DCIT Central Circle-30, New Delhi V. Amit Sankhwal, New Delhi

ITA 1565/DEL/2020

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4473 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-11-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 07-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Tax effect; Retraction
• Section: 68; 132; 154; 133A; 153A; 143(1); 250; 153

Judgement Text

I.T.A.Nos.1564 & 1565/Del/2020 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI G.S. PANNU, HON’BLE VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER आ .अ.स ं /.I.T.A Nos.1564 & 1565/Del/2020 /Assessment Years:2011-12 & 2013-14 DCIT Central Circle-30, Room No.320, E-2, ARA Centre, Jhandewalan Extn., New Delhi. ब म Vs. Amit Sankhwal 6/30, Shanti Niketan, New Delhi. PAN No.ABJPS5322B अ Appellant /Respondent Revenue by Shri Zafarul Haque Tanweer, CIT–DR Assessee by Shri UN Marwah, CA & Shri Praveen Goel, Adv. स ु नवाईक तारीख/ Date of hearing: 21.11.2023 उ ोषणाक तारीख/Pronouncement on 29.12.2023 आदेश /O R D E R PER C.N. PRASAD, J.M. These two appeals are filed by the Revenue against different orders of Ld.CIT(Appeals)-30, New Delhi dated 05.06.2020 for the assessment years 2011-12 and 2013-14. Revenue raised the following common grounds of appeal except for the figures: I.T.A.Nos.1564 & 1565/Del/2020 2 Grounds of ITA No. 1564/Del/2020 for AY 2011-12: 1. “Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the SLP filed before the Hon’ble Supreme Court against the decision of Kabul Chawla has been withdrawn due to low tax effect but the Revenue has already filed SLP in the case of APAR Industries Pvt. Ltd. which includes the ratio as decided by the Hon’ble High Court in the case of CIT(Central-3) Vs. Kabul Chawla. 2. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the assessee Sh. Amit Shankhwal who is one of the directors in M/s J H Jewels Pvt. Ltd. has accepted in his statement recorded that he has received accommodation entry in his company through entry operators in Kolkata. 3. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the assessee retraced his statement made u/s 133A of the Act by an affidavit without producing any evidence to the contrary. 4. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the case of M/s Pebble Investment and Finance Pvt. Ltd. Vs. ITO (2017-TIOL-238 SC-IT) is very much applicable in this case. 5. That the order of Ld.CIT(A) is perverse, erroneous and is not tenable on facts and in law. 6. That the grounds of appeal are with prejudice to each other. 7. That the appellant craves leave to add, amend, alter or forgo any grounds of appeal either before or at the time of hearing of the appeal.” I.T.A.Nos.1564 & 1565/Del/2020 3 Grounds of ITA No.1565/Del/2020 for AY 2013-14: 1. “Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the SLP filed before the Hon’ble Supreme Court against the decision of Kabul Chawla has been withdrawn due to low tax effect but the Revenue has already filed SLP in the case of APAR Industries Pvt. Ltd. which includes the ratio as decided by the Hon’ble High Court in the case of CIT(Central-3) Vs. Kabul Chawla. 2. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the assessee Sh. Amit Shankhwal who is one of the directors in M/s Shivshakti Commercial Pvt. Ltd. and M/s Dynamic Enclave Pvt. Ltd. (the shell companies from which unsecured loans of Rs.16,69,85,000/- has been received in M/s J H Jewels Pvt. Ltd.) has accepted in his statement recorded that he has received accommodation entry in his companies through entry operators in Kolkata. 3. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the assessee retraced his statement made u/s 133A of the Act by an affidavit without producing any evidence to the contrary. 4. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law and on facts in not appreciating that the case of M/s Pebble Investment and Finance Pvt. Ltd. Vs. ITO (2017-TIOL-238 SC-IT) is very much applicable in this case. 5. That the order of Ld.CIT(A) is perverse, erroneous and is not tenable on facts and in law. I.T.A.Nos.1564 & 1565/Del/2020 4 6. That the grounds of appeal are with prejudice to each other. 7. That the appellant craves leave to add, amend, alter or forgo any grounds of appeal either before or at the time of hearing of the appeal.” 2. The Ld. Counsel for the assessee, at the outset, submits that a search and seizure operation u/s 132 of the Act was conducted on 27.07.2016 and 23.08.2016 in the premises of the assessee and his family and associate group of cases at various residential and business premises. Assessment for these two assessment years was completed u/s 153A making additions towards unexplained investments in the form of loans and advances. The Ld. Counsel for the assessee submits that no incriminating material was found in the course of search warranting the additions. Ld. Counsel submits that as there was no incriminating material found and since the assessments for the assessment years 2011-12 and 2013-14 were unabated the Ld. CIT(Appeals) deleted the addition following various decisions including the decision of the jurisdictional High Court in the case of CIT Vs. Kabul Chawla (61 taxmann.com 412). 3. On the other hand, the Ld. DR strongly supported the orders of the Assessing Officer. I.T.A.Nos.1564 & 1565/Del/2020 5 4. Heard rival submissions, perused the orders of the authorities below. 5. The only issue in these appeals is as to whether the addition made by the AO is sustainable in the absence of any incriminating material when the assessments are unabated. The Ld.CIT(Appeals) considered the submissions of the assessee, evidences on record including the materials seized in the course of search and the findings of the Assessing Officer in the assessment order and concluded that no incriminating material was found during search/survey proceedings leading to the additions made by the AO observing as under: “9. Ground Nos. 1, 2 & 5 pertaining to the addition of Rs.16,48,00,000/- which was reduced to Rs.15,22,00,000/- vide order passed u/s 154 of the Act: The AO had made an addition of Rs.16,48,00,000/ (which was reduced to Rs 15,22,00,000/ - vide order passed u/s 154 of the Act dated 24.01.2020 by the AO). The AO while making the addition, has observed that during survey, while going through ledgers, it was found that M/s J H Jewels Pvt. Ltd. had received payments as loans/advances from various companies. Upon Investigation of these loans had come from some Kolkata based companies in F.Y 2010-11 and F.Y. 2012-13 which had acquired money in form of Share Premium. It was seen that M/s J H Jewels Pvt. Ltd. had acquired majority shareholding at nominal value of M/s Shiv Shakti Commercial Pvt. Ltd. M/s Dynamic Enclave Pvt. Ltd., M/s Maharaja Tie Up Pvt. Ltd. before these companies provided loans to M/s J. H. Jewels Pvt. Ltd. Pursuant to Post I.T.A.Nos.1564 & 1565/Del/2020 6 search Investigation commission of enquiry u/s 131(1)(d) of the Act, it was reported that upon visit of the Inspector at the registered offices in Kolkata no physical existence of the companies was found at the addresses . Thereby AO concluded that these were Shell companies formed for providing Accommodation Entries. Shri Amit Sankhwal had in his response to Q.No. 25 of his statement recorded u/s 133A on 29.07.2016 admitted that out of Rs.16,69,85,000/ routed through M/s Shivsakti Commercial Pvt. Ltd. and M/s Dynamic Enclave Pvt. Ltd. was his unaccounted cash which assessee had paid to some entry operator in Kolkata to convert into white. The relevant portion of his statement are reproduced as under: ANS:- I admit that I have taken loans and advances from Shiv Shakti commercial private limited and dynamic enclave private limited in my company J H Jewels private limited. Actually this was my own accounted cash which I paid to some person in Kolkata whose name I do not remember. He had made a deal with me to convert my unaccounted cash into genuine white money. I paid a cash commission of 0.2% of the total loans as received from the company mentioned above. I have generated this cash through personal trading of jewellery out of my firm. I admit my mistake and offer Rs.16,69,85,000/- for due taxation as per Income Tax Act 1961 in the year of receiving loans and advances from these companies. I do not remember any transaction details with maharaja tie up private limited as they are very old and I do not have proper records for that period hence I recollect and thus I am not in a position to explain it. 9.1 The Appellant retracted the above statements by means of affidavit dated 05-08.2016 filed on 08.08.2016. The DDIT(Inv.) again recorded the Appellant's statement on 29.09.2017. The relevant para is hereunder: - I.T.A.Nos.1564 & 1565/Del/2020 7 Question 7: in question No. 25, you have admitted that loans and advances of Rs.16,69,85,000/- received from various companies received in M/s J H Jewels Pvt. Ltd. are not genuine and were in fact monies earned thru unaccounted sales of jewellery. Please clarify why the aforesaid statement is disregarded and the averment made in your affidavit be accepted particularly as your affidavit is self-serving? Answer 7: I was forced to admit the Loans and Advances received by M/s J H Jewels Pvt. Ltd. from Shivshakti Commercial Pvt. Ltd., Dynamic Enclave Pvt. Ltd. and Maharaja Tie up Pvt. Ltd. as my unaccounted income. This statement was made by me under pressure of the officers present during the course of survey proceedings. The true fact is that M/s J H Jewels Pvt. Ltd. has acquired the shares of (i) Maharaja Tie Up Pvt. Ltd. in terms of the Share Purchase Agreement for a consideration of Rs.77,65,000/- paid vide cheques dated 31.03.2010; (ii) shares of Gangaur Management Consultations Pvt. Ltd. in terms of share purchase agreement for consideration of Rs.31,48,250/-. The shares of Gangaur Management Consultant Pvt. Ltd. had been purchased at book value computed as per Rule 11UA of income Tax Rules. The said Gangaur Management Consultants Pvt. Ltd. holds the equity shares of Shivshakti Commercial Pvt. Ltd. and Dynamic Enclave Pvt. Ltd. The purported surrender of Rs.16,69,85,000/ relating to investment by M/s J H Jewels Pvt. Ltd. in acquisition of shares of Shiv Shakti Commercial Pvt. Ltd. and Dynamic Enclave Pvt. Ltd. through undisclosed sales of Jewelry of M/s J H Jewellers LLP is wholly incorrect as no cash was paid towards the acquisition of the shares of the aforesaid companies including Maharaja Tie Up Pvt. Ltd. 9.2 In response to show-cause dated 22.10.2018 issued by the AO, the appellant responded vide letter dated 26.11.2018 objecting to the proposed addition stating: I.T.A.Nos.1564 & 1565/Del/2020 8 (i) The original statement of Amit Sankhwal recorded u/s 133A, from 27.07.2016 to 29.07.2016 having been retracted by means of Affidavit dated 05.08.2016 filed on 08.08.2016 has no validity or evidentiary value, particularly in view of Fresh Statement recorded on 29.09.2017, also figure of surrender is incorrect; (ii) That no incriminating material /evidence has been found during course of search or survey proceedings and since the assessment for this year having been completed, no addition in law can be made; (iii) That without prejudice, investment in companies has been made by J H Jewels Pvt. Ltd. and not the Appellant and since no investment made by Appellant addition not warranted; (iv) That on merits it was stated that the Report of Inspector pursuant to commission u/s 133(i)(d) is incorrect and not reliable for the reason that the registered offices had shifted to Delhi and the tax jurisdiction had also been transferred to ACIT Central Circle 30 New Delhi , who has passed the present order; (v) That all loans given by Maharaja Tie Up Pvt. Ltd. during the year are genuine and satisfy all conditions of Section 68 namely (a) Identity (b) Maharaja Tie Up Pvt. Ltd. assessed to Tax u/s 143(3), share capital and share premium accepted; the said company had reserves and investment in shares of various companies, which were sold and such funds were advanced to M/s J H Jewels Pvt. Ltd. which held 100% of the shares of Maharaja Tie Up Pvt. Ltd., copies of balances sheet, bank Statements, copies of ITR’s, Assessment orders duly filed; Source of Source also explained. Thus the loans received by M/s J H Jewels Pvt. Ltd. were genuine; 9.3 The AO held “The above submissions of the assessee has been considered and not found acceptable. During I.T.A.Nos.1564 & 1565/Del/2020 9 the course of Survey at M/s J H Jewellers LLP on 27.02.2016, statement of the assessee was recorded u/s 133A. The assessee has accepted that he introduced his own money through Shivshakti Commercial Pvt. Ltd. and Dynamic Enclave Pvt. Ltd. As per the statement the assessee was not able to recall the transaction with Maharaja Tie Up Pvt. Ltd. Accordingly, the AO made addition of Rs.16,48,00,000/- being amount of alleged Loan given by Maharaja Tie Up Pvt. Ltd. to M/s J H Jewels Pvt. Ltd. as given out of undisclosed income of appellant. Subsequently, the addition was reduced to Rs.15,22,00,000/- which was the actual loan and not Rs.16,48,00,000/-. 10. The appellant contended that no incriminating material has been found during course of search or survey on the appellant which would warrant any addition during the year under appeal in which the assessment stood completed as on date of search. The addition as per the AO is based on the original statement of appellant recorded u/s 133A from 27.07.2016 to 29.07.2016, which was retracted within 10 days of the search/survey. The reasons for retraction were stated in affidavit and confirmed by the appellant in the fresh statement recorded post retraction by DDIT(Inv.) on 29.09.2017. It is a matter of fact that (i) Statement of Amit Sankhwal was recorded during search at Defence Colony, New Delhi on 27.07.2016 and immediately statement u/s 133A recorded at Sunder Nagar, New Delhi also commenced on 27.07.2016 and continued unabated till night of 29.07.2016. Thus, it was contended that in law no addition is sustainable, Reliance was sought to be placed on following decisions: (i) PCIT v. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC) Where proceedings have been initiated under section 153A of the Act to reopen concluded proceedings of assessment years earlier to the year of search, the addition made is not justified in absence of any incriminating material unearthed during search. I.T.A.Nos.1564 & 1565/Del/2020 10 (ii) CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) “Para 37 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 search shall abate. The total income for such AYs will have to be computed by the AOs as afresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant A Y in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “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 under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or- reassessment can be made. The word 'assess' 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. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the I.T.A.Nos.1564 & 1565/Del/2020 11 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 discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. (iii) PCIT v. Ms. Lata Jain [2017] 81 taxmann.com 83 (Delhi) Section 153A of the Act; Search and seizure- There has to be some incriminating material recovered during search qua assessee in each of years for purposes of framing an assessment under section 153A of the Act. (iv) Harjeev Aggarwal [2016 (3) TMI 329 - DELHI HIGH COURT] and Best Infrastructure (India) (P.) Ltd. [2017 (8) TMI 250 - DELHI HIGH COURT] hold that the statement recorded during the course of search on standalone basis without reference to any other material discovered during the search and seizure operation would not empower the Assessing Officer to make the addition merely because any admission was made by the assessee during the search operation. Reliance also placed on :- • Amit bhai Manu bhai Kachadiya v. DCIT [2019] 105 taxmann.com 341(Surat Trib.) • Anil Mahavir Gupta v. ACIT [2017] 82 taxmann.com 122 (Mumbai Trib.) • ACIT v. Vikas Gutgutia [2017] 77 taxmann.com 268 (Delhi Trib.) I.T.A.Nos.1564 & 1565/Del/2020 12 • BMM Ispat Ltd. V. DCIT [2018] 93 taxmann.com 76 (Banglore Trib.) 10.1 A combined reading of above decisions clearly establish that in case of completed proceedings, addition can be made only in respect to the incriminating material found during the course of search. Since, in the instant case, the assessment proceedings were already concluded under section 143(1) of the Act and did not abate, therefore, applying the ratio of above decisions to the case in hand, the AO can made addition in the returned income only in respect to the incriminating material unearthed during the search. If no incriminating material is unearthed during search then no addition can be made. No incriminating material was found during search/ survey relating to the addition of Rs.16,48,00,000/- [which was reduced to Rs.15,22,00,000/- u/s 154] for this year being completed assessment. 10.2 Applying the aforementioned propositions laid down in the case of Kabul Chawla (supra) to the facts of this case, it is held that the addition made of Rs.16,48,00,000/- for the year under appeal i.e. AY 2011- 12 is bad in law as no incriminating material has been found or seized, which is relatable to this year, during the course of search/^survey proceedings.” 6. As could be observed from the above, it is the finding of the Ld.CIT(A) that no incriminating material was unearthed during search/survey and in view of the proposition laid down in the case of Kabul Chawla (supra) the addition made by the AO was held to be bad in law as no incriminating material was found or seized which relating to the assessment year under consideration. We observe that the decision of the Jurisdictional High Court in the case of CIT Vs. Kabul Chawla (supra) has been affirmed by the Hon’ble Supreme I.T.A.Nos.1564 & 1565/Del/2020 13 Court in the case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. (454 ITR 212). The Revenue could not place on record any seized material based on which the additions were made in the assessment order. In the circumstances, we do not see any infirmity in the order passed by the Ld.CIT(A) in deleting the addition made by the AO in the absence of any incriminating material seized in the course of search. We observe that the facts in both the appeals are identical as in both these assessment years 2011-12 and 2013-14 no incriminating materials were seized leading to the additions in dispute. Thus, the ratio of the decision of the Hon’ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. squarely applies for both these appeals. Thus, we sustain the order of the Ld.CIT(Appeals) for the assessment years 2011-12 and 2013-14. Grounds raised by the Revenue for both these assessment years are rejected. 7. In the result, appeals of the Revenue are dismissed. Order pronounced in the open court on 29/12/2023 Sd/- Sd/- (G.S. PANNU) (C.N. PRASAD) VICE PRESIDENT JUDICIAL MEMBER Dated: 29/12/2023 *Kavita Arora, Sr. P.S. I.T.A.Nos.1564 & 1565/Del/2020 14 Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi