ACIT Vs Atul Kumar Gupta (ITAT Delhi)
ITAT Delhi held that addition is made on the basis of documents found from the separate search at another person. Accordingly, assessment should have been done under section 153C of the Income Tax Act and not under section 153A of the Income Tax Act.
Facts- AO noted that during the course of search and post-search, it is found that assessee and Shri Rajiv Gupta are co-directors in many companies. In many of these companies, there were substantial amount in the share premium reserves which have been utilized for making investment in immovable and movable properties. AO noted that the facts of companies owned by the assessee wherein substantial investments have been made by the assessee were confronted during the course of assessment proceedings vide questionnaire.
Assessee responded only that Rajiv Gupta is not my brother. It was further stated that there was substantial amount of premium in various companies referred to. It was submitted that the question is also not relevant so far as 153A assessment is concerned.
AO opined that from the submissions, it is clear that assessee has nothing to explain. Further, assessee has not denied his shareholdings in the companies. Hence AO was of the opinion that a part of assessee in the shareholdings in those companies is held to be unexplained in the absence of any explanation and documentary evidence supplied by the assessee during the course of assessment proceedings despite providing sufficient opportunities. Thereafter, the AO made various additions on this ground of suppression of purchase price in various investments
Conclusion- We note that addition has been made on the assessee u/s 153A assessment on the basis of documents found from a separate search at Rajiv Gupta. Hence, the plea of the assessee is quite correct that the assessment should have been done under section 153C and not under section 153A. Section 153C permits documents found from another search to be sent to the AO of that person after due satisfaction and then on the basis of those documents assessment u/s 153C can be done. In the present case, material found at the premises of Rajiv Gupta has been taken as if they are material found during search at the assessee, Atul Kumar Gupta, which is not at all correct. Hence, the very basis of addition is missing. The assessment has been made u/s 153A and not u/s 153C, and this has led to a fatal error in the assessment order which is not curable. Moreover, as rightly contended by the ld. Counsel of the assessee that the presumption u/s 132 (4A) cannot be extended to material found at somebody else place and de hors corroborating documents, these cannot be linked to the assessee. Furthermore, the assessee’s plea that assessee’s name is nowhere directly mentioned in these documents found at Rajiv Gupta place whereas it is mentioned as Dildar (Atul sir) which ipso facto cannot mean the assessee. Hence, in the background of the elaborate submission of the assessee’s counsel and discussion herein above, we set aside the order of the authorities below and delete the addition in this regard.
FULL TEXT OF THE ORDER OF ITAT DELHI
These are appeals filed by the assessee and Revenue arising out of respective orders passed by the ld. CIT (A).
2. First we deal with the Revenue’s appeals for AY 2011-12 in case of Atul Kumar Gupta and Rajiv Gupta. It was submitted that issues in both the appeals are common and connected. Both the parties are agreed that orders of authorities below in both the cases are in common lines. We refer to the grounds of appeal raised in both the appeals as under :-
“ITA No.1931/Del/2020
(REVENUE’S APPEAL IN ATUL KUMAR GUPTA CASE)
“1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting addition of Rs.7,99,55,358/- on account of unexplained profit/investment u/s 69A on the ground that no incriminating documents were found in the search proceedings without appreciating the facts that on the basis of information from the seized documents i.e. (A4 to A9) of soft data, Annexure B & Annexure C of soft data etc. the post search enquiries were conducted which has thrown up the material relating to the investments in shares made by assessee in certain companies in which he was the director during the year under consideration.
2. On the facts and in the circumstances of the case, the Ld CIT (A) has erred in deleting the addition of Rs.26,14,151/- on the account of unexplained HDFC credit card payment on the ground that no incriminating documents were found in the search proceedings without appreciating the fact that the scan copy of the incriminating information was clearly apprised by the investigation wing in the appraisal report.
3. Whether on facts and in the circumstances of the case, Ld. CIT(A) was legally justified in allowing relief relying on the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (2015) 380 ITR 573 restricting additions only related to the incriminating documents found during search and seizure operations u/s 132 of the Income Tax Act, 1961 whereas Hon’ble Supreme Court has admitted SLP vide Diary No.37848/2015 in the case of APAR Industries Ltd. decided by Hon’ble Bombay High Court in ITA No. 1669 of 2013 dated 08.05.2015 which is a lead case tagged with more than 115 cases on the issue of restriction of additions only to incriminating material found during search.
4. That the order of Ld CIT (A) is perverse, erroneous and is not tenable on facts and in law.
5. That the grounds of appeal are without prejudice to each other.”
ITA No.1164/Del/2020
(REVENUE’S APPEAL IN RAJIV GUPTA CASE)
“1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in totally deleting the addition of Rs 7,36,99,291/- on account of unexplained profit/investment u/s 69A on the ground that no incriminating documents were found in the search proceedings without appreciating the facts that on the basis of information from the seized documents A (A4 to A9) of soft data, Annexure B & Annexure C of soft data etc. the post search enquiries were conducted which has thrown up the material relating to the investments in shares made by assessee in certain companies in which he was the director during the year under consideration.
2. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in totally deleting the addition of Rs 7,36,99,291/- on the account of unexplained profit/investment u/s 69A on the ground that no incriminating documents were found in the search proceedings without appreciating the fact that the scan copy of the incriminating information was clearly written in the appraisal report.
3. That the order of Ld CIT(A) is perverse, erroneous and is not tenable on facts and in law.
4. That the ground of appeal are without prejudice to each other.”
3. Since the contention is that the issues are common and connected, we are adjudicating with reference to orders of authorities below in the case of Atul Kumar Gupta in ITA No.1931/Del/2020.
4. In this case, AO noted in assessment framed u/s 153A read with section 143 (3), AO noted that original return of income was filed u/s 139 of the Act for the year under consideration on 31.03.2012 declaring an income of Rs.15,38,400/-. That after demonetization, a search & seizure operation was carried out on 21.03.2017 on group cases of Agson Global and others including the assessee. The case of the assessee was centralized by PCIT, Delhi 2. Notice u/s 153A of the Act was issued on 06.08.2018. However AO noted that there was no cooperation from the assessee. He held that since there was no response from the assessee, he was constrained to decide as per the material available on record and finding of the Investigation Officer contained in the appraisal report.
5. AO noted that during the course of search and post-search, it is found that assessee and Shri Rajiv Gupta are co-directors in many companies. In many of these companies, there were substantial amount in the share premium reserves which have been utilized for making investment in immovable and movable properties. AO noted that the facts of companies owned by the assessee wherein substantial investments have been made by the assessee were confronted during the course of assessment proceedings vide questionnaire. Assessee responded only that Rajiv Gupta is not my brother. It was further stated that there was substantial amount of premium in various companies referred to. It was submitted that the question is also not relevant so far as 153A assessment is concerned. AO opined that from the submissions, it is clear that assessee has nothing to explain. Further, assessee has not denied his shareholdings in the companies. Hence AO was of the opinion that a part of assessee in the shareholdings in those companies is held to be unexplained in the absence of any explanation and documentary evidence supplied by the assessee during the course of assessment proceedings despite providing sufficient opportunities. Thereafter, the AO made various additions on this ground of suppression of purchase price in various investments as under :-
“a) Investment in the shares of M/s Orion Packwell Pvt. Ltd: AAAC08029Q: The company has received, share premium of Rs.4.9 Crs from various entities and the same has been invested in properties located at A-20SB, Sushant Lok, Part-1, Gurgaon and farm House No. 789/949 Village- Kadar pur , Rakba Bhondasi, The. Sohria , Gurgaon.
Thereafter, the shares were acquired by the assessee & Sh . Rajiv Gupta in 2010-11 at Rs.10 per share. The book value of per share works out at Rs.91.88 (Capital + Reserve) / No. of shares).
These companies had only charged the face value. This defies any rationale. This is the means resorted to introduce own unaccounted money through layering.
10000 shares were already with Shri Rajiv Gupta and Atul Kumar. Remaining 489000 shares have been acquired at Rs.10/- per share (Rs.4890000/-). The actual worth of these shares as per book value is Rs.449,30,789/- the differential amount of Rs.400,40,789/- which represents unaccounted / unexplained investment by the assessee and Shri Rajiv Gupta business associate.
During the course of assessment proceedings, the assessee was required to explain as to why Rs.200,20,395/ – [i.e. 50% of Rs.400,40,789/-) may not be considered to be your Income from unexplained sources for A.Y. 2011-12 which represents to unaccounted investment.
In response, assessee furnished no reply. Under the circumstances and in view of the facts of the case, it is concluded that Rs.200,20,395/- is being treated to be unexplained investment within the meaning of provisions of section 69 of the IT Act 1961 of the IT Act 1961.
(Addition of Rs. 200,20,395/-)
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
b] Investment in the shares of M/s Orion Freight Solutions Pvt. Ltd.: AAAC07310C:-
The company has share premium of Rs.3.86 Crs which were invested in unquoted govt. securities. Shares were allotted to dubious entities at premium of Rs.90/- per share.
In A,Y. 2010-11, share of the company were acquired by the assessee and his business associate sh. Rajiv Gupta. The company now owns the properties located at Triton Mall Commercial Complex, F-40A, First Floor, Khasra No. 1/1 Village Bassi, Sitarampura, Tehsil Sawal Jaipur, Jhotwara Road, Jaipur and Mitral’s Mega Mall, M-3, Sector 25, Part II, HUDA Panipat.
The shares from dubious entities went acquired by assessee & Shri Rajiv Gupta in 2010-11 at Rs. 10 per share. The book value of per share works out at Rs.90.77.
The dubious entities have only charged the face value. This is the means resorted to introduce own unaccounted money through layering 326000 shares have been acquired Rs.10/- per share (Rs.3260000/-). The actual worth of these shares as per the books value of these shares in Rs.295,92,228/-. The differential amount of Rs.263,32,228/- represents unaccounted investment by the assessee.
During the course of assessment proceedings, the assessee was asked to explain as to why Rs.131,66,114/- (i.e. 50% of Rs.263,32,228/-) may not be considered to be your income for A.Y. 2011-12 on account of unaccounted investment.
In response, assessee furnished no reply. Under the circumstances and in view of the facts of the case, it is concluded that Rs.131,66,114/- is being treated to be unexplained investment within the meaning of provisions of section 69 of the IT Act 1961 of the IT Act 1961.
(Addition of Rs.131,66,114/-)
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true und correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s271(l)© is being initiated separately.
c) Investment in the shares of M/s Iris Infrabuild Pvt. Ltd.: AABCI7766H: (share premium Rs.1.35 Crs);
The company has share premium Rs.1.35 Crs. 150000 shares of the company were allotted to 5 companies at a premium of Rs. 90 /- per share. On 19.05.2010 (AY-2011-12), the shares were transferred to the assessee and Shri Rajiv Gupta at Rs.10 per shares.
The book value of per share works out at Rs.95.12/-.
These 5 companies have only charged the face value. This is the means resorted to introduce own unaccounted money through layering. 150000 shares have been acquired at Rs. 10/ – per share (Rs.1500000/-). The actual worth of these shares as per the books value of these share is Rs.142,66,834/-. The differential amount of Rs.127,60,834/- represents unaccounted investment made by the assessee,
During the course of assessment proceedings, the assessee was asked to explain as to why Rs.63,83,834/- [i.e. 50% 127,66,834/-) may not be considered to be your income from Undisclosed sources which represents to unaccounted investment for the AY-2011-12.
In response, assessee furnished no reply. Under the circumstances and in view of the facts of the case, it is concluded that Rs.63,83,834/- is being treated to be unexplained investment within the meaning of provisions of section 69 of the IT Act 1961.
(Addition of Rs.63,83,834/-)
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
d) Investment in the shares of M/s Micro Spacematrixs Solution P. Ltd. AAECM3093L:
As per ROC data shows that on 24/03/2008, shares were allotted at a premium of Rs.90 per share to the various entitles. Thereafter, the shares were transferred to Cham Gupta and Atul Gupta in 2010. The book value of per share works out at Rs.137.5.
These shares were acquired at Rs. 10 per share. These entities have charged only face value. This is the way, Cham Gupta & Atul Gupta have introduced their unaccounted money through layering.
195000 shares acquired at Rs. 10/- per share, total investment was of Rs.1950000/-. The actual worth of these shares as per book value is Rs.268,16,200/-. Thus the differential amount of Rs.248,66,200/-represents to unaccounted investment made by the assessee and Charu Gupta.
During the course of assessment proceedings the assessee was specifically asked to explain as to why Rs.124,33,000/- may not be considered unaccounted investment in each case.
In response, assessee furnished no reply. Under the circumstances and in view of the facts of the case, it is concluded that Rs.124,33,000/- is being treated to be unexplained investment within the meaning of provisions of section 69 of the IT Act 1961.
(Addition of Rs.124,33,000/-)
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
c) Investment in the share of shares of M/s Sigma Supply Chain Solutions Pvt. Ltd. AALCS3787J :
As per ROC Database, on 02.06.2008, shares were allottee to 4 dubious entities at a premium of Rs.50 per share. The entities were M/s Saksons Investment & Finance Pvt. Ltd., M/s Hercules Builders (Coimbatore) Pvt. Ltd, ANG Finvest Pvt. Ltd. and Visit India Voyages Pvt. Ltd. These entities invested Rs.65.4 lacs.
On 21.05.2010 (AY-2011-12), 109000 shares were acquired by the assessee and Shri Rajiv Gupta in 50:50 ratios at Rs.10/0 per share.
The book value of per share works out at Rs.227.21/-.
These companies have only charged the face value. This is only a means to introduce own unaccounted money through layering, 109000 shares have been acquired at Rs.10/- per share (Rs.10,90,000/-). The actual worth of these shares as per the book value of these share is Rs.24765459/ -. The differential amount of Rs.23675459/- represents unaccounted investment made by the two individuals.
During the course of assessment proceedings, the assessee was asked to explain as to why Rs.118,37,729/- (i.e. 50% 236,75,459/-) may not be considered to be your income from undisclosed sources which represents to unaccounted investment.
Addition of Rs.118,37,729/-
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
f) Investment in the shares of M/s Radical Infratech Pvt. Ltd. AADCR8849Q
The company has shown share premium reserves of Rs.3.375 crore. Out of this, Rs.3.25 crore has been given to related parties as loan and advances.
There are no operations in the company. As per the ROC Database in March 2008 and 2009, shares were allotted at a premium of Rs.90 per share to various entities.
Thereafter, in 2010-11 (AY 2011-12) the shares were acquired by you & Ruth Rengma at Rs.10/ – per share. The book value of per share works out Rs.97.66.
These companies had only charged the face value. This is only a means to introduce own unaccounted money through layering 375000 shares have been acquired at Rs.10/- per share (Rs.3750000/-). The actual worth of these shares going by the book value of these share is Rs.36623377/-. The differential amount of Rs.32873377/- represents unaccounted investment of the two individuals.
With regard to the above, you are therefore, required to explain as to why Rs.161,14,286/- [i.e. 50% 328,73,377/-) may not be considered to be your income from undisclosed sources which represents to unaccounted investment for AY-2011-12.
Addition of Rs.161,14.286/-
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
4. Perusal of AIR/ITS data revealed that the assessee had made HDFC credit card payment of Rs.6,14,151/- and Rs.20,00,000/- towards purchase of mutual funds. Assessee was required to explain the sources of these payments vide questionnaire dated 28/08/2018 and subsequent questionnaires; but, he failed to explain the same. It is therefore, held that these payments were made by the assessee out of his undisclosed sources of income and hence the addition of Rs.26,14,151/- [614151+2000000] is liable to be added to the income of the assessee.
(Addition of Rs. 26,14,151/-)
Since the assessee has failed to comply with the contents of the notices & questionnaires issued from time to time and the assessee failed to disclose his true and correct income which tantamount to concealment of particulars of his income, therefore, a penalty proceedings u/s 271(1)(c) is being initiated separately.
5. Subject to above facts and findings, .the total income of the assessee is being computed hereunder:-
