SHIV KUMAR PALIWAL,KANPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, KANPUR, KANPUR

ITSSA 59/LKW/2021

AI Insights

The case involves an appeal by Shiv Kumar Paliwal against the order of the Commissioner of Income Tax (Appeals)-4, Kanpur, which confirmed the additions made by the Assessing Officer under section 153A of the Income Tax Act, 1961. The additions were made following a search and seizure operation, which the appellant contested as being without jurisdiction and unsupported by incriminating evidence. The ITAT's decision to delete the additions was influenced by recent Supreme Court rulings that clarified the conditions under which additions can be made in cases of unabated assessments following a search operation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31894 (ITAT-LUCKNOW)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: PCIT Vs. Abhisar Buildwell (P.) Ltd, Smt. Shashi Agarwal vs. DCIT, Raj Kumar Arora vs. CIT, Kabul Chawla vs. CIT, U. K. Paints (Overseas) Ltd. vs. Dy. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANU CHAURASIA
• Assessee Lawyers: ASHISH JAISWAL
• Keywords: Principle of natural justice; Block assessment; Benefit of exemption; Bogus
• Section: 251; 132; 153A; 153C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER IT(SS) A No. 59/LKW/2021 Assessment Year: 2014-15 Shiv Kumar Paliwal 117-H-1/137, Model Town, Pandu Nagar, Kanpur. v. DCIT, Central Circle-1 Laxmi Building, 10/503, Allenganj, Kanpur. PAN:AASPP2094H (Appellant) (Respondent) Appellant by: Shri Ashish Jaiswal, Adv Respondent by: Shri Manu Chaurasia,CIT(DR) O R D E R PER ANADEE NATH MISSHRA, AM.: The present appeal has been filed by the assessee against the impugned appellate order dated 01.07.2021 passed by the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur under section 250(6) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the assessment year 2014-15. The grounds of appeal are as under: - “1. THAT THE NOTICE ISSUED AND ASSESSMENT COMPLETED U/S 153A OF THE IT ACT, 1961 IS INVALID AND UNLAWFUL WITHOUT JURISDICTION. 2. THAT THE LD.AO HAS ERRED IN INVOKING SECTION 153A OF THE IT ACT, 1961 3. THAT THE LD.AO HAS ERRED IN MAKING ADDITION ARBITRARILY WITHOUT ANY RELEVANCE OR NEXUS TO THE SEIZED MATERIAL. 4. THAT THE LD.CIT(A) HAS ERRED IN COMFIRMING ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS LONG TERM CAPITAL GAIN U/S 69 OF THE IT ACT, 1961 OF RS. 73,17,110/-. 5. THAT THE APPELLANT HAS RIGHTLY CLAIMED THE GAIN FROM SALE OF SECURITUES AS LONG TERM CAPITAL GAIN UNDER THE RELEVANT SECTION 10(38) OF THE IT ACT, 1961. IT(SS) A No. 59/LKW/2021 Page 2 of 8 6. THAT THE ALLEGED BOGUS SHARE TRANSACTION CANNOT BE TAXED U/S 69 AS THE APPELLANT HAS GIVEN THE DOCUMENTARY EVIDENCE OF SALE AND PURCHASE AT PREVAILING MARKET RATE ON STOCK EXCHANGE. 7- THAT THERE HAS BEEN NO EVIDENCE AS TO THE WHY THE GAIN FROM THE SALE OF SECURITIES BE TREATED AS UNEXPLAINED WS 69 OF THE ACT WHEN THE TRANSACTION HAS BEEN EXPLAINED BY COMPLETE DOCUMENTARY EVIDENCE AND ACCORDINGLY SHOWN U/S 10(38) OF THE ACT BEING GAIN FROM SALE OF SECURITIES TRANSACTION AND PRIMARY ONUS CASTED UPON THE APPELLANT HAS BEEN DISCHARGED. 8- THAT THE LD.CIT(A) AND LD.AO HAS FAILED TO ESTABLISH ANY NEXUS OR MATERIAL EVIDENCE TO ESTABLISH THE ALLEGED INVOLVEMENT OF APPEALLANT OTHER THAN BEING MERELY AN INVESTOR. 9- THAT THE TRANSACTION CANNOT BE DOUBTED AND BURDENED UPON THE APPELLANT WHEN THE PURCHASE AND SALE OF THE SHARES WHICH HAS BEEN TRADED ON EXCHANGE AT PREVAILING MARKET RATE AND DULY DISCLOSED BY THE DOCUMENT AND NOT BARRED BY THE SEBI. MOREOVER WHEN NO COLLUSION HAS BEEN ESTABLISHED BY THE AO BETWEEN THE ALLEGED BROKER/ENTRY OPERATOR/DIRECTOR AND APPELANT. 10.THAT THE LDCIT(A) AND LD.AO HAS COME TO CONCLUSION WITH PREDETERMINED AND PRECONCEIVED MIND OF MAKING ADDITION ON THE BASIS OF INVESTIGATION REPORT WITHOUT BRINGING ON RECORD ANY EVIDENCE TO ESTABLISH THAT THE APPELLANT HAD PREARRANGED TRANSACTION OR ANY DOCUMENTS OR STATEMENT OF DIRECTORS AND PROMOTERS.APART FROM THE ALLEGATIONS ON THE BASIS OF STATEMENT. 11. THAT THE LD.CIT HAS ERRED IN CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF ESTIMATED COMMISSION AT 5% ON ADHOC BASIS OF RS.3,65,855/- WITHOUT ANY RELEVANCE TO MATERIAL FOUND DURING SEARCH. 12. THAT THE LD.CIT(A) AND LD.AO HAS ERRED IN MAKING ADDITION WITHOUT CROSS EXAMINATION OF THE PERSON ON WHOSE STATEMENT THE BENEFIT OF EXEMPTION HAS BEEN DENIED LEADING TO VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. 13. THAT THE ASSESSMENT COMPLETED BY LD.AO AND CONFIRMED BY THE LD.CIT(A) IS ARBITRARY, PREJUDICAL AND UNLAWFUL. 14. THAT THE APPELLANT CRAVES LEAVE TO AMEND, WTHDRAW, REVISE OR INTRODUCE ANY GROUND OF APPEAL WITH YOUR HONOURS KIND PERMISSION.” 2. In this case, a search & seizure operation under section 132 of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) was conducted in the case of the assessee, in pursuance whereof assessment order, dated 30.12.2018 was passed for IT(SS) A No. 59/LKW/2021 Page 3 of 8 Assessment Year 2014-15 under section 153A of the Act. In the aforesaid assessment order, the assessee’s income was determined at Rs.1,78,32,875/- (rounded off to Rs.1,78,32,880/) as against returned income of Rs.1,01,49,910/-. The additions made were two fold: Rs.73,17,110/- (addition made u/s 69 of the Act) and Rs.3,65,855/- (commission income). The assessee filed appeal against the aforesaid assessment order in the office of the Ld. CIT(A). During appellate proceedings, the assessee took the ground, inter-alia, that the Assessing Officer erred in law as well as on facts in making additions to the returned income without any incriminating documents being found during the course of search. The Ld. CIT(A) rejected this contention of the assessee, relying on the judgment in the case of Raj Kumar Arora (2014) 367 ITR 517 (All)/52 taxmann.com 172 (All). Aggrieved, the assessee has filed the present two appeals in Income Tax Appellate Tribunal (ITAT). Earlier, during assessment proceedings also; similar objection of the assessee was rejected vide letter dated 16.10.2018 of the Assessing Officer, relying on the aforesaid case of Rajkumar Arora (supra). 2.1 During the appellate proceedings in ITAT, two paper books containing the following particulars were filed from the assessee’s side: - SI No Particulars 1 Copy of status of return for the A.Y. 2014-15 on the Income tax Portal 2 Copy of written submission filed before the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur dated 28.02.2020 3 Copy of Demat Account for the period of 01.04.2013 to 31.03.2014 4 Copy of ledger account of UPSE Securities in the books of Shiv Kumar Paliwal for the period of 01.04.2013 to 31.03.2014 5 Copy of Bank statement of Shiv Kumar Paliwal for the period of 01.07.2013 to 17.04.2014 6 Copy of UPSE Securities Statement 7 Copy of Contract Note 8 Copy of Demat Account for the period of 01.07.2012 to 31.07.2012 9 Copy of ledger account of UPSE Securities in the books of Shiv Kumar Paliwal for the period of 01.04.2011 to 31.03.2012 10 Copy of Bank statement of Shiv Kumar Paliwal for the period of 01.04.2011 to 17.04.2012 11 Copy of ITR-V along with Computation of income for the A.Y. 2014-15. 12 Copy of ITR-V for A.Y. 2014-15 IT(SS) A No. 59/LKW/2021 Page 4 of 8 13 Copy of Hon'ble Tribunal order in the case of ITSS 90 to 108/LKW/2020 dated 12.07.2021 in appellant own group of cases 14 Copy of Hon'ble Tribunal order in the case of Shashi Agarwal ITA. 198 & 199/LKW/2023 dated 07.10.2024 2.2 At the time of hearing, the Ld. Counsel for the assessee submitted that the issue as to whether additions can be made in a search assessment in the absence of any incriminating material is now well settled in favour of the assessee by the order of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/(2023) 454 ITR 212 (SC). He further submitted that the Lucknow Bench of ITAT in the case of Smt. Shashi Agarwal (2024) 167 taxmann.com 687 (Lucknow Trib.), considered aforesaid decision of Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd (supra) and decided the issue in favour of the assessee relying on the same. He further submitted that in the present appeals, the additions made by the Assessing Officer are not based on any incriminating documents found in the course of search. Relying on the aforesaid cases of Abhisar Buildwell (P.) Ltd (supra), and Smt. Shashi Agarwal (supra), he contended that the additions made in the assessment order for Assessment Year 2014-15 should be deleted. The Ld. Departmental Representative for Revenue supported the orders of the Assessing Officer as well as Ld. CIT(A) and relying on the same. 2.3 We have heard both sides. We have perused the materials available on record. In the case of Smt. Shashi Agarwal (supra), co-ordinate bench of ITAT Lucknow has decided the matter in favour of the assessee, relying on Abhisar Buildwell (P.) Ltd (supra), on the issue whether addition can be made in a search assessment in the absence of any incriminating material found IT(SS) A No. 59/LKW/2021 Page 5 of 8 during search. The relevant portion of the order in the case of Smt. Shashi Agarwal vs. DCIT (supra) is reproduced as under: - “(C) We have heard both sides. We have perused materials on record. There is no dispute regarding relevant facts. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Further, as no assessment proceedings were pending at the time of search & seizure operation u/s 132 of the Act on 08/07/2016, the case of the assessee falls in the category of unabated/completed assessments within the meaning of orders passed by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and within the meaning of order passed in the case of Kabul Chawla 380 ITR 573 (Delhi), which stands approved by Hon'ble Supreme Court by dint of orders of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra). Further, in paragraph 14 of the aforesaid order of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra), the Hon'ble Supreme Court concluded as under: “14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (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. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.” (C.1) Hon'ble Supreme Court in the case of U. K. Paints (Overseas) Ltd. (supra) widened the application of the order in the case of Abhisar Buildwell (supra) to assessments conducted u/s 153C of the IT Act also. In both orders of Hon'ble Supreme Court i.e. in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), the Hon'ble Supreme Court held that in respect of the completed/unabated assessments, no additions can be made in assessment order passed u/s 153A or passed u/s 153C of the IT Act in respect of which incriminating materials were not found in the course of search action u/s 132A of the Act; although Hon'ble Supreme Court held that the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers u/s 147/148 of the IT Act subject to fulfillment of the conditions as envisaged/mentioned u/s 147/148 of IT(SS) A No. 59/LKW/2021 Page 6 of 8 the IT Act. Thus, although the powers of the Assessing Officer u/s 147/148 of the IT Act were saved by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), subject to fulfillment of conditions envisaged u/s 147/148 of the IT Act; it has been categorically held that in respect of completed/unabated assessments, no additions can be made u/s 153A or under section 153C of the Act if incriminating material was not found / unearthed during the course of search u/s 132 of the IT Act in respect of the additions made. (C.2) The issue whether additions can be made in assessment orders passed u/s 153A or u/s 153C of IT Act in cases falling under unabated/completed assessments, when no incriminating material was found at the time of search u/s 132 of the IT Act, was a disputed issue in the past. While a view in favour of assessee was taken, for example, in cases such as CIT vs. Kabul Chawla (supra), Pr. CIT vs. Saumya Construction 387 ITR 523 (Guj), CIT vs. Continental Warehousing 374 ITR 645 (Bom.), Smt. Jami Nirmala vs. Pr.CIT 437 ITR 673 (Orissa), CIT vs. Veerprabhu Marketing Ltd. 388 ITR 574 (Cal.), Pr.CIT vs. Delhi International Airport (P.) Ltd. 443 ITR 574 (Kar.), Pr.CIT vs. Meeta Gutgutia 395 ITR 526 (Delhi), Dr. A. V. Sreekumar vs. CIT 404 ITR 642 (Ker.), Pr. CIT vs. Smt. Daksha Jain 2019 (8) TMI 474 (Rajasthan), etc.; courts took a view in favour of Revenue in cases reported as CIT vs. Rajkumar Arora (supra), CIT vs. Mahndipur Balaji 447 ITR 517 (All.), CIT vs. K. P. Ummer 413 ITR 251 (Ker.), Sunny Jacob Jewellers and Wedding Centre vs. DCIT 362 ITR 664 (Ker.), E. N. Gopakumar 75 taxmann.com 215 (Kerala), etc. The issue has now been finally settled by decisions of Hon'ble Supreme Court in the aforesaid cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) wherein view in favour of assessee has been taken. (C.2.1) In the present appeals before us, the additions have been made by the Assessing Officer in assessment orders passed u/s 153A of the IT Act. Further, we have already noted earlier that the relevant facts are not in dispute. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Furthermore, as no assessment proceedings were pending in the case of the assessee at the time when (on 08/07/2016) search u/s 132 of the IT Act was conducted, the case of the assessee in the present appeals before us, falls in the category of completed/unabated assessments within the meaning of orders passed by Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and in the case of CIT vs. Kabul Chawla (supra) which was approved by Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell (supra). In view of the foregoing, and having regard to the relevant facts and circumstances of the present case before us, and further, as representatives of both sides are in agreement with this, we are of the view that the issue in dispute is squarely covered in favour of the assessee by the orders of Hon'ble Supreme Court in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and by the aforesaid instruction No. 1 of 2023 of CBDT, which is binding on Revenue authorities. Accordingly, we direct the Assessing Officer to delete the additions made amounting to a total of Rs.2,24,81,900/- for assessment year 2015-16 and addition amounting to Rs.44,25,000/- for assessment year 2016-17. IT(SS) A No. 59/LKW/2021 Page 7 of 8 (C.2.2) Since we have directed that the aforesaid additions be deleted, the other issues regarding merits of the additions made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to make any order with regard to the merits of the various additions made.” 3. In view of the foregoing, and respectfully following the orders of the Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and DCIT vs U.K. Paints (Overseas) Ltd (2023) 150 Taxmann.com 108 (SC), and further relying instruction of Central Board of Direct Taxes (CBDT) [Instruction No.1 of 2023 (F. No.279/Misc./M-54/2023-IT)] directing the field authorities to implement the aforesaid orders of Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and U.K. Paints (Overseas) Ltd (supra), in uniform manner; we direct the Assessing Officer to delete the aforesaid addition of Rs.73,17,110/- and addition of Rs.3,65,855/- for Assessment Year 2014-15. Since we have directed that the aforesaid addition be deleted, the other issues regarding merits of the addition made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to express any opinion on the merits of the additions made. All the grounds of appeals are treated as disposed of as aforesaid. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 20/03/2025. Sd/- Sd/- [KUL BHARAT] [ANADEE NATH MISSHRA] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 20/03/2025 Vijay Pal Singh, (Sr. PS) IT(SS) A No. 59/LKW/2021 Page 8 of 8 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard File By order // True Copy// Assistant Registrar "