GINGER PROPERTIES PRIVATE LIMITED,AHMEDABAD V. THE ASSTT. COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE-1(2), , AHMEDABAD

CO 4/AHD/2023

AI Insights

The case involves Ginger Properties Private Limited, a company engaged in real estate construction, which faced an addition of Rs. 1,99,00,000 to its income for the Assessment Year 2013-14, treated as unexplained expenditure under section 69C of the Income Tax Act, 1961. This addition was based on documents and statements obtained from a third-party search prior to the search on the assessee's premises. The CIT(A) deleted this addition, finding it unsupported by incriminating material discovered during the search on the assessee. The Revenue appealed against this decision, but the Tribunal upheld the CIT(A)'s decision, citing precedents that additions in unabated assessments require incriminating material found during the search on the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 103693 (ITAT-AHMEDABAD)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: CIT vs. Saumya Construction Pvt. Ltd. (2017) 387 ITR 529 (Guj), CIT vs. Kabul Chawla (2015) 380 ITR 573 (Del), PCIT vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Set aside; Unexplained expenditure
• Section: 143(3); 143(2); 132; 153A; 139(1); 69C; 153C

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद Ɋायपीठ “ए“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ] ] BEFORE SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील (एस.एस.) सं./IT(SS)A No. 11/Ahd/2023 A/w. CROSS OBJECTION No. 04/Ahd/2023 िनधाŊरण वषŊ /Assessment Year : 2013-14 Asstt. Commissioner of Income-tax Central Circle-1(2), Ahmedabad Ginger Properties Private Limited Sur. No. 270/20, Fp. No. 271/2, Sankalp House, Bh. Rajpath Club, Bodakdev, Ahmedabad – 380054 बनाम/ v/s. & Ginger Properties Private Limited Sur. No. 270/20, Fp. No. 271/2, Sankalp House, Bh. Rajpath Club Bodakdev, Ahmedabad – 380054 Asstt. Commissioner of Income- tax Central Circle-1(2), Ahmedabad ̾थायी लेखा सं./PAN: AADCG0202C अपीलाथŎ/ (Appellant)/ Cross Objector Ů̝ यथŎ/ (Respondent) Assessee by : Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, A.R. Revenue by : Shri B. P. Srivastava, Sr. DR सुनवाई की तारीख/Date of Hearing : 03/04/2025 घोषणा की तारीख /Date of Pronouncement: 17/04/2025 IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 2 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the Revenue and cross-objection by the assessee arise from the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as “CIT(A)”] dated 28.11.2022, for the Assessment Year 2013-14. The impugned order was passed against the order of Assessing Officer [hereinafter referred to as “AO”] under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. Facts of the Case: 2. The assessee is a private limited company engaged in the business of real estate construction. The return of income was filed under section 139(1) of the Act by the assessee on 03.10.2013 declaring total income of Rs. 3,02,920/-. The scrutiny assessment was completed on 24.02.2016 determining total income of Rs. 4,52,920/-. A search action under section 132 of the Act was conducted by the Investigation Wing, Ahmedabad, on 30.10.2018 in the case of the Sankalp Group of Ahmedabad, which also covered the case of the assessee. In response to the notice issued under section 153A of the Act for A.Y. 2013-14, the assessee filed return of income declaring total income of Rs. 3,02,920/- which was the same as declared earlier under section 139(1). The assessment was completed under section 143(3) r.w.s. 153A of the Act, wherein the Assessing Officer made an addition of Rs. 1,99,00,000/- under section 69C of the Act, treating the same as unexplained expenditure. The addition was based on Page 38 of Annexure A/1 seized during a search carried out on 05.12.2012 in the case of M/s. Tricon IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 3 Construction (a third party), which referred to receipt of Rs. 1.59 crores (including Rs. 40 lakhs in cash) for work executed for the assessee. Statement of Mr. Tejas V. Shah, partner of M/s. Tricon Construction, recorded under section 132(4) on 01.02.2013, admitting cash receipt of Rs. 40 lakhs from the assessee. According to the AO, since the assessee had not properly explained the source of Rs. 1.99 crore paid to Tricon Construction, the same was treated as unexplained expenditure under section 69C and added to the total income of the assessee. 3. The assessee challenged the addition before the Ld. CIT(A), who deleted the addition of Rs. 1,99,00,000/- vide order dated 28.11.2022. The CIT(A) held that A.Y. 2013-14 was an unabated assessment year, since the original return was filed on 03.10.2013 and assessment was completed under section 143(3) vide order dated 22.02.2016. Time for issuing notice under section 143(2) had expired before the search on 30.10.2018. The CIT(A) further held that the impugned addition was not based on any incriminating material found or seized during the course of the search conducted in the case of the assessee. The CIT(A) also held that the materials relied upon by the AO (Annexure A/1 and statement of Tricon’s partner) were seized in 2012 and were already in possession of the Department prior to the search dated 30.10.2018. The addition, therefore, was held to be beyond the scope of Section 153A, in view of binding judicial precedents including CIT vs. Saumya Construction Pvt. Ltd. (2017) 387 ITR 529 (Guj), CIT vs. Kabul Chawla (2015) 380 ITR 573 (Del) and PCIT vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC). 4. Aggrieved by the order of CIT(A) the Revenue is in appeal before us raising following grounds of appeal: IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 4 1. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in giving relief to the assessee by holding that no incriminating materials were found with regard to the issue on which additions were made in the assessment order because an SLP on this issue is pending before the Hon'ble Supreme Court? 2. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of unexplained expenditure u/s 69C of the Act amounting to Rs. 1,99,00,000/- on technical ground, rather than going to the merits of the case. 3. 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. 4. 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. 5. The assessee has filed a cross-objection challenging the very jurisdiction of the assessment framed under section 143(3) r.w.s. 153A of the Act. The specific grounds of cross objection are: The learned CIT(A) has erred in law and on the facts of the case in confirming the assessment order framed u/s 143(3) r.w.s. 153(1)(b) of the Act in the hands of the appellant based on documents/information found and seized from the premises other than the searched persons' premises. Under the facts and circumstances of the case, order u/s 153A of the Act is without jurisdiction and therefore bad in law. 6. During the course of hearing, the learned Departmental Representative (DR), relying upon the grounds of appeal, strongly supported the order passed by the AO and contended that the Ld. CIT(A) was not justified in deleting the addition of Rs. 1.99 crore on the sole ground that no incriminating material was found during the search conducted on the assessee. The DR submitted that the Ld. CIT(A) did not address the factual and evidentiary basis of the addition. The DR further submitted that the AO had made the addition of Rs. 1.99 crore under section 69C based on the concrete evidence like Annexure A/1 (Page 38) seized from the premises of M/s. Tricon Construction during a search conducted on 05.12.2012, which mentioned receipt of Rs. 1.59 crore for construction work executed for the IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 5 assessee and also the statement of Mr. Tejas V. Shah, partner of M/s. Tricon Construction, recorded under section 132(4) of the Act on 01.02.2013, wherein he categorically admitted to receipt of Rs. 40 lakhs in cash from the assessee. The DR stated that these documents clearly established that the assessee had incurred unaccounted expenditure and had failed to explain the same. Thus, the addition was justified on merits, and the Ld. CIT(A) erred in ignoring this factual matrix. 7. On the other hand, the learned Authorised Representative (AR) reiterated the submissions made before the Ld. CIT(A) and stated that the addition is based on pre-existing material (seized in 2012 and 2013), much prior to the search on the assessee on 30.10.2018. The AR further stated that the impugned year is unabated, and hence no addition can be made in absence of incriminating material found during search. The AR placed reliance on some judicial precedent including CIT vs. Saumya Construction Pvt. Ltd. (2017) 387 ITR 529 (Guj), CIT vs. Kabul Chawla (2015) 380 ITR 573 (Del), PCIT vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC). Accordingly, the AR submitted that the order of the CIT(A) deserves to be upheld, and the Revenue's appeal be dismissed. 8. We have considered the rival submissions, perused the material on record, and gone through the orders of the lower authorities. It is an undisputed fact that the impugned addition of Rs. 1.99 crore has been made on the basis of Annexure A/1 seized during a search on M/s. Tricon Construction conducted on 05.12.2012, and Statement of Tejas V. Shah, partner of Tricon Construction, recorded under section 132(4) on 01.02.2013. These materials were admittedly not found during the search conducted on the assessee on 30.10.2018. It is also not in dispute that the assessment for A.Y. IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 6 2013-14 had already been completed under section 143(3) on 22.02.2016 and thus stood unabated on the date of search. 8.1 Since the entire basis of the addition is a document and statement obtained in a third-party search in 2012–13, the same cannot be said to constitute “incriminating material” found during the search on the assessee on 30.10.2018. In this context, it is necessary to reiterate the central role of section 132 in the scheme of assessment under section 153A. Section 153A is not an independent code but is triggered by the conduct of a valid search under section 132, and its scope is necessarily confined to the material found or seized during such search. The very jurisdiction to make additions in assessments that have attained finality (i.e., unabated assessments) depends on the existence of incriminating material discovered during the search on the assessee. The Hon’ble Supreme Court in the landmark decision in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra) has laid down the law in categorical terms that no addition can be made in respect of completed/unabated assessments under section 153A, unless it is based on incriminating material found during the course of search conducted under section 132 of the Act. The same principle has been consistently followed by the Hon’ble Gujarat High Court in CIT v. Saumya Construction Pvt. Ltd. (supra). 8.2 These documents, though alleged to have evidentiary value against the assessee, were neither found during the search under section 132 in the case of the assessee, nor seized at any point during the 2018 search. The settled legal position is that only such material which is discovered for the first time during the search can be treated as “incriminating” under section 153A. The documents and statements relied upon by the AO were already in possession IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 7 of the Department well before the date of search and cannot be said to be “found during the course of the search” on the assessee. 8.3 Further, in cases where the Revenue wishes to use material seized from a third party against another assessee, the proper statutory route is section 153C, which provides for assessment of “other persons” based on documents “belonging to” or “relating to” them, provided the AO records requisite satisfaction and follows procedural safeguards. In the present case, no satisfaction under section 153C was recorded, nor were proceedings initiated under that section. Accordingly, the foundation for the assumption of jurisdiction under section 153A for making additions in respect of completed assessments is absent. The addition made by the AO falls outside the permissible scope of section 153A as interpreted by binding judicial precedents. The material relied upon by the AO, even if otherwise relevant, cannot be pressed into service under section 153A in the absence of it being found during a valid search under section 132 in the assessee’s case. Therefore, we do not find any error in the findings of the Ld. CIT(A) in deleting the addition. 8.4 In this context, it is also relevant to note the clear dictum laid down by the Hon’ble Supreme Court in paragraph 14 of its judgement in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra). The Hon’ble Court has categorically held that in respect of completed/unabated assessments, no addition or assessment can be made under section 153A of the Act unless incriminating material is found during the course of search under section 132 or requisition under section 132A. Allowing additions without such material would defeat the purpose of section 153A and render the entire scheme of section 132/132A redundant. In the present case, as already discussed, the materials relied IT(SS)A No.11/Ahd/2023 A/w. CO No. 04/Ahd/2023 Ginger Properties Private Limited Asst. Year : 2013-14 8 upon by the AO were not found during the search conducted on the assessee but had been seized in an earlier search conducted on a third party. Therefore, in light of the binding ratio of Abhisar Buildwell (supra), the addition of Rs. 1.99 crore made under section 69C falls outside the permissible ambit of section 153A and cannot be sustained. 8.5 In light of the above discussion and judicial pronouncements, we find no merit in the appeal filed by the Revenue. The grounds raised are rejected. The Cross-Objection filed by the assessee raising legal issue of jurisdiction under section 153A is not adjudicated as the issue on merits stands covered in favour of the assessee. 9. In the result, the appeal filed by the Revenue is dismissed. The Cross- Objection filed by the assessee is rendered infructuous. Order pronounced in the Open Court on 17th April, 2025 at Ahmedabad. Sd/- Sd/- (TR SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 17/04/2025 S k sinha, Sr. PS True Copy आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ ) अपील ( / The CIT(A)/Pr.CIT-1, Vadodara 5. िवभागीय Ůितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad "