GOPAL GARG,FARIDABAD V. DCIT, CENTRAL CIRCLE-2, FARIDABAD

ITA 965/DEL/2024

AI Insights

The case involves Gopal Garg, the appellant, who contested the additions made to his income assessment for the Assessment Year 2015-16 following a search and seizure operation at the premises of SRS Group. The additions were made under Section 153A of the Income Tax Act, 1961, which allows for assessment or reassessment in cases where a search has been conducted. The primary contention of the appellant was that the additions were made without any incriminating material found during the search, and thus, the assessments were unlawful. The Tribunal referenced several judicial precedents, including a Supreme Court judgment, to support the decision that additions cannot be made in the absence of incriminating material.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23034 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: PCIT, Central Circle-3 Vs. Abhisar Buildwell, PCIT vs. Best Infrastructure Pvt. Ltd., CIT vs. Harjeev Aggarwal, PCIT (Central) - 3 Vs. Anand Kumar Jain (HUF), SatishDev Jain, Sajan Kumar Jain, Principal Commissioner of Income Tax (Central) -3 Vs. PavitraRealcon Pvt. Ltd.DesignInfracon Pvt. Ltd., And Delicate Realtors Pvt. Ltd., Principal Commissioner of Income Tax, Delhi-20 Vs. Ms. Suman Agarwal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR BHARATI
• Assessee Lawyers: VED JAIN; AYUSH
• Keywords: Search and seizure
• Section: 143(2); 132; 153A

Judgement Text

" 1 ITA No. 965/Del/2024 GopalGarg Vs. DCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 965/Del/2024 (A.Y. 2015-16) Gopal Garg House No. 905, Sector 15, Sector-16a, Faridabad, Haryana PAN: AHLPG2578D Vs. DCIT Central Circle-2 Faridabad, Haryana, Appellant Respondent Assessee by Shri Ved Jain, Adv and Sh. Ayush Garg, CA Revenue by Sh. Sanjay Kumar Bharati, CIT DR Date of Hearing 13/01/2025 Date of Pronouncement 07/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: This appeal is filed by the Assessee against the order of Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short)- 3, Gurugram, dated 31/01/2024 for the Assessment Year 2015-16. 2. The Grounds of Appeal are as under:- “1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2 ITA No. 965/Del/2024 GopalGarg Vs. DCIT 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO under Section 153A of the Act is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eye of law. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions made by the AO under Section 153A of the Act are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the assessee and the assessment framed under section 153A are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, confirming the action of the AO despite the fact that the order passed by the AO without obtaining valid prior approval under section 153D of the Income Tax Act. 6 (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 4,06,786/- on account of purchases from M/s Krishna Industries made by the assessee holding the same as not genuine. (ii) That the above addition has been confirmed despite the fact that the same has been made by the AO @ 25% of total purchases on estimated basis by arbitrarily rejecting the explanations and the evidences brought on record by the assessee. 3 ITA No. 965/Del/2024 GopalGarg Vs. DCIT 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above said addition rejecting the contention of the assessee that the addition has been made by the AO despite the assessee has been maintaining regular books of accounts an financial statement are audited as per law and nothing adverse has been pointed out by the AO. 8. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in la in confirming the above said addition ignoring the fact that the quantity purchased and sold being completely tallying, the allegation that the assessee has not made purchases cannot be sustained. 9. (i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 29,50,000/- on account of loan received form M/s RajatFincap Private company. (ii) That the above addition has been confirmed rejecting the detailed submissions and explanations brought on record by the assessee to prove the identity and creditworthiness of the lenders as well as genuineness of the transactions. 10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite the fact that the same has been made by the AO without conducting the independent enquiry under section 133(6)/131 of the Act. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite that the same has been made merely by relying on the statements recorded at the back of the assessee, without giving assessee an opportunity to cross examine the same. 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite that the same has been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same. 13. The appellant craves leave to add, amend or alter any of the grounds of appeal.” 4 ITA No. 965/Del/2024 GopalGarg Vs. DCIT 3. Brief facts of the case are that, the Assessee filed original return of income for Assessment Year 2015-16 declaring total income at Rs. 19,52,500/-. A search and seizure operation conducted on residential as well as office premises of SRS Group on 06/06/2018. Consequent to the same, assessment proceedings u/s 153A of the Income Tax Act, 1961 (‘Act’ for short) was initiated against the Assessee and an assessment order came to be passed by computing the income of the Assessee at Rs. 84,46,917/- as against the returned income of Rs. 19,52,500/-. Aggrieved by the assessment order dated 25/06/2021, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 31/01/2024, partly allowed the Appeal by confirming the addition of Rs. 4,06,786/- made on account of purchase from M/s Krishna Industries, holding the same has not genuine and also confirmed the addition of Rs. 29,50,000/- made on account of loan received from M/s RajatFincap Pvt. Ltd. Aggrieved by the order of the Ld. CIT(A) dated 31/01/2024, the Assessee preferred the presentAppeal on the grounds mentioned above. 4. The Ld. Counsel for the Assessee arguing on the Ground No. 3 of the Appeal submitted that the additions have been made by the A.O. in the absence of any incriminating material found during the course of search, therefore, relying on the Judgment of the Hon'ble Supreme Court in the case of PCIT, Central Circle-3 Vs. Abhisar Buildwell (2023) 454 ITR 212 (S.C) dated 12/05/2023, sought for deletion of the additions confirmed by 5 ITA No. 965/Del/2024 GopalGarg Vs. DCIT the Ld. CIT(A). The Ld. Counsel further submitted that the Ld. CIT(A) erred in observing that statement of Sh. Rajat Mangla recorded u/s 132(4) of the Act during the search proceedings is an incriminating material unearthed during the course of search. The Ld. Counsel relying on plethora of judicial precedents prayed for allowing the Appeal. 5. Per contra, the Ld. Departmental Representative submitted that the statement of one Mr. Rajesh Mangal u/s 132(4) of the Act being incriminating material unearthed during the course of search, the Judgment of the Hon'ble Supreme Court in the case of Abhisar Buildwell (supra) is not applicable to the present case, thus, relying on the orders of the Lower Authorities, sought for dismissal of Ground No. 3 of the Assessee. 6. We have heard both the parties and perused the material available on record. In the present case, original return was filed on 26/09/2015 for Assessment Year 2015-16 and the time limit to issue the notice u/s 143(2) of the Act has already been expired therefore the assessment year under consideration being completed, assessment could not be disturbed in the assessment made u/s 153A of the Act in the absence of any incriminating material found during the course of the search. As could be seen from the order of the Ld. CIT(A), the Ld. CIT(A) at Paragraph 4.5 observed that the addition of Rs. 49 lakhs, (50% in the hands of the appellant) made on account of statement of Rajesh Mangla recorded u/s 132(4) of the Act 6 ITA No. 965/Del/2024 GopalGarg Vs. DCIT recorded during the search proceedings in the case of SRS Ltd. The Ld. CIT(A) treating the said statement as incriminating material unearthed during the course of the search proceedings accordingly upheld the certain additions made by the A.O. It is now well settled law that statement recorded u/s 132 of the Act does not constitute incriminating material in the absence of any other corroborative evidence as held in following judicial pronouncements: • “PCIT vs. Best Infrastructure Pvt. Ltd., 397 ITR 82 (Delhi) affirmed by the Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax 2 Delhi Versus M/S Best Infrastructure (India) Pvt. Ltd. 2018 (6) TMI 971 - SC ORDER, Dated: 14-5-2018 • CIT vs. Harjeev Aggarwal, 2016 (3) TMI 329 - DELHI HIGH COURT, Dated: - 10-3-2016 • PCIT (Central) - 3 Versus Anand Kumar Jain (HUF), SatishDev Jain, Sajan Kumar Jain, 2021 (3) TMI 8 – DELHIHIGH COURT, Dated: 12-2-2021 • Principal Commissioner of Income Tax (Central) -3 Versus PavitraRealcon Pvt. Ltd.DesignInfracon Pvt. Ltd., And Delicate Realtors Pvt. Ltd., 2024 (5) TMI 1408 - DELHI HIGH COURT, Dated: - 29-5-2024 • Principal Commissioner of Income Tax, Delhi-20 Versus Ms. Suman Agarwal, 2023 (2) TMI 1116 - DELHI HIGH COURT, Dated: - 28-7-2022. 7. Further the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra) held that addition cannot be made in the absence of any incriminating material found during the course of search. The relevant portion of the Judgment of Hon'ble Supreme Court are reproduced as under:- 7 ITA No. 965/Del/2024 GopalGarg Vs. DCIT “14. In view of the above and for the reasons stated above, it is concluded as under: iv) In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.\" 8. By respectfully following the ratio laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell (supra), considering the fact that no incriminating materials/documents or any other evidence was found or seized during the course of search proceedings which resulted in additions against the Assessee, we find merit in Ground No. 3 ofthe appeal of the Assesse. Accordingly, we quash the assessment order and the order of the Ld. CIT(A). Since, we have allowed the Ground No. 3 and quash the assessment, other Grounds of appeal requires no adjudication. 9. In the result, appeal of the Assessee is partly allowed. Order pronounced in the open court on 07th February, 2025 Sd/- Sd/- (M. BALAGANESH) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 07.02.2025 R.N, Sr.P.S* 8 ITA No. 965/Del/2024 GopalGarg Vs. DCIT Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "