Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 37196 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-03-2025
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
DB-B
Assessment Year
2018-2019
Judgement Text
"INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH : HYDERABAD BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA.Nos.534 & 535/Hyd./2024 And Cross Objection Nos.4 & 5/Hyd./2025 Arising out of ITA.Nos.534 & 535/Hyd./2024 Assessment Years 2017-2018 and 2018-2019 The ACIT, Central Circle-2(2), Hyderabad. vs. AMR India Limited, Hyderabad. PAN AADCA3750D (Appellant/Respondent in C.O.) (Respondent/Cross Objector in C.O.) For Revenue : MS. M. Narmada, CIT-DR For Revenue : CA Ritu Kamal Kishore Date of Hearing : 10.03.2025 Date of Pronouncement : 24.03.2025 ORDER PER MANJUNATHA G, A.M. : The Revenue has filed two appeals ITA.Nos.534 & 535/Hyd./2024 and the assessee has filed two Cross Objection Nos.4 & 5/Hyd./2025 against the separate orders dated 12.03.2024 and 11.03.2024 of the learned CIT(A)-12, 2 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Hyderabad, relating to the assessment years 2017-2018 and 2018-2019, respectively. 2. The Revenue has raised more or less common grounds in both the assessment years and, therefore, for the sake of brevity, the grounds preferred for the assessment year 2017-2018 [ITA.No.534/Hyd./2024] are reproduced as under : 1. “Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred deleting the disallowance made towards depreciation allowance of Rs.3,56,69,245/- A.Y. 2017-18 solely based on the reason of absence of nexus with the seized material even though the time limit is available for issue of notice u/s 143(2) of the Act (upto 30.09.2018) as on the date of search le 02/05/2018? 2. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in treating the assessment for A.Y. 2017-2018 as completed/unabated even though it is abated assessment? 3. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in giving a finding that the disallowance of depreciation of Rs.3,56,69,245/- cannot 3 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 be made for A.Y. 2017-18 in the absence of incriminating seized material by wrong application of the ratio of Hon'ble Apex Court decision in the case of M/s Abhisar Buildwell Pvt Ltd (Civil Appeal no. 6580 of 2021)? 4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in wrongly relying on the remand report finding of addition not having nexus with seized material without adjudicating the fact whether the assessment for A.Y 2017-18 is abated assessment or unabated assessment? 5. Any other ground that may be urged at the time of hearing.” 3. The assessee has filed common grounds of cross objections for both the assessment years and, therefore, for the sake of brevity, the common grounds of cross objections preferred for the assessment year 2017-2018 [C.O.No.4/Hyd./2025] are reproduced as under : The following grounds of Cross objections are without prejudice to one another:- 4 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the issue on merits, in respect of grounds of appeal nos. 2 to 5 raised before him and thereby forcing the appellant to protracted litigation, regarding disallowance of depreciation of Rs.3,56,69,245/- claimed in respect of machinery merely on the basis of statement of a third party. 2. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the issue of disallowance of depreciation of Rs.3,56,69,245/- claimed in respect of machinery acquired from M/s Pradeep Kumar Babulal & Co, despite furnishing by the appellant of complete particulars of the transactions along with all necessary documents relating thereto and thereby discharging the onus before the Assessing Officer. 3. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not following the principle of consistency in appreciating and considering the fact that the claim of depreciation after the acquisition of the machinery has been allowed consistently in the preceding years since A.Y. 2013-14. 5 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 4. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the issue regarding the Assessing Officer not providing the copy of statement(s) of third party or other relevant material relied upon and not affording an opportunity to cross examine the person(s), who gave such statement that formed the basis of additions/disallowances. 5. The cross objector craves leave to add to, alter, amend and for delete all or any of the foregoing grounds of appeal. 6. The cross objector prays this Hon'ble Income Tax Appellate Tribunal, Hyderabad to direct the Ld. Assessing Officer to delete the disallowance of Rs.3,56,69,245/- made by the Assessing Officer. ITA.No.534/Hyd/2024 – A.Ys. 2017-2018 – Revenue Appeal : 4. The brief facts of the case are that, the assessee company is engaged in the business of EPC business in mining, construction and infrastructure sector which includes power, roads, irrigation and infrastructure of industrial sites etc. The assessee filed it’s original return of income for the Assessment Year 2017-18 on 28.10.2017 6 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 admitting total income of (-) Rs.4,99,72,655/ and the same was processed u/sec.143(1) of the Income Tax Act, 1961 [in short “the Act”]. A Search and Seizure operation u/sec.132 of the Act was conducted in the case of assessee i.e., M/s. AMR India Limited & Others on 02.05.2018. As such, the case of the assessee was covered u/sec.132 of the Act. Consequent to search, a notice u/sec.153A of the Act dated 24.01.2019 was issued to the assessee. In response to the said notice, the assessee filed it’s return of income on 27.02.2019 admitting total income of (-) Rs.4,99,72,655/-. 4.1. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noted that as per the information received from the Assistant Commissioner of Income Tax, Central Circle-1(3), Ahmedabad that, a search and seizure operation u/sec.132 of the Act was conducted at various business and residential premises of Sri Kevalchand Jain of Mumbai. During the search and seizure operation, Sri Kewalchand Jain has admitted that he has no business relation of goods or services except to provide accommodation entries in the 7 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 form of bogus bills and getting commission income for the same. In a statement, Sri Kevalchand Jain has stated that whenever turnover is required by the assessee viz., M/s. AMR India Ltd., he used to provide turnover to M/s.AMR India Ltd. It is also stated that the amounts received by M/s.AMR India Ltd for sale of old machinery were subsequently transferred to an entity managed and operated by Sri Kewalchand Jain like M/s. Pradeepkumar Babulal & Co. etc.. Accordingly, during the course of assessment proceedings, the assessee was requested to provide the details of amounts paid to M/s. Pradeep Kumar Babulal & Co. along with purpose of the said payments. In response thereto, the assessee submitted that during the financial year 2012-2013 relevant to the assessment year 2013-2014, the assessee purchased used machinery viz. loaders, concrete mixers, excavators etc. from M/s. Pradeep Kumar Babulal & Co. for a total consideration of Rs.51.34 crores and accordingly claimed depreciation thereon to the tune of Rs.2,70,29,532/- for the assessment year 2013- 2014. Further, the assessee has also submitted the details 8 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 of machinery purchased from M/s. Pradeep Kumar Babulal & Co. along with all the copies of invoices. The Assessing Officer after considering the relevant submissions of the assessee observed that as the genuineness of the concern M/s. Pradeep Kumar Babulal & Co. and the transactions with it are not proved beyond doubt, the depreciation on the machinery, claimed to have been purchased from M/s. Pradeep Kumar Babulal & Co. identified as shell company providing bills for the machinery without actual delivery of the same, has been disallowed. Accordingly, the depreciation claimed on the said machinery to the tune of Rs.3,56,69,245/- has been disallowed and added back to the total income of the assessee. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged the additions made by the Assessing Officer towards disallowance of depreciation on machinery and argued that when no incriminating material was found during the course of search proceedings, material found in the case of 9 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Shri Kewalchand Jain which cannot be used in the hands of the assessee u/sec.153A of the Act. The assessee further submitted that the assessment for the impugned assessment year 2017-2018 is unabated/concluded as on the date of search because, the search in the case of the assessee was conducted on 02.05.2018 and by that time, the time limit for issuance of notice u/sec.143(2) of the Act has been expired. Therefore, once the assessment is unabated, no addition can be made without any reference to incriminating material found as a result of search. Since the material relied upon by the Assessing Officer is not found in the course of search proceedings of the assessee, but, found in the course of search in the case of Shri Kewalchand Jain, additions made by the Assessing Officer on the basis of said incriminating material cannot be sustained. In this regard, he relied on the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd., [2023] 454 ITR 212 (SC). 10 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 5.1. The learned CIT(A) after considering the relevant submissions of the assessee and also taking note of various reasons given by the Assessing Officer to make addition towards disallowance of depreciation and also by following decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), held that the assessment year 2017-2018 is unabated/concluded as on the date of search and, therefore, once the assessment is unabated, in absence of any incriminating material found as a result of search, no addition can be made in the assessment framed u/sec.153A/153C of the Act. Since the Assessing Officer used the material other than that seized during the course of search action in the case of assessee, as per para-14(iv) of the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) the addition made by the Assessing Officer cannot be sustained. Thus, directed the Assessing Officer to delete the addition made toward disallowance of depreciation. The relevant findings of the learned CIT(A) are as under : 11 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 “6.3. I have considered the assessment order, submissions of the appellant, remand report submitted by the Assessing Officer and the decision of Hon'ble Supreme Court in case of PCIT Vs. Abhisar Buildwell P. Ltd. (Civil Appeal No.6580 of 2021). The Hon'ble Supreme Court in the case of Pr. CIT (Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) held that in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. The relevant portion of the said decision is reproduced as under : “14. In view of the above and for the reasons stated above, it is concluded as under : i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or 12 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 13 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.\" 6.3.1. Applying the judgment of Hon'ble Supreme Court in the case of Pr. CIT (Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) to the facts of the case of the appellant, the Assessing Officer in the remand report dated 1.1.03.2024 has relied on Para 14(iv) of the judgment of Hon'ble Supreme Court in the case of PCIT (Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) which implies that the assessment proceedings in case of the appellant for the AY 2017-18 is completed/unabated. Further, in the remand report, the Assessing Officer has observed that the addition of Rs.3,56,69,245/- was made based on the information received from ACIT, Central Circle- 1(3), Ahmedabad that M/s. Pradeep Kumar Babulal & Co. was engaged into providing accommodation entries to the appellant. In this regard the following observations are made : (i) A plain reading of Para 14(iv) of above decision of Hon'ble Supreme Court clears all doubts regarding making of any addition u/s 153A of the Act. It is seen that the incriminating material relied for making additions must be unearthed during the 14 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 course of search action conducted in case of the assessee and then only, any addition çan be made in the proceedings u/s 153A of the Act. Incriminating material not unearthed in case of assessee cannot be the basis for making any addition in case of that assessee in the proceedings u/s 153A of the Act. (ii) It is seen that proceedings u/s 153A of the Act can be initiated in a case only when a search warrant is executed in name of that assessee. Hence, there is a natural co-relation between the issuance of warrant & initiation of proceedings u/s 153A of the Act and any addition in the proceedings u/s 153A of the Act can be made only when: (a) a valid warrant is executed in case of the assessee which leads to search action and some material is seized during the course of search action, (b). while drawing the Panchanama in consequence to valid warrant, there has to be seizure of documents, money, bullion etc. and these documents, money, bullions etc. belong to the assessee, and 15 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 (c). during assessment proceedings u/s 153A, assessee offers no explanation or explanation offered by the assessee is not found satisfactory to the Assessing Officer. In case, seized material found during the course of search action does not belong to the assessee, the consequent proceedings u/s 153A of the Act are not valid and that seized material can be used for initiation of proceedings u/s 153C of the Act. Similarly, if there is no seizure of documents, money, bullion etc. during the search, no addition can be made in case of the assessee who is subjected to the search warrant. (iii). Any information received by the Assessing Officer of searched person, while completing assessment u/s 153A of the Act, can be used to determine assessee's total income, only when there is some incriminating material seized during the search action in assessee's own case. In case, no material is seized during assessee's own search, other incriminating material received from any other source, howsoever good, cannot be used against the assessce as clearly mentioned in Para 14(iv) of the above Supreme Court decision in respect of completed/ unabated assessment. 16 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 6.3.2. Applying the above observations to the facts of the present case, from the \"Note not to the assessee\" reproduced in the remand report dated 11.03.2024, it is clear that nothing incriminating was found during the search action conducted in case of the appellant for the current AY 2017-18 and the addition of Rs.3,56,69,245/ was made based on information received from ACIT, Central Circle-1(3), Ahmedabad. The aforesaid information received from ACIT, Central Circle-1(3), Ahmedabad can be considered as incriminating material for assessment proceedings u/s 153C in case of the appellant as this information was unearthed during search action conducted in some other party namely Sri Kewalchand Jain and not for the current assessment proceedings u/s. 153A of the Act in case of the appellant. In the current search proceedings, where warrant was executed in name of the appellant, there was no incriminating material found as already mentioned in the remand report given by the AO. 6.3.3. In view of the above, it is held that the information received from the ACIT, Central Circle-1(3), Ahmedabad in case of search action conducted on Sri Kewalchand Jain (person other than the appellant) cannot be considered as incriminating material unearthed during the search action conducted in case of the appellant, rather the information received is hereby 17 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 considered as the material other than that seized during the course of search action in case of the appellant as per Para 14(iv) of above decision of Hon'ble Supreme Court. Accordingly, this information cannot be used for making the said addition of Rs.3,56,69,245/- during the course of assessment proceedings u/s 153A of the Act in case of the appellant. 6.3.4. Therefore, as this assessment for the AY 2017-18 is unabated, respectfully following the above judgment of Hon'ble Supreme Court in the case of PCIT(Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) at Para 14(iv), the addition of Rs.3,56,69,245/- which was not based on any incriminating material found during the course of search in case of the appellant is hereby deleted. Since, the case of the appellant is squarely covered by the above judgment of the Hon'ble Apex Court, it is not being decided on merits. Accordingly, the additional ground no.6 raised by the appellant in submissions during appeal proceedings is hereby allowed. 6.3.5. Further, as case of the appellant for the AY 2017-18 is covered under para 14(iv) of the decision of Hon'ble Supreme Court as mentioned above, Assessing Officer is free to take any action in pursuance to the 18 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 observation of the Hon'ble Supreme Court cited in para 14(iv) and also as per Instruction No.1 of 2023 of the CBDT.” 6. Aggrieved by the order of the learned CIT(A), the Revenue is in appeal before the Tribunal. 7. The Learned CIT-DR Ms. M. Narmada submitted that that the learned CIT(A) erred in deleting the additions made by the Assessing Officer towards disallowance of depreciation on machinery by following decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), without appreciating the fact that the assessment year in question is abated as on the date of search which is evident from the date of search in the present case i.e., 02.05.2018. Learned DR further submitted that the assessee has filed it’s return of income for the year under consideration on 28.10.2017 and the “due date” for issue of notice u/sec.143(2) of the Act will expire on 30.09.2018. The search in the case of assessee was conducted on 02.05.2018 and by the time of search, the time limit to issue notice u/sec.143(2) was not expired. 19 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Therefore, the assessment is abated as per the first proviso to sec.153A of the Act and once the assessment is abated, then the Assessing Officer shall have power to assess or re- assess the total income including the undisclosed income, if any, found as a result of search and this principle is supported by the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra). The learned CIT(A) without appreciating the relevant facts, simply deleted the additions made by the Assessing Officer. Therefore, he submitted that the order of the learned CIT(A) should be set-aside and the additions made by the Assessing Officer should be upheld. 8. CA Ritu Kamal Kishore, Learned Counsel for the Assessee, on the other hand, supporting the order of the learned CIT(A) submitted that the Assessing Officer has used incriminating material found as a result of search in the case of Shri Kewalchand Jain contrary to law as per sec.153A of the Act. She further submitted that in the assessment framed u/secs.153A/153C, the Assessing Officer cannot use the material found in search proceedings 20 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 of other person. In the present case, going by the assessment order passed by the Assessing Officer, the Assessing Officer has used the incriminating material found in the case of Shri Kewalchand Jain coupled with his statement recorded during the course of search, against the assessee, and, therefore, the learned CIT(A) after considering all the relevant facts, has rightly deleted the additions made by the Assessing Officer by following the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra). Therefore, she submitted that the order of the learned CIT(A) should be upheld and the appeals filed by the Revenue should be dismissed. 9. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to fact that the Assessing Officer made additions towards disallowance of depreciation on the basis of search proceedings conducted u/sec.132 of the Act in the case of Shri Kewalchand Jain of Mumbai and material found during the course of search proceedings coupled with the 21 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 statement recorded from Shri Kewalchand Jain. It is also not in dispute that a search and seizure operation u/sec.132 of the Act was conducted in the case of assessee on 02.05.2018. The assessment for the assessment year 2017-2018 is abated as on the date of search i.e., 02.05.2018 which is evident from the date of filing return of income on 28.10.2017 and the time limit available for issue of notice u/sec.143(2) of the Income Tax Act, 1961 i.e., on 30.09.2018. Since the time limit available for issue of notice u/sec.143(2) of the Act as on the date of the search, in our considered view, the assessment for the assessment year 2017-2018 is abated in terms of first proviso to sec.153A of the Act and consequently, the Assessing Officer shall have power to assess/re-assess the total income, including undisclosed income, if any, found as a result of search. This view is followed by the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) in para-14(iv) wherein it has been held that in case no incriminating material is unearthed during the course of search, the Assessing Officer cannot assess/re-assess 22 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 taking into consideration of other material in respect of completed assessment/un-abated assessment. Meaning thereby, in respect of completed-unabated assessment, no addition can be made by the Assessing Officer, in absence of any incriminating material found during the course of search u/sec.132 or requisition u/sec.132A of the Act. However, in the assessment is abated as on the date of search, the Assessing Officer shall assess or re-assess the total income taking into consideration the incriminating material and any other material including books of accounts. In the present case, going by the date of search in the case of assessee i.e., on 02.05.2018, the assessment for the assessment year 2017-2018 is abated. Therefore, in our considered view, the Assessing Officer can assess the total income on the basis of any other material, but, not only on the basis of the incriminating material found as a result of search. The learned CIT(A) without considering the relevant facts and further on wrong assumption of facts that the assessment year is unabated as on the date of search, by following the decision of Hon’ble Supreme Court in the case 23 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 of PCIT vs., Abhisar Buildwell P. Ltd. (supra) has deleted the additions made by the Assessing Officer. Thus, we set aside the order passed by the learned CIT(A) and allow the appeal filed by the Revenue. 10. In the result, ITA.No.534/Hyd./2024 of the Revenue is allowed. ITA.No.535/Hyd./2024 – A.Y. 2018-2019 – [Revenue Appeal] : 11. The assessee filed it’s original return of income for the assessment year 2018-19 on 29.10.2018 admitting total income of (-)Rs.8,07,98,035/- under normal provisions and Rs.4,82,10,057/- as per the provisions of sec.115JB of the Income Tax Act, 1961 [in short “the Act”] and the same was processed u/sec.143(1) of the Act. A Search and Seizure operation u/sec.132 of the Act was conducted in the case of assessee i.e., M/s. AMR India Limited & Others on 02.05.2018. As such, the case of the assessee was covered u/sec.132 of the Act. Consequent to search, a notice u/sec.153A of the Act dated 24.01.2019 was issued to the assessee. In response to the said notice, the assessee filed 24 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 it’s return of income on 27.02.2019 admitting total income of (-)Rs.8,07,98,035/- under normal provisions and Rs.4,82,10,057/- as per the provisions of sec.115JB of the 12. A survey operation u/sec.133A of the Act was carried-out on 19.02.2021 at the business premises of the assessee and certain incriminating material has been impounded by Dy. Director of Income Tax (Inv.), Unit-1(2), Hyderabad. On verification of the P & L A/c submitted by the assessee, it is noticed that assessee has claimed sub- contract expenses. During the financial year relevant to assessment year 2018-2019 the assessee had given sub- contract works to (1) Rayon Infrastructure Pvt. Ltd., and (2) Sunil Hitech Engineers Ltd. During the course of assessment proceedings, after taking into consideration of the material available on record, the Assessing Officer called-upon the assessee to substantiate the sub-contract payments to the above named two companies, more particularly, in light of statement recorded u/sec.131 of the Act from Shri Mahesh Kumar Reddy, Managing Director of the assessee company. In response, the assessee vide it’s 25 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 letter dated 29.04.2021 submitted that the assessee was executing a civil contract work at Khammam District for excavation work of Pranahita-Chevella lift irrigation scheme package-50, which in turn, was sub-contracted to various sub-contractors. The assessee has sub-contracted part of work to Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., and entered into work agreements with these two parties. The assessee further contended that Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., has submitted their bills after completion of work, for which, the assessee has made payment through proper banking channel, after deducting applicable TDS as per law. The assessee further submitted that the allegation of the Assessing Officer that the sub-contractor in question did not exist in the address given is devoid of merit, because there is no details as to when the said enquiry was conducted and in absence of any details, the assessee is not in a position to comment upon the observation of the Assessing Officer. Therefore, he submitted that sub-contract payment made to the above two parties is genuine and is 26 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 supported by necessary evidences including bills submitted by the parties. 13. The Assessing Officer after considering the relevant submissions of the assessee and also taken note of finding of survey conducted u/sec.133(2) of the Act observed that the employee who signed work order stated in the statement recorded u/sec.131 of the Act that they are not aware of Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. Further, in the statement u/sec.131 of the Act recorded on 01.03.2021 Shri Mahesh Kumar Reddy, Managing Director of the Assessee has confirmed that whatever was stated by his staff in the sworn statement is true and he is fully agree with the contents of the same. From the statement of Shri Mahesh Kumar Reddy and the statement of employee of the assessee, it is undisputedly clear that sub-contract payment claimed to have made to above two parties is not genuine and bogus in nature, therefore, rejected the explanation of the assessee and made addition of Rs.15,85,52,155/- towards sub- contract payment made to the above two contractors and 27 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 added the said sum of Rs.15,85,52,155/- to the total income of the assessee. 14. Being aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A) challenging the additions made by the Assessing Officer towards disallowance of a sum of Rs.15,85,52,155/- towards payment of sub-contract work to two sub- contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., and reiterated the submissions made before the Assessing Officer. The learned CIT(A) after considering the relevant submissions of the assessee and also taking note of various reasons given by the Assessing Officer to make disallowance of sub-contract payment made to Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., and after considering the remand report dated 09,.10.2023 of the Assessing Officer, the learned CIT(A) by following decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), held that the assessment year 2018-2019 is unabated/concluded as on the date of search and, therefore, once the assessment is 28 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 unabated, in absence of any incriminating material found as a result of search, no addition can be made in the assessment framed u/sec.153A/153C of the Act. Since the Assessing Officer used the material other than that seized during the course of search action in the case of assessee, as per para-14(iv) of the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) the addition made by the Assessing Officer cannot be sustained. Thus, directed the Assessing Officer to delete the addition made towards disallowance of sub-contract payment amounting to Rs.15,85,52,155/- made to two sub- contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. 15. Aggrieved by the order of the learned CIT(A), the Revenue is in appeal before the Tribunal. 16. The Learned CIT-DR Ms. M. Narmada submitted that that the learned CIT(A) erred in deleting the additions made by the Assessing Officer towards disallowance of payment to sub-contract work amounting to 29 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Rs.15,85,52,155/- made to two sub-contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. by following decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), without appreciating the fact that the assessment year in question is abated as on the date of search which is evident from the date of search in the present case i.e., 02.05.2018. Learned Counsel for the Revenue submitted that the assessee has filed it’s return of income for the year under consideration on 27.02.2019 and the “due date” for issue of notice u/sec.143(2) of the Act will expire on 31.01.2020. The search in the case of assessee was conducted on 02.05.2018 and by that time of search, the time limit to issue notice u/sec.143(2) was not expired. Therefore, the assessment is abated as per the first proviso to sec.153A of the Act and once the assessment is abated, then the Assessing Officer shall have power to assess or re-assess the total income including the undisclosed income, if any, found as a result of search and this principle is followed by the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar 30 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Buildwell P. Ltd. (supra). The learned CIT(A) without appreciating the relevant facts, simply deleted the additions made by the Assessing Officer. Therefore, she submitted that the order of the learned CIT(A) should be set-aside and the additions made by the Assessing Officer should be upheld. 17. CA Ritu Kamal Kishore, Learned Counsel for the Assessee, on the other hand, supporting the order of the learned CIT(A) submitted that the Assessing Officer has used incriminating material found as a result of survey in the case of assessee contrary to law as per sec.153A of the Act. She further submitted that in the assessment framed u/secs.153A/153C, the Assessing Officer cannot use the material found in survey proceedings of other person. In the present case, going by the assessment order passed by the Assessing Officer, the Assessing Officer has used the incriminating material found in case of other person during the course of survey, against the assessee, and, therefore, the learned CIT(A) after considering all the relevant facts and the remand report dated 09.10.20223 of the Assessing 31 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Officer, has rightly deleted the additions made by the Assessing Officer by following the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra). Therefore, she submitted that the order of the learned CIT(A) should be upheld and the appeal filed by the Revenue should be dismissed. 18. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to fact that the Assessing Officer made disallowance of payment made to two sub-contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., amounting to Rs.15,85,52,155/- on the basis of survey operation conducted u/sec.133A of the Act and material found during the course of survey operation coupled with the statement recorded from Shri Subbarami Reddy, Chief Financial Officer and Shri Mahesh Kumar Reddy, Managing Director of the assessee company. It is also not in dispute that a search and seizure operation u/sec.132 of the Act was conducted in the case of assessee on 02.05.2018. The 32 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 assessment for the assessment year 2018-2019 is abated as on the date of search i.e., 02.05.2018 which is evident from the date of filing return of income on 27.02.2019 and the time limit available for issue of notice u/sec.143(2) of the Income Tax Act, 1961 i.e., on 30.01.2020. Since the time limit available for issue of notice u/sec.143(2) of the Act as on the date of the search, in our considered view, the assessment for the assessment year 2018-2019 is abated in terms of first proviso to sec.153A of the Act and consequently, the Assessing Officer shall have power to assess/re-assess the total income, including undisclosed income, if any, found as a result of search. This view is followed by the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) in para- 14(iv) wherein it has been held that in case no incriminating material is unearthed during the course of search, the Assessing Officer cannot assess/re-assess taking into consideration of other material in respect of completed assessment/un-abated assessment. Meaning thereby, in respect of completed-unabated assessment, no addition can 33 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 be made by the Assessing Officer, in absence of any incriminating material found during the course of search u/sec.132 or requisition u/sec.132A of the Act. However, in case the assessment is abated as on the date of search, the Assessing Officer shall assess or re-assess the total income taking into consideration the incriminating material and any other material. In the present case, going by the date of search in the case of assessee i.e., on 02.05.2018, the assessment for the assessment year 2018-2019 is abated. Therefore, in our considered view, the Assessing Officer can assess the total income on the basis of any other material, but, not only on the basis of the incriminating material found as a result of search. The learned CIT(A) without considering the relevant facts and further on wrong assessment of facts that the assessment year is unabated as on the date of search and by following the decision of Hon’ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) has deleted the additions made by the Assessing Officer. Thus, we set aside the order passed 34 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 by the learned CIT(A) and allow the appeal filed by the Revenue. 19. In the result, ITA.No.535/Hyd./2024 filed by the Revenue is allowed. C.O.No.4/Hyd./2025 – A.Y. 2017-2018 – [Assessee] : 20. At the outset, we find that there is a delay of 205 days in filing the cross-objections for both the assessment years i.e., 2017-2018 and 2018-2019, for which, the assessee filed petitions for condonation of delay in filing the cross objections before the Tribunal. Learned Counsel for the Assessee submitted that assessee could not file the cross objections within the time allowed under the Act and Rule 22 of Income Tax Appellate Tribunal Rules, 1963 on the bonafide belief that the assessee has got relief from the learned CIT(A). However, subsequently, the Counsel who is appearing before the Tribunal has advised us to file cross objections against the appeals filed by the Revenue before the Tribunal on the issues which has been decided against the assessee by the learned CIT(A). Therefore, the assessee 35 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 has taken steps to file the present cross objections. Further, our Counsel due to some medical exigencies in the family could not look into the pending adjudication of appeals before the Tribunal consequent to filing of Department’s appeals and in the process, there was 205 days delay in filing the cross objections before the Tribunal. However, the said delay is neither wilful nor for want of any undue benefit, but, beyond the control of the assessee. Therefore, in the interest of justice, the delay of 205 days in filing the above two cross objections may be condoned. 21. The Learned DR, on the other hand, strongly opposed the petitions filed by the assessee for condonation of delay in filing cross objections and submitted that the reasons given by the assessee in their affidavits did not come under any ‘reasonable cause’ as provided under the Act for condonation of huge delay. Therefore, the cross objections filed by the assessee with a delay of 205 days should not be admitted for adjudication. 36 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 22. We have heard both the parties and considered the relevant submissions given by the assessee in it’s affidavit filed for condonation of delay in filing the cross objections and on perusal of the relevant reasons, we find that there is ‘sufficient reason’ for the assessee in not filing the cross objections on or before the due date provided under the Act for filing cross objections. Further, the argument of the Learned Counsel for the Assessee that the assessee was under bonafide belief that once relief has been granted by the learned CIT(A), there is no necessity for filing cross objection on other issues which has been decided against the assessee. In our considered view, the reasons given by the assessee appears to be bonafide and reasonable and further comes under ‘reasonable cause’ for condonation of delay of 205 days in filing the above cross objections. Therefore, in the interest of justice, we condone the delay of 205 days in filing the above cross objections and admit the cross objections for adjudication. 23. Coming back to the Cross Objection No.4/Hyd./ 2025 for the assessment year 2017-2018. The Learned 37 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Counsel for the Assessee, referring to the grounds of cross- objections filed by the assessee, submitted that, the Assessing Officer is erred in making additions towards disallowance of depreciation of old machinery purchased from M/s Pradeep Kumar Babulal & Co. without appreciating the fact that the assessee has filed relevant information including bills submitted by the supplier and consequent payment made through cheque and proper banking channel. Learned Counsel for the Assessee referring to various evidences including purchase order, tax invoice and payment details submitted that the assessee has filed all evidences to prove purchase of machinery from M/s Pradeep Kumar Babulal & Co. Although, the assessee has filed various evidences, but, the Assessing Officer has made additions towards depreciation only on the basis of search conducted in the case of Shri Kewalchand Jain, Mumbai and statement recorded from him during the course of search without providing the statement recorded from Shri Kewalchand Jain to the assessee for his comments and rebuttal and thereby, the Assessing Officer 38 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 violated the principles of natural justice and in absence of any details as to the contents of statement recorded from Shri Kewalchand Jain, the additions made by the Assessing Officer on the basis of third party statement without providing such statement to the assessee, the additions cannot be sustained. In this regard, he relied upon the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 taxmann.com 3 (SC) and Kishanchand Chellaram vs. CIT 125 ITR 713 (SC). Therefore, she submitted that additions made by the Assessing Officer towards disallowance of depreciation should be deleted. 24. The Learned CIT-DR MS. M. Narmada, on the other hand, supporting the order of the Assessing Officer submitted that the Assessing Officer has brought-out clear facts in light of statement recorded from Shri Kewalchand Jain during the course of search and as per the said statement he is clearly admitted to have provided accommodation entries without any actual business activity of supplying old machinery to the assessee. Although, the 39 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 assessee claimed to have made payment through proper banking channel, but, mere payment by cheque does not prove the genuineness of the transaction, more particularly, when the other party clearly admits providing accommodation entries. The Assessing Officer after considering relevant facts has rightly held that purchase of old machinery from M/s Pradeep Kumar Babulal & Co. is not genuine and thus, the depreciation on said machinery cannot be allowed. Therefore, she submitted that the additions made by the Assessing Officer should be sustained. 25. We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that the addition made by the Assessing Officer towards disallowance of depreciation on machinery is on the basis of incriminating material found during the course of search operation conducted u/sec.132 of the Act at various business and residential premises of Shri Kewalchand Jain, Mumbai. According to the Assessing Officer, during the course of 40 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 search, Shri Kewalchand Jain has stated that he has no business relation of goods or services with the assessee company, except providing accommodation entries in the form of bogus bills and gets commission income for the same. In his statement, he further stated that whenever turnover required by the assessee company viz., AMR India Limited, he used to provide turnover to the said company and the amount received from the assessee company has been subsequently transferred to an entity managed, controlled and operated by Shri Kewalchand Jain like M/s Pradeep Kumar Babulal & Co. The Assessing Officer on the basis of statement recorded from Shri Kewalchand Jain came to the conclusion that purchase of machinery from M/s Pradeep Kumar Babulal & Co. is not genuine and, therefore, disallowed the entire depreciation claimed on the said machinery. 26. We have given our thoughtful consideration to the reasons given by the Assessing Officer to disallow the depreciation on plant and machinery claimed to have been purchased from M/s Pradeep Kumar Babulal & Co. in light 41 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 of various arguments of Learned Counsel for the Assessee and we ourselves do not subscribe to the reasons given by the Assessing Officer for the simple reason that, the Assessing Officer except stating that Shri Kewalchand Jain in his statement recorded u/sec.132(4) of the Act has admitted providing accommodation entries of bogus bills to the assessee company, but, has not brought on record any material to suggest that purchase of old machinery from M/s Pradeep Kumar Babulal & Co. is bogus in nature which are not supported by necessary bills and vouchers. On the other hand, assessee has furnished all the evidences including relevant work order, tax invoice and delivery challans of goods purchased from M/s Pradeep Kumar Babulal & Co. and also filed relevant bank statement to prove payment through proper banking channel. Once the assessee has filed all relevant evidences in support of purchase of old machinery from a person or entity, then, it is for the Assessing Officer to disprove the claim of the assessee company by taking on record contrary material to disprove the claim of the assessee-company. However, in the 42 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 present case, the Assessing Officer except the statement of Shri Kewalchand Jain, nothing has been brought on record to disprove the claim of the assessee. It is well settled principle of law by the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 taxmann.com 3 (SC) that any additions made on the basis of third party statement without providing the statement to the other person for his comment or rebuttal, is contrary to principles of natural justice and additions made on the basis of third party statement cannot be sustained. This principle is further supported by the decision of Hon’ble Supreme Court in the case of Kishanchand Chellaram vs. CIT 125 ITR 713 (SC) where similar view has been taken by the Hon’ble Supreme Court. The sum and substance of the ratio laid down by the Hon’ble Supreme Court in the above two cases is that the Assessing Officer cannot make additions only on the basis of third party statement unless corroborative evidences are brought on record to substantiate the contents of statement recorded from third party. Further, 43 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 once the third party statement is relied upon by the Assessing Officer, he is duty bound to provide the statement to the assessee for his comments and cross-examination. In the present case, the Assessing Officer without providing the statement recorded from Shri Kewalchand Jain to the assessee for his comments and cross-examination, made the additions. Therefore, we are of the considered view, that additions made by the Assessing Officer on the basis of statement of third party cannot be sustained. Thus, we direct the Assessing Officer to delete the additions made towards disallowance of depreciation on plant and machinery. 27. In the result, Cross Objection No.4/Hyd./2025 of the Assessee is allowed. C.O.No.5/Hyd./2025 – A.Y. 2018-2019 [Assessee] : 28. Coming back to the cross objection for the assessment year 2018-2019. The Assessing Officer made additions towards sub-contract payment made to two contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil 44 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 Hitech Engineers Ltd., on the ground that both sub- contracts were not existed in the address given in the bill submitted by the assessee when enquires conducted during assessment proceedings. Except this observation, the Assessing Officer has not countered the contract work of the assessee in light of various evidences including work order issued to the sub-contractors, agreement with the above two sub-contractors and bills submitted by the sub-contractors. In fact, the assessee has filed all evidences including agreement of sub-contracts relating to the work, work orders, bills submitted by sub-contractors and also payment made to sub-contractors by cheque through proper banking channel after deducting applicable TDS as per law. Once the assessee has filed relevant details, in our considered view, the Assessing Officer cannot make additions only on the basis of statement recorded from few employees of assessee by stating that the employee who signed work order is not aware of sub-contractors and payment made to them. In our considered view, in an organisation when many employees are dealing with various works, it is not necessary for a 45 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 person who signed the work order is aware of the persons who executed the contract work. Therefore, only on the basis of statement of an employee, no adverse inference can be drawn on sub-contract payments made by the assessee, more particularly, when the assessee has furnished all evidences to substantiate it’s claim. Further, the Assessing Officer has rested his finding only on the basis of enquiry conducted on two sub-contractors and observed that on perusal of commission enquiry, rightly it is noticed that these companies never exist at the premises where they were registered. Further, Shri Subbarami Reddy, Chief Financial Officer of the assessee company also stated that they never knew that these companies do not exist in their registered address, but, the particulars mentioned by the above two companies in the work orders are different to that of their registered address and they gave the contract work on good faith. In our considered view, the Assessing Officer has not brought on record when the enquiry was conducted on the above named two sub-contractors. Further, the Assessing Officer has not given enquiry report to the 46 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 assessee for his comments and rebuttal. Therefore, in our considered view, once addition is made on the basis of enquiries conducted by the Assessing Officer, in our considered view, the findings of the enquiry should be given to the assessee for his comments and rebuttal. In the present case, the Assessing Officer has made addition only on the basis of enquiry conducted on the sub-contract coupled with statement recorded from the employee of the assessee, but, the fact remains that nowhere in the statement of the employees is there any adverse inference against payment made to these sub-contracts. Therefore, we are of the considered view, that the addition made by the Assessing Officer on the basis of enquiry conducted on two sub-contractors coupled with the statement recorded from employee of the assessee company, cannot be sustained. Thus, we direct the Assessing Officer to delete the additions made towards sub-contract payments made to Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. 29. In the result, Cross Objection No.5/Hyd./2025 of the Assessee is allowed. 47 ITA.Nos.534 & 535/Hyd./2024 & C.O.Nos.4 & 5/Hyd./2025 30. To sum-up, appeals of Revenue ITA.Nos.534 & 535/Hyd./2024 and Cross Objection Nos.4 & 5/Hyd./2025 of the assessee are allowed. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 24.03.2025. Sd/- Sd/- [K. NARASIMHA CHARY] [MANJUNATHA G] JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 24th March, 2025 VBP Copy to 1. The ACIT, Central Circle-2(2), Hyderabad. 2. AMR India Limited, Room No.616, 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad – 500 004. Telangana. 3. The Pr. CIT, Hyderabad. 4. The DR ITAT “B” Bench, Hyderabad. 5. Guard File //By Order// //True Copy// "
AI Insights
The case involves appeals by the Revenue against the orders of the CIT(A) which had deleted certain additions made by the Assessing Officer regarding disallowance of depreciation on machinery and additions related to sub-contract payments. The Tribunal examined whether the assessments for the relevant assessment years were abated or unabated at the time of the search and seizure operations conducted on the assessee. It was found that the assessments were abated, allowing the Assessing Officer to reassess the total income including undisclosed income found as a result of the search. However, the Tribunal noted that the additions made were based on materials and statements not directly linked to the assessee, leading to the decision to allow the cross objections and dismiss the Revenue's appeals in part.
