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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG, & SHRI L.P. SAHU,
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal filed by the assessee is directed against the order of the CIT(A)-XXXI, New Delhi, dated 17/09/2013 for A.Y 2005-06.
The grounds raised by the assessee read as under:
“1. The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 2,95,00,000/- u/s 68 for the amounts received against allotment of share capital during the relevant previous year without considering the documentary evidences placed on record and without affording an opportunity to cross examine any third party whose
2 ITA No. 6216/Del/2013 statements was relied upon by the department against the appellant- company. Thus, the said addition so made must be deleted.
The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 1,47,500/- made for alleged commission paid @ 0.5% to obtain accommodation entries though there is absolutely no material available on record. Thus, the said addition must be deleted.
Without prejudice to the grounds taken above, the learned CIT(A) erred in law and on facts in confirming the additions of Rs. 2,95,00,000/- and Rs. 1,47,500/- made in hands of the appellant even when all the surrounding circumstances quite evidently indicate that the alleged undisclosed income could belong to the original promoters who had surreptitiously surrendered the same in the hands of the appellant, though they were the sole and ultimate beneficiaries of the impugned accommodation entries introduced by way of share capital. Thus, the said addition so confirmed in the hands of the appellant- company must be deleted.”
Briefly stated, the facts giving rise to this appeal are that the AO completed assessment u/s 153A r.w.s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. making two additions/disallowance viz. addition of Rs. 2,95,00,000/- on account of unexplained cash credit and another addition of Rs. 1,47,500/- on account of commission paid to accommodation entry providers. Aggrieved, the assessee carried
3 ITA No. 6216/Del/2013 the matter before the CIT(A) by way of appeal but the grievance of the assessee could not be redressed as the appeal was dismissed on both the counts. Now the empty handed assessee is before this Tribunal with the grounds as reproduced hereinabove.
APPLICATION OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL GROUND DATED 20.8.2015
We have heard the rival submissions and have carefully perused the relevant material on record. The ld. AR submitted that as per the ratio of the decision of ITAT Delhi in the case of ACIT Vs. Bhagwati Printers [P] Ltd [2006] 102 TTJ [Del] 480 in the case wherein it was held that the legal ground or issue not involving any fresh investigation into the facts except those already on record, then if the additional ground goes to the root of the case should be admitted and adjudicated in the interest of justice. Further placing reliance on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company [1998] 229 ITR 383 [SC], the ld. AR contended that the additional Ground No. 5 may kindly be admitted for hearing and adjudication.
4 ITA No. 6216/Del/2013 5. Replying to the above, the ld. DR submitted that the additional ground, even if it is legal ground, cannot be admitted at this belated stage for consideration and adjudication. However, he could not controvert this factual position that the additional legal ground placed for admission and consideration by the assessee has been agitated on the basis of order of the Special Bench ITAT Delhi dated 6.7.2012 in the case of All Cargo Global Logistics Ltd Vs. DCIT [2013] 137 ITD 287 [Mum][SB].
In rejoinder, the ld. AR submitted that the additional ground raised by the assessee is purely a legal ground arising out of facts and material already on record and does not require any further investigation beyond the record, therefore, in view of the ratio laid down in the case of NTPC Ltd [supra] additional ground No. 5 may kindly be admitted for hearing and adjudication.
On careful consideration of the above rival submissions, we observe that the assessee is seeking admission of Additional Ground No. 5 which reads as under:
“5. The learned CIT(A) erred in law and on facts in confirming the additions made in the assessment order passed u/s 153A, which is bad in law and on facts because (a) the additions were not based on any books of account or other material not produced in the course of original assessment but which could alleged to have been found in the course of search or an undisclosed income or property discovered therein; and (b) as the assessment proceedings were not abated but were already completed.
5 ITA No. 6216/Del/2013 Thus, all additions so made in the assessment order should be deleted following the Special Bench decision dated 06/07/12 in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2013) 137 ITD 287 (Mum.)(SB).”
In view of the legal issue sought to be raised by the assessee, the additional Ground no. 5 we observe that by this ground, the assessee has challenged the sustainability of additions made in the assessment order passed u/s 153A of the Act alleging the same as bad in law because the additions were not based on any material which could allege to have been found during the course of search and seizure operation carried out on the assessee on 24.9.2009 u/s 132 of the Act.
We may point out that as per the ratio of the decision of Hon'ble Supreme Court in the case of NTPC [supra], a legal issue not involving any fresh investigation into the facts except those already on record of the Tribunal, can be raised by way of additional ground at the belated stage first time before the Tribunal. In the instant case, the legal issue sought to be raised by the assessee way of additional Ground No. 5 is purely a legal issue which does not require any fresh investigation into the factual matrix of the case except the facts and documents already on record and raised on the basis of advice and correct legal position and the omission to raise the same earlier was neither wilful nor deliberate.
6 ITA No. 6216/Del/2013 10. After hearing the rival submissions of the admissibility of the legal Ground no. 5, we are convinced that the additional Ground No. 5 raises a purely legal issue and does not involve any fresh investigation into the facts except those already on record and it goes to the root of the matter and adjudication thereof is necessary before examination of the merits of the assessment. We, therefore, admit the additional ground No. 5 for consideration and adjudication. Finally, application of the appellant for admission of additional ground is allowed.
Additional Ground No. 5
We have heard the rival submissions and have carefully perused the relevant material on record. At the very outset of the opening of the hearing, the ld. AR submitted that no incriminating material was found during the search and seizure operation held u/s 132(1) of the Act conducted by the DIT[INV]-II on 24.9.20009 in the case of M/s Mamram Group of cases including the assessee. The ld. AR further submitted that as per the observations of the A.O at last para at page 9, it is clearly discernible that the A.O observed that he knew that the facts which were gathered through post search and during the course of assessment proceedings regarding the subject of accommodation entries through the system or buy back of shares in the entire group of cases. The ld. AR vehemently pointed out that there was no incriminating material before the A.O which was
7 ITA No. 6216/Del/2013 unearthed or seized during search and seizure operation of the assessee on 24.9.2009, therefore, no addition could have been validly made on the assessment which already stood completed on the date of search and seizure operation as no assessment proceedings pertaining to A.Y 2005-06 i.e. A.Y under consideration were pending on the date of search. Therefore, no addition could have been made validly in the absence of any incriminating material.
The ld. AR further drawing our attention towards last para at page 11 of the assessment order submitted that the A.O proceeded to made addition on account of commission @ 0.5% of the sum for which alleged entry was provided on the basis of so called statement of Shri Mahesh Garg without confronting the same to the assessee by accepting the statement of Shri Mahesh Garg and others as sacrosanct and gospel truth without further investigation. Therefore, this addition without any incriminating material is not sustainable. The ld. AR further pointed out that as per the details of seized documents referred to in the assessment order i.e, Annexure A-5 of Party Y-2, the ld. AR submitted that this Annexure contains share transfer deeds of third party for transfer of shares for M/s Ishu Finance & Invest. [P] Ltd alongwith other related documents pertaining to shares allotted to those third parties by M/s Ishu Finance & Investments [P] Ltd and not the assessee company i.e Shyam Sunder Infrastructure P Ltd.
8 ITA No. 6216/Del/2013 13. Regarding Annexure A-1 of Party Y-2, the ld. AR further submitted that this Annexure contains shares application documents and share transfer deeds for transfer of shares of M/s Mamram Ltd alongwith other related documents pertaining to shares allotted to those third parties by M/s Mamram Ltd. The ld. AR vehemently pointed out that the assessee company M/s Shyam Sunder Infrastructure Private Ltd was incorporated on 27.2.2003 with the earlier name as Mamram Developers Ltd with the directors Shri Surendra Gupta and Shri Sumit Gupta having its Registered Office at G-18 & 19 Mamram Majesty Mall, Plot No. 2, Road No. 43, Gurharkishan Marg, Pitampura, New Delhi 110 034 whereas the said company to which Annexure A-1 to Part Y-2 pertains was incorporated on 8.3.1990 with Mrs. Kamla Garg, Shri Sanjay Gupta, Smt. Renu Gupta as directors having its registered office at Flat No. 101, Pkt-D- 10, Om Sai Apartment, Sector 7, Rohini, New Delhi – 110 085.
Placing copy of the Company Master Data of both the companies, the ld. AR strenuously pointed out that the assessee company which was incorporated in the name and style of M/s Mamram Developers Ltd on 27.2.2003 and another company M/s Mamram Developers Ltd was incorporated on 8.3.1990 has no relationship with the present assessee company which subsequently changed its name as Shri Shyam Sunder Infrastructure Pvt. Ltd a per the company master data. The
9 ITA No. 6216/Del/2013 ld. AR, after placing the above facts on record, vehemently contended that the so called incriminating material as recorded and alleged by the A.O in the assessment order i.e. Annexure A-5 of Party Y-2 and Annexure A-1 of partly Y-2 has no relation in any manner with the present assessee company. Therefore, neither Annexure A-5 of Party Y-2 nor Annexure A-1 to party Y-2 can be taken as an incriminating material for validly framing assessment u/s 153A of the Act against the present assessee in the instant case.
The ld. AR further submitted that even as per the statement of Shri Mahesh Garg recorded on 09-11-2011 u/s 131 of the Act by the ACIT, CC-15, New Delhi, it is clearly discernible from the reply to question Nos. 7 wherein Shri Mahesh Garg replied that he personally knew Shri Ram Kishan Gupta and had, at many time, visited his place of residence as well as his office alongwith Shri Subhash Singhal and had collected money from his premises and in lieu of it, have repaid the sum in the form of cheque/demand draft. Replying to question No. 8, Shri Mahesh Garg stated that so far as he remembered, it was M/s Mamram Limited and the other was M/s Ishu Finance and Investment Pvt Ltd and there is no mention of the assessee company i.e. M/s Mamram Developers Pvt Ltd and the changed name of assessee i.e Shri Shyam Sunder Pvt. Ltd, therefore, the so called incriminating material cannot be linked as “belonging to” or
10 ITA No. 6216/Del/2013 “pertaining to” the assessee and thus, it has to be held that no incriminating material against the assessee was found during the course of search and seizure operation or during post search investigations by the INV team or by the A.O.
The ld. AR further drawing attention towards statement of Shri Ram Kishan Gupta recorded on 24.9.2009 during search and seizure operation u/s 132(4) of the Act, the ld. AR submitted that the assessee surrendered and provided the break-up of disclosure of Rs. 19 crores while replying to question No. 28 and asked some time to submit the same. The ld. AR further submitted that replying to question No. 30, Shri. Ram Kishan Gupta categorically stated that he has offered for taxation of additional income of Rs. 19 crores in the hands of himself, his family members and other business concerns for F.Y 2009-10 relevant to A.Y 2010-11 to account for the discrepancies found during the course of search in respect of individuals and company and also to account for any other discrepancies found during search and post search proceedings and giving details of the additional income as declared and disclosed during the search operation. Therefore, Shri Ram Kishan Gupta further elaborated that Rs. 6 crore have been declared and offered to tax in M/s Mamran Developers Pvt. Ltd. i.e the assessee company which subsequently changed its name as Shri Shyam Sunder Infrastructure Pvt. Ltd. The
11 ITA No. 6216/Del/2013 ld. AR pointed out that in the statement of Shri Mahesh Garg recorded by the ACIT, CC-15, New Delhi, there is no mention in the fact that he provided accommodation entries to the present assessee or its erstwhile company, that is, M/s Mamram Developers [P] Ltd and per contra, the statement of Shri Mahesh Garg clearly states that accommodation entries were provided to M/s Mamram Ltd which is a separate and distinct company which has no relation in any manner, with the present assessee. Therefore, the aid of statement of Shri Mahesh Garg cannot be taken as basis and incriminating material for making additions in the hands of the present assessee u/s 68 of the Act for A.Y 2005-06.
Replying to the above ld. DR, first of all, drew our attention to para 3.1 of the impugned first appellate order and submitted that it was immaterial whether the surrender is recorded in the minutes of the Board meeting/resolution and private dispute affairs between the present share holders and the previous ones, is a matter needed to be challenged before the appropriate Civil Courts. The ld. DR further submitted that Shri R.K. Gupta who had voluntarily surrendered in the hands of the assessee company was Managing Director of the appellant company for last five years. The ld. DR further submitted that Shri R.K. Gupta and his wife held almost entire share holding i.e. 96% on the date of search and he was also promoter of the M/s Mamram
12 ITA No. 6216/Del/2013 Group, Therefore, statement given by him u/s 132(4) of the Act has to be held as valid and indicates to utilize his statement was given by the A.O to the assessee by way of notice u/s 143(1) of the Act on 9.12.2011 and again by note sheet entry dated 2.12.2012. Therefore, facts being same for the reasons mentioned in the case of M/s Babushka Pvt. Ltd for A.Y 2005-06 the assessee’s contention on the grounds relating to reliance placed on the statement of Shri R.K. Gupta were rightly held as not tenable under the law and the same were rightly rejected by the ld. CIT(A) for upholding the rejection.
The ld. DR drawing attention towards reply to Question No. 7, given by Shri Mahesh Garg, submitted that Shri Garg clearly stated that he knew Shri R.K. Gupta and many times he visited resident and office of Shri R.K. Gupta alongwith Shri Subhash Singhal. The ld. DR vehemently pointed out that in view of this statement and facts stated by Shri Garg therein there is no iota of doubt that there was a link between entry provider Shri Mahesh Garg with Shri R.K. Gupta and thus the statement of Shri Mahesh Gupta can very well be relied for making addition u/s 68 of the Act. The ld. DR further submitted that the statement of Shri Mahesh Garg has been recorded by the ACIT, CC-15, New Delhi u/s 131 of the Act on 9.11.2011 which has been taken into cognizance by the A.O in para 11 of the impugned order, therefore, this statement recorded during post search
13 ITA No. 6216/Del/2013 proceedings is an incriminating material which can be taken as basis for making addition in the hands of the assessee.
Replying to the above, the ld. AR further drew our attention towards the statement of Shri R.K. Gupta, especially replying to question No. 30 at internal pages 11 to 13 and submitted that the surrender of Rs. 6 crores in M/s Mamram Developers Pvt. Ltd for F.Y. 2009-10 pertaining to A.Y 2010-11 was made with a condition that these figures are tentative and not final and may undergo some change depending upon the business developments over the remaining period of current financial year 2009-01 may change or deviate. Therefore, the surrendered amount of Rs. 6 crores cannot be ignored by taking into consideration the alleged addition of Rs. 2,95,000/- made u/s 68 of the Act.
The ld. AR placing on record a copy of the order of the ITAT ‘D’ Bench in the case of ACIT Vs. M/s Babushaka Promoters Pvt. Ltd dated 20.09.2016 in ITA No. 6444/Del/2013 for A.Y 2010-11 submitted that the Tribunal, after considering the entire facts and circumstances of the case has held that “since at the time of surrender and statement recorded u/s 132(4) of the Act Shri Ram Kishan Gupta was not asked to provide details the nature of income he was surrendering in the case of a particular company or person and
14 ITA No. 6216/Del/2013 particular head of income and as such failure of the Revenue authorities, addition cannot be made without any basis for A.Y 2010-11”.
On careful consideration of the above noted rival submissions and on vigilant perusal of the relevant material placed on record, we observe that the main contention of the assessee-appellant posed for adjudication before us is that there was no incriminating material found during the course of search u/s 132 of the Act on the assessee group of companies on 24.9.2009. On the contrary, the ld. DR’s contention is that besides the seized material, placed by the assessee as Annexure A-5 of Party Y-2 at pages 96 to 133 and Annexure A-1 of party Y-2 placed at pages 1 to 103, the statement of Shri Ram Kishan Gupta recorded during the course of search and seizure dated 24.9.2009 u/s 132(4) of the Act and subsequent statement of Shri Mahesh Garg recorded on 9.11.2011 u/s 131 of the Act during post search proceedings, there is incriminating material against the assessee, therefore, the legal ground No. 5 of the assessee cannot be allowed.
Further, in our view, the so called incriminating material at Annexure A-5 of Party Y-2, which contains the share application
15 ITA No. 6216/Del/2013 documents and share transfer deeds for transfer of shares of M/s Mamram Ltd. alongwith other related documents pertaining to shares allotted to those third parties by M/s Mamram Ltd. cannot be taken as incriminating material against the assessee. Further, we find that the Annexure A-5 of party Y-2 contains share application documents and share transfer deeds for transfer of shares of M/s Mamram Ltd and as per Company Master Data the directors were Smt. Kamla Garg, Shri Sanjay Gupta and Smt. Renu Gupta and this company was incorporated on 8.3.1990 having its Registered Office at Flat No. 101, Pkt-D-10, Om Sai Apartment, Sector 7, Rohini, New Delhi – 110 085. .
On a specific query from the Bench, the ld. DR could not controvert this fact that the assessee company was incorporated on 27.2.2003 in the name of M/s Mamram Developers Ltd which was subsequently changed into M/s Shyam Sunder Infrastructure Pvt. Ltd having directors as Shri Surendra Gupta and Shri Sumit Gupta having its Registered Office at G-18 & 19 Mamram Majesty Mall, Plot No. 2, Road No. 43, Gurharkishan Marg, Pitampura, New Delhi 110 034. He could not establish any connection or nexus of the present assessee company with the said company M/s Mamram Ltd. Therefore, Annexure A-5 of Party Y-2 which contains share transfer deeds of third parties for transfer of shares of M/s Ishu
16 ITA No. 6216/Del/2013 Finance and Investments [P] Ltd alongwith other related documents pertaining to shares allotted to those third parties by M/s Ishu Finance & Investment [P] Ltd, cannot be taken as incriminating material against the assessee for making addition u/s 68 of the Act.
So far as Annexure A-1 of Party Y-2 is concerned, this Annexure contains share application document and share transfer deeds for transfer of shares of M/s Mamram Ltd alongwith other related documents pertaining to shares allotted to these third parties by M/s Mamram Ltd which is also not related, in any manner, with the assessee company, thus the same cannot be validly taken as incriminating material belonging to or pertaining to the present assessee i.e. M/s Shyam Sunder Infrastructure Pvt Ltd. Thus, in our considered opinion, Annexure A-5 of Party Y-2 and Annexure A-1 of Party Y-2 pertains to some other companies and belonged to some other persons and not the appellant company.
Our above noted conclusion/findings further gets strong support from the statement of Shri Mahesh Garg recorded on 9.11.2011 by the ACIT, CC-15, New Delhi during post search proceedings, wherein replying to question Nos 7 and 8 are
17 ITA No. 6216/Del/2013 relevant. For the sake of completeness, Question and answers are being reproduced as follows:
“Q.7: Have you provided accommodation entries to Sh. Ram Kishan Gupta, Sh. Sanjay Gupta, Smt. Kamla Garg, Smt. Renu Gupta, Sh. Surender Gupta or their companies? A.7: Yes, I personally know Sh. Ram Kishan Gupta and many a times I have visited his place of residence as well as his office along with Sh. Subhash Singhal and have collected money from his premises and in lieu of it I along with Sh. Subhash Singhal have repaid the sum in the form of cheque / demand draft.
Q. 8: Can you provide the name of companies of Sh. Ram Kishan ji to whom cheques were issue by you / by your companies in lieu of cash?
A.8: So far I remember it was M/s Mamram Limited and the other was M/s Ishu Finance and Investment Pvt. Ltd.
Therefore, from the above, it is clear that Shri Mahesh Garg, in his statement recorded by the AO on 9.11.2011 did not support the fact that accommodation entries have been provided to the assessee company by him or by any of his associated companies or persons.
The CIT-DR drawing our attention to para 3.10 of the first appellate order submitted that the addition is based on the statement of Shri Ram Kishan Gupta recorded u/s 132(4) of the Act on 24.9.2009 during search and seizure operation. He
18 ITA No. 6216/Del/2013 further contended that as per the ratio of the decision of the Hon'ble High Court of Delhi in the case of Rajhans Towers [P] Ltd Vs. CIT reported as [2015] 56 Taxman.com [Delhi], Bhagirath Aggarwal Vs. CIT reported as [2013] 13 Taxmann.com 274 [Delhi] and the decision of Hon'ble Madras High Court in the case of B. Kishore Kumar Vs. CIT [2014] 52 Taxmann.com 449 [madras], which has been upheld by the Hon'ble Supreme Court reported as [2015] 62 Taxmann.com 215 [SC], he contended that when the assessee himself has stated in sworn statement during search and seizure operation about his undisclosed income, tax has to be levied on the basis of admission without scrutinizing documents.
Replying to the above contention of the ld. DR, the ld. AR submitted that as per reply to Question No. 30 in the statement of Shri Ram Kishan Gupta, the surrender of Rs. 6 crore has been made for A.Y 2010-11 in the hands of the assessee and not for A.Y 2005-06 thus the impugned addition cannot be made on account of surrender made for A.Y 2010-11. To support this contention, the ld. AR also placed reliance on para 10 of the order of the ITAT Delhi ‘D’ Bench in the case of M/s Babushka Promoters [P] Ltd for A.Y 2010-11 [ITA No. 6444/DEL/2013 dated 20.9.2016 and submitted that above decision was also followed in the present assessee’s own case for A.Y 2010-11 [ITA No.
19 ITA No. 6216/Del/2013 6446/DEL/2013] in the order dated 13.1.2017. The ld. AR vehemently contended that the ratio of the decisions as relied by the ld. DR can be applied to the present case only when the statement reveals undisclosed income for the year under consideration i.e. A.Y 2010-11 and statement of Shri Ram Kishan Gupta is not stating about any fact that he surrendered any amount for A.Y 2010-11 and from reply to question No. 30 it is clear that he surrendered Rs. 6 crores for A.Y 2010-11 in the hands of assessee company in the capacity of its Managing Director and no amount has been surrendered for A.Y 2005-06.
On careful consideration of the above rival contentions, first of all, we find it appropriate to reproduce the relevant question and answer No. 30 of Shri Ram Kisah Gupta which was recorded during search and seizure operation on 24.9.2009, which reads as follows:
“Q. 30 Please refer to the above question in which you have sought time for giving details of bifurcation of additional income of Rs. 19,00,00,000/- and sought time to verify the documents. As you are aware of the contents of the books of accounts and documents which have been seized, you must be now in a position to give bifurcation. So please give the bifurcation now.
A.30: As stated earlier, I have offered for taxation additional income of Rs. 19.00 cr. In the hands of myself, my family members and our business concerns for the FY 2009-10 relevant to AY 2010-11 to 19
20 ITA No. 6216/Del/2013 account for discrepancies found during the course of search in respect of individuals and companies and also to account for any other discrepancies found during search and post-search proceedings. I am giving below detail of additional income in the hands of companies with which we are associated:
Name of Company Amount (Rs.) Symphony Celebrators Pvt. Ltd. 1.00 cr Athena Logistics Park Pvt. Ltd. 1.00 cr Mamram Developer Pvt. Ltd. 6.00 cr Babushka Promoters Pvt. Ltd. 2.00 cr Total: 10.00 cr.
I would also like to state that these figures are tentative and are not final and may undergo some change depending upon business developments over the remaining period of current financial year 2009-10 may change or deviate. We shall try to pay income tax as per the Income-tax Act in this FY only. In respect of individuals I will be able to provide detail only after going through the contents of the lockers and seized material”.
Thereafter, we also find it appropriate to reproduce the findings of the Tribunal in the case of a group company M/s Babushka Promoters [P] ltd [supra] wherein at para 9-10 it was held thus:
“9. On careful consideration of allegations made by the AO for making the impugned addition, it is vivid that the AO made addition in present A.Y 2010-11 in pursuance to some alleged discrepancies pertaining to A.Y 2009-10. In our
21 ITA No. 6216/Del/2013 considered opinion, if any allegation of discrepancies relating to accounting of income has been found in report of any other particular year i.e. A.Y 2009-10 in the present case, then the fact may be considered for making addition or disallowances, if permissible and sustainable under the provisions of the Act but not in the other period relevant to other A.Y, such as A.Y 2010-11 in the case in hand.
We are in agreement with the conclusion recorded by the first appellate authority that the surrender was not made on specific items by Sh. Ram Kishan Gupta and while allocation of the undisclosed income between the companies and other persons of the group, he has not mentioned and specified the heads of income as such. In the absence of any such disclosure and relevant material to establish the undisclosed income for the present A.Y 11, addition cannot be made. Since at the time of surrender and statement recorded u/s 132(4) of the Act Shri Ram Kishan Gupta was not asked to provide details and the nature of income he was surrendering in the case of a particular company or person and particular head of income and as such failure of the Revenue authorities, addition cannot be made without any basis for A. Y. 2010-11..”
In view of above noted answer to Question No. 30 of Shri Ram Kishan Gupta in the statement recorded during search and seizure, it is amply clear that on evaluation of above statement the Tribunal in the case of Group company M.s Babhuska [supra] held that the surrender was not made on specific items by Shri Gupta and while allocation of the undisclosed income between the companies and other persons of the group, he has not 21
22 ITA No. 6216/Del/2013 mentioned and specified the heads of income as such. It was also held that in the absence of any such disclosure and relevant materials to establish the undisclosed income for A.Y 2010-11, addition cannot be made. After consideration of statement the Tribunal categorically held that since at the time of surrender and recording of statement u/s 132(4) of the Act, Shri Gupta was not asked to provide details of the nature of income which he was surrendering in the case of a particular company or person and particular head of income and as such failure of the Revenue authorities addition cannot be made for A.Y 2010-11.
Furthermore, the Tribunal also held that even during the assessment proceedings the AO either at the time of post search stage or during assessment proceedings could not bring any cogent material to show that such undisclosed income under such head has been surrendered for A.Y 2010-11. When we again consider this statement for the present A.Y 2005-06, it is also amply clear that the statement does not state any facts regarding any undisclosed income for A.Y 2005-06. Thus, in our considered opinion, on the strength of such bald statement, no addition can be made taking the same as incriminating material or evidence found by the AO during the search operation.
23 ITA No. 6216/Del/2013 33. In view of the above noted conclusion, from the order of the Tribunal in assessee’s own case for A.Y 2010-11 dated 03.01.2017 [supra] it is discernible that the Tribunal by following earlier Tribunal order in the case of M/s Babhuska [supra] also held that no addition can be sustained on the strength of statement of Shri Gupta. Therefore, we hold that in absence of details about the nature of income he was surrendering in the case of a particular company or person of a group and particular head income the statement of Shri Gupta cannot be taken as valid basis for making addition u/s 68 of the Act for A.Y 2005-06.
So far as the application of the ratio of the decision as relied upon by the ld. DR is concerned, we are of the view that in the present case, we are unable to see any disclosure by Shri Gupta in his statement recorded during search u/s 132(4) of the Act which states that surrender of such amount under such head in the hands of the present assessee company for A.Y 2005 -06, therefore, we respectfully hold that the benefit of the ratio of the decision as relied by the ld. DR on this issue, is not available for the Revenue. Finally, we hold that the strength of the statement of Shri Gupta, addition cannot be made treating the same as incriminating material or facts unearthed during search and seizure operation.
24 ITA No. 6216/Del/2013 35. The ld. DR, in the written synopsis dated 21.9.2016 has also placed his reliance on the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd 291 ITR 500 [SC]. In our respectful opinion, there is no quarrel about this well accepted preposition that the requirement of passing of assessment order has been dispensed w.e.f 1.4.1989 after amended provision instead of passing an order an intimation is required to be sent to the assessee if the AO accepts the return u/s 143(1)(a) of the Act.
In this context, the ld. AR submitted that since in the case of the assessee company no assessment was framed u/s 14393) of the Act for A.Y 2005-06, therefore, ratio laid down by the Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla [2016] 380 ITR 573 [Del] in the case of completed assessments, original assessment order can be interfered with by the AO while making assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents was undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made known to the Revenue authorities in the course of original assessment. The ld. AR vehemently pointed out that so called incriminating material Annexure A-5 of party 2 and Annexure A-1 of party 2 does not belong to the
25 ITA No. 6216/Del/2013 assessee in any manner, therefore, same cannot be held as incriminating material against the assessee company for making addition u/s 68 of the Act for A.Y 2005-06. The ld. AR also contended that statement of Shri Ram Kishan Gupta recorded during the course of search and seizure operation does not reveal any fact of surrendering any amount in the hands of the assessee company for A.Y 2005-06 under any head. Therefore, same cannot also be treated as incriminating material found during the course of search and seizure operation for making addition in the hands of the assessee for A.Y 2005-06. At the same time, we also note that the ld. DR has also placed reliance on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra] and submitted that conjective reading of para 37 (v) and (vi) make it amply clear that incriminating document is must only where assessment u/s 143(3) of the Act has been completed as there is no assessment u/s 143(i)(a) of the Act.
For resolving and proper adjudication of the above rival contentions, at the outset, we find it appropriate to reproduce the relevant para 37 of the judgment of Hon'ble Jurisdictiona l High Court of Delhi in the case of Kabul Chawla [supra] wherein their Lordships summarised the legal position and laid down the following the proposition:
26 ITA No. 6216/Del/2013 “37. On a conspectus of Section 153A(1) of the Act, read 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.
27 ITA No. 6216/Del/2013 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.” 38. On a careful and respectful reading of the above summarised legal position, in our humble understanding, the Hon'ble High Court has observed in sub-para (v) that “in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. It has also been held that 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”. The Hon'ble High Court in sub-para (vi) further held that “in so far 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 finding 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
28 ITA No. 6216/Del/2013 assessment under section 153A 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."
In the present case, on being asked by the Bench, both the parties agreed to the fact that on the date of search and seizure operation that was on 20.4.2009, assessment for A.Y 2005-06 was not pending. We may point out that it was revealed by the parties that in A.Y 2005-06 no assessment order u/s 143(3) of the Act has been passed by the AO as there was no scrutiny notice to the assessee for this A.Y. Be that as it may, under the above noted facts and circumstances, we can safely presume that the assessment for A.Y 2005-06 was completed u/s 143(1) of the Act and thus it has to be held that on the date of search i.e. 24.9.2009, assessment for A.Y 2005-06 was not pending and hence, we hold that assessment for A.Y 2005-06 was completed on the date of search. In view of the above ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla [supra, when we logically analyse the facts of the present case, then we reach to a logical conclusion that the so called incriminating material Annexure A-5 and A-1 of party 2 as well as statement of Shri Ram Kishan gupta recorded during the course of
29 ITA No. 6216/Del/2013 search and seizure operation cannot be held as incriminating material unearthed during the course of search or undisclosed income or property discovered in the course of search and seizure operation which were not produced or not already disclosed or made known to the Revenue authorities during the course of original assessment proceedings.
At this stage, we respectfully point out that their Lordships have not made any discrimination regarding assessment completed u/s 143(3) of the Act and assessment completed u/s 143(1) of the Act and thus the ratio laid down in sub para (vii) regarding completed assessment would be applicable to the present case on all four corners and in view of the foregoing discussion, we reach to a fortified conclusion that there was no incriminating material before the AO for making addition u/s 68 of the Act in the hands of the assessee for A.Y 2005-06. Therefore, we hold that no addition could have been made in the assessment u/s 143(3) r.w.s. 153A of the Act in respect of unabated assessment/completed assessment for A.Y 2005-06 which has become final in the absence of any incriminating material or undisclosed income or property discovered in the course of search. Our conclusion further gets strong support from the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of PCIT Vs. Lata Jain reported [2016]-TIOL-866-
30 ITA No. 6216/Del/2013 HV-DEL-IT wherein it was held that it is necessary to incriminate material recovered for the purpose of framing assessment u/s 143(3) r.w.s 153A of the Act. In this order, their Lordships speaking for the Hon'ble Jurisdictional High Court of Delhi and after considering their earlier decision in the case of Kabul Chawla [supra] held that if no incriminating material was found during the course of search addition is not sustainable and deserves to be deleted.
In view of the above conclusion, we hold that the addition made u/s 68 of the Act by the AO in the assessment order passed u/s 143(3) r.w.s 153A of the Act for A.Y 2005-06, were not based on any books of account or any other material not produced during the course of original assessment which alleged to have been found in the course of search or undisclosed income or property discovered during the course of search and seizure operation, then all the additions made in the assessment order deserve to be deleted as the assessment proceedings for A.Y 2005-06 were not abated but already completed on the date of search i.e. 24.9.2009. Our conclusion also gets support from the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation Ltd [supra] and CIT Vs. All Cargo Global Logistics Ltd [2015] 374 ITR 645 [Bom] wherein dismissing the appeals of the Revenue, it was held that notice
31 ITA No. 6216/Del/2013 u/s 153A of the Act was issued and if there was no incriminating material found during search, then the Tribunal was right in holding that the powers u/s 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material.
Finally, in view of the above discussion, we hold that the impugned assessment order framed u/s 143(3) r.w.s 153A of the Act for A.Y 2005-06 dated 26.12.2011 is bad in law and thus the same is sustainable and deserve to be quashed and hence we quash the same. Accordingly, Additional Ground No. 5 of the assessee is allowed.
Since by the earlier part of this order we have quashed the assessment order and thus the grounds of the assessee on merits become academic and infructuous and hence we are not adjudicating upon them as having become infructuous.
In the result, the appeal of the assessee is allowed in the manner as indicated above.
The order is pronounced in the open court on 07.04.2017
Sd/- Sd/- (L.P. SAHU) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07.04.2017
32 ITA No. 6216/Del/2013
VL/