Tribunal upholds CIT(A)'s order, rejects revenue's appeal on investment gain.

The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order. It held that the addition made by the AO regarding gain on the sale of investment was not sustainable in the eyes of the law as it was based solely on a statement without any incriminating material. The Tribunal reiterated that in the absence of such material, no addition could be made under Section 153A read with Section 143(3) of the Income Tax Act.

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Issues Involved:

1. Legality of the CIT(A)'s order.
2. Deletion of the addition made by the Assessing Officer (AO) on account of gain on sale of investment.
3. Validity of reassessment orders under Section 153A read with Section 143(3) of the Income Tax Act in the absence of incriminating material.

Detailed Analysis:

1. Legality of the CIT(A)'s Order:

The revenue challenged the order of the Commissioner of Income-tax (Appeals) [CIT(A)], arguing that it was incorrect in law and facts. The CIT(A) had deleted an addition of Rs. 9,78,54,242 made by the Assessing Officer (AO) regarding gain on the sale of investment. The CIT(A) had based his decision on his previous orders in similar cases involving the same group of companies, which had been upheld by both the Tribunal and the Hon’ble Delhi High Court.

2. Deletion of the Addition Made by the AO:

The AO had made an addition of Rs. 9,78,54,242 by disallowing the long-term capital gain (LTCG) claimed as exempt income by the assessee. The AO observed that the assessee, along with other members of the Jakson Group, had adopted a modus operandi to claim bogus LTCG through pre-arranged trading in shares of various nondescript listed companies. The CIT(A) deleted this addition, relying on detailed submissions and evidence provided by the assessee, including date-wise purchase and sale details and corresponding bank statements. The CIT(A) found that the addition was based on presumptions and surmises without any material evidence.

3. Validity of Reassessment Orders Under Section 153A Read with Section 143(3):

The Tribunal examined whether the reassessment orders under Section 153A read with Section 143(3) were valid in the absence of any "incriminating material" found during the search operations. The Tribunal noted that no incriminating material was found during the search, and the entire addition was based on post-search inquiries and the statement of Sandeep Gupta. The Tribunal referenced the Hon’ble Delhi High Court’s decision in CIT vs. Kabul Chawala, which held that in the absence of incriminating material, no addition could be made under Section 153A read with Section 143(3) for completed assessments. The Tribunal upheld the CIT(A)’s decision, emphasizing that all transactions relating to the capital gain were already recorded in the books of accounts.

Conclusion:

The Tribunal dismissed the revenue’s appeal, affirming the CIT(A)’s order. It held that the addition made by the AO was not sustainable in the eyes of law since it was based solely on the statement of Sandeep Gupta without any incriminating material. The Tribunal reiterated that in the absence of such material, as per the jurisdictional High Court’s rulings, no addition could be made under Section 153A read with Section 143(3). The judgment was pronounced in open court on July 29, 2021.

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