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Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”,
Before: SHRI. RAJPAL YADAV, VP &SHRI. KRINWANT SAHAY, AM
िनधा�रती की ओर से/Assessee by : Shri Ajay Jain, C.A राज�की ओर से/ Revenue by : Smt. Kusum Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 16/01/2025 उदघोषणा की तारीख/Date of Pronouncement : 11/04/2025 आदेश/Order PER KRINWANT SAHAY, AM: Both the above appeals filed by the Assessee against the separate order of the Ld. CIT(A)-3 each dt. 31/10/2017 pertaining to Assessment Years 2011-12 & 2012-12 respectively.
Both the above appeals were heard together so they are being disposed of by this consolidated order for the sake of convenience and brevity.
Firstly, we shall deal with the appeal in for A.Y. 2011-12 wherein the assessee has raised the following grounds:
1. That the Commissioner of Income Tax (Appeals) has wrongly upheld the additions made in assessment order without appreciating the fact that no incriminating material relating to additions made by AO has been founds during the course of search.
2. That the Commissioner of Income Tax (Appeals) has wrongly upheld the additions of Rs. 1046354/- on account of capital gain on sale of agricultural land.
3. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing.
Briefly the facts of the case are that, Shri Brij Lal Singla, an individual, was assessed for income tax for the year 2011-12 after a search was conducted on the Chinar Group on 08/09/2011 under Section 132of the Income Tax Act. His case was handled by the DCIT, Central Circle-I, Chandigarh. A notice was sent to him on 10/01/2013, asking him to file his tax return. He filed it on 31/07/2013, showing an income of Rs. 4,46,680 from salary and other sources. During the assessment, two main issues came up for hearing firstly, deduction of Rs. 63,778 under Chapter VI-A, and secondly the sale of land worth Rs. 20,12,000, which he said was agricultural land and not taxable. 4.1 The AO asked for documents to prove these claims. Although his representative took part in the process, no proof was given for the deduction. For the land sale, he said the land was bought in 2006-07 for Rs. 6,75,000 and was agricultural, so it should be tax-free.
4.2 The AO disallowed Rs. 63,778/- deduction under Chapter VI-A due to the absence of supporting documentary evidence, adding it back to the taxable income. Regarding the land sale, the AO rejected the exemption claim, noting that the land was classified as "Phahar" (non-cultivable) in the registration deed, with no proof of agricultural activity or income provided. After allowing an indexed cost of acquisition of Rs. 9,65,646, the AO computed capital gains of Rs. 10,46,354 (Rs. 20,12,000 – Rs. 9,65,646) and added this amount to the taxable income. Consequently, the total assessed income was revised to Rs. 15,56,812 (Rs. 4,46,680 + Rs. 63,778 + Rs 10,46,354). The AO also initiated penalty proceedings under Section 271(1)(c) for concealment of income and issued a demand notice with applicable interest. The assessment order was approved by the Addl. CIT under Section 153D of the Act.
Against the order of the AO the assessee went in appeal before the Ld. CIT(A).The Ld. CIT(A) addressed three key grounds. For Ground 1, concerning additions under Section 153A, the CIT(A) upheld the AO’s action, noting that the return had been filed before the search date and the period for issuing notice under Section 143(2) had not lapsed, making the proceedings under Section 153A valid. The CIT(A) referenced the ITAT Chandigarh’s ruling in M/s Mala Builders Pvt Ltd and distinguished it from the Kabul Chawla judgment, which applies only when assessments are concluded and no incriminating material is found. For Ground 2, the CIT(A) allowed a deduction of Rs. 63,778 under Chapter VI-A after accepting additional evidence (insurance premium receipts) under Rule 46A. The documents had initially been unavailable due to their misplacement during the search, but were later produced during the appeal. In Ground 3, involving an addition of Rs. 10,46,354 on the sale of land, the CIT(A) confirmed the AO’s view that the land was a capital asset and not agricultural, as the appellant failed to provide sufficient documentary evidence to prove agricultural use. Overall, the appeal was partly allowed the deduction under Chapter VI-A was accepted, while the additions relating to capital gains and other issues were upheld or dismissed due to lack of substantiation.
Against the order of the Ld. CIT(A) the assessee is in appeal before us.
During proceedings before us, the Ld. Counsel for the Assessee has filed a written submission which is as under: Briefly the facts of the case are that a search u/s 132 (1) of income tax was conducted on 08-09-2011 on Chinar Group of cases and assessee was one of the person covered u/s 132. The assessee has filed return on 31-07-2011 before the date of search & no notice U/s 143(2) was received up to 30-09-2012. Notice U/s 153A was issued on 10-01-2013. During the course of search no incriminating document relating to assessment year 2011-12 was found and assessment has not been abated for relevant assessment year 2011- 12 . The Id assessing officer has made addition on the basis of return filed in response to notice u/s 153-A of Income Tax Act. The Assessing officer has made the addition simply on the basis of information filed in response to notice u/s 142 (1) of Income Tax Act That the assessment has been made u/s 153A (1) (b) r.w.s. 143 (3) of the Income Tax Act, 1961. &therefore addition can be made on the basis of incriminating material found during the course of search & in this case no incriminating material relating to sale of agricultural land has been found . The AO has asked various questions during
assessment proceedings & then he came to know that the assessee has sold agricultural land. That the Ld. Assessing Officer has erred in law as well as on facts in making the additions of Rs. 10,46,354/- on account of sale of agriculture land at Village Kalar, Tehsil Balachaur (Pb.) in para 6 of the Assessment order, without appreciating the facts that no incriminating material relating to addition of Rs 1046354 /- has been found during the search and no addition can be made in search assessment. It is a matter of fact no incriminating document relating to year under consideration was found during the course of search and therefore, no addition can be made u/s 153A (1)(b) read with section 143 (3) of Income Tax Act. The reliance is placed on Supreme Court decision in case of PCIT Vs Abhisar Buildwell (P.) Ltd [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC). In respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A Section 153A, read with sections 132 and 143, of the Income-tax Act, 1961 -Search and seizure - Assessment in case of (Conditions precedent) - Whether object of section 153A is to bring under tax undisclosed income which is found during course of search or pursuant to search or requisition; therefore, only in a case where undisclosed income is found on basis of incriminating material, Assessing Officer would assume the jurisdiction to assess or reassess total income for entire six years block assessment period even in case of completed/unabated assessment- Held, yes - Whether in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A - Held, yes - Whether, however, completed/unabated assessments can be reopened by Assessing Officer in exercise of powers under section 147/148 subject to fulfilment of conditions as envisaged/mentioned under section 147/148 and those powers are saved - Held, yes [Paras 8, 12 to 14] [In favour of assessee]
Pawan Kumar Singla AY 2012-13 /2018
Addition on account of Capital gain of Rs 9054461- That the assessment has been made u/s 153A (1) (b) r.w.s. 143 (3) of the Income Tax Act, 1961 on account of search and seizure take place at business and residential premises of assessee and his family members . That the Ld. Assessing Officer has erred in law as well as on facts in making the additions of Rs. 9,05,446/- on account of sale of agricultural land at Village Bitna in para 5 of the assessment order without appreciating the facts that no incriminating material has been found during the course of search. That the assessment has been made u/s 153A (1) (b) r.w.s. 143 (3) of the Income Tax Act, 1961. &therefore addition can be made on the basis of incriminating material found during the course of search & in this case no incriminating material relating to sale of agricultural land has been found . The AO has asked various questions during asseement proceedings & then he came to know that the assessee has sold agricultural land . . The reliance is placed on Supreme Court decision in case of PCIT Vs Abhisar Buildwell (P.) Ltd [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC).. In respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A 2. Addition on account of cash found Rs 11,150007- The brief fact of this issue is that a cash of Rs. 41.15 lacs was found during the course of search. In this regard the assessee has explained the sources as below: - (1)The son of assessee Sh. Naveen Singla is partner in M/s Green Valleys Heights and this partnership firm has given imp rest of Rs. 30 lacs for business purposes (advance for purchase of land) in the month of July & August 2011 out of withdrawal from bank account
of firm and this transaction has been duly recorded in the books of M/s Green Valleys Heights. The necessary evidence i.e. copy of account in the books of M/s Green Valleys along with bank statement was given during the course of assessment proceedings . The CIT(A) has accepted Rs 30 Lakhs and deleted the addition . However CIT(A) has not appreciated the fact that Naveen Singla is also Managing Partner in M/S Chandigarh Mill Store & Auto & cash in hand of this firm as on date of search i.e 08-09-2011 was Rs1295815/- The learned A.O. has not accepted the explanation of assessee merely on suspicion and wrongly inferred that the explanation was after thought. We also submit that it was specifically mentioned during the course of search that the cash found was related to business. The question of explanation is after thought does not arise.
(2) The assessee has submitted the cash flow statement for whole block period i..e from 01.04.2005 to 31.03.2012 during the course of assessment proceedings to the A.O. and as per the cash flow there was cash balance of Rs. 10,27,000/- available as on the date of search. The learned assessing officer did not point out any defect in the cash flow statement and wrongly make addition without any reason. The main source of cash available with the assessee was sale of agricultural land and withdrawal from banks from time to time and there should not be any reason for disbelieve the explanation given by the assessee. We also submit that the son of assessee is engaged in real estate business under name and style M/s Green Velleys Heights and therefore, the assessee and his son Naveen Singla used to keep cash for making advance in propertie. Total Cash available with assessee was Rs 30,00,000+1295815+1027000/ =5322815 as against cash found of Rs 41.15 lakhs. The question of undisclosed asset in form of cash does not arise.
The Ld. DR relied on the orders of the lower authorities.
We have heard the rival contention of both the parties and perused the finding of the AO as well as of the Ld. CIT(A).
During the appellate proceedings, regarding the issue of various additions made in the assessment under Section 153A read with Section 143(3), the Learned CIT(A) has provided clear and well- reasoned findings, as detailed below: “ It has been stated by the appellant that no incriminating documents relating to the year under consideration were found during the course of search and therefore no addition can be made in view of the Hon'ble Delhi High Court judgment in the case of CIT vs Kabul Chawla ITA 707/2014.
The search u/s 132(1) of the Act in this case was conducted on 08.09.2011 and appellant was one of the persons covered u/s 132. The appellant filed return u/s 139 of the Act for the year under consideration on 31.07.2011, before the date of search. Thereafter, notice u/s 153A was issued on 10.01.2013. Thus it is apparent that on the date of search, the limitation period for issue of notice u/s 143(2) had not expired.
It has been held by the Hon'ble ITAT, Chandigarh Bench in the case of M/s Mala Builders Pvt Ltd in to 437/Chandi/2014 (AY 2004-05 to 2008-09) that on the date of search, no assessment proceedings were considered as pending, if the time limit for issuing notice u/s 143(2) had expired on date of initiation of search.
In the case of the appellant, the time limit for issuing notice u/s 143(2) was 31.07.2012 and thus the time limit for issuing notice u/s 143(2) had not expired on the date of initiation of search.
In view of the above discussion, the order of the AO is as per provisions of law and the judicial pronouncement in the case of CIT vs Kabul Chawla (Delhi High Court) is not applicable in the case of the appellant for the year under consideration.”
By observing the abovementioned findings, we find that the Ld. CIT(A) has provided a clear and well-reasoned finding on this issue, which, in our opinion, requires no interference. Accordingly, the assessee’s appeal on this ground is hereby dismissed 12. Ground No. 2 relates to addition of Rs. 10,46,354/- on account of capital gain on sale of agricultural land. In this regard, Ld. CIT(A) in the impugned order held as under: During the year under consideration, the appellant had sold land at Village Kalar for Rs. 20,12,000/-. The AO during the assessment proceedings asked to the appellant to explain as to why capital gain has not been paid for this sale of land. After perusing the reply of the appellant, it was held by the AO that the land in question was not cultivable and it has been mentioned/categorized in the registration land as 'Pahar' where no agricultural activity is possible. Further, the appellant failed to provide any evidence of agricultural income from this land sold. During the appellate proceedings, the appellant has submitted as follows:- "The assessee has sold agricultural land during the year under consideration which was not situated in any municipality or notified area and therefore was not capital asset within the meaning of section 2(14) of Income Tax Act. The Assessing Officer has treated the agricultural land as capital asset simply on the ground that agricultural land sold by the appellant was gair mumkin pahar. The learned Assessing Officer without making any enquiry for revenue authority wrongly inferred that the land sold by assesse is not cultivable. In this regard, we submit that gair mumkin pahar is type of agricultural land mentioned in revenue record but the land sold by appellant is fit for agricultural purposes and agricultural land and therefore, the assessee should be allowed benefit of section 2(14) of Income Tax Act". The contention of the appellant canot be accepted as the onus lies on the appellant to prove that the land sold is agricultural land and therefore cannot be treated as Capital Asset. The appellant failed to file any documentary evidence to prove that the land sold was agricultural land during the assessment and appellate proceedings. In view of the above discussion it is held that the AO has correctly made addition of Rs. 10,46,354/- on sale of land under the head
Capital Gain' as per provisions of law and hence this addition made is confirmed.
After considering the above findings of the Ld. CIT(A), we find no reason to interfere with the order passed by the Ld. CIT(A). Accordingly, this ground of appeal
filed by the assessee is hereby dismissed.
14. In the result, the present appeal of the assesee is dismissed.
Now we shall deal with the appeal in for A.Y. 2012-13 wherein the assessee has raised the following grounds:
1. That the Commissioner of Income Tax (appeal) has wrongly upheld the additions made in assessment order without appreciating the fact that no incriminating material relating to additions made by AO has been founds during the course of search.
2. That the Commissioner of Income Tax (appeal) has wrongly upheld the additions of Rs 905446/-on account of capital gain on sale of agricultural land.
3. That the Commissioner of Income Tax (appeal) has wrongly upheld the additions of Rs 11,15,000/- on account of cash found during the course of search.
4. That the Commissioner of Income Tax (Appeal) has wrongly confirmed the disallowance of deduction of Rs. 20,000/- under section 80CCF of Income Tax Act.
5. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing.
16. During the proceedings before us the Ld. Counsel for the Assessee stated that he is not inclined to press Ground No. 4 related to disallowance of deduction of Rs. 20,000/- under section 80CCF of Income Tax Act. Accordingly, the appeal of the Assessee on this ground is dismissed as not pressed.
With respect to Ground No. 1, we have already given our findings on this issue while adjudicating the appeal in for the Assessment Year 2011-12. Therefore, the findings recorded in para 9 to 11 of the earlier part of this order shall apply mutatis mutandis to the present appeal as well.
Ground No. 2 relates to additions of Rs 905446/-on account of capital gain on sale of agricultural land. In this regard, Ld. CIT(A) in the impugned order held as under: During the year under consideration, the appellant has sold 1/3 share of land at Village Bitna for rs. 15,33,333/-. The AO held that the land sold is a capital asset as the same falls in municipal limits of Panchkula. Therefore the profit from the sale of land was computed by the AO as under resulting in addition of Rs. 9,05,446/- as follows:- Sale of consideration : Rs. 13,80,000/- Cost (after indexation) : Rs. 4,74,554/- Addition to income : Rs. 9,05,446/- During the appellate proceedings, the appellant filed papers supporting the fact that it was agricultural land. It was further contended that the said agricultural land was not capital asset on 30.10.2011 as the same was not situated within the municipal limits of Pinjore. In this regard, additional evidence in support of this contention was filed in form of search report of Shri Bhupinder Gautam, Advocate dated 10.02.2016 wherein it has been stated that the said land was situated out of limit of municipal limit of Pinjore at the time of execution of the above said sale deed, without referring to the fact that it was situated in municipal limits of Panchkula. The contentions of the appellant that the land sold is not a capital asset cannot be accepted on following grounds:-
(a) No certificate from any Revenue official was filed in to rebut the contention of the AO that the land falls in municipal limit of Panchkula. (b) Perusal of Registration deed of the aforesaid land dated 31.10.2011 shows that it has been stated on page 1 that the said land is outside the limits of municipal Committee Pinjore but within the limits of Municipal corporation Panchkula. (c) As per provisions of section 2(14) (iii) of the Act, Capital Asset includes any agricultural land in India situated in any area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee, town committee or any other name) or a cantonment board and which has a population of not less than 10,000/- As the land sold by the appellant is within the limits of Panchkula Municipal Corporation as discussed hence it is a" Capital Asset" liable to be taxed as per the provision of the Act. Hence the addition made by the AO is in accordance with law and hence confirmed.
Ground No. 3 relates to additions of Rs 11,15,000/- on account of cash found during the course of search.
In this regard, we have considered the findings recorded by the Ld. CIT(A) in the impugned order, wherein it has been held as under:" The following key points emerge on this issue:- (a) The appellant during the course of search had stated in the statement recorded that the cash found at his residence is related to his business. However, he did not give the exact break up of source of the same. (b) During the assessment proceedings, the appellant attributed the cash amounting Rs. 10,00,000/- to self and Rs. 30,00,000/- to his son Shri Naveen Singla who was partner in M/s Green Valleys Heights. (c) The appellant gave details of imprest of Rs. 30 lacs withdrawn for business purpose (purchase of land) in the month of july and august
2011 out of withdrawal from bank account and the fact that these transactions have been duly recorded in the books of M/s Green Valleys Heights. (d) The AO did not contradict these contentions of the appellant in the assessment order. (e) The withdrawals from the bank account of the firm in PNB, Panchkula reflects the amount shown in the imprest account of Shri Naveen Singla. Further, the Audited Balance of the firm in Loan and Advances as on 31.03.2012 shows Naveen Kumar imprest account at Rs. 30,00,000/-. (f) With regard to cash attributed to appellant, it has been stated that there was cash balance of Rs. 10,27,000/- available as on date of search, mainly attributed opening cash (carried from last year) amounting Rs. 11,50,000/- and cash withdrawals of Rs. 53,000/- from PNB account. (g) The cash balance drawn from the last years and shown as opening balance cannot be relied upon as the cash in hand statement drawn from 01.04.2005 to 31.03.2012 is nothing but a self serving document which cannot be relied upon. In view of the same, this contention of the appellant cannot be accepted. (h) Further, the contention that Naveen Singla is also Managing Partner in M/s Chandigarh Mill Store and Auto and cash in land of this firm as on date of search i.e. 08.09.2011 was Rs. 12,95,815/- cannot be accepted as it is not backed up any document/evidence. In view of the above discussion, appellant gets a relief of Rs. 30,00,000/- and the balance addition amounting Rs. 11,15,000/- is confirmed.
We have considered the arguments advanced by the learned Counsel for the assessee, the submissions of the Ld. DR, as well as the findings recorded by the Ld. CIT(A) in the appellate order on this issue. We find that the findings of the Ld. CIT(A) on this matter are clear and well-reasoned, and therefore, do not warrant any interference. Accordingly, the assessee’s appeal on this ground is dismissed 22. In the result, the assessee’s appeal on the various grounds raised
is dismissed.
23. In the result both the above appeals of the Assessee are dismissed. Order pronounced in the open Court on 11/04/2025.