2018 (10) TMI 1635 - AT - Income Tax

Assessment u/s 153A - enhancement of income - assessments made pursuant to search operation - bogus Long Term Capital Gains of hundreds of crores of rupees by pre-arranged trading in shares of some non-descript listed companies has been shown and such bogus pre-arranged tax exempt Long Term Capital Gain was nothing but a form of accommodation entry obtained - addition based on statement of third party which was later retracted - opportunity to the assessee to cross-examine the person whose statements were relied upon not given -

Held that:- AO made the additions on the basis of the statements of third parties recorded u/s 132(4)/133A of the Act and third parties evidences/documentation. However, no live nexus with the incriminating material found in the course of search in the case of the assessee was established. The statements of the third parties were recorded behind the back of the assessee but the opportunity of cross-examination of such parties was not allowed to the assessee, even the statements were retracted later on.

The pen drive of Sh. Ankur Agarwal corroborated/substantiated, the share transactions carried out by the assessee which were duly found recorded in the regular books of the assessee and the said pen drive did not contain anything incriminating against the assessee. Therefore, merely on the basis of the statement of Sh. Ankur Agarwal, the addition made u/s 153A of the Act was also not justified, particularly when Sh. Ankur Agarwal retracted his statement later on. In the instant case, the AO also failed to establish any link/nexus of the alleged cash trail.

In the present case, as the enhancement was based on the order of the Settlement Commission dated 27.05.2015 received much after issuance of notice u/s 153A of the Act after the search dated 13.06.2014. The same could not be categorized as incriminating material found during the course of search. Therefore, the ld. CIT(A) had taken a contrary stand in the case of the assessee i.e. Sh. Neeraj Singal vis-à-vis the BSL by enhancing the income on the same count, in the absence of incriminating material. It is also relevant to point out that the enhancement on account of alleged sale of scrap in the hands of the assessee was made by the ld. CIT(A) on the basis of statement of one Sh. Chandrakant Mahadev Jadhav, employee of BSL recorded u/s 131 of the Act on 13.06.2014 and hand written nothing in his personal diary. However, the said person retracted from his original statement on 30.11.2016. Therefore, the ld. CIT(A) was not justified in enhancing the income on the basis of the said statement.

CIT(A) enhanced the income in the absence of any incriminating material found during the course of search and considered a new source of income which was outside the subject matter of the assessment framed by the AO or the grounds agitated by the assessee in its appeal before the ld. CIT(A). Therefore, the enhancement made u/s 153A r.w.s. 251 of the Act was not justified and accordingly the same is deleted. - Decided in favour of assessee.