DCIT CENTRAL CIRCLE-27, NEW DELHI V. KAMAL KISHORE CHAURASIA , NEW DELHI

ITA 1480/DEL/2022

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the Assessing Officer (AO) under sections 68 and 69C of the Income Tax Act. The additions were related to the alleged accommodation entries and commission charges for procuring these entries in the sale of shares of Nikki Global Finance Ltd, which was identified as a penny stock used for providing bogus Long Term Capital Gains (LTCG). The Tribunal's decision was based on the absence of incriminating material found during the search operation conducted on the assessee, Kamal Kishore Chaurasia, and relied on the legal precedent that unabated assessments can only be interfered with based on incriminating material discovered during the search.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471557 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Kabul Chawla, CIT vs. Meeta Gutgutia, PCIT vs. Abhisar Buildwell Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: PARVEEN KUMAR; ANIL
• Keywords: Income from undisclosed sources; Search and seizure; Accommodation entries; Bogus
• Section: 148; 143(3); 153; 132; 153A; 68; 69C; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA NO. 1480/Del/2022 (AY 2014-15) DCIT, CC-27, NEW DELHI VS. KAMAL KISHORE CHAURASIA, ROOM NO. 348, 3RD FLOOR, E-2 ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI – 55 (PAN: ABJPC8088J) (APPELLANT) (RESPONDENT) Department by : Shri Dayainder Singh Sidhu, CIT(DR) Assessee by : CA, Parveen Kumar & CA Anil Kumar Chopra. Date of hearing : 19.12.2024 Date of pronouncement : 31.12.2024 ORDER PER SHAMIM YAHYA, AM : This appeal filed by the Revenue is directed against the order dated 19.4.2022 of the Ld. CIT(A)-29, New Delhi relating to assessment year 2014-15 on the following grounds :- 1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,74,19,148/- made u/s 68 of the Act, without appreciating the 2 facts that the Sh. Anil Kedia & Sh. Soumen Sen, an entry operator in his statement, recorded u/s 131(1) of the Act, had accepted that Nikki Global Finance Ltd was a penny stock and providing accommodation entries in the form of LTCG to the various beneficiary and the assessee is one of the beneficiary. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.20,22,574/- u/s 69C of the Act on account of commission paid for procuring the above transaction without appreciating the facts that the Sh. Anil Kedia & Sh. Soumen Sen, an entry operator in their statement, recorded u/s 131(1) of the Act had accepted that Nikki Global Finance Ltd was a penny stock and used for providing accommodation entries in the form of LTCG to the various beneficiary and the assessee is one of the beneficiary. 3. Whether on the facts and in the circumstances of the case and in law, the CIT(A) is correct in holding that the scope of section 153A of the Act is limited to assessing only search related income, thereby denying Revenue the opportunity of taxing other escaped income that comes to the notice of the AO? 4. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was right in limiting the scope of section 153A of the Act only to undisclosed income when as per the section the AO has to assess the total income of the six assessment years.? 5. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law. 2. The brief facts of the case are that assessee filed its original return on 28.11.2014 declaring income of Rs.2,32,80,220/-. In the case, the regular 3 assessment was completed on 27/10/2016. The search on the assessee group was conducted on 15/01/2020. No proceedings u/s 143(3) or u/s 148 were pending on the date of search. Thus, this is a case of unabated assessment. Search and seizure operation was conducted on M/s Kamla Pasand group of cases under section 132 of the I. T. Act, 1961 on 15.01.2020. A warrant of authorization for search was issued in the name of Sh. Kamal Kishore Chaurasia, the appellant for his various premises from where certain papers/documents belonging to the assessee were found and seized. Due to the search conducted u/s 132 in this case, notice u/s 153A of the Act was issued on 15.03.2021 requiring the assessee to furnish return of income for the year under consideration being one of the six assessment years preceding to the assessment year in which search was conducted. It has been mentioned in the assessment order that the assessee has shown Long Term Capital Gain ,exempt u/s 10(38) of the Act, amounting to Rs.6,73,58,676/- on account of sale of shares of Nikki Global Finance Limited. That the assessee had purchased 74140 shares of Nikki Global Finance Limited during the financial year 2006-07 for a total consideration of Rs.8,42,321/-and sold these shares during FY 2013-14 for a total sale price of Rs.6,74,19,148/- thereby claiming LTCG of Rs.6,65,76,826/-. Further, as per the assessment order survey action was carried out by the Kolkata Directorate of Investigation at the business premise of Excel Stock Broking Pvt Ltd at 21, Hemanta Basu Sarani, 3rd Floor, Room No. 309, Kolkata- 700001 on 15.6.2015 wherein it was found that Nikki Global Finance Limited was an penny stock and was being used by various entry operators for providing bogus LTCG for accommodating unaccounted income. The statements of Shri Anil Kedia and Shri Soumen Sen in connection with the above survey have also been relied upon by the AO in the assessment order. Accordingly the AO issued show-cause to the assessee on on 11.09.2021. The assessee replied to the show cause the AO vide his submission dated 17.09.2021.The show cause and the reply are part of the assessment order as 4 reproduced above. The AO has mentioned that the assessee requested for complete statement of Shri Anil Kedia and Sh Soumen Sen which were provided to the asses The AO has mentioned that the scrip M/s Nikki Global Finance Lim whose shares the assessee has purchased was managed by Sh Anil Kedia an entry operator whose statement was recorded on oath u/s 131(1) of Income Tax Act, 1961 by Directorate of Investigation, Kolkata. That Soumen Sen in his statement had also accepted that Nikki Global Finance Ltd was a penny stock and had been used by them and other en operators for providing accommodation entries in the form of LTCG to various beneficiaries. It has also been stated in the assessment order that Nikki Global Finance Limited was having market price of share at around 134 on 09 April 2012 and had gone up to Rs 938.75 in 20 months December 2013. Thereafter the AO has analyzed the financials of t company whose shares the assessee has sold and had claimed exempt LTC and has observed that the exceptional price movement of Nikki Global Finance Limited was not commensurate with the financials of the company. In view of the above the AO arrived at a conclusion that that the assessee had taken accommodation entry in form of sale of shares amounting to Rs.6,74,19,148/- and has added the amount u/s 68 of the Act. The addition of Rs. 20,22,574/- was also made u/s 69C on account of commission paid for procuring the above transaction. 3. Upon assessee’s appeal, Ld. CIT(A) decided the issue in favour of the assessee by noting that assessment order was not based on any incriminating material or document found during the course of search and seizure. In this regard, he also placed reliance on several case laws. We may gainfully refer the findings of ld. CIT(A) as under:- “8.4 I find that the addition made in the assessment order is not based upon any incriminating material or documents found during the course of search. The assessment order does not refer to any 5 seized material or any incriminating material found during the course of search regarding the additions made. In the assessment order it has been mentioned that, on the basis of the details filed by the assessee during the assessment proceedings, the AO issued a show cause to the assessment about the LTCG of Rs. 6,74,19,148/- on account of sale of shares of M/s Nikki Global Finance Ltd. during the year. Further, in the assessment order there is a mention of the Survey conducted by the Investigation Wing of the Department on 15.06.2015 on M/s Excel Stock Broking Pvt. Ltd from whom the information of the said LTCG came to knowledge. It may be noted that the search on the appellant was carried out on 15.01.2020. Thus, the information regarding the LTCG incurred by the appellant was not found in the form of incriminating evidence during the course of search conducted on the appellant, but was found in action conducted five years prior to the search. Also there is no mention of incriminating evidence found during search to suggest that the appellant had paid 3% commission amounting to Rs 20,22,574/- for obtaining the accommodation entry. 8.5 The position of law that addition can be made only on the basis of incriminating material etc. found during search, has been laid down by the Hon’ble jurisdictional High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 0573 and plethora of subsequent judicial pronouncements as relied upon by the appellant. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some 6 incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. The Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla, reported as 380 ITR 573, has held at para 37 as follows- “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: ... “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 discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” 8.5.1 Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. The SLP of the Revenue challenging the decision of the Hon’ble Delhi High Court in the case was dismissed by the Hon’ble Supreme Court. There are plethora of judicial pronouncements after the above verdicts that unabated 7 assessments can be interfered with u/s 153A only on the basis of incriminating material/documents/evidence discovered during the course of search. 8.6 Accordingly, I am of the view that the addition on account of sale of shares treating the same as accommodation entries and the commission charges paid, by AO is not justifiable. Respectfully following the legal pronouncements as discussed above, it is held that the additions made by the AO were contrary to provisions of law. In view of the above, the additions made by AO of Rs. 6,74,19,148/- on account of sale of shares and of Rs. 20,22,574/- on account of commission charges paid are deleted. Accordingly, the appellant gets relief on these grounds of appeal.” 4. We have heard both the parties and perused the records. Ld. DR relied upon the order of the AO. However, Ld. AR for the assessee reiterated that the addition in this case has been made without any incriminating material found during the course of search. He further submitted that assessment u/s. 153A in the case of completed assessment cannot be done dehors incriminating material found during the course of search. He further stated that in the instant case the addition is not based on any incriminating material and rather it is based on 3rd party investigation report. Ld. DR could not controvert the findings of the Ld. CIT(A) that addition is not based on any incriminating material found during the course of search. 4.1 Upon careful consideration and after perusing the relevant records, we find that Ld. CIT(A) has passed a correct order wherein, it is abundantly clear that assessment u/s. 153A of the Act and in case of 153A of the Act assessment addition has to be made on the basis of incriminating material found during search. But in this case, Ld. CIT(A) has clearly brought out that addition was 8 not done on the basis of any incriminating material found during search. In this view of the matter, we find that Ld. CIT(A) has passed a well reasoned order, by relying upon the relevant case laws, hence, we do find any infirmity in his order, thus, we confirm the same. Our aforesaid view is fully supported by the decision of the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd., CA No. 67580 / 2021 dated 24.4.2023, (2023) SCC Online SC 481, wherein the Hon’ble Supreme Court has expounded that no addition can be made when the assessment framed u/s. 153A dehors incriminating material found during the search. 5. In the result, the Revenue’s appeal is dismissed in the aforesaid manner. Order pronounced on 31/12/2024. Sd/- Sd/- (YOGESH KUMAR US) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBhatnagar Copy forwarded to: - 1. Appellant. 2. Respondent. 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "