The DCIT, Central Circle-1(4), Ahmedabad V. M/s. Akash Foundation, Ahmedabad

ITA 1523/AHD/2019

AI Insights

The case involves the Deputy Commissioner of Income-tax, Central Circle-1(4), Ahmedabad as the appellant and M/s. Akash Foundation as the respondent. The appeal by the Revenue challenged the CIT(A)'s decision which had set aside the assessment made under Section 153C of the Income Tax Act for the Assessment Years 2010-11 to 2013-14. The original assessment was based on documents seized during a search operation, which the CIT(A) later found not to be incriminating. The Tribunal's decision focused on the legal interpretation of Section 153C and the requirements for making additions to the income based on seized documents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133670 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 03-10-2019
• Other Referred Cases: Saumya Construction Pvt. Ltd. in Tax Appeal No. 24 of 2016 dated 14.03.2016
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Block assessment; Set aside
• Section: 68; 69; 144; 153A; 80IC; 80IC; 13; 153C

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘डी डीडी डी’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 1523/Ahd/2019 नधा रणवष /Assessment Year: 2010-11 Dy. Commissioner of Income-tax, Central Circle-1(4), Ahmedabad Vs. M/s. Akash Foundation, Shop No. 6, Ma Mehngiba Nagar, Motera Road, Sabarmati, Ahmedabad-380005 PAN : AACTA 5449 F / (Appellant) / (Respondent) Revenue by : Shri Atul Pandey, Sr DR Assessee by : Shri S.N. Soparkar, Sr. Advocate & Shri Parin Shah, AR /Date of Hearing : 18.01.2023 /Date of Pronouncement: 20.01.2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal is preferred by the Revenue against the order of the learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as “CIT(A)”) dated 31.07.2019passed u/s 250(6) of the Income-tax Act, 1961, (hereinafter referred to as “the Act”) for Assessment Year (AY) 2010-11. 2. The brief facts relating to the case is that the police authorities, Surat took hold of 42 gunny bags of documents and other materials from the premise Flat No. 205, Shoppers Plaza, Swastik Char Rasta, Opp. Municipal Market, Navrangpura, Ahmedabad belonging to Prahaladbhai Kishanchand Sewani on 26 th and 27 th October, 2013. A requisition u/s 132A of Act was made to the police authorities (custodian of 42 gunny bags actually related to Asaram Group) and possession of the same was taken by the Department. The 42 gunny bags contained incriminating documents which, noting having revenue 2 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 implication and relating to the assessee also; therefore, proceedings under Section 153C of the Act were initiated on the assessee for the Assessment Years 2010-11 to 2013-14. The assessment for the search year i.e. AY 2015-16 was also taken under scrutiny. Thereafter, the assessment was framed for the impugned year making addition of approximately Rs.4.80 crores to the returned income of the assessee of Rs.1.51 lakhs on account of the following:- i) Surplus profit over sales as per P&L account = Rs.1,51,17,649/- ii) Customer advance and bogus sundry creditors = Rs. 61,16,020/- iii) Unexplained cash/cheque deposit in benami = Rs. 8,00,000/- name Krishna Behenji iv) Cash in hand = Rs. 20,65,776/- v) Unexplained loan in purchase of land = Rs.2,40,00,000/- Total = Rs.4,80,99,445/- 3. The assessment framed was an ex-parte assessment under Section 144 r.w.s. 153C of the Act since the assessee, despite repeated opportunities given, failed to participate in the proceedings. 4. The matter thereafter was carried in appeal before the Ld. CIT(A) where the assessee furnished additional evidences, which were admitted by the Ld. CIT(A) and a report sought of the Assessing Officer on remand of the same. After considering all the records and evidences before him, the Ld. CIT(A) held that the assessment framed in the present case under Section 153C of the Act was not based on any incriminating material and, therefore, was not valid in the eyes of law. In this regard, he relied on the decision of the Hon’ble jurisdictional High Court in the case of Saumya Construction Pvt. Ltd. in Tax Appeal No. 24 of 2016 dated 14.03.2016. Further, he dealt with the additions made on merit also and noting that the Assessing Officer in his remand report had made no adverse observation with respect to the evidences /submissions 3 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 and explanation filed by the assessee, he deleted all the additions made on merits also. Aggrieved by the same, the Revenue has come up in appeal before us challenging the findings of the Ld. CIT(A) on the legal ground that the assessment order was invalidly framed as also the deletion of all the additions made on merits. The grounds raised by the Revenue in this regard are as under:- “1. On the facts and in the circumstances of the case and in law, the ld, CIT(A) has erred in holding that anyaddition during the assessment u/s.153C has to be confined to the incriminating material found during the course of search u/s.132(1) of the Act, even though, there is no such stipulation in sec.153C of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT{A) has erred in not appreciating that sec.153C requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or reassess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught, if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec.153A and sec.153BI specifically states that the provisions of Chapter-XIV-B, under which sec.158BB fails, would not be applied where a search was initiated u/s.132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in the case of the assessee, and that if the interpretation of the ld. CIT(A) were to hold it will not be possible to assess such income in the 153C proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 5. 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 of Rs.1,51,17,649/- on account of disallowance made u/s 80IC of the Act. 4 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 5.1 On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in calling for comments of Assessing Officer vide letter dated 26.03.2019, on additional evidences submitted before him without admitting additional evidences beforehand, in violation of provisions of rule 46A and, therefore, erred in considering the additional evidences for deciding the appeal. 5.2 On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in admitting the additional evidences & allowing the claim of the assessee u/s 801C of the Income Tax Act, 1961 without giving an opportunity to the Assessing Officer to examine the applicability of claim u/s 80IC, as the assessee submitted the copy of Audit Report, Income Tax Return & report of C.A. in Form 10CCB, along with notification for exemption u/s 80IC for the first time before the CIT(A) at the appellate stage, as the assessee did not make any claim u/s 801C in original ROI and no Return of Income was filed in response to notice U/s 153C. 5.3 The Ld. CIT(A) has erred in not providing the Assessing Officer to examine the claim u/s 80IC w.r.t to clause 7 of 80IC. 5.4 The Ld. CIT(A) has erred in allowing the claim u/s 80IC of Income Tax Act, despite discrepancies found in Form 10CCB vis-a-vis the submission made before the Assessing Officer during assessment proceedings including the fact that :- (i) The assessee during assessment proceedings has vide submission dated 05.12.2016 stated that the assessee is involved in trading of Ayurvedic Medicines and Pooja Samagri & food Items, whereas in form 10GCB it is stated that the assessee is involved in production & trading of medicines & Pooja Samagri items; (ii) Form no. 10CCB Colum does not show excise duty registration number even though this is a mandatory column. 6. 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 of Rs. 61,16,020/- made u/s 69 of the Act on account of inability to prove genuineness of loans and advances. 7. 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 of Rs.20,65,776/- made on account of unexplained cash u/s 69 of the Act. 8. 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 of Rs.2,40,00,000/- -made u/s 68 of the Act on account of unsecured loan as assessee failed to establish the creditworthiness and genuineness of these transaction. 5 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 9. 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. 10. 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. Ground Nos. 1 to 4 are the legal grounds raised by the Revenue. A perusal of the same reveals that the Revenue has challenged the order of the Ld. CIT(A) holding the assessment framed invalidly in the absence of incriminating material found, challenging the judicial proposition laid down by the Hon’ble jurisdictional High Court in this regard. All the grounds from Ground Nos. 1 to 4 challenged this basic proposition laid down by the Hon’ble jurisdictional High Court as is evident from Ground No.1 wherein the Revenue has contended that assessment under Section 153C of the Act cannot be confined to the incriminating material. In Ground No.2, the Revenue has contended that the provisions of law require assessment of six years to be framed prior to the year of search under Section 153C of the Act and there is no clause for no assessment being made. In Ground No.3, the Revenue has stated that the current provisions for assessments in search cases provided in Section 153A and 153BI of the Act are distinct from the block assessment provisions earlier provided for in search cases under Section 158BB of the Act, wherein the only requirement was of computation of undisclosed income on the basis of evidences found during the search and there being no stipulation in the present provisions for search assessment in 153A and 153BI of the Act, the provisions of law cannot be read so as to restrict the addition to incriminating material. Similarly, in Ground No.4 also, the assessee has challenged the proposition of law laid down by the Hon’ble jurisdictional High Court that in the absence of any incriminating material where the assessments are unabated, no addition can be made; no jurisdiction can be assumed to frame assessment under Section 153A of the Act. 6 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 6. In the light of the above, since the Revenue is only challenging the proposition of law that too laid down by the Hon’ble jurisdictional High Court and that too without bringing to our notice any contrary decision either of the Hon’ble jurisdictional High Court or of the Hon’ble Supreme Court in this regard, we see no merit in Ground Nos. 1 to 4 raised by the Revenue. 7. Without prejudice to the above, we have also considered this issue from the aspect of whether the findings of the Ld. CIT(A) on fact that there was no incriminating material pertaining to the assessee, and we find that this finding of the Ld. CIT(A) is correct. The assessment order reveals, at paragraph No.5 of the order, that the documents which were relating to the assessee and which were requisitioned during search were the following:- Bag No. Annexure No. Page No. Particulars Type of Document Amount Involved BAG No.A-6 Annexure- A-6/13 154 A bank deposit slip A/c No. 14365(The Ahmedabad Dist. Co-op bank, Ahmedabad) of Akash Foundation Cash/Cheque deposit 800000 BAG No.A-7 Annexure- A-7/7 91 Cash Book of Akash Foundation for year ended 31/03/2010 Cash Book 2055776 BAG No.A-7 Annexure- A-7/9 147 to 149 See below the line Land 20000000 8. A further perusal of the order reveals that the Assessing Officer made addition with respect to the first two documents found in relation to bank deposit slip of Rs.8,00,000/- and cash book of the assessee for the year ended 31.03.2010 of Rs.20,55,776/-, but with respect to documents relating to land, there was no addition made by the Assessing Officer. The addition of Rs.2,40,00,000/- made on account of unexplained loan in purchase of land related to the unsecured loan of Rs.2.40 crores taken by the assessee from various parties which was added to the income of the assessee on account of its genuineness having not been proved as per the provisions of Section 68 of the 7 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 Act. This addition of Rs.2.40 crores had nothing to do with the documents relating to the land which was requisitioned. Therefore, from the documents allegedly relating to the assessee which were requisitioned in this case, addition only in relation to the bank deposit slip and the cash book of the assessee was made. 9. From the order of the Ld. CIT(A) it transpires that both these documents were found to be not incriminating in nature even by the Assessing Officer in remand proceedings. 10. With respect to the bank deposit slip of Rs.8 lakhs, we have noted from paragraph No.10 of the Ld. CIT(A)’s order, where the Assessing Officer’s remand report with respect to this deposit slip is reproduced, that the Assessing Officer had admitted to the fact that he had made the addition on the basis of wrong slip and that the correct deposit slip was submitted by the assessee and it was noted by the Assessing Officer that the said amount was reflected in the books of the assessee. The remand report of the Assessing Officer reproduced in this regard at paragraph No.10 of the Ld. CIT(A)’s order is as under:- “iii) Addition of Rs.8,00,000/- on account of Bank Deposit Slip: A bank deposit slip of Rs. 8,00,000/- was found from requisition material and assessee was requested to explain the source of such deposit. In absence of any explanation the amount was added U/s. 69 of the act. The assessee submits that the addition was made based on wrong slip and has also enclosed correct document at Bag No. A-6, annexure no. 13 page 154. The contention of appellant is verifiable and deposit slip mentioning name of Krishna bahanji was wrongly mentioned in the assessment order. The assessee has now produced correct deposit slip and submitted that the amount deposited of Rs. 8,00,000/- was cheque received from M/s. Pratius merchants private limited. The said facts are verifiable from the ledger confirmation and bank statement of Pratius Merchants Pvt. Ltd. The assessee has never explained the requisitioned material provided by the assessee during the course of the assessment thereby resulting in addition of the said amount. This issue may therefore be decided on merits by your good self.” 8 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 Thus, even as per the Assessing Officer, this deposit slip did not tantamount to any incriminating material. 11. With respect to the cash book of the assessee requisitioned, the Assessing Officer noted that the assessee had explained all transactions noted therein and he had no adverse comment to make with respect to the same. The Assessing Officer’s report as reproduced by the Ld. CIT(A) at paragraph No.11 of his order with respect to the said cash book is as under:- "iv) Addition of Rs.20,55,776 on the basis of Cash Book of 25.3.2010 from the requisitioned material In requisition material cash book as on 25.03.10 was found wherein cash balance of Rs. 20,55,776/- was mentioned. The assessee was asked to explain the source of cash balance and in absence of any clarification amount was added to the total income of assessee. Before your good self, the assessee had submitted that page found and requisition material is not cash book but it is a ledger account of Head office in the books of Achyutaya Hariom Pharma and the amount mentioned therein were amounts received for day to day expenditure and payment made by head office to the suppliers on behalf of the branch. The assessee has also enclosed ledger account of suppliers at page 50 to 56 of the written submission in which payment made by the head office is reflected. Since the details were not submitted before this office; therefore this office had no option but to add the same to the total income. The said details have been submitted for the first time at the time of appeal therefore, the issue on hand may be decided on merits." Clearly, even this cash book requisitioned in the case of the assessee was found by the Assessing Officer himself to be not incriminating in nature. 12. Therefore, the findings of the learned CIT(A) that no incriminating material relating to the assessee was requisitioned in the present case, we find, is the admitted case of the Assessing Officer . Further, it is not disputed that the assessment for the impugned year was unabated. The proposition of law laid down by the Hon’ble jurisdictional High Court in Saumya Construction (supra) that in unabated assessments, in the absence of any incriminating material, no addition under Section 153A/C could be made is also not 9 ITA No. 1523/Ahd/2019 DCIT Vs. Akash Foundation AY :2010-11 dislodged before us. Therefore, without prejudice to the grounds raised by the Revenue, we find that the Ld. CIT(A) has rightly held in the facts and circumstances of the case, the assessment order having been passed invalidly and without jurisdiction. Therefore, the order of the Ld.CIT(A) setting aside the impugned assessment is upheld and the grounds of appeal Nos. 1 to 4 raised by the Revenue are dismissed. 13. Since we have upheld the order of the Ld. CIT(A) setting aside the impugned assessment as invalidly framed without jurisdiction, the grounds raised on merits are mere academic in nature and, therefore, not being dealt with by us. 14. In effect, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 20/01/2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 20/01/2023 **bt आदेश ! " # $े# /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. %&%'( आ आ ) / Concerned CIT 4. आ आ ) ) (/ The CIT(A)- 5. # , - ! ! '( ,आ '( /DR,ITAT, Ahmedabad, 6. - ./ 0 /Guard file. आदेश / BY ORDER, TRUE COPY ह %ज (Asstt. Registrar) आ '( ITAT, Ahmedabad