PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-20 vs. MS. SUMAN AGARWAL

ITA 167/2022 Page 4 of 8 However, CIT(A) relying upon the statement of Sh. Madho Gopal Agarwal confirmed the addition made by the AO and dismissed the appeal vide order dated 17th July, 2018. The assessee being aggrieved by the dismissal filed an appeal before ITAT. The order of the ITAT is a common order which has been passed in respect of six assesses pertaining to same search. The lead appeal determined by the ITAT is in the case of Shri Gopal Agarwal, however, no challenge to the said appeal is pending before this Court. It is stated by the learned counsel that the appeal may be in the process of filing or listing before the Registry. 4. The ITAT after determining the appeal of Shri Gopal Agarwal has on same reasoning allowed the appeal of the respondent/assessee since it contained identical grounds for challenge. The ITAT concluded that the additions made by the AO for the assessment under consideration is not based on any incriminating material found during the course of search from the premises of the assessee. The ITAT concluded that the AO had made the additions solely relying on the disclosures made by the Managing Director, Sh. Madho Gopal Agarwal. The ITAT after finding that there was no incriminating material found as a result of the search conducted against the assessee on record, allowed the appeal and set aside the addition made by the AO. The ITAT has relied upon the judgment of this Court in PCIT v. Anand Kumar Jain (HUF) 432 ITR 384 Del and CIT v. Best Infrastructure India Pvt. Ltd reported in (2017) 397 ITR 82, Delhi wherein this Court has held that statements recorded under Section 132(4) of the Act do not themselves constitute as incriminating material in the absence of any corroborative evidence. The ITAT placed reliance on para 35 of CIT v. Best Infrastructure India Pvt. Ltd. (supra) as reproduced hereinbelow:- This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002945

ITA 167/2022 Page 5 of 8 “35. Turning to the facts of the present case, it requires to be noted that the statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A-1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs.” 5. The appellant has filed the present appeal aggrieved by the aforesaid order of the tribunal. 6. It is contended before us that the ITAT fell in error in holding that there was no corroborative material in support of the statement made by Sh. Madho Gopal Agarwal, in this regard, it was contended that in pursuance to the statement made by Sh. Madho Gopal Agarwal, various other members of the family disclosed LTCG and did not claim exemption under Section 10(38) of the Act and paid taxes on the said amount. It was, thus, submitted that in view of the statement of Sh. Madho Gopal Agarwal and the corroborative conduct of the other family members, the ITAT fell in error and the reliance placed on the judgment of this Court in CIT v. Best Infrastructure India Pvt. Ltd. (supra) is erroneous. 7. The addition has been made by the AO with respect to the LTCG earned on sale of shares of M/s KGN Industries Limited. 8. We have perused the statement dated 3rd August, 2015 and the contents of the letter dated 31st July, 2015, both authored by Sh. Madho Gopal Agarwal. There is no reference to M/s KGN Industries Limited in either of the said documents. No other material found during search pertaining to M/s KGN Industries Ltd. has been placed on record. The This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002945

ITA 167/2022 Page 6 of 8 Revenue has not placed on record any incriminating material which was found as a result of the search conducted on the assesee herein. It is also the contention of the assessee that there was no surrender by her unlike Sh. Madho Gopal Agarwal and she, therefore, specifically disputed that any notice under Section 153A of the Act could have been initiated against her. The said facts are not disputed by the counsel for the Revenue. 9. On the date of search, admittedly, the assessment with respect to the AY under consideration 2011-12 admittedly stood completed. Since no assessment was pending for the relevant AY 2011-12 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court in the case of Commissioner of Income Tax v. Kabul Chawla (supra) and Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526. The relevant paragraphs are reproduced hereinbelow:- “10. The ITAT, therefore, concluded that since no assessment was pending for the relevant assessment year 2010-11 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court in the case of Commissioner of Income Tax vs. Kabul Chawla (2016) 380 ITR 573 and Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 as well as by the orders of the ITAT in the group cases of Madho Gopal Agarwal and M/s Kapis Impex LLP (supra). 11. A predecessor Division Bench of this Court in Kabul Chawla (supra) has held that if no incriminating material is found during the course of the search in respect of an issue, then no addition in respect of such an issue can be made in the assessment under Sections 153A and 153C of the Act. The legal position summarized in the subsequent decision of Meeta Gutgutia (supra) is reproduced hereinbelow:- "37. On a conspectus of Section 153A(1) of the Act, read This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002945

ITA 167/2022 Page 7 of 8 with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002945

ITA 167/2022 Page 8 of 8 vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."” 10. In this view of the matter there is no infirmity in the order passed by the ITAT. In the aforesaid facts, no substantial questions of law arise for consideration. Accordingly, the present appeal is dismissed. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J JULY 28, 2022/msh This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002945