DCIT, CENTRAL CIRCLE- 14 , NEW DELHI V. MOHAL LAL GUPTA, NEW DELHI

ITA 5008/DEL/2019

AI Insights

The case involves appeals by the Revenue against the orders of the Commissioner of Income Tax (Appeals)-XXVI, New Delhi, which pertained to the assessment years 2009-10 to 2012-13. The core issue was the protective additions made by the Assessing Officer (AO) in the assessee's case following a search and seizure operation on the Rama Group of Companies. The AO had concluded that the assessee's firm was used as a conduit by the Rama Group to inflate its purchases. However, the CIT(A) found that the additions were double taxation as the income had already been declared and audited in the assessee's return. The Tribunal supported the CIT(A)'s decision, emphasizing that protective additions are only justified when ownership cannot be immediately determined, which was not the case here.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474546 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Other Referred Cases: Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd., PCIT v. Pavitra Realcon Pvt. Ltd., Kailashben Manharlal Chokshi v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: MADHAV KAPUR; MADHUSUDAN KAPUR
• Keywords: Retraction; Search and seizure; Block assessment
• Section: 143(3); 143(2); 132; 68; 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITAs No.5008 to 5011/Del/2019 Assessment Years: 2009-10 to 2012-13 DCIT, Central Circle-14, New Delhi. Vs Mohan Lal Gupta, N-28, Gali No.13, Bihari Colony, Shahdara, Delhi – 110 032. PAN: AAGPG4977J ITAs No.5012 to 5015/Del/2019 Assessment Years: 2009-10 to 2012-13 DCIT, Central Circle-14, New Delhi Mohan Lal Gupta (HUF), N-28, Gali No.13, Bihari Colony, Shahdara, Delhi – 110 032. PAN: AAJHM6131M (Appellant) (Respondent) Assessee by : Shri Madhav Kapur, Advocate & Shri Madhusudan Kapur, CA Revenue by : Shri Javed Akhtar, CIT-DR Date of Hearing : 20.12.2024 Date of Pronouncement : 28.02.2025 ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 2 ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the Revenue against the orders of the Commissioner of Income Tax (Appeals)-XXVI, New Delhi (hereinafter referred to as Ld. First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short). Further details of the orders of the lower authorities are as under:- ITA No. CIT(A) who passed the order Appeal No. & Date of order of the CIT(A) AO who passed the assessment order & Date of order Section of the IT Act under which the AO passed the order 5008/Del/2019 CIT(A)-XXVI, New Delhi. 10618/16-17, Dated 22.03.2019 ACIT, Central Circle-14, New Delhi, date: 31.12..2016 153C/143(3) 5009/Del/2019 - Do- 10584/16-17, Dated 22.03.2019 - Do - - Do - 5010/Del/2019 - Do - 10619/16-17, Dated 22.03.2019 - Do - - Do - 5011/Del/2019 - Do 10620/16-17, Dated 22.03.2019 - Do - - Do - 5012/Del/2019 - Do - 10617/16-17, Dated 22.03.2019 - Do - - Do - ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 3 5013/Del/2019 - Do - 10582/16-17, Dated 22.03.2019 - Do - - Do - 5014/Del/2019 - Do - 10589/16-17, Dated 22.03.2019 - Do - - Do - 5015/Del/2019 - Do - 10593/16-17, Dated 22.03.2019 - Do - - Do - 2. Heard and perused the record. The relevant facts of the case are as that a search and seizure operation was carried out on the Rama Group of Companies on February 28, 2014. The assessment proceedings in the case of the assessee, were completed under Section 153C of the Income Tax Act, 1961 on 31.12.2016. The Assessing Officer (AO) made protective additions in the case of the assessee, with substantive additions made in the hands of the Rama Group of Companies and holding that the firm had been used as a conduit by the Rama Group to inflate its purchases. That the assessee, aggrieved by the Ld. AO’s actions, filed an appeal before the Ld. Commissioner of Income Tax (Appeals). The Ld. CIT(A), after considering the submissions and the facts of the case vide order dated 22.03.2019, concluded that since, the appellant has been facilitator of supply of the raw material to the Rama Group of Companies and has admitted to earning of commission for the supply of the raw material. The AO has added back the turnover with Rama Group which is apparently a double addition as it is clearly declared in the return of income filed by the appellant which has also been subjected to audit. Such an addition cannot be made as it is already declared ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 4 in the appellant's return. Thus, the additions made by the AO were not sustainable. The CIT directed that the protective additions made in the assessee's case be deleted, as the substantive issues concerning the Rama Group's income were dealt with separately and appropriately. 3. In this regard, ld. AR has placed on record a chart explaining such year wise additions in all the aforesaid appeals. 4. Ld. AR has submitted that since, the search relating to the impugned cases, was conducted on 28.02.2014 and assessment for relevant assessment year i.e. A.Y. 2009-10 to 2012-13, stood concluded prior to such search and no additions had been made without reference to any specific incriminating material/document found as a result of search action under section 132 of the Act, thus, in case no incriminating material is found during the search, the Ld. AO cannot assess or reassess taking into consideration the other materiel in respect of completed assessment/ unabated assessments. In support to the above, reliance being placed on Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023]. 5. Next the Ld. AR has submitted that statements on a stand-alone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 5 operation. In this regard reliance is being placed on the decision in case of PCIT v. Pavitra Realcon Pvt. Ltd., ITA 579 and 587 of 2018, Dated 29.05.2024 (Del) and the relevant part relied is reproduced here below:- “19. Undisputedly, during the period of search no incriminating: material appears to have been found. However, the Revenue proceeded to issue notice under Section 143(2) of the Act on the pretext of the statements of the Directors of the respondent- assessee companies recorded under Section132(4) of the Act and material seized from the search conducted on Jain group of companies. The assessment order was also passed under Section 143(3) read with Section 153C of the Act making additions under Section 68 of the Act. 20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements” 6. As for same proposition ld. AR has relied further on decision in Kailashben Manharlal Chokshi v. CIT1, where the Hon’ble Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: - “26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary state merit, ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 6 if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disbelieve the retrac tion made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in isnorins the retraction made by the assessee.” 7. Then on merits of the case it was submitted that the Ld. AO in the case of the assessee has erred in law and facts of the case in making additions on protective basis, since ld. AO has concluded that the assessee firm had been used as a conduit by the Rama Group to inflate its purchases. It was submitted that the protective assessments are permissible when ownership cannot be immediately determined, which is not the case of the assessee. As the Ld. AO has never doubted the same to be the additions to be made in the case of the assessee. Therefore, the question of protective addition does not even arise. The appellant has been a facilitator of supply of the raw material to the Rama Group of Companies and has admitted to earning of commission for the supply of the raw material. The AO has added back the turnover with Rama Group which is apparently a double addition as it is clearly declared in the return of income filed by the appellant which has also been subjected to audit. Such an addition cannot be made as it is already declared in the appellant's return. That since, the assessee has earned commission on the sale facilitated by him and which has been assessed to tax and not doubted. ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 7 8. We have considered the material on record and the submissions and are of the considered view that admittedly, the assessments have been concluded only on the basis of the oral statements and for AYs 2009-10 to 2012-13, apart from the statements, there was no other incriminating material/document. These assessment years being unabated assessments thus the ratio laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (supra) is squarely applicable. 9. Even otherwise, the ld.CIT(A) has been legally correct to hold that if the assessee was a conduit and the income reported by way of sales have been accepted, then, adding the alleged disputed turnover with Rama Group will lead to double taxation. The protective addition are only justified in cases where the two set of assessee earned the alleged undisclosed income on the basis of similar nature of transaction and not just because the same transaction has given rise to different nature of incomes protective addition can be said to be legal way to make an income taxable. Thus, the findings of the ld.CIT(A) require no interference. The appeals filed by the Revenue, thus, have no substance. Accordingly, the appeals are dismissed. Order pronounced in the open court on 28.02.2025. Sd/- Sd/- (S. RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28th February, 2025. ITAs 5008 to 5011/Del/2019 ITAs 5012 to 5015/Del/2019 8 dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "