PCIT Vs Suman Agarwal (Delhi High Court)
The Delhi High Court has dismissed an appeal filed by the tax department, affirming a ruling by the Income Tax Appellate Tribunal (ITAT) that set aside a tax addition made against an individual regarding long-term capital gains (LTCG) from share sales. The court reiterated that in completed tax assessments, additions under Section 153A of the Income Tax Act, 1961, can only be justified by incriminating material unearthed during a search operation.
The case, Principal Commissioner of Income Tax (PCIT) Versus Suman Agarwal, originated from a search and survey operation conducted by the Income Tax Department on July 8, 2015, against M/s K.R. Pulp & Papers Ltd. and its associated entities.
Following the search, the Managing Director of M/s K.R. Pulp & Papers Ltd., Mr. Madho Gopal Agarwal, provided a statement. The Revenue contended that Mr. Agarwal admitted to routing undisclosed income through bogus LTCG from share sales and that incriminating documents seized indicated that beneficiaries, including promoters and family members, used such gains for personal expenses. The tax department specifically relied on Mr. Agarwal’s sworn statement dated August 3, 2015, and a letter from him dated July 31, 2015.
Subsequently, the case was centralized, and a notice under Section 153A of the Act was issued to the assessee, Suman Agarwal, on September 26, 2016, for Assessment Year (AY) 2011-12. In response, the assessee filed her return declaring an income of Rs. 5,23,360, which included income from house property, capital gains, and other sources.
