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2017 (6) TMI 824 - ITAT DELHI

2017 (6) TMI 824 - ITAT DELHI - TMI - Addition u/s 68 - Held that:- No addition can be sustained on the strength of statement of Shri Gupta. Therefore, we hold that in absence of details about the nature of income he was surrendering in the case of a particular company or person of a group and particular head income the statement of Shri Gupta cannot be taken as valid basis for making addition u/s 68 of the Act for A.Y 2005-06. - Assessment u/s 153A - Held that:- We hold that the addition ma .....

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ready completed on the date of search i.e. 24.9.2009. We hold that the impugned assessment order framed u/s 143(3) r.w.s 153A of the Act for A.Y 2005-06 dated 26.12.2011 is bad in law and thus the same is sustainable and deserve to be quashed and hence we quash the same. - ITA No. 6216/Del /2013 - Dated:- 7-4-2017 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Shri Sanjeev Bindal, Adv For Th eRespondent : Shri S.S. Rana, CIT DR ORDER PER CHA .....

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an opportunity to cross examine any third party whose statements was relied upon by the department against the appellant-company. Thus, the said addition so made must be deleted. 2. The learned CIT(A) erred in law and on facts in confirming the addition of ₹ 1,47,500/- made for alleged commission paid @ 0.5% to obtain accommodation entries though there is absolutely no material available on record. Thus, the said addition must be deleted. 3. Without prejudice to the grounds taken above, t .....

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us, the said addition so confirmed in the hands of the appellant- company must be deleted. 3. Briefly stated, the facts giving rise to this appeal are that the AO completed assessment u/s 153A r.w.s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. making two additions/disallowance viz. addition of ₹ 2,95,00,000/- on account of unexplained cash credit and another addition of ₹ 1,47,500/- on account of commission paid to accommodation entry providers. A .....

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ed that as per the ratio of the decision of ITAT Delhi in the case of ACIT Vs. Bhagwati Printers [P] Ltd [2006] 102 TTJ [Del] 480 in the case wherein it was held that the legal ground or issue not involving any fresh investigation into the facts except those already on record, then if the additional ground goes to the root of the case should be admitted and adjudicated in the interest of justice. Further placing reliance on the decision of the Hon'ble Supreme Court in the case of National Th .....

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as been agitated on the basis of order of the Special Bench ITAT Delhi dated 6.7.2012 in the case of All Cargo Global Logistics Ltd Vs. DCIT [2013] 137 ITD 287 [Mum][SB]. 6. In rejoinder, the ld. AR submitted that the additional ground raised by the assessee is purely a legal ground arising out of facts and material already on record and does not require any further investigation beyond the record, therefore, in view of the ratio laid down in the case of NTPC Ltd [supra] additional ground No. 5 .....

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but which could alleged to have been found in the course of search or an undisclosed income or property discovered therein; and (b) as the assessment proceedings were not abated but were already completed. 5 ITA No. 6216/Del/2013 Thus, all additions so made in the assessment order should be deleted following the Special Bench decision dated 06/07/12 in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2013) 137 ITD 287 (Mum.)(SB). 8. In view of the legal issue sought to be raised by the asse .....

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rt in the case of NTPC [supra], a legal issue not involving any fresh investigation into the facts except those already on record of the Tribunal, can be raised by way of additional ground at the belated stage first time before the Tribunal. In the instant case, the legal issue sought to be raised by the assessee way of additional Ground No. 5 is purely a legal issue which does not require any fresh investigation into the factual matrix of the case except the facts and documents already on recor .....

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fore examination of the merits of the assessment. We, therefore, admit the additional ground No. 5 for consideration and adjudication. Finally, application of the appellant for admission of additional ground is allowed. Additional Ground No. 5 11. We have heard the rival submissions and have carefully perused the relevant material on record. At the very outset of the opening of the hearing, the ld. AR submitted that no incriminating material was found during the search and seizure operation held .....

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ases. The ld. AR vehemently pointed out that there was no incriminating material before the A.O which was 7 ITA No. 6216/Del/2013 unearthed or seized during search and seizure operation of the assessee on 24.9.2009, therefore, no addition could have been validly made on the assessment which already stood completed on the date of search and seizure operation as no assessment proceedings pertaining to A.Y 2005-06 i.e. A.Y under consideration were pending on the date of search. Therefore, no additi .....

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out further investigation. Therefore, this addition without any incriminating material is not sustainable. The ld. AR further pointed out that as per the details of seized documents referred to in the assessment order i.e, Annexure A-5 of Party Y-2, the ld. AR submitted that this Annexure contains share transfer deeds of third party for transfer of shares for M/s Ishu Finance & Invest. [P] Ltd alongwith other related documents pertaining to shares allotted to those third parties by M/s Ishu .....

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r Infrastructure Private Ltd was incorporated on 27.2.2003 with the earlier name as Mamram Developers Ltd with the directors Shri Surendra Gupta and Shri Sumit Gupta having its Registered Office at G-18 & 19 Mamram Majesty Mall, Plot No. 2, Road No. 43, Gurharkishan Marg, Pitampura, New Delhi 110 034 whereas the said company to which Annexure A-1 to Part Y-2 pertains was incorporated on 8.3.1990 with Mrs. Kamla Garg, Shri Sanjay Gupta, Smt. Renu Gupta as directors having its registered offic .....

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e Pvt. Ltd a per the company master data. The 9 ITA No. 6216/Del/2013 ld. AR, after placing the above facts on record, vehemently contended that the so called incriminating material as recorded and alleged by the A.O in the assessment order i.e. Annexure A-5 of Party Y-2 and Annexure A-1 of partly Y-2 has no relation in any manner with the present assessee company. Therefore, neither Annexure A-5 of Party Y-2 nor Annexure A-1 to party Y-2 can be taken as an incriminating material for validly fra .....

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lected money from his premises and in lieu of it, have repaid the sum in the form of cheque/demand draft. Replying to question No. 8, Shri Mahesh Garg stated that so far as he remembered, it was M/s Mamram Limited and the other was M/s Ishu Finance and Investment Pvt Ltd and there is no mention of the assessee company i.e. M/s Mamram Developers Pvt Ltd and the changed name of assessee i.e Shri Shyam Sunder Pvt. Ltd, therefore, the so called incriminating material cannot be linked as belonging to .....

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ak-up of disclosure of ₹ 19 crores while replying to question No. 28 and asked some time to submit the same. The ld. AR further submitted that replying to question No. 30, Shri. Ram Kishan Gupta categorically stated that he has offered for taxation of additional income of ₹ 19 crores in the hands of himself, his family members and other business concerns for F.Y 2009-10 relevant to A.Y 2010-11 to account for the discrepancies found during the course of search in respect of individual .....

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inted out that in the statement of Shri Mahesh Garg recorded by the ACIT, CC-15, New Delhi, there is no mention in the fact that he provided accommodation entries to the present assessee or its erstwhile company, that is, M/s Mamram Developers [P] Ltd and per contra, the statement of Shri Mahesh Garg clearly states that accommodation entries were provided to M/s Mamram Ltd which is a separate and distinct company which has no relation in any manner, with the present assessee. Therefore, the aid .....

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a matter needed to be challenged before the appropriate Civil Courts. The ld. DR further submitted that Shri R.K. Gupta who had voluntarily surrendered in the hands of the assessee company was Managing Director of the appellant company for last five years. The ld. DR further submitted that Shri R.K. Gupta and his wife held almost entire share holding i.e. 96% on the date of search and he was also promoter of the M/s Mamram 12 ITA No. 6216/Del/2013 Group, Therefore, statement given by him u/s 13 .....

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rejected by the ld. CIT(A) for upholding the rejection. 18. The ld. DR drawing attention towards reply to Question No. 7, given by Shri Mahesh Garg, submitted that Shri Garg clearly stated that he knew Shri R.K. Gupta and many times he visited resident and office of Shri R.K. Gupta alongwith Shri Subhash Singhal. The ld. DR vehemently pointed out that in view of this statement and facts stated by Shri Garg therein there is no iota of doubt that there was a link between entry provider Shri Mahesh .....

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en as basis for making addition in the hands of the assessee. 19. Replying to the above, the ld. AR further drew our attention towards the statement of Shri R.K. Gupta, especially replying to question No. 30 at internal pages 11 to 13 and submitted that the surrender of ₹ 6 crores in M/s Mamram Developers Pvt. Ltd for F.Y. 2009-10 pertaining to A.Y 2010-11 was made with a condition that these figures are tentative and not final and may undergo some change depending upon the business develo .....

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ire facts and circumstances of the case has held that since at the time of surrender and statement recorded u/s 132(4) of the Act Shri Ram Kishan Gupta was not asked to provide details the nature of income he was surrendering in the case of a particular company or person and 14 ITA No. 6216/Del/2013 particular head of income and as such failure of the Revenue authorities, addition cannot be made without any basis for A.Y 2010-11 . 21. On careful consideration of the above noted rival submissions .....

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ges 1 to 103, the statement of Shri Ram Kishan Gupta recorded during the course of search and seizure dated 24.9.2009 u/s 132(4) of the Act and subsequent statement of Shri Mahesh Garg recorded on 9.11.2011 u/s 131 of the Act during post search proceedings, there is incriminating material against the assessee, therefore, the legal ground No. 5 of the assessee cannot be allowed. 22. Further, in our view, the so called incriminating material at Annexure A-5 of Party Y-2, which contains the share a .....

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arg, Shri Sanjay Gupta and Smt. Renu Gupta and this company was incorporated on 8.3.1990 having its Registered Office at Flat No. 101, Pkt-D-10, Om Sai Apartment, Sector 7, Rohini, New Delhi - 110 085. . 23. On a specific query from the Bench, the ld. DR could not controvert this fact that the assessee company was incorporated on 27.2.2003 in the name of M/s Mamram Developers Ltd which was subsequently changed into M/s Shyam Sunder Infrastructure Pvt. Ltd having directors as Shri Surendra Gupta .....

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ining to shares allotted to those third parties by M/s Ishu Finance & Investment [P] Ltd, cannot be taken as incriminating material against the assessee for making addition u/s 68 of the Act. 24. So far as Annexure A-1 of Party Y-2 is concerned, this Annexure contains share application document and share transfer deeds for transfer of shares of M/s Mamram Ltd alongwith other related documents pertaining to shares allotted to these third parties by M/s Mamram Ltd which is also not related, in .....

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rded on 9.11.2011 by the ACIT, CC-15, New Delhi during post search proceedings, wherein replying to question Nos 7 and 8 are 17 ITA No. 6216/Del/2013 relevant. For the sake of completeness, Question and answers are being reproduced as follows: Q.7: Have you provided accommodation entries to Sh. Ram Kishan Gupta, Sh. Sanjay Gupta, Smt. Kamla Garg, Smt. Renu Gupta, Sh. Surender Gupta or their companies? A.7: Yes, I personally know Sh. Ram Kishan Gupta and many a times I have visited his place of r .....

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r that Shri Mahesh Garg, in his statement recorded by the AO on 9.11.2011 did not support the fact that accommodation entries have been provided to the assessee company by him or by any of his associated companies or persons. 27. The CIT-DR drawing our attention to para 3.10 of the first appellate order submitted that the addition is based on the statement of Shri Ram Kishan Gupta recorded u/s 132(4) of the Act on 24.9.2009 during search and seizure operation. He 18 ITA No. 6216/Del/2013 further .....

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assessee himself has stated in sworn statement during search and seizure operation about his undisclosed income, tax has to be levied on the basis of admission without scrutinizing documents. 28. Replying to the above contention of the ld. DR, the ld. AR submitted that as per reply to Question No. 30 in the statement of Shri Ram Kishan Gupta, the surrender of ₹ 6 crore has been made for A.Y 2010-11 in the hands of the assessee and not for A.Y 2005-06 thus the impugned addition cannot be m .....

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isions as relied by the ld. DR can be applied to the present case only when the statement reveals undisclosed income for the year under consideration i.e. A.Y 2010-11 and statement of Shri Ram Kishan Gupta is not stating about any fact that he surrendered any amount for A.Y 2010-11 and from reply to question No. 30 it is clear that he surrendered ₹ 6 crores for A.Y 2010-11 in the hands of assessee company in the capacity of its Managing Director and no amount has been surrendered for A.Y 2 .....

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s of the books of accounts and documents which have been seized, you must be now in a position to give bifurcation. So please give the bifurcation now. A.30: As stated earlier, I have offered for taxation additional income of ₹ 19.00 cr. In the hands of myself, my family members and our business concerns for the FY 2009-10 relevant to AY 2010-11 to 20 ITA No. 6216/Del/2013 account for discrepancies found during the course of search in respect of individuals and companies and also to accoun .....

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usiness developments over the remaining period of current financial year 2009-10 may change or deviate. We shall try to pay income tax as per the Income-tax Act in this FY only. In respect of individuals I will be able to provide detail only after going through the contents of the lockers and seized material . 30. Thereafter, we also find it appropriate to reproduce the findings of the Tribunal in the case of a group company M/s Babushka Promoters [P] ltd [supra] wherein at para 9-10 it was held .....

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allowances, if permissible and sustainable under the provisions of the Act but not in the other period relevant to other A.Y, such as A.Y 2010-11 in the case in hand. 10. We are in agreement with the conclusion recorded by the first appellate authority that the surrender was not made on specific items by Sh. Ram Kishan Gupta and while allocation of the undisclosed income between the companies and other persons of the group, he has not mentioned and specified the heads of income as such. In the a .....

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1. In view of above noted answer to Question No. 30 of Shri Ram Kishan Gupta in the statement recorded during search and seizure, it is amply clear that on evaluation of above statement the Tribunal in the case of Group company M.s Babhuska [supra] held that the surrender was not made on specific items by Shri Gupta and while allocation of the undisclosed income between the companies and other persons of the group, he has not 22 ITA No. 6216/Del/2013 mentioned and specified the heads of income a .....

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h failure of the Revenue authorities addition cannot be made for A.Y 2010-11. 32. Furthermore, the Tribunal also held that even during the assessment proceedings the AO either at the time of post search stage or during assessment proceedings could not bring any cogent material to show that such undisclosed income under such head has been surrendered for A.Y 2010-11. When we again consider this statement for the present A.Y 2005-06, it is also amply clear that the statement does not state any fac .....

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/s Babhuska [supra] also held that no addition can be sustained on the strength of statement of Shri Gupta. Therefore, we hold that in absence of details about the nature of income he was surrendering in the case of a particular company or person of a group and particular head income the statement of Shri Gupta cannot be taken as valid basis for making addition u/s 68 of the Act for A.Y 2005-06. 34. So far as the application of the ratio of the decision as relied upon by the ld. DR is concerned, .....

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ition cannot be made treating the same as incriminating material or facts unearthed during search and seizure operation. 24 ITA No. 6216/Del/2013 35. The ld. DR, in the written synopsis dated 21.9.2016 has also placed his reliance on the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd 291 ITR 500 [SC]. In our respectful opinion, there is no quarrel about this well accepted preposition that the requirement of passing of assessment order has .....

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nts, original assessment order can be interfered with by the AO while making assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents was undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made known to the Revenue authorities in the course of original assessment. The ld. AR vehemently pointed out that so called incriminating material Annexu .....

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ead. Therefore, same cannot also be treated as incriminating material found during the course of search and seizure operation for making addition in the hands of the assessee for A.Y 2005-06. At the same time, we also note that the ld. DR has also placed reliance on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra] and submitted that conjective reading of para 37 (v) and (vi) make it amply clear that incriminating document is must only where assessment u/s 143( .....

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he 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 under Section 132 of the Act, notice under Section 153 A (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 s .....

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;in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A 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 relevance or nexus with the seized material. Obviously an assessment has to be made .....

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original assessment and the assessment under Section 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 under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property .....

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in Section 153 A is relatable to abated proceedings '(i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings . The Hon'ble High Court in sub-para (vi) further held that in so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the finding of the search and any other mat .....

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n being asked by the Bench, both the parties agreed to the fact that on the date of search and seizure operation that was on 20.4.2009, assessment for A.Y 2005-06 was not pending. We may point out that it was revealed by the parties that in A.Y 2005-06 no assessment order u/s 143(3) of the Act has been passed by the AO as there was no scrutiny notice to the assessee for this A.Y. Be that as it may, under the above noted facts and circumstances, we can safely presume that the assessment for A.Y 2 .....

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e A-5 and A-1 of party 2 as well as statement of Shri Ram Kishan gupta recorded during the course of 29 ITA No. 6216/Del/2013 search and seizure operation cannot be held as incriminating material unearthed during the course of search or undisclosed income or property discovered in the course of search and seizure operation which were not produced or not already disclosed or made known to the Revenue authorities during the course of original assessment proceedings. 40. At this stage, we respectfu .....

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see for A.Y 2005-06. Therefore, we hold that no addition could have been made in the assessment u/s 143(3) r.w.s. 153A of the Act in respect of unabated assessment/completed assessment for A.Y 2005-06 which has become final in the absence of any incriminating material or undisclosed income or property discovered in the course of search. Our conclusion further gets strong support from the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of PCIT Vs. Lata Jain reported [20 .....

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