AI Insights
The case involves Shakti Pumps (India) Ltd., which faced a consolidated assessment under sections 153A and 143(3) of the Income-tax Act, 1961, for the Assessment Years 2010-11 to 2012-13 following a search operation. The AO made certain additions, which were contested by the assessee and led to appeals before the CIT(A), who granted relief to the assessee. The revenue, aggrieved by the CIT(A)'s decision, filed appeals before the Income Tax Appellate Tribunal. The Tribunal examined the legality of the additions made by the AO in the context of the absence of incriminating material for the unabated years and the applicability of section 153A.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 134566 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
30-03-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
13-11-2022
Assessment Year
2012-2013
Appeal Filed On
24-03-2021
Judgement Text
आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.103 to 105/Ind/2021 Assessment Year: 2010-11 to 2012-13 ACIT (Central)-1 Indore बनाम/ Vs. Shakti Pumps (India) Ltd. 226, Shastri Market, M.G. Road, Indore (Appellant / Revenue) (Respondent / Assessee) PAN: AAECS 5027 L Revenue by Shri P.K. Mishra, CIT-DR Assessee by Ms. Nisha Lahoti & Vijay Bansal, ARs Date of Hearing 14.11.2022 /22.02.2023 Date of Pronouncement 31.03.2023 आदेश / O R D E R Per B.M. Biyani, AM: Feeling aggrieved by a consolidated appeal-order dated 14.09.2020 passed by learned Commissioner of Income-Tax (Appeals)-III, Indore [“Ld. CIT(A)”], which in turn arises out of a consolidated assessment-order dated 29.12.2017 passed by learned DCIT, Central-1, Indore [“Ld. AO”] u/s 153A read with 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2010-11 to 2012-13, the revenue has filed these appeals. 2. All these appeals arising out of the common assessment-order and common appeal-order of first appellate authority; therefore they were heard together and are being disposed of by this common-order for the sake of convenience. Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 2 of 11 3. Heard the learned Representatives of both sides at length and case- records perused. 4. The registry has informed that that all these appeals are filed after a delay of 92 days; therefore time-barred. Ld. DR prayed that the delay has occurred due to Covid-19 Pandemic. Ld. DR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted Ld. AR who agreed to the submission of Ld. DR. In view of this, the appeals are proceeded with for hearing, there being no delay. 5. Briefly stated the facts are such that the assessee is company engaged in the business of manufacturing of pumps, control panels and trading of their accessories, etc. A search u/s 132 was conducted on assessee on 21.01.2016, pursuant to which the cases of AY 2010-11 to 2012-13 were assessed u/s 153A/143(3) vide a consolidated assessment-order dated 29.12.2017, wherein certain additions were made. Subsequently, the Ld. AO also passed a rectification-order dated 12.11.2018 u/s 154 for AY 2012-13. Being aggrieved, the assessee went in first-appeal to Ld. CIT(A). The Ld. CIT(A) decided appeals granting relief to the assessee. Aggrieved by order of first-appellate authority, the revenue has filed these appeals and now before us. 6. We will proceed year-wise for the sake of smooth adjudication. IT(SS)A No. 103/Ind/2021 – Revenue’s appeal for AY 2010-11: 7. The grounds raised in this appeal are as under: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the addition of Rs. 7,00,89,407/- made by the Assessing Officer on account of disallowance of exemption u/s 10AA of Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 3 of 11 the Income-tax Act, 1961 and has overlooked the findings of the Assessing Officer mentioned in the assessment-order. (2) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the aforesaid addition u/s 10AA of the Income-tax Act, 1961 by holding that addition was made in absence of incriminating documents and that has overlooked the findings of the Assessing Officer mentioned in the assessment-order.” 8. Both of these grounds involve only one issue i.e. the disallowance of exemption u/s 10AA. 9. The facts qua this issue are such that the assessee is having two manufacturing units, one located in Domestic Tarrif Area (DTA) and other in Special Economic Zone (SEZ). The SEZ unit is eligible for exemption u/s 10AA. Both units are independent of each other; geographically located at distinct places; managed by separate staff; books of account are separately maintained; separate financial statements are prepared and separate profitability is ascertained although the assessee also prepared consolidated financial statements. The assessee also filed Form 56F for 10AA exemption available for SEZ unit. The assessee has maintained books of account/accounting data in SAP ERP system. During assessment- proceeding, Ld. AO analysed the financial data of assessee and observed that the profit of SEZ unit was exaggerated by assessee (i) by over- invoicing/under-invoicing of transactions of sales/transfers by/between SEZ unit and other entities of assessee, and (ii) by making a wrong allocation of expenses between SEZ units and DTA units. Ld. AO further concluded that such exaggeration was done to claim higher amount of exemption u/s 10AA. Accordingly, Ld. AO made a re-working and disallowed exemption u/s 10AA. 10. Taking the lead on this issue, the Ld. AR representing the assessee straightaway pointed out that the AY 2010-11 involved in this appeal was an “unabated/completed year” within the meaning of section 153A. He further submitted that the Ld. AO has disallowed exemption u/s 10AA on the basis of mere re-appraisal of books of account/accounting data already Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 4 of 11 maintained by the assessee in SAP ERP system in the normal course of business even before the search and that data had already been subjected to regular assessments by authorities. Ld. AR submitted that SAP ERP system (or the books of account/accounting data maintained in SAP ERP system) is not an “incriminating material”. Then, the Ld. AR submitted that it is a consistent view of Hon’ble jurisdictional High Court as well as ITAT, Indore that no addition can be made in an “unabated/completed year” without having incriminating material and the Ld. CIT(A) has also allowed relief to assessee by adopting this legal view at length in his order. 11. Having found that the Ld. AO has made addition in an “unabated/completed year” without recourse to any incriminating-material, which cannot be rebutted by Ld. DR before us, we straightaway observe that the position is directly covered by the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP), ITA No. 21, 31 & 32 of 2019, order dated 12.07.2019,wherein relying upon the decision of Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300, the Hon’ble jurisdictional High Court has dismissed the revenue’s appeal by holding that no addition can be made u/s 153A in a unabated assessment year in absence of incriminating material found during search. The relevant paras of the decision are reproduced below: “8. Dwelling on the scope of sub-section (1) of Section 153A of the Act, a Division Bench of Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300 observed: “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 5 of 11 ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” 9. We are in respectful agreement with the view expressed. 10. In the given facts of present case as no incriminating documents during course of search are found, the order in appeal cannot be said to have suffered the illegality as would give rise to the proposed substantial question of law. 11. Consequently, appeals fail and are dismissed. No costs.” 12. Ld. DR representing the revenue, with due respect to all Hon’ble Courts, made a legal submission that there had been a change in the scheme for assessment of search cases from time to time. He submitted that Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 6 of 11 in the case of searches conducted upto 31.05.2003, scheme of “Block- assessment” prescribed under Chapter-XIV-B consisting of section 158B to 158BH was applicable, but in respect of searches conducted after 31.05.2003, a new scheme prescribed u/s 153A to 153D is applicable. Ld. DR would further explain that while in older scheme u/s 158B to 158BH, there was assessment only of “undisclosed income”, the newer scheme u/s 153A to 153D prescribes assessment of “total income including undisclosed income”. He would further submit that due to this material change, the present scheme u/s 153A to 153D is a “full-fledged” type of assessment wherein the concept of “incriminating material” is not applicable because the AO has power to assessee full power to assess total income, which may or may not be based on incriminating material. According to him, in the present case of assessee where assessment had been made by Ld. AO u/s 153A and not u/s 158BC, the addition made, even without having incriminating material, must be viewed as legal. 13. We observe that the Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra) has clearly held that in absence of incriminating material, addition cannot be made in an assessment of unabated year u/s 153A. Ld. DR is not able to demonstrate any decision of Hon’ble Supreme Court holding against the decision of Hon’ble jurisdictional High Court. 14. At this stage, we would also like to mention that in their later decision in the case of Pr. CIT and ors. Vs. Meeta Gutgutia, Prop. Ferns ‘N’ Patels and Ors. (2017) 395 ITR 526 (Delhi), the Hon’ble Delhi High Court reiterated with approval their observations in Kabul Chawala’s case (supra) that completed assessments could be interfered with by AO while making assessment u/s 153A only on basis of incriminating material unearthed during course of search. If in relation to any assessment year, no incriminating material was found, no addition or disallowance could be made in relation to that assessment year in exercise of powers u/s 153A and earlier assessment should have to be reiterated. This later decision of Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 7 of 11 Hon’ble Delhi High Court has also been affirmed by Hon’ble Supreme Court by dismissing Revenue’s SLP in PCIT vs. Meeta Gutgutia (2018) 96 taxmann. Com 468 (SC). 15. In view of above discussion, respectfully following the decision of Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra), we are of the view that in the present appeal, the addition made by Ld. AO without having any incriminating material, is beyond the purview of section 153A and, therefore, clearly unsustainable. We find that the Ld. CIT(A) has also given relief to assessee by adopting such a view, hence there is no infirmity in the order of first-appeal. Being so, we dismiss the grounds raised by revenue. 16. With this, the revenue’s ITA of AY 2010-11 is dismissed. IT(SS)A No. 104/Ind/2021 – Revenue’s appeal for AY 2011-12: 17. The grounds raised in this appeal are as under: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the addition of Rs. 11,73,97,597/- made by the Assessing Officer on account of disallowance of exemption u/s 10AA of the Income-tax Act, 1961 and has overlooked the findings of the Assessing Officer mentioned in the assessment-order. (2) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the aforesaid addition u/s 10AA of the Income-tax Act, 1961 by holding that addition was made in absence of incriminating documents and that has overlooked the findings of the Assessing Officer mentioned in the assessment-order.” 18. These grounds relate to exemption u/s 10AA and are identical to the grounds raised in ITA for AY 2010-11. Further, the AY 2011-12 is also an “unabated / completed year” as fairly accepted by both sides. Hence, our findings / conclusion made for AY 2010-11, as above, shall apply mutadis mutandis. Applying the same, we dismiss these grounds too. 19. With this, the revenue’s ITA of AY 2011-12 is dismissed. Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 8 of 11 IT(SS)A No. 105/Ind/2021 – Revenue’s appeal for AY 2012-13: 20. The revenue has raised four grounds in this appeal. Ground No. 1 to 2: 21. These grounds read as under: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the addition of Rs. 13,88,64,968/- made by the Assessing Officer on account of disallowance of exemption u/s 10AA of the Income-tax Act, 1961 and has overlooked the findings of the Assessing Officer mentioned in the assessment-order. (2) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the aforesaid addition u/s 10AA of the Income-tax Act, 1961 by holding that addition was made in absence of incriminating documents and that has overlooked the findings of the Assessing Officer mentioned in the assessment-order.” 22. These grounds relate to exemption u/s 10AA and are identical to the grounds raised in ITA for AY 2010-11. Further the AY 2012-13 is also an “unabated / completed year” as fairly accepted by both sides. Hence, our findings / conclusion made for AY 2010-11, as above, shall apply mutadis mutandis. Applying the same, we dismiss these grounds too. Ground No. 3: 23. This ground relates to the addition made by AO on account of unexplained cash credit u/s 68. The ground raised by revenue reads as under: “(3) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 44,00,000/- made by the Assessing officer on account of unexplained cash credits u/s 68 of the Income-tax Act, 1961.” 24. The sole basis of this addition is the enquiries made during post- search assessment-proceeding and there was no incriminating material found during search qua this issue. Therefore, as held earlier, this addition is also not sustainable. Hence, this ground is also dismissed. Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 9 of 11 Ground No. 4: 25. This ground relating to the addition made by AO on account of disallowance of various expenses, reads as under: “(4) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 20,71,799/- made by the Assessing officer on account of disallowance of various expenses under the Income-tax Act, 1961.” 26. Ld. AO observed that certain expenses were disallowed during regular assessment-proceeding u/s 143(3) but while submitting return u/s 153A, the assessee has not taken into account those expenses. Therefore, the Ld. AO made this addition. 27. Ld. CIT(A), however, deleted addition by accepting assessee’s stand that the MAT income of assessee was higher than the normal income and even after addition of impugned disallowances in normal income, there would be no impact on taxability of assessee. 28. After a careful consideration, we observe that the understanding gained by Ld. CIT(A) on the basis of stand of assessee is not correct for the simple reason that the gap between MAT income and normal income has a direct impact on “Tax credit under MAT” which is allowed to be carried forward and set off in future. It seems that the Ld. CIT(A) has lost sight of this aspect and given relief to assessee. Therefore, we are of the view that the Ld. CIT(A) has wrongly given relief to assessee. We find that the disallowance already made in regular assessment u/s 143(3) is a part of taxable income and failure on the part of assessee to include the same in the return u/s 153A certainly attracts addition, which is rightly done by Ld. AO. Therefore, we subscribe to the action of Ld. AO; reverse the decision of Ld. CIT(A) and accordingly allow this ground of revenue. Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 10 of 11 29. Resultantly, IT(SS)A No. 103 & 104/Ind/2021 are dismissed and IT(SS)A No. 105/Ind/2021 is partly allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 31/03/2023. Order pronounced in the open court on ....../....../2023. Sd/- Sd/- (CHANDRA MOHAN GARG) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 31.03.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Shakti Pumps (India ) Ltd. IT(SS)A No.103 to 105/Ind/2021 Assessment years 2010-11 to 2012-13 Page 11 of 11 1. Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order
Other Referred Cases
PCIT Vs. Gahoi Dal & Oil Mills, CIT Vs. Kabul Chawla, Pr. CIT and ors. Vs. Meeta Gutgutia, Prop. Ferns 'N' Patels and Ors.
Laws Referred To
Income-tax Act, 1961
Master The Pitch-Deck Game
₹0
Consultation on Entity Formation
₹0
1:1 Consultation on Legal Requirements
₹1
Memorandum Amendment Resolution
₹0
Startup Dissolution Resolution
₹0
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026
Budget 2026: 5 Major Personal Tax Changes Every Taxpayer Must Know
Team Counselvise - February 05, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026