SHRI MANMOHAN SINGH , JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JALANDHAR

ITA 171/ASR/2023

AI Insights

The case involves an appeal by Manmohan Singh against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana, which confirmed the assessment order passed by the Deputy Commissioner of Income Tax, Central Circle-1, Jalandhar, under section 153A of the Income Tax Act, 1961. The assessment included an addition of Rs. 52,89,797/- under section 2(22)(e) of the Act, which was contested by the assessee on grounds of jurisdiction and the absence of incriminating material. The Tribunal examined the nature of the transaction between the assessee and M/s Saffron Home Developers Pvt. Ltd., which was found to be a business transaction, thus not falling under the purview of section 2(22)(e). The Tribunal's decision was influenced by a similar case adjudicated by the ITAT Amritsar Bench.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114884 (ITAT-AMRITSAR)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 14-06-2023
• Other Referred Cases: M/s G.G. Continental Trades Pvt. Ltd. vs DCIT-1, Bhatinda, PCIT-3 vs. Abhisar Buildwell Pvt. Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA BHAURAOJI NINAWE
• Keywords: Set aside
• Section: 132; 153A; 2(22)(e); 250; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 Manmohan Singh 171-A, New Vijay Nagar Jalandhar. [PAN:-ABQPS5329B] (Appellant) Vs. DCIT, Central Circle-1, Jalandhar. (Respondent) Appellant by Sh. Ashray Sarna, CA. Respondent by Sh. Hitendra Bhauraoji Ninawe, CIT. DR Date of Hearing 17.07.2023 Date of Pronouncement 26.07.2023 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana,[in brevity the ‘CIT (A)’],order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y. 2018-19. The impugned order was emanated from the order of the ld. Dy. I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 2 Commissioner of Income Tax, Central Circle-1, Jalandhar, [in brevity ‘the AO’] order passed u/s 153A of the Act. 2. The assessee has taken the following grounds: “1. That the order passed by the Hon’ble CIT(A) dated 02.06.2023 is against the law and facts of the case. 2. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 153A of the Act and without complying with the mandatory conditions u/s 153/153A/153D as envisaged under the Income Tax Act, 1961. 3. That in any case and without prejudice to the above grounds , additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition. 4. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs. 52,89,797/- u/s 2(22)(e) of the Act, without considering the facts of the case and without observing the principles of natural justice. I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 3 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 3. Brief fact of the case is that the search was conducted u/s 132 at the assessee’s premises. The incriminating material was seized by the revenue. The revenue found that the assessee has financial transaction with M/s Saffron Home Developers Private Ltd (in short SHDPL). During the assessment year the assessee is a shareholder of more than 38% of the company. The ld. AO added back amount of Rs.52,89,797/- for contravening section 2(22)(e) of the Act and the amount was added in the hands of the assessee. Aggrieved assessee filed an appeal before the ld. CIT(A) by challenging both the legal ground and on merits. The ld. CIT(A) upheld the order of the ld. AO. Being aggrieved, the assessee filed an appeal before us. 4. The ld. AR filed a written submission which is kept in the record. The ld. AR first pointed out that the said document of the company is not incriminating documents, so, the entire assessment u/s 153A is void ab initio. I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 4 4.1 He further produced that the transaction with the assessee the SHDPL is a business transaction during this impugned assessment year. So, entire transaction is related to business exigency. The ld. AR relied on the order of the ITAT, Amritsar Bench in the case of M/s G.G. Continental Trades Pvt. Ltd. vs DCIT-1, Bhatinda, I.T.A. No.189/Asr/2018 date of pronouncement 11/07/2023 “13.3. A receipt which cannot be liable for tax, unless there are specific provisions to tax the same. Certain transaction is covered by deeming provision & have been brought in the statute under deeming provision. Same section 2(22)(e), deeming provision has been brought in the statute to cover up transaction. The benefit is not individual but solely on business exigency. The deeming provision is always under the control of express provision. It is pertinent to observe that the benefit of expressed provision is covered in deeming provision or not. Considering the factual matrix, the assessee did not get any direct benefit of the payment made by GAPL and the amount was returned back to party. We respectfully relied on the order of jurisdictional High Court in the case of Suraj Dev Dada (supra). Only it is the benefit of business exigency. Accordingly, in our humble understanding, the principles laid down by the ITAT-Amritsar Bench in the assessee’s own case, ITA I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 5 No. 508/Asr/2017 (supra) is not applicable in the given facts and circumstances. In our considered view we set aside the order of the ld. CIT(A) and the grounds of the appeal of the assessee are allowed.” 5. The ld. DR vehemently argued and relied on the order of the revenue authorities. The ld. DR drawn our attention in appeal order page 22 to 24 para no. 6.2which is reproduced as below: “6.2 Grounds of Appeal Nos. 2, 3 & 5: In these grounds, the AR has contested the addition made by AO by submitting that the jurisdiction u/s 153A is without basis as there was no incriminating material available with the AO while finalization the assessment. The AO has also made an addition of Rs. 52,89,797/- u/s 2(22)(e) on account of loan in the nature of dividend received by the assessee from M/s. Saffron Home Developers Pvt. Ltd. Incriminating Material A perusal of assessment order clearly brings on record that during the course of search at the office premises of the assessee his copy of account in the books of M/s. Saffron Home Developers Pvt. Ltd. was seized. From the said copy of account, inference regarding the advancing of loan to the assessee was detected. It shall be important to analyze the meaning of incriminating material before proceeding further. As per para 5 & 6 of Article published in Taxman reported at I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 6 [2020] 122 taxmann.com 203, the definition of 'incriminating material' is as under: “Meaning of 'incriminating' material 5. While going through a large number of the decisions rendered in context of search assessment, it shall be observed that the word 'incriminating material' has been used very often, but the point here is that what is the meaning of 'incriminating material' or in other words what meaning can be attributed to 'incriminating material', as the same is the main bone of contention while framing the search assessment order U/s 153A of the Income-tax Act, 1961 and the same certainly is not defined under the Act. Therefore, it is imperative to understand the meaning of the word 'incriminating material'. 6. Practically stating it can be stated that the 'incriminating material' can be in any form such as evidence in the nature of the following: (a) a document, content of any document; (b) an entry in books of account; (c) an asset; (d) a statement given on oath; (e) absence of any fact claimed earlier but coming to notice during search; (f) absence of books being found during search; (9) absence of the office/business premises as claimed during returns filed or any other documents; (h) any of the documents/material seized from a different person and not from the assessee, etc. In short, any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 7 genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute an 'incriminating material' sufficient to make assessment for the purposes of the Act. A mere statement U/s 132(4) is an evidence for making an assessment as held by Apex Court in B. Kishore Kumar v. Dy. CIT120151 62 taxmann.com 215/234 Taxman 771 and even a statement U/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment U/s 153A. The aforesaid list is subjective and shall change, in the nature of each case." From above discussion, it is very clear that the entries of loan in the books of assessee received from Saffron Home Developers Pvt. Ltd. which were recorded on the seized copy of account are in the nature of incriminating material which has been used to understate the income and was only a device based on misrepresented facts, hence the said copy of account falls very well within the definition of 'incriminating material'. The Hon'ble Supreme Court of India in the case of PCIT-3 vs. Abhisar Buildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 vide order dated 24.04.2023 inpara 14(iii) has held as under on the issue of incriminating material “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 reassess the 'total income' taking into consideration the I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 8 incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns” From the above judgment, it is clear that in case incriminating material is found during the course of search, the AO can assess the total income of the assessee on the basis of incriminating material as well as any other material in knowledge or possession of the AO including the total income declared in the returns. Hence, the contentions of the appellant that no incriminating material was found on the basis of which the said assessment has been framed is without basis and is liable to be dismissed. Hence, these grounds of appeal are dismissed.” 6. We heard the rival submission and relied on the documents available in the record. The ld. AR agitated the two issues, one the legal and another the factual, considering the legal issue the assessee’s documents were found during the search by the revenue authorities. The transaction with the company was duly seized by the revenue. The ld. CIT(A) had well described the incriminating material in the appeal order and also relied on the order of the Hon’ble Apex Court in the case of PCIT-3 vs. Abhisar Buildwell Pvt. Ltd. (supra). Here, we are not intervening in the order of the ld. CIT(A). Accordingly, the order of the ld. CIT(A) in this issue is upheld. 7. In the result, the ground nos. 1, 2 and 3 of the assessee are dismissed. I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 9 8. Related to factual ground the ITAT Amritsar Bench has adjudicated the issue in the case of M/s G.G. Continental Trades Pvt. Ltd.(supra). 9. The entire transaction is only for the business exigency. There is not any specific investment of the company to the assessee. We further consider the comparative analysis of the observation of the ld. AO and assessee’s submission duly submitted by the ld. AR which is reproduced as below: Adverse remarks against assessee bv the ld. AO Counter comments of the assessee A perusal of the said account statement clearly shows that there is movement of funds between the assessee and the private limited company. From the said copy of account, no business transactions in the nature of purchase/sales etc. are visible. In such scenario, the AR has not been able to establish as to how the said transaction should be treated as commercial transaction and not in the nature of loan or advance. The ledger account between assessee and Saffron Home Developers Pvt. Ltd. shows that the said account is a running account and no benefit ever accrued to the assessee. Assessee had been working for the company and introduced funds as and when required by the company and this is evident from the ledgers uploaded herewith. Sir no actual income ever accrued to the assessee. Sir it is evident from the ledgers that there had always been credit balance and assessee never charged any interest from the company. Sir, it is submitted that a current account is different from a loan account in the sense that it has the feature of mutuality in a loan account. It is further submitted that the transaction between the assessee and Saffron home developers are in the nature of current account transactions, therefore, case of assessee would not fall within the provision to Section 2(22)(e) of the I.T. Act, 1961. I.T.A. No.171/Asr/2023 Assessment Year: 2018-19 10 9.1 In our considered view, the transaction of the company with the assessee is not contravening section 2(22)(e) of the Act. We fully relied on the order of coordinate bench in the case of M/s G.G. Continental Trades Pvt. Ltd. (supra). So, the addition amount of Rs.52,89,797/- is quashed. 9.2 In the result, ground no. 4 of the appeal of the assessee is allowed. 10. Ground No. 5 of the appeal of the assessee is general in nature. 11. In the result, the appeal of the assessee bearing ITA No. 171/Asr/2023is allowed. Order pronounced in the open court on 26.07.2023 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE ) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order