M/S. ORACLE VENTURE, Bhopal V. THE ACIT 3(1), Bhopal

ITSSA 286/IND/2014

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0927 (ITAT-INDORE)
• Duration Of Justice: 8 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 25-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Reasonable cause; Corroborative evidences
• Section: 68; 271(1)(c); 143(3); 153A

Judgement Text

Page 1 of 11 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.192 & 193/Ind/2014 (Assessment Years:2004-05 & 2005-06) M/s. AP India Biotech Pvt. Ltd. E-7/80, Arera Colony, Bhopal Vs. ACIT -3(1) Bhopal (Appellant / Assessee) (Revenue) PAN: AACCA9055A ITA No.285 & 286/Ind/2014 (Assessment Years:2007-08 & 2008-09 ) M/s. Oracle Venture A/3, 10, Amrit Deep Apartment Punjabi Bagh, Raisen Road, Bhopal Vs. ACIT -3(1) Bhopal (Appellant / Assessee) (Revenue) PAN: AABFO 7829 E Assessee by S/Shri Sumit Nema, Sr. Adv. Gagan Tiwari & Anand Solanki ARs Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 27.09.2023 Date of Pronouncement 09.10.2023 O R D E R PER BENCH: These two set of two appeals by two related assessees for A.Y.2004- 05 & 2005-06 and 2007-08 & 2008-09 are directed against two separate composite orders of the CIT(A) in each case dated 19.03.2014 & IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 2 of 11 Page 2 of 11 21.10.2014 respectively. The assessees have raised following grounds of appeal: For A.Y.2004-05, M/s. AP India Biotech Pvt. Ltd. 01. On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the disallowance of Rs. 8,15,000/- as made by the assessing officer out of the expenses incurred under the heads of Salary & Labour, Repairs & Maintenance. Freight, Telephone & Travelling Exps. For A.Y.2005-06, M/s. AP India Biotech Pvt. Ltd. 01. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in confirming the addition u/s. 68 of Rs. 3,50,000/- towards the unsecured loans as made by the assessing officer as below:- a. M/s. Gurudev Agro Agencies Rs. 2,50,000.00 b. M/s. Krishi Sewa Kendra Khandawa Rs. 1,00,000.00 Rs. 3,50,000.00 02. On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the disallowance of Rs. 9,12,000/- as made by the assessing officer out of the expenses incurred under the heads of Salary & Labour, Repairs & Maintenance, Freight, Telephone & Travelling Exps. For A.Y.2007-08 M/s Oracle Venture “01.On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the addition of Rs. 1,04,00,000/- as made by the assessing officer towards the capital introduced by its partner M/s. Oracle Plantation (P) Ltd during the a/c year 02. On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the above said addition of Rs. 1,04,00,000/- towards the capital contribution of its partner during the reassessment proceedings u/s. 153A even though it was accepted as explained during the proceedings u/s. 143(3) in regular proceedings. 03. The appellant craves leave to add, to alter and/or to modify the grounds of appeal on or before the date of hearing.” IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 3 of 11 Page 3 of 11 For A.Y.2008-09 M/s Oracle Venture “01.On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the addition of Rs. 70,00,000/- as made by the assessing officer towards the capital introduced by its partner M/s. Oracle Plantation (P) Ltd during the a/c year. 02. The appellant craves leave to add, to alter and/or to modify the grounds of appeal on or before the date of hearing. 2. Since these appeals are arising from same search and seizure action u/s 132 of the Act and involve common facts and issues therefore, these four appeals are being heard together and are being disposed of by this composite order. The assessee filed the additional grounds in all these appeals vide application under Rule 11 of ITAT, Rules 1963. The common additional grounds are as under: “1. That the appellant prays leave of this Hon'ble Tribunal to urge the following additional ground in its appeal:- "Whether on the facts and circumstances of the case assessments could have been made u/s 153A for AY 2007-08 & 2008-09 since both these assessment years stood completed and hence could not have abated and in the absence of any incriminating material no assessment u/s 153A and consequentially no addition for share capital could have been made?" 2. That the present ground is a purely a legal ground. This ground was also raised before the CIT(A) and has been adjudicated by the Ld. CIT(A) against the assessee. Raising of such an alternative claim as an additional ground is permissible as held in the case of NTPC v. CIT (1998) 229 ITR 383 SC. 3. That it is therefore prayed that the appellant be allowed to raise and argue this additional ground since this goes to the root of the matter and is essentially a legal ground. 4. That the additional ground is necessitated to protect the interest of the appellant and this being a purely legal ground.” 3. Ld. Sr. counsel has submitted that the additional ground raised by the assessee for these four years is purely legal ground and was also IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 4 of 11 Page 4 of 11 raised before the Ld. CIT(A). This ground was adjudicated by the Ld. CIT(A) against the assessee but due to inadvertence this ground was not taken in the original grounds of appeal raised in form no.36. Thus, the Ld. Sr. counsel has submitted that the additional ground raised by the assessee arising from the impugned order of the Ld. CIT(A) and the same can be adjudicate on the basis of the facts available on record. He has pleaded the legal issue raised in additional ground be admitted and be adjudicated prior to the other grounds raised by the assessee as it goes to the root of the matter. In support of his contention he has relied upon the judgment of Hon’ble Supreme Court in case of NTPC vs. CIT 229 ITR 383 (SC). 4. On the other hand, Ld. DR has not disputed the fact that this issue was very raised by the assessee before Ld. CIT(A) and was also adjudicated by the ld. CIT(A) against the assessee. However, the Ld. DR has submitted that the assessee has not explained a reasonable cause for not raising this ground in form no.36. 5. We have considered the rival submissions as well as relevant material on record. The assessee has raised an additional ground challenging the sustainability of the addition made by the AO in the proceedings u/s 153A for A.Ys.2004-05 & 2005-06 as well as 2007-08 & 2008-09 in case of other assessee. Since this ground is not raised by the assessee as first time before the Tribunal but this ground is arising from the impugned order of the Ld. CIT(A) as decided against the assessee. Therefore, this is not a case of raising a fresh ground or plea before the Tribunal. The assessee has explained that due to inadvertence this legal issue was not raised in the original grounds of appeal in form 36 and therefore, this ground has been raised as an additional ground. Having regard to the fact that the additional ground raised by the assesse is arising from the impugned order of the Ld. CIT(A) as well as in view of the judgment of Hon’ble Supreme Court in case of NTPC vs. CIT 229 ITR 383 (SC). We admit the additional ground raised by the assesse for all these four appeals for adjudication on merits. Ld. Sr. counsel has submitted IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 5 of 11 Page 5 of 11 that the search u/s 132 was conducted on 04.02.2010 and therefore, the assessments for A.Y.2004-05 & 2005-06 as well as 2007-08 & 2008-09 were not pending as on the date of search. Therefore, these four assessments were not got abated due to the search and seizure action on 04.02.2010. Ld. Sr. counsel has referred to the assessment order and submitted that while framing assessment u/s 153A the assessing officer has made disallowance of expenses and also made addition on account of unsecured loans. 6. For A.Y.2004-05 & 2005-06 these disallowance and addition were made by the AO without any incriminating material found or seized during the course of search and seizure action. He has further submitted that for A.Y.2004-05 & 2005-06 the assessments were originally competed u/s 143(3) wherein the AO made disallowance on account of traveling expenses but no disallowance was made by the AO in respect of the administrative expenses as made in the proceedings u/s 153A of the Act as well as addition on account of unsecured loans for A.Y.2005-06. These additions are impermissible when there was no incriminating material found or seized during the course of search and seizure action disclosing any undisclosed income on account of the claim of administrative expenses as well as unsecured loans. Thus, Sr. counsel has submitted that the addition made by the AO in the proceedings u/s 153A in absence of any incriminating material is not sustainable in law. 7. He has relied upon the judgment of Hon’ble Supreme Court in case of Pr.CIT vs. Abhisar Buildwell Pvt. Ltd. 149 taxmann.com 399(SC). Ld. Sr. Counsel has also relied upon the decision of this bench dated 31 st August 2023 in CO Nos. 49, 50 & 51/Ind/2014 in case of Madhya Bharat Phosphate Pvt. Ltd. vs. DCIT/ACIT and submitted an identical issue has been considered and adjudicated by this Tribunal in favour of the assesse. 8. On the other hand, ld. DR has relied upon the order of the authorities below. IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 6 of 11 Page 6 of 11 9. We have considered the rival submissions as well as relevant material on record. For A.Y. 2004-05 & 2005-06 the AO has made disallowance of expenses in para 6 as under: (6) Disallowance of Expenses The assessee was assessed u/s 143(3) for the A.Y 2004-05, 2005-06 & 2007-08 where administrative expenses were disallowed by the then assessing officer. During the course of assessment proceedings the assessee was asked o provide bills vouchers etc. for support of expenses debited to trading and profit and loss account. The assessee failed to do so despite various reminders hence the disallowance of expenses cannot be ruled out in the period covered under present scrutiny Also use of company's assets cannot be ruled out for personal purposes. A huge variation was found in the expenditure booked under the head freight on sales. The percentage of freight booked in the A.Y 2006-07 is 8.43% as compared to 4.67% in AY 2009-10. Blank bills books of M/s Manmeet Roadways was found in the name of which freight expenses are booked. Accordingly a lump sum disallowance is made under the heads of repairs & maintenance, telephone & travelling, salary & wages, freight on sales etc. in following assessment years. A.Y. Amount(Rs.) 2004-05 815000 2005-06 912000 2006-07 1035000 2007-08 1210000 2008-09 1350000 2009-10 1465000 IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 7 of 11 Page 7 of 11 2010-11 1525000 Penalty u/s 271(1)(c) & u/s 271AAA are initiated separately. 10. Thus, the AO has made this disallowance on the basis of the trading and profit & loss account of the assessee wherein these expenses are debited and the assesse has failed to produce supporting evidence to the satisfaction of the AO. It is apparent that the AO has made the disallowance on the ground that some of the expenses incurred for personal purpose are not ruled out as there was a variation in the percentage of the expenses claimed to the sales for these years. It is manifest from the assessment order that the AO has disallowed the expenses for these two years by reconsidering the record which is available with the AO at the time of the original assessment passed u/s 143(3). It is also clear from the assessment order that the AO has not made any reference to any incriminating material seized or found during the search and seizure action relating to the claim of expenses in question. Therefore, it is clear that the AO has disallowed certain expenses in the proceedings u/s 153A of the Act which were allowed by the AO in the proceedings u/s 143(3). Similarly the addition on account of unsecured loan for A.Y.2005-06 were made by AO in para 5 is as under: “(5) UNSECURED LOANS TAKEN BY THE COMPANY During the assessment proceedings the assessee was asked to provide the details of Loans taken and repaid including details of spared up accounts. The assessee has taken loans of Rs 610000/- from various persons during AY 2005-06 including Shri Ishaan Joshi from whom Rs. 500000 and Rs.1500000 were taken in the AY 2006- 07 & 2007- 08 respectively. Incomplete confirmations statements were submitted by the lenders except that of Shri Ishaan Joshi whose confirmation along with required PAN, address, income tax returns and bank accounts was not provided. The assessee submitted vide its reply that it will submit required information relating to bank accounts, TTR etc of lenders but failed to do so. Thus the credit worthiness and identification and genuineness of the lenders could not be established. Therefore loans so received are added to income of the assessee. IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 8 of 11 Page 8 of 11 A.Y. Amount (Rs.) 2005-06 610000 2006-07 500000 2007-08 1500000 Penalty u/s 271(1)(c) is initiated separately. 11. The said addition was made by the AO in the proceedings u/s 153A but no such addition was made while completed assessment u/s 143(3). The AO has made addition by considering the material in the shape of books of accounts/ledger accounts wherein the assesse has shown unsecured loans. Therefore, in absence of any incriminating material disclosing any facts casting doubt on the genuineness of the claim, the addition made by the AO in the proceedings u/s 153A is not sustainable in law. The said addition made by the AO in absence of any incriminating material is not permissible under the proceedings u/s 153A of the Act as held by the various High Courts including the decision of Hon’ble Delhi High Court in case of CIT vs. Kabul Chawla 380 ITR 573 as well as jurisdictional High Court in case of Pr. CIT vs. Gahoi & Oil Mills and Ors. 272 Taxman 522 (MP). Now this issue has been finally settled by the Hon’ble Supreme Court vide judgment in case of Pr.CIT vs. Abhisar Buildwell Pvt. Ltd. (supra). By considering the binding precedent this tribunal in case of Madhya Bharat Phosphate Pvt. Ltd. vs. DCIT (supra) has decided this issue in para 9 to 11 as under: “9. Having shown this, Ld. AR submitted that the search was conducted on 04.02.2010 and the AYs 2005-06, 2006-07 and 2008- 09 involved in these Cross-Objections were “completed/unabated years” within the meaning o f section 153A. He submitted that the Hon’ble Delhi High Court in the landmark decision in CIT Vs. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi HC) : (2016) 380 ITR 573 has held that no addition can be made u/s 153A in an IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 9 of 11 Page 9 of 11 “completed/unabated year” without having incriminating material. The said decision was also followed by 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. Recently on 24.04.2023, the Hon’ble Supreme Court has also approved Kabul Chawla’s decision in PCIT Vs. Abhisar Buildwell (P) Ltd. Civil Appeal No. 6580/2021, order dated 24.04.2023. Therefore, in view of these decisions, the disallowances made by AO have to be deleted. 10. Ld. DR for the revenue dutifully relied upon the orders of lower- authorities. 11. We have considered submissions of both sides and perused the orders of lower-authorities in the light of judicial decisions cited before us. We find that in the present matters, the AO has made lump sum disallowances of expenses without having recourse or reference to any seized or incriminating material. Further, the assessment-years involved in present Cross-Objections are “completed/unabated years”. These vital aspects are not rebutted or disputed by revenue. When it is so, the disallowances being contested by assessee in present matters are not sustainable as per the binding decisions cited above. In that view of matter, we are inclined to delete the impugned disallowances. Ordered accordingly. The assessee succeeds in these additional grounds.” 12. Accordingly in view of the various binding precedent as well as the decision of the Tribunal in case of Madhya Bharat Phosphate Pvt. Ltd. vs. DCIT (supra) the addition made by the AO in absence of any incriminating material for A.Ys.2004-05 & 2005-06 are not sustainable in law and liable to be deleted. We order accordingly. A.Y.2007-08 & 2008-09 13. We have heard the rival submissions and considered the relevant material on record. For these two assessment years the AO has made addition on account of capital introduced by the partners in assessee partnership firm. In para no.5.1 the assessing officer has discussed this issue as under: “(5.1) INTRODUCTION OF CAPITAL During the assessment proceedings the assessee was asked to provide the details of Capital Introduced by the partners of the firm its source along with ITR's and Bank Statements from which the IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 10 of 11 Page 10 of 11 funds were brought in. The counsel in his reply on behalf of the assessee stated that the firm was started in P.Y 2006-07 with a capital of Rs.10400000/- which was inducted by M/s Oracle Plantation Private Limited and Rs.50000/- was invested by Shri Pawan Agrawal. No other addition was claimed to be made by the partners in succeeding years. A copy of confirmation etc by M/s Oracle Plantation Pvt. Ltd. stating an investment of Rs.10400000/- was provided on companies letter head. However, confirmations along with Bank statement ITR documents and other record of the other partner Shri Pawan Agrawal were not provided. Mr. Pavan Agrawal in his books of accounts has shown no such loan given to the company. Accordingly as per provisions of section 68 of Income Tax Act, 1961 such additions are made to the total income of the assessee in following assessment years. S.No. A.Y. Amount 1 2007-08 10400000 2 2008-09 7000000 Total 17400000 Penalty u/s 271(1)© is initiated separately. 14. It is clear from the order of the AO passed u/s 153A of the Act that the addition was made by the AO on the basis of the material already available with the AO and without any incriminating material disclosing the nature of transactions as not genuine. Accordingly when the AO has made the addition without referring to any incriminating material and in fact there was no incriminating material found or seized relating to the introduction of capital by the partners in the assessee firm the addition made in the proceedings u/s 153A is not sustainable. In view of our finding for A.Y.2004-05 of the connected appeals the addition made for A.Y.2007-08 & 2008-09 on account of introduction of capital by partnership firm is not sustainable and the same is deleted. Since the additions are deleted on the legal ground therefore, we do not propose to go into the other grounds of appeal raised by these assessees. IT(SS)A No.192 & others /Ind/2014 AP India Biotech Pvt. Ltd. & Oracle Venture Page 11 of 11 Page 11 of 11 15. In the result, both appeals filed by the assesse in IT(SS)ANo.192 & 193/Ind/2023 in case of M/s. AP India Biotech Pvt. Ltd. and IT(SS)A No.285 & 286/Ind/2014 in case of M/s Oracle Venture are allowed. Order pronounced in the open court on 09.10.2023 Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 09 .10.2023 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