TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 320
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....einafter called 'the Act') were conducted on 8.7.2015 and subsequent dates in the case of assessee along with the other case of the M/s KR Pulp & Papers Ltd Group at various residential and business premises. In response to notice issued u/s 153A of the Income Tax Act, 1961 issued to the assessee on 26th September, 2016, the assessee filed the return of income on 2nd March, 2017 declaring total income at Rs. 11,80,380/-. The Assessing Officer (AO) inter alia has observed that the assessee has claimed long term capital gain of Rs. 9,52,494/- as exempt u/s 10(38) of the Act. He has noted that Mr. Madho Gopal Agarwal, Managing Director of the group had admitted Rs. 25 crores on behalf of entire group on account of long term capital gain earned by the various family members. He further noted that the assessee is the brother of Shri Madho Gopal Agarwal but he has not considered the long term capital gain of Rs. 9,52,494/- in his return filed u/s 153A of the Act. Therefore, the case was assessed at an income of Rs. 35,30,874/- by denying the claim of exemption u/s 10(38) of the Act vide order passed u/s 153A/143(3) of the Act. 2.1 Before the Ld. CIT (A), the assessee, apart from challen....
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....on has been made on account of disclosure made by the Managing Director of the group namely, Sh. Madho Gopal Agarwal amounting to Rs. 25.00 crores on behalf of entire group on account of long term capital gain in the hands of various family members. However, during the filing of return of income, various members of the group disclosed the long term capital gain and did not claim the exemption u/s 10(38) of I. T. Act and paid the taxes on that, but the appellant Sh. Shri Gopal Agarwal, did not pay the taxes on the long term capital gain of Rs. 9,52,494/- for the year under consideration rather claimed exemption u/s 10(38) of the I.T. Act. However, neither during the assessment proceedings nor appellate proceedings, appellant could give any satisfactory reason for not disclosing the aforesaid long term capital gain as taxable in his hands. Despite of disclosure made during the search proceedings and long term capital gain shown as taxable in the hands of various persons of group while filing their returns of income, appellant has failed to disclose the long term capital gain of his part. The stand taken by appellant is self contradictory. Since the disclosure was made during the se....
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....appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term 'capital asset' is not includible in total income of the assessee in view of section 10(38) of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant. 3.4 That the surrender by Madho Gopal Agarwal i.e. the brother of the appellant, under no circumstance can be treated ....
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....ional income on behalf of the entire group for our mental peace. This additional Income of Rs. 25.00 Crores shall include income on account of long term capital gains in the hands of various family members, other assets including cash in hand and various other discrepancies, omissions and commissions. The details of the additional income and the assessment year will be submitted after going through the seized documents and records. The above additional income is being offered is subject to the consideration that no penal action will be taken / initiated." 3.1 The Ld. AR also submitted that the assessee along with other group assessee had paid taxes in respect of long term capital gain earned/claimed as exempt u/s 10(38) of the Act aggregating to Rs. 19.02 crores in Assessment Year 2014-15 and 2015-16 in respect of two scrips M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures & Services Ltd, which were different from the scrip in the instant year, namely M/s KGN Industries Ltd. The Ld. AR also submitted that in absence of any incriminating material vis-a-vis the disallowance u/s 10(38) of the Act, the addition was uncalled for in light of the following judgments: i) CIT v.....
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....essee, he denied having known Mr. Jindal. Since there was insufficient material to support the additions, the ITAT deleted the same. This finding of fact, based on evidence calls for no interference, as we cannot re-appreciate evidence while exercising jurisdiction under section 260A of the Act. 8. Next, we find that, the assessment has been framed under section 153A, consequent to the search action. The scope and ambit of section 153A is well defined. This court, in CIT v. Kabul Chawla, [1] concerning the scope of assessment under Section 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue's case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the sea....
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....mt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law." 5.3 Also the Hon'ble Delhi High Court in the case of Pr. CIT vs. SMC Power Generation in ITA 406/2019 (Del) dated 23.07.2019 has observed as under: "3. The question sought to be raised by the Revenue is whether the ITAT was justified in quashing the assessment order framed under Section 153A of the Income Tax Act, 1961 (Act) on the ground that there is no incriminating material found ....
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....s made by the Assessing Officer which has been upheld by the Ld. CIT (A). For the sake of completeness, the respective grounds are being reproduced here in under: Grounds of appeal in ITA No.5278/Del/2018 "1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2....
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....d Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable. 3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 16608/- under section 234A of the Act and interest of Rs. 269046/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant. It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed." Grounds of appeal in ITA No.5280/Del/2018 "1. ....
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....e in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of the Act, the inclusion of the long term capital gain is illegal, invalid and untenable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no surrender by appellant and in absence thereof of no adverse inference may please be drawn against appellant. 3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant. 3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawi....
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....der of assessment made u/s 153A/143(3) is invalid and not in accordance with law. 3. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in not allowing exemption of long term capital gain of Rs. 24,11,178/- on sale of shares duly sold on recognized stock exchange under section 10(38) of the Act. 3. 1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that equity shares of a listed company which had been held by assessee for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term 'capital asset' is not includible in total income of the assessee in view of section 10(38) of the Act. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no estoppel against statute and surrender alone in absence of any incriminating material detected as a result of search and subsequent assessment proceedings or otherwise to allege that appellant was ineligible for claim of exemption under section 10(38) of ....
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....uashed as such. 1.1 That addition made and upheld are without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that in a case of concluded assessment i.e. when no notice u/s 143(2) of the Act has been issued and served prior to search on 08.07.2015 u/s 132(1) of the Act, the provision of section 153 A of the Act could not be applied in a case where no incriminating evidence or material had been found in search, the additions made were beyond the scope of section 153 A of the Act. 2. That learned Commissioner of Income Tax (Appeals)-27, New Delhi, has erred both in law and on facts in not disposing off the ground of appeal raised by appellant that approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to the facts of the assessee company, order of assessment made u/s 153A/143(3) is invalid a....
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....form of long term capital gain by manipulating the price of share. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 68,545/- under section 234A of the Act and interest of Rs. 9,25,357/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant. It is therefore, prayed that it be held that order framed is without jurisdiction and deserves to be quashed as such. It be further held that additions so made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed." Grounds of appeal in ITA No.5288/Del/2018 "1. That the learned Commissioner of Income Tax (Appeals)-27, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made and upheld ....
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....e may please be drawn against appellant. 3.4 That the surrender by Madho Gopal Agarwal i.e. the father of the appellant, under no circumstance can be treated as incriminating material against the appellant. 3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of appellant had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 3.6 That the learned Commissioner of Income Tax (Appeals) has sustained the addition arbitrarily and mechanically rejected the explanation and evidence tendered by the appellant and sustained the addition denying exemption by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable. 3.7 That the learned Commissioner of Income Tax (Appeals) has failed to sustain addition without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the price of share. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 33868/....