Third-Party Search Material Required Section 153C Route for LTCG Addition: ITAT Delhi

By CA Sandeep Kanoi Income Tax Judiciary September 28, 2026

TaxGuru Citation: 2026 taxguru.in 14101
Case Name: Anoop Kumar Gupta Vs ACIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2015-16
Courts: All ITAT, ITAT Delhi

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Anoop Kumar Gupta Vs ACIT (ITAT Delhi)

Summary: ITAT Delhi partly allowed the assessee’s appeal concerning denial of exemption under Section 10(38) on long-term capital gains of Rs.20.56 crore from sale of shares of Mahavir Advanced Remedies Ltd. The assessee was searched on 30.03.2016, but no incriminating material concerning the LTCG was found at his premises.

The Revenue relied substantially on material and statements arising from searches of other persons, including documents concerning preferential allotment of MARL shares bearing an allegedly forged signature. The Tribunal held that if incriminating material relating to the assessee was found during searches of third parties, the mandatory course was proceedings under Section 153C, rather than using that material in the assessee’s Section 153A assessment.

It relied upon ITO v. Vikram Sujitkumar Bhatia in reaching this conclusion. On merits, the Tribunal also noted that the shares were acquired through banking channels, reflected in the balance sheet, dematerialised and subsequently sold through a recognised stock exchange, while no money trail connecting the assessee with alleged accommodation-entry operators was established.

SEBI’s final order also did not implicate the assessee or his broker. The Tribunal therefore held that there was no case for denying the Section 10(38) exemption or sustaining the estimated commission expenditure. The relevant additional and original grounds were allowed, while the limitation ground was dismissed as not pressed and the appeal was partly allowed.

Cases Discussed

M.K. Rajeshwari v. ITO, ITA No.1723/Bang/2018 (ITAT Bangalore) — Referred to in the assessee’s grounds while challenging the Revenue’s reliance on another alleged LTCG matter concerning trading in MARL shares.
Kanwar Singh Saini v. High Court of Delhi, (2012) 4 SCC 307 (Supreme Court) — Relied upon by the assessee on the jurisdictional challenge raised through the additional grounds.
PCIT v. S S Con Build (P) Ltd., 2022-TIOL-656-HC-DEL-IT (Delhi High Court) — Relied upon by the assessee on the jurisdictional issue going to the root of the assessment proceedings.
Mavany Brothers v. CIT, (2015) 62 taxmann.com 50 (Bombay High Court) — Relied upon by the assessee in support of the jurisdictional challenge to the assessment.
NTPC Ltd. v. CIT, 229 ITR 383 (Supreme Court) — Followed by the Tribunal while admitting additional legal grounds that went to the root of the matter and did not require verification of fresh facts.
ITO v. M. Pirai Choodi, 20 taxmann.com 733 / 334 ITR 262 (Supreme Court) — Relied upon by the Revenue to contend that denial of cross-examination need not result in deletion and that the matter could instead be restored for providing cross-examination.
CIT v. Sunil Aggarwal, 64 taxmann.com 107 (Delhi High Court) — Relied upon by the assessee to distinguish M. Pirai Choodi and oppose remand merely for providing an opportunity of cross-examination.
PCIT v. Jagat Talkies Distributors, (2017) 85 taxmann.com 189 (Delhi High Court) — Relied upon by the assessee on the distinction between failure to avail a statutory remedy and denial of cross-examination despite objections being raised during proceedings.
SHL (India) (P.) Ltd., [2021] 128 taxmann.com 426 (Bombay High Court) — Referred to while distinguishing the Supreme Court ruling in M. Pirai Choodi on denial of cross-examination and availability of statutory appellate remedy.
ITO v. Vikram Sujitkumar Bhatia, (2023) 149 taxmann.com 123 (Supreme Court) — Relied upon for holding that where incriminating information relating to the assessee emanated from searches of third parties, the statutory route under Section 153C was required.
PCIT v. Abhisar Buildwell Pvt. Ltd., (2023) 149 taxmann.com 399 (Supreme Court) — Considered while examining the scope of Sections 153A and 153C and the treatment of material emanating from search proceedings.
S S Con Build Pvt. Ltd., 293 Taxman 491 (Supreme Court), dated 04.05.2023 — Referred to by the Tribunal while discussing the jurisdictional requirement of following the statutorily prescribed procedure.
CIT v. RRJ Securities Ltd., 380 ITR 612 (Delhi High Court) — Followed on the deemed date relevant to proceedings under Section 153C and the receipt of seized material by the Assessing Officer having jurisdiction over the other person.
Pr. CIT v. Raj Buildworth (P) Ltd., 113 taxmann.com 600 (Delhi High Court), SLP dismissed at 113 taxmann.com 601 (Supreme Court) — Referred to while determining the relevant period and deemed date for proceedings under Section 153C.
CIT v. Jamnadevi Agarwal, 328 ITR 656 (Bombay High Court) — Followed for the proposition that an off-market transaction by itself does not render a share transaction sham where documentary evidence establishes the purchase and sale.
CIT v. Shreyashi Ganguli, ITA No.196 of 2012 (Calcutta High Court) — Referred to while considering genuineness of share transactions supported by demat and transactional records notwithstanding regulatory action concerning the broker.