Sen Ferro Alloys Pvt. Ltd., Kolkata V. DCIT, Cir. 4(3), Kolkata

ITSSA 2/KOL/2022

AI Insights

The case involves Sen Ferro Alloys (P) Ltd., which appealed against the orders of the Commissioner of Income Tax (Appeals)-21, Kolkata, for the assessment years 2011-12 and 2012-13. The primary issue was the addition of Rs. 1,30,00,000 as unexplained cash credit, which the Assessing Officer (AO) added based on share application money received from 27 parties. The AO deemed this amount unexplained as the assessee failed to prove the genuineness of these transactions. The Tribunal, referencing decisions from similar cases involving the assessee's sister concerns, ruled that the bank accounts and documents seized during the search, which were already disclosed in the books of account, did not constitute incriminating material. Therefore, no addition could be made in an unabated assessment year.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127343 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-04-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 13-02-2022
• Other Referred Cases: M/s A One Infra Projects Pvt. Ltd. vs. DCIT, M/s Daffodil Vincompvt. Ltd. vs. DCIT, M/s Jayanti Agro Products Pvt. Ltd. vs. DCIT, M/s Trinayani Vyapar Pvt. Ltd. vs. DCIT, Carevel Medical System Pvt Ltd. Vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 131; 68; 153A; 139(1)

Judgement Text

आयकर अपील य अ धकरण, कोलकाता पीठ ‘‘‘ए’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA ी राजेश क ु मार, लेखा सद य एवं ी संजय शमा या यक सद य के सम [Before Shri Rajesh Kumar, Accountant Member & Shri SonjoySarma, Judicial Member] I.T.(SS).A. Nos. 1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. (PAN: AAICS 0672 B) Vs. DCIT, Central Circle-4(3), Kolkata Appellant / (अपीलाथ ) Respondent / ( !यथ ) Date of Hearing / स ु नवाई क$ त&थ 06.04.2023 Date of Pronouncement/ आदेश उ)घोषणा क$ त&थ 26.04.2023 For the Appellant/ नधा /रती क$ ओर से Shri Somnath Ghosh, Advocate For the Respondent/ राज व क$ ओर से Shri Subhrajyoti Bhattacharjee, CITDR ORDER / आदेश Per Rajesh Kumar, AM: These are the appeals preferred by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata (hereinafter referred to as the Ld. CIT(A)”] even dated 30.12.2021 for the AYs 2011-12 & 2012-13. 2. The assessee has raised in the various grounds of appeal challenged the order of Ld. CIT(A) on legal issues as well as on merit. We would like to adjudicate ground no. 2first of all in ITA No. 2/Kol/2022 A.Y.2012-13 which is extracted below: 2 I.T.(SS)A. Nos.1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. 2. For that on a proper interpretation of the scope and ambit of the provision s of Section 153A of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata acted unlawfully in upholding the action of the Ld. Deputy Commissioner of Income Tax, Central Circle-4(3), Kolkata in resorting to the impugned addition of Rs. 1,30,00,000/- which was duly disclosed in the original return which did not abate and without adducing any incriminating material in support thereof and the purported finding on that behalf is absolutely arbitrary, unreasonable and perverse. 3. Facts in brief are that the search action was conducted on 01.12.2015 u/s 132(1) of the Act at the residential as well as business premises of the assessee belonging to the Bhalotia Group. The group was engaged in the business of manufacturing sponge iron, infrastructure, jewellery business, manufacturing and supply of medical furniture and equipment as well as transportation etc. The assessee filed original return of income on 30.09.2010 u/s 139(1) of the Act declaring Nil income. Thereafter the post search, a notices u/s 153A of the Act was issued from AY 2010-11 to 2015-16 which was duly served on the assessee. In response to the notice the assessee filed the return of income on 20.02.2017 for AY 2012-13 disclosing total income of Rs. Nil followed by statutory notices which were duly served on the assessee. The AO upon perusal of the bank account of the assessee noted that the assessee has received share application money for Rs. 1,30,00,000/- from 27 parties and accordingly called upon the assessee to prove the genuineness of the said loans. The AO also issued notice u/s 131 of the Act to the share subscribers but they were returned unserved. Finally the amount was added to the income of the assessee as unexplained cash credit u/s 68 of the Act on the ground that the assessee has failed to prove the condition as stipulated in Section 68 of the Act. 4. The assessee has challenged the order before the Ld. CIT(A) on this legal issue that no addition could be made by the AO in an unabated assessment year without any incriminating material found during the course of search. The Ld. CIT(A) simply dismissed the appeal of the assessee by holding that several documents were seized 3 I.T.(SS)A. Nos.1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. during the search and thereafter including bank accounts which relate to the assessee showing that assessee has raised share capital of Rs. 1,30,00,000/- and thus held these documents to be incriminating materials for the purpose of making addition. 5. The Ld. Counsel for the assessee at the outset submitted that the issue is squarely covered in favour of the assessee by decisions of the coordinate benches in the cases of assessee’s sister concerns covered under the same search wherein it was held by the Co-ordinate Benches that the bank accounts found during the course of search which were already disclosed in the books of account did not constitute incriminating material. The Ld. Counsel cited and relied on the following decisions: i) M/s A One Infra Projects Pvt. Ltd. vs. DCIT in IT(SS)A No. 91/Kol/2018 for AY 2012-13 dated 10.05.2019. ii) M/s Daffodil Vincompvt. Ltd. vs. DCIT in IT(SS)A No. 95 & 96/Kol/2018 for AY 2011-12 & 2012-13 dated 28.06.2019. iii) M/s Jayanti Agro Products Pvt. Ltd. vs. DCIT in IT(SS)A Nos. 92 & 93/Kol/2018 for AY 2010-11 & 2011-12 dated 10.05.2019. iv) M/s TrinayaniVyapar Pvt. Ltd. vs. DCIT in IT(SS)A No. 94/Kol/2018 for AY 2010- 11 dated 1.10.2019. v) M/s A One Infra Projects Pvt. Ltd. vs. DCIT in IT(SS)A Nos. 89 & 90/Kol/2018 for AYs 2010-11 & 2011-12 dated 15.11.2019. vi) Carevel Medical System Pvt Ltd. Vs DCIT in IT(SS)A No. 3,4,5/Kol/2022 A.Y. 2010-11 to A.Y. 2012-13 dated 23.12.2022. The Ld. A.R. therefore submitted that since the issue has been settled by the Co- ordinate Bench in the group concerns cases as stated hereinabove, therefore the present appeals of the assessee may kindly be allowed following the said decision. 4 I.T.(SS)A. Nos.1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. 6. The Ld. D.R on the other hand fairly conceded that the issue has been decided in the cases of sister concerns however he strongly relied on the order of authorities below. 7. We have heard the rival contentions and perused the materials on records. We have also perused the decisions cited by the ld counsel of the assesse as stated above in the case of group concerns and find that similar issue has been decided in favour of the assesse under similar facts.The coordinate benches have held that there being no seized incriminating materials during search and no addition can be made in the unabated assessment year. In the present case also we note that there is no incriminating materials is there qua share capital which was found and seized during the course of search and this being unabated year , the AO has no jurisdiction to make addition. For the sake of convenience we are taking in IT(SS)A No. Carevel Medical System Pvt Ltd. Vs DCIT (supra) and the operative part is reproduced as under: “7. After hearing rival contentions and perusing the material on record including the Co- ordinate Benches decisions as stated hereinabove, we find that similar issue under similar facts have been decided by the Co-ordinate Benches by holding that the bank accounts found and seized during the course of search, which were already disclosed in the books of account of the assessee and also in the return of income originally filedin the instant year, did not constitute incriminating materials and therefore no addition can be made on the basis of said documents in an unabated assessment year as these documents fall outside the ambit of incriminating materials. For the sake of convenience we are taking in IT(SS)A No. 91/Kol/2018 and the operative part is reproduced as under: “7. We have considered the rival submissions and also perused the relevant material available on record. It is now well settled that when the assessment originally completed for the relevant year has become final before the date of search, there is no abatement of the said assessment and the scope of assessment under section 153A which is made in pursuant to the search is limited to assessing the undisclosed income of the assessee as found/detected on the basis of incriminating material found during the course of search. In the case of Kerele Paper Mills Pvt. Ltd. (supra) cited by the Ld . counsel for the assessee, no incriminating evidence related to share capital issue was found during the course of search and keeping n view the same, the addition made by the Assessing Officer by treating the share capital as unexplained cash credit under section 68 was held to be unsustainable by the Hon’ble Delhi High Court. In the case of Salasar Stock Broking Ltd. (supra), it was held by the Hon’ble Calcutta High Court that incriminating material is pre-requisite before power could have been exercised under section 153A and the Assessing Officer had no jurisdiction 5 I.T.(SS)A. Nos.1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. under section 153A to reopen the concluded cases when the search and seizure did not disclosed any incriminating material. Since the facts of the present appeal are materially same as in the case as extracted above, we ,therefore, respectfully following the same, allow the groundno. 2 raised by the assessee. ” 8. Since we have allowed the appeal of the assessee on legal issue, therefore other grounds are not being adjudicated and left open for adjudication if need arises for the same in future. 9. Now we shall take up IT(SS)A Nos. 1/Kol/2022 for AY 2011-12. Issue involved in ground no. 2 in this appeal is identical one as decided by us in IT(SS)A No. 2/Kol/2022. Therefore our decision on the above appeal in ground no. 2 would, mutatis mutandis, apply to ground no. 2 of this appeal as well. Accordingly ground no. 2 in these appeals is allowed and the AO is directed to delete the addition. 10. In the result, both the appeals of the assessee are allowed. Order is pronounced in the open court on 26 th April, 2023 Sd/- Sd/- (Sonjoy Sarma /संजय शमा ) (Rajesh Kumar/राजेश क ु मार) Judicial Member/ या यक सद य Accountant Member/लेखा सद य Dated: 26 th April, 2023 SB, Sr. PS 6 I.T.(SS)A. Nos.1 & 2/Kol/2022 Assessment Years: 2011-12 & 2012-13 Sen Ferro Alloys (P) Ltd. Copy of the order forwarded to: 1. Appellant- Sen Ferro Alloys Pvt. Ltd., 206, Centre Point, 2 nd Floor, 21, HemantBasuSarani, Kolkata-700001 2. Respondent – DCIT, Central Circle-4(3), Kolkata 3. Ld. CIT(A)-21, Kolkata(Sent through e-mail) 4. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata