Suraj Enterprises Pvt.. Ltd., Ahmedabad V. The DCIT, Central Circle-1(3), Ahmedabad

CO 156/AHD/2019

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4962 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-11-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Document seized; Block assessment; Documents seized
• Section: 68; 132; 143(3); 153A; 153C

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The DCIT, Central Circle-1(3), Ahmedabad (Appella nt) Vs Suraj Enterprises Pvt. Ltd., “Suraj Ho use”, Opp. Usmanpura Garden, Vidhyanagar Society, Usmanpura, Ahmedabad PAN: AALCS2331N (Respondent) Suraj Enterprises Pvt. Ltd., “Suraj House”, Opp. Usmanpura Garden, Vidhyanagar Society, Usmanpura, Ahmedabad PAN: AALCS2331N (Appella nt) Vs The DCIT, Central Circle- 1(3), Ahmeda bad (Respondent) IT(SS)A Nos. 7 & 8/Ahd/2019 Assessment Years 2009-10 & 2010-11 C.O. No. 156/Ahd/2019 (In IT(SS)A No. 7/Ahd/2019) Assessment Years 2009-10 I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 2 The DCIT, Central Circle-1(3), Ahmedabad (Appella nt) Vs Suraj Impex Pvt. Ltd., “Suraj Ho use”, Opp. Usmanpura Garden, Vidhyanagar Society, Usmanpura, Ahmedabad PAN: AACCS9971R (Respondent) Suraj Im pex Pvt. Ltd., “Sura j House”, Opp. Usma npura Garden, Vidhyanagar Society, Usma npura, Ahmedabad PAN: AACCS9971R (Appella nt) Vs The DCIT, Central Circle- 1(3), Ahmeda bad (Respondent) Assessee by: Shri Jignesh Parikh, A.R. Revenue by: Shri Akhilendra Pratap Yadav, CIT-D.R. Date of hea ring : 14-11-2023 Date of pronouncement : 30-11-2023 IT(SS)A Nos. 10 &11/Ahd/2019 A.Ys 2010-11 & 2011-12 C.O. Nos. 157 & 158/Ahd/2019 (In IT(SS)A Nos. 10 & 11/Ahd/2019) Assessment Years 2010-11 & 2011-12 I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 3 आदेश/ORDER PER BENCH:- These appeals are filed by the Revenue and Cross Objection by the assessee against the respective appellate orders passed by Commissioner of Income Tax (Appeals)-11 Ahmedabad vide separate orders dated 05-10-2018 in the case of Suraj Enterprises Ltd. and vide separate orders dated 30-11-2018 in the case of Suraj Impex Pvt. Ltd. 2. Since common issues are involved in all the above Appeals and Cross Objections, the same are being disposed of by this common order. ITA No. 07/Ahd/2019 in the case of Suraj Enterprises Pvt. Ltd. is taken as the lead case. 3. The brief facts of the case, the assessee is a private limited company deriving income from trading of shares and securities. The assessee filed its original return of income for the assessment year 2009-10 on 25-09-2009 declaring Nil income, after set off business loss of Rs. 20,66,369/-. There was a search action u/s. 132 of the Act in Suraj Group of companies on 18-12-2013. Several incriminating documents and details belong to the assessee company were said to be found during the course of search proceedings and therefore notice u/s. 153C was issued to the assessee on 11-08-2015. In response, the assessee filed its return of income on 20-11-2015 declaring nil income. I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 4 3.1 The Assessing Officer made addition on account of share application money to Rs. 3 crores received from one Shri Mahesh P. Gandhi treating the same as unexplained cash credit u/s. 68 of the Act, since the identity, genuineness and creditworthiness were not proved by the assessee. However, there is no discussion or reference in the assessment order regarding incriminating material found and seized during the course of search. The Assessing Officer during the course of post search proceedings issued notice u/s. 131 of the Act to Shri Mahesh P. Gandhi, recorded his statement and also relied upon the statement recorded u/s. 132(4) of the Act of Shri Ashok t. Desai, Chairman of Suraj Group and made the above addition of Rs. 3 crores as the unexplained income of the assessee. 3.2 During the course of appellate proceedings, the ld. CIT(A) called for a remand report from the Assessing Officer. Even in the remand report, there was no reference of any seized material or incriminating document found during the course of search action, based upon which impugned addition was made. The ld. CIT(A) considered the above issue in detail and deleted the addition made by the A.O. of the unexplained cash in respect of shares issued to Shri Mahesh P. Gandhi observing as follows:- “The First Ground of appeal is a legal ground whereby the appellant has challenged the additions made in the assessment u/s 143(3) rws 153C of the Act in absence of any incriminating material found and seized during the course of search action u/s 132 of the Act From the assessment order, it is seen that the AO has made the addition on account of share application money of Rs 3,00,00,000/- received from one Shri Mahesh P Gandhi treating the same as I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 5 unexplained cash credit u/s 68 of the Act. There is no discussion in the assessment order regarding any incriminating material found during the course of search action u/s 132 of the Act based on which the impugned addition has been made. Therefore, in order to verify this fact, the remand report of the AO was called. In the remand report also there is no reference of any seized material found during the course of search action based upon which the impugned addition has been made Since the present assessment is u/s 153C of the Act, as due to search uls. 132 of the Act on 18/12/2013, the proceedings u/s 153C was initiated by issue of notice u/s 153C of the Act dated 11/08/2015, as discussed in 1"para on page no 2 of the assessment order The AO has stated in para 1 of the assessment order that incriminating documents belonging to the assessee were found during the course of search proceedings, but the said observation of the AO is found to be general observation, as there is no reference to any such material, as discussed hereinabove. Under the facts and circumstances of the case of the appellant company, the ratio laid down by the Hon'ble jurisdictional Gujarat High Court in case of Pr. CIT Vs. Saumya Construction Pvt. Ltd. (81 Taxmann.com 292) is squarely applicable. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx In view of the above facts and legal position, I am inclined to agree with the submission of the AR of the appellant that the addition of share application money of Rs. 3,00,00,000/- received from Shri Mahesh P. Gandhi treating it as unexplained cash credit made by the AO is illegal and without reference to any seized material found during the course of search u/s. 132 of the Act. Therefore, the ground no. 1 of the appeal is allowed. The AO is directed to delete the addition of Rs. 3,00,00,000/- on account of unexplained cash in respect of shares issued to Mahesh P. Gandhi.” 3.3 However, the ld. CIT(A) held that the purchase and sale of shares are not genuine transaction and sustained the addition made by the Assessing Officer and dismissed the grounds of appeal of the assessee. I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 6 4. Aggrieved against the appellate order, the Revenue is in appeal before us and assessee has filed Cross Objection raising the following grounds of appeal:- 4.1. (IT(SS)A No. 07/Ahd/2019) Grounds of appeal “1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition on account of unexplained cash credit of Rs.3,00,00,000/- 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts is not appreciating the provisions of section 153A of the IT Act, 1961 which requires the total income to be brought under tax without any restrictions. 3) On the facts and in the circumstance of the case and in law, the Ld.CIT(A) has erred in law and on facts in holding that such assessment or re- assessment u/s 153A of the IT Act, 1961 is to be restricted only to the incriminating materials found during the search. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5) It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 4.2 Additional Grounds of Appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in holding that such additions made are not based on any material seized during the course of search proceedings without appreciating the fact that incriminating material was found in digital data seized during the course of search." 4.3 (CO No. 156/Ahd/2019) Grounds of Cross Objection I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 7 “1.The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 3,00,00,000/- u/s. 68 of the Act on account of share application money received from from Shri Mahesh P. Gandhi treated the same as non-genuine transaction without proper appreciation and consideration of the submission of the appellant on merits. On the merits of the facts of the case, the Ld. CIT(A) ought to have deleted the impugned addition u/s. 68 of the Act of Rs. 3,00,00,000/-.” 5. Heard both the parties and perused the material available on record including the paper book filed by the Revenue and the assessee. It is undisputed fact the assessment in the hands of the assessee are made u/s. 153C of the Act from reading of the preamble portion of the assessment order. The Assessing Officer explained about the search action u/s. 132 of the Act taken place in the Surat Group of Companies on 18-12-2013 and there is no reference of any incriminating documents or seized documents belonged to the assessee, during the course of search proceedings. When the assessee was served with 153C notices, it filed the very same nil return, as it is done by the assessee in the original return. During the course of assessment proceedings, the Assessing Officer issued a show cause to explain how the assessee’s share of capital from 50 lakhs was increased to 3.5 crores by allotment of 3 lakh equity shares at face value of Rs. 10/- and with a premium of Rs. 90/-. The assessee’s explanation was not accepted since the investor of shares namely Mahesh P. Gandhi has responded to summon issued u/s. 131 and his statement was recorded on 28- 01-2016 where he clearly admitted that the assessee company has given in cash of Rs. 3 crores, against which he has been allotted I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 8 3,000 shares of the assessee company and he had paid Rs. 3 crores by cheque of various amounts on different dates. Further, he had also admitted that these shares were sold by him to the related companies of the assessee group for a consideration of Rs. 10/- per share and created artificial loss of Rs. 2.7 crores. Thus, the Assessing Officer concluded that Shri Mahesh P. Modi has provided accommodation entries to the assessee company by routing its unaccounted money back to the books of accounts in the name of share capital. The Assessing Officer also rejected that providing cross examination to the assessee since Shri Mahesh P. Gandhi, statements were recorded at the fag end of the time barring assessment on 28-03-2016. Thus, based on circumstantial evidences, the Assessing Officer made the addition of Rs. 3 crores as undisclosed income of the assessee. But the ld. A.O. failed to make any reference on the seized material found during the course of search. There is no material placed before us, the satisfaction recorded by the searched officer about any seized material during the course of search. Thus the very basis of assessment itself against the provisions of section 153C of the Act. 6. Further it is well settled Principle of law by various judgements rendered by the Jurisdictional Gujarat High Court that when an assessment has to be made in relation to the search or requisition under section 153A/153C the Act, namely, in relation to material disclosed during the course of search or requisition, if in relation to any particular assessment year, at the same time when there is no incriminating material found, no addition or disallowance can I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 9 be made in relation to that assessment year in exercise of powers under section 153A/153C of the Act and the earlier assessment shall have to be reiterated. This legal preposition is now settled by the Hon'ble Supreme Court by judgement dated 24- 04-2023 in the batch of cases namely PCIT, Central-3-Vs- Abhisar Buildwell Pvt. Ltd. reported [2023] 149 taxmann.com 399 (SC) holding that in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in the absence of any incriminating material found during the course of search under section 132 or requisition made under section 132A of the Act observing as follows: “Section 153A, read with sections 132 and 143, of the income tax Act, 1961 Search and seizure Averinent in case of (Conditions precedent) Whether object of section 153A is to bring under tas undisclosed income which is found during course of search or pursuant to search or requisition, therefore, only in a case where undisclosed income in found on basis of incriminating material, Assessing Officer would assume the jurisdiction to assess or reassess total income for entire six years block assessment period even in case of completed/unabated assessment Held, yes Whether in case of search under section 132 or requisition under section 132A, Assessing Officer assumes jurisdiction for block assessment under section 153A and that all pending assessments/reassessments shall stand abated Held, yes Whether in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A Held, yes Whether, however, completed/unabated assessments can be reopened by Assessing Officer in exercise of powers under section 147/148 subject to fulfilment of conditions as envisaged/mentioned under section 147/148 and those powers are saved Held, yes I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 10 6.1 The Hon'ble Supreme Court in this case of Abhisar Buildwell Pvt. Ltd. considered Judgements of various High Courts and concurred with one of the Judgement of the Gujarat High Court in the case of Saumya Construction and laid down the following points in a nutshell: “.....13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material 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 AD would assume the jurisdiction to assess or reassess the total income taking into consideration the Incriminating material unearthed during the search and the other material available with the AD including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AD 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. I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 11 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. 7. Respectfully following the above judicial precedents, we do not find any merits in the grounds raised by the Revenue. Thus Ground Nos. 1 to 5 and Additional Grounds of Appeal raised by the Revenue are devoid of merits and the same are hereby dismissed. 8. As we have already held that the assessment itself invalid in the eye of law, consequently addition made on merits of the case are invalid in law. Therefore, the C.O. No. 156/Ahd/2019 filed by the assessee is hereby allowed. 9. In the result, the appeal filed by the Revenue in IT(SS)A No. 7/Ahd/2019 is hereby dismissed and the C.O. No. 156/Ahd/2019 filed by the assessee is allowed. ITA No. 8/Ahd/2019 A.Y. 2010-11 10. The facts in this assessment year is identical with the earlier assessment year. The assessee filed its return of income on 18-09- 2010 declaring nil income after set off business loss of Rs. 43,07,031/-. Pursuant to the search action in Suraj Group of Companies, the assessee was issued with 153C notice on 11-08- 2015 and in response the assessee filed the same nil income on 20- 11-2015. The Assessing Officer made addition as follows:- I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 12 (i) Disallowance of loss on purchase and sale of listed shares off market Rs. 30,00,000/- (ii) Disallowance of loss on sale of shares to Private limited company treating the same as bogus Rs. 1,19,85,000/- (iii) Disallowance of Rent Expenses Rs. 11,34,375/- 10.1 Perusal of the above assessment order clearly shows that there is no reference about incriminating/seized material during the course of search. Thus the very basis of assessment itself is against the provisions of section 153C of the Act. Respectfully following the very detailed reasoning stated in paragraph 6 and 6.1 of this order, we do not find any merits in the grounds raised by the Revenue. Thus, the appeal filed by the Revenue in ITA No. 08/Ahd/2019 is hereby dismissed. ITA Nos. 10 & 11/Ahd/2019 A.Y. 2010-11 & 2011-12 11. The assessee Suraj Impex Pvt. Ltd. is a private limited company engaged in the business of trading of shares, securities and financing. The assessee filed its original return of income for the assessment year 2010-11 on 30-09-2010 claiming a loss of Rs. 1,16,69,148/- and book profit of Rs. 77,01,710/-. Similarly, for the assessment year 2011-12, the assessee filed original return of income on 14-09-2011 declaring a loss of Rs. 2,41,533/-. Pursuant to the search action on 18-12-2013, the assessee was issued with 153A notice for the A.Y. 2010-11 and 153C notice for I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 13 A.Y. 2011-12. In response the assessee filed the same loss of returns on 06-04-2015 and 04-04-2015. The Assessing Officer completed assessment for the A.Y. 2010-11 claiming bogus short term capital loss of Rs. 1.8 crores and the preliminary expenses written off of Rs. 34,003/- for A.Y. 2011-12. Similarly, the Assessing Officer made an addition u/s. 56(2)(viia)(ii) of Rs. 5,56,19,000/- and preliminary expense of Rs. 33,400/-. The above additions are not based on any seized material found during the course of search. The above additions were made pursuant to the verification of books of accounts and statements recorded from various other parties. Thus, the very basis of search assessment itself is against the provisions of section 153A of the Act. For the very detailed discussions made in para 6 and 6.1 of this order and following the Hon’ble Supreme Court judgement, the assessment made by the Assessing Officer are hereby quashed. Thus, the grounds of appeal and additional grounds of appeal raised by the Revenue are devoid of merits and hereby dismissed. CO No. 157 & 158/Ahd/2019 A.Y. 2010-11 & 2011-12 12. As we have already held that the assessment itself invalid in law, consequently additions made on merits has no legs to stand. Therefore, the C.O. Nos. 157 & 158/Ahd/2019 filed by the assessee are hereby allowed. I.T(SS).A Nos. 7,8,10 &11 & CO Nos.156,157&158/Ahd/2019 Page No. Dy. CIT vs. Suraj Enterprises Pvt. Ltd. & Dy. CIT vs. Suraj Impex Pvt. Ltd. 14 13. In the result, the appeals filed by the Revenue in ITA Nos. 10 & 11/Ahd/2019 are dismissed and cross objections in ITA Nos. 157 & 158/Ahd/2019 filed by the assessee are allowed. Order pronounced in the open court on 30-11-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 30/11/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद