M/s. Ankur Chemfood Ltd., Ahmedabad V. The Pr. CIT (Central), Ahmedabad

ITA 93/AHD/2021

AI Insights

The case involves Ankur Chemfood Ltd., which appealed against the revision order passed by the Principal Commissioner of Income Tax (Central), Ahmedabad. The revision was based on the grounds that the original assessment order was erroneous and prejudicial to the interest of the revenue as it did not include certain additions and disallowances related to interest income and expenses. The Tribunal examined whether the additions proposed by the PCIT were justified, considering the absence of incriminating material found during the search operation under section 132 of the Income Tax Act. The Tribunal referenced several judicial precedents to conclude that in the absence of such material, no additions could be made, leading to the setting aside of the PCIT's revision order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114219 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 16-05-2021
• Other Referred Cases: PCIT vs. Meeta Gutgutia, Pr.CIT vs. Desai Construction (P.) Ltd., Pr.CIT vs. Saumya Construction (P.) Ltd., Pr.CIT vs. Sunrise Finlease (P.) Ltd., Commissioner of Income-tax (Central) vs. Murli Agro Products Ltd., Wind World India Infrastructure (P.) Ltd. vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure; Opportunity of being heard; Assessment record; Prejudicial to interest; TDS; Set aside
• Section: 131; 263; 132; 143(3); 153A; 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Ankur Chemfood Ltd. 9/B, Sumatinagar Society, Usmanpura, Ahmedabad-380013 PAN: AABCA8203F (Appellant) Vs The Pr.CIT (Central), Ahmedabad (Respondent) Assessee Represented: Ms. Astha Maniar, A.R. Revenue Represented : Shri A.P. Singh, CIT Date of hearing : 25-01-2023 Date of pronouncement : 31-01-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This is an appeal filed by the Assessee as against the Revision order dated 19.03.2021 passed by the Principal Commissioner of Income Tax (Central), Ahmedabad under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2012-13. ITA No. 93/Ahd/2021 Assessment Year 2012-13 I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 2 2. The brief facts of the case is that the assessee is a Company engaged in the business of manufacturing, marketing and export of Triple Refined Free Flow Iodized and Pure Industrial Salt. For the Assessment Year 2012-13, the assessee filed its Return of Income on 17/09/2012 declaring total income of Rs. 98,81,410/-. Regular assessment was completed u/s. 143(3) dated 22/01/2015 making disallowance on account of court case fine of Rs. 3,15,000/- and disallowance of depreciation on motor car of Rs. 6,51,195/-. 2.1. There was a search operation u/s. 132 of the Act in the assessee premises on 220/09/2016 along with M.R. Shah and Champalal Group of cases. In compliance to the 153A notice, the assessee filed its Return of Income declaring income of Rs. 98,81,410/- on 15/09/2017. After examination of the details and discussions on the materials supplied by the assessee, the Assessing Officer passed that assessment order dated 31.12.2018 accepting the returned income. 2.2. On verification of the assessment records, the Ld. PCIT found that the Assessing Officer did not make the following additions/disallowances to the returned income namely: (a) Interest Income on Electricity Security Deposits of Rs. 8,23,765/-. (b) Interest on Security Deposits made against Supply of goods and services of Rs. 22,91,053/-. (c) Interest Expenses to the tune of Rs. 6,32,414/- on account of non-deduction of TDS. I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 3 Thus the PCIT found that the assessment order without considering the above additions is an erroneous order and prejudicial to the interest of Revenue. 2.3. Therefore a show cause notice dated 24.02.2021 was issued to the assessee calling for his explanation. The assessee in its detailed reply dated 08.03.2021 submitted that the assessment year 2012- 13 had not been abated within the meaning of Section 153A of the Act, existence of incriminating document is a precondition to proceed with the said proceedings and making such additions/disallowances. Since none of the proposed addition, disallowances is found pursuant to the search is based on any incriminating material found during the course of search, no addition could have been made in the non-abated assessment year. Thus the assessee relied upon PCIT vs. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC), Pr.CIT vs. Desai Construction (P.) Ltd. [2017] 81 taxmann.com 271 (Guj.), Pr.CIT vs. Saumya Consturction (P.) Ltd. [2017] 81 taxmann.com 292 (Guj.) and Pr.CIT vs. Sunrise Finlease (P.) Ltd. [2018] 89 taxmann.com 1 (Guj.). Thus the assessee claimed that the proposed addition/disallowances are unwarranted either on facts or in law. 2.3. On merits of the case, the assessee submitted the interest income from PGVCL is already accounted in its interest income and only the net interest is booked in the profit and loss account which can be cross verifiable from the Schedule 23 of the audited annual I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 4 accounts. The assessee company had made interest free deposits with the said four parties for business purpose only. Since the assessee follows mercantile system of accounting and no interest has been accrued to it, on any of the above deposits and therefore accounting alleged interest income clearly does not arise. 2.4. Non-deduction of TDS on interest expenses is relating to the vehicle loans availed by the assessee from NBFIS. The assessee have deducted at 10% and also filed TDS return. Since the interest as per assessee’s book is more than what is stated in Ld. PCIT notice, no disallowance u/s. 40(a)(ia) is called for and no adverse inference may be drawn. The Ld. PCIT was not satisfied with the reply filed by the assessee and thereby set aside the assessment order dated 31/12/2018 with a direction to the Assessing Officer to pass fresh assessment order in accordance with law and facts of the case, after examining by giving assessee a reasonable opportunity of being heard. 3. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeals: 1. The Ld. PCIT (Central), Ahmedabad erred in law and on facts in holding that the order u/s 143(3) r.w.s 153A of the Act dated 31.12.2018 passed by the AO is erroneous and prejudicial to the interest of the revenue. 2. The Ld. PCIT (Central), Ahmedabad failed to appreciate that while passing the impugned order, the AO only followed the binding decisions of the territorial High Court and rightly refrained from making any addition which was not based on any incriminating document. The Ld. PCIT therefore, erred in treating such order as erroneous and prejudicial to the interest of the revenue. 3. The Ld. PCIT (Central), Ahmedabad erred in law in not appreciating the judicial dictum that what cannot be done directly under the law, cannot be done indirectly by taking recourse to any other section of the Act. I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 5 4. Without prejudice to above, the Ld. PCIT (Central), Ahmedabad therefore erred in law and on facts in setting aside the issues back to the file of the AO despite complete factual details submitted before him to prove that on facts also, no income really escaped assessment. 3.1. Ld. Counsel for the assessee submitted before us a Paper Book containing the submissions filed by the assessee before the Assessing Officer during the course of search assessment proceedings. Ledger accounts of Interest Income and the interest expenses, summary of chart reflecting TDS deducted on interest paid to various parties on account of vehicle loan and Ledger Account of various parties from whom contracts and agreements were executed. Reiterating the submissions made before Ld. PCIT and prayed that the initiation of u/s. 263 proceedings is against the provisions of law and liable to be quashed. 3.2. The assessee further relied upon Bombay High Court judgment in the case of Commissioner of Income-tax (Central) vs. Murli Agro Products Ltd. reported in [2014] 49 taxmann.com 172 wherein it is held that Commissioner could not invoke jurisdiction under section 263 on the ground that assessment order passed under section 153A was erroneous or prejudicial to the interest of Revenue. When nothing on record to suggest that any material was unearthed during the course of search proceedings under section 132 of the Act. 4. Per contra, the Ld. D.R. appearing for the Revenue supported the order passed by the Ld. PCIT and pleaded to uphold the same. I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 6 5. We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee. It is seen from record, the original assessment was completed on 22.01.2015 wherein the Assessing Officer made some disallowances on account of court case fine and motor car depreciation. Pursuant to the search action, the assessee filed the very same Return of Income, as there is no incriminating material seized by the Department during the course of search. After considering the same, the Assessing Officer accepted the returned income and passed the assessment order after obtaining approval from Joint Commissioner of Income-tax under section 153D of the Act. 5.1. It is settled position of law by Hon’ble Supreme Court and Jurisdictional High Court, no addition can be made in the absence of incriminating material found during the course of search by the following judgments: (a) Pr.CIT vs. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC) 1. Section 153A of the Income-tax Act, 1961 - Search and seizure (General principles) - Assessment years 2001-02 to 2003-04 and 2004-05 - High Court in impugned order held that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year -Whether SLP against said decision was to be dismissed. (b) Pr. CIT vs. Desai Construction (P.) Ltd. [2017] 81 taxmann.com 271 (Guj) Section 153A of the Income-tax Act. 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment years 2004-05 and 2005-06 - In absence of any incriminating material found during search, Assessing Officer, in assessment under section 153A, would not I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 7 be entitled to interfere with assessee's claim for deduction under section 80-IA, which was part of original assessment proceedings and such assessment had abated. (c) Pr. CIT Vs Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292 (Guj) Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Condition precedent) - Assessment year 2006-07 - Under section 153A, an assessment has to be made in relation to search or requisition, namely, in relation to material disclosed during search or requisition; if no incriminating material is found during search, no addition can be made on basis of material collected after search. (d) Pr. CIT vs. Sunrise Finlease (P.) Ltd. [2018] 89 taxmann.com 1 (Gujarat) Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Condition precedent) - Assessment year 2007-08 - Whether where no incriminating evidence against assessee was found during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of material collected after search - Held, yes - Whether since no incriminating evidence against assessee was found or seized during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of statement of director of assessee company which was recorded under section 131 much later after search. 5.2. Further the Bombay High Court in the case of Murli Agro Products Ltd. (cited supra) wherein it has been held as follows: “Where there was nothing on record to suggest that any material was unearthed during search or during proceedings initiated under section 153A showing that certain relief in form of deduction was wrongly allowed to assessee, Commissioner could not invoke jurisdiction under section 263 on ground that assessment order passed under section 153A, read with section 143(3) was erroneous or prejudicial to interest of revenue”. 5.3. Further Co-ordinate Bench of this Tribunal in Wind World India Infrastructure (P.) Ltd. vs. PCIT [2017] 86 taxmann.com 279 wherein it has been held as follows: “It is observed that the Assessing Officer after deliberating upon the contention of the assessee that as on the date on which the search and seizure proceedings under section 132 were conducted on it, viz. 14-3- I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 8 2013, no assessment or reassessment proceedings for the year under consideration i.e. assessment year 2007-08 were pending, therefore, in the absence of any incriminating material found during the course of the search and seizure proceedings, no addition in respect of the unabated assessment for the year under consideration could be made in the hands of the assessee-company, had thus in the backdrop of the order of the 'Special Bench1 of the Tribunal in case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum.) and order of Tribunal in case of Asstt. CIT v. Pratibha Industries Ltd. [2013] 141 ITD 151/28 taxmann.com 246 (Mum.) as were available at the time of the assessment proceedings and were specifically relied upon by the assessee before him, rightly refrained from making any addition in the hands of the assessee. The aforesaid view of the Tribunal that in case of an unabated assessment no addition in the absence of any incriminating material emerging during the course of the search and seizure proceedings conducted under section 132(1) can be made in the hands of an assessee, had been approved by the Jurisdictional High Court. Thus, in view of settled position of law, the Assessing Officer remaining within the four parameters of law having passed the assessment order under section 153A read with section 143(3), dated, 27-3-2015, the said assessment cannot be faulted with and held to be 'erroneous'. Thus, now when the assessment order passed by the Assessing Officer is not found to be ‘erroneous’, therefore, the Principal Commissioner had wrongly assumed jurisdiction and revised the order in exercise of the powers vested with him under section 263. Thus, the order passed by the Principal Commissioner under section 263 is set aside and the order passed by the Assessing Officer under section 153A read with section 143(3), dated, 27-3-2015 is restored.” 6. Respectfully following the above judicial precedents, we are of the considered opinion in the absence of any incriminating materials seized by the Department during the course of search action u/s. 132, no addition can be made by the Assessing Officer in 153A proceedings. Thus the above proposed additions made by the Ld. PCIT in his Revision order, has no link or nexus with any seized materials recovered in the premises of the assessee during the course of search. Thus the entire Revision proceedings initiated by the Ld. PCIT is against the provisions of law and therefore the same is quashed. I.T.A No. 93/Ahd/2021 A.Y. 2012-13 Page No M/s. Ankur Chemfood Ltd. vs. Pr.CIT 9 7. In the result, grounds raised by the assessee is hereby allowed and the appeal filed by the assessee is allowed. Order pronounced in the open court on 31-01-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 31/01/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / 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 अपीलȣय अͬधकरण, अहमदाबाद