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TMI Blog2020 (2) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... rification on 04/02/2020 i.e. the date on which another cases of the same group to which these assessees belong are fixed. The Ld. Counsel for the assessee clarified that the Departmental appeals against the said order dated 31/10/2018, were belated by approximately 200 days and till date those appeals had not been admitted by the Hon'ble Jurisdictional High Court and as such the said order dt. 31/10/2018 in the case of another persons belonging to the same group and decided by the ITAT Delhi Bench, is intact. 2.1 Since the issues involved are common having similar facts in all these appeals which were heard together, so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. At the first instance we will deal with the appeal in ITA No. 706/Chd/2018 wherein following grounds have been raised: 1. That order dated 31.03.2018 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter called the "Act") by the Ld. Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much as he was not justified to uphold the action of the Ld. Assessing Officer in initiating proceedings u/s 153A of the Act despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Power & Steel Group (BPSL in short) alongwith residential / business premises of its Directors and other related entities & persons on 03/03/2010. 6. During the course of search certain incriminating documents, papers, books of accounts etc. were found and seized. The A.O. mentioned that the assessee being the Director and key person of the Group filed letter dt. 18/06/2010 before the Investigation Wing surrendering an amount of Rs. 302 Crores in the hands of various Group Companies, his wife and himself as undisclosed income emanating from the seized documents. The surrender was made as under: Sr. No. Name of the person making disclosure Amount of disclosure made Assessment Yeatr of Surrender 1 Shri Sanjay Singal Rs. 110 Crores 2010-11 2 Smt. Aarti Singal Rs. 140 Crores 2010-11 3 M/S Bhushan Power & Steel Ltd. Rs. 8 Crores 2010-11 4 M/S Diyajyoti Steel Pvt Ltd Rs. 10 Crores 2010-11 5 M/S Vision Steel Pvt Ltd Rs. 9 Crores 2010-11 6 M/S Marsh Steel Pvt Ltd Rs. 12 Crores 2010-11 7 M/S Jasmine Steel Pvt Ltd Rs. 13 Crores 2010-11 6.1 Later on the settlement application was filed by the Company M/S Bhushan Power & Steel Group (BPSL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the A.Y. 2013-14 on account of unexplained credits, cash payment for land purchase and interest disallowance in the hands of various Group concerns. Thereafter, another search and seizure operation on 21/02/2014 was initiated by the Department at the business premises alongwith residential / business premises of the Directors and other related persons of BPSL. 6.3 The AO also observed that various new evidences in the form of soft as well as hard data including statements of Numerous Entry Operators were found / recorded which prime facie indicated that bogus Long Term Capital Gain (LTCG), accommodation entries in the case of individuals of BPSL group and One Time accommodation (OT) towards share capital /share premium in the case of group concerns were obtained which suggested that BPSL Group had been continuously involved in introducing its unaccounted income in garb of LTCG, OT etc. The AO pointed out that during the course of search and seizure action on 22/02/2014 the key person of the BPSL Group Shri Sanjay Singhal i.e; the assessee was confronted with the various incriminating evidences alongwith the statement of various connected persons and his statement under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces Ltd. 40.43 4 Unisys Software &Holding Indust. Ltd. 3.18 7.75 5 Nouveau Multimedia Ltd. 0.37 6 Action Financial Services (India ) Ltd. 0.72 7 Rutron International Ltd. 9.62 8 Rander Corporation Ltd. 9 P.L. Enterprises Ltd. now known as Mantra Kausal Enterprises Ltd. 10 Matra Kaushal Enterprises Ltd. 11 Grandma Trading & Agencies Ltd. 12 Asiallak Capital & Finance Ltd now known as Glot>al Infratech Ltd. 35.04 13 Global Infratech & Finance Ltd. 13.99 14 G-tech Info 0.23 Total 0.37 0.00 0.23 54.36 60.48 8.48 58.65 6.5 The A.O. ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2013 u/s. 131(1 A) 5 Damodar Attal Main person handling share trading and synchronized trading work. 09.04.2013 u/s. 131(1 A) 6 Devang D. Master Key- associate handling the compliance work and involved in legal planning 09.04.2013 u/s. 132(4) and 10.04.2013 u/s. 131(1 A) 7 Devang Jhaveri Key associate handling day to day compliances and verification of documents. u/s. 132(4) dated 09.04.2013 8 Prakash Dave Employee of Shirish Shah u/s. 132(4) dated 09.04.2013 9 Naresh Parmar Employee of Shirish Shah, prepares cash and cheques sheets. u/s. 132(4) dated 10.04 2013 10 Kumar Raichand Madan Person supplying Directors and Addresses for the companies of 1 Shirish Shah. He has also been found to be Director in many of the companies of Shinsh Shah u/s. 131(1 A) dated 09.04.3013 11 Praveen Kumar Jain (alias Pintu alias Chintan) Accommodation entry provider, facilitated conversion of cash into RTGS/cheques in the accounts of Shirish Shah's entities. u/s. 131(1 A) dated 11.10.2013 12 Satish Saraf Accommodation entry provider, facilitatedconversion of cash into RTGS/cheques in the accounts of Shirish Shah's entities. u/s. 131(1 A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises. The evidences and the statements of employees of SCS were confronted to him during the course of search and in the post search proceedings and SCS in his statement admitted to have provided various types of accommodation entries against receipt of cash from the clients either directly or through intermediaries and also admitted to be engaged in synchronized trading in the shares of various listed companies managed and controlled by him so as to facilitate LTCG to the clients against receipt of cash from them. The A.O. mentioned that the modus operandi followed by SCS for providing accommodation entries of LTCG was as under: * The preferential shares are allotted by way of private placement by the listed companies controlled and managed him me to various clients/beneficiaries who approach him for getting accommodation entry of long term capital gains. * In certain cases the clients purchase shares from the companies under his control on BOLT at low prices. * Thereafter, the price of share of the listed companies is artificially raised by way of purchase and sale of shares through the web of companies. * When the share prices are raised to high levels, the shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. * Secondly, an artificial structure of share capital of the listed company is created, wherein, a private limited company managed by SCS subscribes to the shares of the listed company. The listed company in turn advances these funds to another private limited company managed by SCS. This money so received by the second private limited company is layered in the web of companies managed by SCS and another private limited company invests in the share capital of the listed company. In this manner the cycle of layering and increasing the share capital of the listed company is repeated several times. In this way the share capital of the listed company is artificially structured without actual flow of funds into the entities under the control of SCS. 6.8 The A.O. pointed out that the share's price in the case of PIL jacked up from Rs. 2.25/- per share to Rs. 87.10/- per share during the period April 2009 to March 2011. The A.O. mentioned that it was clearly established from the statement of Shri Omprakash Anandialal Khandelwal that : * PIL is a paper company with no activities. * PIL has been engaged in providing various types of accommodation entries. * The entire turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 -50,000.00 45,75,000.00 22.07.10 COMM ON 40.97 @ 4.75 % COMM 1,94,607.50 47,69.607.50 22.07.10 CASH RCD 50,00.000.00 -2,30.3 92.50 22.07.10 ANGAD1A CHRG 12,500.00 -2,17,892.50 26.07.10 CASH RCD 50,00,000.00 -52,17,892.50 26.07.10 ANGADIA CHRG 12,500.00 -52,05,392.50 * At Column No. (1), the date of transaction is recorded, * At column No. (2) the nature of the transactions for which the amounts have been credited and debited in the said sheet has been recorded. * "Prraneta New" refers to transaction of purchase and sale of shares of M/s. Prraneta Industries Limited (PIL) * "4.75%" represents commission charged on the LTCG provided to the client (This was charged From Mr. Kedia who charged at higher rate from clients). * "cash red" represents cash received from the client and credited to the account of the client at Column No. (8) * "Angadiya charges" refer to the cash courier expenses debited to the account of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. (8). The nature of credit or the mode of receipt is recorded at Column No. 2 (Details) of the sheet. * At column No. (9), the balance in the account of the client BPSL Group is recorded. Positive balance represents debit balance i.e. the amount receivable by SCS from the client and vice versa. According to the A.O. the entries in the Kedia 2 Sheet completely correlated with the shares trading data of M/s PIL as obtained from the BSE which revealed that 3,00,000 shares of M/s PIL had been traded on 14/02/2011 @ Rs. 68.75/- per share and exactly total 3,00,000 shares had been sold by the various individuals to M/s BPSL Group as per following details: SNo. Name of the Company No of Shares Sale consideration Long Term Capital Gains SNo. 14-02-2011 1510 68.75 103812.5 Kinita Real Estate Pvt. Ltd. Sanjay Singal HUF 14-02-2011 23490 68.75 1614937.5 Kinita Real Estate Pvt. Ltd. Sanjay Singal HUF 14-02-2011 25000 68.75 1718750 Kinita Real Estate Pvt. Ltd. Sanjay Singal HUF 14-02-2011 25000 68.75 1718750 Kinita Real Estate Pvt. Ltd. Aarti Singal 14-02-2011 25000 68.75 1718750 Kinita Real Estate Pvt. Ltd. Aarti Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details found in books of accounts and document seized from Shri R.K. Kedia who admitted that the code language has been used and a dot(.) had been placed before two zeroes (.00) while recording the amount of transaction in the books of accounts. The same fact was admitted by the employees of Shri R.K. Kedia in their statements recorded on oath. He also observed that the details of LTCG accommodation entries arranged by Shri R.K. Kedia through listed paper entities like M/s PIL of SCS had been found seized in the case of Shri R.K. Kedia. The AO prepared a cash trail showing the flow of unaccounted cash from various individual of BPSL Group to SCS through Shri R.K. Kedia at page no. 60 of the assessment order and observed that the evidence in the form of seized books of accounts from three independent searches on SCS Group, Kedia Group and Pintu Group at different point of time, having the exactly same details of accommodation entries in lieu of unaccounted cash established beyond any doubt that various individuals of the BPSL Group had taken LTCG accommodation entries with the help of accommodation entry operators. He also pointed out that the documents revealed that SCS had cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perators (SCS in this case) for his different client beneficiaries various individuals of the BPSL group in this case, after charging a fixed percentage of commission in cash. * Out of the total percentage of commission received in cash (6 - 7%) from Bhushan Power & steel Group he paid around 4.50-4.75% of commission to SCS and 0.25% to angadias for cash courier. 6.13 The A.O. observed that Shri R.K. Kedia and his employee Shri Manish Arora admitted on oath that they were in the business of providing accommodation entries and had arranged various kinds of accommodation entries for the various individuals of the BPSL Group and received commission @ 6% of the entries provided by them and that upon being confronted with the evidences the assessee disclosed additional income of Rs. 250 Crores under section 132(4) in the sworn statement recorded on 22/02/2014 and backed it up with disclosure letter, however he could not give any satisfactorily reply to the question asked by the authorized officers and reiterated the disclosure of unaccounted income of Rs. 250 Crores under section 132(4) of the Act in the whole group. The A.O. pointed out that aforesaid surrenderred amount included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Krishan Kumar Khadaria 12 PS Infrstructure & Services Ltd. (Parag Shilpa Invesments Ltd) Sh. Jagdish Purohit 6.15 The A.O. observed that during the post search investigation various information related to the above named companies was collected which proved that all these companies were paper companies doing no actual business and were being used for giving exempt LTCG accommodation entries by various entry operators. The A.O. discussed the investment pattern in the case of M/s Blue Circle Services Ltd. (BCSL) used for providing accommodation entries to various beneficiaries at page no. 70 to 75 of the assessment order for the cost of repetition the same is not reproduced herein. The A.O. observed that most of the beneficiaries booked bogus LTCG between October 2011 to November, 2012 and after that the prices had fallen to rock bottom, therefore the study of share prices history of BCSL also proved how this company had been used for providing accommodation entries to various beneficiaries. He also observed that the trade details of BCSL revealed that the most of the share brokers through whom most of the purchases had been, done had admitted on oath that they helped vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity and exorbitantly high stock prices. Some of the companies which had been investigated by SEBI were as under: Sr. No. Name of the Company 1. M/s Greencrest Financial Services Ltd. (GCFS) (Earlier known as Mangold Glass Industries Ltd.) 2. M/s Maa Jagdambe Tradelinks Ltd (MJTL) 3. Ms Mishka Finance and Trading Ltd(MFTL) 4. M/s Parag Shilpa Investments Ltd (PCSL) 5. M/s Surabhi Chemicals & Investment Ltd (SCIL) 6. M/s Premier Capital Services Ltd. (PCSL) 7. M/s Global Infratech & Finance Ltd (GIFL) 8. M/s Dhenu Buildocn Infra Ltd 9. M/s First Financial Services Ltd 10. M/s DB (International) Stock Broker Ltd. 11. M/s Dhanleela Investments Trading Company Ltd 12. M/s Grandma Trading & Agencies Ltd 13. M/s Matra Kaushal Enterprises Ltd 14. M/s Pine Animation Ltd. 15. M/s Rajlaxmi Corporation Ltd 16. M/s Rander Corporation Ltd. 17. M/s Shreekrishna Biotech Ltd. 6.17 The A.O. also pointed out that out of the above 17 companies, BPSL group had taken bogus LTCG accommodation entries by trading shares of companies at Sr. No. 2,4,7,10,12,13,16 & 17. The A.O. observed that the investigation carried out by SEBI, an independent agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khlal Vora, filed affidavit dt. 26/11/2015 before their A.O. and disclosed additional income which was also offered for taxation before the Income Tax Settlement Commission, Mumbai in their application and that they had accepted that this income was ploughed back through companies managed and controlled by Shri Shirish C. Saha (SCS) by making investment in preferential share capital in one of their group concern namely M/s Andura Infrastructure Products Pvt. Ltd. which clearly revealed that the companies managed and controlled by SCS were mere paper companies and all the financial dealings of the assessee group with SCS and his companies were in the nature of accommodation entries. The A.O. further observed that in the case of SCS, on the basis of entries recorded in the evidence seized / impounded during the search, details of year wise commission and deposits supposed to have been received by SCS for providing accommodation entries were prepared which was quantified at Rs. 92.79 Crores and the same was not challenged by SCS, who however claimed that various expenses were incurred against such commission. 6.20 He also observed that Shri Praveen Agarwal had been assessed as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Aadhar Ventures India Ltd. ). 8. In response the assessee submitted that he had invested in the share warrants of PIL and subsequently these shares were converted to equity shares and all the shares were credited to DEMAT account, the shares of PIL were held for more than 12 months and the sales were affected on various dates during the year under consideration and all the shares were sold through stock broker registered with Bombay Stock Exchange(BSE) through recognized stock exchange and that the Securities Transaction Tax (STT) on the entire sale was duly paid, as such, the assessee had earned LTCG on sales of shears of PIL which was claimed as exempt under section 10(38) of the Act. It was also submitted that all the proceeds from the sales of shares were received through banking channels from stock broker through whom the shares were sold and duly credited to the assessee's bank accounts, copies of the contract notes and sale bills as an evidence towards sale of shares of M/s PIL claimed as exempt under section 10(38) of the Act were furnished. It was submitted that the assessee did not know any person by the name Shri Shirish Chandrakant Shah (SCS) and had nothing to do w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotment of share warrants of Prraneta Industries Ltd. Since the promoters were hiking their stake in the company and the share price was very low, the Assessee was attracted to invest in the shares of Prraneta Industries Ltd. When the share price of Prraneta Industries Limited appreciated, the Assessee decided to dispose o f f the shares through his brokers. As already mentioned in the earlier para of reply, the entire sale was through registered stock broker and the sale transactions of shares of Prraneta Industries Ltd. were effected online and the payments against the same were received through banking channels from the stock broker. " 10. As regards to the detail of cash as recorded in BIPS folder, it was stated that the assessee was not aware of the basis / purposes of maintaining those records and that no adverse inference could have been drawn merely on the basis of statement of SCS and that he was not aware of the transactions between SCS and Shri R.K. Kedia. 11. As regard to the transactions recorded in the form of cash sheets and cheques sheets seized from the premises of SCS, the assessee submitted that he was not aware of nor was he in any way concerned with the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee observed that the assessee had not commented or offerred any explanation on the merits of the evidence/documents seized from Mr. Kedia, SCS and Praveen Kumar Jain which tallied exactly between themselves and independently with the transactions recorded in the books of the assessee group. He further observed that upon being confronted with solid evidence establishing the transaction of sale of shares of penny stock companies as sham transaction undertaken through a syndicate of entry providers, the onus cast on the assessee doubles under section 68 of the Act to prove that the transactions were genuine and mere filing of Demat account, bank account, contract notes, bills etc was not adequate to discharge the heavy onus cast upon the assessee. He also observed that the assessee was required to produce the brokers through whom transactions were undertaken in stock exchange, produce the counter parties who purchased the shares and the directors of penny stock companies etc for examination to prove identity, creditworthiness, genuineness of transaction which the assessee failed to do. Therefore the income was taxable under section 68 of the Act. The reliance was placed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructurals Pvt. Ltd. etc to various concerns of BPSL Group was made which establish that multiple layers were created among the group concern of Shri Praveen Kumar Agarwal before remitting the funds to the final beneficiaries including BPSL Group companies and that data also established that OT (One Time) Entries were received by BPSL Group from the entries managed and controlled by Shri Parveen Kumar Agarwal whose modus operandi was that the beneficiaries wanting to book bogus expenses were linked through a maze of paper concerns with the beneficiary wanting to plough back their unaccounted income back into business as share capital / premium and that the need to deposit cash into the bank account was bypassed. The A.O. mentioned the details of all the cheques received from and paid to various parties as found on an excel sheet seized from Shri Praveen Agarwal at page no. 116 to 120 of the assessment order, for the cost of repetition the same is not reproduced herein. 13.2 The A.O. on the basis of the aforesaid excel sheet observed that in the column of 'Party' various names were mentioned like Roshan, Mishra, Pramod, Kabra, SKJ, Sunil, Subhas, Ravi, NSE, LKS etc and the particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intaining data pertaining to details of share capital / premium received by the assessee group, details of advances paid and details of shares sold by it, clandestinely by Mr. Kedia who had long association with BPSL group and delt directly with the key person like assessee. 14. With regard to the disclosure of Rs. 250 Crores mae under section 132(4) of the Act by the assessee and its retraction, the A.O. observed that during the course of search and seizure operation the assessee was confronted with various documentary evidences and statements of various entry operators like SCS, Omprakash Anandilal Khandelwal (director of PIL), R K Kedia etc. and when the assessee found himself cornered by the department, he admitted undisclosed income of Rs. 250 Crores and a surrender letter was also furnished wherein it was stated that the detailed bifurcation would be submitted later and that the assessee on 06/03/2014 furnished a letter clearly stating that out of the surrender of Rs. 250 Crores, Rs. 159.61 Crores had been surrendered for the LTCG shown from M/s PIL in the assessment year 2011-12 and 2012-13 in the hands of the assessee, his HUF and his wife Smt. Arti Singal. Therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under those circumstances could not be relied upon. The assessee also stated that he was not aware for what purposes "Chopra Account" was prepared by Shri R.K. Kedia and Shri Manish Arora to whom he never paid any cash and had nothing to do with the cash transactions recorded in "Chopra Account" in the books of JMD Associates. 15. With regard to the observations regarding payment of commission @ 6% to 7% in cash for receiving the accommodation entries through Mr. Kedia, the assesse outrightly denied this fact. The A.O. however observed that most of the entry providers had specifically admitted that they were in the business of providing entry through various companies managed and controlled by them and that the actual activity of their companies was to provide accommodation entries and no genuine business activities were undertaken and that the thousands of persons across country were benefitted from their activities in evading tax and the assessee was one of them. The A.O. also observed that the assessee had not explained how and what specific information he had which prompted him to make huge investments in the companies particularly when he did not file any evidence to subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eople were working hand in glove in providing various types of accommodation entries to various beneficiaries including BPSL group and that the entries recorded in the name of "JMD Associates" and "Chopra Account" were described at length by Manish Arora and those entries were cross matched from the actual transaction recorded in the assessee's books, therefore, the authenticity of the documents seized from the possession of Shri Kedia and Manish Arora could not be doubled and since Mr. Chopra was an employee of BPSL and working for this group for a long time, therefore, "Chopra Account" was not mere imaginary creation of Shri. Kedia and Manish Arora. 17. With regard to commission paid in cash to the entry providers, the A.O. observed that commission @ 6% to 7 % was being paid to Shri Kedia was based on the entries recorded in various excel sheets by Shri R.K. Kedia and the assessee could not satisfactorily explained the reason for maintaining data pertaining to him clandestinely by Shri Kedia and his accountant Shri Manish Arora and that Shri Kedia had long association with BPSL group and delt directly with the key person i.e; the assessee. Therefore there was no inconsist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by rule of evidence, reference was made to the following case laws: * Dhakeshwari Cotton Mills Ltd. Vs. CIT reported at 26 ITR 775, 783 (SC) * Kishinchand Chellaram Vs. CIT reported at 125 ITR 713 (SC) * Gunda Subbayya Vs. CIT reported at 7 ITR 21,28 (SC) * Moti lal Padampat Udyog Ltd. Vs. CIT reported at 160 Taxman 233 (Alld) * Kishanlal Agarwalla Vs. Collector of Land Customs (AIR 1967 Cal. 80) * Satellite Engineering Ltd. Vs. Union of India & Ors. (1983 ELT 2177 Bom) * Kanungo & Co. Vs. Collector of Central Excise (1983 ELT 1486 SC) * Union of India & Anr. Vs. Tulsiram Patel (AIR 85 SC 1416) * DCW Ltd. Vs. Collector of Central Excise * GTC Industries Ltd. Vs. Assitant Commissioner of Income Tax reported at 65 ITD 380 * CIT Vs. Nova Promoters & Finlease (P) Ltd. reported at 342 ITR 169 (Delhi) * Smt. Kusum Lata Thakral Vs. CIT, Karnal reported at 185 Taxman 237 (P&H) 18.1 The A.O. observed that in the aforesaid cases the Hon'ble court held that the rules of natural justice are not rigid rules, they are flexible and their application depends upon the background of statutory provisions, nature of the right which may be effected and the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG of the year for arranging those entries. The A.O. made the addition of Rs. 42,46,375/- in the following manner: Total Sale proceeds u/s 68 Rs. 40,05,419/- 6.5% of NET gain (LTCG) u/s 69C towards commission expenses Rs. 2,40,956/- TOTAL Addition to the returned income Rs. 42,46,375/- 19. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and challenged the validity of the initiation of proceedings under section 153A of the Act as no incriminating material was found during the course of search under section 132 of the Act on 21/02/2014 and submitted as under: (1) It is humbly submitted that as on the date of search i.e. 21-02-2014, assessment proceedings for A/Y 2012-13 had already been completed vide order no CPC/1213/P4/1306877063 dated 19/01/2014 passed u/s 143(1) of the Act (copy enclosed) and no incriminating material had been found during the course of search with respect to the year under appeal. (2) In this connection, Your Honour's attention is invited to the provisions of Section 153A of the Act the relevant parts of which read as follows; - 153A. (1) Notwithstanding anything contained in Section 139, section 147, section 148, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings which are pending before an Assessing Officer on the date of initiation of the search shall abate and merge into assessment proceedings initiated u/s 153A of the Act Undoubtedly, in such cases the scope of assessment is wide open and would cover matters reflected in the original return of income and also matters reflected from the material seized in the course of search u/s 132 of the Act (5) However, importantly and pertinently it should be noted that completed proceedings will not merge with the proceedings initiated u/s 153A but will survive and their sanctity will , inviolably, have to be respected unless indelibly violated by any incriminating material found during the course of search u/s 132 of the Act. To put it differently completed proceedings, whether u/s 143(3) or even u/s 143(l)(a) of the Act can be interfered with by proceedings u/s 153A only on the basis of some positively incriminating search material found during the course of action u/s 132 of the Act. (6) In view of the same since no incriminating document pertaining to the year under appeal i.e A/Y2012-13 has been found during the course of search, it is submitted that no cause lies for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 153A 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 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 153A 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) Since in the instant case since no incriminating documents/material or information of any sort has been unearthed/discovered in the search operation u/s 132A of the Act the completed assessments cannot be interfered with and accordingly the assessment order is bad in law void and infructuous. In this connection, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing details:- SNo. Name of the Company No of Shares Sale consideration Long Term Capital Gains (i) M/s Pranneta Industries Ltd (Now known as Aadhar Ventures India Limited) 198487 12488355 12041759 (ii) DB (International) Stock Brokers Ltd 1750000 166846614 156696614 (iii) Blue Circle Services Ltd 5500000 412557740 404307740 (iv) Unisys Software & Holding Industries Ltd 157290 34746157 31833434 (3) The sale was effected on various dates during the year and the details alongwith copies of contract notes alongwith the requisite documentary evidence for the same were duly filed before the Id Assessing Officer vide letters dated 29/02/2016 and 11/12/2015 (copies again being enclosed herewith). The entire sale of shares, which had been undisputedly held by the Appellant for more than twelve months before the date of sale, was affected through a broker registered on a recognized Stock Exchange, (BSE in this case) and Securities Transaction Tax (STT) was duly paid on the transaction. (4) As a result of the said sale of shares, the Appellant had earned Long Term Capital Gain(LTCG) ofRs. 60,48,79,547/ which was claimed as exempt u/s 10(38) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The sale proceeds for the sale of shares were received through normal and regular banking channels from the stock broker through whom the shares had been sold (who, in turn, received the same from the Stock Exchange through its designated payout mechanism) and stood duly credited to the Appellant's Bank Account(s). (9) In order to evidence the said transactions, copies of share purchase documents, DEMAT account, share certificates, contract notes and bank statements highlighting the relevant entries regarding payments made against the purchase of share and receipts against sale of shares and ledger accounts of the Appellant in the books of the Broker through whom the shares have been sold were duly filed before the Ld. Assessing Officer and are again being enclosed herewith. (10) In this connection, before proceeding further, Your Honour's kind attention is invited to the provisions of Section 10(38) of the Act as per which "any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity-oriented fund where (a) the transaction of sale of such equity share or unit is entered on or after the date on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of public policy and accordingly its reach, functions, applicability and jurisdiction should be limited thereto. (13) The provisions of Section 10(38) of the Act also need to be viewed in conjunction with the manner of functioning of the securities market, in particular stock exchanges. With the advent of online-trading, the trades on any stockexchange (NSE/BSE etc) are conducted online through a registered broker on the respective exchange. The entire dealing in securities takes place electronically whereby there is no physical contact/communication and all the transactions get consummated through online matching of the bids and pffers of the respective parties viz buyers or sellers. The securities traded, being invariably held in De-materialized (DEMAT) form, are transferred from/to the accounts of the relevant parties involved and the accounts (Delivery of shares as well as financial) are settled inter-se brokers and with their clients, both with respect to the delivery of shares and settlement of accounts due as per in the mechanism of the concerned exchange. It may be mentioned here that the securities markets function with the framework of the rules/regulations/procedures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket operations or influencing to any degree or extent its stock market prices. The transactions were entered into as a stock market investor on the basis of information available, the Appellant's perception and anticipation as to future price movements, performance of the Company etc. and as soon as in his opinion they reached a particular level, considered as optimal, the same were divested. The objective of the Appellant was to keep a track of the prices of the securities only, which formed the sole pivot for all his actions related thereto. (17) It may be submitted that in the case of the Appellant, the acquisition of shares, through a preferential allotment/purchase from the open market and which were subsequently duly credited to his DEMAT account, stands duly and comprehensively documented. Further, the sales of the securities took place through a registered broker on the NSE/BSE in accordance with the prescribed regulatory procedures, rules and applicable laws whereby both the limbs of the transaction vis purchase and sale of shares gets duly authenticated. The transactions were also, in all cases, concluded through regular banking channels. The said facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in the shares of the various companies was made on the basis of their expected growth potential, the information in respect of which came to be known to the Appellant through various sources. Simply because the share price of a small Company had appreciated substantially, and the Appellant had earned substantial capital gains therefrom does not call for the entire transaction to be viewed prejudicially with a jaundiced eye/ prejudicial mind. The fact that any person was able to earn substantial gains, translating, may be, into astronomical rate of returns, could be the result of various factors including the Investors foresight, ability to exploit any bits and pieces of information that he may become privy to or even sheer fortitude - none of which call for a negation of the entire transaction so as to strike at the roots of its authenticity, nature and character. (iii) The Ld Assessing Officer has also placed reliance on the fact of the apparently phenomenal rise in the prices of the shares compared to their revenues/ operating results / assets base/ business health and the apparent absence of any new development which promises bright future for the shareholders which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck exchange(s) and ever watchful eyes of the market regulator and watchdog viz the Securities and Exchange Board of India (SEBI) and the fact that the Appellant does not have any role direct, indirect or even notional in the management of the subject companies or any degree of control thereon, he cannot even nationally have any role to play in the movement of prices of the said companies. In such a situation, the Appellant cannot be deemed to be a part of any wrong doing/non-compliance, including price manipulation, to which the company or any its promoters may be a part. It should be noted that in a free-market environment, fluctuation in share price(s) is a natural phenomenon and cannot be made the basis for doubting any transaction for the purchase/sale of shares. (vii) It is pertinent to mention here that the process of preferential allotment of shares as well as follow up public issue(s) is the culmination of a rigorous exercise wherein various statutory/regulatory bodies such as SEBI, the Stock Exchanges etc are involved. The entire process involves a multi-stage, rigorous, coordinated and time-bound process involving comprehensive due-diligence, vetting of documents, back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The said findings, if any, cannot be unilaterally and in the absence of concrete authoritative evidence, extrapolated to apply to the Appellant. Moreover, the various documents/reports/findings/order have been relied upon by the Ld Assessing Officer only generally and no specific case has been made out against the Appellant. There is not an iota of evidence to suggest that the Appellant indulged in the price rigging since he was neither connected with the alleged unusual price movement of shares nor there is any concrete evidence of his complicity in this regard and there is no allegation of any wrong -doing with regard to the Appellant. (xi) The efforts of the Ld Assessing Officer, rather unfairly, seek to conjure a negative image with respect to "penny stocks". In fact globally, in the context of the working of the securities markets and in the normally used and colloquially accepted terminology of people trading/advising in securities, "penny stocks" are those which trade at a very low price and have very low market capitalization whereby although there is a high-risk, the probability of a rapid upside and the opportunity to gain from even a small rise in price is very hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not disputed any part of the transaction relating to the purchase of shares in any manner -whether payment, allotment, conversion or any other aspect/limb related thereto. His entire case, almost solely, rests on the procedure for sale and the alleged, somewhat conjectural, manipulation in the sale thereof and other circumstantial/third-party evidence, the entire gamut of which is being negated hereinafter. Notwithstanding the said arguments, it should be noted that any action based and conclusion drawn on a partial view of the entire transaction, where the other part has not been disputed, even microscopically, can only be of questionable quality. B Documentary evidence gathered during search, statements of entry/exit provides and Investigation of PIT (Inv) Kolkata and Mumbai (i) At the outset the charge that the Appellant had been the beneficiary of allegedly bogus LTCG entries is vehemently denied. The LTCG arising to the Appellant arose from genuine transactions carried out in accordance with the prescribed procedures and duly compliant with the relevant regulatory laws and regulations. (ii) The action of the Ld. Assessing Officer relies, almost solely, on independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f relationship with and has not entered into any dealing either directly, indirectly, peripherally, tangentially and no cash has ever been paid by the Appellant to SCS either directly or through any intermediary(ies). SCS also did not have any role, whatsoever in the investment made by the Appellant in various shares. The said fact has also been reiterated by the Appellant in various replies filed before the Ld. DDIT (Inv) during the course of post-search investigation and before the Ld Assessing Officer in assessment proceedings. (c) With regard to the allegation that payments were made through RTGS by BPSL to various companies alleged to be managed and controlled by SCS, it is submitted that as per the information available with the Appellant, the said payments were made through Sh. RK Kedia and not to SCS. There is no contradiction in the stand taken by the Appellant during the course of the assessment proceedings which remains that the payments were in the nature of advances for purchase of capital assets made by BPSL in the normal course of business to various companies apparently and allegedly controlled by SCS, a fact which was definitely never in the knowledge of the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of PIL by the Appellant and/or his family members does not and cannot motivate any thought process culminating in taking a slanted/prejudicial view of the facts. The Ld Assessing Officer's averment that the said sheet contains details of cash received by RK Kedia on behalf of the Bhushan Group is not backed by facts since the name of the Appellant / any of his family members/ group company(ies) does not figure in the said sheet and Ld Assessing Officer's assertion is just an apprehension/ assumption bordering on suspicion. (g) While the Appellant is not and cannot be expected to be aware of the purpose/need of maintaining the said record particularly with regard to the entries regarding sale of shares of PIL, which incidentally matches with the Appellant's transactions, it can only be speculated that, since as alleged, SCS was managing and controlling the affairs of PIL, he may have maintained the said record for his own purpose or analysis. It is common, normal and definitely not unusual for persons in control of and managing the affairs of listed companies to keep a track of not only the share price movement but also the volume and number of transactions therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has any dealing with him. While going through his statement, as provided by the Ld Assessing Officer, it has been observed that no reference regarding M/s PIL has been made therein. As such no adverse inference on the basis of his statement is warranted with regard to the transactions of the Appellant in the shares of PIL. It is also submitted that from a cursory look at the statements of Sh. Manish Arora as provided by the Ld Assessing Officer, it seems that the statements have not been given by him in a free and undisturbed mind but obviously under enormous pressure and a state of extreme mental stress. The process of recording his statement which started on 13-06-2014 continued right up to 09/07/2014 with only small breaks in between. It needs to be appreciated that any human being required to make a statement before investigating authorities for a period of almost 25 days is bound to be under a lot of stress and psychological pressure whereby the possibility of errors, contradictions and inconsistencies can definitely arise casting a serious doubt on their accuracy/reliability and the extent of reliance that can be placed thereon. (j) The action of the Ld Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th all the onerous formalities as required by various applicable statues would not only be a misrepresentation of facts but also and a travesty of justice. (v) As regards the assertion of the Directors of the Company being dummy Directors, the Appellant as an investor had no knowledge of the same nor was he in any way concerned with the same. Similarly, the Appellant was in no way concerned with nor was aware of the person who was exercising effective control over the management of the Company. The Appellant had made investment in shares of many listed companies and was neither inclined to keep track of the internal activities of all those companies nor was required to do so, whether statutorily or even prudentially. (k) With regard to the statements of Sh. Kumar Rai Chand Madan and Shri Deepak Shanghani, it is submitted that the Appellant had absolutely no connection either with them or with SCS. The statements are in no way connected to the Appellant. Without prejudice to the above and after going through their contents it transpires that they have just tried to explain their nature of activities and there is no mention of PIL or that of the Appellant or any of his family m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawing an adverse inference on the basis of documents of third parties and correlating them with the Appellant despite the fact that the Appellant was in no way associated/connected with any of these parties is .again neither warranted nor sustainable. (o) With regard to the Ld Assessing Officer's allegation that amounts have been remitted through entities of Pintu into various entities of SCS on behalf of the Appellant and his family members, while the said allegation is, ab-initio vehemently denied, it is submitted that these transactions do not pertain to the Appellant or any of his family members. The Appellant is neither aware of nor in any way connected with any transactions between Pintu and Shri RK Kedia if any. The Appellant has not paid any cash to Sh. RK Kedia, Pintu or SCS against sale of shares of PIL. (p) The Ld Assessing Officer has also relied on the alleged cash trail of unaccounted cash and alleged flow of unaccounted cash from the Appellant and his family and group to SCS through Sh RK Kedia and Pintu. In this regard it is again submitted that no cash has ever been paid to Sh RK Kedia or any of his employees. Without prejudice to the said averments, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and SCS. (t) With regard to Ld Assessing Officer's observations that an analysis of the timing difference reveals that 48% of the trades were executed within one minute and more than 71% orders were executed within five minutes of placing the order, it is submitted that on a detailed analysis of such data, it has been observed that even in the case of transactions of purchase of shares of PIL, by persons/entities other than the entities alleged to be managed and controlled by SCS, a majority of the orders were executed in less than five minutes in as much as 14.92 lac shares out of 21.51 lac shares i.e. more than 69% were traded in less than 5 minutes of placing the order leading to the definite conclusion that no adverse inference is warranted on the basis of the same. (u) It should also be noted that in an online mechanism, the matching of buyer and seller could be instant wherein the intention of the various parties (whether buyer or seller) is exhibited instantly and a willing counter party can react instantly, within seconds, what to talk of minutes. Further since the entire system operates in a virtual world, with no physical interaction between the counter parties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded of various persons such as S/Shri Jagdish Prasad Purohit, Anand Sharma, Deepak Patwari, Praveen Agarwal, Pramod Ramdin Sharma, Umesh Singh, Pulak Bagchi, Chiranjit Mahanta, Vishal Sharma, Natwar Lai Daga, Krishan Khadaria etc. In this connection the various issues are being dealt with hereinafter with respect to all the companies involved. (a) With regard to the reliance placed on the statements dated 19-10-2011, 12-02-2013, 17-12-2013 and 21-01-2015 of Sh. Jagdish Prasad Purohit stating that he was controlling and managing various companies through dummy directors which are used for providing accommodation entries, it is submitted that Appellant does not know any person by the name of Sh. Jagdish Prasad Purohit and is in no way connected with the affairs of the companies alleged to be controlled and managed by him and the composition of the Board of Directors of such company. (b) It is further observed that Sh. Jagdish Prasad Purohit has not stated that he was providing any long-term capital gain accommodation entries through the companies controlled and managed by him. Also, in none of the statements, Sh. Jagdish Prasad Purohit has he mentioned the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price movement of the various companies is not warranted in the facts and circumstances of the case. It may be noted that as already discussed elsewhere, the securities market operates in a volatile environment and the shares prices and their movements are the results of an interplay of various factors, of which may not even enter public domain. (g) The Ld Assessing Officer has also placed reliance on the fact of the apparently phenomenal rise in the prices of the shares compared to their revenues/ operating results / assets base/ business health and the apparent absence of any new development which promises bright future for the shareholders which apparently defies logic of share trading pattern of primary or secondary markets. The said argument goes against the basic grain, manner and functioning of the capital market wherein price discovery of the underlying security and its movement is the result of the complex interplay of a set of intricate and diverse set of factors, sometimes mutually exclusive, sometimes competing and sometimes even-conflicting and on almost all of whom an investor has no control and of which revenues/operating results is just one solitary factor. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allegedly stated that he had traded in shares of listed penny stocks for helping and providing LTCG accommodation entries. In this regard it is submitted that neither does the Appellant know Sh. Deepak Patwari nor is he in any way connected/concerned with his transactions/activities nor does his any relevance with the case of the Appellant. Even so the Appellant has gone through his statements as provided by the Ld Assessing Officer wherein it transpires that the name of Blue Circle Services Limited does not find any mention in the list of shares which he has stated to have purchased nor does the name of the Appellant or any of his family members/group companies find mentioned in his above referred statements thereby severely denting the reliance that can be placed thereon. (l) With regard to the reliance on the reliance placed by the Ld Assessing Officer on the alleged statement of Sh. Praveen Aggarwal admitting that he was controlling and managing the affairs of 200 paper entities through a number of dummy directors for providing bogus LTCG accommodation entries, it is submitted that the Appellant had no connection or dealing whatsoever with Sh. Praveen Aggarwal or any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (o) With regard to the reliance placed by the Ld Assessing Officer on the statements of various brokers/sub-brokers/employees/associates of various broker firms and directors of the companies alleged to be controlled and managed by Sh. Praveen Aggarwal namely Pramod Ramdin Sharma, Umesh Singh, Pulak Bagchi, Chiranjit Mahanta and Vishal Sharma, it is submitted that while the Appellant does not know any of these persons and is not in any way connected with their activities. A perusal of their statements reveals that they have merely tried to explain the nature of activities/transactions carried out by them or their clients. In their entire statements nothing has been stated regarding any wrong doing by the Appellant and even the name of the Appellant or any of his family members does not find mention in any of the said statements. (p) The Ld Assessing Officer has also relied upon the alleged cash transactions recorded at page no. 18 to 23 and 26 of Annexure A-2 seized during the course of search from the premises of Sh R K Kedia. In this connection, it is submitted that none of the alleged cash transactions recorded on these pages pertain to the Appellant even otherwise, and with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any adverse conclusion with regard to the Appellant It is once again reiterated that no cash has been paid by the Assessee to Sh. R.K. Kedia, Sh. Jagdish Prasad Purohit or anybody else against the sale of any shares. Further, even Mr. R.K. Kedia during the course of his statement recorded on 20-03-2014, has stated in reply to question no.5 that he just knew Mr. Purohit as friend, but no cash was delivered through him. (s) With regard to the transactions recorded in excel sheet at path G:\Back Office\back office[12]7.3gb\Back Office Radha[12]Data\Present Data\Blue, about the sale of shares of M/s Blue Circle Services Ltd, G:\Back Office\back office 128mb[2]\Back Office 128[2]Data\DeIeted Data\[0000050] in respect of sale of shares of M/s Unisys Software & Holdings Ltd and G:\Back Office 128mb[12]\Back Ice 128mb[12]\data\[000107] in respect of sale of shares ofDB (International Stock Brokers Ltd it is submitted that the Appellant is neither aware of the purpose of recording details in an excel sheet nor connected/concerned with the maintenance thereof. Simply because some transactions match with sale of these shares by the Appellant cannot lead to any adverse conclusion. Although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and managed by Sh. Praveen Aggarwal, as already stated above, the Appellant neither the Assessee knows any person by the name ofSh. Praveen Aggarwal nor is in no way connected or concerned with the transactions entered into by the companies alleged to be controlled and managed by Praveen Aggarwal. Moreover, as already mentioned above, the entire sale of shares of Blue Circle Services Ltd. was affected through BOLT platform of BSE and the Appellant was neither be aware of the person/ entity buying the shares sold nor had/could have any control that the shares could be sold to a particular person/entity. (w) Without prejudice to the averments made above, it is submitted that the Ld Assessing Officer has drawn an adverse conclusion on the basis of the fact that the alleged paper companies had purchased shares worth 37% of the total value of shares sold by the Appellant meaning thereby that shares worth 63% of the value of shares sold by the Appellant were purchased by other entities/individuals. The mere fact that only shares worth 37% of the value of shares sold by the Appellant were purchased by the alleged paper companies need not work to the detriment of the Appellant as he w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain started rising and went to as high as Rs. 313/- as on 13-02- 2013 i.e. almost 8 months after the sale of shares of Unisys Software & Holdings Ltd by Appellant. Even after one year of sale of shares by the Appellant i.e. on 07-06- 2013 the closing price of the shares of Unisys Software & Holdings Ltd was 252.90 i.e. an increase of almost Rs. 55 per share. Similarly, the shares of DB (International) Stock Brokers Ltd were sold by the Appellant during the period 29-07-2011 to 03- 10-2011 at prices ranging from Rs. 93.95 to 100.95 per share. Subsequently, prices of the shares of DB (International) Stock Brokers Ltd also remained almost stable for the next two and a half years. Accordingly, the allegation of any kind of collusion, price-rigging/manipulation with respect to the transaction can be ruled out since the same borne by the share prices movement subsequently and considering the fact that if such an allegation were true the Appellant would have sold the shares at the highest price and not intermittently at various levels in a falling market (z) With regard to the Ld Assessing Officer's allegation and subsequent conclusion that various entry operators like Sh. Jagdish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been purchased by the companies allegedly managed/controlled by alleged entry operators, whereas the fact is that an analysis of the trade data obtained from BSE and as provided by the Ld Assessing Officer reveals that in case ofPrraneta Industries Ltd. only 73%, in case of Blue Circle Services Ltd only 37%, in case of Unisys Software Holdings & Industries Ltd only 38% and in case of DB International Stock Brokers only 61 % of the shares were purchased by them. (ad) The Ld Assessing Officer has on the basis of investigations carried out by the Directorate of Income -tax (Inv), Wing - Kolkata has concluded that various syndicates of alleged accommodation entry providers were operating in tandem to provide allegedly bogus LTCG by rather unfortunately ignoring the fact that the Appellant did not have any dealings with any of the cited brokers. (ae) In so far as reliance has been placed by the Department on the statements of various persons recorded during the course of diverse proceedings at different points of time and uncommitted with the Appellant it is submitted that without prejudice to the arguments advanced separately with regard to the degree of reliance that can be plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividual or entity may not have any control. The entries in the books of accounts of any third person cannot be solely the basis for arriving at any conclusion with respect to the Appellant case. In this connection reliance is placed on the decision of the Hon'ble Supreme Court in the case of Central Bureau of Investigation vs V.C. Shukla & Ors [(1998) AIR 1406 (SC)[ wherein the said conclusion has been emphatically drawn (ai) The said view has also been affirmed followed by various Courts of law across the Country in a series of decisions asfollows:- * Additional Commissioner of Income Tax, Bombay City - Ivs Miss Lata Mangeshkar [(1974) 97ITR 696 (Bom)] * SP Goyal v DCIT [(2002) 821TD 85 (Mum)]; * ITO, Mumbai vs. Synthetic Hydrocarbon, Mumbai in ITA Nos 5188/Mum/2011; * Amarjit Singh Bakshi(HUF) vs. Asstt CIT[(2003) 86ITD13 (Del)]; * Prarthana Construction (P) Ltd. vs. Dy CIT[(2001) 118 Taxman 112 (Ahd) (Mag)]; * Chuharmal vs CIT[(1988) 38 TAXMAN 190 (SC)]. (Ill) Application of the principle of preponderance of probabilities, test of human profitabilities and reliance on circumstantial evidence (a) The Ld Assessing Officer has greatly relied on the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oof and there can be no addition on the basis of mere suspicion. Reference, in this regard, may be made to the following decisions: - * Lalchand Bhagat Ambica Ram v CIT[(1959) 37 ITR 288 (SC)]; * CIT v. Paras Cotton Co [(2007) 288 ITR 211 (Raj.)]; * Faqir Chand Chaman Lai v. ACIT [(2004) 1 SOT 914 (Asr.)] [Appeal dismissed by P&H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR 215 (St)]; * Assam Tea Co. v. ITO [(2005) 92 ITD 85 (Asr.) (SB)]; * jhantala Investments Limited v ACIT[(2000) 73 ITD 123 (Mum.)] (e) It may also be submitted here that it has also been judicially held in no uncertain terms that the act of questioning the very basis of a transaction and to brand it as illegitimate or camouflage, has to be based on substantial, concrete and cogent evidence wherein the proof of wrong-doing has to be "clear", "succinct" and "irrefutable". In this connection reference, may be made to the observations of their Lordships of the Hon'ble Supreme Court in the case of Union of India vs Azadi Bachao Andolan [(2003) 132 Taxmann 373 (SC)] wherein their Lordships of the Hon'ble Supreme Court have made the following pertinent topical observations: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction could not be treated as unaccounted income." The above view derives unanimous support from various Benches of the Hon'ble Income Tax Appellate Tribunal, across the Country, in the following cases: - * Chainroop Bohra and Others Vs. DCIT, Kolkata [(ITA Nos 24 to 27/Kol/2013)] * Ashok Kumar Gupta and Others Vs. DCIT, Kolkata [(ITA No. 501- 502/Kol/2013)]; * Arvind Asmal Mehta Vs. ITO, Mumbai [(ITA No. 2799/Mum/2015)]; * Vasantraj Birawat Vs. ACIT, Mumbai [(2015 61 Taxman. Com 295 (Mumbai- Trib); * Kamal Kishore Aggarwal & Sons (HUF) vs ACIT, CC-11 [(ITA No. 504/DeI/2011)]; * Shri Kamlesh Mundra vs ITO, Ward 19(2)(3), Mumbai [(ITA No. 6248/Mum/2012)]; * Deputy Commissioner of Income Tax vs Asha V Mehta [(ITA No. 6405/Mum/2012 & 6998/Mum/2012)]. * CIT vs Udit Narain Agarwal (judgement dated 12, 2012 in the Hon'ble High Court of Allahabad in IT Appeal No. 560 of2009)]; * CIT vsSmtSumitra Devi [(2014) 49 taxmann.com 37 (Rajasthan)]; * Commissioner of Income Tax vs Smt Pushpa Malpani [(2012) 20 taxmann.com 597 (Raj)]; * ACIT vs SmtSumitra Gaur[(2012)27 taxmann.com 107 (jodhpur - Trib); * ACIT, Mathura Vs. Smt Kela Devi Agarwal [(ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to cross-examine the said persons. In fact, the Appellant, through his authorized representative, was duly present to crossexamine the said persons on the appointed day, as informed by the Ld Assessing Officer, wherein none of the said persons turned up. The Ld Assessing Officer has held that the insistence on cross-examination was only meant to thwart income tax proceedings which conclusion is not only unjust and decidedly, unfair but, a misinterpretation of law and exhibits an utter disregard for the principles of natural justice which form the bedrock of any legal proceedings in particular those relating toIncome tax which are unquestionably quasi-judicial in nature. (3) The failure of the appointed persons to appear for cross-examination on the appointed date has prompted the Ld Assessing Officer to, again, rather unfairly and unjustly, conjure up an imaginary "unnatural nexus" between the Appellant, and the alleged entry provider, with absolutely no evidence to back up his conclusion. The said contention is exponentially and conclusively damaging to the Appellant since no such evidence exists to even remotely suggest, let alone prove such a nexus. Apart from routine fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and observation of the A.O. at page no. 157 to 168 of the impugned order which we have already discussed in the former part of this order therefore the same are not reproduced herein. 23. As regards to the issue agitated by the assessee of initiation of proceedings under section 153A of the Act in the absence of incriminating material found during the course of search the Ld. CIT(A) observed that the disclosure letter submitted by the assessee on 06/03/2014 had given specific details of disclosure made amounting to Rs. 159.61 Crores on account of sale of shares of M/s PIL which tantamount to admittance that they had taken accommodation entries from SCS. He further observed that the disclosure of the assessee group was based on the seized documents in the search of the SCS as well as Shri R.K. Kedia who were searched simultaneously with the assessee group and the surrender of income under section 132(4) of the Act was based on the documents seized therefore those documents were certainly incriminating in nature. Ld. CIT referred to the judgment of the Hon'ble Delhi High Court in the case of Smt. Daya Wanti .... Vs. CIT dt. 27/10/2016 and in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Deepu respectively had been noted. The names has been mentioned by the Ld. CIT(A) at page no. 174 of the impugned order. 24.2 The Ld. CIT(A) was of the view that if the documents mentioned above were correlated, it revealed that the amount remitted from BPSL by RTGS were received by SCS and after layering, the same was received back by four holding companies of BPSL, similarly the cash received by "Deepu" was remitted back to BPSL in the form of LTCG, therefore the documents seized from SCS, Shri R.K. Kedia and BPSL were linked which sufficiently showed that the record of incriminating nature was seized from the premises of BPSL at Chandigarh which was maintained on the computers as well as in the printed form. The Ld. CIT(A) observed that the documents seized from the search on SCS was incriminating in nature as accepted by the assessee in his submissions and that the documents seized from the premises of BPSL confirm the transactions recorded by SCS and Shri R.K. Kedia, as such those were also required to be considered as incriminating. Ld. CIT(A) also observed that the documents seized from the premises of SCS were his own documents and as per the prevailing provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee earned LTCG of Rs. 696.44 Crores during the year under consideration in four cases of investment of Rs. 21.36 Crores and none of the family members had made any significant investments in any stock other than 14 penny stock traded and also did not have any income / loss from investment in other shares. The Ld. CIT(A) also observed that the return from the shares in penny stock ranged 29620% to 45740% over a period of approximate 2 years and over all return for the family of the assessee from investment in shares amounting to Rs. 21.36 crores was 32600%. Thus every rupee invested had given a profit of Rs. 326 in two years which could not be considered as normal under any circumstances and even the human probabilities of earning such high return was NIL. The Ld. CIT(A) mentioned the sequence of events to strengthen the theory of improbable returns in the case of the assessee, his family members and business concerns in the following manner: (i) A search and seizure operation u/s 132(1) of the Act was carried at the residential / business premises of the appellant group viz Bhushan Power and Steel Group on 03.3.2010. After the search, Shri Sanhay Singhal, director and key ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kedia with regard to the share of PIL and the assessee declared the additional income on account of LTCG on sale of shares of PIL. He also mentioned that the different Government agencies had investigated the issue of LTCG declared from penny stock and had given adverse report on the same after investigation. Therefore the assessee could not have brushed aside the facts that the transaction in bank account of BSP, Punajb National Bank, were recorded in "Kedia 2" Sheet found in the search proceedings of Shri Shirish Chanderkant Shat (SCS) at different locations which proved the close nexus of the assessee's group with those LTCG entry operator dealing with manipulation of share trading. He therefore disproved the submissions of the assessee that the investment in shares of PIL was made as an ordinary investor. Ld. CIT(A) summarised the facts as drawn from the assessment order at page no. 181 to 184 which read as under: (i) During the year under consideration, the appellant had filed return declaring Rs. 89,93,460/- and claimed exemption u/s 10(38) of the Act amounting Rs. 62,66,38,865/-. The AO made an addition of 62,66,38,865/- reflecting the total share proceeds received duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIT (Inv) Delhi. All the evidences and findings of search action on SCS Group and other related groups were confronted to Shri R.K. Kedia during this seach action. Shri R.K. Kedia stated during oath on 14.06.2014 that he had arranged LTCG accommodation entries for the various individuals of the BPSL group on the request of Shri Sanjay Singhal and Shri R.P. Goyal. He also gave names of the person who used to deliver unaccounted cash of the group to Shri R.K. Kedia or his employees against which he used to arrange LTCG entry for " Bhushan Family" Group. (ix) Evidence gathered in the case of Shri Praveen Kumar Jain (Pintu Alias Chintan) searched u/s 132 of the Act by the DIT (Inv) Mumbai is discussed at para 9. It is was held by the AO that the entries recorded in the accounts maintained by Pintu and seized in an independent search action conducted by Mumbai Directorate are independently correlated with the entries recorded in the evidence seized/ impounded during the course of search in the case of SCS. This has been backed by the details as per seized documents, wherein it has been noticed that the cheque or RTGS received by SCS Group entities paid by M/s Bhushan Power &Steel Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice discovery in these companies was distorted and not in consonance with the fundamentals of these companies. (xvii) After decoding from the cash book found during search of Shri R.K. Kedia, it was noticed that Shri Kedia had received total amount of Rs. 245.6 crores from BPSL family and group in cash during FY 2013-14 and had provided various kind accommodation entries including OT and LTCG. (xviii) The AO has also given list of disclosure by benifiaries of LTCG and OT entries and disclosure by beneficiaries of LTCG. (xix) The AO has also rebutted the submission of appellant regarding PIL shares furnished in response to show cause as to why the receipts on account of sale of shares of penny stock companies should not be taxed u/s 68 of the Act. 28. The Ld. CIT(A) observed that the assessee submitted copies of all the documents to substantiate the genuineness of the transactions related to purchase and subsequent sale of shares leading to LTCG claimed by him, those documents were also placed before the A.O. who after detailed examination / discussion had gone beyond those documents and had established that those documents were mere masks to hide the real nature of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been created as masks to cover up the true nature of transaction leading to claim of LTCG were distinctly genuine, non bogus, and to contradict the findings that all the 14 companies whose scripts were capable of being traded at high price which resulted into claim of LTCG exempt under section 10(38) of the Act. The Ld. CIT(A) was of the view that once the assessee was made aware of the result of investigation which proved that trading of shares leading to LTCG was not genuine, the onus was on the assessee to prove that he and his family members had earned genuine LTCG under section 101 of the Indian Evidence Act, 1972 as it was the assessee who was asserting a claim that he was engaged in genuine share transactions. The reference was made to the judgment of the Hon'ble Supreme Court in the case of Shri Charan Singh Vs. Chandra Bhan Singh AIR 1988 SC 637 wherein it has been held that the burden of proof lies on the party who substantially asserts the affirmative of the issue and not upon the party who denies it, and that the party cannot, on failure to establish the prima facie case take advantage of the weakness of his adversary's case, the party must succeed by strength of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979) 120 ITR 46 (SC) 33. The Ld. CIT(A) observed that primafacie the assessee had produced documents showing the details of transactions but he miserably failed to satisfy the test of human probability. He also observed that the case laws relied upon by the assessee were apparently in favour of the assessee but probably the role of human conduct, surrounding circumstances and preponderance of probabilities were either not brought to the notice of the authorities or were not as dominant or deciding factors as those were found to be in the present case and that the A.O. had very clearly segregated the apparent from the real by using various evidences gathered from the reliable sources of information and report. The Ld. CIT(A) was of the view that the documents submitted as evidence to prove the genuineness of the transaction were themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares were arranged transactions to create bogus profit in the garb of tax exempt LTCG by well organized network of entry provider with the sole motive to sell such entries to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action on 21/02/2014. It was stated that a survey operation under section 133A was also conducted in the case of BPSL group on 27/02/2012 and once again nothing incriminating was found with respect to LTCG claimed by the assessee(s). Subsequently search action under section 132(1) of the Act was again carried out in BPSL group of cases including office/residential premises of the assessee(s) on 21/02/2014 and once again nothing incriminating was found in the course of search operation in other words the said search action did not lead to discovery of any iota of evidence indicating any irregular availment of bogus LTCG by the assessee(s). 36.3 It was emphasized that the simultaneous search operation was also conducted on the same date i.e; 21/02/2014 in the case of Shri R.K. Kedia the alleged broker on whose advise the assessee had made the impugned investments in the shares. Once again no incriminating material with respect to the LTCG claimed by the assessee was found in the course of said search action and the statement of Shri R.K Kedia was recorded under section 132(4) of the Act on 22/02/2014 wherein he categorically confirmed the genuineness of the share transactions carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee filed cogent documentary evidence with respect to acquisition of the share, payment made via account payee cheques, copies of DMAT account, evidence pertaining to sale of shares over recognized stock exchange at prices prevailing on the stock exchange through registered stock broker / broker's notes, receipt of sale consideration via regular banking channels etc. thus conclusively establishing all the requisite ingredients of section 68 of the Act to explain the nature and sums found credited in the books of account, shifting onus to disprove the same on the A.O. 36.6 It was stated that the A.O. made references to certain seized documents and statement recorded by various officers of Investigation Wing pursuant to separate search and seizure operation carried out in the case of various alleged entry / exit operator in earlier years vis Shri Praveen Agarwal on 13/09/2012, Shri Sirish Chandrakant Shah (SCS) on 09/04/2013, Shri Praveen Kumar Jain(Pintu) on 11/10/2013, Shri Jagdish Prasad Purohit on 19/10/2011, 12/02/2013, 17/12/2013 etc. However the name of the assessee was not mentioned in any of the documents seized pursuant to the search action on the aforesaid alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nesses was a serious flaw which shall render the order to nullity, as it amounts the violation of principles of natural justice. 36.9 It was submitted that the A.O. made the addition merely on the basis of report of Investigation Wing and statement recorded by the Investigation Wing without any corroborative evidence and examination and without allowing cross examination to the assessee so, it was not sustainable. The reliance was placed on the following case laws: * ITO Vs. M/s Softline Creations (P) Ltd. in ITA No. 744/Del/2012 * CIT Vs. Gangeshwari Metal Pvt. Ltd. (2014) 264 CTR 277 (Del) * M/s Devansh Exports Vs. ACIT (ITA No. 2178/Kol/2017 * Adhesive P. Ltd. Vs. ITO in ITA No. 3133/Del/2018 * CIT Vs. Fair Invest Ltd. (2013) 357 ITR 146 36.10 It was emphasized that when the search / survey conducted on the alleged third parties i.e; entry / exit operators in earlier years, the assessment under section 153A of the Act was already completed in December 2011 in the case of assessee and if any document was found to be directly claimed against the assessee the proceeding under section 153C ought to have been initiated against the assessee but no such action was ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material is found, therefore, the earlier assessment would have to be reiterated, the reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of Pr. CIT & Othrs Vs. Meeta Gutgutia Prop. Ferns 'N' Petals & Ors (2017) 395 ITR 526 which subsequently has been affirmed by the Hon'ble Supreme Court as reported at (2018) 96 taxmann.com 468. 36.13 It was submitted that the search action conducted in the case of the assessee on 21/02/2014 did not lead to discovery of any incriminating material whatsoever indicating any irregular availment of bogus LTCG by the assessee as alleged by the A.O. and simultaneously search action in the case of alleged broker Shri R. K. Kedia also did not lead to discovery of any incriminating material against the assessee. However having not discovered anything incriminating the Department kept inflicting immense pressure on Shri R.K. Kedia with a predetermined mindset of extracting certain illicit statements against the assessee, again examined Shri R.K Kedia on 14/03/2014 and subsequently on 20/03/2014. However having once again failed in implicating the assessee it appears that the department continued to pressurize Shri R.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O u/s 68 of the Act despite the fact that the Assessee(s) filed cogent documentary evidences conclusively establishing all the requisite ingredients of section 68 of the Act and the A.O failed to successfully discharge the secondary burden of disproving the same before making the addition u/s 68 of the Act. * Uncorroborated third party statements/ documentation gathered by the Investigation Wing in course of separate search/survey actions on third parties have been circuitously used by the A.O for making additions u/s 68 & 69C of the Act in assessments framed u/s 153 A of the Act: * by illegally treating such pre-existing third party statements & documentation already available with the Department at the time of initiation of the search action in the case of the Assessee(s) herein as 'incriminating material' discovered pursuant to the search actions in the case of the Assessee(s) and reopening the concluded assessment proceedings of the unabated assessment years u/s 153A of the Act on the said basis; * by placing reliance on certain fabricated documents allegedly seized from premises of Sri R.K. Kedia on 13.06.2014 in search actions conducted almost four mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 153A can only be made on the basis of incriminating material found during the course of search - in the present case no incriminating material was found during the course of search at the premises of the Assessee - hence no addition was called for - see para 107 of the order for unabated years (at page 1152 ofPB-5C) (ii) Opportunity of cross examination of the persons whose statements were relied upon by the AO was required to be given to the Assessee - on the date fixed by the AO, the Assessee presented himself through his AR but the concerned persons did not turn up, so it cannot be said that opportunity of crossexamination was provided to the Assessee - see para 113 of the order for unabated years (at page 1158 ofPB-5C) (iii) No reliance could be placed on testimony dt. 13.06.2014 of RK Kedia who had been proved to have indulged in double speaking and taking contradictory stands (first retracted from his statement on 14.10.2014 & thereafter withdrew his retraction on 31.03.2015) - see para 113 of order for unabated years (at page 1158 ofPB-5C) (iv) Assessments u/s 153A pursuant to search operation are required to be based on incriminating materials discovered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additions cannot be sustained merely by placing reliance on theory of preponderance of probabilities - statements of several persons recorded by the Revenue were not allowed to be cross-examined by the Assessee- Assessee had shown purchase consideration paid by cheque and recorded in its books of account which were accepted by the Revenue in earlier years - shares were sold at prices prevailing at the stock exchange- the regulatory bodies viz. SEBI & Stock exchange had not questioned the conduct of the Assessee and the broker selling the shares - Assessee had paid STT and the sale consideration was received from SEBI registered stock broker - Assessee had produced overwhelming evidences which were not proved to be false - AO reliance on preponderance of probabilities to tax the LTCG in the hands of the Assessee held not to be in order - see para 34 of the order for abated years (at pages 1343-1344 ofPB-5C) (x) Even on merit, the LTCG earned by the Assessee could not be charged to tax u/s 68 - see para 44 of the order for abated years (at page 1351 ofPB-5C) The holdings of the Hon'ble ITAT, Delhi Bench in the case of Brij Bhushan Singal & Ors Vs. ACIT (supra) are equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 877 to 3881/Del/2016) * Pr. CIT Vs. Dharampal Premchand Ltd. (2017) 99 CCH 202 * CIT Vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad) * CIT Vs. Sri P. Balasubramanium (2013) 354 ITR 116 (Mad) * CIT & Ors, Vs. Meeta Gutgutia Prop. Ferns 'N' Petals & Ors (supra) * Sri Krishna Vs. Kurukshetra University, AIR 1976 SC 376 * K.T.M.M. Mohd. Vs. UOI: 197 ITR 196 (SC): * Vinod Solanki Vs. UOI Civil Appeal No. 7407 of 2008 * Francis Stanly @ Stalin v. Intelligence Officer, Narcotic Control Bureau Thiruvanthapuram (2006) 13 SCC 210 * S. Khadar Khan (2008) 300 ITR 157 * Ratan Corporation 196 CTR 536 (Guj) * Ashok Manilal Thakkar Vs. ACIT: 97 ITD 361/ 279 ITR 143 (AT)(Ahd I * Govind Ram Chhugani: 77 TTJ 339 (Jodh) 37. As regards to the issue relating to the addition under section 68 of the Act, the Ld. Counsel for the assessee stated that the A.O. while making the additions under section 68 and 69C of the Act on account of sale proceeds of shares & alleged unaccounted commission expenses and submitted as under: * In making the impugned addition, the AO has essentially placed reliance on: * third party statements, third party documentation viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and were sold at prevailing market rates through the Bombay Stock Exchange Online Trading (BOLT) and all the payments were received through account payee cheques. It was reiterated that all the relevant documentary evidences in the form of shares purchase documents, DMAT account, share certificates, contract notes and bank statements evidencing the relevant entries regarding receipt against sale of shares etc were duly filed before the A.O. Therefore the impugned addition made by the A.O. and sustained by the Ld. CIT(A) was not justified. It was further submitted that in making the impugned addition the A.O. predominantly relied upon the statements of third parties without allowing cross examination which is a serious flaw and makes assessment nullitiy. It was stated that a general confession by a person that all his transactions were bogus or that he had indulged only in bogus transactions could not be the basis for the assessment of an assessee who had the transactions with that persons. It was further stated that most of the third party statements relied upon by the A.O. were generic in nature which could not form the basis of assessment under section 153A of the Act in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.P. v. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623 * Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634 * Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100 * CIT Vs. SMC Share Brokers Ltd., (2007) 288 ITR 345 (Del) * Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] * Prakash Chand Nahta Vs. CIT, (2008) 301 ITR 134 (MP) * Bangodaya Cotton Mills Ltd. vs. CIT [2009] 21 DTR 200 (Cal) * CIT Vs. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H) * CIT & Anr. Vs. Land Development Corporation (2009) 316 ITR 328 (Kar) * CIT Vs. Rajesh Kumar (2008) 306 ITR 27 (Del) * Heirs & LRs of Late Laxmanbhai S. Patel Vs. CIT (2009) 222 CTR (Guj) 138 * CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del) * CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del) * CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad) * P. S. Abdul Majeed, (Kerala) (1994) [209 ITR 821] * Prarthana Construction (P) Ltd. [2001] 70 TTJ 122(Ahd Trib) * CIT Vs. S.M Aggarwal 292 ITR 43 * Straptex India (P) Ltd. Vs. DCIT [2003] 84 ITD 320 (Mum) * R.W. Promotions (P.) Ltd. v. Asstt. CIT [2015] 61 taxmann.com 54 (Bom.) * Obulapuram Mining Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectrodes 329 ITR 271 (Del HC) * CIT Vs. UK Shah (1973) 90 ITR 396 (Bom HC) * DCIT Vs. GS Control ITA No. 1560 Del/2010 order dt. 13.03.2015 (Del ITAT) * Sri Brij Bhushan Singall & Ors Vs. ACIT(ITA Nos. 1412-141,1476,147,1482, 1485- 1487/Del/2018) * CIT Vs. Eastern Commercial Enterprises (1994) 201 ITR 103 * DCIT Vs. Bholsa Nath Radha Krishna (ITA No. 5149/Del/2012) * Smt. Smita P. Patil Vs. ACIT, (2014) 159 TTJ 182 * CIT Vs. Sunita Dhadda dt. 28.03.2018 (SC) * Vinit Ranawat v. ACIT, [2017] 88 taxmann.com 428 (Pune - Trib.) * Ganeshmull Bijay Sing Baid (HUF) & Ors Vs. DCIT & Ors (2015) 45 CCH 306 (Kol Trib) * CIT Vs. Anil Khandelwal, (2015) 93 CCH 42 (Del HC): MANU/DE/1326/2015) * Straptex India (P) Ltd. v. DCIT, [2003] 84 ITD 320 (Mum) * Pradeep Amrut Lai Runwal v. Tax Recovery Officer, [2014] 47 taxmann.com 293 (Pune - Trib) * ACIT v. Amit D Irshid [IT Appeal No.988 (PN) of 2911, dated 22-4-2013) * Prarthana Construction (P.) Ltd., Vs. DCIT [2001] 118 TAXMAN 112 (AHD.) (MAG.) * Rama Traders Vs. First ITO (1998) 25 ITO 599 (Pat.) (TM) * ACIT Vs. Kishore Lai Balwani Rai (2007) 17 SOT 380 (Chd.) * ACIT Vs. Prabhat Oil Mills (1995) 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing cash on 11.10.2013 v. Sh. Sanjay Singal and others, the appellants on 21.02.2014. vi. Sh. R.K. Kedia (RKK), share broker cum entry operator on 21.02.2014. vii. Sh. R.K Kedia and his accountant, Manish Arora on 13.06.2014. viii. Sh. Jagdish Prasad Purohit (JPP), entry operator at Mumbai and Kolkata on 19.10.2011 and 12.02.2013 ix. Sh. Praveen Kumar Agarwal (PKA), entry operator at Kolkata on 13.09.2012 38.2 Ld. Standing Counsel stated that the transactions recorded / reflected in the books of account of BPSL did not mean that those were explained. It was also stated that the incriminating material would include the following items : a. Documents found at the premises of BPSL which corelate with the transactions recorded in the documents found at the premises of Shri. Shirish Chandra Shah (SCS), Sh. R.K.Kedia and other connected entities b. Statement of Shri. Sanjay Singal u/s 132(4) c. Documents found at the premises of the entities involved in the transaction d. Statements of Stock brokers, entry operators and other connected persons throwing light on the real nature of the transactions. 38.3 It was submitted that the transactions recorded in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153 A contemplate only initiation of search as a pre-condition for assumption of jurisdiction and empower the AO to assess or reassess the total income of six assessment years preceding the year of search. v. What constitutes "search" is not circumscribed by any definition u/s 153A. The search in the case of a person may be initiated at his place or at the places of certain other persons. In the process of investigation, a situation may also arise where certain persons are searched at one point of time while others are searched at an earlier or later point of time. The material found from the premises of one may be relevant for making assessment in the case of the other and therefore, the expression used by the Courts or Tribunals "incriminating material" would include all materials recovered from the assesse in whose case search is conducted, or from the premises of other persons who are connected to that search if the material is relevant for determining the income of the assessee. vi. There may arise situations, as in the present case, where a few unconnected persons may join together to derive some illegal or impermissible benefits. They all become accomplice to a cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized from the premises of a person "K", which carried a title to which the assessee is related was a relevant material to proceed with the assessment u/s 153C of the Act. x. The material found from the premises of SCS or RKK or Pintu or Pranneta Industries did categorically indicate that the claim of the assessee of a Long-Term Capital Gain (LTCG) at the time of the original assessment proceedings was bogus and the exemption needed to be withdrawn for the correct determination of income. The material had a live nexus with the claim of the assessee and it completely demolished the averments made by the appellants at the time of original assessment. xi. It is incorrect to say that the provisions of Section 153C can be invoked only if the material "belongs" to the appellant. In the scheme of search assessments, action to reassess certain income in relation to abated or unabated years is done either u/s 153 A or 153C. The provisions of Section 153C stipulate the consideration of documents "belonging to" or "pertaining to" or "information contained therein" relating to the assessee. The assessments in these cases were made after the necessary amendment made to Section 153C. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Sh. Sanjay Singal not under pressure but after he was confronted with the entire material which was recovered by the Investigation Wing from the premises of SCS and other connected entities. The categorical statements given by the entry operator was not only read out, but Mr. Singal was given an opportunity to see the copy of statement and he adequately pondered over it. It was only after full consideration of the implications of the incriminating material found at different places that the statement u/s 132(4) was made offering an additional income represented by false claim of exempt LTCG. This statement was further backed up by subsequent letters and filing of the breakup of the LTCG from Pranneta. All these statements and disclosures cannot be ignored on the basis of unsubstantiated allegation of undue pressure, as contended by the Appellant. xiv. In the light of the above, it is evident that adequate incriminating material seized from different premises of entry operators, brokers which had a live nexus with the documents found from the premises of BPSL and the recovery of these documents led to damning statements from entry operators and other entities involved in the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been thoroughly exposed of their fraud, these are lame excuses which will be dealt with hereinafter for the sake of completeness. xviii. Thus, the assessments for unabated years are based on incriminating material found during the course of search operations and there is absolutely no basis to suggest that the assessments have been framed in the absence of any incriminating material during search operations. This proposition of the appellant is highly fallacious in as much as they are seeking to read something which is not in the statute, nor intended in various judicial pronouncements and further, the proposition is wholly against not only the spirit of the provision but also the language employed in the statute. No decision has been rendered to suggest that even if incriminating material is found in connected searches, the AO cannot make any additions merely on the basis that such material has not been recovered from the premises of the assessee. In a peculiar situation where certain persons act in a concerted manner as a co-conspirator in a scheme of fraud, the material seized from one would always be a material relevant for the assessment of the other. A comprehensive se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2003 to replace Section 158BC and the earlier scheme of assessment of search and seizure cases. b. The provision starts with a non-obstante clause overriding Sections 139, 147, 148, 149, 151 and 153 in the case of a person who has been subjected to search operations u/s 132/132A. The scheme postulates separate assessments for each of the six years covered in the period. While for the years the assessments of which are pending would be "assessed", of those which stand completed would be "re-assessed". c. A person who has been searched would be assessed u/s 153 A but a person who has not been searched, but some material flows from the search of the other person would also be assessed u/s 153C but in accordance with the provision of Section 153 A. The assessment proceedings reopened u/s 148 shall also abate and the Assessment or Reassessment shall be made only u/s 153A or 153C r.w.s.l53A. d. The statute does not refer to any "incriminating material" as forming the basis of proceeding u/s 153A or 153C. This concept evolves from judicial precedents. e. An assessment u/s 153A can be made even in respect of completed assessments whether or not any material was found durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial found at the premises of the assessee. However in the present case such a live nexus existed and there was a direct link of the material at the assessee's place with that found at the premises of SCS which has elaborately been discussed by the A.O. at page no. 43 to 58 of the Assessment Order. 39.4 It was emphasized that each and every bit of material with the Department was made available to the assessee even before the voluntary surrender of income was made. It was stated that presumption under section 132(4) of the Act, in the caseof SCS and Shri R.K. Kedia based on material found and their statement that they had acted as entry operator itself was enough to justify the addition made in the assessee's case. 40. Ld. Standing Counsel justified the making of addition in the years under consideration and submitted as under: "a. The Assessment Years for which assessments stood completed at the time of search were A.Y. 2008-09, 2010-11 and 2012-13. b. As submitted earlier, there are no fetters on the power of the Assessing Officer (AO)to make additions to the assessed income u/s 153 A if the AO has material in his possession to justify the addition irrespective of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggest that the assessments have been framed in the absence of incriminating material was found during the search operations. This proposition of the appellant is highly fallacious in as much as they are seeking to read something which is not in the statute, nor intended in various judicial pronouncements and further, the proposition is wholly against not only the spirit of the provision but also the language employed in the statute. No decision has been rendered to suggest that even if incriminating material is found in connected searches, the AO cannot make any additions merely on the basis that such material has not been recovered from the premises of the assessee. In a peculiar situation where certain persons act in a concerted manner as a coconspirator in a scheme of fraud, the material seized from one would always be a material relevant for the assessment of the other. A comprehensive search of connected persons or premises is sought to be dissected into different entities and in an attempt to destroy the whole scheme and object of Section 132 and the follow up provisions. Such a proposition is not only wholly untenable but carries the argument to absurd levels. g. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh for the A.O. to make the addition even if no other documents or statements were to be taken into consideration. 44. The Ld. Standing Counsel justified the addition made by the A.O. by giving in writing as under: "i. In the facts and background of the case, it has been amply demonstrated that the appellant obtained accommodation entry from the entry operators with the active help and connivance of Sh. R.K.Kedia, a broker who admittedly helped Singals in these transactions. ii. The records have been meticulously maintained as detailed by the AO to show the receipt of cash by the appellants and the receipt of the corresponding amount of capital gains eceipt from entry providers by cheque. iii. The documents maintained at the premises of SCS fully match with those seized from R.K.Kedia and his associates. These transactions also match with the documents found at the premises of BPSL to satisfactory extent. iv. The appellant or the company BPSL has not given any explanation as to how and why huge amounts were transferred through RTGS to the companies of SCS as an advance for purchase of capital goods when these companies were bogus entities managed by SCS for providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted money was introduced in the accounts. Rather, the onus is on the assessee to establish that the credits were genuine. x. A host of pleas raised by the assessee proceed on the premise that the burden is on the Revenue to establish conclusively that the unaccounted money has been introduced by way of accommodation entries. That is not the legal position. xi. The addition is, therefore, fully justified" 45. As regards to the opportunity of cross examination not provided to the assessee by the A.O., Ld. Standing Counsel submitted as under: "The most significant material fact in this case is that the entire material by way of seized documents and sworn statements were made available to the appellants at the first available opportunity by the Investigation Wing itself and the Assessing Officer did also provide copies thereof with the Show-cause notice. ii. The disclosure u/s 132(4) was made by the appellant after perusal of all such documents and statements in detail. iii. No request for cross-examination was made when the appellant was confronted with these statements. The plea of cross-examination was raised after a considerable lapse of time and maybe after e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 ITR 624 (Ker) * CIT Vs. Kabul Chawla reported at (2016) 380 ITR 573(Del) * CIT Vs. Anil Kumar Bhatia reported at (2013) 352 ITR 493 (Del) * CIT Vs. Sinhgad Educational Society(SC) * Goyal Industries Ltd. Vs. ACIT reported at (2015) 372 ITR 514 (Guj) * Ganpati Fincap Service (P.) Ltd. Vs. CIT reported at (2017) 395 ITR 692(Del) * V3S Infratech Ltd. Vs. ACIT (2019) 104 Taxmann.com 403(Del) * Rakesh Gupta Vs. CIT (2018) 405 ITR 213 (P&H) * Rajesh Sunderdas Vaswani Vs. ACIT (2016) 76 taxmann.com 311(Guj) * Smt. M.K. Rajeshwari Vs. ITO (2018) 99 Taxmann.com 339 * Sanjay Bimalchand Jain Vs. PCIT (2018) 89 taxmann.com 196(Bom) * Udit Kalra Vs. ITO in ITA No. 220/19 order dt. 08/03/2019 (Del) * Rajnish Jain Vs. CIT (2018) reported at 402 ITR 12 (All) * Kantilal C. Shah Vs. ACIT reported at (2011) 133 ITR 57 (Ahd) * Hukum Chand Jain Vs. ACIT reported at (2011) 337 ITR 238(Chattisgarh HC) * Ms. Priyanka Chopra Vs. DCIT reported at (2018) 169 ITR 144(Mum Trib) * Bhagirath Agarwal Vs. CIT reported at (2013) 351 ITR 143(Del) * Smt. Kusum Lata Thakral Vs. CIT reported at (2010) 327 ITR 424 (P&H) * CIT Vs. Nova Promoters & Finlease (P.) Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was not appearing in the said seized documents and the assessee did not know those persons. 47. As regards to the submissions of the Ld. Standing Counsel that the documents seized from SCS had shown that Shri R.K.Kedia acted on behalf of the BPSL group to get bogus accommodation entries of LTCG, it was stated that no incriminating material was found in the case of simultaneously search on Shri R.K. Kedia on 21/02/2014 and that in the statement recorded under section 132(4) of the Act Shri R.K. Kedia categorically admitted that transactions undertaken by the assessee were perfectly genuine. 47.1 It was submitted that the assessee's case is fully covered by the decision of the ITAT Delhi Bench in the case of Shri Brijbhushan Singal & Others(supra) therefore the addition made by the A.O. and sustained by the Ld. CIT(A) in the absence of incriminating material found during the course of search was not justified and deserved to be deleted. 47.2 Ld. Counsel for the assessee also distinguished the case laws relied by the Ld. Standing Counsel for the Department in his written submissions page nos. 28 to 43 (which is placed on record) and submitted that the concluded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examine those parties was provided to the assessee. In the present case the Ld. CIT(A) himself admitted at page no. 176 of the impugned order that no incriminating material was found from the possession of the assessee during the course of search. 48.1 During the course of hearing the Ld. Standing Counsel for the Department heavily relied on the judgment of the Hon'ble Delhi High Court in the case of M/s Ganpati Fincap Services (supra) wherein it has been held that documents found from the premises of third parties were also relevant if they incriminate the assessee. However, in the present case nothing is brought on record to substantiate that the name of the assessee was mentioned in any of the documents / material found from the premises of the third parties i.e; SCS or Shri R.K. Kedia or Pintu or PIL. 48.2 In the instant case the Ld. Standing Counsel stated that the decision of the Hon'ble Delhi High Court relied by the Ld. Counsel for the assessee in the case of CIT Vs. Kabul Chawla(supra) was not rendered by the Jurisdictional High Court and the decisions of the Hon'ble Kerala High Court in the cases of E.N. Gopakumar Vs. CIT reported at (2017) 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered the submissions of both the parties and perused the material available on the record. In the present case, the assessee had raised the legal issue in the additional ground as well as the main ground no. 1 by challenging the jurisdiction of the AO and the ld. CIT(A) in making the additions/enhancement u/s 153A of the Act in the absence of incriminating material pertaining to the years under consideration found during the course of search. 105. In the instant case, it is an admitted fact that the search and seizure operation u/s 132(1) of the Act was conducted at the premises of the assessee on 13.06.2014 and thereafter notice u/s 153A of the Act dated 08.09.2014 was issued to the assessee for furnishing the return of income. In response to the said notice, the assessee filed its return of income on 12.07.2016 declaring the same income which was furnished in the original return of income filed on 31.07.2010. The provision contained in Section 153A of the Act read as under: "153A-Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 106. From the second proviso to the aforesaid Section, it is clear that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in Sub-Section (1) of Section 153A of the Act, is pending on the date of initiation of search u/s 132 of the Act or making of requisition u/s 132A of the Act as the case may be shall abate. In other words, the only assessment which are pending shall abate but those assessments which had already been completed before the search proceedings cannot be reassessed under this Section. In the present case, the search took place on 13.06.2014 and the assessment for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Knowledge Park P. Ltd. (2016) 385 ITR 346 (supra) held as under: "A search was conducted on Y, Z and IBC on June 17, 2008. One of the offices of the assessee was in the same premises where the search took place. Certain documents belonging to the assessee were seized and the Assessing Officer of the persons in whose cases search was conducted transferred the documents to the Assessing Officer of the assessee under section 153C of the Act. Assessment orders under section 143(3) read with section 153C were passed for the assessment years 2004-05 to 2008-09. In respect of the assessment year 2004-05, the Tribunal noted that as on the date the search was conducted i.e., on June 17, 2008, no assessment proceeding was pending and as no undisclosed income was detected, the assessment made under section 153A read with section 153C of the Act the Tribunal quashed the assessment. For the assessment year 2005-06, though no order under section 143(3) had been passed, an intimation under section 143(1) had been issued. The Tribunal held that for the purpose of section 153A read with section 153C of the Act, anintimation under section 143(1) was also an order of assessment. It upheld the vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, it may be seen that nothing incriminating was found in the course of search. It is also apparent from the search document that no incriminating material in the form of undisclosed, document, unaccounted money, bullion, jewellery etc. indicating the factum of undisclosed income were found or seized in the course of search operation u/s 132(1) of the Act for any of the assessment years under consideration. In the instant case, the AO relied upon the statement of Sh. Raj Kumar Kedia his employee Sh. Manish Arora, Sh. Ankur Agarwal, an employee of BSL and Sh. Chandrakant Mahadev Jadhav. However, Sh. Raj Kumar Kedia retracted his statement on 14.10.2014 (copy of which is placed at page nos. 446 to 451 of the assessee's compilation). Thereafter, he filed letter dated 31.03.3015 withdrawing his retraction, copy of which is placed at page nos. 452 to 455 of the assessee's compilation. Therefore, he was changing his stand as such his statement cannot be considered to be reliable. Similarly, Sh. Ankur Agarwal also retracted his statement vide letter dated 20.12.2016 which is placed at page no. 190 of the assessee's compilation. Similar was the position with regard to the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anu Aggarwal was confronted with A-1, A-4 and A-n he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs, 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for crossexamination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his detriment." 112. Similarly, the ITAT Mumbai 'B' Bench in the case of Straptex (India) (P) Ltd. Vs DCIT 84 ITD 320 (supra) held as under: "Presumption under Section 132(4A) is not limited only to the proceedings under Section 132(5); presumption under Section 132(4A) is applicable only against the person from whose possession books of account or other documents were found and not against any other person." 113. In the present case, the opportunity to the assessee to cross-examine the person whose statements were relied upon by the AO was required to be given, on the date fixed by the AO, the assessee presented himself through his Authorized Representative but the concerned person did not turn up, so it cannot be said that the opportunity to cross-examination was provided to the assessee, although the statements of third parties were used against the assessee. In the instant case, it is an admitted fact that the persons whose statements were recorded at the time of search, later on retracted from their statements and one person, namely, Sh. Raj Kumar Kedia first retracted on 14.10.2014 and thereafter withdrew the retraction vide letter dated 31.03.2015. Therefore, no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 286/98/2013-IT dated 18.12.2014 which read as under: "Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the 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 assessment years in which both the disclosed and the undisclosed income would be brought to tax. (iv) Although section 153A 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 Assessing Officer 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 the seized material, (v) In the 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 153A is relatable to abated proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bul Chawla [2016] 380 ITR 573 (Delhi) where original assessment have been made under section 143(1) of the Act is apt and squarely covers issue in favour of the assessee. The Hon'ble High Court in paragraph No. 37 of that decision has held that no addition can be made in the hands of the assessee in the absence of any incriminating material unearthed during the course of search or requisition of documents. On reading of the order of the Assessing Officer we could not find that there is any incriminating material referred to by the Assessing Officer which is found during the course of search for making these additions. Therefore, respectfully following the decision of the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla (supra) we confirm the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeal of the Revenue." The Revenue urges that the non obstante clause in section 153A together with section 158BD removes the barrier vis-a-vis restriction upon search assessments being confined to "undisclosed income". In other words, it is stated that none of the provisions confine the enquiry of the Assessing Officer to evaluating incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of subsection (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition." 24. In the present case, since no incriminating material was found, therefore, the addition made by the AO u/s 153A of the Act was not justified. 25. On an identical issue, the Hon'ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla (2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with by the Assessing Officer while making the assessment under section 153A 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." 26. A similar view has been taken by the Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs Meeta Gutgutia Prop. M/s Ferns "N" Petals (2017) 395 ITR 526 (supra) wherein it has been held as under: "Any and every document cannot be and is not an incriminating document. No addition can be made for a particular assessment year without there being an incriminating material qua that assessment year which would justify such an addition." 27. Similarly, their Lordships of the Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs Ram Avtar Verma (2017) 395 ITR 252 (supra) observed as under: "The Commissioner of Income-tax (Appeals), after considering the record, was of the opinion that the additions could not be justified, and accordingly granted relief, holding that no incriminating material was recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in section 153A. But for such a non obstante clause, the Revenue could possibly have faced hurdles in regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under section 153A/ 153C. Having regard to the above directions, we are of the opinion that the Income-tax Appellate Tribunal's decision does not call for interference. Both the appeals are accordingly dismissed." 120. Similarly, the ITAT Delhi Bench 'E', New Delhi in the case of ACIT, Central Circle-8, New Delhi Vs Meroform India Pvt. Ltd. in ITA Nos. 4630 to 4635/Del/2014 for the assessment years 2006-07 to 2011-12 (supra) vide order dated 31.07.2018 held in paras 14 & 15 as under: "14. We have heard the rival submissions and also perused the relevant material referred to before us and the decisions relied upon by the parties. As discussed above, it is an undisputed fact that for the assessment years 2006-07, 2007-08 and 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment "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 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee which were duly found recorded in the regular books of the assessee and the said pen drive did not contain anything incriminating against the assessee. Therefore, merely on the basis of the statement of Sh. Ankur Agarwal, the addition made u/s 153A of the Act was also not justified, particularly when Sh. Ankur Agarwal retracted his statement later on. In the instant case, the AO also failed to establish any link/nexus of the alleged cash trail. We, therefore, by considering the totality of the facts and the various judicial pronouncement discussed in the former part of this order are of the view that the additions made by the AO and sustained by the ld. CIT(A) u/s 153A of the Act in the absence of any incriminating material found during the course of search u/s 132(1) of the Act in respect of unabated assessment years i.e. the assessment years 2010-11 to 2012-13 were not justified. Accordingly, the same are deleted." So respectfully following the aforesaid referred to order dt. 31/10/2018 in the case of Shri Brij Bhushan Singal & Others Vs. ACIT in ITA Nos. 1412 to 1414/Del/2018 & Others for the A.Y. 2010-11 to 2012-13, the additions made by the A.O. under section 153A r.w.s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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