VIKAS JAIN,NEW DELHI V. ACIT CENTRAL CIRCLE-20, NEW DELHI

ITA 1316/DEL/2023

AI Insights

The case involves Shri Vikash Jain, who was assessed for unexplained investments in property following a search operation under section 132 of the Income-tax Act, 1961, conducted at his premises and those of the Micromax group. The AO made an addition of Rs. 2,09,50,000 as unexplained investment based on documents found during the search at Micromax's premises, which were not directly related to Jain. The CIT(A) upheld this addition, but the Tribunal set aside the CIT(A)'s decision, emphasizing that the documents should have been treated under section 153C, not section 153A, as they pertained to a third party.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 303121 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Other Referred Cases: PCIT Vs. Anand Kumar Jain HUF
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: VED JAIN
• Keywords: Set aside; Question of law; Unexplained investment; Document seized; Documents seized; Search and seizure; Valuation report; Accommodation entries; Loose papers; Bogus
• Section: 143(3); 142(1); 132; 153A; 69B; 13; 153C; 260A

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 1316/Del/2023 (Assessment Year: 2009-10) Shri Vikash Jain, B-1/118, 2nd Floor, Paschim Vihar, Delhi Vs. ACIT, Central Circle-20, Delhi (Appellant) (Respondent) PAN: AAGPJ3118G Assessee by : Shri Ved Jain, Adv Shri Ayush Garg, CA Revenue by: Shri Dayainder Singh Sidhu, CIT DR Date of Hearing 12/03/2025 Date of pronouncement 23/04/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1316/Del/2023 for AY 2009-10, arises out of the order of the Commissioner of Income Tax (Appeals)-27, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. CIT(A), Delhi-27/10054/2008-09 dated 20.03.2023 against the order of assessment passed u/s 254 r.w.s. 153A/ 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 29.09.2021 by the Assessing Officer, ACIT, Central Circle-20, New Delhi (hereinafter referred to as „ld. AO‟). 2. At the outset, we find that the assessee had filed his additional grounds on 11.11.2024 which reads as under:- ITA No. 1316/Del/2023 Shri Vikash Jain Page | 2 14. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in ignoring the settled position of the law that where the assessment of the assessee has been made on the basis of any material found during the course of search of other person, then assessment of the assessee shall be completed by following the procedure prescribed under section 153C of the Act and not under section 153A of the Act and therefore, the impugned assessment order passed by the AO under section 254 r.w.s. 153A/143(3) is invalid and liable to be quashed.\" 3. This additional ground goes to the root of the matter and purely legal in nature and the facts relevant for its adjudication are already in record. Accordingly the same is hereby admitted and taken up first for adjudication. 4. We have heard the rival submissions and perused the materials available on record. The assessee is an individual and had filed his return of income for AY 2009-10 on 23.07.2009 declaring total income Rs. 31,93,010/-. A search and seizure operation u/s 132 of the Act on 10.02.2011 was conducted at the premises of the assessee being B- 1/118, Paschim Vihar, New Delhi, and B-1/238, Ground Floor, Paschim Vihar, New Delhi and Panchanama dated 11.02.2011 was drawn. A search and seizure was also conducted on the same day u/s 132 of the Act in Micromax group of cases. According to the ld AO, the assessee is a member of this group. Consequent to the search on the assessee, notice u/s 153A of the Act stood issued to the assessee on 21.12.2012. During the course of search operation in Micromax Group, loose sheets of paper were found, wherein, certain transactions with Chawla Buildwell Pvt. Ltd were unearthed. The ld AO of Micromax alleged that these rough notings reflect the unexplained investment in property made by the assessee and that purchase consideration was calculated at Rs. 2.60 crores. The assessee explained that he along with his wife jointly had purchased the ITA No. 1316/Del/2023 Shri Vikash Jain Page | 3 property from M/s. Chawla Buildwell Pvt. Ltd for a total consideration of Rs. 49.50 lacs which was paid from his bank account to the said company. The assessee placed on record the copy of his bank statement and his wife to prove the same wherein it could be seen that the assessee paid Rs. 27 lakhs on 27.11.2008 and his wife paid Rs. 15 lacs on 15.09.2008 and Rs. 7.50 lacs on 21.11.2008. The ld AO ignored the contentions of the assessee and proceeded to make an addition of Rs. 2,09,50,000/- (Rs. 2.60 crores – Rs. 49.50 lacs) as unexplained investment made by the assessee on purchase of property in assessment framed u/s 153A of the Act dated 28.03.2013. The assessee filed an appeal before the ld CIT(A) who deleted the addition by holding that no adverse presumption could be drawn from the loose sheets found. He held that in the absence of any corroborative evidence brought on record, the ld AO had failed to discharge his duty that there was a payment to the extent of Rs. 2,09,50,000/- by the assessee over and above the amount mentioned in the sale deed which was paid through cheque. The revenue preferred an appeal before this Tribunal wherein, the matter was set aside to the file of the ld CIT(A) in ITA No. 4075/Del/2014 dated 19.03.2019 with the following directions:- a. It was not clear as to how the figure of Rs. 2.60 crores was computed by the ld AO; b. Neither any enquiry nor any action was taken against the seller i.e. M/s. Chawla Buildwell Pvt. Ltd ; c. The entire addition of unexplained investment could not be made in the hands of the assessee unless the ld AO is able to substantiate that the entire money was paid by assessee only; d. Presumption of section 132(4A) of the Act will not be available if the documents were not found from the search conducted at the premises of the assessee. ITA No. 1316/Del/2023 Shri Vikash Jain Page | 4 5. In the set aside assessment proceedings, a questionnaire was issued to the assessee on 04.11.2019 along with notice u/s 142(1) of the Act. The assessee duly complied with the said notice by furnishing the requisite details. Summon was issued to the Principal Officer of Chawla Buildwell Pvt. Ltd on 09.12.2019. In response to the summons, Chawla Buildwell Pvt Ltd vide its reply which is reproduced in page 4 of the assessment order, furnished the requisite details. The ld AO on perusal of the reply dated 12.12.2019 filed by Chawla Buildwell Pvt Ltd (CBPL) concluded that the assessee purchased a property from CBPL and therefore conclusion could easily be drawn that the transaction recorded in the seized documents are in respect of property purchased by the assessee form CBPL. 6. It is not known from the reply of CBPL dated 12.12.2019 as to how the ld AO had concluded that the transactions recorded in the seized documents were in respect of property purchased by the assessee from CBPL. The name of CBPL has not been mentioned in the seized documents at all. Only Chawlaji is mentioned in the seized documents. The nature of transactions is not at all reflected in the entire seized documents. Only figures are mentioned. Hence, the conclusion drawn by the ld AO in para 4.4 of the assessment order is incorrect. The case was referred to ld Departmental Valuation Officer (DVO) who valued the property at Rs. 74,93,851/- as against the assessee‟s purchase consideration of Rs. 49.50 lacs. The copy of the valuation report dated 29.10.2020 of the ld DVO are enclosed in pages 124 to 130 of the Paper Book. The ld AO however post referring the matter to the ld DVO and receipt of report thereof, rejected the said valuation report and conducted his own enquiry from several online website like 99acres and Magic Bricks and estimated the value of subject mentioned property to be at Rs. 3.50 ITA No. 1316/Del/2023 Shri Vikash Jain Page | 5 crores. In response to the show cause notice issued, the assessee submitted vide letter dated 26.08.2021 that :- i. No incriminating material was found during the course of search at the premises of the assessee ; ii. The underlying documents i.e. loose sheet of papers have been found during the course of search conducted at the premises of some other assessee; iii. The documents which were found at some other assessee's premise were dumb documents as there is no reference of any property on such papers and there were no signatures (neither of the assessee nor of the seller) on such papers; iv. The property was purchased by the assessee jointly with his wife and the payments have been made both by the assessee and his wife via proper banking channels; v. The valuation done by the DVO is excessive and unreasonable; vi. No evidence has been brought on record to substantiate that the assessee had paid anything over and above the purchase consideration in the Purchase Deed; vii. The addition cannot go beyond the estimated value of DVO; viii. Without prejudice to the fact that no addition can be made in hands of the assessee, assessee as well as his wife had jointly invested in the property under consideration. Therefore, even if it is presumed that there is unexplained investment, entire addition cannot be made in the hands of the assessee solely. 7. The ld AO ignoring the replies furnished by the assessee made an addition of Rs. 2,09,50,000/- on account of unexplained investment in the hands of the assessee u/s 69B of the Act. This action of the ld AO was upheld by the ld CIT(A). ITA No. 1316/Del/2023 Shri Vikash Jain Page | 6 8. Now the crucial question that arises for our consideration was whether the seized documents that was relied upon for making an addition towards unexplained investment was found from the premises during the course of search conducted at the premises of Micromax group, i.e. Micromax Informatics, Micromax Technology Pvt. Ltd, Micromax Media Pvt. Ltd, at 697 Udyog Vihar, Phase-V, Gurgaon Haryana. This fact is evident from the Panchanama of the said companies of Micromax group, placed on record by the ld AR. The assessee‟s search was conducted at B-1/118, 2nd floor, Paschim Vihar, New Delhi which is evident from the copy of Panchanama placed at pages 9 to 13 of the Paper Book. It is pertinent to not that that the panchanama drawn in the case of Micromax does not contain or include the name of assessee. Accordingly, it was rightly pleaded by the ld AR that if at all such search documents was to be used in the hands of the assessee, the right course could be initiation of separate proceedings on the assessee u/s 153C of the Act and the same cannot be done u/s 153A of the Act in the hands of the assessee. Very strangely the ld CIT(A) in para 7.3.1 had observed that seized documents was found from the chamber of Director of Micromax i.e. assessee. There is absolutely no evidence to make this observation as it is not discernable from the records. From the panchanama what is seen is that these seized documents were found from the company premises. The company i.e. Micromax as well as the assessee were subjected to independent search on the same day pursuant to independent search warrant of authorization u/s 132 of the Act. Hence, it could be safely concluded that the seized documents from premises of the company (being a 3rd party qua the assessee), could be used in the hands of the assessee only u/s 153C of the Act. The trigger point for proceedings u/s 153A of the Act is both initiation and conduct of ITA No. 1316/Del/2023 Shri Vikash Jain Page | 7 search u/s 132 of the Act, whereas the proceedings u/s 153C of the Act gets triggered only after recording a satisfaction by the ld AO of the searched person that a particular document does not pertain or relate to the searched person and that it pertains or relates to some other person, then the same should be handed over to the ld AO of such other person for taking necessary action in accordance with law. Thereafter the ld AO of such other person has to record independent satisfaction with the seized documents which was handed over by the ld AO of the searched person that it has a bearing on the determination of the total income of such other person and accordingly record a satisfaction to initiate proceedings u/s 153C of the Act on such other person. When these are the parameters laid down by the statute, any documents found during the course of search of 3rd party cannot be simply utilized in the hands of the searched person u/s 153A of the Act. This issue is no longer res integra in view of the decision of the Hon‟ble Jurisdictional High Court in the case of PCIT Vs. Anand Kumar Jain HUF reported in 432 ITR 384 wherein it was held as under:- “3. A search was conducted u/s. 132 on 18th November, 2015 at the premises of the Assessee (being Anand Kumar Jain (HUF), its coparceners and relatives) as well as at the premises of one Pradeep Kumar Jindal. During the search, statement of Pradeep Kumar Jindal was recorded on oath u/s. 132(4) on the same date, wherein he admitted to providing accommodation entries to Anand Kumar Jain (HUF) and his family members through their Chartered Accountant. The assessing officer framed the assessment order detailing the modus operandi as to how the cash is provided to accommodation entry operator in lieu of allotment of shares of a private company. Thereafter when the matter was carried up in appeal before the CIT(A), the findings of AO were affirmed. However, in further appeal before the ITAT, the said findings were set aside vide the impugned order. ITA No. 1316/Del/2023 Shri Vikash Jain Page | 8 4. The Revenue is aggrieved with the aforesaid impugned order and has filed the present appeal under Section 260A of the Act, proposing the following questions of law: a. Whether the ITAT is justified in deleting the additions made on account of bogus long term capital gain on the ground that the evidences found during search at the premises of entry provider cannot be the basis for making additions in assessment completed u/S. 153A in the case of beneficiary ignoring the vital fact that there was a common search u/s 132 conducted on the same day in both the cases of the entry provider and the beneficiary? 5 …………………………………….. 6 …………………………………….. 7. …………………………………….. 8 ……………………………………. 9. …………………………………….. 10. Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (l.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration. 11. Accordingly, the present appeals, along with all pending applications, are dismissed.” ITA No. 1316/Del/2023 Shri Vikash Jain Page | 9 9. Respectfully following the said decision, the additional ground of the assessee is hereby allowed and original grounds raised by the assessee are hereby left open. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 23/04/2025. -Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23/04/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "