M/s Shree Ganesh Realmart P Ltd , Indore V. The DCIT Central Circle-2 , Indorer

ITSSA 29/Ind/2022

AI Insights

The case involves Shree Ganesh Realmart Private Limited, which appealed against the order of the Commissioner of Income-Tax (Appeals)-3, Bhopal, upholding an addition of Rs. 91,35,751 to the company's income for the assessment year 2015-16. This addition was initially made by the Assistant Commissioner of Income-Tax, Central Circle-2, Indore, under section 153A of the Income-tax Act, 1961, following a search operation. The addition was treated as bogus/unexplained expenditure under section 69C of the Act. The Tribunal examined whether the addition was justified in the absence of incriminating documents found during the search and considering the year was completed/unabated.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130860 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 08-12-2022
• Other Referred Cases: CIT Vs. Kabul Chawla, PCIT Vs. Gahoi Dal & Oil Mills, PCIT Vs. Abhisar Buildwell (P) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THOUGH DUTIFULLY SUPPORTED
• Keywords: Bogus
• Section: 132; 69C; 153A

Judgement Text

Page 1 of 6 आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No. 29/Ind/2022 Assessment Year:2015-16 Shree Ganesh Realmart Private Limited, Satguru Girls Hostel, Khandwa Road, Palda, Indore. बनाम/ Vs. DCIT, (Central Circle)-2, Indore. (Assessee / Appellant) (Revenue / Respondent) PAN: AALCS3097H Assessee by Shri S.N.Agrawal, AR Revenue by Ms.Simran Bhullar, CIT DR Date of Hearing 04.10.2023 Date of Pronouncement 31.10.2023 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 20.10.2022 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 09.06.2021 passed by learned ACIT, Central Circle-2, Indore, [“Ld. AO”] u/s 153A of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on following effective grounds: “1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of addition of Rs. 91,35,751/- made by the AO to the total income of the appellant on account of contract payment made to various parties by treating it as bogus/unexplained expenditure u/s 69C of the Income-tax Act, 1961, in case of non-abate M/s Shree Ganesh Realmart Private Limited, ITA No.29/Ind/2022 Assessment year 2015-16 Page 2 of 6 assessment and that too in absence of any incriminating documents found and seized during the course of search. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 91,35,751/- made by the AO to the total income of the appellant on account of contract payment made to various parties by treating it as bogus/unexplained expenditure u/s 69C of the Income-tax Act, 1961, without properly appreciating the facts of the case and submissions made before him even when genuineness of the transactions entered into with those parties was duly established duly established with supporting documentary evidences. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 91,35,751/- made by the AO to the total income of the appellant on account of contract payment made to various parties by treating it as bogus/unexplained expenditure u/s 69C of the Income-tax Act, 1961, without issuing any show cause notice prior to making the aforesaid addition thereby grossly violating the principles of natural justice.” 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Brief facts leading to present appeal are such that a search u/s 132 was conducted on “Shri Shankar Plywood & Veener House Group” including assessee on 04.01.2019 pursuant to which notices u/s 153A were issued to assessee for 6 assessment-years 2013-14 to 2018-19 followed by notices u/s 143(2)/142(1). Ultimately, the AO passed separate assessment-orders of all assessment-years u/s 153A. The present appeal relates to AY 2015-16 for which the AO passed assessment-order after making an addition of Rs. 91,35,751/- u/s 69C treating the payments made by assessee to different contractors as bogus. The assessee contested addition in first-appeal but could not succeed. Now, the assessee has come in next appeal before us. 4. Ld. AR for assessee submitted that the search was conducted on 04.01.2019 and AY 2015-16 involved in present-appeal was a ‘completed/ unabated year” for the purpose of section 153A because no assessment- proceeding was pending on the date of search. The fact of ‘completed/ unabated year’ is also accepted by CIT(A) in Para No. 3.1.2. / Page 26-27 of appeal-order; therefore we can accept this aspect as undisputed. M/s Shree Ganesh Realmart Private Limited, ITA No.29/Ind/2022 Assessment year 2015-16 Page 3 of 6 5. Then, the Ld. AR carried us to Para No. 5 / Page 17-31 of assessment- order where the AO has made the impugned addition of Rs. 91,35,751/-. Ld. AR drew our attention to following noting made by AO therein: “5. During the search proceedings, various documents were found and seized from the premises of the assessee company y and the associate group cases of Shiv Shankar Plywood group. On verification of the bank statements of the assessee company, various suspicious payments were seen and on investigation & enquiries the bogus expenditure in form of bogus contractors was detected. Assessee was asked to furnish details with specific query as under :- “During the assessment proceedings, you have submitted bank account statement of the company. After analysis of bank account statement. It was found that you have made payment to various persons through RTGS/Cheque. In this regard you are requested to please furnish the yearwise ledger account, bill raised by these persons against which the payment has been made Nature of payment and copy of work contract including PAN details in respect of the following persons :- (i) Shri Govind Cheema, (ii) Shri Nitin Ahire, (iii) Shri Pappu Kushwaha, (iv) Shri Vishal JDevgirkar, (v) Shri Umesh Chaudhary, (vi) Shri Akhilesh Vyas, (vii) Shri Gulab Chand Kumau, (vii) Shri Tarun Virwani, (viii) Shri Vikas Manje, (ix) Shri Ankit Rathore, (x) Shri Sunil Mehra, (xi) Gopal Enterprises, (xii) Ravindra Kumar Matta” The submission of the assessee in this regard is duly examined, investigations made and the outcome of the observation is discussed and income is assessed accordingly.” 6. Referring to same, Ld. AR submitted that the AO has made a general remark about various documents found and seized during search of assessee and associated group-entities but as far as the impugned addition of Rs. 91,35,751/- is concerned, there is no ‘incriminating material’ whatsoever having been found during search referred by AO. The notings made by AO clearly demonstrate that he initiated enquiries on the basis of ‘bank statement’ submitted during assessment-proceeding. Further, the detailed notings made by AO in sub-para No. 5.1 to 5.12 of main Para 5 of assessment-order also reveal that the entire addition has been made on the basis of details/ documents/statements/information called for by AO from assessee/ contractors and in response, submitted by assessee/contractors during assessment-proceeding. Thus, Ld. AR successfully demonstrated that M/s Shree Ganesh Realmart Private Limited, ITA No.29/Ind/2022 Assessment year 2015-16 Page 4 of 6 the impugned addition has been made on mere appraisal or verification of what was existing in assessee’s books of account and without recourse to any seized or incriminating material. 7. Having shown this, Ld. AR submitted that the Hon’ble Delhi High Court in landmark decision in CIT Vs. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi HC) : (2016) 380 ITR 573 held that no addition can be made u/s 153A in an “completed/unabated year” without having incriminating material. The said decision was also followed by Hon’ble Jurisdictional High Court of Madhya Pradesh in PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP), ITA No. 21, 31 & 32 of 2019, order dated 12.07.2019. Ld. AR submitted that there were also contrary judgements of some High Courts on this issue giving favour to revenue. Accordingly, in first-appeal, the CIT(A) has given more weightage to the decisions in favour of revenue and held that the AO has power to assessee or reassess the income which includes both disclosed and undisclosed income and also section 153A does not put bar that additions should be restricted to incriminating materials found during search. But ultimately and recently, the Hon’ble Supreme Court has approved Kabul Chawla’s decision in PCIT Vs. Abhisar Buildwell (P) Ltd. (2023) 454 ITR 212, order dated 24.04.2023 and settled controversy in favour of assessee. Therefore, in view of decision of Hon’ble apex court, the addition made by AO cannot be sustained and have to be deleted. 8. Ld. DR for the revenue dutifully relied upon the orders of lower- authorities. Ld. DR submitted that the AO has vehemently discussed contractor-wise payments and came to a conclusion that the assessee has recorded bogus payments to contractors. The AO’s analysis deserves to be upheld. 9. 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 M/s Shree Ganesh Realmart Private Limited, ITA No.29/Ind/2022 Assessment year 2015-16 Page 5 of 6 that in the present matters, the AO has made addition u/s 69C without having recourse or reference to any seized or incriminating material. Further, the assessment-year involved in present appeal is a “completed/unabated year”. Ld. DR for revenue, though dutifully supported the orders of lower-authorities, yet could not rebut or dispute these vital aspects of the matter. When it is so, the addition being contested by assessee in present matter is certainly not sustainable as per binding decision in Abhisar Buildwell, where the Hon’ble Supreme Court concluded thus: “14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; 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 incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.” [Emphasis supplied] In that view of matter, we are inclined to delete the impugned addition. Ordered accordingly. The assessee succeeds in this appeal. M/s Shree Ganesh Realmart Private Limited, ITA No.29/Ind/2022 Assessment year 2015-16 Page 6 of 6 10. Since we have deleted the addition on legality/maintainability itself, it would be unnecessary to go into the merit of same. Accordingly, the merits are left open without adjudication. 11. Resultantly, this appeal of assessee is allowed. Order pronounced in the open court on 31.10.2023. Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore Ǒदनांक /Dated : 31.10.2023 CPU/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 Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore