(LATE) AUDINARAYANA REDDY ALTHURI REP.BY L/R MAHESH REDDY ALTHURI,HYDERABAD vs. ACIT, CENTRAL CIRCLE-2(1), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.39/Hyd./2023 Assessment Year 2012-2013 Mahesh Reddy Althuri, L/H of Late The ACIT, Audinarayana Reddy vs. Central Circle-2(1), Althuri, Hyderabad. Hyderabad. PIN – 500 033 PAN ABQPA4251N (Appellant) (Respondent) For Assessee : CA D K Chhablani [Through Hybrid Mode] For Revenue : Dr. Sachin Kumar, Sr. AR Date of Hearing : 09.04.2025 Date of Pronouncement : 17.04.2025 ORDER PER MANJUNATHA G. :

This appeal has been filed by the Assessee against the order dated 20.12.2022 of the learned CIT(A)-12, Hyderabad, relating to the assessment year 2012-2013.

2 ITA.No.39/Hyd./2023 2. Brief facts of the case are that the assessee is an individual, derived income from long term capital gains, income from other sources and agricultural income. The assessee has not filed return of income for the assessment year 2012-2013 on or before the “due date” provided under section 139 of the Income Tax Act, 1961 [in short “the Act”]. A search and seizure operation under section 132 of the Act was conducted in the case of M/s. AMR India Limited and others on 02.05.2018. As part of the search operations, case of the assessee was also covered under section 132 of the Act. A notice under section 153A of the Act was issued to the assessee on 25.06.2019. In response to the said notice, the assessee filed his return of income on 24.07.2019 admitting total income of Rs.41,810/-; agricultural income of Rs.14,05,376/- after claiming exemption under section 10(38) of the Act to the tune of Rs.5,96,11,906/- towards long term capital gains on sale of shares.

2.1. The case was selected for scrutiny and during the course of assessment proceeding, the Assessing Officer noticed that search operations and survey action was 3 ITA.No.39/Hyd./2023 conducted by the Directorate of Investigation, Kolkata on various share brokers revealed the modus operandi of the brokers for providing accommodation entry of bogus long term capital gains and short term capital gains to various beneficiaries. Further, during the course of investigation, it was noticed that, they have facilitated various entities to trade in shares of M/s. Twenty First Century India Limited and other penny scrips for providing accommodation entry of bogus long term/short term capital gains. Further, information received from the Directorate of Investigation, Kolkata shows that the Directors and other family members of AMR India Limited have used penny stock to route their undisclosed income by booking long term capital gains through a company M/s. Twenty First Century India Limited managed by Shri Anil Kumar Khemkha. Subsequently, a search and seizure operation under section 132 of the Act was also conducted in the business premises of AMR India Limited and during the search operation, a statement was recorded from A. Mahesh Reddy wherein he had admitted to have received accommodation entry of 4 ITA.No.39/Hyd./2023 bogus long term capital gains in the name of his family members and also voluntarily come forward to withdraw exemption claimed under section 10(38) of the Act. The Assessing Officer after considering the relevant information received from the Directorate of Investigation, Kolkata coupled with the statement recorded from various individuals and also the statement recorded from A.Mahesh Reddy, Managing Director of the AMR India Limited observed that, the assessee is a beneficiary of bogus long term capital gains entry provided by the entry operators which is evident from the statement recorded from various persons coupled with other information found during the course of search in the case of entry providers situated at Kolkata. The Assessing Officer had also discussed the issue at length in light of report of Directorate of Investigation, Kolkata and also the shares of companies, of which, the assessee has derived long term capital gains and came to the conclusion that, the long term capital gains derived by the assessee from sale of shares of M/s. Twenty First Century India Limited is bogus in nature which was used to 5 ITA.No.39/Hyd./2023 re-route the undisclosed income of the assessee and, therefore, denied exemption claimed by the assessee under section 10(38) of the Act and made addition of Rs.5,96,11,906/- as unexplained cash credits under section 68 of the Act.

7 ITA.No.39/Hyd./2023 4. The learned CIT(A) after considering the relevant submissions of the assessee and also by taking support from the judicial precedents, rejected the legal ground taken by the assessee challenging the addition made by the Assessing Officer in the assessment framed under section 153A of the act by holding that, once search is conducted. the Assessing Officer shall assess or reassess the total income including any undisclosed income found as a result of search and addition made by the Assessing Officer cannot be restricted to the incriminating material found as a result of search. The learned CIT(A) had also rejected another legal ground taken by the assessee in light of 4th proviso to section 153A of the Act and held that, assessment in question, does not fall beyond 6 years from the relevant assessment year and, therefore, it cannot be said that this assessment year is relevant assessment year and falls under 4th proviso to section 153A of the Act. Therefore, rejected the argument of the assessee. The learned CIT(A) had also rejected the argument of the assessee on the issue of addition made towards long term capital gains derived from 8 ITA.No.39/Hyd./2023 sale of share by holding that, evidences gathered during the course of assessment proceedings coupled with the statement recorded from various parties during the course of search in the case of entry providers by Directorate of Investigation, Kolkata shows the modus operandi of the entry providers in dealing with various penny stocks for accommodating various persons in the form of bogus long term capital gains/short term capital gains. Since the assessee is one of the beneficiary of bogus long term capital gains provided by entry providers and this fact has been admitted by A Mahesh Reddy in the statement recorded under section 132(4) of the Act during the course of search in the case of AMR India Limited, the argument of the assessee that, long term capital gains declared by the assessee on sale of shares by the assessee is genuine, is devoid of merit and cannot be accepted. Therefore, rejected the argument of the assessee and sustained the addition made by the Assessing Officer towards bogus long term capital gains derived from sale of shares as unexplained cash credits u/sec.68 of the Act.

9 ITA.No.39/Hyd./2023 5. Aggrieved by the learned CIT(A) order, the assessee is now in appeal before the Tribunal.

“10. We have heard the rival submissions and perused the material available on record. It is an admitted fact that there is no reference to any incriminating material either by the Assessing Officer or by the ld.CIT(A) in their orders. The whole addition was made in the hands of the assessee on the basis of the search conducted by the Director of Investigation, Kolkata, in the premises of the Kolkata based share brokers wherein they have admitted that they were allegedly providing accommodation entries to various persons. However, the fact remains that no 15 ITA.No.39/Hyd./2023 incriminating material was found during the course of search in the premises of the assessee.

10.1. In Paragraph 1.4 of the assessment order, assessee has categorically mentioned that no incriminating material constituting the tangible assets were found in the premises of the assessee. In our view, in the absence of any incriminating material, no addition can be made in the hands of the assessee. For the above said purposes, we may fruitfully reply upon the decision of Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra). The co-ordinate Bench of the Tribunal has an occasion to examine the applicability of the decision in the case of Abhisar Buildwell Pvt. Ltd. (supra) in the case of Preranaa Agarwal ITA 458/Hyd/2021 wherein the co-ordinate Bench of the Tribunal in Para 8.2 to 9.1 had held as under :

“8. We have gone through the record in the light of the submissions made on either side. Insofar as the facts and figures are concerned, there is not much dispute. The return of income filed by the assessee for the assessment year 2013-14 on 27/07/2013 was processed under section 143(1) of the Act and notice under section 143(2) of the Act was never issued. By the date of search on 15/11/2018, four years elapsed after the last 16 ITA.No.39/Hyd./2023 date for issuance of notice under section 143(2) of the Act in this case. It is also not the case of the Revenue that any incriminating material was found during the search that was considered by the learned Assessing Officer, but made the assessment. In these circumstances, the question that arises for consideration is whether any interference could be made with the concluded assessments while assessing the income under section 153A of the Act, when no incriminating material was found.

9. As stated earlier, the return of income filed by the assessee for the assessment year 2013-14 on 27/07/2013 was processed under section 143(1) of the Act by 30/09/2014. Neither notice under section 143(2) of the Act was issued nor any proceedings were pending as on the date of search. Though the divergent views taken on this aspect are brought to our notice by both the counsel, the Hon'ble Supreme Court put a quietus to the issue by the decision in the case of PCIT vs. Abhisar Buildwell P. Ltd. (supra). While in complete agreement with the view taken by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, (2015) 61 taxmann.com 412 (Delhi) and the Hon'ble Gujarat High Court in the case of 17 ITA.No.39/Hyd./2023 PCIT Vs. Saumya Construction (2016) 387 ITR 529 and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material, Hon’ble Apex Court concluded that- i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/ unabated assessments. Meaning thereby, in 18 ITA.No.39/Hyd./2023 respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re- opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.

9.1. This decision applies to the facts of the case on all fours and respectfully following the same, we hold that since no incriminating material found in the case of assessee for the assessment year 2013-14, the concluded assessment cannot be disturbed and the addition made by the learned Assessing Officer and sustained by the learned CIT(A) cannot be upheld. We accordingly allow the appeal of assessee.”

22 ITA.No.39/Hyd./2023 11. Coming back to the arguments of the learned SR. AR that the assessment year under consideration is abated and further it cannot be said that it is unabated/concluded, because the assessee did not file his return of income on or before the due date provided u/sec.139 of the Act and, therefore, whatever information submitted by the assessee in the return of income furnished u/sec.153A becomes incriminating material in nature and the Assessing Officer can make additions on the basis of the said return of income and other materials available at the time of assessment proceedings, in our considered view, the said argument is fallacious and cannot be accepted for the simple reason that, whether the assessment order is pending and abated or completed/unabated as on the date of search needs to be examined in light of the date of search and consequent due dates provided for completion of assessment for the relevant assessment year, but, not based on whether the assessee has filed return of income u/sec.139 of the Act. In case, if an assessee is not filed any return of income u/sec.139 of the Act, then, the law 23 ITA.No.39/Hyd./2023 provides for various other mechanism for the Assessing Officer to proceed on the assessee to assess the income of any assessment year. However, it cannot be said that just because not filing of return of income on or before the due date u/sec.139, whatever information supplied in the return of income filed u/sec.153A of the Act, constitute “incriminating material” and as per the ratio laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (supra), the assessment year can be considered as pending as on the date of search, if such assessment is pending by issuing a notice u/sec.143(2) of the Act or if time limit is available for issue of notice u/sec.143(2) of the Act. In case, any assessment is completed as on the date of search or time limit to issue of notice u/sec.143(2) of the Act has been expired as on the date of search, then, such assessment can be considered as unabated/concluded as on the date of search. Therefore, in our considered view, the argument of the learned Sr. AR present for the Revenue on this issue is devoid of merit and cannot be accepted and thus, we reject the argument of the Revenue.

24 ITA.No.39/Hyd./2023 12. Coming back to the case law relied upon by Dr. Sachin Kumar, the learned Sr. AR. The learned DR relied upon the decision of Hon’ble Supreme Court in the case of Ghata Mehandipur Balaji Griding Works (P.) Ltd., vs., PCIT (Central) (supra). We find that, the Hon’ble Supreme Court dismissed the SLP filed by the assessee against the order of the Hon’ble High Court of Allahabad in the case of PCIT vs., Mehandipur Balaji (supra) and uphold the findings of the Hon’ble High Court of Allahabad in remitting the matter back to the ITAT to consider the alleged incriminating material which was looked into by the Assessing Officer as well as the CIT(A) for the purpose of section 153A of the Act. Since the Hon’ble Supreme Court dismissed the SLP filed by the assessee and the Hon’ble High Court of Allahabad has restored the matter back to the ITAT for reconsidering the issue in light of incriminating material which was looked into by the Assessing Officer as well as the CIT(A), in our considered view, the ratio laid down by the Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd., (supra), is neither distinguished nor deviated. Therefore, in 25 ITA.No.39/Hyd./2023 our considered view, the ratio laid down by the Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd., (supra), still holds good and thus, there is no merit in the arguments of the learned Sr. AR appeared for Revenue in light or decision of Hon’ble Allahabad High Court decision in the case of CIT vs., Mehndipur Balaji (supra) on this issue. We, thus, reject the arguments of the Senior AR for the Revenue.