DEPUTY COMMISSIONER OF INCOME TAX, DELHI vs. GAURAV DALMIA, DELHI

PER NAVEEN CHANDRA, AM :-

This appeal by the Revenue is directed against the order of the ld.

CIT(A)-23, Delhi dated 31.03.2025 pertaining to A.Y 2016-17.

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of Rs. 100 crores made under Section 69A, despite the presence of corroborative evidence in the form of a seized document (Annexure-Al, page no. 14) and statements recorded under Section 132(4) of the Act. 3. Whether the retraction of statements recorded under Section 132(4) of the Act, made much later and without contemporaneous evidence, can override the evidentiary value of such statements in the absence of any allegation of coercion or mis-recording therein. 4. Whether the Ld. CIT (A) has erred in law in holding that nominal shareholding of the assessee precludes the addition of the entire amount of cash receipt of Rs. 100 crores in his hand u/s 69A of the Act, ignoring the factual matrix indicating beneficial ownership and control of Sh. Gaurav Dalmia on the entities involved in the transaction. 5. Whether the Ld. CIT (A) has erred in applying principles of consistency from other assessments, i.e., Rakesh Aggarwal's case, contrary to the settled law that each assessment is to be judged independently based on specific evidence applicable to the assessee in question. 6. Whether the Ld. CIT (A) is correct in law in relying on the valuation report submitted by the assessee, valuation of the shares on DCF method, ignoring the fact that:  there were flaws in the valuation report as pointed out in the assessment order, and  the valuation report does not hold significance when the incriminating material relating to unaccounted cash component in the transaction of shares were found and corroborated by Page 2 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia statements recorded u/s 132(4) of the key persons handling the transactions. 7. Whether on the facts and in the circumstances of the case, the Ld. CIT (Appeals) has erred in accepting the assessee's explanation that the transaction of Rs. 100 crores recorded at Sl. No. 31 of Page No. 14 of Annexure-1 pertains to an investment made by Dalmia Group Holding in JM Financial Mutual Funds.” 3. The ld. counsel for the assessee has filed an application under Rule

27 of the Income Tax Appellate Tribunal Rules, 1963 raising the following

additional legal grounds of appeal in support of the order of the learned

Commissioner of Income Tax (Appeals):

"Additional Ground No. 1. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in overlooking the basic fact that no incriminating material was found during the course of search and the assessment as contemplated under section 153A is not a de novo assessment and as such, the additions so made by assessing officer are beyond the scope of assessment under section 153A of the Act and are liable to be deleted in totality." Additional ground no 2. That on the facts and circumstances of the case the approval accorded under section 153D of the Act (any) is a mechanical and arbitrary approval without there being any application of mind and also without satisfying the statutory preconditions of the Act and as such, the assessment so framed is null and void and deserves to be quashed." 4. It is submitted that it is well settled proposition of law that the

respondent is entitled to raise a legal ground at any stage of the

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia proceedings, even though he may not have filed an appeal against such

an order and relied upon the following the Judicial pronouncements:

to Additional Ground No. 1, submitted that during the course of search

and seizure proceedings conducted in the Dalmia Group, incriminating

document i.e. a sheet named "Aexited" (Page No.14 of ANNEXURE A-1)

pertaining to the assessee was found and seized from the residence of

Sh. Rakesh Aggarwal who is intricately connected with the Dalmia Group

and who was covered under the same search on the same day. The

scanned copy of the seized document is reproduced at Page 3 of the

Assessment Order and it contains details of amounts received by various

entities/persons of Dalmia Group.

the case of K. Krishnamurthy V. Deputy Commissioner of Income-tax

[2025] 171 taxmann.com 413 (SC) for the proposition that assessment

u/s 153A can be based on the materials found anywhere in the search.

In view of the above judgment of Hon'ble Apex Court, the seized

documents "Aexited" (Page No.14 of ANNEXURE A-1), seized from the

residence of Shri Rakesh Aggarwal, falls within the expression 'found in

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia the course of search' and, therefore, assessment under section 153A of

the Act is valid and legal as per the provisions of the Income-tax Act,

1961 [the Act, for short]. Thus, it was prayed that the additional ground

raised by the assessee under rule 27 may not be admitted.

submitted that Rule 27 of the ITAT Rules enables a respondent (i.e., the

assessee) to support the order appealed against on any ground decided

against him, even if no separate appeal or cross-objection has been

filed. However, notably, that it cannot be this enabling provision is

subject to judicial limitations invoked to raise an entirely new ground

unconnected with the order of the CIT(A).

present case, the assessee's additional ground with respect to approval

under section 153D of the Act without application of mind/mechanical

approval was never raised before the ld. CIT(A). The same, therefore,

cannot be introduced for the first time before this Hon'ble Tribunal

under the garb of Rule 27 as the ground sought to be raised does not

emanate from the order of the CIT(A). Judicial authorities have

consistently held that Rule 27 permits only such grounds as were raised

before CIT(A)/ decided against the respondent by the CIT(A). It does not

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia permit the introduction of fresh grounds at the appellate stage under

Rule 27 and prayed for its rejection.

raised by the assessee and have perused the relevant material on record.

We find that Additional ground 1 is with respect to the material found

in the course of search on person other than assessee and reliance on it

by the AO to make addition in the case of the assessee. We find that the

material, whether found from the assessee or from person other than

assessee, has to be taken into consideration as held by the hon’ble

Supreme Court in its decision in the case of K. Krishnamurthy V.

Deputy Commissioner of Income-tax [2025] 171 taxmann.com 413 (SC)

wherein the Hon'ble Supreme Court has held as under:

" 40. The argument that the said transactions had not been found in the search at the Appellant's premises but had been found due to 'copies of sale deeds collected from the society’ cuts no ice with this Court as the sale deeds had been collected as a result of the search and in continuation of the search. This Court is of the view that as the causation for collecting the sale deeds from the Society was the search at the Appellant's premises. it cannot be said that the said documents were not found in the course of the search. 41. Further, this Court is of the opinion that the expression 'found in the course of search' is of a wide amplitude. It does not mean documents found in the assessee's premises alone during the search. At times, search of an assessee leads to a search of another

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia individual and/or further investigation/interrogation of third parties. All these steps and recoveries therein would fall within the expression 'found in the course of search’. 10. In the above decision, the hon’ble Supreme Court widened the

scope of expression ‘found in the course of search’ to include documents

seized from person other than searched person. In view of the above

judgment of Hon'ble Apex Court, the seized documents "Aexited" (Page

No.14 of ANNEXURE A-1) seized from the residence of Shri Rakesh

Aggarwal falls within the expression 'found in the course of search'

especially when the said Shri Rakesh Aggarwal was an employee of the

assessee and was covered under the same search. We therefore hold

that the assessment under section 153A of the Act, made on the basis of

document seized from Rakesh Agarwal, is valid and legal as per the

provisions of the Income-tax Act, 1961 [the Act, for short]. We are of

the view however, whether the material found is incriminating or not,

goes to the root of the matter and since the additional ground 1 raises

the incriminating nature of the seized document, hence the same is

admitted.

153D being a legal ground and can be raised before the ITAT for the first

time, we are of the considered view that the approval u/s 153D was

without application of mind or was mechanical approval, is not borne

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia out from the relevant facts on record. Furthermore, we agree with the

Revenue, that under Rule 27 of the Income Tax Appellate Tribunal Rules,

1963, that Rule 27 permits only such grounds as were raised before

CIT(A)/decided against the respondent by the CIT(A). Rule 27 of ITAT

Rules, 1963, reads as under:

"27. Respondent may support order on grounds decided against him - The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” In the instant case, the question of approval u/s 153D was not before

the CIT(A) nor the CIT(A) decided the issue against the assessee.

Moreover, the ld AR did not make any submission regarding the issue of

approval u/s 153D. We therefore hold that the provision do not permit

the introduction of fresh grounds whose relevant facts are not on record,

at the appellate stage before us under Rule 27. The additional ground 2

is rejected.

original return of income u/s 139(1) of the Act on 17.08.2016 declaring

income at Rs. 6,39,54,250/- along with the current losses of Rs.

71,01,029/-. The assessee filed its revised return of income on

22.03.2017 without making any change in the original return of the

income. Thereafter, the case was selected for complete scrutiny under

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia CASS. Accordingly, notice u/s 143(2) of the Act dated 04.07.2017 was

issued and the assessment was completed u/s. 143(3) of the Act vide

order dated 19.12.2018 at returned income.

the premises of the assessee on 17.03.2021 and subsequently, the

assessment u/s 153A r.w.s 143(3) of the Act was completed on

31.03.2023 at an income of Rs. 1,06,39,54,250/- u/s 69A of the Act. In

the order passed u/s 153A of the Act dated 31.03.2023 the Assessing

Officer made an addition u/s 69A of the Act of Rs 100,00,00,000/- by

relying on document found from the residence of Shri Rakesh Aggarwal,

an employee of the assessee who was searched along with the assessee.

The AO held that the assessee has received unaccounted cash of Rs.

100,00,00,000/- on account of sale of shares of Landmark Hi Tech

Development Private Limited('LHDPL') to Uppal Chadha Hi Tech

Developers Pvt Ltd. On appeal, the ld. CIT(A) vide order dated

31.03.2025, deleted the entire addition so made by Assessing Officer.

has filed additional ground as above under Rule 27. As the assessee’s

additional ground 1 goes to the root of the matter, we take up the

assessee’s issues first.

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia 15. The assessee, in support of his ground has made the following

submission on legal issues as well as on merits:

“2.1 It is now well settled law that no addition can be made in the proceeding u/s 153A of the Income Tax Act, unless any incriminating material qua each assessment year is found from the premises of the appellant. In the

impugned order ld of the Income Tax Act on the basis of noting found during the course of search from the residence of Shri Rakesh Aggarwal (third party), kindly see pages 2 to 4 of assessment order. For the sake of

completeness, the document so seized is extracted below i.e. 2.2. It is an undisputed fact that above noting relied upon in the impugned

order have not been found from the premise of the appellant but have been found from the premise of Shri Rakesh Aggarwal. Further, the material found from the premise of third party cannot be used in the proceeding u/s 153A of the Income Tax Act. In this regard, it is submitted that it is the settled

proposition of law that the reference to the incriminating material is with regard to incriminating material found as a result of search of assessee's premises and not of any other assessee/ third person. For making addition on the basis of material including document found during the course of search at the premises of the third party, the procedure laid down under section

153C/148 of the Act is to be followed. Section 153C/ 148 of the Income Tax Act can be invoked on the basis of incriminating material found during the course of search from the premise of any other person different from the assessee. Reliance is placed on the judgment of Hon'ble High Court of Delhi

in the case of PCIT (Central) 3 vs Anand Kumar Jain (HUF) reported in 432

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia ITR 384 on the aforesaid proposition and Hon'ble Supreme Court in the case

of CIT vs Singhad Technical Education Society reported in 397 ITR 344.

2.3 In view of the above ld AO wrongly assumed the jurisdiction u/s 153A

of the Income Tax Act on the basis of notings found from the residence of

Shri Rakesh Aggarwal (third party) and as such impugned order passed u/s

153A of the Income Tax Act is liable to be quashed, furthermore, there is no

basis as to how the amount mentioned in "others" (in the aforesaid seized

document) has been attributed to the assessee neither any investigation or

enquiry was made by learned AO to prove the same, whereas, the assessee

submitted necessary and requisite documentary evidences in order to prove

that the said amount mentioned in "others" of Rs. 100 crores is nothing but

investments made by Dalmia Group Holdings in JM Financial Mutual Fund

which has not been rebutted by learned AO (kindly see pages 54 to 55 of CIT

(A) order) – (Emphasis Supplied).

2.4 It may also be observed that the original assessment was completed

u/s. 143(3) of the Act vide order dated 19.12.2018 at returned income and

in the original assessment there was no addition to returned income. Since

it is an unabated assessment and as such addition cannot made in the

impugned order in the absence of incriminating material found during the

course of search. Reliance is placed in this regard on the following judicial

ruling: -

a) PCIT vs Abhisar Buildwell (P) Ltd. (SC) reported in 454 ITR 212 b) Commissioner of Income Tax, (Central) III Vs Kabul Chawla ITA no 707/2014, (Delhi High Court) reported in 380 ITR 573. c) CIT Vs Singhad Technical Education Society (SC) 397 ITR 344 d) Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (Delhi HC) reported in 395 ITR 526.

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia 2.5 The aforesaid judgments have also been noted by learned CIT (A) at

pages 60 and 61 of his order, further, even the fact that the entries so

mentioned in the alleged seized document are recorded in the books of

accounts of various entities of Dalmia groups have been noted by learned CIT

(A) at pages 40 to 55 of his order, even then the learned CIT(A) failed in his

duty in quashing the impugned assessment order so made, however, gave full

relief on merits.

2.6 As such, the assessee-respondent prays that it be held that additions

so made by the learned AO are beyond the scope of assessment in view of

the aforesaid judgments. In effect, it is prayed that Additional Legal Ground

No. 1 as per Rule 27 Application be allowed. Submissions on merits with regards to department's ground nos. 1 to 3.

8 so raised in memo of appeal: Heavy reliance is placed on the findings of

learned CIT (A) recorded at pages 61 to 78 of the order, wherein, addition

has been deleted on merits by holding that addition u/s 69A is also not

sustainable in view of the facts of the case and further, by holding that

allegation of Id AO that the appellant received unaccounted cash of Rs.

100,00,00,000 on sale of shares of Landmark Hi Tech Development Private

Limited ('LHDPL') to Uppal Chadha Hi Tech Developers Pvt Ltd., has not been

substantiated or investigated by learned AO and as such, the addition so

made by learned AO was deleted.

3.1 In support of the findings of learned CIT (A), it is submitted that it is

an admitted fact (as also accepted by ld CIT (A) at pages 75 and 76 of his

order) that the appellant has nominal investment in shares of Landmark Hi

Tech Development Private Limited and in this regard shareholding of

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia Landmark Hi Tech Development Private Limited as on 31/03/2013 is being

given below: -

S. No Name of the Shareholder No of Shares %

1 Banyan Real Estate Fund 6,433,180 94.70 2 Plus One Realtors Pvt Ltd, (an entity, 3,50,250 5.16 controlled by Dalmia Group) 3 Mr. Gaurav Dalmia (Assessee) 5,000 0.07 4 Mrs. SharmilaDalmia 5,000 0.07 Total 6,793,430 100.00 3.2 From the perusal of the above it may be observed that as on

31.03.2013 Banyan Real Estate Fund (BREF) held 94.7% stake in Landmark Hi

Tech Development Private Limited. After 6 years of making investment,

Banyan Real Estate Fund (BREF) intended to exit the investment made in

LHTDPL. Accordingly, on 06.06.13, Landmark Realtech Pvt Ltd (LRTPL)

purchased shareholding from BREF @ Rs. 500 per share i.e. for an aggregate

consideration of Rs 321.659 crores. As such shareholding of Landmark Hi Tech

Development Private Limited before transfer of shares to Uppal Chadha Hi

Tech Developers Pvt Ltd is being given below: -

s. no Name of the shareholder No of shares % 1 Landmark Realtech Pvt Ltd 6,433,180 94.70 2 Plus One Realtors Pvt Ltd 350,250 5.16 3 Mr. Gaurav Dalmia (Assessee) 5,000 0.07 4 Mrs. Sharmila Dalmia 5,000 0.07 Total 6,793,430 100.00 3.3 It may be observed that vide agreement dated 12.06.2013, LRTPL and

others (Gaurav Dalmia, Sharmila Dalmia and Plus One Realtors Pvt Ltd) were

to sell 67,93,430 shares of LHTDPL during FY 13-14, in a phased manner, to

Uppal Chadha Hi-Tech Developers Pvt. Ltd at Rs. 515.20 per share having an

aggregate consideration of Rs 350 crores. In pursuance to the aforesaid

agreement, LRTPL and others (Gaurav Dalmia, Sharmila Dalmia and Plus One

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia Realtors Pvt Ltd) sold shares and offered the resulting income in AY 2014-15

to AY 2016-17. The sale of shares took place as under:

A.Y. No. of shares Consideration (Rs.) @515.20 per share 2014-15 49,43,782 254,70,36,486 2015-16 10,65,597 54,89,95,574 2016-17 7,84,051 40,39,43,075 Total 67,93,430 350,00,00,000 3.4 From the perusal of the above it is important to note the following

facts: -

i) Landmark Realtech Pvt Ltd (LRTPL) purchased 6,433,180 shares of

Landmark Hi Tech Development Private Limited from BREF @ Rs. 500 per

share on 06.06.13 for Rs 321.659 crores

ii) Landmark Realtech Pvt Ltd entered into agreement to sale dated

12.06.2013 with Uppal Chadha Hi-Tech Developers Pvt. Ltd for sale of shares

of Landmark Hi Tech Development Private Limited@ Rs. 515.20 per share.

iii) The Id AO has not disputed the purchase rate @ Rs. 500 per share on

06.06.13

iv) However, the sale rate @ Rs. 515.20 per share vide agreement to sale

dated 12.06.2013 has been disputed by the ld AO

v) The Id AO worked out sale rate @ 651.22 which shows lack of application

of mind as the rate per share cannot increase from Rs 500 per share to Rs

651.22 per share within few days.

vi) The Id AO wrongly relied upon the DCF method of valuation in respect of

transfer of shares. However DCF method of valuation cannot be applied in respect of transfer of shares as per section 56(2)(viia) of the Income Tax Act.

vii) In view of the above i.e. based on reading of provisions of the Section

56(2)(viia) read with Rule 11UA, it can be observed that, the valuation of the

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia equity shares is to be done based on the Book Value of Assets and Liabilities.

The relevant formula is given hereinabove i.e. Net Asset Value which means

the Book value for the purpose of this particular section of the Act.

viii) In view of the above Id AO wrongly relied upon DCF method of valuation

for working out rate per share of Rs 651.22 and estimating the sale

consideration of Rs 450 crore as against sale consideration of Rs 350 crore as

per books of accounts and made the entire addition in AY 2016-17, whereas,

the transaction of sale of shares was scattered in three different assessment

years (kindly see para 3.3. above and finding of Id CIT (A) at page 76 para

94). Further, substitution of value as per DCF method is also outside the

scope of assessment under section 153A of the Act, since AY 2016-17 was a

completed assessment on the date of search and addition can only be made

on the basis of incriminating material and not on the basis of estimated

difference in valuation under section 56(2)(viia). Reliance is placed in this

regard on the following judicial ruling: (Emphasis supplied) -

a) PCIT vs Abhisar Buildwell (P) Ltd. (SC) reported in 454 ITR 212 b) Commissioner of Income Tax, (Central) - III Vs Kabul Chawla ITA no 707/2014, (Delhi High Court) reported in 380 ITR 573. c) CIT Vs Singhad Technical Education Society (SC) 397 ITR 344 d) Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (Delhi HC) reported in 395 ITR 526.

ix) On merits and as per Section 56(2)(viia) read with Rule 11UA(1)(c)(b), Net

Asset Value is required to be worked out and NAV of share is Rs 200 per share.

x) As such the rate of share of Rs 515.20 per share at which shares of

Landmark Hi Tech Development Private Limited have been sold by Landmark

Realtech Pvt Ltd is above the fair market value of share worked out as per

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia section 56(2)(viia) read with Rule 11UA and as such, substitution of value by

learned AO on DCF basis is unjustified and untenable in law.

3.5 It may also be observed that the Id AO relied upon the following

statements recorded during the course of search of Mr Rakesh Agarwal, Mr

SN Pareekh and Mr. Naresh Ghai, who all retracted the statements recorded

during search and explained the circumstances under which the statements

were recorded during the course of search i.e. under extreme duress and

coercion. Learned CIT (A) has held in the order that even learned AO has

partly relied on the statements and not fully, as no addition on account of

commission was ever made in the hands of Sh. Rakesh Aggarwal, whereas, he was assessed by same assessing officer (kindly see pages 64 to 75 of CIT (A)

order). Reliance is placed on the judgment of Hon'ble Supreme Court in the

case of CIT vs Jindal Steel & Power Ltd. reported in 460 ITR 162 on the

proposition that "statement cannot override evidences more so when the

same is retracted".

3.6 Valuation report submitted during assessment proceedings not

accepted by the AO: At the outset, it is imperative to give a background as

to why the appellant had obtained the impugned valuation report. In this

regard, following would be pertinent- LRTPL had purchased shares of LHTDPL

from BREF (i.e. a foreign company). As and when it was required to make

foreign payments, LRTPL was required to file Form FC-TRS with RBI, as a

compliance. These Forms were filed for remittances made for the period July

2013 to September 2015 (valuation report dated 06.06.2013 and 28.09.2015.

It is pertinent to note that such valuation report was obtained purely for

FEMA purposes, wherein DCF method was used for arriving at the Fair market

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia value (FMV) and to ensure that there was no FEMA violation at the time of

making foreign payments. This valuation report showing FMV of Rs 517.02

per share was being filed and was being accepted by the RBI. This shows that

the true underlying and inherent value of such share was around Rs. 500 only

and by no means it could derive an additional value as is being alleged by the

Id AO in the assessment order.Hence, the working of IdAO to arrive at FMV

of Rs 651.22 per share is to be disregarded.

3.7 AO has nothing on record to show deployment of 100 crores or identify

an undisclosed asset worth Rs.100 crores. In the para no 5 of the impugned

order it has been observed by the ld AO that unaccounted cash of Rs 5.50

crore was seized which has remained unexplained. As per ld AO, the assessee

claimed that the cash seized belongs to Shri Mridu Hari Dalmia and belong to

Shri Mridu Hari Dalmia. In this regard it is submitted that during the course

of search cash of Rs 5.50 crore were found. In respect of cash so found

addition of RsRs 5.50 crore were made by the ld AO in the hands of Shri Mridu

Hari Dalmia in the order passed u/s 143(3) for A Y 2021-22.

3.8 From the perusal of the order for A Y 2021-22 (para no 7.4 of order)

of Shri Mridu Hari Dalmia it may be observed that it has been admitted by ld

AO that:

i) Cash found during search pertains to A Y 2021-22

ii) The cash found is not related to wave group as the addition has been made

by Id AO in respect of cash found during search separately.

In view of the above the Id AO wrongly made adverse observation on the basis

of cash found during search the addition in respect of which has been made

separately in the A Y 2021-22 in the hands of Shri Mridu Hari Dalmia. On

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia analysis of the entire assessment order nowhere it is brought by the IdAO

that if such huge amount was received by the assessee in cash, where and

how it was deployed. Had the assessee actually received such huge sum of

cash, it would have deployed it somewhere which IdAO has not been able to evidence by way of any cogent material or supporting documents. This also

supports that no such cash receipt of 100 crores was made by the assessee.

3.9 Without prejudice to above, reliance is placed on the findings of

learned CIT (A) (kindly see pages 75 to 76 of CIT (A) order) that it is not

correct to add entire alleged suppressed income in AY 2016-17 and in the

hands of the appellant as the shareholding of Landmark Hi Tech Development

Private Limited before transfer of shares to Uppal Chadha Hi Tech Developers

Pvt Ltd is being given below: -****

3.10 From the perusal of the above it may be observed that Shri Gaurav

Dalmia was holding only 5000 shares and as such the ld AO wrongly made the

addition in respect of transfer of entire shares of 6793430 shares in the hands

of the appellant (kindly see finding of ld CIT (A) page 75 para 93).

Krishnamurthy vs DCIT reported in 473 ITR 557 in misconceived as the same

is clearly distinguishable on the facts of the assessee, since the said judgment

dealt with issue of penalty under section 271AAA(2) of the Act, wherein, in

that case the assessee admitted undisclosed income and paid taxes thereon,

however, in the case of assessee the additions have been made by learned

AO purely on the basis of suspicion and surmises without there being any

incriminating material or any admission on the part of assessee. Reliance is

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia placed on the judgment of Hon'ble Supreme Court in the case of CIT vs Singhad Technical Education Society reported in 397 ITR 344. 5. In view of the aforesaid, it is most humbly submitted that the appeal of Revenue be dismissed and the Rule 27 so filed by the assessee - respondent be allowed”. 16. Per contra, the ld DR vehemently relied on the order of the AO.

The ld reiterated that the document seized are incriminating in nature

and reflect the receipt of cash as corroborated by the statements of

Rakesh Agarwal, Mr SN Pareekh and Mr Naresh Ghai. The retraction of

statement made u/s 132(4) cannot alter the fact as the statement was

recorded out of free will and no coercion was involved.

relevant material on record. The foundation on which the assessing

Officer has built his edifice of addition of Rs 100 crore is a document

seized as "Aexited" : Annexure A-1, Page No. 14, seized from the

residence of Shri Rakesh Aggarwal and the statements made u/s 132(4)

of Shri Rakesh Aggarwal; Mr SN Pareekh and Mr Naresh Ghai, all

employees of the assessee working in various capacity. On the basis of

this document and the statements recorded during the course of search

of Mr Rakesh Agarwal, Mr SN Pareekh and Mr. Naresh Ghai, the AO

related the addition of Rs. 100,00,00,000/- to unaccounted cash

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ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia received, on the sale of shares of Landmark Hi Tech Development

Private Limited ('LHDPL') to Uppal Chadha Hi Tech Developers Pvt Ltd.

ascertain certain facts of the instant case. We find the assessee for AY

2016-17, had filed its original return on 17.08.2016 which was revised

on 22.03.2017. The return was scrutinized and an order u/s 143(3) was

passed on 19.12.2018 accepting the returned income.

on 17/03/2021. As the assessment in the instant case was completed u/s

143(3) of the Act vide order dated 19.12.2018 at returned income, and

no notice 148 was issued, no proceedings were pending and therefore

the AY 2016-17 becomes an unabated assessment. With the law laid

down by the hon’ble Supreme Court in PCIT vs Abhisar Buildwell (P)

Ltd, it is no longer res-integra that in the case of unabated assessment

year, the addition u/s 153A of the Income Tax Act can be made only on

the basis of incriminating material unearthed during the course of

search. The first and foremost issue for adjudication in the instant case

therefore, is whether the addition is based on any incriminating

material.

material of the document seized. The term ‘incriminating material’ has

Page 20 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia not been defined in the Act. The Courts however, have judicially

interpreted the meaning of ‘incriminating material’ as including any

record, item, or information that, when discovered during a search or

requisition which directly indicates and/or effectuates a direct link or

causal nexus to undisclosed income or assets, which is inconsistent with

the assessed person's declared returns. Such material may be in the form

of documents demonstrating mismatches between actual and declared

asset values (land, jewellery, cash, deposits, etc.); records evidencing

off-books or concealed transactions; or any other credible data

indicative of concealment of real income. In Kabul Chawala (supra),

the hon’ble Delhi High Court interpretated incriminating material as

evidences unearthed during the course of search which were not

produced or not already disclosed or made known in the course of

original assessment. The Hon’ble High court of Delhi in the case of SSP

Aviation Ltd vs DCIT reported in 346 ITR 177 has observed that for the

year to which the seized documents belonged, Assessing officer will

verify whether the transaction reflected by the seized documents are

duly accounted for in the books of accounts. We therefore, examined

the seized document i.e., Annexure A 1 page 14 to ascertain its

‘incriminating’ nature from the perspective of the ‘document’ seized

Page 21 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia and the statements recorded u/s 132(4). For better understanding, the

Annexure A 1 page 14 is reproduced as under:

Page 22 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia 21. We find that there are 32 entries in the seized document. The AO

has chosen the entry no 31 which reads as follows “Sr No. 31.Nature of

entity : Others- Amount:1,00,00,00,000” for making the said addition.

The AO has held that the entry at Sr. 31 reflects payment of Rs

1,00,00,00,000/-, in cash, to the assessee for sale of shares of Landmark

Hi Tech Development Private Limited ('LHDPL') to Uppal Chadha Hi

Tech Developers Pvt Ltd. It is the case of the AO that the shares of

LHDPL was sold @ Rs 515.20 per share totaling to Rs 350 crore whereas

the sales price of the shares of LHDPL should have been Rs. 651.22 per

share totaling to 450 crore. The AO has considered this difference of Rs

100 crore as cash received by the assessee which is reflected in the said

entry no 31 of the seized document. Such a conclusion is based on

statement of Rakesh Agarwal who stated u/s 132(4) that the entry

reflects payment to Dalmia group in cash from Wave Group. As per the

statements, this amount was received by Rakesh Agarwal and given to

SN Pareekh, cashier of the Dalmia Group and confirmed by Naresh Ghai,

GM Finance of Dalmia Group.

that the AO has accepted amount received vide entries from Sr no 1 to

Sr no. 30 and Sr no. 32 as explained and duly reflecting in the assessee

books of account. With respect to entry at sr. no. 32, the assessee

Page 23 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia explained that the same is on account of investment in JM Financial

Mutual Fund which was made through banking channel and is not

unaccounted transaction. As evidence for the same, the assessee

submitted copy of account statement and the relevant portion of bank

statement in respect of investment of Rs 100 crore. The AO however,

without controverting the assessee’s submission, rejected the

explanation of the assessee on the ground that other entries on the same

seized paper are regarding receipts and entry at sr. no. 32 reflecting

transaction of Rs. 100 Crores, is about investment. In this regard, the

assessee explained that the seized sheet are not regular books of

account and hence it reflects both receipts and investment which are

all duly recorded in books which remained uncontroverted.

Pareekh and Mr Naresh Ghai is concerned, we find that all these person

retracted their statement as the same being given under pressure and

not out of free will. While Shri Satya Narayan Pareek and Shri Naresh

Ghai retracted their statement soon after the search vide letter dated

31/03/2021 along with affidavit, Shri Rakesh Agarwal retracted his

statement in March 2023.

relevance and validity of these statements. The CIT(A) concluded that

Page 24 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia the AO himself believed that these statements are not reliable. The

CIT(A) found that Shri Naresh Ghai had stated that at question 24 to 20,

that Rs 27 to 20 crores were received from ATS; similarly at question 31,

34 & 35 he had stated that Rs 28 Crores was received from Ansal and at

question 32 & 33, he had admitted that cash of Rs 95-100 crores were

received from Wave Group. The AO however, did not consider receipt of

Rs 27 to 28 crore from ATS or receipt of Rs 28 crore from Ansal for

addition in the hands of the assessee. The only addition made is with

respect to question no. 32 & 33 on account of cash of Rs 95-100 crore

received from Wave Group. Thus the AO himself only partially relied on

the statement of Shri Naresh Ghai.

receipt of cash of 100 crore from Wave Group, had also stated that Rs 4

crore annually was received from some real estate companies like

Unitech and Ansal and others. The AO however, accepted the statement

regarding 100 crore but did not make any addition in respect of Rs 4

crore annually received from some real estate companies like Unitech

and Ansal and others and cash received from S M Saraf(Forum Group).

Thus the AO himself only partially relied on the statement of Shri S N

Pareek.

Page 25 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia 26. As far as statement of Rakesh Agarwal is concerned, we find from

the statement of Rakesh Agarwal that he had prepared the impugned

seized document for calculation of bonus/commission income for

arranging the various deals as reflected in entry 31 of the said document.

The AO of Rakesh Agarwal, who was the same AO as that of the assessee,

did not consider the bonus/commission part of the statement as income

in the hands of Rakesh Agarwal. Thus the AO again only partially relied

on the statement of Shri Rakesh Agarwal. We therefore are inclined to

endorse the CIT(A)’s view that the AO himself was convinced that the

statements given u/s 132(4) by Rakesh Aggarwal; SN Pareekh and Naresh

Ghai were given under undue pressure and without free will and

therefore were not reliable. We also add that the AO nowhere

demonstrated that statement given by Rakesh Aggarwal; SN Pareekh and

Naresh Ghai are backed by any cogent/corroborative evidence. The only

evidence relied upon by the AO, is the seized document A-1 which

contrary to the AO’s assessment, contains entries which are all duly

recorded as part of the books of account of the assessee.

that it has evidentiary value but only if the same is corroborated by any

evidence/material. Such statement by themselves do not constitute

incriminating material as held by the hon’ble Delhi Court in PCIT v Best

Page 26 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia Infrastructure India P Ltd in ITA 13/2017 dated 01.08.2017. In the case

of CIT V Harjeev Agarwal in ITA/8/2004 dated 10.03.2016 the hon’ble

Delhi High Court further elaborated the significance of statement

recorded u/s 132(4) by holding that the such statement cannot be used

on a standalone basis and it must be in context of other evidence or

material discovered during the search. In the factual matrix of the

instant case therefore, we are of the view that the AO has failed to

establish any nexus between the statements of Rakesh Aggarwal; SN

Pareekh and Naresh Ghai with any materials/materials found during the

search.

document, the assessee explained with cogent evidence that the same

corresponds to an investment made by Dalmia Group Holdings in JM

Financial Mutual Funds. As evidence the assessee produced the ledger

account and the bank statement reflecting the transaction involved. We

find that the explanation offered by the assessee has neither been

rebutted by the AO with any evidence showing the assertion is

false/unsatisfactory nor the Revenue could controvert the assertion of

the assessee that the said transaction is reflected in its books of

account. This failure of the AO to not even controvert the assessee’s

Page 27 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia assertion that the said entry of 100 crore is investment in J M Financial

Mutual Fund, is fatal to his theory of cash receipt from Wave Group.

that the document seized as "Aexited" (Page No.14 of ANNEXURE A-1),

seized from the residence of Shri Rakesh Aggarwal, is not proved to be

an incriminating material/document. With such a finding with regard to

absence of any incriminating material to disturb the unabated

assessment year u/s 153A, the foundation on which the assessing Officer

built his edifice of addition of Rs 100 crore, has now crumbled. Applying

the well-established legal maxim of Sublato fundamento cadit opus

which is used to state that if the initial, foundational, or triggering

action is invalid or illegal, all subsequent actions, orders, or proceedings

stemming from it are automatically null and void, we hold that the

assessment framed u/s 153A in the instant case is invalid and bad in law

as the same is devoid of any incriminating material. This finding, it is

needless to add, is in accordance with the decision of the Hon'ble

Supreme Court in PCIT vs. Abhisar Buildwell (P) Ltd (supra).

Accordingly, the Additional Ground 1 raised under Rule 27 is allowed.

on legal ground therefore, the grounds of appeal of the Revenue on

Page 28 of 30

ITA No.4162/DEL/2025 [A.Y 2016-17] The Dy. C.I.T. Vs. Gaurav Dalmia merits is not adjudicated upon and is dismissed as academic and

infructuous.

allowed and appeal of the Revenue in ITA No.4162/DEL/2025 is

dismissed.

Order pronounced in open court on 29.01.2026.

Sd/- Sd/-

[SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 29th January, 2026.

VL/