ACIT, CENTRAL CIRCLE-15, NEW DELHI vs. LUXMAN BUILDERS PVT. LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI (Through Virtual Hearing) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.817/Del/2018 Assessment Year: 2010-11 ACIT, Vs Lumax Builders Pvt. Ltd., Central Circle-15, 25, Bazar Lane, New Delhi. Bengali Market, New Delhi. PAN: AAACL2184R CO No.93/Del/2018 (ITA No.817/Del/2018) Assessment Year: 2010-11 Lumax Builders Pvt. Ltd., Vs. ACIT, 25, Bazar Lane, Central Circle-15, Bengali Market, New Delhi New Delhi. PAN: AAACL2184R (Appellant) (Respondent) Assessee by : Shri Gautam Jain, Advocate & Shri Lalit Mohan, Advocate Revenue by : Ms Paramita M. Biswas, CIT, DR Date of Hearing : 16.09.2021 Date of Pronouncement : 14.12.2021 ORDER PER R.K. PANDA, AM: This appeal filed by the Revenue is directed against the order dated 3rd November, 2017 of the CIT(A)-26, New Delhi, relating to assessment year 2010- 11.

ITA No.817/Del/2018 CO No.93/Del/2018 2. The assessee has filed the CO against the appeal filed by the Revenue. For the sake of convenience, these were heard together and are being disposed of by this common order.

ITA No.817/Del/2018 CO No.93/Del/2018 Sr. Assessment Share capital Share Total No. Year Name of Company premium 1 2010-2011 Competent 6,75,000 60,75,000 67,50,000 Infoways (P) Ltd. Passion IT 9,00,000 1,00,000 10,00,000 Solutions (P) Ltd Prince IT Solutions 1,25,000 11,25,000 12,50,000 Pvt Ltd Sterling Foils Ltd 2,50,000 22,50,000 25,00,000 \ Sidhbhoomi Alloys 5,00,000 45,00,000 50,00,000 Limited Total 16,50,000 1,48,50,000 165,00,000

ITA No.817/Del/2018 CO No.93/Del/2018 recorded of Shri Narender Kumar Jain, recorded u/s 132(4) of the Act on 28.03.205, the statement of Shri M.M. Aggarwal, director of the flagship company of MM group M/s Moon Beverages Ltd., Shri Krishan Kumar, GM (Finance) of M/s Moon Beverages Ltd., the statement of Shri Sanjiv Agrawal, promoter of M/s M.M. Group and asked the assessee to establish the identity and credit worthiness of the investors who have subscribed to the share capital in the assessee company and genuineness of the transaction.

7.1 However, the AO was not satisfied by the arguments advanced by the assessee. He noted from the perusal of the details filed that the assessee received

ITA No.817/Del/2018 CO No.93/Del/2018 certain funds in the form of accommodation entries in a layered structure. The undisclosed funds were received in the form of share capital from the shell companies of the group which in turn remitted the same to operating companies. On verification of the source of such funds in the investor companies, it is apparent that the assessee has failed to substantiate the source of funds received by its investors. The assessee also did not produce the director or other office bearers of the investor companies.

ITA No.817/Del/2018 CO No.93/Del/2018 9. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of assessment u/s 153A on the ground that no incriminating materials were found at the time of search. Regarding the share application money, it was argued that as on the date of search, no assessment proceedings was pending as notice u/s 143(2) was not issued with respect to the original return. It was accordingly argued that no addition could be made on this issue in view of various decisions of the Tribunal and jurisdictional High Court.

ITA No.817/Del/2018 CO No.93/Del/2018 133(6) of the Act to the AO. Therefore, even on merit also no addition is called for.

ITA No.817/Del/2018 CO No.93/Del/2018 related material during the course of search operation that upon collating with the information received by the department lead to specific inputs in respect of doubtful nature on genuineness of equity infused in the companies of the group. The material so gathered is prima facie incriminating in its nature and substance so as to attract the provisions of S. 153A of the Act in the case of the appellant. The overall scheme that emerges therefrom indicates that there was prima facie material available in this regard to enable the AO to initiate the proceedings u/s 153A.The assessee contentions in this regard as under- a) In respect of share certificate found during the course of search in respect of companies mentioned at serial no. 1 & 2 It has also been submitted that companies JA Builders Ltd and JPM Automobiles Ltd was also assessed with the ACIT, Central Circle-13, New Delhi and the order have also been passed at the same time. In the order passed in the case of JA Builders Ltd and JPM Automobiles Ltd no addition towards share capital have been made. As such the appellant contended that same Assessing Officer while passing the order at the same time in respect of the same issue has formed two different views. b) The share certificates found in respect of companies mentioned at serial no 3 to 5 is related to investment made by group concerns of JPM group and does not pertain to outsiders. 5.3 These merit examination of the case under 153A of the IT Act 1961. The availability of such documents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of independent entity in normal circumstances. Any such entity will surely expect due returns or capital appreciation in due course. The investor is surprisingly bereft of interest in the matter. The AO and this appellate forum too have to construe the incriminating material in a harmonious fashion. Hon’ble Delhi High Court has also reiterated in many rulings that action u/s 153A is bound to be initiated in such situations. Therefore, this action of the AO is in tune with judgement of Hon’ble Delhi High Court in CIT (C )-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412(Delhi), 234 Taxman 30.The same if further strengthened by the judgement of Hon’ble Delhi High Court in the case of Dayawanti Gupta vsCIT in ITA Nos 357,358.359/2015 and other’ dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record, I am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The AO was well within his powers to invoke section 153 A of the Act on 8

ITA No.817/Del/2018 CO No.93/Del/2018 prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground no. 4(a) and 4(b) are therefore dismissed.” 11.1 He however, deleted the addition on merit by observing as under:- “5.4 Regarding the merit, as per grounds of appeal no.3, I have gone through the assessment order passed by and A.O. and verified the material placed on paper book and was part of the assessment records also. The summons were issued and duly delivered. Also necessary information and documents were requisitioned to verify the identity, genuineness of the transaction and credit worthiness of the investors by issuing notices u/s 133(6) of the Act which were duly submitted by the respective investors. The notice u/s 133(6) was given to:- a) M/s Competent Infoways Private Limited b) M/s Passion IT Solutions Private Limited c) M/s Prince IT Solutions Private Limited d) M/s Sterling Foils Limited e) M/s Sidhbhoomi Alloys Limited 5.5 And information And documents requisitioned u/s 133(6) were as under: i) Relevant extracts Statement of bank account statement of the investors showing payments made towards share application money. ii) Copies of allotment letters. iii) Share Application form duly filled by the investor companies. vi) Confirmation in respect of allotment of equity shares to the investors. v) Copy of PAN card of the Investor companies. vi) Memorandum& Articles of Association of the investors companies clearly depicting their corporate identity number. vii) Copies of share certificate issued by the assessee company. viii) A chart showing details of director of the investor companies. ix) A chart showing details of shareholders of the investor companies. xi) Copies of the acknowledgement of the income tax return filed for AY 2010-11 by the investor companies along with their audited financials for the year ended 31st March 2010. 5.6. The notice u/s 133(6) of the act was complied with and the requisite information and documents were furnished to the AO required information 9

ITA No.817/Del/2018 CO No.93/Del/2018 and documents were available according to text of order itself. The assessee has furnished the detail of financials of the investing entities. After considering the identities and financials and credit worthiness of the 'investor companies and genuineness of transaction and source and availability of fund by investor, I am of the considered view that the A.O has merely accepted the appraisal report of the Investigation Wing without meeting the touchstone tests of section 68 like- credit worthiness, identities and genuineness of transaction. Further A.O has made such addition stating that the income declared by the investors is lesser than the investment made by them which in my opinion has no criteria it is only source and availability of fund which remain the factor to observe accordingly the addition made by A.O u/s 68 of the Act is deleted. 5.7. Ld AR also placed reliance on the judgments in CIT vs. Sophia Finance Ltd. [1994] 205 ITR 98 (FB) (Delhi), CIT vs. Nipuan Auto (P) Ltd. {[2014] 49 taxmann.com 13 (Del.) 361 ITR 155 (Del.), Commissioner of Income- Tax vs Winstral Petrochemicals p. Ltd. 201 1 330 ITR 603 (Del.), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Stellar Investments Ltd 192 ITR 287 (Del.) & CIT v. Stellar Investment Ltd 2001 251 ITR 263 (SC) and contented that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the shares application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR (ST.) 5 (SC), CIT v. Divine Leasing & Finance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon’ble SC vide order dated 21.01.2008], CT=It vs Five Vision Promoters Pvt. Ltd 65 taxmann.com 71 (Delhi HC), CIT v. Vrindavan Farms Pvt. Ltd (ITA 71/2015) (Delhi HC), CIT V. Kamdhenu Steel & Alloys Ltd. [2004] 361 ITR 0220 (Del HC). 5.8. It is pertinent to refer to the recent judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt. Ltd. ITA No 13/2017 covers the case of the appellant on the facts. Relevant Para of the judgment is extracted below:- 31. In Principal Commissioner of Income Tax Central - 2, New Delhi v. MeetaGutgutia (supra), this court had considered the entire gamut of case law on the assumption of jurisdiction under Section 153A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. MeetaGutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the said decision in Smt. Dayawanti Gupta v. CIT (supra) is being again discussed herein. 10

ITA No.817/Del/2018 CO No.93/Del/2018

ITA No.817/Del/2018 CO No.93/Del/2018 remand report from the Assessing Officer. There is no cash deposit in the bank Account of any of theshare applicant before the issue of cheque for share application money to the group companies of the assessee. On the other hand, the credit is by way of transaction. During remand proceedings, the Assessing Officer has made necessary verification from the bank of the share applicant and no adverse finding is recorded by him in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to ShriTarunGoyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of HarjeevAggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of ShriTarunGoyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of ShriTarunGoyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by ShriTarunGoyal in his statement. ---- Conclusion --- 44. Accordingly the question framed by the Court in ITA Nos. 11,12 and 21 of 2017 by the order dated 21st March, 2017 is answered in the negative i.e. in favour of the Assessee and against the Revenue by holding that the additions made under Section 68 of the Act on account of the statements made by the Assessee’s Directors in the course of search under Section i 32of the Act were rightly deleted by the ITAT.” 5.9. Respectfully following the above judgment, which is on identical factual matrix, it can be reasonably inferred that material found during the search in respect of the equity received by the assessee cannot lead to the conclusions drawn by the AO. No specific corroborative evidence has been brought on record by Assessing Officer to prove that the equity subscription is an accommodation entry. Besides, appellant has also discharged its onus and submitted all the documentary evidence in respect of the investment. The details submitted in this regard by the appellant have also been made part of order by Assessing officer. It is also undisputed fact that the Director of appellant companies have never made any statement regarding the share capital/share premium/share application money and no disclosure have been 12

ITA No.817/Del/2018 CO No.93/Del/2018 made with regard to share capital/share premium/share application money/unsecured loan. As such the addition made by the Assessing officer is unsustainable on the various legal grounds and on facts of the case. The addition made in the case of the appellant is deleted. These grounds are accordingly allowed.”

ITA No.817/Del/2018 CO No.93/Del/2018 1.1 That addition made of Rs. 1,65,00,000/- is without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526. 2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153 A/143(3) is invalid and not in accordance with law. It is therefore, prayed that it be held that notice issued u/s' 153A of the Act and also assessment framed u/s 153A/143(3) of the Act are without jurisdiction.”

ITA No.817/Del/2018 CO No.93/Del/2018 15. Referring to the order of the CIT(A) at para 5.2, he submitted that the ld.CIT(A) has held that the assessment proceedings were pending at the time of search and was abated and, therefore, the legal ground objected to by the appellant was not valid as such the same is bound to be rejected is factually incorrect since no proceedings were pending on the date of search. He submitted that identical findings were also given by the CIT(A) in the case of group companies. Referring to page 534-536 of the paper book, he submitted that identical finding was there in the order of the CIT(A) for AY 2013-14 in the case of M/s Moon Beverages Ltd., where he has held as under:- “Since assessment proceedings were pending at the time of search and was abated, the legal ground objected by the appellant is not valid as such, the same is bound to be rejected.”

“45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.

ITA No.817/Del/2018 CO No.93/Del/2018 46. Since the assessee succeeds on this legal ground, arguments made by the ld. counsel for the assessee on merit are not adjudicated being academic in nature.”

He submitted that Shri Sanjeev Aggarwal, vide letter dated 29th March, 2015 18. had made an offer of undisclosed income on behalf of M.M. Aggarwal Group of companies in respect of AY 2007-08 which was retracted by him within a period

ITA No.817/Del/2018 CO No.93/Del/2018 of two months i.e., 18th May, 2015. He submitted that there was no surrender in respect of the period under consideration, i.e., for AYs 2009-10 to 2015-16. Referring to various decisions in the case law compilation he submitted that when there was no surrender for the impugned assessment year, no incriminating material was found during the course of search and the assessment year is a non- abated assessment year, therefore, no addition could have been made in the order passed u/s 153A/143(3) and the ld.CIT(A) was not justified in rejecting the legal ground raised before him.

18.1 He submitted that even otherwise also, the document relied upon for making the addition was found from the premises of the third party and, therefore, the addition could have only been made u/s 153C of the IT Act and not u/s 153A of the Act.

18.2 So far as the merit of the case is concerned, he submitted that the assessee had duly discharged the burden laid down u/s 68 of the IT Act by proving the identity and credit worthiness of the shareholders and genuineness of the transaction. He submitted that the AO had asked the details such as relevant extracts of the bank statements of the investors showing payments towards share application money, copies of allotment letters, copies of share application form duly filled in by the investors, details of directors of the investor companies, etc. as per para 5.5. of the CIT(A)’s order from the investor companies u/s 133(6) of the IT Act which were duly complied with by furnishing the requisite information. 17

ITA No.817/Del/2018 CO No.93/Del/2018 The assessee has furnished the financials of the investing entities. Merely stating that the income declared by the investors is less than the investment made by them cannot be the criteria for making the addition u/s 68 of the Act, especially when the investor companies have sufficient funds available with them. He submitted that since the ld.CIT(A) has passed a very detailed order deleting the addition made by the AO u/s 68, therefore, the same should be upheld.

ITA No.817/Del/2018 CO No.93/Del/2018 (iv) Prem Castings (P) Ltd. vs. DCIT, 88 taxmann.com 189; (v) CIT Vs. Nipun Builders & Developers Pvt. Ltd. 350 ITR 407; (vi) CIT vs Nova Promoters & Finlease (P) Ltd.,342 ITR 169; (vii) CIT vs. Ultra Modern Exports (P) Ltd., 40 taxmann.com 458 (Del); (viii) CIT vs. NR Portfolio (P) Ltd., 29 taxmann.com 291 (Del); and (ix) CIT vs. Empire Buildtech (P) Ltd., 306 ITR 110 (Del).

20.1 So far as the legal ground raised by the assessee in the CO challenging the validity of the assessment framed u/s 153A/143(3) of the Act in absence of any incriminating material is concerned, he submitted that the ld.CIT(A) has correctly decided the issue and has held that the issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non- seizure of documents. The same has to be construed with the trade practices and 19

ITA No.817/Del/2018 CO No.93/Del/2018 the respective action on the part of the independent entity in normal circumstances. Further, certain share certificates were found in the case of JA Builders Ltd. and JPM Automobiles Ltd. Therefore, it cannot be said that no incriminating material was found during the course of search.

ITA No.817/Del/2018 CO No.93/Del/2018 of the five investor companies and genuineness of the transaction. We find, the ld.CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the ld. Counsel that the original return was filed on 08.09.2010 and the period for issue of notice u/s 143(2) had already expired and the assessment is unabated assessment. Since the addition made by the AO was not based on any incriminating material found during the course of search and addition has been made on the basis of pre and post search inquiry and on the basis of the statement recorded u/s 132(4) of the Act, therefore, the same cannot constitute incriminating material so as to enable the AO to assume jurisdiction u/s 153A of the Act. So far as the finding given by the ld.CIT(A) that the Department found information in respect of the share certificates and the counterfoils thereof and other significant related material during the course of search operation is concerned, he submitted that in a corporate office, the company is required to keep the share certificates and the same cannot be construed as incriminating in nature. It is also his submission that the assessee has proved the three ingredients of section 68 based on which the ld. CIT(A) has deleted the addition in the detailed order passed by him which is in accordance with law and, therefore, the grounds raised by the Revenue has to be dismissed.

ITA No.817/Del/2018 CO No.93/Del/2018 course of search when the assessment was not pending as per ground No. 1 and 1.1 of the CO. It is an admitted fact that the original return of income was filed on 08.09.2010 which was processed u/s 143(1) of the Act. The period for issue of notice u/s 143(2) expired on 30th September, 2011, i.e., the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained finality much prior to the date of search on 28th March, 2015. Under these circumstances, the findings of the ld.CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. We find, the ld.CIT(A) at para 5.2 (page 28) of his order has observed as under:- “……Though the appellant has stated to have recorded all the transactions under appeal in its books of accounts and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected. These being primary and basic the legal ground going to the root of the assessment, it is necessary to examine the nature of incrimination material conferring upon the AO necessary jurisdiction u/s 153A to utilize such material arising consequent to the search operation. The material so found and seized and thereafter relied upon and utilised thereon in the assessment of assessee leading the AO to conclude that the share application/capital received by the appellant are unexplained.

23.1 Therefore, the findings of ld.CIT(A) that assessment proceedings were pending at the time of search and was abated is factually incorrect.

ITA No.817/Del/2018 CO No.93/Del/2018 24. We find, identical issue had come up before the coordinate Bench of the Tribunal in the case of another group concern, namely, M/s Moon Beverages Ltd. vs. ACIT in ITA Nos.115 to 118/Del/2018 and CO Nos.73 to 76/Del/2018 for AYs 2009-10 to 2012-13 and batch of other appeals. We find the Tribunal vide order dated 27.11.2020 has held that 153A assessment proceedings are void ab initio and the legal ground raised by the assessee was allowed. The relevant observations of the Tribunal from para 44 onwards read as under:- “44. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of various post search enquiries conducted and statement recorded of various persons u/s 132(4) and 131 made addition of Rs.6,46,20,000/-/- in the hands of the assessee u/s 68 of the I.T. Act on the ground that the assessee failed to substantiate with cogent evidence to his satisfaction regarding the identity and creditworthiness of the investor and the genuineness of the transaction. According to the Assessing Officer, since the assessee could not produce the directors/principal officers of the investor companies and since the returned income is meager considering the huge investment made by them in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted. We find, in appeal, ld. CIT(A) deleted the addition made by the Assessing Officer on merit, the reasons for which have already been reproduced in the preceding paragraph. He however has dismissed the ground raised by the assessee challenging the validity of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search, reasons for which have already been reproduced in the preceding paragraphs. 45. It is the submission of the ld. counsel for the assessee that the original return was filed on 30th September, 2009 declaring income at Rs.10,21,50,894/- which was assessed u/s 143(3) at total income of Rs.10,27,91,857/-. This assessment was rectified u/s 154 of the Act determining the income at Rs.7,50,21,860/-. Thus, assessment was completed and the assessment was not pending on the date of search. Since the addition made by the Assessing Officer is not based on any incriminating material found during the course of search and addition has been made on the basis of post-search enquiry and on the basis of statements recorded u/s 132(4) of the I.T. Act, therefore, the same cannot 23

ITA No.817/Del/2018 CO No.93/Del/2018 constitute incriminating material so as to enable the Assessing Officer to assume jurisdiction u/s 153A of the I.T. Act. 45.1 So far as the finding given by the ld.CIT(A) that share certificates and counterfoils thereof were found which, according to him, is incriminating in nature, it is the submission of the ld. Counsel that in a corporate office the company is required to keep the share certificates and, therefore, the same cannot be construed as incriminating in nature. So far as the seized document showing details of certain cash flow is concerned, it is the submission of the ld. Counsel that the said document was found and seized from the corporate office of M/s Hindustan Aqua Ltd., at 1010, Vijaya Building, Barakhamba Road, New Delhi, which is a flow chart and is not incriminating in nature. Further, it is also his submission that the said document was seized from third party premises in respect of other concerns/other assessees and, therefore, addition, if any, could have been made u/s 153C of the Act and not u/s 153A of the Act. In any case, it is his submission that the said document is not incriminating in nature since the said chart showing details of advance for purchase of shares or refund of share application money are duly recorded in the books of account, a statement submitted before the AO and not controverted by him, and, therefore, cannot be said as incriminating in nature. So far as the statements recorded u/s 132(4) of the Act is concerned, it is also his submission that statements recorded u/s 132(4) cannot be construed as incriminating in nature in view of the various decisions cited. 46. It is also the submission of the ld. Counsel for the assessee that the investor companies have responded to the notice issued u/s 133(6) of the Act by the AO and the same has not been doubted or disputed. Further, the assessee by producing all the relevant materials, has discharged the burden cast on it in terms of section 68 of the Act i.e., the identity and credit worthiness of the share applicants and the genuineness of the transaction. Not only this, the assessee has also proved the source of the source. Therefore, no addition u/s 68 is called for. 46.1 Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending. As mentioned earlier, the original return was filed on 30th September, 2009 declaring income at Rs.10,27,91,857/-. The assessment was completed u/s 143(3) determining the total income at Rs.10,27,91,857/- . This assessment was rectified u/s 154 of the IT Act determining the income at Rs.7,50,21,860/-. Thus, the assessment was completed and was not pending on the date of search. A perusal of the assessment order shows that the addition is not based on any incriminating material, but, based on post-search enquiries or statements recorded u/s 132(4) of the Act. The

ITA No.817/Del/2018 CO No.93/Del/2018 share certificates and counterfoils thereof found during the search, in our opinion, cannot be construed as incriminating in nature. Even the document appearing at page 59 of Annexure A-10 found and seized from the corporate office of M/s Hindustan Aqua Limited at 1010, Vijaya Building, Barakhamba Road, New Delhi, showing the details of advance for purchase of shares or refund of share application money in our opinion cannot be construed as incriminating since the entries are duly recorded in the books of account. The AO nowhere has disputed or challenged the above submission of the assessee before him as appears at page 43 of the assessment order. Therefore, once the entries are recorded in the books of account, the same in our opinion cannot be construed as incriminating in nature. So far as statements u/s 132(4) is concerned, the same are also not incriminating in nature as held in various decisions. Under these circumstances, we are of the considered opinion that when the addition is not based on any incriminating material found as a result of search, no addition can be made u/s 153A/143(3) of the Act. 47. We find, identical issue had come up before the Tribunal in assessee’s own case for A.Y. 2013-14. We find, the Tribunal vide ITA No.7374/Del/2017, order dated 7th June, 2018 for A.Y. 2013-14, while deciding the validity of assessment u/s 153/143(3) in absence of any incriminating material has observed as under:- “35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has

ITA No.817/Del/2018 CO No.93/Del/2018 surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected." 37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post- search enquiries. 38. The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 has held that statements recorded u/s 132(4) of the I.T. Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under :- "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

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ITA No.817/Del/2018 CO No.93/Del/2018 41. In the light of the above decisions, statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material. 42. As mentioned earlier, the addition of Rs.11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or 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 not known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings. 44. The Hon'ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 has upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. 45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post- search enquiry and no incriminating material was found/seized

ITA No.817/Del/2018 CO No.93/Del/2018 during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted. 46. Since the assessee succeeds on this legal ground, arguments made by the ld. counsel for the assessee on merit are not adjudicated being academic in nature.” 48. We find, the Hon’ble Delhi High Court in the case of PCIT vs. SMC Power Generation Ltd., ITA 406/2019, order dated 23rd July, 2019, copy of which is placed at pages 429 to 432 of the paper book, has observed as under:- “3. The question sought to be raised by the Revenue is whether the ITAT was justified in quashing the assessment order framed under Section 153A of the Income Tax Act, 1961 (Act) on the ground that there is no incriminating material found qua the addition made on account of share application money in the course of the search? 4. The facts in brief are that a search and seizure operation under Section 132 of the Act was initiated in the case of the SMC Group on 4th August, 2011. Thereafter a notice dated 11th January, 2013 under Section 153A of the Act was issued to the Assessee to file return of income for the relevant year. The allegation was that the Assessee had not established the genuineness, identity and creditworthiness of the three entities from whom it had received share premium in the sum of Rs.3.00 crore, Rs.35 lakhs and Rs.2.65 crores during the AY in consideration. In the assessment order dated 31st March, 2014 under Section 143 (3) read with Section 153A of the Act, the AO made an addition of Rs.3.00 crores to the income of the Assessee disbelieving the contentions of the Assessee. 5. The appeal by the Assessee was allowed by the Commissioner of Income Tax (Appeals) [CIT (A)] by an order dated 21st May, 2015. The CIT (A) once again examined the documents produced by the Assessee and came to the conclusion that in the assessment framed earlier under Section 143(3) of the Act, the Revenue had accepted the amount received by the Assessee as share capital. It was held that there was no evidence to take a different view in the matter.

ITA No.817/Del/2018 CO No.93/Del/2018 6. Aggrieved by the above order, the Revenue filed an appeal before the ITAT and the Assessee filed its cross objections. The cross-objections were on the basis of the decision of this Court in CIT v. Kabul Chawla 2015(380) ITR) 573 wherein it was held that if no incriminating material was found at the time of search the addition would be unjustified. 7. At the outset it is required to be noticed that the Revenue’s appeal against the decision of this Court in Kabul Chawla (supra) has been dismissed by the Supreme Court on account of the low tax effect. However, learned counsel for the Revenue states that there are other appeals of the Revenue pending in the Supreme Court questioning the correctness of the said decision. Nevertheless the fact remains that there is no stay of the operation of the decision of this Court in Kabul Chawla (supra) and it continues to hold the field. 8. Learned counsel for the Revenue submitted that the observations of the ITAT in the impugned order that there was no incriminating material “in respect of the share capital” and therefore the addition was unjustified, was not warranted. According to her this was beyond the judgment of this Court in Kabul Chawla (supra). 9. The fact remains that the Revenue itself is not disputing that in respect of the share capital no incriminating documents were found in the search proceedings. The Court’s attention has been drawn to the decision of the Supreme Court in CIT v. Singhad Technical Education Society (2017) 397 ITR 344 (SC) where in the context of Section 153C of the Act it was held that the incriminating material which was seized had to pertain to the AY in question. It is further held that documents seized had to establish a co- relation documents wise with the assessment years for which the addition was sought to be made. 10. The requirement that the incriminating material to have the co- relation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently, this Court does not find any error having been committed by the ITAT in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the share capital. Therefore, the jurisdictional requirement of Section 153 A of the Act was not satisfied.”

ITA No.817/Del/2018 CO No.93/Del/2018 49. We find, the coordinate Bench of the Tribunal in the case of ACIT vs. Versatile Polytech P. Ltd. vide ITA No.2257/Del/2018 and ITA No.1088/Del/2018 for A.Y.s 2009-10 and 2014-15 respectively, vide order dated 15th March, 2019, has held that no addition can be made u/s 153A in absence of any incriminating material found during the course of search. The relevant observation of the Tribunal from para 20 onwards read as under:- “20. We have considered the rival arguments made by both the sides and perused the relevant material available on record. We have also considered the various decisions cited before us. We find the original return of income in the instant case was filed on 29th September, 2009 and the assessment was completed u/s 143(3) on 26th December, 2011 at a loss of Rs.1,06,53,140/- and income u/s 115JB at Rs.1,19,22,760/-. We find the search took place in the instant case on 28th March, 2015 and on the date of search, the assessment was not pending. It is also an admitted fact that no incriminating material relating to the share application money was found during the course of search and the entire addition of Rs.3,66,00,200/- is based on pre-search verification or post-search enquiries and statements recorded u/s 132(4) of the Act. It is also pertinent to mention that the statements recorded u/s 132(4) relates to either MSG Finance India Pvt. Ltd. or Heritage Beverages Pvt. Ltd. and does not relate to the assessee, i.e., M/s Versatile Polytech P. Ltd. Therefore, the question that has to be answered is as to whether the addition u/s 153A in absence of any incriminating material found during the course of search can be sustained. 21. We find an identical issue had come up before the Tribunal in the case of the sister concern, namely, Moon Beverages Ltd. (supra). We find the Tribunal, relying on various decisions held that no addition could have been made u/s 153A since the assessment was not abated and the addition was made on the basis of statements recorded u/s 132(4) and post search enquiry and no incriminating material was found/seized during the course of search. While doing so, the Tribunal has relied on the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 (Del), CIT vs. Meeta Gutgutia reported in 395 ITR 526, CIT vs. Harjeev Aggarwal reported in 290 CTR 263, CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and various other decisions. The relevant observations of the Tribunal from para 35 onwards read as under:- “35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of

ITA No.817/Del/2018 CO No.93/Del/2018 any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected." 37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post- search enquiries.

ITA No.817/Del/2018 CO No.93/Del/2018 38. The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 has held that statements recorded u/s 132(4) of the I.T. Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under :- "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law." 39. We find the Hon'ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263 has observed as under :- "23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment." 40. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order

ITA No.817/Del/2018 CO No.93/Del/2018 dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under :- "4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search." 41. In the light of the above decisions, statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material. 42. As mentioned earlier, the addition of Rs.11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or 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 not known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in

ITA No.817/Del/2018 CO No.93/Del/2018 the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings. 44. The Hon'ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 has upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. 45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post- search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.” 22. Therefore, we do not find any infirmity in the order of the CIT(A) in deleting the addition made by the Assessing Officer in the absence of any incriminating material found during the course of search. Even though the Revenue has filed an appeal, the grounds of which are already reproduced in the preceding paragraphs, however, the Revenue has not challenged the order of the CIT(A) deleting the addition in absence of any incriminating material found during the course of search. Therefore, the order of the CIT(A) is upheld on the legal ground. Since the order of the CIT(A) deleting the addition on legal ground is upheld, therefore, the grounds raised by the Revenue on merit become infructuous being merely academic in nature. The appeal filed by the Revenue is accordingly dismissed.” 49.1 We find, the coordinate Bench of the Tribunal in the case of M/s Metbrass Plassim India Ltd. vs. ACIT, ITA No.7532/Del/2017, order dated

ITA No.817/Del/2018 CO No.93/Del/2018 17th September, 2018 (one of the group concerns and one of the assessees here) for A.Y. 2013-14, has observed as under:- “36. We have considered the rival arguments made by both the sides in the light of the orders of the authorities below. We have also considered the case law that is brought to our notice. Ld. Assessing Officer made addition of Rs.39 lacs in the hands of the assessee u/s 68 of the Act basing on various enquiries conducted and statements recorded of various persons u/s 132(4) and 131, stating that the assessee failed to substantiate to his satisfaction the identity and creditworthiness of the investor and the genuineness of the transaction with cogent evidence. According to the Assessing Officer, since the assessee could not produce the investor company and since its returned income is meager considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted. 37. Ld. CIT(A) also upheld the action of the Assessing Officer on merit in the appeal preferred by the assessee. He has also dismissed the ground raised by the assessee challenging the validity of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search. Ld. CIT(A) alternatively also held that the addition is sustainable on account of mischief of provisions of section 56(2)(viib) read with Rule 11UA(1)cb, the reasons for which have already been reproduced in the preceding paragraph. 38. It is the submission of the ld. AR that the original return was filed on 26.09.2013 declaring income at Rs.1,84,981/- which was assessed u/s 143(1) of the Act. He further submitted that the period for issue of notice u/s 143(2) expired by 30.9.2014 since such notice cannot be served on the assessee after the expiry of six months from the end of the financial year in which the returns was furnished and thereby the assessment proceedings reached finality and there was no pending proceedings. It is not the case of the revenue that any notice u/s 143(2) of the Act was issued or served before the prescribed time limit and, therefore, the assessment on the date of search was not pending. Since the addition made by the Assessing Officer is not based on any incriminating material found during the course of search and addition has been made on the basis of post-search enquiry and on the basis of statements recorded u/s 132(4) of the Act, therefore, the same cannot constitute incriminating material so as to enable the Assessing Officer to assume jurisdiction u/s 153A of the Act.

ITA No.817/Del/2018 CO No.93/Del/2018 39. Before adverting to the merits of the case, we deem it necessary to deal with the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A of the Act, in absence of any incriminating material found during the course of search when the assessment was not pending. It is an admitted fact that the original return of income was filed on 26.09.2013 which was processed u/s 143(1) of the Act. The period for issue of notice u/s 143(2) expired by 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 40. Para 5 page 11 of the impugned order reads that,- “The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected……” 41. At this juncture reference to the case law relied upon by the Ld. AR becomes necessary. In CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 the Hon’ble jurisdictional High Court has held that statements recorded u/s 132(4) of the Act do not by themselves constitute incriminating material, with the following observations:- “38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out 37

ITA No.817/Del/2018 CO No.93/Del/2018 hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law.” 42. Further in CIT vs. Harjeev Aggarwal reported in 290 CTR 263 (Del) Hon’ble Court observed that,- “23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment.” 43. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order dated 29.12.2017, following the above decision of the Hon’ble Delhi High Court, has observed as under :- “4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, 38

ITA No.817/Del/2018 CO No.93/Del/2018 respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.” 44. In the light of the above decisions, statements recorded u/s 132(4) of the Act, 1961 cannot constitute as incriminating material. 45. In this context, it could be seen from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries. 46. As has been stated above, the addition of Rs.39 lacs was not made on the basis of any incriminating material, but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. We shall refer to the leading cases on this aspect. 47. The Hon’ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or 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 not known in the course of original assessment. Following the above decision, the Hon’ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the Act. This, of course, would not apply if incriminating materials are gathered in the 39

ITA No.817/Del/2018 CO No.93/Del/2018 course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings. 48. Again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 the Hon’ble Delhi High Court has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. 49. In the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 Hon’ble Supreme Court upheld the decision of Hon’ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. 50. Since in the instant case addition of Rs.39 lacs was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted. 51. Inasmuch as the assessee succeeds on the legal ground, we deem it not necessary to delve deeper into the arguments made by the ld. counsel for the assessee on merit since such adjudication would be academic in nature.” 49.2 In view of the above discussion, we are of the considered opinion that since the addition is not based on any incriminating material found during the course of search, therefore, such assessments framed u/s 153A/143(3) is not in accordance with law and is liable to be quashed. Our above view is fortified by the recent decision of the Hon’ble Delhi High Court in the case of PCIT vs. M/s L.T. Foods Pvt. Ltd., vide ITA No.67/2020 and CM No.4576-77/2020, order dated 4th February, 2020 wherein the Hon’ble High Court has observed as under:-

ITA No.817/Del/2018 CO No.93/Del/2018 “ The Revenue appeals against the order dated 03.07.2019 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in ITA No.4162/Del/2013 and ITA No.4044/Del/2013. The first was an appeal preferred by the assessee and the second was an appeal preferred by the Revenue in relation to the Assessment Year 2005-06. The Tribunal allowed the appeal of the assessee and disallowed the appeal of the Revenue on the premise that the Revenue had not been able to establish that any of the additions made during the course of the assessment proceedings were premised on any incriminating material found during the search of the Dawat Group of Companies – to which the assessee belongs. The Tribunal has held in paragraph 40 of the impugned order as follows: “40. We have carefully considered the rival contention and perused the orders of the lower authorities. It is apparent that on the date of initiation of search on 10/2/2009 the assessment proceedings u/s 143 (3) of the income tax act was completed on 18/12/2007. Therefore on the date of search no assessment proceedings were pending for the impugned assessment year. Therefore if any addition is required to be made by the learned assessing officer should have been made on the basis of the seized material found during the course of search. We have perused the various additions/disallowances made by the learned assessing officer and found that there is no discretion of any seized material found during the course of search based on which these disallowances/additions have been made. The learned departmental representative also could not show us any seized material based on which the said additions have been made. Therefore, respectfully following the decision of the honourable Delhi High Court in CIT vs Kabul Chawla (supra) the above additions deserve to be deleted. Accordingly we direct the learned assessing officer to delete the disallowance of payment in contravention is of provisions of section 40A (3) of the income tax act, disallowance of expenses on account of nondeduction and short deduction of tax at source and addition on account of personal expenditure. In the result, we reverse the order of the learned CIT - A income from the above disallowances and allow the appeal of the assessee to these extent. ” The Assessing Officer, while passing the assessment order, has not clearly stated as to what is the incriminating material on the basis of which the additions were sought to be made. The co- relation between the so-called incriminating material – which has not even been disclosed, and the additions made, should have been established by the Assessing Officer, which had not been done.

ITA No.817/Del/2018 CO No.93/Del/2018 In these circumstances, in our view, no substantial question of law arises for our consideration. Dismissed.” 49.3 In view of the above discussion, we allow the ground of cross objection No.1 and hold that since no incriminating material was found as a result of the search conducted on the assessee, therefore, the notice issued for initiation of proceedings u/s 153A and the assessment framed subsequently are without jurisdiction and deserves to be quashed. We hold and direct accordingly.”

ITA No.817/Del/2018 CO No.93/Del/2018 27. In the result, the CO filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. The decision was pronounced in the open court on 14.12.2021. Sd/- Sd/- (KUL BHARAT) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14th December, 2021. dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi