seizure of a diary, which contained purchasing of nine per cent RBI relief bonds by assessee from funds received from two firms ‘B’ and ‘C’ in which he was a partner. Tribunal after examination of cash flow statement held that two firms were used as conduits by assessee; that ‘A’ had made payments to ‘B’ and ‘C’ for benefit of assessee, which enabled him to

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 71 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra buy nine per cent RBI Relief Bonds and upheld finding of Assessing Officer. Upheld addition u/s 2(22(e) of I.T. Act.

h) Video Master Vs JCIT 66 taxmann.com 361 (SC)/[2015] 378 ITR 374 (SC)/[2016] 282 CTR 221

where Hon’ble Supreme Court held that where addition on account of undisclosed income was based on statement of partner of assessee-firm, it could not be said that addition was based on no evidence

i) Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143)

where Hon’ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect.

j) CIT Vs M. S. Aggarwal [2018] 93 taxmann.com 247 (Delhi) where Hon’ble Delhi High Court held that where in course of block assessment proceedings, AO made addition to assessee's undisclosed income in respect of gift, in view of fact that assessee did not even know donor personally and, moreover, he himself in presence of his Chartered Accountant had made a statement under sec. 132(4)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 72 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra admitting that said gift was bogus, impugned addition was to be confirmed.

k) Smt.Dayawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[2016] 290 CTR 361 (Delhi)

where Hon’ble Delhi High Court held that where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified.

l) Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9)

where Hon’ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 73 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra m) PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi)

where Hon’ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain (SURVEY CASE)

n) Decision of Hon’ble High Court of Chhattisgarh in the case of ACIT vs. Hukum Chand Jain - [2010] 191 Taxman 319 (Chhattisgarh)

The search and seizure operations were conducted at the business and residential premises of the assessee. In course of search, statement of the assessee was recorded under section 132(4) wherein he surrendered Rs. 30 lakhs as undisclosed income for the block period and offered that whatever taxes would be worked out on the surrendered income, he was prepared to pay the same. However, in response to the notice issued under section 158BC, he offered only Rs. 3,52,000 in his case and the aggregate amount of Rs. 2,05,500 in the case of his 3 sons as their undisclosed income. The Assessing Officer, however, completed assessment by including the amount of undisclosed income offered by the assessee besides specific

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 74 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra additions based on material, which could not be explained by him. On appeal, the Commissioner (Appeals) deleted the addition. The Tribunal dismissed the revenue's appeal holding that confessional statements made during search are often vulnerable, as the person making such statements remains under great stress and strain and he does not have relevant details, documents and books of account and in the absence of the same, precise computation relating to mode of utilization of such income and year of investment cannot be clearly furnished.

On the revenue's appeal to the High Court:

HELD From the principles of law laid down in various judgments, it may be deduced that admission is one important piece of evidence, but it cannot be said that it is conclusive. It is rebuttable. It is open to the assessee, who made admission, to establish that confession was involuntary and the same was extracted under duress and coercion. The burden of proving that the statement was obtained by coercion or intimidation lies upon the assessee. Where the assessee claims that he made the statement under the mistaken belief of fact or law, he should apply for rectification to the authority who passed the order based upon his statement. The retraction should be made at the earliest opportunity

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 75 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. [Para 27]

In the instant case, search was conducted in the presence of the assessee and his sons and seizures were effected. The assessee was confronted with the documents seized during search proceedings, but he could not explain the same. He could not explain the recovery of cash and jewellery and in his statement under section 132(4), he surrendered Rs. 30 lakhs as his undisclosed income for the block period and further expressed his willingness to pay the taxes worked out against the surrendered undisclosed income. He further stated that he was surrendering the income to avoid the dispute with the Income-tax department and for mental peace. The assessee had further stated that he was signing his statement after reading and understanding the same without any coercion and the same had been further countersigned by his 3 sons. The assessee did not retract his statement immediately after the search and seizure was over and in the return also, no explanation was offered for the surrender of the undisclosed income of Rs. 30 lakhs at the time of search and seizure operations under section 132(4). The allegation of duress and coercion was made for the first time in the year 2004, i.e., after almost 2 years

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 76 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra when the Assessing Officer confronted them with their statements under section 132(4) and they were asked to explain as to how the said undisclosed income did not find place in their returns. The department's contention that there were no mitigating circumstances to show that the admission/surrender made by the assessee was retracted at the earliest part of time with corroborative evidence had substance. There was substance in the argument that the assessee surrendered undisclosed income only when he was not able to explain the unaccounted cash, gold jewellery, other documents and loose papers found during search and by volunteering surrender of undisclosed income, he induced the search party not to proceed with collection of other evidence and to accept the surrendered amount. Apart from that, the assessee made alternative plea that in case any other additions were made to his income, then the same should be set off from the amount of Rs. 7.5 lakhs in each case, as surrender was made to cover up all the possible leakages of the revenue and to cover all the unexplained loose papers, etc., and the same was accepted by the Assessing Officer. From perusal of the order of the Commissioner (Appeals) as also of the Tribunal, it was found that none of the forums had recorded a finding that the statement under section 132(4) was obtained under duress. The assessee had totally failed to discharge the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 77 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra burden of proving that the statement was obtained under coercion or intimidation. He did not make any complaint to the higher authorities alleging intimidation or coercion for retracting the statement under section 132(4). The Tribunal had confirmed the order of the Commissioner (Appeals) by observing that surrender was made under bona fide mistake, though it was never the case of the assessee before any of the forums that the surrender was on account ofbona fide mistake. The appellate forums, while reversing the orders of the Assessing Officer, are legally bound to dwell upon specific reasons assigned by the Assessing Officer for not accepting the explanation of the assessee. In the instant case, the Assessing Officer had assigned cogent reasons for not accepting the retraction of the statement under section 132(4) by the assessee. From perusal of the orders of the appellate forums, it was found that without meeting the reasoning of the Assessing Officer for not accepting the explanation of the assessee, the order had been reversed and explanation has been accepted, that too on a ground which was never agitated by the assessee before any of the forums. [Para 30]

Thus, the assessee had failed to discharge the onus of proving that confession made by him under section 132(4) was as a result of intimidation, duress and coercion or that the same was made as a result of mistaken belief of law or

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 78 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra facts. The Assessing Officer was justified in assessing the income of the assessee on the basis of surrender of undisclosed income made by the assessee under section 132(4). The orders passed by the Commissioner (Appeals) and the Tribunal were to be set aside and the order passed by the Assessing Officer was to be restored. [Para 31]

o) Decision of Hon’ble High Court of Bombay in the case of Paras Shantilal Shah vs. DCIT, Mumbai [2017] 81 taxmann.com 104 (Bombay) dated 21.08.2015

In this case the addition made on the basis of statement recorded during search, was upheld by Honb’le Bombay High.

In this case during search, certain jewellery was found in possession of assessees. The assessees in a statement made on oath under section 132(4), admitted that jewellery recovered from them and in their locker was part of their undisclosed income and offered same to tax. Subsequently, the assessees filed a letter before the revenue explaining that the part of the allegedly undisclosed jewellery belonged to their father, the late mother and their minor children as shown in the valuation reports of jewellery in their possession. The Assessing Officer did not accept

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 79 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessee'sexplanation and added value of said jewellery as assessees' undisclosed income. Held that subsequent letter written to the department did not indicate that assessees were retracting the earlier statements made on oath. Further, it did not state that the earlier statements were incorrect or even make an attempt to explain away the categorical statement on oath. There was also no allegation of any ill treatment which led to assessees to make a statement. Therefore, said communication could not supersede/replace the statement made on oath under section 132(4). Therefore, the seized jewellery was rightly treated as unaccounted income of assessee.

p) Decision of Hon’ble Supreme Court of India in the case of BannalalJat Constructions (P) Ltd. [2019] 106 taxmann.com 128 (SC) dated 08.04.2019

In this case where the Tribunal as well as Rajasthan High Court had upheld the additions made on the basis of statement recorded under Section 132(4) during search but subsequently retracted, Apex Court dismissed the SLP filed by the assessee . In the case, a search was carried out at business premises of assessee-company. In course of search proceedings, statement of director of assessee-company was recorded under section 132(4) admitting certain undisclosed

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 80 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra income. In course of assessment, Assessing Officer made addition to assessee's income on basis of statement given by its director although subsequently, director of assessee- company retracted said statement .Tribunal, however, finding that statement had been recorded in presence of independent witness, confirmed addition made by Assessing Officer .High Court also opined that mere fact that director of assessee-company retracted statement at later point of time, could not make said statement unacceptable . It was further opined that burden lay on assessee to show that admission made by director in his statement was wrong and such retraction had to be supported by a strong evidence showing that earlier statement was recorded under duress and coercion - High Court finding that assessee failed to discharge said burden, confirmed order passed by Tribunal.”

Submitted by, Sd/- (Sushma Singh) Commissioner of Income Tax (DR) F-Bench, ITAT, New Delhi

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 81 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Government clearly reveal that the assessee is the owner of an undisclosed bank account. She placed reliance on the findings of the ld. CIT(A) in this regard. The ld. DR submitted that the ld. CIT(A) has called a number of remand reports and the AO has replied to each and every issue raised by the assessee before the ld. CIT(A). The ld. CIT(A) after thoroughly examining all the facts and the evidences on record has confirmed the addition. She submitted that the AO was justified in making the addition in the year under consideration as the 6 page document clearly demonstrated that the assessee was still holding such investment in the year under consideration. As regards the contention of the ld. AR. that the addition in the year under consideration on the basis of the statement of the assessee is unsustainable, she submitted that the AO has to make assessment on human probabilities. In support of her contention, she relied upon the judgment of the Supreme Court in the case of SumatiDayalVs CIT, (1995) 80 Taxman 89 (SC).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 82 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra cannot be doubted. She submitted that once information has been received from a competent authority, then that information cannot be doubted and as such and the contention of the Id. AR that this information is not authentic is not correct. In such cases, the AO is not supposed to establish the source from where the French Competent Authority has obtained such information. On the issue that the 6 page document is not a bank statement, she submitted that it is not important whether this 6 page document is a bank statement or not but what is important, prime and relevant is the “information” contained therein. She submitted that though apparently there is no debit or credit as is usual in a bank statement, but the fact remains that this information pertains to the assessee. On the issue of language in which this 6 page document has been written, she submitted that this document is in French language since the documents are received from French Competent Authority. She submitted that it is a common knowledge many Indians have parked their funds outside India and assessee is one of them. She submitted that it is a clear case where the assessee himself has admitted in the statement recorded during search that it has opened a bank account outside India. The statement recorded during the course of search clearly establishes the fact that the assessee was having a bank account

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 83 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra outside India. She submitted that the retraction made by the assessee later on was an afterthought. She reiterated that the AO has made the addition by taking into consideration both the statement and the 6 page document. She submitted that the assessee has also refused to sign the consent waiver form and thus failed to discharge the onus casted upon him and argued that accordingly, the order of the ld. CIT(A) need to be upheld.

Rebuttal of Ld. AR:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 84 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 85 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra the year under consideration and as such, onus was upon him to bring material to substantiate such allegation.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 86 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra on the contrary, this judgment would support the case of the assessee. It was reiterated that the doubt however strong cannot take place of the legal proof. In support thereof, the Id. AR placed reliance on the judgment of Hon’ble Supreme Court in Umacharan Shah 85 Bros. Vs CIT (37 ITR 271 SC). He further submitted that though income tax proceedings are not bound by the strict rule of evidence but that does not mean that addition can be made without evidence. In support thereof, the Id. AR placed reliance on the judgment of Supreme Court in the case of Dhakeshwari Cotton Mills vs CIT [1954] 26 ITR 775 (SC).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 87 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra “Undisputed Facts:- 1. CBDT receives a pen drive from French Authority on 28.06.2011. 2. Print out taken of the pen drive. 3. A 6 page document is stated to be that pertaining to the assessee and on the basis of this document, it is stated that this is bank account of the assessee with HSBC, Geneva.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 88 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 9. Notices are issued for reassessment under Section 153A on 21.11.2012.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 89 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessee contention of proving evidence that assessee has a foreign bank account, has stated that the assessee’s own statement of having bank account is evidence.

Issues:-

In view of above facts, the following issues arise:-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 90 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 4. As per above section, addition under section 69 section is to be made in the financial year in which assessee has made investment.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 91 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra reveals that the data is erroneous, unauthentic and unreliable. 7. The 6 pg document is not a bank statement. What is the nature of this document? How it is being alleged it is HSBC bank account. Nowhere, HSBC has been stated. There is no debit or credit as is normal in a bank statement. Whether addition is being made on the basis of account with HSBC Geneva or HSBC Zurich. This 6pg document as per French Authority stated in letter dated 26.06.2015 PB Volume I page 250 is HSBC Bank Geneva. The reference in statement is HSBC Zurich.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 92 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra was not any original document. It was not sent by HSBC; it was not sent by Swiss Authorities.

No addition in absence of incriminating material

• Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 93 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra • Delhi High Court in the case of Pr. CIT v. Best Infrastructure (India) Pvt. Ltd. [2017] 397 ITR 82 • Delhi High Court in the case of Pr. CIT v. MeetaGutgutia [2017] 395 ITR 526 • Hon’ble Supreme Court of India in the case of CIT v. Sinhgad Technical Education Society in Civil Appeal No. 11080 of 2017 dated 29th August, 2017

No incriminating material whatsoever found during the course of search

 ITAT Delhi in the case of AnuragDalmia versus DCIT, I.T.As. No.5395 And 5396/DEL/2017  ITAT Delhi in the case of Krishan Kumar Modi versus ACIT, ITA No.2892/Del/2017

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 94 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra  ITAT Kolkata. in the case of Shri BishwanathGarodia versus DCIT, I.T.A. Nos. 853 & 854 /KOL/ 2016, I.T.A. Nos. 855 & 856 /KOL/ 2016

Premise for making addition in the case in hand

• 6 page document on the basis of which search was carried out: The first basis for making the addition is the 6 page unverified, unauthenticated, alleged document (as reproduced in para 3.1 of the assessment order) received allegedly under exchange of information mechanism through DTAA/DTAC which was available with the Department prior to the date of search. • Statement: The second basis for mocking the addition is statement of the assessee obtained under coercion which was subsequently retracted.

6 page document available prior to search - thus not incriminating material

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 95 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra date of search itself. This is an undisputed fact. The same is evident from, inter-alia, the communication between the Director of Investigation Wing and the Pr. CIT placed at PB Volume I page 250. Accordingly, the said document cannot constitute incriminating material for the purpose of making the addition. In this regard, reliance is placed on the following judgments:

• ITAT Delhi in the case of AnuragDalmia versus DCIT, I.T.As. No.5395 And 5396/DEL/2017 • ITAT Delhi in the case of Krishan Kumar Modi versus ACIT, ITA No.2892/Del/2017 • ITAT Kolkata in the case of Shri BishwanathGarodia versus DCIT, I.T.A. Nos. 853 & 854 /KOL/ 2016, I.T.A. Nos. 855 & 856 /KOL/ 2016

Statement does not constitute incriminating material

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 96 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra constitute incriminating material. In this regard, reliance is placed on the following judgments:

 Hon’ble Delhi High Court in the case of Pr. CIT v. Best Infrastructure (India) Pvt. Ltd. [2017] 397ITR 82  Delhi High Court in the case of CIT versus Harjeev Aggarwal, (2016) 290 CTR 263  ITAT Ahmedabad in the case of Vascroft Design Pvt. Ltd., versus ACIT , I.T(SS).A. Nos. 129, 130, /Ahd/2015  ITAT Jaipur in the case of Shri Nirmal Kumar Kediaversus DCIT (vice-versa), ITA 124 to 126/%JP/2019  Hon’ble ITAT Delhi in the case of SH. BrijBhushanSingal versus ACIT, ITA No. 1412/Del/2018

• ITAT Delhi in the case of Krishan Kumar Modi versus ACIT, ITA No.2892/Del/2017 • ITAT Delhi in the case of AnuragDalmia versus DCIT, I.T.As. No.5395 And 5396/DEL/2017 • ITAT Kolkata in the case of Shri BishwanathGarodia versus DCIT, I.T.A. Nos. 853 & 854 /KOL/ 2016, I.T.A. Nos. 855 & 856 /KOL/ 2016

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 97 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

Even if the statement constitutes incriminating material; it does not constitute incriminating material qua the near under consideration

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 98 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra material pertains. In this regard, reliance is placed on the judgment of Apex Court in CIT v. Singhad Technical Education Society (2017) 397 ITR 344 (SC) [Para 18].

Q. 7. Can you recollect as to when was it opened? Ans. Sometime in 2002.

Q. 18 What amount was given at the instruction Charlie and what amount was deposited by him in your account? Ans. Various amount were given on various dates in 2002 in Delhi ranging from Rs. 2 crore to 5 crore.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 99 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 26. If the Revenue to rely on the statement, the statement must be read in entirety. In this regard, reliance is placed on the following judgments:  Supreme Court in the case of State of Orissa and Ors. vs. MangaljiMuljiKhara&ors. &Titaghur Paper Mills Co. Ltd. &Anr. in [1985] 60 STC 213  Madhya Pradesh High Court in the case of Shri Digambar Jain AndOrs. vs Sub Registrar, AIR 1970 MP 23  Delhi High Court in the case of CIT v. Vatika Township Pvt. Ltd. in IT A No. 1329/2010 dated 10.09.2010  Gujarat High Court in the case of Glass Lines Equipments Co. Ltd. v. CIT [2002] 253 ITR 454  ITAT Jaipur in the case of Om Prakash Agarwal v. ACIT in IT A Nos. 721 to 726/JP/2015 dated 23.011.2016  ITAT Delhi in the case of Anant Raj Industries Limited vs. AO, TTJ 119, 865

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 100 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Sing had and as has been echoed by the Hon’ble Delhi High Court in the case of Smc Power Generation Ltd. (supra).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 101 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Krishna Devi, ITA 125/2020, dated 15.01.2021 wherein it has been held that no addition can be made merely on the basis of suspicion in absence of any evidence on record of in absence of adequate inquiry.

(i) Nowhere the name of the bank i.e. ‘HSBC’ is mentioned in the impugned document. (ii) The so called bank statement does not look like bank account at all. In the communication between the Director of Investigation Wing and the Pr. CIT, it has been stated that the document is in the nature of ‘base sheet’ [PB Volume I page 250]. (iii) That from the said abstracts of statement reproduced in the Assessment order, it appears to be belonging to some “Nine On Ten Foundation” and “Bunfield Invest SA” which are separate entities.

(iv) There is no amount or balance which is outstanding in the name of the assessee.

(v) The documents do not indicate at all that at any transaction was ever conducted by the assessee during the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 102 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra relevant assessment year in the alleged bank accounts with the other entities stated therein.

(vi) These documents further do not indicate any link or relationship of the assessee.

(vii) It is nowhere reflected from the documents that the assessee ever operated the said account during the period relevant to the assessment year.

(viii) There is no document which shows that the money held by these entities in these accounts has been remitted to the assessee in any way.

(ix) It is also not explained anywhere as to what is the constitution of the above said entities/companies mentioned in the said documents, what is the legal status of the entities, what is connection of the assessee with the bank account numbers mentioned against the said entities which are companies and not individuals and what is the role played by the assessee in the said entities.

(x) The said document nowhere contains the name or whereabouts of the organization or person from whom the same has been received. Even name of any bank has not been mentioned in the same.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 103 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 32. In CC No.525792/16, ACMM vide order dated 18.11.2020 in the case of ITO vsPradipBurman, the ACMM has considered the above said aspects and as specifically observed that there are material inconsistencies in the content which leads to grave doubt on the authenticity of the USB drive and its contents.

“32. It is clear from the complaint and assessment order that the alleged account is stated to be opened in HSBC

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 104 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Zurich but as per the testimony of CW-6 and documents Ex. CW-6/2 annexure Ex. CW-6/2 Page 1A to 14 of additional documents filed on 08.09.2016, the alleged account of the accused is at HSBC Geneva.These inconsistencies show that the complainant himself is not sure or clear as to where the alleged bank account of the accused was opened i.e. in which branch. No effort was made to enquire from Swiss Authorities or French authorities to clarify the aforesaid inconsistencies.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 105 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra version of the complaint and assessment order qua existence of account in HSBC, Zurich is true and correct then it can be safely held that the USB drive sent by French embassy was not the correct drive or that correct drive was sent to India but printouts of some other drive were taken by the officials. This inconsistency shows that no occasion ever arose to conduct the present investigation and file the complaint. It further indicates that the documents Ex. CW-1/5 are not trustworthy, authentic and reliable.”

Other arguments in brief:-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 106 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra expenditure /investment. That, such onus has not been discharged.

Non issuance of notice under section 143(2)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 107 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 41. In this regard, it is submitted that the said judgment doesn’t hold good in view of the subsequent judgments of the Hon’ble Delhi High Court on the subject matter of issuance of notice.

Assessment order is time barred

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 108 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 45. At the outset, it is submitted that the reference was made on 21.02.2012. At that time, clause (viii) of Explanation to section 153B provided for time period of 6 months as against 1 year. Vide Finance Act, 2012, the period of 6 months was increased to 1 gear with effect from 01.07.2012. It is submitted that only the references made on or after 01.07.2012 will be eligible for the extended period of 1 year. Wherever legislation prescribes a date of applicability of a provision to be date other than 1st April of the year, it is with reference to transaction that takes place after such date. This is normal in the case of amendment to provision of TDS, etc. Thus, the benefit of extended period of 1 year vide the amendment made vide Finance Act 2012 will only be made to references made on or after 01.07.2012. In view of the same, if 6 months extension is considered, the assessment order was required to be passed by 30.09.2014. However, the order was passed on 09.03.2015. Thus, the order is barred by limitation and liable to be quashed.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 109 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra letter exchanged. In absence thereof, the benefit of extended period cannot be considered.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 110 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra financial year in which search is carried out. In the case of the assessee, the search was carried out on 28.07.2011. Accordingly, the period of two years end on 31.03.2014. The assessment in this case however has been made on 09.03.2015. The AO has relied upon the clause (viii) of Explanation below Section 153B which gives an extension for completion of assessments.

i. The first issue is that the clause (viii) as on the date of the reference i.e. 21.01.2012 which provided extended limit of 6 months only will be applicable and hence the order will be barred by limitation.

ii. The second issue raised by the Id. AR is that the AO, despite repeated remand report being called by the CIT(A), has failed to place any evidence of making reference and reply thereof. Since AO is invoking extension of limitation on this basis, the onus was upon him to produce evidences in support thereof, which he has failed.

iii. The third issue raised by the Id. AR on this aspect without prejudice to the above is that even if reference was made on 21.01.2012 as is being contended by the AO, it is not possible that no reply to such requisition by the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 111 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Competent Authority would have been received from the other Competent Authority of a Sovereign Nation. The AO has simply made a statement without giving any evidence on this aspect.

iv. The fourth issue raised by the ld. AR is that reference having been made on 21.01.2012 as is being by contended by the ld. AO, even before the initiation of the proceedings under section 153A, the extension of limitation for assessment proceedings will not be available.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 112 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 7. Whether the assessee agreed of having the bank Yes No account abroad in the statement recorded on 28.07.2011 ? 8. Whether as per the statement the account was Yes No opened in the year 2002 ? 9. Whether as per the statement, the deposits were Yes No made in the year 2002 or not ? 10. Whether the assessee accepted of making deposits to Yes No the tune of Rs.2 to 5 crores ? 11. Whether the balance amount in the month of May Yes No 2006 pertains to deposit during the year ? 12. Whether the assessee filed letter of retraction of the Yes No statement on 30.08.2011 before the DDIT, Unit-II(1) ? 13. Whether the amounts shown in the document Yes No deposited in financial years 2005-06 and 2006-07 ? 14. Whether the documents bear the stamp of any Yes No bank/logo ? 15. Whether as per the document, the date of creation of Yes No the account and the trust was 29.01.2001/06.02.2001/16.01.2002/15.01.2002 ? 16. Whether the information has been provided by the Yes No Competent Authorities of France ? 17. Whether the HSBC Bank confirmed the information ? Yes No 18. Whether the AO held that the documents are the Yes No

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 113 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra account of HSBC Zurich ? 19. Whether the Director(Inv.) held that the documents Yes No are the account of HSBC Geneva ? 20. Whether it has been clarified the bank statement Yes No belongs to HSBC Geneva or HSBC Zurich ? 21. Whether the CBDT handed over the set of documents Yes No (Computer Printout) to the respective DGIT ? 22. Whether the CBDT information (CIT-Inv. CBDT) Yes No mentioned the documents relating to HSBC Geneva ? 23. Whether CBDT certified them as HSBC accounts ? Yes No 24. Whether CBDT held that the “information/printed Yes No documents” pertain to information of the bank accounts ? 25. Whether a certificate u/s 65B of Indian Evidence Act Yes No drawn by the US/ CBDT confirms receipt of USB pen drive ? 26. Whether the Director(Inv.) made reference to Yes No regarding the bank account through FT&TR ? 27. Whether any bank account details have been Yes No received by the FT&TR ? 28. Whether time limits u/s 153B stand extend when a Yes No reference is made by Competent Authority ? 29. Whether the extension of the time limit of 12 months Yes No is allowed even in the absence of receipt of reply ? 30. Whether the extension of time depends on the Yes No

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 114 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

outcome of the reply received, if any, 31. Whether as per the protocol notification dated Yes No 27.12.2011, the information can be provided only after 01.04.2011 ?

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 115 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Decision:

A) On the issue of limitation-Section 153B

"Explanation:- In computing the period of limitation under this section- (i) ……….. (viii) the period commencing from the date on which a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information so requested is received by the Commissioner or a period of six months, whichever is less, shall be excluded.”

"Explanation:- In computing the period of limitation under this section- (i)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 116 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ……….. (viii) the period commencing from the date on which a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information so requested is received by the Commissioner or a period of One year, whichever is less, shall be excluded.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 117 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra extension has to be counted from the date of the search as provided under section 153A and thus, only period of only 6 months will be available because on the date of the search i.e. 28.07.2011, this clause provided only period of 6 months. We are of the view that if the legislature has extended the period during the pendency of the proceedings, then, such extended period will be available in the absence of any specific provision linking such extension with the date of the search. The contention of the ld. AR would have been correct had the time period for completion of assessment under the amended provision would have expired. Then, the later on amendment could not have revived the proceedings which stood barred by limitation when the amendment has been made. In the present case, the amendment was made w.e.f. 01.07.2012 and as on that date, the proceedings were alive and hence, the extended period of limitation by the amendment made w.e.f. 01.07.2012 being a procedural law will be available to the AO.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 118 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra enclosed a chart giving name of the assessee and reference number and date [Paper book page 391] when as per the Under Secretary, FT & TR (III), the first reference was made. The contention of the ld. AR before the CIT(A) and as well as before us is that this is an internal correspondence from Under Secretary FT&TR to CCIT (Central). The AO has failed to produce the copy of the reference made and as such, this evidence is not sufficient to establish that a reference was made on 21.01.2012. The CIT(A) has accepted this as a credible evidence of in support of the fact that a reference was made by the Competent Authority. Considering the overall circumstances and this being a communication from one Department to another Department, we are of the view that the reference was made by Competent Authority on 21.01.2012 and hence we reject the contention of the ld. AR on this aspect. The third contention of the ld. AR is that as per the above clause (viii), the period commencing from the date on which the reference for exchange of information is made by a Competent Authority and ending with the date on which the information requested is last received by the Commissioner or period of one year, whichever is less, gets extended. It is the case of the AO that a reference was made by the Competent Authority and the information as requested was not received till the time of passing the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 119 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessment order and hence, the extension in passing the assessment order will be of one year. As against this, the contention of the ld. AR is that it is not possible that a reply would not have been received from the Competent Authority of Sovereign Government. The ld. AR has invited attention to the repeated remand reports before CIT(A) whereby the AO has not placed any correspondence or reply which has been received in response to the alleged reference made on 21.01.2012.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 120 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra was made i.e. 21.01.2012 to the date when the Swiss Competent Authority disposed of the reference.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 121 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 112. We are of the opinion that AO in the remand report has made a categorical statement that till the date of the order i.e. 09.03.2015, reply was not received. The AO has made a categorical statement in the remand report, we cannot ask the AO to establish a negative evidence that no reply was received from the Swiss Competent Authority. Accordingly, we reject this contention of the ld. AR.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 122 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 153B cannot be read dehors the clause (viii) of the Explanation. We are of the view that it does not matter when the reference was made whether before the assessment proceedings having been initiated or later on. The time period for completion of assessment will include the extended period in case a reference has been made. Accordingly, we reject this contention of the ld. AR.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 123 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra B) Non-issue of notice u/s 143(2)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 124 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 125 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra application of mind by the Ld. AO under such dictate. Similar contention was raised by the assessee before the ld. CIT(A). The ld. CIT(A) has called for a remand report on this issue and the AO in the remand report dated 28.12.2015 has clarified that CIT and Addl. CIT are supervisory authorities and they monitor the progress of sensitive cases. Thus, in the instant matter, directions were given by the Addl./Joint CIT and CIT in view of the seriousness of the matter including the unaccounted transaction of HSBC, Zurich. The ld. CIT(A) after taking into consideration the above reply from the AO has held that these directions do not in any way convey that the AO has been influenced to decide the case before her in any particular manner. CIT in has administrative powers and the Addl.CIT has statutory powers under the act.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 126 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra the order vitiated on account of such supervisory authority having been exercised by the Addl.CIT. In fact, the provisions of Section 153D provides that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year u/s 153A except with the prior approval of the Joint/Addl. Commissioner. Accordingly, this ground of appeal is dismissed.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 127 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

C) No Incriminating material seized during the search:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 128 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra the search. The second being the statement of the assessee recorded on the date of the search.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 129 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 123. Without prejudice to above, the contention of ld. AR is that the addition on the basis of the alleged statement even otherwise cannot be sustained in the year under consideration as unexplained investment under section 69 of the Act as in the statement, no such investment has been made during the year under consideration as per the statement.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 130 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra document as a bank account. During the course of the hearing before the ld. CIT(A), the assessee has challenged the authenticity of this document and also that this document is not a bank account and more so with HSBC, Switzerland as is being contended by the Revenue. The assessee has also raised the issue that the Revenue itself is not clear whether this allegation of bank account is with HSBC, Geneva, or with HSBC, Zurich. The ld. CIT(A) has called a number of remand reports seeking clarification from the AO on the various issue raised by the assessee before the ld. CIT(A). In one of the remand reports dated 28.12.2015, the AO has enclosed a letter dated 26.06.2015 giving clarification regarding the source of the 6 page document. As per this letter, the French Competent Authority has handed over a pen drive to the Indian Competent Authority in Paris on 28.06.2011. The print out from the contents of the pen drive pertaining to Delhi region were handed over to the DGIT (Investigation). These documents after print out from the said pen drive and on this basis, it has been contended in this remand report that 6 page document is authentic. As against this, the contention of the assessee has been that merely because a pen drive has been handed over by French Competent Authority to Indian Competent Authority, the information contained in the pen drive will not become authentic. The

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 131 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra allegation is that the assessee is having a bank account with HSBC, Geneva, Switzerland as per this document. This information has not come from HSBC. This information has also not come from Switzerland Competent Authority where it is being alleged that the assessee is having the bank account. How this pen drive came in possession of French Competent Authority, there is no answer from any source.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 132 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra statement or not, we find that she did not controvert the fact that such document does indeed lack the basic essentials of a bank statement.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 133 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 130. The next issue is whether the 6 page document can be considered to be authentic or not and whether addition can be made on the basis of said document or not by considering the details contained therein to be that of a bank account. We have given our careful consideration. The source of information has always been the pen drive received from Competent French Authority. From perusal of the case records as referred to by the ld. AR, we find that the assessee has raised this contention before the ld. CIT(A) as well.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 134 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Authority of India, till has reached the AO, there remains no doubt. There is no quarrel with the proposition that the French Competent Authority has handed over the pen drive to the Indian Competent Authority and the 6 page document is a print out of the said pen drive. But the ld. CIT(A) failed to address the argument of the assessee that the information contained in pen drive, the source thereof and author thereof and the authenticity of the information contained in the pen drive has not been established with any credible evidence or linkage with any of the document. The pen drive so received was just like an anonymous letter forwarded by French Competent Authority to the Indian Competent Authority. The issue which the ld. CIT(A) has failed to appreciate is the origin of the source of information only and certainly not the passing of the information from French Competent Authority to Indian Competent Authority, till such time the origin of source of information is authenticated.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 135 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra making it very clear that we have not given any finding on merits and also to veracity of the information received by the department from the foreign authorities, as to whether assessee has any link with the foreign bank accounts or not.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 136 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra in the course of search, then in view of the principle laid down by the Hon'ble Jurisdictional High Court in several cases, such an addition cannot be roped in the assessment u/s.153A especially in the assessments which are not abated. If the Revenue had any incriminating material antecedent to the search, that is, it was found during the course of search or as a result of search, then in that case Revenue had various other courses of action left under the provisions of Income Tax Act, but certainly not within the ambit and scope of Section 153A read with 2nd proviso thereto.

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ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 137 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 138 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra argued that in the absence of any seized material, no addition can be made in the non-abated assessments. He has produced the copy of the panchnama at page no. 4 to 28 of the paper book pertaining to the seizure of documents. It was argued that the Income Tax Department had the documents in their possession even before the date of search, the statement recorded and the addition made is not based on the material found and seized during the search. We have specifically asked the revenue as to the factum of the issue. The revenue fairly replied that the 6 page document is not part of the seized material. We are unable to agree with the contention of the ld. DR that the statement do constitutes seized material. In view of the judgment of Hon’ble Delhi High Court in the case of PCIT VsAnand Kumar Jain (HUF) in ITA No. 23/2021 dated 12.02.2021 wherein it was held that the statement recorded u/s 132(4) does not constitute incriminating material and no addition can be made on the basis of statement alone without any reference to material gathered during the course of search operations, we hold that no addition can be made in the instant years.

• Krishan Kumar Modi Vs ACIT in ITA No. 2892/Del/2017

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 139 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra • Shri BishwanathGarodiaVs DCIT in ITA Nos.853 to 856/Kol/2016

“6. The ld. counsel for the assessee submitted that the returns of income filed by the assessee for both the years under consideration, i .e. A.Ys. 2006-07 and 2007-08 were processed by the Assessing Officer under section 143(1) prior to the date of search and since no notices under section 143(2) were issued by him for the said two years and even the period available to issue such not ices had already lapsed even prior to the date of search, the assessments for the said two years were deemed to have been completed. He submitted that the information relating to the undisclosed Bank account maintained by the assessee with HSBC, Geneva, Switzerland was available with the Assessing Officer prior to the date of search and although the search was conducted on the basis of the said information, no incriminating material whatsoever was found during the course of search relating to the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 140 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra transactions reflected in the said Bank account or income arising to the assessee relating thereto. He contended that the scope of assessment made by the Assessing Officer under section 153A for both the years under consideration pursuant to the search, therefore, was limited to the income unearthed during the course of search on the basis of incriminating material found and in the absence of any such incriminating material found during the course of search, addition on account of HSBC Bank transactions or income relating thereto was beyond the scope of assessment made under section 153A. He contended that when this issue was specifically raised by the assessee during the course of appellate proceedings before the ld. CIT(Appeals), the concerned Assessing Officer had appeared before the ld. CIT(Appeals) on 21.12.2015 and agreed vide order-sheet entry dated 21.12.2015 recorded by the ld. CIT(Appeals) (copy at page no. 22 of the paper book) that the information regarding the undisclosed HSBC bank account maintained by the assessee was duly received from the CBDT and there was no incriminating documents/ books of account that were found during the course of search, which had been used in making the additions to the income of the assessee under section 153A of the Act. The ld. counsel for the assesese reiterated that in the absence of such incriminating material, the additions as made to the total

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 141 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC Bank, Geneva, Switzerland as well as income relating thereto in the assessments completed under section 153A for both the years under consideration are not maintainable. In support of this contention, he relied on the decision of the Mumbai Special Bench of the Tribunal in the case of All Cargo Global Logistics Limited vs. DCIT reported in 137 ITD 287 as well as the decision of the Division Bench of this Tribunal in the case of ACIT vs. Pratibha Industries reported in 141 ITD 151.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 142 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessment at all and since the assessment proceedings for both the years under consideration had not been completed prior to the date of search, the scope of proceedings under section 153A was wide to assess and reassess the total income of the assessee. In support of this contention, he relied on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (Income Tax Appeal No. 1626 of 2010 & Others dated 14.05.2012) as well as the decision of the Delhi Bench of this Tribunal in the case of ShivnathRaiHarnarain (India) Limited vs. DCIT [117 TTJ (Del.) 480].

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 143 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra by the Assessing Officer during the course of appellate proceedings before the ld. CIT(Appeals) as is evident from the relevant order-sheet entry dated 21.12.2015 recorded by the ld. CIT(Appeals) (copy at page no. 22 of the paper book). The question that arises now is whether in the absence of such incriminating material, any addition to the total income of the assessee can be made on account of the transactions reflected in the Bank account of the assessed with HSBC Bank or any income relating thereto in assessments completed under section 153A of the Act for both the years under consideration.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 144 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra assessee’s total income are subsisting at the time when the search or requisition is made, the scope of assessment under Section 153A is limited to reassess the income of the assessee on the basis of incriminating material found during the course of search.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 145 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra already in existence having been passed prior to the initiation of search/requisition. Although this question was not finally answered by the Hon’ble Delhi High Court in the case of Anil Kumar Bhatia (supra), it is quite clear from the said question raised by the Hon’ble Delhi High Court that there was no distinct ion made by Their Lordships in the assessments completed under section 143(1) and section 143(3) for determining the scope of the proceedings under section 153A. However, the said question arose specifically for the consideration of Mumbai Bench of this Tribunal in the case of ACIT vs. Pratibha Industries reported in 141 ITD 151 and after referring to the discussion made by the Hon’ble Delhi High Court in this context in the case of Anil Kumar Bhatia (supra), the Tribunal held that the only logical conclusion which could be traced out by harmonizing the legislative intendment and the judicial decision was that where the assessments had already become final prior to the date of search, the total income has to be determined under section 153A by clubbing together the income already determined in the original assessments and the income that is found to have escaped assessment on the basis of incriminating material found during the course of search. To arrive at this conclusion, reliance was placed by the Tribunal on the decision of Special Bench, Mumbai in the case of All Cargo Global Logistic Limited (supra), wherein it

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 146 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra was held that even though all the six years shall become subject matter of assessment under section 153A as a result of search, the Assessing Officer shall get the free hand through abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 147 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 138. The Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla (supra) held as under:

“vii. Completed assessments can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed 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”

“69. What weighed with the Court in the above decision was the “habitual concealing of income and indulging in clandestine operations” and that a person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long.” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 148 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

Conclusion

(i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A. of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 149 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 140. The above Judgment is confirmed by the Hon’ble Supreme Court by dismissing the SLP of the Department. Therefore, on this reason also no addition could be made of any unexplained bank deposits or interest earned thereon in any of the assessment years. In view of the above, we set aside the Orders of the authorities below and delete the entire additions.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 150 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra D) Statement u/s 132(4) - Whether the amounts have been deposited in the instant years?

“Unexplained investments.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 151 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra may be deemed to be the income of the assessee of such financial year.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 152 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

“Q. 7. Can you recollect as to when was it opened? Ans. Sometime in 2002.

Q. 18 What amount was given at the instruction Charlie and what amount was deposited by him in your account? Ans. Various amount were given on various dates in 2002 in Delhi ranging from Rs.2 crore to Rs.5 crore.”

(i) the assessee has made in the financial year certain investment: (ii) such investments are not recorded in the books of accounts, if any, maintained by him; and

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 153 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra (iii) the assessee offers no explanation or that his explanation is not satisfactory.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 154 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra where speaking through one of us, the Co-ordinate Bench observed as under:

“(4) We have heard both sides patiently and attentively. We have also considered all the materials on our record. At the time of hearing before us, the relevant facts are not in dispute. Firstly, it is not disputed that the total investment made by the assessee in this year was Rs. 12,58,100/- and the remaining investment was made in earlier years. It is also not disputed that out of the aforesaid investment of Rs.12,58,100/-, the total payment amounting to Rs.6,05,100/- was made by cheque and the remaining balance of Rs.6,53,100/ - was made by cash. It is also not disputed that the assessee had sufficient deposits in her bank account due to brought forward deposits of earlier year at the beginning of the year under consideration to explain the source of aforesaid transactions by cheque totaling Rs.6,05,000/-. It is further not disputed that the deposits in the bank accounts of the assessee at the beginning of the year had accumulated in the past, across several years. It is also not disputed that the assessee had made significant amounts of withdrawals in cash, out of her bank account in an earlier year.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 155 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra (4.1) It will be useful to refer to Section 4 of I.T. Act, which is the charging section. For ease of reference, Section 4 is reproduced as under:- “Charge of income-tax.

Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. ”

(4.1.1) On perusal of Section 4(1) of IT. Act, it is obvious that in the year under consideration, no addition can be made in respect of investments in property made by the assessee in earlier years or in respect of deposits in bank

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 156 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra accounts of the assessee made in earlier year which brought forward to this year for making cheque payments of the aforesaid total amount of Rs. 6,05,100/ -. Moreover, in any case, when certain amounts were invested by the assessee and also, certain other amounts were deposited in the bank account of the assessee, in previous years relevant to earlier A.Ys.; such investments or deposits could not possibly have been out of the income of the previous year under consideration (relevant to A.Y. 2009-10). It is well settled that each year is separate and self- contained period. Income Tax is annual in its structure and organization. We take strength from decisions reported at KikabhaiPremchand vs. CIT 24 ITR 506(SC); ITO vs. MurlidharBhagwan Das [1964] 52 ITR 335 (SC); CIT vs. British Paints India Ltd. 188 ITR 44(SC) and CIT vs. BasantRaiTakht Singh 1 ITR 197 (SC) for the proposition that each ‘previous year’ is a distinct unit of time for the purposes of assessment and further, that the profits made; and the liabilities of losses made before or after the relevant previous year are immaterial in assessing income of a particular year; unless in accordance with proviso to Section 4(1) of I.T. Act, there is statutory provision to the contrary, authorizing income of a period other than the previous year under consideration to be charged to income-tax (such as Section 7 IB of I.T. Act and Section 72 of I.T. Act which allow losses to be carried forward). Useful

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 157 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra reference may also be made to in the RatanchandLallumal 4 ITR 189 (All.), Jagannath Ram Dayal CIT 18 ITR 375 (All); M.K Muhammad Ibrahim vs. CIT 10 ITR 64 (Mad.), CIT vs. Jug Sah Muni Lai Sah 7 ITR 522 (Patna), CIT vs. Planters Co. Ltd. 123 ITR 648 (Mad.), CIT vs. Spunpipe 141 ITR 246 (Guj.), DebaprasannaMulcharjee vs. CIT 20 ITR 293 (Cal.), CIT vs. Bijli Cotton Mills Pvt. Ltd. (All.) and CIT VsPartabmullRameshwar 107 ITR 526 (Cal.) for proposition that; even if certain income has escaped tax in the relevant assessment year, because off a device adopted by the assessee or otherwise, it does not entitle revenue to assess the same as the income of any subsequent year when the mistake becomes apparent.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 158 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra made in the year under consideration. If that be so, irrespective of the fact whether such statement has been retracted subsequently or whether such statement constitute incriminating material or not, we are of the view that the addition, on the basis of this statement, cannot be made in the year under consideration.

“5.3 As per the aforesaid provisions of section 69, where the assessee is found to have made any investment not recorded in the books of account in any financial year and the assessee is not able to explain its source to the satisfaction of the assessing officer, then, the value of the investments is deemed to be unexplained income of the assessee in financial year in which investments were made. Therefore, for section 69 of the Act to be applied, the undisclosed investment must be found to be relating to any

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 159 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra particular year and in that year, in the absence of satisfactory explanation of the assessee value of investments is subjected to tax. XXX

5.6 In the present case, on perusal of the papers relied upon by the assessing officer, it is seen that there is reference to various dates. There is no specific date wherefrom the date of investment in the so-called bank account can be determined. As per the English translation, the date of creation of the profile of the so-called bank account is reflected as 09.01.2001 and another date of creation is mentioned as 30.01.2001 and both the dates are much prior to assessment year 2006-07, the year under consideration. Moreover, it is noticed that the amounts reflected balances carried forward from earlier period and there is no reference to any deposition being made in the said bank account which could be related to any of the assessment years 2006-07 or 2007-08. Of course, there is reference to certain balances for the period November, 2005 to February, 2007, which has been relied upon by the assessing officer, but it is noticed that the said balances are merely balances and not any deposits. In this context, the Ld. Senior Counsel vehemently contended that if one were to strictly construe the document as it is, then, no addition could have been made in any of the assessment years under consideration

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 160 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra since as per the document the account was created much earlier and there is no evidence of deposition of any amount in any of the assessment yeas beginning with assessment year 2006-07. It was contended that the assessee merely offered the amount to tax in assessment year 2012-13 to avoid litigation and if at all the said amount could only been taxed in the said year, being the year of search, as per the provisions of section 69A of the Act.

5.7 On thorough and serious consideration, we find substantial merit in the aforesaid contention of the Ld. Sr. Counsel that if at all the amount on the basis of the papers relied upon could only be taxed in year of search, when the said papers were, for the first time, confronted to the assessee. This is for the reason that the paper nowhere shows any amount being deposited in any of the assessment years beginning with assessment year 2006-07. Therefore, neither in assessment year 2006-07 nor in assessment year 2007-08, the two years in which additions have been made by the assessing officer, the assessed could be regarded as having made any investment and therefore, the provisions of section 69 of the I.T. Act cannot, in our view, be applied in those assessment years. Further, the documents relied upon actually refer to creation of account in earlier assessment year, much prior to assessment year 2006-07.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 161 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA No. 4576/Del/2016 AY: 2007-08:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 162 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 153. In assessee’s appeal for the assessment year 2007-08 in ITA No. 4576/Del/2016, the ld. Counsel for the parties have submitted that the facts and the issue involved is the same as that involved in the assessee’s appeal in ITA No. 4575/Del/2016 for the assessment year 2006-07. Accordingly, in view of our findings for the assessment year 2006-07, we direct the AO to delete the addition. In the result, the appeal of the assessee is allowed.

ITA No. 5330/Del/2016: AY: 2007-08:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 163 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 164 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ITA No. 5332/Del/2016 A.Y. 2009-10:

“1. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.40,00,000/-made by AO on account of Unexplained expenditure.

Ground No. 1 Unexplained Expenditure:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 165 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

“6. Vide submission 11.02.2014, assessee submitted in response to the question raise regarding marriage/social function, that total amount spent was approximately Rs.40,00,000/- on his son’s marriage. Assessee has not explained any source regarding the same and has not furnished any detail of the same which he had himself admitted to have spent. Assessee has not even linked the expenditure so made with any withdrawals from his bank account. Therefore, in view of the assessee’s own admission of such amount to have been spent on marriage but not substantiated with any corroborative evidence addition of Rs.40,00,000/- is made as unexplained expenditure in the hands of the assessee.” Addition : Rs.40,00,000/-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 166 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra with HDFC Bank and Rs.18,60,000/- was met by assessee’s wife Smt. Tripat Kaur. The details of expenditure are as under:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 167 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Amount paid to 475604 11-06- HDFC 500000 TK Global E-travel 2008 Bank Solutions Pvt. Ltd. towards cost of Air tickets for guests

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 168 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Amount paid to 494177 13.09.200 HDFC 40000 PSK Jerry Pinto for 8 Bank decoration of venue of wedding function Amount paid to 475667 23.09.200 HDFC 78000 PSK Saroja 8 Bank Communications for invitation cards 495408 10060 TK Amount paid to 17.04.200 HDFC Spice Jet 475654 8 Bank 4240 PSK

Amount paid to 13.09.200 HDFC Spice Jet 8 Bank Total 207300 G. Total 3936732. 50

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 169 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Ground No. 2 and 4 Disallowance u/s 14A and section 36(1)(iii): 162. Ground no. 2 and Ground no. 4 in Revenue’s appeal are regarding the deletion of addition of Rs. 12,23,083/- on account of disallowance of disallowance under section 14A and the deletion of addition of Rs. 11,77,070 under section 36(1)(iii). Since the issue of disallowance under section 14A is linked to the disallowance under section 36(1)(iii), we will first take up the ground no. 4 regarding disallowance of interest under section 36(1)(iii).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 170 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra earned interest. As such, there is no logical basis for making disallowance under section 36(1)(iii).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 171 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra page no. 115-118) wherein it was explained that all the interest bearing funds were utilized for making interest bearing advances. It was pointed out that the assessee was sanctioned overdraft facility of Rs. 400 Lacs. from State Bank of Patiala (SBOP) in October 2017. The interest free loan of Rs.15 Lacs was given to Mr. Gurdeep Singh in FY 2006-07 and Rs. 37 Lacs was given to Mr. RK Gupta in FY 2005-06 i.e. before sanctioning of the bank overdraft facility. It was thus established that there was no nexus between the interest free loans and the borrowed funds. In support thereof, the ld. AR invited to the sanction letter from bank dated 1.9.2007 (PB pg. no. 119 - 122) and confirmation letter of party since the inception of loan (PB page no. 123-126). As regards loan to the third party (Omega Finhold Pvt. Ltd.), it was submitted that the same had been paid during the year under consideration, but out of assessee’s own funds and not out of the borrowed funds of lending business. The same was also corroborated with the ledger account of the assessee in the books of the party (PB page no. 104) and assessee’s bank statement (PB page no.100-102). The AO without considering the reply of the assessee from proper perspective made an addition of Rs. 11,77,070, being proportionate disallowance of interest paid on borrowing vide the assessment order alleging that the assessee has not been able to establish the nexus

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 172 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra between the borrowed and interest earning advances. The AO alleged that the assessee’s contention that all borrowed funds were utilized for earning income has not been substantiated with any credible evidence. The CIT(A) after perusing the evidences on record has rightly deleted the addition by giving a categorical funding that all interest bearing loans to the tune of Rs. 3,03,50,275 had been advanced on interest.

“18. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during assessment as well as appellate proceedings. It is

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 173 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra seen that the assessee had borrowed amount on interest during the year under consideration and the loans had been advanced on interest two different parties also during the year under consideration only. The assessee had filed copy of the bank statement before the AO as well copy of each of the parties to whom the amount has been advanced on interest. The facts also highlight that the assessee had advanced interest bearing amounts totaling Rs.3,41,00,000 as on 31.3.2009 as against interest bearing loans raised amounting to Rs. 3,03,50,275/- on the said date. This fact clearly shows that the amount borrowed on interest has been used specifically and exclusively for advancing amounts of interest for the purposes of earning income. The facts that an amount of Rs. 46.80 lakh has been given as loans free of interest in earlier years cannot effect the arguments taken by the assessee on the issue. The assessee had sufficient capital of loan owned as evident from the capital account and any amounts out of the same advanced in the earlier years for whatever personal circumstances, cannot be the basis to disallow the interest on amounts borrowed as the said amount has been duly used for the interest earning income. The appellant had also submitted before the AO at para 4 on his reply dated 26.12.2004 that the interest free loan given to Shgurdeepsingh at rs 15 lacs had been advanced in FY 2006-07 out of which Rs 3.20

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 174 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra lacshad been received in Fy 2007-08 and balance was outstanding at the end of this financial year. Similarly the amount advanced to rar R.K. gupta was in FY 2005-06 out of which an amount of Rs 2 lacs had been received back in Fy 2006-07 and 35 lacs in FY 2008-09 and nothing was outstanding. Further the amounts advanced to Omega Finhold pvt. Ltd. had been from personal funds as evident from perusal of bank statement of SBOP account wherein the interest bearing loans are credited., in view of the detailed analysis of the facts of the case there is no logical basis in the AOs action making the disallowance of Rs.11,77,770 /-. The same is directed to be deleted.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 175 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra under Rule 8D of Rs. 21,39,724 need to be made. However, considering the fact a disallowance of Rs. 11,77,070/- has been made under section 36(1)(iii), the balance disallowance i.e. Rs. 12,23,083/- is made under this head. The CIT(A) had deleted this addition holding that the entire interest expenditure was for business purposes.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 176 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra year under consideration, the assessee had earned a dividend of Rs. 35,854/- . Further, on perusal of the computation of income (PB page no. 2), the AO vide para 7 of the assessment order observed that the assessee had claimed dividend income of Rs. 35,854/- as exempt and interest expenditure of Rs. 24,00,153/- towards interest in money lending business. The AO then proceeded to straightaway compute the disallowance under section 14A r.w.r 8D of the Act, without discussing the issue further, or providing any basis for establishing nexus between the borrowed funds and amount invested in equity shares. It was submitted that out of the total interest of Rs. 24,00,153/- claimed by the assessee, the AO computed disallowance under Rule 8D at Rs. 21,39,724/-. However, owing to the fact that interest to the extent of Rs. 11,77,070/- was already disallowed under section 36(1)(iii) of the Act, therefore the AO restricted the disallowance under section 14A to Rs. 12,23,083/- (i.e. 24,00,153 (-) 11,77,070). The AO has further disallowed Rs. 9,16,641 (i.e. 21,39,724 (-)12,23,083) on protective basis. It was submitted that the CIT(A) has examined the entire facts as can be seen from the finding recorded in para 27 of its order. It was further contended that Rule 8D is not mandatory. Section 14A nowhere makes it mandatory for the assessee or the assessing officer to make calculation as

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 177 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra per Rule 8D. Sub section 2 read with sub section 3 of section 14A and sub rule (1) of Rule 8D, clearly states that the power to exercise the provision of Rule 8D is available to an assessing officer only if he is not satisfied with assessee’s claim of expense with respect to the income which do not form part of the total income. In the present case, the AO has simply stated that the claims of the assessee are not acceptable, without making any reference to the books of accounts. The same therefore does not amount to recording of satisfaction as per the mandatory requirement of section 14A(2) r.w.r. 8D(1). In support thereof, the ld. AR placed on the decision of jurisdictional High Court in the case of CIT vs. Taikisha Engineering India Limited ITA 115/2014 & 119/2014 wherein it was held that unless the AO rejected the explanation or the rationale which induced the assessee to offer particular amount as expenditure with some reasoning, the mere rejection per se cannot be accepted. Ld. AR submitted that since in the instant case, the disallowance has been made by the AO, without providing any specific finding regarding dissatisfaction with the explanation given by the assessee, therefore in such a case, the disallowance of interest by invoking Rule 8D is untenable. Ld. AR also placed reliance on the following decisions:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 178 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra (i) Hon’ble Supreme Court in the case of Maxopp Investments vs. CIT and PCIT vs. D.B. Corp Ltd., Civil Appeal Nos. 104-109 of 2015 (ii) Hon’ble Delhi High Court (SLP against which has been dismissed by the apex court) in the case of PCIT vs. M/s. Moonstar Securities Trading and Finance Co. Pvt. Ltd., ITA 81/2018, CM APPL.2787/2018 (iii) Hon’ble Delhi High Court in the case of H.T. Media Ltd. vs. PCIT, ITA No. 548/2015, & ITA No. 549/2015 (iv) Hon’ble Delhi High Court in the case of PCIT vs. M/s. U.K. Paints (India) Pvt. Ltd., [2017] 392 ITR 552

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 179 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra PCIT vs. DLF Home developers Ltd. ITA 65/2019, CM APPL. 3709/2019.

“27. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during assessment as well as appellate proceedings. I have already analysed in detail the facts of the case in respect of the amounts borrowed by the appellant on interest and the usage thereof in the form of amounts advanced on interest. It has been held that the amount borrowed on interest most specifically the OD limit used by the assessee, has led to debit of an amount of Rs. 2400153/- in the form of interest on the said amount of loan and the same had been directly used for lending amounts on interest to different parties

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 180 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra which had led to earning of interest of Rs. 3672034/-. This being so there is no basis for the AO to hold the view that the amounts borrowed on interest had not been for the purposes of earning taxable income. The provisions of section 14A read with Rule 8D clearly require the AO to analyse the facts of the case so as to get to the satisfaction that certain expenditure had been incurred for earning tax exempt income and in the event of such satisfaction recourse to Rule 8D could be made. It is apparent from the perusal of the assessment order that no such exercise has been undertaken by the AO before the proceedings to resort to the machinery available under Rule 8D. This fact apart, the expenditure in the form of interest debited in the P&L account has already been examined to have been incurred for earning taxable income in the form of interest earned to the tune of Rs. 3672034/-. This being so it can be said that no expenditure has been debited in the P&L account which could be attributed to earning of exempt income. In the circumstances the primary requisite as stipulated in section 14A does not get satisfied and therefore no consequential disallowance either by resorting to the machinery available under Rule 8D or otherwise could be made. The disallowance made by the AO on protective basis is therefore directed to be deleted.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 181 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 174. We are in agreement with the finding of the CIT(A) and accordingly, uphold the order of the CIT(A) and this ground of the Revenue is dismissed.

Ground No. 3 Interest on Foreign Deposits:

Ground No. 5 Capital Introduced:

“In response to questionnaire dated 27.01.2014, Assessee vide annexure -D of letter dated 11.02.2014 submitted business Balance Sheet as on 31.03.2009 detailed as under: Liabilities & Capital Assets & Property Capital Current Assets & Loans Advances

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 182 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Add: Profit for the year Rs. 12,71,883 Loans & advances(sch.A) Amount Introduced Rs.24,77,843 Rs.37,49,725 Rs3,41,00,000

Current Liabilities & Provisions Borrowings from Overdraft A/c (Bal.Fig.) Rs.36,00,275 Advanced from Rs.2,67,50,000 Customers (Sch-B) Rs.3,03,50,275 Rs.341,00,000 Rs.3,41,00,000

Vide questionnaire Dated 17.12.2014-Assessee was further asked to explain the source of capital introduced of Rs.24,77,843/- during the year. Vide annexure A of submission dated 30.12.2014, assesee has furnished lending Business Balance sheet detailed as under:

Liabilities Assets Capital A/c Balance b/f Rs.12,70,023 Loans & advances Rs.3,41,00,000 Add:

A. Amount Introduced i. Total amount transferred from personal/other A/c Rs.1,02,50,000 ii. Less” transferred to personal/Other A/c Rs.96,27,765 Rs.6,22,235 Rs.5,85,585 Rs.24,77,843 B. Interest Receivable Add: Profit during the year Rs.12,71,883 Rs.37,49,725

Loans & Advances

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 183 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Bank : SBOP OD A/c Rs.36,00,275 Others Rs.2,67,50,000 Rs.3,41,00,000Rs.34100000

Vide Point No.1 of the submission dated 30.12.2014, assesee has mentioned that the earlier Balance sheet submitted on 11.02.2014 was based upon single entry system wherein amount introduced of Rs.24,77,843/- was a balancing figure and vide submission dated 30.12.2014, Balance Sheet submitted is based upon Double entry system. In the Balance Sheet submitted on 30.12.2014, assessee has explained Capital Introduction of Rs.24,77,843/- as under: 30.12.2014 11.02.2014 Balance b/fd Rs.12,70,023 Nil Difference between Amount lent & taken (Rs.1,02,50,000-Rs.96,27,765) Rs.6,22,235 Nil Interest Receivable Rs.5,85,585 Nil Rs.24,77,843 Nil

Assessee was show caused vide letter dated 20.02.2015 as to why addition of Rs.24,77,843/- be not made. Assessee vide reply dated 26.02.2015 reiterated its earlier reply and has further stated that unexplained credit is based on the figure of Balance Sheet and not based on any credit entry which is found in the books of accounts.

Contentions of Assessee are not acceptable on following grounds:- i. Assesee has not submitted any evidence of balance brought forward of Rs. 12,70,023/-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 184 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ii. No detail of amount lent & borrowed on Personal A/c is submitted and hence Rs.6,22,235/- remains unexplained. iii. Interest Receivable of Rs.5,85,585/- is grossly wrong as interest receivable is an asset item and not liability item. This is further established by the fact that vide Annexure “G” of submission dated 11.02.2014, assessee has given detail of Loans & Advances squared up and confirmation of Consortium Securities Pvt. Ltd. Loan a/c is given wherein figure of Rs. 5,85,585/- appears on both sides signifying that on 01.04.2008 there was Nil Balance.

From the above facts it is crystal clear that assesee has not been able to prove the amount of Capital introduced of Rs.24,77,843/- and therefore addition of Rs.24,77,843/- made.” Net Addition: Rs.24,77,843/-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 185 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra “12.1 The Assessing Officer has stated that since the assessee has not submitted any evidence regarding the balance brought forward, details of the amount lend and borrowed and the interest receivable, the capital introduced of Rs.24,77,843/- as shown by the assessee in his balance sheet of lending business activity is considered to be unexplained.

10.2 In this regard it is submitted that the findings recorded by the Assessing Officer are factually incorrect and contrary to the material and documents on record. The Assessing Officer has not been able to appreciate or understand the facts of the case in the right perspective. The assessee is an individual. He is not carrying on any business except the activity of giving loans on interest from the overdraft limit sanctioned by the State Bank of Patiala, loans taken on interest from friends/associates as well as from own capital funds of the assessee. The assessee by treating it as lending business activity, disclosed the income under the head 'Income From Business & Profession’ in his return of income, as is evident from the computation of income placed at PB Pg. 2 - 3.

12.2.1 From the records it may be observed that he has earned interest on the advances given of Rs.36,72,034/- and he has paid interest of Rs.24,00,153/- and hence

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 186 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra earned net interest income of Rs.12,71,881/- from this lending business activity. All these transactions are through bank and there is no outside source and no outside introduction of the capital.

12.2.2. No separate books of account/records were being maintained and no expenditure has been claimed on this lending business activity. Thus, the assessee simply drew the statement of affairs of the lending business activity on single entry basis from the consolidated records and the capital introduced at the end of the year was the balancing figure, i.e. Rs.24,77,843/-, difference between the ‘Interest bearing advances” of Rs.3,41,00,000/- reduced by the 'interest bearing loans’ of Rs.3,03,50,275/- and profit for the year of Rs.12,71,883/-. The Assessing Officer asked for further details of this balancing figure to support the capital figure in the statement of affairs drawn on the basis of single entry basis.

12.2.3. During the course assessment proceedings, the assessee prepared the books of accounts of the lending business activity on the double entry system and submitted that the details that constitute the capital balance shown in the statement of affairs prepared and drawn on single entry basis from consolidated records. The details of the same

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 187 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra were worked out and provided as mentioned hereinabove, that interalia includes the following, as evident from PB 53:

i. Rs.12,70,023/- which was the opening balance carried forward from the previous balance sheet and duly submitted in previous assessment year.

ii. Difference of Rs. Rs.6,22,235/- (1,02,50,000 - 96,27,765) relates to net difference of the funds transfer to and from non interest bearing accounts i.e. Rs. 1,02,50,000/- received in the bank account of SBOP and Rs. 96,27,765 being amount received in HDFC Bank account relating to interest bearing accounts, etc.

iii. Further a sum of Rs.5,85,585/- was the interest accrued but not received (receivable) from the previous year which was inadvertently not shown in the previous balance sheet/statement of affairs of lending business activity, and as such had not been added to opening capital balance carried forward. This interest receivable was duly offered for tax in the previous assessment year.

iv. Thus the aggregate of these was obviously assessee's own capital, as shown as balancing figure in the balance sheet of lending business activity.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 188 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 10.3 During the course of proceedings, the assessee, in support of the Capital in the statement of affairs of lending business activity, provided bank statement of all banks, with description of each deposit and withdrawal. The Ld. AO being satisfied with each debit and credit entry in the bank account / statement of the assessee did not raise any further query. Thus the capital balance reconciled with each debit and credit entries in lending business activity which were through bank entries, and which stand explained and accepted by the Ld. AO.

10.4 The Assessing Officer without appreciating the above facts has made an arbitrary and casual remark with predetermined mind set to treat it as income, stating that the assessee has failed to submit evidences and substantiate the explanation without pointing out what remains unsubstantiated or unexplained. On the basis of explanation given, and facts narrated herein below. This observation of the Assessing Officer is not correct as may be seen from the following facts.

(a) That Rs. 12,70,023/- being opening balance in the statement of affairs of lending business activity of the year under consideration gets corroborated from the closing balance of previous year, i.e. 31.03.2008 (being the difference between interest bearing loans {Rs. 13,29,977}

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 189 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra and interest bearing advances {Rs. 26,00,000} pertaining to lending business activity of the assessee in the previous year}.

(b) Thus, the difference of these two is the closing capital of the last year i.e. Rs.12,70,023/-. The closing capital of the last year is obviously the opening capital of this year. As regards the amount of Rs.6,22,235/-, which relates to net difference of the funds transfer to and from non interest bearing bank accounts i.e. Rs. 1,02,50,000/- received in the bank account of SBOP and Rs. 96,27,765 being amount received in HDFC Bank account relating to interest bearing accounts, etc. It is further submitted that details of each and every entry in the amounts given above to determine the balance of Rs. 6,22,235/- are duly reflected in the bank statements submitted during the assessment proceedings together with narration of every debit and credit entries. Therefore this addition to the capital of the assessee in the lending business activity of the assessee during the year under consideration stands explained and substantiated. Thus it is not an unexplained source to the capital introduction of the assessee in statement of affairs of lending business activity warranting any addition to the returned income.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 190 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra (c) The figure of Rs.5,85,585/- relates to interest income earned in the preceding F.Y. 2007-08 (relevant to A.Y, 2008- 09), which inadvertently was not shown as 'interest accrued but not received' on the asset side, and its corresponding credit in Capital Account in the lending business balance sheet, as this amount was not received in F.Y. 2007-08. This amount of Rs.5,85,585/- which was received on 01.04.2008 is therefore added to the Capital in the year under consideration.

(d) The above three figures, i.e. (i) Rs. 12,70,023/- is the opening capital of assessee in lending business activity in the year under consideration, (ii) Rs. 6,22,235/- is contribution of difference between funds transferred from and to as per bank statement and (iii) Rs. 5,85,585/- is interest receivable, and total of the all these entries which in aggregate makes a sum of Rs.24,77,843/- [12,70,023 + 6,22,235 +5,85,585). Thus, the assessee provided a detailed and substantiated explanation, vide letter, dated 30.12.2014 and 26.02.2015.

10.5 That the addition to the capital in statement of affairs of lending business activity is not a result of any credit entry in books or bank account that remained unexplained or unsubstantiated by the assessee. Thus, this kind of addition which related to reconciliation entries is cannot be

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 191 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra treated as ‘unexplained cash-credit' or unaccounted investment as contemplated under the Act.

10.6 From the assessment order is quite clear and evident that the Ld. AO has not rebutted the above explanation on merit or with some documentary evidence, and just arbitrarily and with pre set mind concluded that the assessee did not submit explanation. In view of the above facts and explanation on record the Assessing Officer was not justified in making this addition and the same be deleted.”

“That an amount of Rs. 12,70,023 /- has been the previous opening balance capital in the balance sheet. This amount represented the difference between the interest bearing loans of Rs. 13,29,977/- and interest bearing advances at Rs. 26 lakh as on 31.3.2008. These figures are directly verifiable from the statement of affairs as per the assessment record of the AY 2008-09. Further an amount of

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 192 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Rs. 6,22,235/- is the net funds transferred to and from the non-interest bearing bank accounts(HDFC) to interest bearing bank account (SBOP). The interest bearing bank account is the State Bank of Patiala from where an amount of Rs. 96,27,765/- has been transferred to HDFC Bank which is non interest bearing funds account. The amounts transferred to the State Bank of Patiala account is Rs.1,02,50,000/-. The difference between the two at Rs.6,22,635/- is the increase in the capital employed in the business of advancing loans. This increase in the capital does not represent any fresh infusion of funds from outside sources but transfer from one account of the assessee to another account as detailed above. Thirdly, the figure of Rs. 5,85,585/- represents interest income earned in the FY 2007-08 which had been shown in the said assessment order as income but the said amount had been received as on 1.4.2008 thereby leading to the increase in capital. In view of the detailed analysis as above, it becomes clear that no entry in respect of the increase in capital remain unexplained and the increase in capital actually does not represent any fresh infusion from sources other than the assessee's own accounted for funds. Therefore there is no logic in AO’s action in making the impugned addition, same is directed to be deleted."

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 193 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 181. On going through the order, we find that the ld. CIT (A) has judiciously examined the bank account of HDFC, State Bank of Patiala and the interest earned and the capital transferred. In the absence of any factual incongruency brought to our notice by the revenue, we hereby decline to interfere with the order of the ld. CIT (A) on this issue.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 194 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra ITA No. 5333/Del/2016 A.Y. 2010-11:

“1. On the facts and circumstances of the case the CIT(A) has erred in deleting the addition of Rs.31,70,746/-made by AO on account of Unexplained cash credit u/s 68 of the I.T. Act.

Ground No. 1 Unexplained Cash Credit u/s 68:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 195 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra “The between the two balance sheets prepared by the assessee pertaining to the bank overdraft (Loan amount at Rs.31,70,470.62/- is admitted fact. The said difference had been explained before the AO on account of the fact that the bank loan/overdraft became the balancing figure instead of capital account of the assessee on account of the incorrect inputs in the excel sheet. The assessee had submitted all the bank statements including in respect of the overdraft bank loan which did not show any difference with respect to the bank loan amount at Rs.2,45,,75,570.98. The confusion has arisen on account of the balancing figure being termed as bank loan/overdraft rather than capital which could be the resultant figure under single entry system of accounting. The same figure in respect of the affairs of the assessee had been prepared under the double entry systems which clearly reconciles the alleged difference arising out of the reasons mentioned above. The increase in the bank overdraft/loan amounting from Rs.2,14,05,094.36 to 2,45,75,570.98 leads to corresponding decrease in capital account of Rs.(-) 75,570/- as against the credit balance of Rs. 30,94,905.64 as shown in the audited balance sheet. The above detailed explanation of the assessee has not been considered and understood by the AO correctly and the impugned difference has been deemed to be income of the assessee. I don’t find any reason to reject the logical explanation of the assessee

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 196 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra as submitted before the AO and after considering the same there is no scope to hold the view that impugned difference of Rs.31,70,476/- represented any entry which could be treated as income of the appellant. The addition made is therefore directed to be deleted.”

Ground No. 2 Disallowance of Interest u/s 36(1)(iii):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 197 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 186. As per the Assessing Officer, the assessee has given interest free loans of Rs.5,45,40,000/- during the year and the opening balance of the same was Rs.20,80,000/-, totaling the amount of interest free loans to Rs.5,66,20,000/-. Further, during the year under consideration, the assessee has borrowed funds from banks and others at the rate of 13.5% and has paid interest of Rs.34,73,669/-. During the year, the assessee has received loans of Rs.5,23,40,000/- and loans given of Rs.5,45,40,000/-.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 198 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra paid to others, and Rs.5,17,378/- on account of interest paid on OD, resulting in a profit of Rs.18,23,024/-. The opening balance of the capital of the assessee was Rs.12,71,881/-.

Loans received on account of business: Rs.3,10,00,000/- (Tripata, Kalra, Anand, Utpal, DPBP, Vibhu)

OD on account of business: Rs.2,14,05,094/- Total borrowed funds: Rs.5,24,05,094/- Opening capital balance: Rs. 12,71,881/- Total funds available: Rs.5,36,76,975/- Total loans given: Rs.5,55,00,000/- (LaxmiBuildtech, Neera, Auto Links)

The interest earned and paid is part of the P&L A/c. The profit declared on this transaction was Rs.18,23,024/-.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 199 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Pvt. Ltd. was infact Rs.10,00,000/- only but not Rs.1,00,00,000/- as shown at page 76 of the paper book. It was submitted that these personal loans were extended out of the own capital of the assessee but not from the business of lending.

Ground No. 3 Interest on Foreign Deposits:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 200 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

ITA No. 5334/Del/2016 A.Y. 2011-12:

“1. On the facts and circumstances of the case the CIT(A) has erred in deleting the addition of Rs.1,43,29,815/-made by AO on account of Unexplained cash credit u/s 68 of the I.T. Act.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 201 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 19,16,415/- made by AO on account of capital introduced.”

Ground No. 1 Unexplained Cash Credit u/s 68:

“7. Vide show cause dated 20.02.2015, assessee was asked as to why addition of Rs. 1,43,29,815/- be not made on account of margin money of Rs. 1,00,00,000 and on account of HDFC of Rs.43,29,815/- as mentioned in Annexure C-1 of assessee’s letter dated 06.01.2015. Vide letter dated 27.02.2015, assessee has submitted that he has received Rs. 100 Lacs from the Consortium Securities Pvt. Ltd. which he had given as margin money in the earlier year. The contention of the assessee is not acceptable because the amount has not been reflected in both the Balance Sheets i.e. Audited as well as Not Audited of the assessee of A.Y. 2010-11. Assessee has tried to confuse the issue by mixing the personal and business Balance Sheet

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 202 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra prepared on single entry and double entry. Hence, an addition of Rs. 1,00,00,000/- is made.

Regarding credit from HDFC of Rs.43,29,815/-, assessee has submitted that it relates to the net Balance of transaction between HDFC Bank Account and State Bank of Patiala OD Account. This transaction of the assessee is also not acceptable as assessee has not given any credible evidence in the form of Bank Statement. Moreover, this Balance is not appearing in any of the Balance Sheet. Hence, an addition of Rs. 43,29,815/- is made.”

“27. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during assessment as well as appellate proceedings. It is seen that the AO has made an addition of Rs. 1 crore on the ground that such receivable had not been recorded in the balance sheet prepared by the assessee. The explanation of the assessee clearly shows that the amounts in question had been given as margin money for transaction of shares

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 203 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra through its broker viz. M/s Consortium Securities Private Limited and had been received in the current year. The balance sheet prepared by the assessee was with respect to the money lending business and impugned share transactions and the related deposits of margin money was not part of the said record and accordingly had not been made part of the said balance sheet which was exclusively for the money lending business. The source of payment of said amount of Rs. 1,00,00,000/- to M/s Consortium Securities Private Limited in the earlier years and its receipt during the year under consideration has been as per the bank statement filed before the AO and as per the copy of account with the with the said entity. The AO has not brought on record anything to contradict the factual submission of the appellant on the issue as detailed above. It is a peculiar feature of the assessee's financial affairs that no formal books of accounts had been maintained which could take into account all the financial transactions entered into by the assessee and whatever balance sheet has been prepared, its for purpose of recording transaction namely the bank statements pertaining to money lending business. This being so the exclusion of a particular transaction pertaining to advance given for margin money and its receipt back in particular year could be termed as unaccounted only if the same had not been given received from the disclosed

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 204 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra bank accounts. It is a matter of fact that no entry in assessee’s impugned bank accounts has been shown to be of unexplained nature. This being so the basis taken by the AO in making the impugned addition is not rational. Further the addition of Rs.43,29,815/- with respect to the transactions between the HDFC bank account and the State Bank of Patiala both operated by the assessee and had been treated as capital addition while preparing the accounts on double entry system. These amounts represented the transfer of funds from HDFC bank account (considered as representing personal bank account) to State Bank of Patiala (considered as money lending/business activities account). The source of funds in the said bank account has not been a subject matter of any doubt as obvious from the assessment order of the AO. The AO’s observations that the assessee had not filed relevant bank statements is also contrary to the facts of the case as each bank statement of the assessee as well M/s Consortium Securities Private Limited along with narration of the entry therein had been filed before the AO. The addition made does not have any rationale in terms of the specific entry being unaccounted. The resultant addition is merely on account of lack of understanding shown by the AO in comprehending the peculiar nature of accounts maintained by the assessee. The addition made by the AO is therefore directed to be deleted.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 205 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

Ground No. 2 of Revenue’s appeal and Ground no.8 of Cross Objection No. 344/Del/2016 of the assessee Addition on account of Profit Share:

Particula P.S. Kalra Manish BadalMidha Samir r Mehta Kalia Share 12,131,97 12,131,97 12,131,97 12,131,97 3 3 3 3 Less: 6,053,855 6,677,851 4,422,213 5,173,444

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 206 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Balance with them Net 6,078,118 5,454,122 7,709,760 6,958,529 Balance Payable

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 207 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra in the profits of the company to the extent of ¼ of the company’s profit. The assessee’s attempt to mislead the department by saying that this is the net worth or the book value cannot be accepted in absence of evidence & more so as col. 3 of the seized paper shows that the amount is actually been distributed.

Shareholder P.S. Manish BadalMidha Samir Name Kalra Mehta Kalia BadalMidha 32,490 Mrs. ArtiMidha 3,760 Mrs. Tripat 5,454 Kaur M/s Consortium 18,180 Securities P. Ltd. Omega Finhold 12,616 P. Ltd. Santosh Mehta 36,250 VeenaKalia 36,250 Total 36,250 36,250 36,250 36,250

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 208 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 202. From the above, we find that the assessee is not a shareholder but only a Director in the said company. From the balance sheet, it is found that the net worth of the company as per the seized material was Rs.4,85,27,890/- (page no. 78, 79 Annexure A-2). The assessee was representing Tripat Kaur, M/s Consortium Securities P. Ltd. and M/s. Omega Finhold P. Ltd. whose total shares was 36,250 whereas Manish Mehta, BadalMidha along with ArtiMidha and Samir Kalia were also holding equal share of 36,250. The value of the shares have been represented in the page no. 76 of Annexure A-2. From the concurrent reading and examination of the page 76 and page 78, 79 of the same Annexure A-2, we hold that the seized material doesn’t represent the half yearly profit but represent the value of the shares held by and on behalf of the four persons namely P.S. Kalra, Manish Mehta, BadalMidha along with ArtiMidha and Samir Kalia.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 209 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Solutions Pvt. Ltd. Assessment of the said company has also been made post search and no adverse inference has been drawn in respect of the seized document. Accordingly, we direct to delete the entire addition of Rs. 2,42,63,946/-. In the result, the ground no. 2 of the Revenue’s appeal is dismissed and ground no. 8 of assesse’s Cross Objections is allowed.

Ground No. 3 Addition on account of Sale of unlisted Shares:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 210 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

“It is pertinent to mention that company whose share have been bought and sold is a Private Limited Company (Closely held) whose shares are not listed/traded on the stock exchange. Therefore, no prudent investor will buy the shares for more than book value.

This shows that the assessee has paid back the extra differential amount of Rs.49,35,250/- (120-78.44 = 41.56 × 118750) in cash to the investors.”

Ground No. 4 Disallowance u/s 14A:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 211 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 206. The Assessing Officer held that the assessee has claimed Rs.80,49,478/- towards interest in money lending business and worked out disallowance of Rs.42,08,366/- u/s 14A.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 212 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra CIT(A) deleting this addition and this ground of the Revenue is dismissed.

Ground No. 5 Interest on Foreign Deposits:

Ground No. 6 Disallowance of Interest u/s 36(1)(iii):

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 213 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra proportional amount of Rs.15,99,503/- which was computed as under: Name of Amount Period Period To Intere Amount Person From st of loan of (INR) Rate Interest deemed Gallery 200000 1 year 13.5% 27,000 GurdeepSin 10,80,000 1 year 13.5% 1,45,800 H.S. Kalra 23,90,000 62 30.10.20 03.01.20 13.5% 54,806 22,00,000 5 04.01.20 22.06.20 13.5% 1,35,074 months 10 10 27,00,000 6 23.06.20 06.01.20 13.5% 1,91,737 months 10 11 28,00,000 22 07.01.20 30.01.20 13.5% 22,784 31,00,000 1 day 30.01.20 31.01.20 13.5% 1,146 33,00,000 4 days 01.02.20 04.02.20 13.5% 4,883 41,00,000 25 05.02.20 30.03.20 13.5% 37,911 37,00,000 1 day 31.03.20 31.03.20 13.5% 1,368 Omega 25,00,000 7 month 23.06.20 21.02.20 13.5% 2,20,068 Finhold & 28 10 11 Pvt. Ltd. days 1,05,00,0 12 22.02.20 06.03.20 13.5% 46,603 10,00,000 23 07.03.20 31.03.20 13.5% 8,507 days 11 11 Acron Inf. 50,00,000 294 03.06.20 28.03.20 13.5% 5,43,699 Pvt. Ltd. days 10 11 Chiraga 10,00,000 60 01.09.20 01.11.20 13.5% 22,192 Associates days 10 10 Pvt. Ltd. 15,00,000 245 02.11.20 07.12.20 13.5% 1,35,925 Total 15,99,50 3 211. The ld. CIT (A) deleted the addition after examining that the entire interest bearing borrowed funds have been utilized for the purpose of interest bearing advances. It was categorically mentioned that the ld. CIT (A) that the P&L A/c of the assessee has been examined and the assessee has earned interest of Rs.1,23,98,677/-. From the

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 214 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra examining of the details available on record and the balance sheet of the assessee, we find that the assessee has got sufficient own funds to extent interest free loans. Hence, no disallowance is called for on account of interest paid especially when all the interest bearing loans were shown to have been utilized for the purpose of business.

Ground No. 7 Capital introduced:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 215 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra examining the due reconciliation of the amounts involved in the capital account.

ITA No. 5335/Del/2016 A.Y. 2012-13:

“1. On the facts & circumstances of the case the CIT (A) has erred deleting the addition of Rs.6,14,300/-made by AO on account of Unexplained cash credit u/s 68 of the I.T. Act.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 216 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Rs.12,85,898/- made by AO on account of disallowance u/s of interest u/s 36(1)(iii).

Ground No. 1 Unexplained Cash Credit u/s 68:

“3. During the search dated 28.07.2011, total cash found from the various premises was Rs.1,79,62,800/-. Vide explanation given in annexure-F to the submission dated 06.01.2015 only a sum of Rs.1,73,48,500/- (seized) has been explained. The difference amount (Rs.1,79,62,800 – Rs.1,73,48,500 = Rs.6,14,300) has not been explained by the assessee. Assessee was given a final show cause on 20.02.2015. Vide reply dated 26.02.2015 assessee has explained that the cash found at various premises have not been seized and therefore no addition is warranted. Reply of the assessee has been considered and found to be not

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 217 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra tenable. Assessee is the key person who has offered for entire group. Further, non seizure cannot be the basis for non taxability. Hence, addition of Rs.6,14,300/- made in the income of the assessee.”

Avtar Singh &Gurucharan Singh Rs. 2,32,000/- Sanjay Vats Rs.4,700/- Consortium Securities Rs.1,16,500/- AlokGoel Rs.15,000/- B.S. Kalra Rs.61,000/- Rajendra Place Office (Petty cash) Rs.800/- MeharAnand Locker Rs.50,000/- Global E-Solutions Rs.1,04,300/-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 218 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra cash, the existence and accountability of which has been duly proved.

Ground Nos. 2 Addition on account of Unexplained Investments: Paintings (Rs.1,44,00,00/-)

“4. Assessee was asked to explain the source of paintings of Rs.2.38 crores belonging to assessee as stated in the of assessment proceedings of Mrs. Tripat Kaur.

Vide Submission dated 06.01.2015 assessee has submitted that the value of Rs.2.38 crores is tag price and not the purchase price. The assessee has submitted that this consists of 13 paintings. Submissions of the assessee have been considered which reflects 13 paintings with tag price shown as Rs 2.38 Crores. Five paintings have been shown as acquired in the year 1990. One painting has been shown as acquired in 2001, four paintings have been stated to be acquired in 2006 and three painting have been acquired in 2007 as per assessee. Details submitted by the assessee have been perused and found that assessee has not been able to produce any credible evidence. The only evidence which assessee has submitted is handmade vouchers filed

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 219 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra during the assessment proceedings. The same were neither found during the search nor submitted during the post search proceedings. Fact remains that assessee has not been able to reconcile the paintings of Rs.2.38 crores and submit any credible evidence. Hence, the explanation of assessee is rejected and addition of Rs. 1,44,00,000/- (2.38 crores -39.5% on account of GP i.e. Rs.94,00,000 =Rs.1,44,00,000 - GP taken in the assessment of assessee’s wife case) is made in the income of the assessee.”

The facts pertaining to this issue are as under:

“The assessee has paid the amounts for purchase of paintings as below:

(i) An amount of Rs.80,00,000/- (Rupees Eight Lakhs only) drawn on HDFC Bank (Cheque No. 336958 dated 17.10.2006) in favour of K.S. Radhakrishnan.

(ii) An amount of Rs.17,00,000/- (Rupees Seventeen Lakhs only) drawn on HDFC Bank (Cheque No. 286371 dated 22.03.2006) in favour of K.S. Radhakrishnan.

(iii) An amount of Rs.80,000/- (Rupees Eighty thousnad only) drawn on HDFC Bank (Cheque No. 451215 dated 13.06.2008) in favour of Suman Gupta.

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 220 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra (iv) An amount of Rs.10,00,000/- (Rupees Ten Lakhs only) drawn on HDFC Bank (Cheque No. 286357 dated 20.02.2006) in favour of Sanjay Bhattacharya.”

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 221 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra both paintings have been gifted on important social occasions and had been marked as 'not for sale' (NFS) in the inventory as per Annexure A-1, A-2 in the case of Smt. Tripat Kaur. It clearly lends credibility to the impugned claim of the appellant that the paintings at Sr. No. 12-13 being receipts as gift were not meant for sale (NFS).

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 222 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra paintings inventorized 5 paintings are acquired in 1990, one in 2001, 4 paintings acquired in 2006 and 3 in 2007, technically no addition is called for in the instant year.

Ground Nos. 3 Addition on account of Unexplained Investments:Jewellery (Rs.22,31,727/-)

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 223 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra

Name Date of A.Y. Weigh Value H. S.Kalra 26.02.2010 2009- - Rs. Tripat Kaur 25.02.2010 2009- - Rs. Bikramjit Singh 26.02.2010 2009- - Rs. Kalra 10 16,49,100/- Total Rs.66,74,07 3/- 227. Further, the assessee has submitted the valuation report in respect of above family members giving the weights as on 31.03.2009. In addition, the assesee has submitted valuation report as on 31.03.2008 giving the details of jewellery as under:

Name Date of A.Y./Dat Weigh Value P.S. Kalra Not filed 31.03.20 95.31 Rs. P.S. Kalra Not filed 31.03.20 247.5 Rs.

H.S. Kalra : 946.45 Gram Tripat Kaur : 1584.09 Gram Bikramjit Singh Kalra : 796.45 Gram P.S. Kalra(HUF) : 95.310 Gram

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 224 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra P.S. Kalra(Ind.) : 247.522 Gram Total Weight : 3668.922 Gram

Tripat Kaur : 70.46 Gram P.S. Kalra (Ind.) : 10.17 Gram P.S. Kalra(HUF) : 8.31 Gram Total : 88.94 Gram

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 225 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra jewellery of 247.522gram, aggregating to total 342.832 grams.

18.01.2005 Rs.8,895.50/- 19.12.2005 Rs.3,12,443/- 17.02.2006 Rs.3,28,250/-

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 226 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra 235. It is also a matter of record that from the entire jewellery found an amount of 2148 gms. has been considered as unexplained and disclosed in the Income Tax Return of Smt. Tripat Kaur. The quantity of the jewellery is less than the threshold limit of the Wealth Tax Return. Since, the evidence proved the availability of the jewellery in the hands of the HUF, the addition made is liable to be deleted. It can also be held to be reasonably valid that the assessee possesses a minimum quantity of the jewellery in his personal capacity. In the absence of any other material brought before us, we hereby decline to interfere with the order of the ld. CIT (A) on this issue.

Ground No. 4 Disallowance of Interest u/s 36(1)(iii):

Ground No. 5

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 227 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra Interest on Foreign Deposits:

Ground No. 6 Disallowance u/s 14A:

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 228 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra balance amount of Rs. 51,58,924/- is the income declared by the assessee. There being a direct nexus of the borrowing of the fund and its utilization towards interest bearing advances, there is no justification for allocating any interest expenditure towards earning dividend income. It is also surprising that AO has made a disallowance of Rs. 2,98,882 as administrative expenses despite no such expenses having been incurred by the assessee. In view of these facts, we are of the view that no disallowance under section 14A is required in the present case and accordingly, we uphold the order of the CIT(A) deleting this addition and this ground of the Revenue is dismissed.

ITA Nos. 6701 & 6702/Del/2017: AYs. 2006-07 & 2007- 08

ITA Nos.5330, 5332 to 5335, 4575 & 4576/Del/2016 & 229 CO Nos. 342 to 345/Del/2016 ITA Nos. 6701 & 6702/Del/2017 Pariminder Singh Kalra investment in both these years have been upheld. Since we have deleted the addition in both these years, the very basis of levying penalty do not survive. Accordingly, we direct the AO to delete the penalty in both these years. In the result, appeal of the assessee for AY 2006-07 in ITA No. 6701 and for AY 2007-08 in ITA No. 6702/Del/2017 are allowed.

Order Pronounced in the Open Court on 15/06/2021.

Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member

Dated: 15/06/2021 *Subodh*