ACIT CENTRAL CIRCLE, MORADABAD V. GENUS PAPER & BOARDS LTD, MORADABAD

ITA 8128/DEL/2019

AI Insights

The case involves appeals by both the assessee, M/s. Genus Paper & Boards Ltd, and the revenue against the orders of the Commissioner of Income Tax (Appeals)-III, Lucknow, concerning the assessment years 2013-14 and 2014-15. The primary issue was the addition of Rs 4 crores as unexplained cash credit under section 68 of the Income-tax Act, 1961, following a search and seizure operation. The Tribunal examined whether the additions were justified in the absence of incriminating material found during the search. The Tribunal's decision was influenced by precedents and the lack of evidence linking the additions to any incriminating material discovered during the search.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470202 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: Genus Apparels Ltd vs DCIT in ITA No. 44/Del/2021, Abhisar Buildwell Private Limited vs 454 ITR 212 (SC), B Jayalakshmi v. ACIT reported in 96 taxmann.com 486 (Mad HC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA PAL
• Assessee Lawyers: MAYANK PATWARI
• Keywords: Additional evidence; Unexplained cash credit; Search and seizure; Source of fund
• Section: 143(3); 143(2); 143(1); 153A; 68; 133(6); 139

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA Nos. 8127 & 8128/Del/2019 (Assessment Years: 2013-14 & 2014-15) ACIT, Central Circle, Moradabad Vs. M/s. Genus Paper & Boards Ltd, Village-Aghwanpur, Kanth Road, Moradabad (Appellant) (Respondent) PAN: AAECG5483A ITA No. 45/Del/2021 (Assessment Year: 2013-14) M/s. Genus Paper & Boards Ltd, Village-Aghwanpur, Kanth Road, Moradabad Vs. DCIT, Central Circle, Moradabad (Appellant) (Respondent) PAN: AAECG5483A Assessee by : Shri Mayank Patwari, CA Shri Akash Ojha, Adv Revenue by: Shri Surendra Pal, CIT DR Date of Hearing 06/01/2025 Date of pronouncement 22/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.45/Del/2021 for AY 2013-14 filed by the assessee and ITA Nos. 8127 & 8128/Del/2019 for AYs 2013-14 and 2014-15, arise out of the order of the Commissioner of Income Tax (Appeals)-III, Lucknow [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 6/293/ACIT/CC/MBD/CIT(A)-III/Lko/17 dated 25.07.2019 against the order of assessment passed u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 2 (hereinafter referred to as „the Act‟) dated 31.12.2017 by the Assessing Officer, DCIT, Central Circle, Moradabad (hereinafter referred to as „ld. AO‟). 2. At the outset, we find that there is a delay in filing of appeal by the assessee by 381 days. Considering the reasons adduced in the delay condonation petition, we find that assessee was having sufficient cause and accordingly in the interest of substantial justice, we are inclined to condone the delay and admit the appeal of the assessee for adjudication. 3. Let us take up the appeal of the assessee and appeal of the revenue for assessment year 2013-14 first. 4. The assessee has raised an additional ground as under:- “That the Ld AO erred in law and on facts in passing the impugned assessment order without considering the fact that there was no seized material qua the unabated assessment year.” 5. Since this additional ground raised by the assessee goes to the root of the matter and purely legal in nature and all the facts relevant for adjudication are already on record, we deem it fit to admit the said additional ground and take up adjudication. 6. We have heard the rival submissions and perused the materials available on record. The original return of income was filed by the assessee company within the time permitted under section 139 of the Act. The time limit for issuance of notice under section 143(2) of the Act had expired on 30- 9-2014. Thereafter, a search and seizure operation was carried out on 30-7- 2015 in Genus group of cases, Moradabad at the residential and business premises of directors and partners of the assessee. Pursuant to the search, notice under section 153A of the Act stood issued to the assessee on 9-8-2017 for assessment year 2013-14. The assessee filed its return of ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 3 income for the assessment year 2013-14 on 19-9-2017 declaring total income of Rs 16,94,26,450/- in response to notice under section 153A of the Act. In the search assessment framed under section 153A read with section 143(3) of the Act dated 31-12-2017, the Learned AO proceeded to make an addition of Rs 4 crores treating the loans received by the assessee from 4 parties as unexplained cash credit under section 68 of the Act and determined the total income at Rs 20,94,26,450/-. The Learned CITA observed in respect of loans received by the assessee from Bahubali Properties Ltd and Shagun Commercial Pvt Ltd, the loan creditors had duly confirmed the fact of having advanced loan to the assessee and they had furnished the ledger account, copy of income tax return, audit report, bank statements and explained the source of funds for the loan advanced to the assessee thereby proving all the three ingredients of section 68 of the Act. Accordingly, the Learned CITA deleted the addition made under section 68 of the Act to the extent of Rs 2 crores and sustained the loan amounts received from BSR Finance & Construction Ltd (Rs 1 crore) and Mayank Global Finance Ltd (Rs 1 crore). Aggrieved, by this order, both assessee as well as the revenue are in appeals before us. 7. As stated earlier, as on the date of search on 30-7-2015, no proceedings were pending on the date of search for the assessment year 2013-14, the assessment for the assessment year 2013-14 had been already completed and hence becomes an unabated/ completed assessment. Hence the learned AO while framing the search assessment, if he chooses to disturb the existing assessment framed in the case of the assessee, either under section 143(1) / 143(3) or 147 of the Act, then he can do so only when there is incriminating material found during the course of search, qua the additions proposed to be made. In the instant case, the loans borrowed from four parties were sought to be added as unexplained cash credit under section 68 ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 4 of the Act by the learned AO in the search assessment framed under section 153A of the Act. But there was absolutely no search material or incriminating material found during the course of search of the assessee, qua those additions made under section 68 of the Act. Further this fact is also upheld by the Co-ordinate Bench decision of this Tribunal in the case of sister concern of assessee in Genus Apparels Ltd vs DCIT in ITA No. 44/Del/2021 dated 26-11-2024 where similar addition pursuant to same search was made. Hence, since the assessment year 2013-14 being an unabated / completed assessment, the earlier assessment though framed under section 143(1) of the Act could not be disturbed by the learned AO while framing the search assessment under section 153A of the Act as admittedly there is no incriminating material found during the course of search, qua the unsecured loans received from four parties. This issue is no longer res integra in view of the decision of Hon‟ble Supreme Court in the case of Abhisar Buildwell Private Limited reported in 454 ITR 212 (SC). Respectfully following the same, we hereby delete the entire addition of Rs 4 crores made by the learned AO in the search assessment as there is no incriminating material found during the course of search in respect of such addition. Accordingly the additional ground raised by the assessee is allowed. 8. In the result, the appeal of the assessee is allowed and appeal of the revenue is dismissed for assessment year 2013-14. ITA No. 8128/Del/19 – Asst Year 2014-15 – Revenue Appeal 9. The only issue to be decided in this appeal is as to whether the learned CITA was justified in deleting the addition made under section 68 of the Act in respect of loans received by the assessee from Babubali Properties Ltd (Rs 50 lacs) and Shagun Commercial Pvt Ltd (Rs 1.50 crores) in the facts and circumstances of the instant case. ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 5 10. We have heard the rival submissions and perused the materials available on record. This assessment year 2014-15 was pending on the date of the search conducted on 30-7-2015. Hence, it becomes an abated assessment. Notice under section 153A of the Act stood issued to the assessee on 9-8-2017 for the assessment year 2014-15. The assessee filed its return of income on 23-09-2017 declaring total income of Rs. 9,71,31,850/- in response to notice under section 153A of the Act. The assessee received unsecured loans from Bahubali Properties Limited to the tune of Rs. 50 lakhs and Shagun Commercial Private Limited to the tune of Rs. 1.50 crores during the year under consideration. The learned AO observed that during the post- search proceedings, commission under section 131(1)(d) of the Act was issued to DDIT Investigation Unit 4(2), Kolkata. The Investigation Unit Kolkata in their inquiry report dated 27-05-2016 stated that summons was issued to the parties through speed post which was returned unserved with the remark „party not found or left‟ by the postal department. An Inspector was deputed for doing the field inquiries and inspector found that parties were not existent at the given address. Accordingly, based on this report, the learned AO concluded that even identity of the lenders could not be established by the assessee. Since no details were filed, the learned AO concluded that assessee was not able to prove the genuineness of the transaction and credit worthiness of the lenders. The learned AO concluded that the 3 ingredients of section 68 of the Act were not proved by the assessee and proceeded to treat the loans received from these two parties as unexplained cash credit under section 68 of the Act and completed the assessment. 11. Before the Learned CITA, the assessee filed all the requisite documents as additional evidences and the Learned CITA called for a remand report from the Learned AO in respect of those additional evidences. A remand report was ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 6 issued by the Learned AO on 27-2-2019. The assessee also filed rejoinder to the said remand report. The assessee submitted before the Learned CITA that around 170 income tax cases were to be completed in the assessee group and assessee herein was given lesser time to furnish the requisite documents during the course of assessment proceedings. Accordingly, the assessee could not furnish the requisite details and documents before the Learned AO which prompted the Learned AO to make an addition as unexplained cash credit under section 68 of the Act. However, the assessee had filed all the relevant documents as additional evidences before the Learned CITA and prayed for admission of those additional evidences. The Learned CITA admitted those additional evidences and sought for a remand report from the Learned AO. In the remand report submitted on 27- 2-2019, the Learned AO categorically observed that on merits, in order to verify the genuineness of the loans received by the assessee from the above parties, notices under section 133(6) of the Act were issued on 29-1-2019. Both the parties had duly responded to the notice under section 133(6) of the Act by furnishing the requisite documents directly before the Learned AO. The Learned AO also submitted that the parties had duly confirmed the loan transactions with the assessee and had furnished their ledger account, income tax returns, audit reports and bank statements. The Learned CITA took cognizance of the remand report and also observed that Bahubali Properties Limited had gross revenue from operations at Rs 115,38,85,925/- during the year under consideration which is evident from the copy of audited accounts submitted by them. Similarly, the Learned CITA observed that Shagun Commercials Pvt. Ltd. had gross revenue from operations of Rs 6,81,13,104/-during the year under consideration. This clearly proves the creditworthiness of the parties. Further, both the parties are duly assessed to tax. Moreover, both the parties had duly responded to the notice issued ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 7 under Section 133(6) of the Act directly before the Learned AO by furnishing the requisite documents and details. Accordingly, the identity of the lenders could not be doubted. From the copy of the bank statements of the lenders produced before the Learned AO in the remand proceedings, the creditworthiness of the lenders is also proved. Both the parties had duly confirmed the fact of advancing loan to the assessee, which fact is also reflected in their audited balance sheet, thereby proving the genuineness of the transactions. Hence, all the three ingredients of Section 68 of the Act stands clearly established in respect of the aforesaid two loans received by the assessee. Based on all these factual documents and favourable report given by the Learned AO in the remand report, the Learned CITA had proceeded to delete the addition, on which, we do not find any infirmity. In any event, once the Learned AO accepts the loans received by the assessee as genuine on merits in the remand proceedings, then the revenue cannot be aggrieved in any manner whatsoever. Hence, the appeal of the revenue is to be dismissed as not maintainable on this count itself. Reliance in this regard is placed on the decision of Hon‟ble Madras High Court in the case of B Jayalakshmi v. ACIT reported in 96 taxmann.com 486 (Mad HC). 12. In view of the aforesaid observations, the grounds raised by the revenue are dismissed on this technical issue as well as on merits. 13. In the result, the appeal of the revenue for assessment year 2014-15 is dismissed. 14. To sum up, the appeal of the assessee for assessment year 2013-14 is allowed and both the appeals of the revenue are dismissed. Order pronounced in the open court on 22/01/2025. ITA Nos. 8127 & 8128/Del/2019 ITA No. 45/Del/2021 M/s. Genus Paper & Boards Ltd Page | 8 -Sd/- -Sd/- (YOGESH KUMAR U.S.) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "