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

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI

BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER

ITA No. 2083/Del/2012 (Assessment Year: 2004-05) Ranjana Garg, vs DCIT 141, Sunder Nagar, Central Circle 12, New Delhi. Jhandewalan AANPG3625Q Extn., New Delhi.

ITA No. 2833/Del/2012 (Assessment Year: 2004-05) Ranjana Garg, vs DCIT 141, Sunder Nagar, Central Circle 12, New Delhi. Jhandewalan AANPG3625Q Extn., New Delhi. ITA No. 2759/Del/2012 (Assessment Year: 2004-05) ACIT vs Amita Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AADPG0990L ITA No. 2345/Del/2012 (Assessment Year: 2006-07) ACIT vs Amita Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AADPG0990L

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CO No. 254/Del/2012 (In ITA No. 2345/Del/2012) (Assessment Year: 2006-07) Amita Garg, vs ACIT G-15, Maharani Bagh, Central Circle 12, New Delhi. New Delhi. AADPG0990L ITA No. 2081/Del/2012 (Assessment Year: 2006-07) Amita Garg, vs ACIT G-15, Maharani Bagh, Central Circle 12, New Delhi. New Delhi. AADPG0990L ITA No. 2758/Del/2012 (Assessment Year: 2003-04) Amita Garg, vs ACIT G-15, Maharani Bagh, Central Circle 12, New Delhi. New Delhi. AADPG0990L ITA No. 2087/Del/2012 (Assessment Year: 2003-04) Kusum Lata Garg vs DCIT G-15, Maharani Bagh Central Circle 12, New Delhi Jhandewalan Extn., AAUPG3747N New Delhi.

ITA No. 2344/Del/2012 (Assessment Year: 2006-07) ACIT vs Kusum Lata Garg Central Circle 12, G-15, Maharani Bagh Jhandewalan Extn., New Delhi New Delhi. AAUPG3747N CO No. 253/Del/2012 (In ITA No. 2344/Del/2012)

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(Assessment Year: 2006-07) Kusum Lata Garg vs ACIT G-15, Maharani Bagh Central Circle 12, New Delhi Jhandewalan Extn., AAUPG3747N New Delhi.

ITA No. 2088/Del/2012 (Assessment Year: 2004-05) Kusum Lata Garg vs DCIT G-15, Maharani Bagh Central Circle12, New Delhi Room No. 330, AAUPG3747N Jhandewalan Extn., New Delhi.

ITA No. 2755/Del/2012 (Assessment Year: 2003-04) ACIT vs Kusum Lata Garg Central Circle – 12 G-15, Maharani Bagh New Delhi. New Delhi. AAUPG3747N ITA No. 2079/Del/2012 (Assessment Year: 2004-05) Rakesh Kumar Garg, vs DCIT G-15, Maharani Bagh, Central Circle 12, New Delhi. Jhandewalan Extn., AADPG0991M New Delhi.

ITA No. 2078/Del/2012 (Assessment Year: 2003-04) Rakesh Kumar Garg, vs DCIT G-15, Maharani Bagh, Central Circle 12, New Delhi. Jhandewalan Extn., AADPG0991M New Delhi.

ITA No. 2756/Del/2012 (Assessment Year: 2003-04)

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ACIT vs Rakesh Kumar Garg Central Circle 12 G-15, Maharani Bagh New Delhi. New Delhi. AADPG0991M

ITA No. 3185/Del/2013 (Assessment Year: 2006-07) Rakesh Kumar Garg vs DCIT G-15, Maharani Bagh Central Circle 12, New Delhi. Jhandewalan Extn., AADPG0991M New Delhi. ITA No. 2085/Del/2012 (Assessment Year: 2003-04) Devi Dass Garg vs DCIT G-15, Maharani Bagh Central Circle 12, New Delhi. Room No. 330, 3rd Floor, AACPD7283Q ARA Centre, E-2, Jhandewalan Extn., New Delhi.

ITA No. 2761/Del/2012 (Assessment Year: 2004-05) ACIT vs Devi Dass Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AACPD7283Q

ITA No. 2086/Del/2012 (Assessment Year: 2004-05) Devi Dass Garg, vs DCIT G-15, Maharani Bagh, Central Circle 12, New Delhi. Room No. 330, 3rd Floor, AACPD7283Q ARA Centre, E-2, Jhandewalan Extn., New Delhi.

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ITA No. 2760/Del/2012 (Assessment Year: 2003-04) ACIT vs Devi Dass Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AACPD7283Q

ITA No. 2341/Del/2012 (Assessment Year: 2006-07) ACIT vs Devi Dass Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AACPD7283Q CO No. 252/Del/2012 (In ITA No. 2341/D/2012) (Assessment Year: 2006-07) Devi Dass Garg, vs ACIT G-15, Maharani Bagh, Central Circle 12, New Delhi. New Delhi. AACPD7283Q ITA No. 2762/Del/2012 (Assessment Year: 2005-06) ACIT vs Devi Dass Garg, Central Circle 12, G-15, Maharani Bagh, New Delhi. New Delhi. AACPD7283Q CO No. 176/Del/2013 (In ITA No. 2762/D/2012) (Assessment Year: 2005-06) Devi Dass Garg, vs ACIT G-15, Maharani Bagh, Central Circle 12, New Delhi. New Delhi. AACPD7283Q

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ITA No. 2348/Del/2012 (Assessment Year: 2006-07) DCIT vs Devi Dass Santosh Central Circle-5, Room No. 361, Kumar (HUF), 3rd Floor, ARA Centre, Jhandewalan 13-B, 3rd Floor, Extn., New Delhi. Netaji Subhash Marg, Darya Ganj, New Delhi. AAAHD4035J CO No. 179/Del/2013 (In ITA No. 2348/D/2012) (Assessment Year: 2006-07) Devi Dass Santosh Kumar (HUF), vs DCIT 13-B, 3rd Floor, Central Circle-5, Netaji Subhash Marg, Room No. 361, Darya Ganj, New Delhi. 3rd Floor, ARA Centre, AAAHD4035J Jhandewalan Extn., New Delhi.

Assessee by Sh. Rajeev Saxena, Adv. Sh. Sudesh Garg, CA Ms. Sumangla Saxsena, Adv. Revenue by Sh. Sunil Chander Sharma, CIT DR

Date of Hearing 19.07.2016 & 20.07.2016 Date of Pronouncement 19.10.2016

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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.

AY 04-05:

ITA No. 2083/Del/2012 has been preferred by the assessee

against the order dated 20/03/2012 passed by the Ld. CIT

(A)-XXXI, New Delhi, whereas ITA No. 2833/Del/2012 is the

cross appeal by the Department. The brief facts are that the

proceedings under section 153A of the Income Tax Act, 1961,

(hereinafter called ‘the Act’) were initiated in pursuance to

search conducted on 31/07/2008 on the Raj Darbar Group.

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

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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.

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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

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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

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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:

Grounds of ITA 2833/Del/12:

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

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:

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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.

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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.

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(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

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iii. ACIT vs. Pratibha Industries Ltd. 23 ITR 766 (Trib) (Mum) iv. MGF Automobiles Ltd. vs. ACIT ITA No. 4212 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.

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3359, 3360, 3361/Del/2013 dated 6.6.2014 xv. Jakson Engineering Ltd. vs. ACIT ITA No. 349-350/Del/13 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

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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

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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 ITA Nos. 142 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

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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

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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 ITA No. 707/2014 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.

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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.

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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

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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.

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2.1 Amita Garg – ITA Nos. 2081 & 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

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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

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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:

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

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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

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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

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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

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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

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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.

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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

Page 35

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

Page 36

case of CIT vs. Kabul Chawla in ITA No. 707/2014 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 – ITA No. 2759/Del/2012 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

Page 37

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

Page 38

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:

Page 39

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

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.

Page 41

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. ITA No. 369/2015 (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.”

Page 43

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),

Page 44

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– ITA No. 2345/Del/2012 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

Page 45

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:

Page 46

Grounds of appeal ITA No. 2345/D/12 :

Grounds of CO No. 254/D/12:

Page 47

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.

Page 48

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

Page 49

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. ITA No. 369/2015 (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

Page 50

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.

Page 51

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

Page 52

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 – ITA Nos. 2087 &

2755/Del/2012 – AY 03-04:

ITA No. 2087/Del/2012 has been preferred by the assessee

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.

Page 53

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

Page 54

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

Page 55

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:

Page 56

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:

Page 57

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

Page 58

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

Page 59

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 &

Page 60

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

Page 61

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

Page 62

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

Page 63

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

Page 64

which does not specifically point out towards the assessee.

The Hon’ble Delhi High Court in the case of CIT vs. Kabul

Chawla in ITA No. 707/2014 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.

Page 65

2.5 Smt. Kusum Lata Garg – ITA No. 2088/Del/2012

– 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

Page 66

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

Page 67

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:

Page 68

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.

Page 69

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. ITA No. 369/2015 (Delhi HC)

Page 70

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.

Page 71

Page 72

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

Page 73

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.

Page 74

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 ITA No. 707/2014 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 – ITA No. 2344/Del/2012

& CO 253/Del/2012 AY 06-07:

ITA No. 2344/Del/2012 has been preferred by the

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

Page 75

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

Page 76

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:

Page 77

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:

Page 78

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

Page 79

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. ITA No. 369/2015 (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

Page 81

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

Page 82

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.

Page 83

2.7 Rakesh Kumar Garg – ITA Nos. 2078 and

2756/Del/2012 – AY 03-04:

ITA No. 2756 has been preferred by the Department against

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

Page 84

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

Page 85

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

M.P. Investments Ltd. and Quest Financial Services Ltd.

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.

Page 86

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:

Page 87

Grounds of ITA 2078/Del/12:

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:

Page 88

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.

Page 89

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. ITA No. 369/2015 (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.

Page 90

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

Page 91

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

Page 92

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

Page 93

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 ITA No. 707/2014 dated 28/08/2015

Page 94

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 – ITA No. 2079/Del/2012 – 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

Page 95

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

Page 96

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:

Page 97

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.

Page 98

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

Page 99

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.

Page 100

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

Page 101

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

Page 102

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 – ITA No. 3185/Del/2013

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

Page 103

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:

Page 104

Grounds of ITA 3185/Del/13 :

Page 105

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

Page 106

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:

Page 107

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. ITA No. 369/2015 (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

Page 108

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 – ITA Nos. 2085 and

2760/Del/2012 AY 03-04:

ITA No. 2085 has been preferred by the assessee against the

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

Page 109

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

Page 110

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

Page 111

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

Investments Ltd. and Quest Financial Services Ltd.

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:

Page 112

Grounds of ITA No. 2085/Del/12:

Grounds of ITA No. 2760/Del/12:

Page 113

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:

Page 114

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.

Page 115

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. ITA No. 369/2015 (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.

Page 116

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

Page 117

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

Page 118

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

Page 119

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

Page 120

towards the assessee. The Hon’ble Delhi High Court in the

case of CIT vs. Kabul Chawla in ITA No. 707/2014 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.

Page 121

2.11 Devi Dass Garg – ITA Nos. 2086 and

2761/Del/2012 – AY 04-05:

ITA No. 2086 has been preferred by the assessee against the

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

Page 122

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

Page 123

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

Nageshwar Investment Ltd.

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,

Page 124

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:

Page 125

Grounds of ITA No. 2086/Del/12:

Grounds of ITA No. 2761/Del/12:

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

Page 127

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. ITA No. 369/2015 (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

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

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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

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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

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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 – ITA No. 2762/Del/2012 and

CO 176/Del/2013 AY 05-06:

ITA No. 2762 has been filed by the Department against the

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

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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

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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:

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Grounds of ITA No. 2762/Del/12:

Page 135

Grounds of CO No. 176/Del/13:

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

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“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

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(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. ITA No. 369/2015 (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

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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

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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.

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2.13 Shri Devi Dass Garg – ITA No. 2341/Del/2012

and CO 252/Del/2012 – AY 06-07:

ITA No. 2341 has been preferred by the Department against

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

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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:

Page 142

Grounds of ITA No. 2341/Del/12:

Page 143

Grounds of CO No. 252/Del/12:

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

Page 144

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

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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. ITA No. 369/2015 (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

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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.

2.13.3 The Ld. DR submitted that the Ld. CIT (A) had

erred in deleting the addition of Rs. 9,157,450/- made by the

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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

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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) – ITA No.

2348/Del/2012 and CO No. 179/Del/2013:

ITA No.2348 has been filed by the Department against the

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.

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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

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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 ITA No. 2348/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, 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

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the search as decided in the recent decision of Delhi ITAT Bench in the matter of MGF Automobiles Ltd. vs. ACIT in ITA No. 4212/D/2011 & 4213/D/2011.”

2.14.2 The Ld. AR submitted that the issue involved is

identical to the issue before the Tribunal in ITA No.

2341/Del/2012 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 ITA No. 2341/Del/2012 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

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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.

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allowed and Department’s appeal is dismissed. ii. ITA Nos. 2081 & 2758/Del/2012 – Assessee’s appeal is

allowed and Department’s appeal is dismissed. iii. ITA No. 2759/Del/2012 – Department’s appeal is

dismissed. iv. ITA No. 2345/Del/2012 & CO No. 254/Del/2012 – CO of

the assessee is allowed and appeal of the Department is

dismissed. v. ITA Nos. 2087 & 2755/Del/2012 – Assessee’s appeal is

partly llowed and Department’s appeal is dismissed. vi. ITA No. 2088/Del/2012 – appeal of the assessee is

allowed. vii. ITA No. 2344/Del/2012 & CO No. 253/Del/2012 – CO of

the assessee is allowed and appeal of the Department is

dismissed. viii. ITA Nos. 2078 & 2756/Del/2012 – Assessee’s appeal is

allowed and Department’s appeal is dismissed. ix. ITA No. 2079/Del/2012 – Assessee’s appeal is allowed.

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x. ITA No. 3185/Del/2013 – Assessee’s appeal is allowed. xi. ITA Nos. 2085 & 2760/Del/2012 – Assessee’s appeal is

allowed and Department’s appeal is dismissed. xii. ITA Nos. 2086 & 2761/Del/2012 – Assessee’s appeal is

allowed and Department’s appeal is dismissed. xiii. ITA No. 2762/Del/2012 & CO No. 176/Del/2013 – CO of

the assessee is allowed and Department’s appeal is

dismissed. xiv. ITA No. 2341/Del/2012 & CO No. 252/Del/2012 – CO of

the assessee is allowed and appeal of the Department is

dismissed. xv. ITA No. 2348/Del/2012 & 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

Sd/- Sd/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER Dated: 19.10.2016 *Kavita Arora

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