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Facts
A search and seizure operation was carried out on the assessee in 2012, leading to Section 153A proceedings. The original assessment orders for AY 2010-11 and 2011-12, completed on 31.03.2015, accepted the assessee's claim for exemption of Long Term Capital Gain (LTCG) under Section 10(38). Subsequently, the ld. CIT invoked Section 263, set aside these orders, and directed fresh assessments. The AO then passed fresh assessment orders on 20.12.2017, denying the Section 10(38) exemption for Rs. 2,46,59,762/- and Rs. 2,36,24,407/- respectively, treating the LTCG on sale of shares as bogus, which was upheld by the ld. CIT(A).
Held
The ITAT condoned the delay in filing the appeals and rejected the additional ground regarding the non-requirement of Section 153D approval for fresh assessments pursuant to a revisional order under Section 263, citing judicial precedents. However, on the merits of the additions, the Tribunal, relying on the Supreme Court's ruling in *Abhisar Buildwell Pvt. Ltd.*, held that no additions could be made in Section 153A assessments without incriminating material found during the search. Since the AO failed to adduce any such material and merely relied on general reports and suspicion, the denial of exemption under Section 10(38) was not sustainable.
Key Issues
1. Whether additions can be made in an assessment under Section 153A in the absence of any incriminating material found during the search. 2. Whether prior approval under Section 153D is required for fresh assessment orders passed pursuant to a revisional order under Section 263.
Sections Cited
153A, 143(3), 263, 10(38), 132, 153D, 147, 148, 139(1), 143(1), 142(1), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
The present two appeals are directed at the instance of assessees against the separate orders of ld. CIT(A) dated 28.11.2018 passed on the respective appeals of the assessee for assessment year 2010-11 and 2011-12. Since common issues are involved in both these appeals, therefore, we heard them together and deem it appropriate to dispose of them by this common order.
& 322/CHD/2019 A.Y. 2010-11, 2011-12 2
The Registry has pointed out that both the appeals are time barred by 41 days. The assessee has filed application for condonation of delay alongwith his affidavit. In the application for condonation of delay, it has been pleaded that business run by the appellant came under financial crunch and insolvency proceedings were initiated. It has been further pleaded that due to this hardship, lots of record was misplaced and is not available to the assessee. Therefore, compliance was inadvertently missed by the then Accountant handling all the legal issues of the assessee. An affidavit of the assessee has also been placed on the record.
With the assistance of ld. Representative, we have heard both the parties. We find that identical issue was involved in 704 and 705/CHD/2019 when appeals of Shri Dinesh Soin, Smt. Ginny Soin were considered by the ITAT. The appeal in the case of Shri Dinesh Soin was time barred by 38 days whereas in the case of Smt. Ginny Soin was time barred by 85 days. In these appeals, the delay in filing the appeals has been condoned by ITAT vide its order dated & 322/CHD/2019 A.Y. 2010-11, 2011-12 3 29.04.2025. Accordingly, following the same set of facts, we condone the delay and proceed to decide the appeals on merit.
As the facts, issues and circumstances in both the appeals are identical, therefore, we take the facts mainly from assessment year 2010-11. The other relevant facts from ITA 322/CHD/2019 for assessment year 2011-12 would be taken note according to requirement.
The assessee has taken three grounds of appeal in each year, out of which Ground No. 1 and 3 are general in nature which do not call for recording of any finding. In Ground No.2, assessee has pleaded that ld. CIT (Appeals) has erred in confirming the addition of Rs.2,46,59,762/- and Rs.2,36,24,407/- which was added by the AO by denying exemption u/s 10(38) of the Income Tax Act in A.Y. 2010-11 and 2011-12 respectively. The assessee has raised additional grounds whereby it has been pleaded that after an order passed by the ld. CIT u/s 263, ld. AO ought to have taken approval u/s 153D of the Income Tax Act because earlier approval was not in order.
& 322/CHD/2019 A.Y. 2010-11, 2011-12 4
The brief facts of the case are that a search & seizure operation was carried out at the premises of the assessee u/s 132 of the Income Tax Act on 28.08.2012. A notice u/s 153A was issued on 07.03.2013 and served upon the assessee on 11.03.2013 in both the years. The assessee has filed his return of income declaring an income at Rs.20,08,430/- and Rs.30,19,280/- for A.Y. 2010-11 and 2011-12 respectively. These returns were equivalent to the return filed u/s 139(1) of the Income Tax Act by the assessee. The AO, thereafter issued notices u/s 143(1) and 142(1). He has passed the assessment order u/s 153A read with Section 143(3) on 31.03.2015 in both years. The AO has accepted the claim of the assessee about Long Term Capital Gain exempt u/s 10(38) of the Income Tax Act.
7. The ld. CIT, thereafter took cognizance u/s 263 of the Income Tax Act. The ld. CIT (Appeals) has set aside the assessment orders passed on 31.03.2015 in both years and relegated the issues to the AO for fresh adjudication vide his orders dated 22.02.2017. The AO, thereafter, passed & 322/CHD/2019 A.Y. 2010-11, 2011-12 5 assessment order and denied the exemption claimed u/s 10(38) of the Income Tax Act.
Dissatisfied with the order of the AO dated 20.12.2017 passed u/s 143(3) read with Section 263, the assessee carried the matter in appeals before the ld. CIT (Appeals) who has dismissed the appeals vide orders dated 28.11.2018 which are impugned in the present appeals.
9. With the assistance of ld. Representative, we have gone through the record carefully. We find that identical issues, facts and circumstances have been considered and decided by the Tribunal in 704 and 705/CHD/2019 vide its order dated 29.04.2025. The relevant findings of the Tribunal are reproduced hereunder : “7. Both the appellants have raised an additional ground of appeal
vide which, it has been pleaded that original assessment order passed under Section 153A read with Section 143(3) of the Act was required to be approved by the Commissioner of Income Tax under Section 153D. This approval was granted in a mechanical manner without applying his mind on the issues. The appellants have submitted that this additional ground of appeal goes to the roots of cause of action and therefore, they be permitted to raise this ground.
8. During the course of hearing, we have confronted the ld. Counsel for the assessee about maintainability of this ground of appeal
. The simple reason is that against an assessment order dated 31.03.2015 passed by the AO in the cases of both the appellants in these assessment years, no appeals were filed because AO did not make any additions, therefore, there was no grievance to the assessee and this issue was not challenged. The fresh assessment orders are being passed in pursuance of a revisional order passed by the CIT under Section 263 on 22.02.2017. The ld. Counsel for the assessee submitted that stand of the assessee is protected by the judgement of Hon'ble & 322/CHD/2019 A.Y. 2010-11, 2011-12
6. Punjab & Haryana High Court in the case of Osho Forge Ltd. Vs CIT reported in 410 ITR 198, 255 Taxman 375. He drew our attention towards relevant paragraphs of the judgement which read as under : “11. The assessment order dated 24.12.2010 was passed under Section 153A read with Section 143(3) of the Act after obtaining approval under Section 153D of the Act. The approval was vide letter dated 24.12.2010. Thereafter the said order was taken up in revision. The order was set aside and the matter was remitted to the A.O. to pass a fresh assessment order. The approval under Section 153D was not set aside. There was no question thereupon of the A.O. seeking fresh approval under Section 153D. The order dated 18.03.2014 passed by the A.O. was in compliance with the remand directions. It was not a case of the A.O. assuming jurisdiction under Section 153A of the Act. That stage was over when order dated 24.12.2010 was passed. The A.O. was complying with the directions of the revisional authority. Section 153D of the Act is only applicable for passing an assessment order or re-assessment order. There is no requirement under Section 153D for prior approval for complying the remand directions. The approval dated 24.12.2010 in fact was to the effect that assessment of assessee can be passed under Section 153A. Remand direction was that the assessment under Section 153A should be framed again. There was no occasion of fresh assumption of jurisdiction to frame assessment. Rather it was in continuation of earlier proceeding which was duly approved. Even otherwise there is no question of seeking an approval from the Joint Commissioner or the Additional Commissioner Officer lower in rank than Commissioner for complying with the directions given by the Commissioner.
12. The CIT (Appeals) allowed the appeals of the assessee on the basis that compliance of Section 153D of the Act was mandatory. It is not the issue whether the provision is procedural or the requirement of approval is mandatory. The fact is that Section 153D of the Act had been duly complied with by the A.O. The contention raised that even an order of remand cannot be passed without complying with Section 153D of the Act is beyond the scope of the section. The Tribunal rightly held that Section 153D of the Act is for assuming jurisdiction to pass an assessment order under Section 153A of the Act and the A.O. would not loose the jurisdiction to frame assessment while complying with remand order.
13. The contention of learned counsel for the appellant that the order dated 18.03.2014 was passed under Section 143(3) read with Section 263 of the Act is not well founded. Though in the heading Section 143(3)/ 263 of the Act are referred to from the order it is clear that it has been passed under Section 153A read with Section 143(3) of the Act and the same has been passed pursuant to the remand under Section 263 of the Act. In the heading the A.O. has mentioned Section 1.43(3) read with Section 263 of the Act only to show that the assessment is being framed as per the directions of the CIT in revisional proceedings.
The questions of law are answered against the appellant. Appeal is therefore dismissed.
& 322/CHD/2019 A.Y. 2010-11, 2011-12 7 8.1 On the other hand, ld. CIT DR submitted that issue of approval attained finality alongwith the assessment order dated 31.03.2015 passed in the cases of both the assessees in these three assessment years.
9. We have duly considered the rival contentions and gone through the record carefully. Whether original assessment order was passed after taking approval from the Commissioner of Income Tax in rightful manner or not, has attained finality. The assessee did not challenge that order because they were not aggrieved with the assessment order. This is the second round of assessments framed in pursuance of 263 order. In these assessment orders, approval was not required to be taken because these are passed under the command of revisional order passed under Section 263. The judgement relied upon by the ld. Counsel for the assessee if perused, then it would reveal that in this judgement, an assessment order was passed wherein approval was taken by the AO. That order was set aside by the Commissioner by exercising powers under Section 263. The fresh assessment order was passed but no approval was taken. The facts to this extent are common. The Hon'ble High Court has observed that while exercising the powers under Section 263, issue regarding approval under Section 153D was not set aside. Therefore, no fresh approval was required to be taken by the AO. To our mind, if this judgement is applied on the facts of present case, then it would come out that approval granted by the CIT in the assessment order framed on 31.03.2015 was not disturbed by the CIT while exercising powers under Section 263. It attained finality. Had assessee any grievance against that approval, then it would have been challenged in an appeal and that appeal ought to have been filed against original assessment order dated 31.03.2015. The right to appeal would not emerge to an assessee according to convenience. It is a statutory right and it is to be availed according to the procedure provided for availing that. The stand of the assessee is that since they were not aggrieved against the original assessment order, therefore, they did not challenge that approval but this approval percolated in the second assessment order passed in pursuance of 263 order. Therefore, they be permitted to challenge that. In our opinion, it is a far-fetched argument at the end of the assessees once the issue of approval was not set aside in 263, they cannot challenge that issue in the second assessment order. For example, an assessment was reopened. An assessee has a right to challenge that re-opening as well as additions made on merit. The assessee did not challenge re-opening but challenged the additions on merit which are set aside by the appellate authority for fresh examination. The AO again made the additions, can in the second round of litigation, assessee challenged re-opening. The simply reply to this question is in negative because issue of re-opening attained finality at the stage when assessee did not challenge the re-opening in filing the appeal. The second round of litigation emanates from the remand of the issues to the AO for re-adjudication. Therefore, we do not find any merit in this additional ground of appeal
sought to be raised by the assessee. Accordingly, additional ground of appeal is rejected in all the three years.
10. The solitary substantial grievance of the appellants in each appeal is that ld. CIT(A) has erred in confirming the denial of exemption on alleged Long Term Capital Gain claimed under Section 10(38) of the Income Tax Act. This exemption was claimed on sale of shares.
& 322/CHD/2019 A.Y. 2010-11, 2011-12 8 11. First we take note of the facts from ITA 306/CHD/2019. The brief facts of the case are that a search & seizure operation under Section 132 of the Income Tax Act was conducted at the premises of the assessee on 28.08.2012. A notice under Section 153A was issued on 07.03.2013. The assessee has filed his return of income on 31.07.2013 declaring total income at Rs.31,70,120/-. A notice under Section 143(2) was issued and served upon the assessee. Thereafter ld. AO has passed an assessment order under Section 153A read with Section 143(3) of the Income Tax Act on 31.03.2015. Since no incriminating material was found during the course of search, therefore, no addition was made by the AO except Rs.25,000/-. This estimated addition was made on account of certain unexplained expenses.
12. The ld. CIT perused the assessment record and formed an opinion that assessment order is erroneous as much as it has caused prejudice to the interests of Revenue. He put reliance upon the judgement of Hon'ble Karnataka High Court in the case of Canara Housing Development Corporation Vs DCIT, Central Circle, Bangalore. On the strength of this judgement, he was of the view that apart from seized material, any other issue could also be examined in an assessment required to be framed under Section 153A of the Income Tax Act. The judgement of Hon'ble Delhi High Court in the case of CIT Vs Kabul Chawla 380 ITR 571 was brought to his notice but he observed that against this judgement, an appeal is being filed before the Supreme Court. He further observed that assessee has claimed exemption under Section 10(38) on sale of shares. It is ought to be examined by the AO. 12.1 The order of the ld. CIT dated 22.02.2017 attained finality. The AO has passed the fresh assessment order under Section 143(3) read with Section 263 of the Act on 20.12.2017. A perusal of his order would reveal that ld. AO has observed that assessee has sold shares of M/s Oasis Cine Communication Ltd. for a consideration of Rs.3,72,79,089/- and claimed exemption under Section 10(38) of the Income Tax Act. The AO, thereafter, made reference to a report of Director of Investigation, Calcutta. Such reference is of general term and we deem it appropriate to take note of this observation of the AO which is verbatim on all three assessment orders. It readd as under : “The Directorate of Investigation, Kolkata carried out a country- wide investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gain (LTCG) which is exempt from tax. The modus operandi adopted by the operators was to make the beneficiary buy some shares of a predetermined Penny stock company controlled by them. These shares are transferred to the beneficiary at a very nominal price mostly off-line through preferential allotment or off-line sale to save STT. The beneficiary (an individual) holds the share for one year, the statutory period after which LTCG is exempt under section 10(38) of the Income tax Act 1961. In the meantime the operators rig the price of the stock and gradually rise its price many times, often 500 to 1000 times. This is done through low volume transaction indulged in by the dummies of the operator at a pre-determined price. When the price reaches the desired level the beneficiary who bought the shares at a nominal price, is made to sell it to a dummy Paper company of & 322/CHD/2019 A.Y. 2010-11, 2011-12 9 the operator. For this, unaccounted cash is provided by the beneficiary which is routed through a few layers of paper companies by the operator and finally is parked with the dummy paper company that will buy the shares.” 12.2 Thereafter, ld. AO confronted the assessee to submit details on six counts which has been submitted by the assessee and brief summary of such details has been reproduced by him on page No.
3. The AO thereafter observed that he has issued notice under Section 133 sub-section (6) on 23.11.2017 from Calcutta Stock Exchange as also M/s Oasis Cine Communication Ltd. which were not replied. Therefore, he treated the alleged sale of shares as a bogus and made the addition.
13. Appeal to the ld. CIT(A) did not bring any relief to the assessee. ITA 704/CHD/2019 14. This case has also identical facts. The only difference is the quantum of addition which has been made at Rs.78,02,942/-. The search was conducted on the same date. In other words, both the assessees are family members, hence, there is no variation in the facts.
Similar is the situation in ITA 705/CHD/2019.
The observations recorded by the AO are verbatim same except variation of the quantum. The orders of the ld. CIT under Section 263 are also similar as much as the orders of the CIT(A) are also verbatim same.
The ld. Counsel for the assessee while impugning the orders of Revenue Authorities submitted that original assessments were framed under Section 153A. According to the position of law propounded by the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. 149 taxman.com 399, the additions in an assessment under Section 153A was to be made on the basis of seized material found during the course of search. No such material was either found during the course of search nor any material was transmitted to the AO by Investigation Wing of Calcutta. The whole addition is being made on a theoretical narration made by the AO. Without collecting any evidence, AO simply assumed that the transaction of the assessee was bogus and it was of a penny stock. He has not conducted any enquiry. 17.1 On the other hand ld. CIT DR relied upon the orders of the Revenue Authorities. He further relied upon the following judgements: 1. Judgement of Hon'ble High Court of Bombay in the case of Sanjay Bimalchand Jain Vs Pr.CIT - ITA 18/2017 2. Judgement of the Hon'ble Calcutta High Court in the case of Pr.CIT Vs Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta)[2022] 446 ITR 56 (Calcutta) [ 14.06.2022] 3. Judgement of the Hon'ble ITAT, Ahmedabad in the case of Hemil Subhashbhai Shah " Samarpan" Vs DCIT (ITA No. 1211/Ahd/2018) (ITA No. 961/Ahd/2019)
& 322/CHD/2019 A.Y. 2010-11, 2011-12 10 4. Judgement of the Hon'ble ITAT, Delhi in the case of Pooja Ajmani Vs. ITO (ITA 5714/Delhi/2018) 5. Judgement of the Hon'ble ITAT, Delhi in the case of Sangeeta devi Jhunjhunwala Vs. ITO (ITA 747/Delhi/2022) 17.2 He submitted that transactions of the assessee are bogus and therefore, AO has rightly made the addition.
We have duly considered the rival contentions and gone through the record carefully. Though the order passed by the ld. Commissioner dated 27.02.2017 under Section 263 attained finality but a perusal of this order would indicate that whole premises of this order is based upon the construction of the position of law that in a search assessment, any issue can be examined rather unearthed or not during the course of search. When judgement of the Hon'ble Delhi High Court in the case of CIT Vs Kabul Chawla 388 ITR 571 was brought to his notice , then he ignored that judgement only on the basis that appeal is being filed before the Supreme Court against this. He relied upon the judgement of Hon'ble Karnataka High Court in the case of Canara Housing Development Corporation Vs DCIT. After judgement of Hon'ble Supreme Court in the case of Abhisar Buildwell, situation reversed. Judgement of Hon'ble Delhi High Court in the case of Kabul Chawla has been upheld and judgement of Hon'ble Karnataka High Court in the case of Canara Housing Development Corporation Vs DCIT was disproved by the Hon'ble Supreme Court. The Hon'ble Supreme Court has propounded that in a search assessment, additions are to be made on the basis of incriminating material found during the course of search. The observations made by the Hon'ble Supreme Court in the concluding paragraph is worth to note, which read as under : “11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to & 322/CHD/2019 A.Y. 2010-11, 2011-12 11 concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible under the law.
For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material”. & 322/CHD/2019 A.Y. 2010-11, 2011-12 12 19. In the light of above, let us examine the assessment order. The order under Section 263 was passed ion 20.02.2017. Assessment is being passed on 20.12.2017. This assessment order is under Section 153A read with Section 143(3)/263 of the Income Tax Act because ld. Commissioner has taken action under Section 263 against an assessment order passed under Section 153A/143(3) dated 31.03.2015. A perusal of the complete assessment order would reveal that nothing is being possessed by the AO. He simply made reference of some report by the Director of Investigation, Calcutta but we have reproduced the reference of this Report in the assessment order, in the upper part of this order. A perusal of this reference would indicate that it only exhibit the modus-operandi of alleged earning of Long Term Capital Gain. It is a generic narration and does not have any connection with the assessee. The AO was not having any information from the Director of Investigation, Calcutta regarding information of M/s Oasis Cine Communication Ltd. He wrote two letters under Section 133(6) dated 23.11.2017 to Calcutta Stock Exchange and 30.11.2017 to M/s Oasis Cine Communication Ltd. Reference is being made with regard to above facts at page No. 2 of the assessment order. The assessment order was passed on 20.12.2017. Hardly he has devoted any energy for conducting investigation from these concerns. The assessee has submitted a note about his transactions whereby it was contended that he has purchased shares of M/s Sharp Transport Pvt. Ltd. which was merged in M/s Oasis Cine Communication Ltd. and he got the shares of M/s Oasis Cine Communication Ltd. on merger of erstwhile company whose shares were purchased by the assessee. He has submitted the complete details but no steps were taken by the AO.
Before the ld. CIT(A), assessee has placed reliance upon the judgement of Hon'ble jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central, Ludhiana Vs Shri Hitesh Gandhi of 2017 decided on 16.02.2017. He also relied upon judgement in CIT Vs Prem Pal Gandhi of 2017. The assessee has made a comparative analysis of facts of both these cases. Such submissions have been reproduced by the ld. CIT(A) in paragraph No. 5.1, which read as under : 5.1 The facts and circumstances of the case of the appellant are similar to the facts and circumstances of this case of the Honorable Punjab & Haryana High Court. We are giving below the facts on the basis of which the Hon'ble Punjab and Haryana High Court has upheld the deletion of addition by the CIT(A) and the Hon'ble ITAT in the case of Hitesh Gandhi(Supra) Hitesh Gandhi's case Appellant’s case 1. Shares were actually purchased 1.In our case also shares were actually and these were physically transferred in purchased and were transferred in favour favour of the assessee in the books of the of the appellant in the books of the listed listed company. company 2. Shares were got dematerialised 2. In our case also shares were and credited to the account of the assessee dematerialised in the account maintained in the accounts maintained by the by Depository-Participant Master Capital Depository Participant i.e. HDFC Services Ltd. & 322/CHD/2019 A.Y. 2010-11, 2011-12 13
3. Even in the search carried out by 3 In our case also an action under section 132 of the IT Act was taken and the Department in this case no recovery is shown to be made of any incriminating here also no such incriminating evidence to show that the transaction of material was found during the search. purchase and sale of shares was arranged, as suspected by the Assessing Officer 4. Post search enquiries also did not 4. Post search enquiries in our case bring out any adverse material relating to also did not bring out any adverse the transaction of purchase and sale of material relating to sale or purchase of shares. share. 5. Just because the assesse has been 5. In our case also the A.O. held found to have earned huge amount of long similarly under exactly similar term capital gain on the sale of shares, the circumstances A.O. held the transaction to be sham merely on the ground of same being unlikely in the given circumstances. 6. Sales of shares debited in the D Mat account of the assessee and STT duly paid on the same 6. In Appellant's case also sales of shares are debited in the D Mat account and STT 7. Sales and Purchase of shares were paid through SEBI Regd. Brokers only. 7. Sales and purchase of shares are 8. Payments of sales of shares were through SEBI Regd. Brokers only received through banking channels only. 8. In our case also payments of sales of shares were received through banking channels only.
As could be seen from the above comparison the addition in question was made in the case of the appellant under exactly similar facts and circumstances as those in the case of Hon'ble jurisdictional High court in the case of Hitesh Gandhi (Supra). Therefore our case is squarely covered by the said decision. That decision being binding on the appellate authorities in the jurisdiction of the Hon'ble High court it is prayed that the addition of Rs . 3,72,79,089/- be deleted as held by the Hon'ble High Court. Further reliance is also placed on the decision in the case of CIT vs. Alpine Investments (Calcutta High Court) Posted on September 15, 2018 which states S. 68 Bogus Capital Gains From Penny Stocks: The share transaction is genuine because it is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments. A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises. In view of the above, it is prayed that addition of Rs. 3,72,79,089/- made by the Ld AO may be deleted.
6. The Ld AO has made addition in this case on the basis of suspicion in his mind that the capital gain in this case may not be in genuine as in the case of assesses in & 322/CHD/2019 A.Y. 2010-11, 2011-12 14 regard to which investigation was made by the DIT (Inv), Kolkata. In this regard it has been held in a number of cases that suspicion however stronger cannot partake the character of an evidence. The assessee cannot be taxed and penalized just on the basis of suspicion in the mind of the AO. Reliance in his regard is placed on the following decisions:- i) Lalchand Bhagat Ambica Ram v CIT (37ITR 288) (SC) ii) CIT v. Paras Cotton Co. (288 ITR 211) (Raj.) iii) Faqir Chand Chaman Lai v. ACIT [(2004) 1 SOT 914 (Asr.)] [Appeal dismissed by P&H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR 215(St)]; iv) Assam Tea Co. v. ITO [(2005) 92ITD 85 (Asr.) (SB)]; v) Jhantala Investments Limited v ACIT [(2000) 73 ITD 123 (Mum.)]
Further in this case assessment was made under section 153A, being a search case. No incriminating material, to show that the long term capital gain shown by the assessee is ingenuine, was found during the course of search. The Ld CIT may have set aside the assessment order under section 263 on whatever ground, but still the fresh assessment has to be completed taking into consideration the decisions of the courts and appellate authorities prevailing at that time. Even while adjudicating the appeal, the issue as to whether addition can be made on the point on which no incriminating material was found during search will have to decided on the basis of prevailing judicial decisions . In this regard the humble appellant may point out that there are following decisions of jurisdictional Tribunal on this issue:- i) DCIT Central Circle II. Chandigarh Vs Times Finvest and Commerce Ltd ITAT Chandigarh)in "In view of the proposition laid down in the case of Murli Agro Products Ltd. by th Hon'ble Bombay High Court, we hold that in the absence of any incriminating"' material found during the course of search and the assessment proceedings having not been abated at the time of search, the Assessing Officer has no jurisdiction to make the addition under section 153A of the Act." ii) Mala Builders Pvt. Ltd Vs CIT (ITAT Chandigarh) on 23 August, 2016 "In view of the above we hold that in the absence of any incriminating material found during the course of search and the assessment proceedings having not abated at the time of search, the assessing officer has no jurisdiction to make the addition under section 153A of the Act. This ground of appeal of the assessee is therefore allowed. The additions made in the order under section 153A /143(3) are accordingly deleted." iii) DCIT Vs. SCM Fin Trade Pvt. Ltd. ( ITAT Chandigarh- and 982/Chd/2017 )-date of order 05.01.2018 "We have heard the contentions of both the parties. We do not find any merit in the present appeal filed by the Revenue. The facts vis-a-vis both the appeals are that search action was carried out on the assessee on 4.10.2012 and at the time of search action no assessment or re- assessment proceedings were pending is ITA No.321 & 322/CHD/2019 A.Y. 2010-11, 2011-12 15 undisputed. It is also not disputed that no incriminating documents or record or any other evidence was found or seized during the course of search proceedings which resulted in any addition in the case of the assessee. Therefore, the Ld. CIT(Appeals), we hold, has rightly deleted the addition made following various judicial pronouncements in this regard. Further we do not find any merit in the contention of the Ld. DR that the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla has been distinguished in the case of Smt. Dayawanti Vs. CIT in dated 27.10.2016, since we find that even this aspect has been dealt with by the ITAT, Chandigarh Bench, in the case of Bharatnet Technology Ltd. (supra) in which it was observed that the case of Smt. Dayawanti was subsequently discussed by the Hon'ble Delhi High Court in the case of Pr. CIT Vs. MeetaGutgutia Prop. M/s Ferns 'N' Petals in ITA No.306/2017 decision vide order dated 25.5.2017, wherein it was held that in the case of Smt. Dayawanti (supra) incriminating material was found during search action, however, in the case of Pr. CIT Vs. Meeta Gutgutia Prop. M/s Ferns 'N' Petals no incriminating material was found during search action and hence addition made was not justified. In view of the above, we do not find any infirmity in the order of the Ld.CIT(Appeals) while deleting the impugned additions in both the appeals filed by the Revenue."
iv) Sh. Ramesh Mittal. Panchkula Vs ACIT, Chandigarh (ITAT Chandigarh) on 30 November, 2017 , in "We have heard the submissions. We find that it is not in dispute that the additions made were on account of entries depicted in the balance sheet and the pass book and are not based on any incriminating material seized during the search. In the face of these facts we find that the issue is covered by the entire gamut of section 153(A),153(B) and 153(C), case of CIT Vs. Kabul Chawla, 61 Taxmann.com 412(Delhi) , CIT Vs RRJ Securities 380 ITR62 and Pr. CIT Vs Lata Jain in dated 29.04.2016 the decision lay down the propositions that in the absence of any incriminating material found during the course of search and where the assessment proceeding having not been abated at the time of search, the AO has no jurisdiction to make the addition under section 153A. This ratio is applicable in the case of the assessee for the AY 2003-04. Reliance has also been placed on the order of ITAT Chandigarh Bench in ITA No. 433 to 437/Chd/2014 for AY 2008-09 in the case of M/s Mala Builders Pvt. Ltd. Vs. ACIT, wherein the issue of addition or disallowance in assessment can be made or not, in the absence of the incriminating material found during the course of search, has been extensively discussed. Hence, the addition made by the Assessing Officer on account of unsecured loans and deposits in saving bank account in this assessment year wherein no assessment proceedings were pending hitherto stands deleted." v) DCIT . CC-II. Chandigarh Vs. Sh. R.K. Garg ( ITAT Chandigarh) date of order 01.05.2018 "We have heard the contentions of both the parties. We do not find any merit in the present appeal filed by the Revenue. The facts vis-a-vis both the appeal that ITA No.321 & 322/CHD/2019 A.Y. 2010-11, 2011-12 16 search action was carried out on the assessee on 4.10.2012 and at the time of search action no assessment or reassessment proceedings were pending is undisputed. It is also not disputed that no incriminating documents or record or any other evidence was found or seized during the course of search proceedings which resulted in any addition in the case of the assessee. Therefore, the Ld.CIT(Appeals), we hold, has rightly deleted the addition made, following various judicial pronouncements in this regard. Further we do not find any merit in the contention of the Ld. DR that the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) has been distinguished in the case of Smt. Dayawanti Vs. CIT in & Others dated 27.10.2016, since we find that even this aspect has been dealt with by the ITAT Chandigarh Bench in the case of Bharatnet Technology Ltd. (supra) in which it was observed that the case of Smt. Dayawanti (supra) was subsequently discussed by the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia Prop. M/s Ferns 'N' Petals in ITA No.306/2017 85 Other decision vide order dated 25.5.2017, wherein it was held that in the case of Smt. Dayawanti (supra) incriminating material was found during search action, however, in the case of Pr. CIT Vs. Meeta Gutgutia Prop. M/s Ferns 'N' Petals no incriminating material was found during search action and hence addition made was not justified. In view of the above, we do not find any infirmity in the order of the Ld.CIT (Appeals) while deleting the impugned additions in both the appeals filed by the Revenue. Applying the aforesaid decision to the present case, we uphold the order of the Ld. CIT(A) deleting the addition made in the present case, in the absence of any incriminating material found during the course of search and dismiss all the grounds raised by the Revenue." vi) DCIT. CC-II. Chandigarh Vs. DHG Marketing Pvt. Ltd.. (ITAT Chandigarh) date of order 09.05.2018 "We have heard the contentions of both the parties. We do not find merit in the present appeal filed by the Revenue. The fact that a search was conducted on the assessee on 04.10.2012 and the assessment in the present case, pertaining to assessment year 2010- 11 was not pending on the said date and thus had not abated, is not disputed. It is also an admitted fact, as noted above by the Assessing Officer of the assessee, that no incriminating material was found during the course of search. In the backdrop of such facts the decision of the Honble Delhi High Court in the case of , Kabul Chawla(supra) has been rightly followed by the Ld.CIT (Appeals) , holding that no addition could be made in such circumstances. Therefore, the Ld. CIT( Appeal) , we hold, has rightly deleted the addition made in the present case following various judicial pronouncements in this regard, vis a vis the ground raised by the revenue that the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla has been distinguished in the case of Dayawanti Vs CIT in and others dated 27.10.2016, we find that this aspect has being dealt with by the ITAT in the case of SCM Fintrade Private Limited (supra) wherein it has been held that the case of Dayawanti (Supra) was subsequently discussed by the Hon'ble Delhi High Court in the case of Pr. CIT Vs Meeta Gutgutia, Prop. M/s Ferns & Petals in ITA No. 306/2017 and others, vide & 322/CHD/2019 A.Y. 2010-11, 2011-12 17 order dated 25.05.2017, wherein it was held that in the case of Dayawanti (supra), incriminating material was found during search action while in the case of Pr. CIT vs Meeta Gutgutia (supra) no incriminating material was found during search action and addition was not justified in view of the above. In view of the above we do not find any infirmity in the order of the Ld. CIT( Appeal) deleting the impugned addition." Further these decisions of ITAT Chandigarh are based on decisions of various High Courts. It has been held in a number of cases that the decisions of the Hon'ble 7.1 jurisdictional Tribunal are of binding nature for Hon'ble first appellate authority, and otherwise it will result into judicial indiscipline resulting into judicial anarchy. Attention in this regard is drawn on the decision of in the case of Cargo Handling Private Workers Pool Vs DOT ( ITAT Vishakhapatnam) order dated 19.07.2011 in which it is held that the Tribunal's order is binding and failure to follow it is a contempt of court . 7.2 So in the appellant's humble view the assessment under section 153A which may have been set asides under section 263 on any ground, while completing the fresh assessment the Ld AO will take into consideration the decisions prevailing at that time and the Hon'ble First Appellate Authority shall take into consideration the decisions of the Hon'ble Jurisdictional Tribunal. And as no incriminating material is found showing in genuineness of capital gain, no addition deserves to be sustained on this point.
8. In view of the humble submission, the appellant prays that the addition made may kindly be deleted. Kindly do let the appellant know if your honour requires any further information/ explanation in matter."
We have perused the submissions as well as the orders relied upon by the ld. CIT DR. We are of the view that AO failed to make reference to any material seized during the course of search for disbelieving the case of the assessee. He has not made any reference to any document which has been transmitted to him by the Director General of Investigation, Calcutta. He has only made a reference to generic analysis of penny stock companies by the DIT (Investigation) Calcutta. The additions could be made only on the basis of specific information or by disproving the claim made by the assessee. No such steps were taken by the AO. More so, these are the assessment orders passed under Section 153A. Their scope is limited to seized material found during the course of search. This aspect has been totally ignored by both ld. Revenue Authorities below. Therefore, in the light of these propositions laid down by Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd., these additions are not sustainable in the hands of all the assessees.
Accordingly, all the appeals are partly allowed.”
As discussed above, there is no disparity on facts, therefore, Respectfully following the order of ITAT in the case of other family & 322/CHD/2019 A.Y. 2010-11, 2011-12 18 members, we allow these appeals and delete the additions in both assessment years. Accordingly, both the appeals of the assessee are partly allowed.
Order pronounced on 29.07.2025.