SMT. RANJANA GARG,NEW DELHI vs. DCIT, NEW DELHI

ORDER PER BENCH: These are a bunch of 26 appeals and involve identical issues. All these appeals were heard together and are being disposed off through this common order. We now take up these appeals one by one.

The AO in his assessment order has discussed the background of the case and has observed that from the perusal of the details filed, it is seen that the assessee has claimed to have received an amount of Rs. 99,00,630/- as sales consideration of M/s Nageshwar Investment Ltd. and has declared a capital gain of Rs. 96,81,629/-. Apart from this the assessee has also claimed to have received Rs. 31,77,380/- as sale proceeds of shares of M/s Quest Financial and Rs. 21,17,350/- as sale proceeds of shares of M/s M.P. Investments Ltd. The AO has also observed that enquiries were made from Kolkata Stock Exchange which revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- on 02/07/2002 and as high as Rs. 107/- on 02/05/2003. The AO observed that such a meteoric rise in price was also a subject matter of enquiry by the SEBI.

The AO further noted that information has been received from Calcutta Stock Exchange that during that period only 15 members participated in transactions in the scrip of M/s Nageshwar Investments Ltd. and that a large number of tradings were in the nature of self trading. The AO further noted that SEBI has informed that enquiries have also been initiated against the share brokers for rigging the prices of shares of this scrip and that the trading of the scrip of M/s Nageshwar Investments Ltd. was suspended w.e.f.

22/11/2005.

2.01 Another important fact related to this case is that the assessee had been assessed earlier u/s 143(3) at Central Circle, Agra for the year under consideration. In the assessment order dated 29/12/2006, the AO had specifically mentioned that in order to verify the genuineness of the transaction of shares, notices u/s 133(6) were issued to M/s Nageshwar Investments Ltd. and M/s Bubna Stock Broking Services Ltd. through which the shares were purchased/sold by the assessee but no reply was received in respect of transactions of shares of M/s Nageshwar Investment Ltd. Accordingly, at the time of the original proceedings, the amount claimed to be received on account of sale of these shares was held as unexplained cash credit and additions were made accordingly. Similarly, the amounts claimed to have been received as sale proceeds of shares of M/s Quest Financial & M/s MP Investments Ltd. were also held to be unexplained cash credits. The AO also noted that M/s Nageshwar Investment Ltd. was a group concern of the assessee. During the course of proceedings u/s 153A, it has been the assessee’s contention that no incriminating material was found during the course of the search. However, the AO made an addition of Rs. 1,54,99,270/- on account of alleged accommodation entry. This addition included 2% expenditure incurred for accommodation transaction. This addition was made on account of long term capital gain on sale of shares u/s 68 of the Act. Besides this an addition of Rs. 3,21,317/- on account of notional income from house property was made as already made in the original order of assessment dated 29/12/2006. Further, an addition of Rs. 1 lakh was made on account of disallowance of agricultural expenses as out of books expenses. Aggrieved, the assessee preferred an appeal before the Ld. CIT (A) and challenged the assumption of jurisdiction u/s 153A of the Act as well as challenged the addition on merits. However, the Ld. CIT (A) dismissed the assessee’s legal ground challenging the assumption of jurisdiction u/s 153A and confirmed addition of Rs. 54,00,627/- (including 2% expenses on providing accommodation entries) being undisclosed income from the sale of shares of M/s Nageshwar Investment Ltd. The other additions were however, deleted by the Ld. CIT (A). Now, both the assessee as well as the Department has filed the cross appeals before the ITAT and the grounds read as under:

Grounds of ITA 2083/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) – XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) – XXXI erred in confirming the addition of Rs. 54,00,627/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd. 3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

Grounds of ITA 2833/Del/12:

1. “The order of the Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances, the Ld. CIT (A) has erred in deleting the addition of Rs. 21,59,698/- made by the AO u/s 68 of IT Act, 1961 as unexplained cash credit on account of sale of shares of M/s M.P. Investment Limited, without appreciating Page 11

the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 32,40,929/- made by the AO under section 68 of the IT Act, 1961 was unexplained cash credit on account of sale of shares of M/s Quest Financial Services Ltd., without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

2.02 The Ld. AR filed written submissions in support of the assessee’s cross appeal and the same is being reproduced for a ready reference as under:

1. “That the aforesaid cross appeal have been filed against the order of the CIT (A) dated 20.03.2012, wherein learned CIT (A) has partially allowed the appeal of the assessee.

2. That vide the aforesaid order, learned CIT(A) has rejected the ground of the assessee whereby assessee has challenged the additions made in the order of assessment framed under section 153A of the Act, as none of the additions made by the learned AO were based on the incriminating material found as a result of search under section 132(1) of the Act on the searched person i.e. M/s Rajdarbar Group 31.07.2008.

3. It is respectfully submitted that in the instant case, for the aforesaid assessment year i.e. AY 2004-05, return of income filed by the assessee was duly scrutinized by the learned AO by framing an order of assessment under section 143(3) of the Act on 29.12.2006 making additions of Rs. 1,54,99,267/- as bogus accommodation entry, disallowance of expenses and also addition of Rs. 3,21,317/- on account of section 23(l)(c). Against the aforesaid order of assessment, assessee preferred an appeal before the learned CIT(A) and learned CIT(A) vide his order dated 21.01.2008 deleted the addition made on account of bogus accommodation entry, disallowance of expenses to the extent of Rs. 1,00,000 and addition of Rs. 3,21,317/- on account of section 23(1)(c) of the Act. It is most humbly submitted that appeal filed by the revenue against the aforesaid order of the learned CIT(A) has also been dismissed by the Hon’ble Tribunal vide its order dated 31.08.2009 and aforesaid order of the Hon’ble Tribunal has also been upheld by the Hon’ble High Court vide its order dated 11.05.2011.

4. It is submitted that in the instant case, proceedings under section 153A of the Act has been initiated in pursuance to search conducted on 31.07.2008, wherein no incriminating material has been found, learned AO vide his order dated 20.12.2010 has again made addition of Rs, 1,54,99,270/- on account of alleged accommodation entry and also made addition of Rs. 3,21,317 on account of notional income from house property as was made in original order of assessment dated 29.12.2006. It is submitted that while making the aforesaid additions in order of assessment passed under section 153A of the Act, learned AO has not referred any incriminating material found as a result of search and has made the addition of Rs, 1,54,99,270/- on account of alleged accommodation entry merely on the basis

of the unsubstantiated material gathered from the stock exchanges which material also does not establish that the assessee has taken any accommodation entry, as such, addition made in the order of assessment is outside the scope of section 153A of the Act.

5. In support of the aforesaid submission, reliance is placed on the recent judgment of the jurisdictional High Court in the case of CIT vs. KABUL CHAWLA (ITA 707/2014 dated 28.08.2015) wherein Hon’ble High Court after threadbare examining all the judicial pronouncements on the subject i.e. judgments of High Court of Delhi in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Del), Madugula Tax[2013] Venu v. Director of Income 29 Taxmann.Com 200 (Delhi), CIT v. Chetan Das Lachman Das (ITA No.2021/2010), Filatex India Ltd. v. CIT- IV [2014] 49 Taxmann.Com 465 (Delhi), Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.( of 2015), judgment of High Court of Rajasthan in the case of Jai Steel (India), Jodhpur v. ACIT [2013] 36 Taxmann.Com 523 (Raj), judgments of High Court of Bombay in the case of CIT v. M/s. Murli Agro Products Ltd.

(ITA No.36/2009), Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 Taxmann.Com 78 (Bom), judgment of High Court of Karnataka in the case of M/s. Canara Housing Development Company v. The DCIT (ITA No.38/2014), order of Special Bench in the case of All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income Tax [2012] 23 taxmann.com 103 (Mum.) (SB) has summarized the legal position.

XXX

6. That aforesaid judgment of CIT vs. KABUL CHAWLA (supra) has further been followed in the case of PCIT v. Kusum Gupta in dated 01.09.2015, wherein again it was reiterated that unless some incriminating material is found as a result of search addition made is outside the scope of section 153A of the Act.

iii. ACIT vs. Pratibha Industries Ltd. 23 ITR 766 (Trib) (Mum) iv. MGF Automobiles Ltd. vs. ACIT and 4213/Del/11 dated 28.6.2013 v. Bharati Vidyapeeth vs. ACIT ITA No. 917- 922/PN/2010 dated 28.4.2011 vi. Sinhgad Technical Education Society vs. ACIT 140 TTJ 233 (Pune) vii. ACIT vs. Shri Manoj Narain Aggarwal ITA No(s). 5518 to 5524/Del/12 A.Ys. 03-04 to 09-10 dated 30.01.2014 viii. M/s Marigold Merchandise P. Ltd. vs. DCIT ITA Nos. 2666 & 2667/Del/2013 A.Ys. 08-09 and 07-08 dated 27.12.2013 ix. ACIT vs. Pradeep Kumar Kumra ITA No. 4016/Del/2011 A.Y. 02-03 dated 7.11.2013 x. CIT vs. Smt. Shaila Agarwal 346 ITR 130 (All) xi. Divine Infraction P. Ltd. vs. DCIT ITA No. 2393/Del/2014 AY 08-09 dated 12.6..2014 xii. Asstt. Commissioner of Income Tax, vs. Inlay Marketing P. Ltd. (ITA No. 4200/Del/2012 to 4202/Del/2012 and 4197/Del/2012 to 4199/Del/2012 dated 14.11.2014) xiii. ACIT vs. Asha Kataria ITA No. 3105/Del/2011 order dated 20.5.2013 xiv. DCIT vs. Vrindavan Farms P. Ltd. ITA Nos.

3359, 3360, 3361/Del/2013 dated 6.6.2014 xv. Jakson Engineering Ltd. vs. ACIT dated 11.4.2014 xvi. Bharati Vidyapeeth Medical Foundation vs. ACIT ITA No. 36,37, 39/2012 dated 10.4.2014 (Bom.); xvii. ACIT vs. Prithvi Sound Products Co. P. Ltd. ITA No. 3422-6/Del/2011 dated 17.4.2014 (Delhi Tri.).

pronouncements, it is most humbly submitted that since none of the additions/disallowances made by the learned AO was based on any incriminating material found as a result of search, as, such, the additions/disallowances made is outside the scope of section 153A of the Act and, as such, it is prayed that the appeal of the assessee be allowed and appeal of the revenue may kindly be dismissed.”

2.03 The Ld. DR submitted that that the addition was justified in view of the fact that the broker did not respond to the summons issued by the Department. The Ld. DR submitted that the deletion made by the Ld. CIT (A) of Rs. 2,159,698/- on account of sale of shares of M/s M.P.

Investment Ltd. and of Rs. 3,240,929/- on account of sale of shares of M/s Quest Financial Services Ltd. was not justified because the onus on the assessee cannot be shifted to the Revenue. He emphasized that here the bona fides of the broker were under question and the dealings with all the three companies were apparently suspicious. The Ld. DR heavily relied on the findings of the AO and vehemently argued that in view of the specific inconsistencies pointed out by the AO, the relief granted to the assessee by the Ld. CIT (A) was not legally tenable.

2.04 We have heard the rival submissions and have also perused the material on record. Section 153A of the Act provides that where a search is initiated u/s 132 of the Act, the AO shall assess or reassess the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. The first proviso states that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years.

The second proviso states that the assessment or reassessment relating to the said six assessment years pending on the date of initiation of the search u/s 132 shall abate. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed for different assessment years making various additions. It is assessee’s claim that the addition was not tenable as the regular/original return had been filed wherein the particulars relating to the addition has been disclosed and the same had been added by the AO in the assessment made u/s 143 (3) of the Act. It is also seen that the assessee had preferred an appeal before the Ld. CIT (A) who had deleted these additions and on further appeal by the Department, ITAT Agra Bench had also upheld the CIT (A)’s order in and 153/Agr/2008. Subsequently, revenue’s appeal before the Hon’ble High Court was also dismissed vide order dated 29.03.2011. It is seen from the records that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However an assessment which has been contested up to the High Court cannot be said to be pending.

The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which were disclosed in the original assessment proceedings.

A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 15,499,270/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A and has summarized the legal position by holding as under:

“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 u/s 132 of the Act, notice u/s 153A(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 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 153A 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 relevant 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 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassessee’ to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment u/s 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 u/s 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.” 2.05 In the light of the aforesaid observations of the Hon’ble Delhi High Court, we hold that on the facts and circumstances of the case, the Ld. CIT (A) was not correct in upholding the assessment framed outside the search material and hence, while allowing ground no. 1 of the assessee’s appeal, we delete all the additions made in the assessment proceedings u/s 153A of the Act as the impugned additions have been made without any reference to any seized material.

Ground no. 2 of the assessee’s appeal is also allowed.

Consequently, on similar reasoning, the Department’s appeal stands dismissed.

2.06 Therefore, the assessee’s appeal stands allowed and the Department’s appeal is dismissed.

2.1 Amita Garg – & 2758/Del/2012 for AY 03-04:

In this case also notice u/s 153A of the Act was issued as a consequence of action u/s 132 of the Act on the Raj Darbar Group of Companies and its Associates. Pursuant to the notice, the assessee filed its return of income declaring income of Rs. 23,96,029/- which was the same as the return filed originally. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gain of Rs. 1,04,72,923/- from the sale of shares of M/s Nageshwar Investment Ltd., M/s Quest Financial Ltd. and M/s M.P. Investment Ltd. in which a total consideration of Rs. 1,07,85,970/- was received. The AO observed that these shares were purchased in the month of November, 2001 and sold in February and March, 2003 on which long term capital gains were claimed to have been earned. The AO referred to the enquiries made from the Kolkata Stock Exchange which had revealed that the price of scrip of M/s Nageshwar Investment was as low as Rs. 2/- and as high as Rs. 107/- on 2nd May, 2003 and also referred to the fact that the spurt in the price was enquired into by the SEBI. The AO also noted that SEBI had conducted enquiries against the share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO proceeded to hold that the claim of profit on the shares of Nageshwar Investment Ltd. was a sham. The AO also noted that SEBI had suspended the trading in the scrip of M/s Nageshwar Investment Ltd. w.e.f.

22/11/2005. In case of the other two companies i.e. M/s Quest Financial Ltd. and M/s M.P. Investment Ltd., the AO noted that the share broker M/s Bubna Stock Broking Services Ltd. Kolkata, who had traded these shares, had not replied to the enquiries conducted by the Department and proceeded to hold that both the purchase as well as the sale transactions were arranged. Accordingly, in the case of this assssee also an addition of Rs. 1,10,01,690/- (including 2% expenditure incurred for the accommodation transaction) was made on account of long term capital gains on sale of shares u/s 68 of the Act although it had been the assessee’s contention that no incriminating document was found during the course of search conducted in the Raj Darbar Group. An addition of Rs. 70,000/- was also made on account of disallowance of agricultural expenses being out of books expenses. On appeal before the Ld. CIT (A), the Ld. CIT (A) vide his order dated 20/03/2012 confirmed addition of Rs. 29,96,250/- (including 2% expenses on providing accommodation entries) on account of undisclosed income from the sale of shares of M/s Nageshwar Investments Ltd. The balance additions were deleted by the Ld. CIT (A). Now, both the assessee as well as the Department have approached the Tribunal and have raised the following grounds of appeal:

Grounds of appeal ITA No. 2081/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) XXXI erred in confirming the addition of Rs. 29,96,250/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd.

3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

Grounds of appeal ITA No. 2758/D/12:

1. “The order of the Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 32,77,538/- made by the AO u/s 68 of I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s M.P. Investments Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 47,27,905/- made by the AO u/s 68 of the I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s Quest Financial Services Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

2.1.1 At the outset, the Ld. AR filed written submissions which are summarized as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments 143(1) or 143(3) were abated or not within the meaning of second proviso to sec. 153A of the Act. 2003-04 27.02.2004 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. xxx However, the appellant wishes to refer to some of them as per the list below:

S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013

5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015. The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004- 05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order

dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.1.2 The Ld. DR submitted that that the addition was justified in view of the fact that the broker did not respond to the summons issued by the Department. The Ld. DR submitted that the deletion made by the Ld. CIT (A) of Rs. 3,277,535/- on account of sale of shares of M/s M.P.

Investment Ltd. and of Rs. 4,727,905/- on account of sale of shares of M/s Quest Financial Services Ltd. was not justified because the onus on the assessee cannot be shifted to the Revenue. He emphasized that here the bona fides of the broker were under question and the dealings with all the three companies were apparently suspicious. The Ld. DR heavily relied on the findings of the AO and vehemently argued that in view of the specific inconsistencies pointed out by the AO, the relief granted to the assessee by the Ld. CIT (A) was not legally tenable.

2.1.3 We have heard the rival submissions and have also perused the material on record. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed making various additions. It is assessee’s claim that the addition was not tenable as the regular/original return had been filed wherein the particulars relating to the addition has been disclosed and the same had been accepted by the AO in the assessment made u/s 143 (3) of the Act.

On examination of the records, it is seen that this contention of the assessee is correct in so far as consequent to information received from the Investigation Wing Agra, the erstwhile AO had made detailed enquiries on this issue and had then accepted the assessee’s claim in the original assessment order framed u/s 143(3) of the Act. Now, it is seen from the records that no material has been found during the search to justify the addition and the assessment order does not make any reference whatsoever to any seized material on which the impugned addition can be said to be based. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 1,101,690/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A and has summarized the legal position in Para 37 of its order (which has been reproduced in earlier part of this order). In the light of the aforesaid observations of the Hon’ble Delhi High Court, we hold that on the facts and circumstances of the case, the Ld. CIT (A) was not correct in upholding the assessment framed outside the search material and hence, while allowing ground nos. 1 and 2 of the assessee’s appeal, we delete all the additions made in the assessment proceedings u/s 153A of the Act as the impugned additions have been made without any reference to any seized material. On similar reasoning, the Department’s appeal become academic in nature and the same is dismissed.

2.1.4 Therefore, the assessee’s appeal stands allowed and the Department’s appeal is dismissed.

2.2 Amita Garg – for AY 04-05:

This appeal has been preferred by the Department against the order dated 30/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi. In this case, there had been an action u/s 132 of the Act on Raj Darbar Group of Companies and its Associates.

The assessee was issued notice u/s 153A of the Act although it had been the assessee’s contention that no incriminating material was seized by the Department from the assessee.

Pursuant to notice u/s 153A, the assessee had filed her return of income declaring income of Rs. 15,74,769/-. The assessee had also shown agricultural income of Rs. 26,80,753/-. During the course of assessment, the AO observed that there had been a sale of agricultural land at Bangalore that had been examined by the AO in his earlier assessment completed u/s 143(3) of the Act on 29/12/2006.

It was also stated that further enquiries had been initiated by the erstwhile AO in this regard to ascertain the status of the land which was claimed by the assessee as agricultural land situated in Gram Devarabisanahalli, Barthur Hobli, Bangalore and that the reply to the enquiries were yet to be received as on the date of assessment order. The AO further observed that Tehsildar, Bangalore vide letter no. ADM/CR/142/143/0809 dated 02/11/2008 has informed that the distance of Gram Devarabisanahalli, Barthur Hobli, Bangalore from the nearest Bangalore Mahanagar Palika Limit namely Konena Agrahara, HAL, Main Gate is 6 k.m. and, therefore, the compensation of Rs. 2,30,62,500/- was to be treated as a short term capital gain. The AO also made a disallowance of Rs. 2 lakhs on account of alleged non- furnishing of bills and vouchers of agricultural expenses. An amount of Rs. 2,47,716/- was also added to the income of the assessee being the notional value of two properties held by the assessee by calculating the Annual Lettable Value (ALV) @ 7% of the amount of investment made valuing Rs. 50,55,482/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT (A) challenging the issuance of notice u/s 153A and also challenging the impugned addition on merits.

The Ld. CIT (A) did not accept the assessee’s contention that the issuance of notice u/s 153A was not valid. He however, deleted all the additions on merits. Now, the Department has preferred this appeal before the ITAT and has filed the following grounds of appeal:

Grounds of appeal ITA No. 2759/Del/12:

1. “The order of the Ld. CIT (a) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,30,62,500/- made by the Assessing Officer on account of sale of agricultural land holding the same as short term capital gain by admitting the additional evidence in contravention of Rule 46A of the Income Tax Rules, 1962. 3. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

2.2.1 The assessee has also filed an application under Rule 27 of the ITAT Rules for admission and adjudication of the following issue:

“Whether the CIT (A) was correct in upholding the additions to be within the scope of assessments u/s 153A of the Act where addition/disallowances made by the Assessing Officer were not based on any material found and seized during the course of search.”

2.2.2 The Ld. AR filed written submissions which are being summarized as under: Page 40

“The respondent has moved an application under Rule 27 of the ITAT Rules for admission and adjudication of the following issues: “Whether the CIT (A) was correct in upholding the additions to be within the scope of assessments u/s 153A of the Act where addition/disallowances made by the AO were not based on any material found and seized during the course of search.” The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act.

2004-05 28.03.2005 Yes Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act.

Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated Page 42

24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. The very basis on which the AO held agricultural land to be non agricultural land was held to be incorrect on the basis of documentary evidences.

2. The Ld. CIT (A) has himself measured the distance using the Google Maps technology and found that the agricultural land was located beyond 8 kms.

3. Original assessment was completed u/s 143(3) of the Act in Central Circle, Agra and no mention of letter having been written to the concerned authority was made as incorrectly mention by the AO in the impugned order.”

2.2.3 At the outset, the Ld. DR opposed the assessee’s application under Rule 27 of the ITAT Rules. The Ld. DR further submitted that the Ld. CIT (A) had deleted the addition of Rs. 23,062,500/- made by the AO on account of sale of agricultural land by admitting additional evidence in contravention to Rule 46A of the Act and submitted that the AO’s order should be restored.

2.2.4 We have heard the rival submissions and have also perused the material on record. We admit the assessee’s application filed under Rule 27 of the ITAT Rules and proceed to adjudicate upon it. A perusal of the impugned order dated 30/03/2012 reveals that although the Ld. CIT (A) has upheld the assumption of jurisdiction u/s 153A of the Act, he has also given a categorical finding in Para 5.6.7 of his order that the AO has not brought on record any incriminating material discovered during the search suggestive of and which led to an adverse finding by him. This finding of the Ld. CIT (A) could not be negated by the Department before us. Hence, respectfully following the ratio of the judgments laid down by the Hon’ble Delhi High Court in CIT vs. Kabul Chawla (supra), we allow the issue raised by the assessee under Rule 27 of the ITAT Rules and confirm the deletion made by the Ld. CIT (A).

Accordingly, the Department’s appeal becomes academic and the same is dismissed.

2.2.5 In the result, the Department’s appeal is dismissed.

2.3 Amita Garg– and CO 254/Del/2012 - AY 06-07:

In this year also, notice u/s 153A of the Act was issued as a consequence of action u/s 132 of the Act on the Raj Darbar Group of Companies. Here also it has been the contention of the assessee that no incriminating materials were found in the case of the assessee. Pursuant to the notice u/s 153A, the assessee filed her return of income declaring income of Rs. 96,02,851/- and also showed agricultural income of Rs. 24,00,291/-. During the course of the assessment, the AO observed that the assessee was the holder of 16.65% shares of M/s Tarupit Exports Ltd. and that the shares had been transferred to M/s Vipul Limited on 19/12/2005. The AO further observed that the other shareholders had also sold their shares to the same company and proceeded to hold that the plot in the company held as an asset was deemed to be transferred to M/s Vipul Limited and by applying provisions of section 50C on the sale of the plot by the assessee made an addition of Rs. 91,57,450/- on account of short term capital gain in pursuance to section 2(47)(vi) and section 50C of the Act by considering the transfer of shares as transfer of ownership of the land. The AO further disallowed an amount of Rs. 2 lakh from agricultural expenses on the ground that some of the bills and details were unverifiable. The assessee preferred an appeal before the Ld. CIT (A) challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the addition on merits. The Ld. CIT (A) did not accept the assessee’s contention regarding assumption of jurisdiction u/s 153A but deleted both the disallowances on merits. Aggrieved, the Department has preferred this appeal before the Tribunal and the assessee has filed a CO. The grounds taken by both the parties are as under:

Grounds of appeal :

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 91,57,450/- made by the AO on account of Short Term capital gain in pursuant to section 2(47)(vi) and section 50C of the Income Tax Act, 1961 by considering the mere transfer of shares as transfer of ownership of land held as fixed assets by the company in which the assessee was a shareholder. 3. The order of the Ld. CIT (A) is perverse in law and on facts. 4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

Grounds of CO No. 254/D/12:

1. “Because the departmental appeal is bad in law as well as on facts and is liable to be dismissed.

2. Whether the assessment framed u/s 153A/143(3) of the Income Tax Act, 1961 is legal, when consequent upon action taken by the department under section 132 of the Act on 31/07/2008 against the assessee was carried out and nothing incriminatory was found, and re-visiting the issues, which have been settled earlier, and re-assessment in the garb of the provision of sec. 153A of the Act not based upon the search material is permissible? 3. The respondent craves leave for addition, modification, alteration, amendment of any of the cross objection.”

2.3.1 The Ld. AR filed written submissions which are summarized as under:

“The appellant/respondent wishes to submit that search in this case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether the assessments were abated or not within the meaning of second proviso to sec. 153A of the Act. 2006-07 30.03.2007 Did not abate From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T.

Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated

21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. The assessee had sold shares of the company only and did not transfer the land. There was no legal basis for applying section 50C of the IT act on assumed circle rate basis.

2. Land was shown as stock in trade in the balance sheet of the company where the assessee was the shareholder. Section 50C of the Act did not apply on stock in trade even otherwise.

3. The assessee cannot be assumed to be 16.5% owner of the land for the reason that it held 16.5% of shares of the company which owned land because company is a distinct legal person.

4. The company had very substantial amount of loans as has been pointed out by the Ld. CIT (A) in his appellate order.

5. Book value of land/inventory in the books of company as on 31.3.2006 was Rs. 7,77,09,789/-. If for argument sake the circle sale value of the land taken by the AO at Rs. 8,33,00,000/- is assumed to be correct action then the capital gains taxable will be much less than the capital gains offered by the assessee. The AO cannot be allowed to have sale value/assumed sale value of land and cost of purchase of shares to work out the capital gains.”

2.3.2 The Ld. DR submitted that the Ld. CIT (A) was not correct in deleting the addition of Rs. 9,157,450/- made by the AO on account of short term capital gains. He submitted that the AO was correct in applying the provisions of Section 2(47)(vi) and Section 50C and he vehemently defended the same.

2.3.3 We have heard the rival submissions and have also perused the material on record. Although the Ld. CIT (A) had given relief to the assessee on merits, the assessee has challenged the action of the Ld. CIT (A) in upholding the assumption of jurisdiction u/s 153A of the Act by means of a CO. It is undisputed that the assessment for the year under consideration did not abate consequent upon the search within the meaning of second proviso to section 153A of the Act. Perusal of the assessment order also reveals that the additions made by the AO were not based on any incriminating material/document. The Ld. CIT (A) has also not referred to any incriminating material/document. The additions made, therefore, are indeed outside the scope of assessment as envisaged u/s 153A of the Act. The Hon’ble Delhi High Court has laid down the proposition of law in Para 37 of its judgment in the case of CIT vs. Kabul Chawla (supra) and respectfully following the same, we hold that the additions made in the assessment framed u/s 153A of the Act in the instant appeal are legally not tenable and the entire assessment is bad in law in as much as the same is not based on any incriminating material found during the course of search and we have no option but to confirm the deletion of the additions. Therefore, the CO of the assessee is allowed and the appeal preferred by the Department becomes academic and the same is dismissed.

2.3.4 In the result, the CO of the assessee is allowed and the appeal of the Department is dismissed.

2.4 Smt. Kusum Lata Garg – & 2755/Del/2012 – AY 03-04: against the order dated 20/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi, whereas ITA No. 2755/Del/2012 has been preferred by the Department. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed her return of income declaring income of Rs. 13,16,908/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 1,11,14,987/- from sale of shares of M/s Nageshwar Investment Ltd., M/s Quest Financial Ltd. and M/s MP Investment Ltd. and the assessee had claimed to have received a total consideration of Rs. 1,14,27,510/-. In this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- and as high as Rs. 107/- on 02.05.2003. The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department. The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005.

The AO was of the opinion that both sales as well as purchase transactions were arranged ones as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. The AO also observed that the assessee had claimed to have received Rs. 31,16,010/- as sale consideration for shares of M/s MP Investments and Rs. 47,92,500/- for shares of M/s Quest Financial Ltd on 13/03/03 and 20/03/03 respectively which were claimed to have been purchased on 09/11/2001 and 30/11/2001 for Rs. 96,840/- and Rs. 1,01,000/- respectively.

The AO also noted that deduction u/s 54F of the Act has been claimed against the long term capital gains on these shares.

It was the contention of the assessee before the AO that her case stood assessed u/s 143(3), vide assessment order dated 30/03/2006 without any addition on this ground. However, the AO proceeded to treat the transactions as sham and made an addition of Rs. 1,11,14,987/- as unexplained credit although it was the assessee’s contention that no incriminating material relating to the assessee was found during the course of search u/s 132 of the Act. The AO also made an addition of Rs. 2,52,124/- being amount debited to the profit and loss account under various heads. The AO also made an addition of Rs. 50,000/- on account of alleged non furnishing of bills of expenditure on agriculture.

2.4.1 Aggrieved the assessee preferred an appeal before the First Appellate Authority challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the additions on merits. The Ld. CIT (A) dismissed the legal ground challenging the assumption of jurisdiction u/s 153A of the Act but deleted additions pertaining to sale of shares of M/s M.P. Investment Ltd. and M/s Quest Financial Services Ltd. on merits. Now, both the assessee as well as the Department has preferred an appeal before the ITAT in which the following grounds have been raised:

Grounds of ITA 2087/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) – XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) – XXXI erred in confirming the addition of Rs. 34,82,351/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd. 3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

Grounds of ITA 2755/Del/12:

1. “The order of the Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 30,74,684/- made by the AO u/s 68 of the I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s M.P. Investment Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 47,80,252/- made by the AO u/s 68 of the I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s Quest Financial Services Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.” 4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the disallowance of Rs. 2,52,124/- made by the AO on account of disallowing the expenses claimed against interest income without appreciating the fact that the assessee has not carried out any business activities. 5. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of this appeal.”

2.4.2 The Ld. AR filed written submissions which are being summarized and reproduced as under:

“The assessee wishes to submit that search in this case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether the assessments were abated or not within the meaning of second proviso to sec. 153A of the Act. 2003-04 05.03.2004 Did not abate From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT- DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 Corporation Ltd. taxmann.com 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 Corporation Ltd. taxmann.com 78 (Bombay HC) dated 21.04.2015

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015. The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004- 05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original

assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.4.3 The Ld. DR submitted that that the addition was justified in view of the fact that the broker did not respond to the summons issued by the Department. The Ld. DR submitted that the deletion made by the Ld. CIT (A) of Rs. 3,074,687/- on account of sale of shares of M/s M.P.

Investment Ltd. and of Rs. 4,780,252/- on account of sale of shares of M/s Quest Financial Services Ltd. was not justified because the onus on the assessee cannot be shifted to the Revenue. He emphasized that here the bona fides of the broker were under question and the dealings with all the three companies were apparently suspicious. The Ld. DR heavily relied on the findings of the AO and vehemently argued that in view of the specific inconsistencies pointed out by the AO, the relief granted to the assessee by the Ld. CIT (A) was not legally tenable.

2.4.4 We have heard the rival submissions and have also perused the material on record. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed making various additions. It is assessee’s claim that the addition was not tenable as the regular/original return had been filed wherein the particulars relating to the addition has been disclosed and the same had been accepted by the AO in the assessment made u/s 143 (3) of the Act. On examination of the records, it is seen that this contention of the assessee is correct in so far as consequent to information received from the Investigation Wing Agra, the erstwhile AO had made detailed enquiries on this issue and had then accepted the assessee’s claim in the assessment order framed u/s 143(3) of the Act. Now, it is seen from the records that no material has been found during the search to justify the addition and the assessment order does not make any reference whatsoever to any seized material on which the impugned addition can be said to be based. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 11,337,287/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee.

The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A and has summarized the legal position in Para 37 of its order (which has been reproduced in earlier part of this order). In the light of the aforesaid observations of the Hon’ble Delhi High Court, we hold that on the facts and circumstances of the case, the Ld. CIT (A) was not correct in upholding the assessment framed outside the search material and hence, while allowing ground nos. 1 and 2 of the assessee’s appeal, we delete the entire additions made in the assessment proceedings u/s 153A of the Act as the impugned additions have been made without any reference to any seized material. As a result, on similar reasoning, the Department’s appeal becomes academic and the same stands dismissed.

2.4.5 In the result, the appeal of the assessee is allowed and the appeal of the Department is dismissed.

2.5 Smt. Kusum Lata Garg – – AY 04-05:

This appeal has been preferred by the assessee against the order dated 20/03/2012 passed by the Ld. CIT (A) – XXXI, New Delhi. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed her return of income declaring income of Rs. 13,78,318/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 46,88,865/- from sale of shares of M/s Nageshwar Investment Ltd. and that the assessee had claimed to have received a total consideration of Rs. 47,97,550/-, in this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- and as high as Rs. 107/- on 02.05.2003. The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department. The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005. The AO was of the opinion that both sales as well as purchase transactions were arranged once as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. The AO further noted that these shares were purchased in F.Y. 01-02 at a meager rate and sold on 28.04.2003 at a high price. The AO observed that the assessee had claimed to have received an amount of Rs. 47,97,550/- as sales consideration on the sale of shares of M/s Nageshwar Investment Ltd. and had declared long term capital gains of Rs. 46,88,865/- on which deduction u/s 54F of the Act has also been claimed. The AO proceeded to make an addition of Rs. 48,93,501/- u/s 68 of the Act in respect of the sale of shares. In addition the AO also made an addition of Rs. 1 lakh on account of non furnishing of bills relating to expenses on agriculture.

2.5.1 Aggrieved the assessee approached the first appellate authority challenging the issue of assumption of jurisdiction u/s 153A of the Act. The assessee also challenged the addition on merits. The Ld. CIT (A) did not accept the assessee’s challenge on the legal ground of assumption of jurisdiction u/s 153A of the Act and also confirmed the addition on merits. Now, the assessee approached the Tribunal and has raised the following grounds of appeal:

Grounds of ITA 2088/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) – XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) – XXXI erred in confirming the addition of Rs. 48,93,501/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd.

3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

2.5.2 The Ld. AR filed written submissions which are summarized and reproduced as under:

“The assessee wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether the assessments were abated or not within the meaning of second proviso to sec. 153A of the Act. 2004-05 31.03.2005 Did not abate From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted.

The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. The Hon’ble High Court has laid down following propositions of law in the aforesaid case. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. The assessee does not want to burden the Hon’ble Tribunal with all of these cases. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC)

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015. The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004- 05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware

of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.5.3 The Ld. DR vehemently supported the orders of the AO as well as the Ld. CIT (A) and submitted that the additions were fully justified and ought to be upheld.

2.5.4 We have heard the rival submissions and have also perused the material on record. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed making various additions. It is assessee’s claim that the addition was not tenable as the regular/original return had been filed wherein the particulars relating to the addition has been disclosed and the same had been added by the AO in the assessment made u/s 143 (3) of the Act. It is seen that the assessee had preferred an appeal before the Ld. CIT (A) who had deleted these additions and on further appeal by the Department, ITAT Agra Bench had also upheld the CIT (A)’s order. Subsequently, revenue’s appeal before the Hon’ble High Court was also dismissed. It is seen from the records that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However an assessment which has been contested up to the High Court cannot be said to be pending. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 4,893,501/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee.

The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A and respectfully following the same, we deem it appropriate to delete all the additions made in the assessment proceedings u/s 153A of the Act as being not legally tenable. Therefore, ground nos. 1 and 2 of the assessee’s appeal are allowed.

2.5.5 In the result, the appeal of the assessee is allowed.

2.6 Smt. Kusum Lata Garg – & CO 253/Del/2012 AY 06-07:

Department against the order dated 09/03/2012 passed by the Ld. CIT (A) – XXXI, New Delhi, whereas the CO has been preferred by the assessee. In this case also, notice u/s 153A of the Act was issued as a consequence of action u/s 132 of the Act on the Raj Darbar Group of Companies. Here also it has been the contention of the assessee that no incriminating materials were found in the case of the assessee. Pursuant to the notice u/s 153A, the assessee filed her return of income declaring income of Rs. 76,53,150/-. During the course of the assessment, the AO observed that the assessee was the holder of 16.65% shares of M/s Tarupit Exports Ltd. and that the shares had been transferred to M/s Vipul Limited on 19/12/2005. The AO further observed that the other shareholders had also sold their shares to the same company and proceeded to hold that the plot in the company held as an asset was deemed to be transferred to M/s Vipul Limited and by applying provisions of section 50C on the sale of the plot by the assessee made an addition of Rs. 91,57,450/- on account of short term capital gain in pursuance to section 2(47)(vi) and section 50C of the Act by considering the transfer of shares as transfer of ownership of the land. The AO further disallowed an amount of Rs. 1 lakh from agricultural expenses on the ground of non furnishing of bills related to agricultural expenses. The AO also made an addition of Rs. 1,54,987/- being expenses debited under various heads in the profit and loss account.

2.6.1 The assessee preferred an appeal before the Ld. CIT (A) challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the addition on merits. The Ld. CIT (A) did not accept the assessee’s contention regarding assumption of jurisdiction u/s 153A but deleted both the additions/disallowances on merits. Aggrieved, the Department has preferred this appeal before the Tribunal and the assessee has filed a CO. The grounds taken by both the parties are as under:

Grounds of ITA No. 2344/Del/2012:

1. “The order of the Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 91,57,450/- made by the Assessing Officer on account of Short Term Capital gain in pursuant to section 2(47)(vi) and section 50C of the Income Tax Act, 1961 by considering the mere transfer of shares as transfer of ownership of land held as fixed assets by the company in which the assessee was a shareholder.

3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the disallowance of expenses incurred amounting to Rs. 1,54,987/- by the assessee towards interest paid on loan, printing and stationery expenses made by the Assessing Officer.

4. The order of the Ld. CIT (A) is perverse in law and on facts.

5. The appellant craves leave to add, amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

Grounds of CO No. 253/Del/12:

1. “That the CIT (A) has erred in law as well as on facts in rejecting the contention that impugned assessment order is bad in law as the assessment as well as additions or computation of income has not been framed/made on the basis of any material seized pursuant to an action taken under section 132 of the Act in the case of Rajdarbar Group which itself makes the assessment contrary to law, illegal leading to be quashed.

2. The respondent craves leave for addition, modification, alteration, amendment of any of the cross objection.”

2.6.2 The Ld. AR filed written submissions which are summarized and reproduced as under:

“The assessee wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether the assessments were abated or not within the meaning of second proviso to sec. 153A of the Act. 2006-07 31.03.2007 Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 Page 80

8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well. 1. The assessee had sold shares of the company only and did not transfer the land. There was no legal basis for applying section 50C of the IT act on assumed circle rate basis. 2. Land was shown as stock in trade in the balance sheet of the company where the assessee was the shareholder. Section 50C of the Act did not apply on stock in trade even otherwise. 3. The assessee cannot be assumed to be 16.6% owner of the land for the reason that it held 16.6% of shares of the company which owned land because company is a distinct legal person. 4. The company had very substantial amount of loans as has been pointed out by the Ld. CIT (A) in his appellate order. 5. Book value of land/inventory in the books of company as on 31.3.2006 was Rs. 7,77,09,789/-. If for argument sake the circle sale value of the land taken by the AO at Rs. 8,33,00,000/- is assumed to be correct action then the capital gains taxable will be much less than the capital gains offered by the assessee. The AO cannot be allowed to have sale value/assumed sale value of land and cost of purchase of shares to work out the capital gains.”

2.6.3 The Ld. DR submitted that the action of the AO in making an addition of Rs. 9,157,450/- on account of short term capital gain by virtue of provisions of section 2(47)(vi) and 50C was fully justified. The Ld. DR vehemently argued that the Ld. CIT (A) had erred on facts as well as in law in deleting the addition in face of the detailed findings and observations of the AO.

2.6.4 We have heard the rival submissions and have perused the records. A perusal of the assessment order reveals that addition has been made without any reference to any incriminating material/document found during the course of the search and is based entirely on fresh evidences gathered during the course of the assessment proceedings u/s 153A of the Act. It is undisputed that in the instant appeal the assessment did not abate consequent upon the search within the meaning of second proviso to section 153A of the Act. The Ld. CIT (A) has also not made any reference to any incriminating material/document in the impugned order.

Therefore, the additions made in the assessment framed u/s 153A cannot be upheld as there is no reference to any incriminating material whatsoever. We have no option but to hold the impugned additions as being bad in law. We, accordingly, allow the CO of the assessee and dismiss the appeal filed by the Department as having become academic in view of our allowing the CO of the assessee.

2.6.5 In the result, the CO of the assessee is allowed and the appeal of the Department is dismissed.

2.7 Rakesh Kumar Garg – and 2756/Del/2012 – AY 03-04: the order dated 20/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi, whereas ITA No. 2078 is the cross appeal by the assessee. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed his return of income declaring income of Rs. 35,77,586/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 1,03,20,630/- from sale of shares of M/s Nageshwar Investment Ltd., M/s Quest Financial Ltd. and M/s MP Investment Ltd. and the assessee had claimed to have received a total consideration of Rs. 1,05,15,970/-. In this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- and as high as Rs. 107/- on 02.05.2003. The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department. The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005. The AO was of the opinion that both sales as well as purchase transactions were arranged ones as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. The AO also observed that the assessee had claimed to have received Rs. 32,13,270/- as sale consideration for shares of M/s MP Investments and Rs. 46,35,200/- for shares of M/s Quest Financial Ltd on 26/02/2003 and 18/02/2003 respectively which were claimed to have been purchased on 06/11/2011 and 03/11/2001 for Rs. 96840/- and Rs. 1,01,000/- respectively.

The AO also noted that deduction u/s 54F of the Act has been claimed against the long term capital gains on these shares.

It was the assessee’s plea before the AO that these amounts should not be treated as unexplained cash credits because in the earlier assessment order made u/s 143(3) of the Act in the case of the wife of the assessee consequent upon an action taken by the Department by the Investigation Wing Agra, the same transactions were held as genuine. However, the AO proceeded to make an addition of Rs. 1,07,26,290/- as unexplained cash credit u/s 68 of the Act on account of transfer of shares of M/s Nageshwar Investment Ltd., M/s 2.7.1 Aggrieved the assessee preferred an appeal before the Ld. CIT (A) challenging the assumption of jurisdiction u/s 153A of the Act. The assessee also challenged the addition on merits. The Ld. CIT (A) confirmed the addition of Rs. 27,20,850/- (including 2% expenditure) and deleted the additions of Rs. 32,77,536/- and Rs. 47,27,904/- on account of sale of shares of M/s M.P. Investment Ltd. and Quest Financial Services Ltd. respectively.

2.7.2 Aggrieved, the Department as well as the assessee has preferred an appeal before the ITAT and have raised the following grounds of appeal:

Grounds of ITA 2756/Del/12:

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 32,77,535/- made by the Assessing Officer u/s 68 of I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s M.P. Investment Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 47,27,904/- made by the Assessing Officer u/s 68 of the I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s Quest Financial Services Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

Grounds of ITA 2078/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) XXXI erred in confirming the addition of Rs. 27,20,850/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd. 3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

2.7.3 The Ld. AR filed written submissions which are reproduced as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below:

A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2003-04 08.09.2003 Yes 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search.

XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015.

The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004-05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.7.4 The Ld. DR submitted that that the addition was justified in view of the fact that the broker did not respond to the summons issued by the Department. The Ld. DR submitted that the deletion made by the Ld. CIT (A) of Rs. 3,277,535/- on account of sale of shares of M/s M.P.

Investment Ltd. and of Rs. 4,727,904/- on account of sale of shares of M/s Quest Financial Services Ltd. was not justified because the onus on the assessee cannot be shifted to the Revenue. He emphasized that here the bona fides of the broker were under question and the dealings with all the three companies were apparently suspicious. The Ld. DR heavily relied on the findings of the AO and vehemently argued that in view of the specific inconsistencies pointed out by the AO, the relief granted to the assessee by the Ld. CIT (A) was not legally tenable.

2.7.5 We have heard the rival submissions and have also perused the material on record. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed making various additions. It is seen from the records that no material has been found during the search to justify the addition. A perusal of the assessment order shows that the additions made by the AO were not based on any incriminating documents and, therefore, the additions made are indisputably outside the scope of assessment u/s 153A of the Act. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However, in the instant appeal, the assessment did not abate. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 10,726,290/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A in Para 37 of its order (which has been reproduced in earlier part of this order). Respectfully following the ratio of judgment laid down by the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra), we allow ground nos. 1 and 2 of the assessee’s appeal and delete all the additions made in the assessment framed u/s 153A of the Act.

Consequently, on similar reasoning, the appeal filed by the Department stands dismissed.

2.7.6 In the result, the appeal filed by the assessee is allowed and appeal filed by the Department is dismissed.

2.8 Rakesh Kumar Garg – – AY 04-05:

This appeal has been preferred by the assessee against the order dated 20/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed his return of income declaring income of Rs. 14,21,716/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 47,25,145/- from sale of shares of M/s Nageshwar Investment Ltd. and that the assessee had claimed to have received a total consideration of Rs. 48,32,200/-. In this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- on 02/07/2002 and as high as Rs. 107/- on 02.05.2003. The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department.

The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005. The AO was of the opinion that both sales as well as purchase transactions were arranged ones as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. The AO further noted that these shares were purchased in F.Y. 01-02 at a meager rate and sold at a high price. The AO proceeded to make an addition of Rs. 49,28,844/- u/s 68 of the Act in respect of the sale of shares and including 2% expenses.

2.8.1 Aggrieved the assessee preferred an appeal before the Ld. CIT (A) challenging the assumption of jurisdiction u/s 153A of the Act as well as on merits. However, the appeal of the assessee was dismissed on both the counts and now the assessee has approached the ITAT and has raised the following grounds of appeal:

Grounds of ITA 2079/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion?

2. That on the facts and circumstances of the case, the Ld. CIT (A) XXXI erred in confirming the addition of Rs. 49,28,844/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd.

3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

2.8.2 The Ld. AR submitted written submissions which are reproduced as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2004-05 28.03.2005 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act.

Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below:

S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015

3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015. The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed.

Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004- 05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.8.3 The Ld. DR vehemently supported the order of the AO as well as the Ld. CIT (A) and submitted that in view of categorical findings of both the authorities below, the addition ought to be upheld.

2.8.4 We have heard the rival submissions and have perused the records. A perusal of the assessment order reveals that addition has been made without any reference to any incriminating material/document found during the course of the search and is based entirely on fresh evidences gathered during the course of the assessment proceedings u/s 153A of the Act. It is undisputed that in the instant appeal the assessment did not abate consequent upon the search within the meaning of second proviso to section 153A of the Act. The Ld. CIT (A) has also not made any reference to any incriminating material/document while confirming the additions in the impugned order. Therefore, the additions made in the assessment framed u/s 153A cannot be upheld as there is no reference to any incriminating material whatsoever. We have no option but to delete all the additions in the impugned assessment order as being bad in law. We, accordingly, allow ground nos. 1 and 2 of the assessee’s appeal.

2.8.5 In the result, the appeal of the assessee is allowed.

2.9 Rakesh Kumar Garg – AY 06-07 :

This appeal has been preferred by the assessee against the order dated 13/03/2013 passed by the Ld. CIT (A) – XXXI, New Delhi. In this year also the assessee was issued notice u/s 153A of the Act pursuant to search operation u/s 132 on the Raj Darbar Group of Companies and its associates.

Pursuant to the notice, the assessee filed his return of income declaring income of Rs. 10,35,937/-. While completing the assessment the AO observed that the documents submitted by the assessee did not suggest that the assessee was carrying any business or profession and accordingly held that since no business activities were carried out during the year under consideration, interest payment of Rs. 9,51,557/- could not be allowed as an expenditure and the same was added to the income of the assessee. It was the assessee’s contention before the AO that no incriminating material was found during the course of search.

2.9.1 Aggrieved the assessee preferred an appeal before the first appellate authority raising the legal ground that the assumption of jurisdiction u/s 153A of the Act was illegal.

The addition was also contested on merits. However, the Ld. CIT (A) dismissed the assessee’s appeal on both the counts.

Now, the assessee has approached the ITAT and has raised the following grounds of appeal:

Grounds of ITA 3185/Del/13 :

1. “That on the facts and circumstances of the case and in law, the CIT (A) has erred in not holding that the notice issued u/s 153A and the assessment order passed u/s 153A/143(3) are illegal, bad in law and without jurisdiction.

2. The order of the CIT (A) is bad in law, as the CIT (A) has not considered that the assessment order in this case has not been passed on the basis of any material seized in a search action taken u/s 132 of the Income Tax Act, 1961. 3. The order of the CIT (A), on the facts and circumstances of the case, is perverse as it does not take into consideration the relevant documents brought on record and submissions of the assessee. 4. The CIT (A) has erred on the facts and in law in confirming the addition of Rs. 9,51,557/- made by the AO while disallowing interest expenses claimed by the Appellant. 5. The CIT (A) has erred on the facts and in law in not considering that the interest of Rs. 9,51,557/- has been utilized in making payment of unsecured loan and are therefore fully allowable as deduction under the provisions of Income Tax Act, 1961.

6. The CIT (A) has erred on the facts and in law in not considering that the interest of Rs. 9,51,557/- does not fall under the head “Income from Other Sources” and said the interest is fully allowable as deduction to the Appellant under the head “Income from Profits or gains of Business or Profession”.

7. The assessee craves leave to add, alter or modify the aforesaid ground and craves leaves to file additional grounds. 8. The aforesaid grounds are taken without prejudice to each other.”

2.9.2 The Ld. AR filed written submissions which are summarized as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2006-07 30.03.2007 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below:

S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL 2.9.3 The Ld. DR vehemently supported the order of the AO as well as the Ld. CIT (A) and submitted that in view of categorical findings of both the authorities below, the addition ought to be upheld.

2.9.4 We have heard the rival submissions and have perused the records. A perusal of the assessment order reveals that addition has been made without any reference to any incriminating material/document found during the course of the search and is based entirely on fresh evidences gathered during the course of the assessment proceedings u/s 153A of the Act. It is undisputed that in the instant appeal the assessment did not abate consequent upon the search within the meaning of second proviso to section 153A of the Act. The Ld. CIT (A) has also not made any reference to any incriminating material/document while confirming the additions in the impugned order. Therefore, the additions made in the assessment framed u/s 153A cannot be upheld as there is no reference to any incriminating material whatsoever. We have no option but to delete the impugned additions as being bad in law. We, accordingly, allow ground nos. 1 to 8 of the assessee’s appeal.

2.9.5 In the result, the appeal of the assessee is allowed.

2.10 Shri Devi Dass Garg – and 2760/Del/2012 AY 03-04: order dated 20/03/2012 passed by the Ld. CIT (A) – XXXI, New Delhi, whereas ITA No. 2760 is the cross appeal filed by the Department. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed his return of income declaring income of Rs. 17,35,192/- and agricultural income of Rs. 8,52,989/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 1,12,89,717/- from sale of shares of M/s Nageshwar Investment Ltd., M/s Quest Financial Ltd. and M/s MP Investment Ltd. and the assessee had claimed to have received a total consideration of Rs. 1,16,00,010/-. In this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- and as high as Rs. 107/- on 02.05.2003.

The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department. The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005.

The AO was of the opinion that both sales as well as purchase transactions were arranged once as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. The AO also observed that the assessee had claimed to have received Rs. 31,16,010/- as sale consideration for shares of M/s MP Investments and Rs. 47,80,000/- for shares of M/s Quest Financial Ltd. on 10/03/2003 and 21/02/2003 respectively which were claimed to have been purchased on 09/11/2001 and 30/11/2001 for Rs. 96,840/- and Rs. 1,01,000/- respectively. The AO also noticed that the assessee had claimed deduction u/s 54F of the Act in respect of the long term capital gains on the sale of the aforesaid shares. The AO proceeded add back an amount of Rs. 1,18,32,010/- (including 2% for expenses) to the income of the assessee on account of unexplained cash credit u/s 68 of the Act in relation to the alleged share transactions. The AO also added back a sum of Rs. 2,35,482/- being expenses debited under various heads in the profit and loss account and also disallowed Rs. 70,000/- on account of non furnishing of the bills relating to expenditure on agriculture.

2.10.1 Aggrieved the assessee preferred an appeal before the Ld. CIT (A) challenging the validity of assumption of jurisdiction u/s 153A of the Act as well as challenging the additions on merits. The Ld. CIT (A) rejected the assessee’s ground relating to the validity of proceedings u/s 153A but give relief on merits by deleting additions of Rs. 31,78,330/- and Rs. 48,55,200/- on account of sale of shares of M/s MP respectively. The Ld. CIT (A), however, confirmed the addition of Rs. 37,98,480/- on account of sale of shares of M/s Nageshwar Investment Ltd. Now, both the assessee and the Department have approached the ITAT and have raised the following grounds of appeal:

Grounds of ITA No. 2085/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) – XXXI erred in confirming the addition of Rs. 37,98,480/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd. u/s 68 of the Income Tax Act, 1961. 3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

Grounds of ITA No. 2760/Del/12:

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 31,78,330/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961 as unexplained cash credit on account of sale of shares of M/s M.P. Investment Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

3. On the facts and in the circumstances of the case, the Ld.CIT (A) has erred in deleting the addition of Rs. 48,55,200/- made by the AO Assessing Officer u/s 68 of I.T. Act, 1961 as unexplained cash credit on account of sale of shares of M/s Quest Financial Services Ltd. without appreciating the fact that the transaction of sale of shares is not genuine but an arranged deal managed by the assessee.

4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the disallowance of Rs. 2,35,482/- made by the Assessing Officer on account of disallowing the expenses claimed against interest income without appreciating the fact that the assessee has not carried out any business activities. 5. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

2.10.2 The Ld. AR filed written submissions which are being reproduced as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below:

A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2003-04 31.03.2004 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search.

XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015.

The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. Assessing Officer’s mention of SEBI enquiries is incorrect, irrelevant and misleading. In the SEBI report there is no mention that the assessee was in any way involved in the alleged rigging of the M/s Nageshwar Investment Ltd. Even the broker through whom the assessee transacted in shares did not find any mention in the SEBI report. The SEBI investigations were in fact on account of certain price rise in the shares of the M/s Nageshwar Investment Ltd. during the period April 2005 to November 2005. Trading in the M/s Nageshwar Investment Ltd. scrip was suspended for a very brief period and was revoked on 31.5.2006 whereas transactions in the case of the assessee which have been questioned pertain to FY 2003-04 & FY 2004-05 which was much before the alleged period of rigging.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it was against the department.”

2.10.3 The Ld. DR submitted that that the addition was justified in view of the fact that the broker did not respond to the summons issued by the Department. The Ld. DR submitted that the deletion made by the Ld. CIT (A) of Rs. 3,178,330/- on account of sale of shares of M/s M.P.

Investment Ltd. and of Rs. 4,855,200/- on account of sale of shares of M/s Quest Financial Services Ltd. was not justified because the onus on the assessee cannot be shifted to the Revenue. He emphasized that here the bona fides of the broker were under question and the dealings with all the three companies were apparently suspicious. The Ld. DR heavily relied on the findings of the AO and vehemently argued that in view of the specific inconsistencies pointed out by the AO, the relief granted to the assessee by the Ld. CIT (A) was not legally tenable.

2.10.4 We have heard the rival submissions and have also perused the material on record. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed making various additions. It is assessee’s claim that the addition was not tenable as the regular/original return had been filed wherein the particulars relating to the addition has been disclosed and the same had been accepted by the AO in the assessment made u/s 143 (3) of the Act. It is seen from the records that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However an assessment which has been finalized u/s 143(3) of the Act cannot be said to be pending.

The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition of Rs. 11,832,010/- has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla in dated 28/08/2015 has examined thread bare the provisions of section 153A and has summarized the legal position in Para 37 of its decision (which has been reproduced in an earlier part of this order). Respectfully following the ratio of the judgment in the case of CIT vs. Kabul Chawla (supra), we have no hesitation in holding that the additions in the instant appeal were made by the AO without being based on any incriminating document found during the course of the search and, therefore, the additions made in the assessment u/s 153A are patently and legally wrong and we delete the same. We allow ground nos. 1 and 2 of the assessee’s appeal.

In view of our adjudication of the assessee’s appeal, the appeal preferred by the Department becomes academic and the same is dismissed.

2.10.5 In the result, the appeal filed by the assessee is allowed, whereas the appeal filed by the Department is dismissed.

2.11 Devi Dass Garg – and 2761/Del/2012 – AY 04-05: order dated 30/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi, whereas ITA No. 2761 is the cross appeal filed by the Department. In this case also notice was issued u/s 153A of the Act subsequent to an action u/s 132 of the Act on the Raj Darbar Group of Companies and its associates. Pursuant to the notice, the assessee filed his return of income declaring income of Rs. 10,32,827/- and agricultural income of Rs. 13,77,751/-. During the course of assessment proceedings, the AO observed that the assessee had claimed long term capital gains of Rs. 46,40,105/- from sale of shares of M/s Nageshwar Investment Ltd. and that the assessee had claimed to have received a total consideration of Rs. 47,53,850/-. In this case also the AO observed that the shares were purchased in the month of November, 2001 and sold during February and March, 2003. The AO referred to the enquiries made from Calcutta Stock Exchange, wherein it was revealed that the price of scrip of M/s Nageshwar Investment Ltd. was as low as Rs. 2/- on 02/07/2002 and as high as Rs. 107/- on 02.05.2003. The AO also referred to the enquiry made by the SEBI against share brokers who had traded in the scrip of M/s Nageshwar Investment Ltd. The AO also noted that M/s Bubna Stock Broking Services Ltd. had failed to reply to the enquiries conducted by the Department.

The AO further noted that the SEBI has informed that the trading in the scrip of M/s Nageshwar Investment Ltd. was suspended w.e.f. 22.11.2005. The AO was of the opinion that both sales as well as purchase transactions were arranged once as no details from whom these shares were purchased and to whom these shares were sold have been furnished by the assessee. It was the assessee’s contention before the AO that in the case of the assessee and other family members for A.Y. 04-05, additions were made by ACIT, Central Circle, Agra vide his order passed u/s 143(3) of the Act against which the assessee and other family members had filed appeals before the Ld. CIT (A) – II, Agra and got relief for the additions made by the AO in respect of long term capital gains. The Department had preferred an appeal before the ITAT, Agra Bench which confirmed the orders of the Ld. CIT (A). On still further appeal by the Department, the Hon’ble High Court had dismissed the Department’s appeal and, therefore, these additions were not justifiable. However, the AO proceeded to add back Rs. 48,48,927/- (including 2% expenses) to the income of the assessee with regard to the sale of shares in 2.11.1 The AO had further observed that there had been a sale of agricultural land at Bangalore that had been examined by the AO in his earlier assessment completed u/s 143(3) of the Act on 29/12/2006. It was also stated that further enquiries had been initiated by the erstwhile AO in this regard to ascertain the status of the land which was claimed by the assessee as agricultural land situated in Gram Devarabisanahalli, Barthur Hobli, Bangalore and that the same were pending as on the date of assessment order. The AO further observed that Tehsildar Bangalore vide letter no. ADM/CR/142/143/08-09 dated 02/11/2008 has informed that the distance of Gram Devarabisanahalli, Barthur Hobli, Bangalore from the nearest Bangalore Mahanagar Palika Limit namely Konena Agrahara, HAL, Main Gate is 6 k.m. and, therefore, the compensation of Rs. 5,62,50,000/- was to be treated as a short term capital gain.

2.11.2 The AO made a further addition of Rs. 1 lakh out of agricultural income of Rs. 13,77,751/- as undisclosed income from other sources.

2.11.3 Aggrieved, the assessee preferred an appeal before the first appellate authority challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the additions on merits. Ld. CIT (A) did not accept the assessee’s ground relating to validity of the proceedings u/s 153A of the Act. The Ld. CIT (A) also confirmed the addition of Rs. 48,48,927/- on account of sale of shares of M/s Nageshwar Investment Ltd. However, the addition of Rs. 5,62,50,000/- on account of sale of agricultural land and the addition on account of agricultural expenses were deleted. Aggrieved both the assessee as well as the Department has preferred appeals before the ITAT and the following grounds have been raised:

Grounds of ITA No. 2086/Del/12:

1. “Whether on the facts and circumstances of the case, the Ld. CIT (A) XXXI is correct in upholding the assessment framed outside the search material and after the change of opinion? 2. That on the facts and circumstances of the case, the Ld. CIT (A) – XXXI erred in confirming the addition of Rs. 48,48,927/- including 2% expenditure on account of sale of shares of M/s Nageshwar Investments Ltd. u/s 68 of the Income Tax Act, 1961. 3. The assessee craves for the addition, modification and deletion of the grounds of appeal.”

Grounds of ITA No. 2761/Del/12:

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 5,62,50,000/- made by the Assessing Officer on account of sale of agricultural land holding the same as short term capital gain by admitting the additional evidence in contravention of Rule 46A of Income Tax Rules, 1962. Page 126

3. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

2.11.4 The Ld. AR filed written submissions which are being reproduced herein under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2004-05 28.03.2005 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 Page 128

8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL We also wish to mention that additions in the identical manner were made and sustained in the case of Sh. Santosh Kumar Garg, a family member of the assessee where search was conducted along with the assessee. Hon’ble Tribunal has disposed off the aforesaid matter vide order dated 29.10.2015. The department filed appeal against the aforesaid order of the Hon’ble Tribunal before the Hon’ble Delhi High Court and the appeal has been dismissed. Considering the aforesaid facts and circumstances of the matter, the case of the assessee may kindly be considered to be fully covered and its appeal may please be allowed & department’s appeal may please be dismissed. Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

2. The AO’s reliance on the additions in the case of Sh. Devi Dass Garg in the original assessment proceedings in his case on the identical issue is also not helpful to the department. The additions made were deleted by the Hon’ble Tribunal vide order dated 31.08.2009. The AO should have been aware of this order when he passed the impugned assessment order yet he chose to ignore it as it

was against the department.

2.11.5 The Ld. DR agitated the impugned action of the Ld. CIT (A) in deleting the addition of Rs. 56,250,000/- on account of sale of agricultural land by admitting additional evidence in contravention of Rule 46A of the Income Tax Rules, 1962 and vehemently supported the order of the AO.

2.11.6 We have heard the rival submissions and have perused the material on record. As far as the issue of sale of shares is concerned, it is seen that these transactions were added back under the original assessment order made u/s 143(3) of the Act but on appeal were deleted by the Ld. CIT (A), Agra and no further appeal was preferred by the Department on this issue. Similarly, the issue of taxability of long term capital gains on the sale of agricultural land was examined and accepted by the AO u/s 143(3) of the Act. A perusal of the assessment order u/s 153A of the Act reveals that no reference whatsoever has been made to any incriminating material on which these additions have been based. The Ld. CIT (A) also does not make any reference to any incriminating material seized during the course of the search. Therefore, the additions made in the instant appeal are undisputedly outside the scope of the assessment u/s 153A of the Act and we have no option but to delete the entire additions made in the assessment as having been made without any incriminating material/document. Reliance is placed on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) for the same. We, accordingly, allow ground nos. 1 and 2 of the assessee’s appeal. In view of our adjudication in the assessee’s appeal, on similar reasoning, we dismiss the Department’s appeal.

2.11.7 In the result, the appeal of the assessee is allowed, whereas the Department’s appeal is dismissed.

2.12 Devi Dass Garg – and CO 176/Del/2013 AY 05-06: order dated 30/03/2012 passed by the Ld. CIT (A)-XXXI, New Delhi, whereas CO 176 has been preferred by the assessee.

In this case also notice u/s 153A was issued as a consequence of search and seizure operation u/s 132 of the Act carried out in the Raj Darbar Group of cases. In response, return of income was filed declaring an income of Rs. 16,06,973/- and Rs. 18,06,900/- as agriculture income.

During the course of assessment proceedings, it was gathered that land situated at Devarabisanahalli Village, Banglore, Karnataka was acquired by the Government during the year and a compensation of Rs. 2,03,71,875/- was received by the assessee. The assessee claimed that this land was an agricultural land and, therefore, not a capital asset within the meaning of section 2(14) of the Act and, therefore, no capital gain was declared on this transaction. The AO further observed that Tehsildar Bangalore (East Taluk) vide letter no. ADM/CR/142/143/08-09 dated 02/11/2008 has informed that the distance of Gram Devarabisanahalli, Barthur Hobli, Bangalore from the nearest Bangalore Mahanagar Palika Limit namely Konena Agrahara, HAL, Main Gate is 6 k.m. and, therefore, the assessee’s claim that the above land was situated at a distance of 11 k.m. from Banglore Nagar Mahapalika does not sustain. The AO opined that the compensation of Rs. 2,03,71,875/- was to be treated as a short term capital gain. The AO further disallowed a sum of Rs. 3,79,569/- debited to the profit and loss account under various heads of expenditure. The AO also disallowed an amount of Rs. 1,50,000/- on account of non furnishing of complete bills and vouchers relating to agriculture expenditure.

2.12.1 Aggrieved, the assessee preferred an appeal before the first appellate authority challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the addition on merits. The Ld. CIT (A) dismissed the assessee’s challenge on the legal ground of assumption of jurisdiction u/s 153A of the Act. He, however, deleted the additions on merits. Now, the Department has preferred an appeal against the said order, whereas the assessee has preferred a CO. The grounds taken by both the parties are as under:

Grounds of ITA No. 2762/Del/12:

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,03,71,875/- made by the Assessing Officer on account of sale of agricultural land holding the same as short term capital gain by admitting the additional evidence in contravention of Rule 46A of Income Tax Rules, 1962. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the disallowance of expenses incurred amounting to Rs. 3,79,569/- towards interest paid on loan, bank charges and telephone expenses without appreciating the fact that the assessee has not carried out any business activities and the assessee also failed to establish that interest expenses were incurred for earning interest income. 4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

Grounds of CO No. 176/Del/13:

“The grounds stated herein are without prejudice to each other:

1. 1. That on the facts and circumstances of the case the AO has erred in passing the order u/s 153A and the said order illegal and bad in law.

2. That in the absence of any incriminating material found during search, the additions made by the AO while completing assessment u/s 153A rws 143(3) are unjust, arbitrary, and bad in law and without jurisdiction.

3. That the assessment for relevant assessment year was not pending at the time of search hence the same was not abated, as such assessment made u/s 153A and addition are illegal, bad in law and without jurisdiction.

4. That all the above grounds are independent to each other and mutually exclusive.

5. The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing.”

2.12.2 The Ld. AR filed written submissions which are reproduced as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether Whether the assessed u/s assessments were 143(1) or 143(3) abated or not within the meaning of second proviso to sec. 153A of the Act. 2005-06 10.01.2006 Yes, 143(3) Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412

(Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below: S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well.

1. The very basis on which the AO held agricultural land to be non agricultural land was held to be incorrect on the basis of documentary evidences.

2. The Ld. CIT (A) has himself measured the distance using the Google Maps technology and found that the agricultural land was located beyond 8 kms.

3. Original assessment was completed u/s 143(3) of the Act in Central Circle, Agra and no mention of letter having been written to the concerned authority was made as incorrectly mention by the AO in the impugned order.”

2.12.3 The Ld. DR agitated the impugned action of the Ld. CIT (A) in deleting the addition of Rs. 20,371,875/- on account of sale of agricultural land by admitting additional evidence in contravention of Rule 46A of the Income Tax Rules, 1962 and vehemently supported the order of the AO.

2.12.4 We have heard the rival submissions and have perused the material on record. It is seen that the issue of taxability of long term capital gains on the sale of agricultural land was earlier examined and accepted by the AO u/s 143(3) of the Act. A perusal of the assessment order u/s 153A of the Act reveals that no reference whatsoever has been made to any incriminating material on which these additions have been based. The Ld. CIT (A) also does not make any reference to any incriminating material seized during the course of the search. Therefore, the additions made in the instant appeal are undisputedly outside the scope of the assessment u/s 153A of the Act and we have no option but to hold the additions as having been made without any incriminating material/document. Reliance is placed on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) for holding the same. We, accordingly, allow the assessee’s CO. On similar reasoning as in the CO, we dismiss the Department’s appeal.

2.12.5 In the result, the CO of the assessee is allowed, whereas the Department’s appeal is dismissed.

2.13 Shri Devi Dass Garg – and CO 252/Del/2012 – AY 06-07: order dated 09/03/2012 passed by the Ld. CIT (A) – XXXI, New Delhi, whereas the CO has been preferred by the assessee. In this case also, notice u/s 153A of the Act was issued as a consequence of action u/s 132 of the Act on the Raj Darbar Group of Companies. Here also it has been the contention of the assessee that no incriminating materials were found in the case of the assessee. Pursuant to the notice u/s 153A, the assessee filed its return of income declaring income of Rs. 1,79,58,618/- and agriculture income of Rs. 19,71,794/-. During the course of the assessment, the AO observed that the assessee was the holder of 16.65% shares of M/s Tarupit Exports Ltd. and that the shares had been transferred to M/s Vipul Limited on 19/12/2005. The AO further observed that the other shareholders had also sold their shares to the same company and proceeded to hold that the plot in the company held as an asset was deemed to be transferred to M/s Vipul Limited and by applying provisions of section 50C on the sale of the plot by the assessee made an addition of Rs. 91,57,450/- on account of short term capital gain in pursuance to section 2(47)(vi) and section 50C of the Act by considering the transfer of shares as transfer of ownership of the land. The AO further disallowed an amount of Rs. 2 lakhs from agricultural expenses on the ground of non furnishing of bills related to agricultural expenses. The AO also made an addition of Rs. 5,41,917/- being expenses debited under various heads in the profit and loss account.

2.13.1 Aggrieved the assessee preferred an appeal before the first appellate authority challenging the assumption of jurisdiction u/s 153A of the Act. The assessee also challenged the additions on merits. The Ld. CIT (A) rejected the assessee’s legal ground challenging the assumption of jurisdiction u/s 153A but deleted all the additions on merits.

Now, the Department has filed an appeal before the ITAT, whereas the assessee has preferred to file a CO. The grounds raised by both the parties are as under:

Grounds of ITA No. 2341/Del/12:

1. “The order of Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 91,57,450/- made by the Assessing Officer on account of Short Term Capital gain in pursuant to section 2(47)(vi) and section 50C of the Income Tax Act,1961 by considering the mere transfer of shares as transfer of ownership of land held as fixed assets by the company in which the assessee was a shareholder. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the disallowance of expenses incurred amounting to Rs. 5,41,917/- by the assessee towards interest paid on loan Bank charges, legal expenses & telephone expenses made by the Assessing Officer. 4. The order of the Ld. CIT (A) is perverse in law and on facts. 5. The appellant craves leave to add, amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

Grounds of CO No. 252/Del/12:

1. “That the CIT (A) has erred in law as well as on facts in rejecting the contention raised in Ground no. 1 that impugned assessment order is also bad in law because the assessment as well as additions or computation of income has not been framed/made on the basis of any material seized pursuant to an action taken under section 132 of the Act in the case of Rajdarbar Group which itself makes the assessment contrary to law, illegal leading to be quashed.

2. The respondent craves leave for addition, modification, alteration, amendment of any of the cross objection.”

2.13.2 The Ld. AR submitted written submissions. The same are reproduced as under:

“The appellant/respondent wishes to submit that search in his case was conducted by the department on 31.07.2008. Status of return of income filed by the assessee originally is as below: A.Y. Date of filing Whether the assessments were abated or not within the meaning of second proviso to sec. 153A of the Act. 2006-07 27.02.2007 Did not abate

From the aforesaid table, it can be gathered that the assessments in the case of the assessee did not abate consequent upon the search within the meaning of second proviso to section 153A of the I.T. Act. Perusal of the assessment order as quoted above very unambiguously evidences that the additions made by the AO were not based on any incriminating documents. The additions made therefore, were indisputably outside the scope of assessments u/s 153A of the I.T. Act and deserves to be deleted. The Ld. CIT (A) has also not referred to any incriminating document while confirming part of the additions. The assessee relies upon the order of the Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) for the proposition that additions in the unabated assessments can be made only on the basis of incriminating documents found and seized during the course of search. XXX

Innumerable cases have been decided subsequent to the aforesaid judgment of the Hon’ble Delhi High Court upholding/following the aforesaid judgment. However, the appellant wishes to refer to some of them as per the list below:

S.No. Judgment Citation 1. Suncity Projects P. Ltd. vs. DCIT 2016-TIOL-643-ITAT-DEL dated 21.03.2016 2. CIT vs. Continental Warehousing [2015] 63 taxmann.com Corporation Ltd. 118 (Mum – Trib.) dated 12.10.2015 3. CIT vs. Continental Warehousing [2015] 58 taxmann.com Corporation Ltd. 78 (Bombay HC) dated 21.04.2015 4. Jai Steel (India) Ltd. 219 Taxmann 233 (Rajasthan HC) dated 24.05.2013 5. Pr CIT vs. Kurele Paper Mills P. Ltd. (Delhi HC) 6. CIT (C )-I vs. MGF Automobiles Ltd. ITA No. 13,14/2014 (Delhi HC) 7. Jaipuria Infrastructure Developers P. Ltd. ITA No. 5522, vs. ACIT 5523/Del/2015 dated 27.06.2016 8. Pr. CIT vs. Dinesh Tarachand Kasat Tax Appeal No. 469, 470 of 2016 (Gujarat HC) dated 28.6.2016 9. CIT vs. Thakkar Popatlal Velji Sales Ltd. 2016-TIOL-709-HC-MUM- IT dated 29.03.2016 10. Infoworld vs. DCIT 2016-TIOL-548-ITAT-DEL dated 29.01.2016 11. ACIT vs. Mahagun Realtors P. Ltd. 2016-TIOL-955-ITAT-DEL

Besides the aforesaid reason the assessee wishes to bring some other relevant facts which makes the additions unsustainable for other reasons as well. 1. The assessee had sold shares of the company only and did not transfer the land. There was no legal basis for applying section 50C of the IT act on assumed circle rate basis. 2. Land was shown as stock in trade in the balance sheet of the company where the assessee was the shareholder. Section 50C of the Act did not apply on stock in trade even otherwise.

3. The assessee cannot be assumed to be 16.5% owner of the land for the reason that it held 16.5% of shares of the company which owned land because company is a distinct legal person.

4. The company had very substantial amount of loans as has been pointed out by the Ld. CIT (A) in his appellate order.

2.13.3 The Ld. DR submitted that the Ld. CIT (A) had erred in deleting the addition of Rs. 9,157,450/- made by the AO on account of short term capital gains by applying provisions of Section 2(47)(vi) and Section 50C. The Ld. DR vehemently supported the order of the AO and submitted that the addition was rightly made and ought to be upheld.

2.13.4 We have heard the rival submissions and have perused the material on record. It is seen that although the Ld. CIT (A) has upheld the assumption of jurisdiction u/s 153A of the Act, he has categorically stated in Para 5.9.3 of the impugned order that the AO has not brought any evidence on record found during the course of search which through light on the transfer of land. He has further noted that there was no document which suggested that any amount was paid/received out of books in lieu of alleged transfer of the company vested with land. This finding by the Ld. CIT (A) could not be controverted by the Department before us also.

It is undisputed that no incriminating document was found during the course of the search which could warrant this addition in the assessment framed u/s 153A of the Act. The additions made are, therefore, outside the scope of assessment u/s 153A of the Act and respectfully following the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra), we hold that the additions made in the assessment u/s 153A have no legal ground to stand on.

Accordingly, the CO of the assessee is allowed. Consequently, the appeal filed by the Department becomes academic and is dismissed.

2.13.5 In the result, the CO of the assessee is allowed and the appeal of the Department is dismissed.

2.14 Devi Dass Santosh Kumar (HUF) – and CO No. 179/Del/2013: order dated 09/03/2012 passed by the Ld. CIT (A) – XXXI, New Delhi, whereas the CO has been filed by the assessee. In this case also, notice u/s 153A of the Act was issued as a consequence of action u/s 132 of the Act on the Raj Darbar Group of Companies. Here also it has been the contention of the assessee that no incriminating materials were found in the case of the assessee. Pursuant to the notice u/s 153A, the assessee filed its return of income declaring income of Rs. 1,79,93,174/-. During the course of the assessment, the AO observed that the assessee was the holder of 16.73% shares of M/s Tarupit Exports Ltd. and that the shares had been transferred to M/s Vipul Limited on 19/12/2005. The AO further observed that the other shareholders had also sold their shares to the same company and proceeded to hold that the plot in the company held as an asset was deemed to be transferred to M/s Vipul Limited and by applying provisions of section 50C on the sale of the plot by the assessee made an addition of Rs. 92,24,000/- on account of short term capital gain in pursuance to section 2(47)(vi) and section 50C of the Act by considering the transfer of shares as transfer of ownership of the land.

2.14.1 Aggrieved, the assessee preferred an appeal before the first appellate authority challenging the assumption of jurisdiction u/s 153A of the Act as well as challenging the addition on merits. The Ld. CIT (A) dismissed the assessee’s ground relating to assumption of jurisdiction u/s 153A of the Act but allowed the assessee’s appeal on merits by deleting the impugned addition. Now, the Department has filed the appeal before the Tribunal and the CO has been filed by the assessee. The grounds taken by both the parties read as under:

Grounds of 1. “The order of the Ld. CIT (A) is not correct in law and facts.

2. On the facts and in the circumstances, the Ld. CIT (A) has erred in deleting the addition of Rs. 92,24,000/- made by the AO on account of Short Term Capital Gain in pursuant to Section 2(47)(vi) and section 50C of the IT Act, 1961 by considering the mere transfer of shares as transfer of ownership of land held as fixed assets by the company in which the assessee was a shareholder.

3. The order of the Ld. CIT (A) is perverse in law and on facts.

4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

Grounds of CO No. 179/Del/2013: “That the Ld. CIT (A) erred in law as well as on facts in ignoring the fact that no addition can be made when no incriminatory material found during the search as decided in the recent decision of Delhi ITAT Bench in the matter of MGF Automobiles Ltd. vs. ACIT in & 4213/D/2011.”

2.14.2 The Ld. AR submitted that the issue involved is identical to the issue before the Tribunal in and CO 252/Del/2012 in the case of Devi Dass Garg for AY 06-07 and submitted that the adjudication also would be on similar lines.

2.14.3 The Ld. DR accepted the submission of the Ld. AR and submitted that the adjudication may be made on similar lines as in and CO 252/Del/2012 in the case of Devi Dass Garg for AY 06-07.

2.14.4 We have heard the rival submissions and have perused the material on record. It is seen that although the Ld. CIT (A) has upheld the assumption of jurisdiction u/s 153A of the Act, he has categorically stated in Para 5.9.3 of the impugned order that the AO has not brought any evidence on record found during the course of search which through light on the transfer of land. He has further noted that there was no document which suggested that any amount was paid/received out of books in lieu of alleged transfer of the company vested with land. This finding by the Ld. CIT (A) could not be controverted by the Department before us also.

It is undisputed that no incriminating document was found during the course of the search which could warrant this addition in the assessment framed u/s 153A of the Act. The additions made are, therefore, outside the scope of assessment u/s 153A of the Act and respectfully following the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra), we hold the additions made in assessment proceedings u/s 153A as being patently illegal.

Accordingly, the CO of the assessee is allowed. Consequently, the appeal filed by the Department becomes academic and is dismissed.

2.14.5 In the result, the CO of the assessee is allowed and the appeal of the Department is dismissed.

x. – Assessee’s appeal is allowed. xi. ITA Nos. 2085 & 2760/Del/2012 – Assessee’s appeal is allowed and Department’s appeal is dismissed. xii. & 2761/Del/2012 – Assessee’s appeal is allowed and Department’s appeal is dismissed. xiii. & CO No. 176/Del/2013 – CO of the assessee is allowed and Department’s appeal is dismissed. xiv. & CO No. 252/Del/2012 – CO of the assessee is allowed and appeal of the Department is dismissed. xv. & CO No. 179/Del/2013 – CO of the assessee is allowed and appeal of the Department is dismissed.

Order is pronounced in the open court on 19.10.2016