Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld. CIT(Appeals) in deleting the addition made by the AO holding that the addition was not made based on any seized material.
Heard rival submissions, perused the orders of the authorities below. The assessee filed return of income on 19.12.2015 declaring 1 income of Rs.10,14,890/- and the return was processed u/s 143(1) on 04.01.2016. Search and seizure operations were carried out u/s 132 of the Act on 19.12.2019 in the Stonex Group of cases, accordingly, warrant under 132 was duly executed on the assessee’s locker no.679 held in HDFC Bank jointly with his wife M/s Manju Devi Aggarwal in Union Bank of India. Subsequently, assessment u/s 153A was made on 30.09.2021 making addition of Rs.19,20,877/- u/s 68 of the Act, denying long term capital gain claimed by the assessee u/s 10(38) of the Act in his return of income.
On appeal the Ld. CIT(Appeals) deleted the addition on the ground that the addition was not made based on any seized materials but was made only on the analysis of the financial statement of the company namely Alankit Ltd. whose shares were claimed as long term capital gains by the assessee observing as under:
“7. Ground Nos. 1, 3 to 3.4: The brief facts of this case are that a search and seizure operation u/s 132A was conducted on Stonex Group of cases on 19.12.2019 by Unit-2(2) of Investigation Wing, New Delhi. A warrant of authorization for search was issued in the name of appellant at locker No. 679 held in HDFC Bank, West Punjabi Bagh, New Delhi and locker no. 557, jointly held by appellant and Ms. Manju Devi Agarwal in Union Bank of India, Shalimar Bagh, New Delhi. Subsequent to the search u/s 132 in the case of appellant, notice u/s 153A of the Act was issued on 21.12.2020. Assessment 2 proceedings u/s 153A were completed vide order dated 30.09.2021 after making an addition of Rs. 19,20,877/- on account of unexplained credit. AO had noted in the assessment order that appellant had acquired 13,700 shares of M/s Alankit Ltd. for Rs. 12,25,631/- in July, 2013 and sold such shares in March, 2015 for a total consideration of Rs. 31,46,508/-. The appellant had claimed exempt capital gain of Rs. 19,20,877/- u/s 10(38) of the Income Tax Act, 1961. It was held by AO that M/s Alankit Ltd. is a penny stock as the price of the shares of M/s Alankit Ltd. increased by more than 250% within a very short span of less than 21 months. Accordingly, an addition at Rs.19,20,877/- was made by the AO u/s 68 as unexplained credit. 7.1 In the grounds of appeal
, as well as the written submissions, appellant has claimed that the case of the appellant is that of an unabated assessment and on the date of search no assessment proceedings were pending. It was further submitted by the appellant that no incriminating material was found during the course of search and the present addition has been made solely on the basis of claim made in the return of income. 7.2 The appellant has also sought to place reliance upon the order of Hon’ble Supreme of PCIT Vs Abhisar Build well Pvt. Ltd. in Civil Appeal No. 6580 of 2021 dated 24.12.2023 wherein it was held that if no assessment proceedings are pending as on the date of search and no incriminating material was found during the search, no addition can be made u/s 153A. 7.3 In the judgement as referred above, it has been held that completed assessments can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition which were not produced or not already disclosed or made known in the course of original assessment. 7.4 The search was conducted in the case of the appellant on 19.12.2019. As per the submissions of the appellant, the original return of income was filed on 19.12.2015 and the time to issue notice u/s 143(2) expired on 30.09.2016. On the date of search, assessment for the A.Y. 2015-16 was thus completed assessment as the time period to issue notices u/s 143(2) for aforesaid years had already expired. Therefore, in this assessment year, the additions could have been made by the AO only on the basis of incriminating material/evidence found during, the search proceedings. However, it is seen that in the present assessment order framed u/s 153A, the additions have not been made on the basis of any incriminating material found during the search proceedings but on the basis of an analysis by AO on the financial statements of M/s Alankit Ltd. for last ten years which indicated him that the stock is a penny stock and there is neither any reference to any seized material nor any statement recorded during search on this issue. In this connection it is significant to make reference to the decision of Hon’ble Supreme Court in the case of M/s Abhisar Buildwell Pvt. Ltd., the relevant extract of which is reproduced as under:
11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, relating to any assessment year years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section f\ (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub- section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the 4 legislation seems to be that in case of search only the pending assessment/ reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search .under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/148 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/ completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/ total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall 5 not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/ reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law.
For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated;
iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/ unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re- opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.” 7.5 In view of the decision of Hon’ble Apex Court it is clear that in the case of unabated assessments, no addition can made for a particular assessment year without there being an incriminating material qua that assessment year which would justify such an addition. The completed assessments, as in the present case, can be interfered only based on the incriminating material found during the course of search or requisition of documents. Thus, presence of incriminating for each assessment year is a sine qua non for framing an assessment under section 153A of the Act. In the present case the assessment has been framed in spite the fact that there was no incriminating material qua the year under consideration which is against the settled position of' law that additions u/s 153A of the Act can be made 7 only on the basis of incriminating material etc. found during the course of search as laid down by the Honorable Supreme Court. There is no concrete material or any detail in the assessment order which support the stand of AO that M/s Alankit Ltd. is a penny stock company. The addition seems to have been made for the sole reason that the value of shares of M/s Alankit Ltd. has increased more than 250% in a very short span of time. Even the analysis made by AO of financials which led him to the suspicious that M/s Alankit Ltd. is a penny stock company is not given in the assessment order. 7.6 Respectfully following the judgements as elaborated above, I hold that since no incriminating documents were found during the course of search, pertaining to the said addition made by the A.O., therefore this addition is not sustainable u/s 153A of the Act. Accordingly, the addition of Rs.19,20,877/- by the AO is hereby deleted.”
None of the above findings of the Ld. CIT(A) have been rebutted by the Revenue. Further on perusal of the assessment order, we observed that there is no reference to any seized materials based on which the addition was made u/s 68 of the Act denying the claim for exemption in respect of long term capital gains shown by the assessee. On careful perusal of the order of the Ld. CIT(A), we do not see any valid reason to interfere with the findings of the Ld. CIT(A) and the decision in deleting the addition made by the AO in the absence of any seized materials relating to the addition. Thus, the grounds raised by the Revenue are rejected.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 04.11.2025