TMI Blog2021 (7) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... e I.T. Act. Accordingly, the disallowance made by the Assessing Officer and as upheld by the Ld. CIT (A) in the 153A assessment proceedings being void ab initio is deleted. - Decided in favour of assessee. - I.T.A No.5278/Del/2018, I.T.A No.5853/Del/2018, I.T.A No.5280/Del/2018, I.T.A No.5284/Del/2018, I.T.A No.5858/Del/2018, I.T.A No.5288/Del/2018 - - - Dated:- 30-6-2021 - Shri R.K.Panda, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : Sh. Gautam Jain, Adv. For the Respondent : Sh. H. K. Choudhary, Sr. DR ORDER PER BENCH: The captioned six appeals filed by the respective assessees are directed against the separate orders passed by the Ld. Commissioner of Income Tax (Appeals) - 27, New Delhi {CIT (A)}. Since common issues have been raised in all these appeals, therefore, they were heard together and are being disposed of by this common order. 2.0 ITA No. 5853/Del/2018 for Assessment Year (A.Y.) 2011-12 in the case of Shri Gopal Agarwal is taken as the lead case. Facts of the case, in brief, are that search seizure and survey operations under section 132/133A of the Income Tax Act, 1961 (hereinafter call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in respect of long term capital gain earned on disinvestment of shares. It was further submitted before the Ld. CIT (A) that the statement of Shri Madho Gopal Agarwal, who happens to be brother of the assessee, could not be the sole ground to draw any adverse inference against the assessee. In support of the aforesaid contentions, the assessee relied on the judgment in the case of Kabul Chawla reported in 380 ITR 573 and Pr. CIT v. Meeta Gutgutia 395 ITR 526 along with several other decisions of the Hon ble jurisdictional High Court as well as other Hon ble High Courts. 2.2 However, the Ld. CIT (A) upheld the action of the Assessing Officer by observing as under: 6.4 so far as the second addition of ₹ 9,52,494/-, on account of disallowance u/s 10(38) of I T. Act, is concerned, I have considered the facts of the issue, basis of addition made by AO and submissions of appellant. As it is reflected from assessment order, a search and seizure operation was conducted by the Investigation Wing of the Department in the cases of M/s K. R, Pulp and Papers Ltd. Group and during the searches, the appellant's case was also covered u/s t32(1) of I.T. Act. It is also clear fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 395 ITR 526. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153A of the Act. 2 That learned Commissioner of Income Tax (Appeals) -27, New Delhi, has erred both in law and on facts in not disposing off the ground of appeal raised by appellant that approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, and therefore order of assessment made u/s 153A/143(3) is invalid and not in accordance with law. 3 That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of ₹ 9,52,494/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act. 3.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant. 3.0 Thus, all the aforesaid grounds essentially relate to the validity of disallowance of ₹ 9,52,494/- by denying the claim of exemption u/s 10(38) of the Act. The Ld. Authorised Representative (AR) contended that the disallowance made and upheld was without jurisdiction since it was not based on any incriminating material found as a result of search on the assessee. He submitted that the addition on account of disallowance u/s 10(38) of the Act has been made and sustained by the Ld. CIT (A) only on the basis of disclosure made by the Managing Director of the group namely Shri Madho Gopal Agarwal amounting to ₹ 25 Crore. He further submitted that during the post search proceedings, Shri Madho Gopal Agarwal, vide letter dated 31.07.2015 had submitted as under: Sub: Investigation Proceedings under the Income Tax Act, 1961. M/s K.R. Pulp Papers Ltd. (Group). Date of Search 08.07.2015. This has reference to search in group at various premises. We hereby reiterate that we have been doing proper business and all the transactions are duly recorded and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer, only on the basis of the disclosure made by the Managing Director of the group Shri Madho Gopal Agarwal amounting to ₹ 25 crores, made the impugned disallowance of ₹ 9,25,494/- on sale of shares duly sold on recognized stock exchange u/s 10(38) of the Act. 5.1 The Hon ble Delhi High Court in the case of PCIT v. Anand Kumar Jain (HUF) (supra) in an identical matter has held that such a statement does not constitute incriminating material found as a result of search. It has been held therein as under: 7. The preliminary question under consideration before us is whether a statement under Section 132(4) constitutes incriminating material for carrying out assessment under S. 153(A) of the Act. A reading of the impugned order reveals that the statement of Mr. Jindal recorded under Section 132(4) forms the foundation of the assessment carried out under Section 153A of the Act. That statement alone cannot justify the additions made by the AO. Even if we accept the argument of the Revenue that the failure to cross-examine the witness did not prejudice the assessee, yet, we discern from the record that apart from the statement of Mr. Jindal, Revenue has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration. 5.2 The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. (supra) has held that statements recorded u/s 132(4) of the Income Tax Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under:- 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no explanation as to the contradictory stand in as much as surrender was made in Assessment years 2014-15 and 2015-16 but not in the instant year. The Ld. AR has explained that the scrips in Assessment year 2014-15 and 2015-16 were M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures Services Ltd., which is different from the scrip in the instant year, namely M/s KGN Industries Ltd. 5.5 The Ld. DR has not been able to rebut the above factual submission and also not highlighted any incriminating material found as a result of search despite copies of panchnamas having been again placed on record by the Ld. AR. 5.6 In view of the above, we hold that the Ld. CIT (A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the disallowance made by the Assessing Officer and as upheld by the Ld. CIT (A) in the 153A assessment proceedings being void ab initio is deleted. 5.7 Since the assessee succeeds on this legal ground, the grounds raised on merits are not adjudicated having become academic in nature. 6.0 In the result, ITA 5853/Del/2018 stands allowed. 7.0 ITA No. 5278/D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term capital asset is not includible in total income of the assessee in view of section 10(38) of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant. 3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant. 3.5 That the learned Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act. 2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law. 3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of ₹ 3,61,496/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act. 3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gwith interest levied be deleted and appeal of the appellant be allowed. Grounds of appeal in ITA No.5284/Del/2018 1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable. 3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of ₹ 14,322/- under section 234A of the Act and interest of ₹ 5,80,052,/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant. It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed. Grounds of appeal in ITA No.5858/Del/2018 1. That the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant. 3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant. 3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 3.6 That the learned Commissioner of Income Tax (Appeals) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153 A of the Act. 2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid and not in accordance with law. 3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of ₹ 19,18,852/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act. 3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term capital asset is not includible in total income of the assessee in view of section 10(38) of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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