The ACIT, Central Circle-1(1), Ahmedabad V. M/s. Amraworld Agrico Ltd., Ahmedabad

ITSSA 341/AHD/2018

AI Insights

The case involves the Revenue and the assessee, M/s. Amraworld Agrico Ltd., contesting the validity of assessments made under Section 153A of the Income-tax Act, 1961 for the Assessment Years 2008-09 and 2010-11. A search under Section 132 was conducted on the Amrapali Group, which included the assessee, but no incriminating material was found during the search on the assessee. The Assessing Officer made additions to the assessee's income based on alleged Client Code Modifications (CCM). The CIT(A) found the assessments invalid due to the lack of incriminating material, a decision which was challenged by the Revenue in the Tribunal. The Tribunal dismissed the Revenue's appeal, aligning with the Supreme Court's decision that no additions can be made in the absence of incriminating material for unabated assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136016 (ITAT-NA)
• Duration Of Justice: 4 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Ahmedabad
• Next Hearing Date: 17-04-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2018
• Other Referred Cases: PCIT vs. Abhisar Buildwell (P.) Ltd., M/s.Kunvarji Finance Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ACFSL WORTH RS.
• Keywords: Share purchase agreement; Transactions in derivatives; Block assessment
• Section: 132; 143(3); 133A; 153A

Judgement Text

आयकरअपीलीयअिधकरण,अहमदाबाद᭠यायपीठ‘‘सी’’अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER IT(SS)A Nos. 340 & 341/Ahd/2018 with CO Nos. 77 & 78/Ahd/2020 िनधाᭅरणवषᭅ/Assessment Years : 2008-09 & 2010-11 Asst. Commissioner of Income-tax, Central Circle-1(1), Ahmedabad Vs. M/s. Amraworld Agrico Ltd., 33, While House, Above Honest Restaurant, CG Road, Panchvati, Ellisbridge, Ahmedabad-380006 PAN : AABCG 5611 R अपीलाथŎ/ (Appellant)Ů̝ यथŎ/ (Respondent) & Cross-objector Assessee by :Shri Anil Kshatriya, AR Revenue by :Shri A.P. Singh, CIT-DR सुनवाईकᳱतारीख/Date of Hearing : 18.04.2023 घोषणाकᳱतारीख/Date of Pronouncement: 05.07.2023 आदेश/O R D E R PER BENCH : These two appeals filed by the Revenue and the corresponding Cross- objections thereof filed by the assessee are directed against separate orders of the learned Commissioner of Income-Tax (Appeals)-11, Ahmedabad, both dated 12.09.2018 for Assessment Years 2008-09 & 2010-11. Since the issue involved is identical in both the appeals and cross-objections, these were heard together and are being disposed of by this common order for the sake of convenience. 2.For the sake of convenience, we shall be dealing with the facts in the case of IT(SS)A No. 340/Ahd/2018 and CO No. 77/Ahd/2020 pertaining to Assessment Year 2008-09 and the decision rendered therein will applymutatis mutandis to other appeal and cross-objection also. 2 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 3.The brief facts relating to the case are that a search action under Section 132 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) was conducted in the Amrapali Group on 26.10.2012 and the assessee-company was also covered under Section 132 of the Act. Thereafter, in view of the provisions of Section 153A(1)(a) of the Act, proceedings under Section 153A of the Act were initiated by issuing notice under Section 153A of the Act. In response to the notice, the assessee filed the return of income for AY 2008-09 declaring the total income at Rs.6,57,870/-. Thereafter, notices were issued and details were sought from the assessee. After considering the details and documents so filed in response to the notices, assessment was framed under Section 143(3) r.ws. 153A(1)(b) of the Act on 31.03.2015, making addition of Rs.1,04,15,639/- on account of alleged Client Code Modification (CCM) carried out by the assessee being found to be colourable devise, untrue and manipulated. The Assessing Officer accordingly treated profits of Rs.1,04,15,639/- shifted from client code of the assessee to the client code of others as managed by the assessee and made addition of the same to the income of the assessee. 4.The matter was carried in appeal before the learned CIT(A); where besides challenging the addition made on merits, the assessee also raised legal grounds challenging the validity of the assessment framed under Section 153A of the Act in the absence of any search conducted on the assessee as also any incriminating material being found during search. The learned CIT(A), though did not find any merit in the legal ground raised by the assessee challenging the validity of the assessment framed under Section 153A of the Act in the absence of any search action conducted on the assessee which was dismissed by him, he however found merit in the challenge to the validity of the assessment framed under Section 153A of the Act in the absence of any 3 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 incriminating material found during the search. Accordingly, he held the assessment order to have been invalidly passed under Section 153A of the Act in the absence of any incriminating material found during search. 5.Aggrieved by the order of the learned CIT(A), both the Revenue and assessee have come up in appeal/cross-objection before us. 6.At the outset itself, learned Counsel for the assessee stated that he was not pressing the cross-objection raised before us. The Cross-Objection filed by the assessee is, therefore, dismissed as not pressed. 7.Taking up the appeal filed by the Revenue, the following grounds of appeal have been raised before us:- “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts is not appreciating the provisions of section 153A of the IT Act, 1961 which requires the total income to be brought under tax without any restrictions. 2. On the facts and in the circumstance of the case and in law, the Ld.CIT(A) has erred in law and on facts in holding that such assessment or reassessment u/s 153A of the IT Act, 1961 is to be restricted only to the incriminating materials found during the search. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,04,15,639/- on account of shifting of profit through Client Code Modification (CCM). 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance on the decision of the Hon’ble ITAT in the case of M/s.Kunvarji Finance Pvt. Ltd., even though appeal of the Revenue against this decision has been admitted by the Hon’ble High Court. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.” 8.A perusal of the above grounds would reveal that the only grievance of the Revenue against the order passed by the learned CIT(A) is the application of the proposition of law that in the absence of any incriminating material 4 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 found during search no addition could have been made in the assessment framed under Section 153A of the Act. All the grounds raised by the Revenue, we have noted, are against this legal proposition of law. This proposition of law, we are aware, has found favour with the Hon’ble Apex Court in a recent decision passed in a group of cases with the lead case being Abhisar Buildwell (P.) Ltd. in Civil Appeal Nos. 6580 of 2021 & oths, reported in [2023] 149 taxmann.com 399 (SC), wherein the Hon’ble Apex Court has categorically held that any assessment framed under Section 153A pertaining to those assessment years where the assessments are not abated or in other words the assessments stand completed, addition can be made only on the basis of incriminating material found during the course of search. The relevant findings in this regard in the order of the Hon’ble Apex Court are as under:- “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.” 5 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 9.Though the Revenue has challenged the legal proposition applied by the learned CIT(A), it also sought to raise the issue that in the present case there was incriminating material found during the search. Sufficient opportunities were provided to the learned DR to produce the relevant incriminating material and the response in this regard was finally filed before us vide letter dated 08.07.2022; the contents of which are reproduced hereunder:- “No. DCIT/CC-1(1)/AHD/ITAT-AGL/2022-23 Date: 08.07.2022 To, The Sr. Departmental Representative, ‘C’ Bench, ITAT-3(1) Ahmedabad. Sir, Sub.: Personal Appearance with seized material in the case of M/s. Amraworld Agrico Ltd. - IT(SS) A. No. 340 & 341/Ahd/2018 and CO 77 & 78/Ahd/2020 for A.Y. 2008- 09 and 2010-11 - reg. Ref.: No. CIT(DR)/‘C’ Bench/(ITAT)-3/AAL/2022-23 dated 17.06.2022 Kindly refer to the above. 2.With respect to above letter dated 17.06.2022 it is submitted that search action u/s 132 of the 1.1. Act, 1961, was conducted on 26-10-2012 on Amrapali Group of Ahmedabad and survey u/s 1 33 A of the Act was carried out at the registered office of Assessee Company situated at 803, Samedh Complex, Adjacent to Associated Petrol Pump. C.G. Road, Ahmedabad. However, the said address was found to be office of M/s. Corporate Strategic Alliance Ltd. Further, no books of Assessee Company were found at the said premises. 2.1 As per the books of account of M/s. ACFSL, 2,00,000 shares of face value of Rs. 10/- were as allotted to M/s. Amraworld Agrico Limited at a premium of Rs. 290/- per share. Thus, on this account a sum of Rs. 6,00,00,000/- has been credited in the books of account of M/s. ACFSL. A survey was conducted under section 133A of the Act at the registered office of the company situated at 803, Samedh Complex, Adjacent to Associated Petrol Pump, C.G. Road, Ahmedabad-38000 Amraworld Agrico Limited. However, the same was found to be office of M/s. Corporate Strategic Alliance Limited. No books of M/s. Amraworld Agrico Limited were found at the said premises. Personal summons were issued to the Principal Officer of the said company, however, 6 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 no one attended. A written submission was filed by the company, On examination of the details submitted by the said company it was been found that the company does not have any significant activities, infect the company has been making operating losses since FY 2006-07 and has been filing nominal return of total income. 2.2 It is noteworthy, that original share certificate issued in favour of M/s. Amraworld Agrico Limited was found and seized at the premise of M/s ACFSL, Thus, it is further proved that the said transaction recorded in the books of M/s. ACFSL were not genuine as the share certificates were also not provided to the shareholders. The company M/s Amraworld Agrico Limited was being used for non genuine transactions by the Amrapali Group. 2.3 Further, on analysis of the CCM data received from NSE since 01.04.2006, it has been found that ACFSL has in majority cases used the tool of CCM so as to reduce the book profits of the entities and key persons of "Amrapali Group". Profits aggregating Rs. 46,57,90,987/- have been reduced by the clients by resorting to CCM through M/s. ACFSL. 2.4 In case of Amraworld Agrico Limited, on analysis of the CCM data for the AY 2008-09 (FY 2007-08) it was found that the client code of AAL (A026) was modified 1115 times i.e. its code was changed with other client codes and its profits/losses on these 1115 transactions were shifted to other clients of Amrapali Capital & Financial Services Limited. On further analysis it has been found that out of 1115 times, in 941 transactions profits have been shifted to other clients. In remaining 174 transactions losses aggregating have been shifted. However, this client code modification has resulted in overall shifting of profits accrued to Amraworld Agrico Limited on F&O transactions aggregating to Rs. 1,04,15,639/- to other clients. Thus, it is clear from the seized share certificates and the data received from NSE, that Amraworld Agrico Limited was being used to perform non genuine transactions and for shifting profits/losses in the larger scheme of Client Code Modifications. Yours faithfully, Sd/- (Sonal Singh) Deputy Commissioner of Income-tax Central Circle-1 (1 ), Ahmedabad” 10. A perusal of the above would reveal that the case of the Revenue vis a vis incriminating material found during search pertained to material found 7 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 during search on Amrapali Capital & Financial Services Limited (ACFSL). The AO mentions share certificates issued to the assessee by ACFSL worth Rs.6 crores found during search at the premises of ACFSL. From the financials of the said company he has deduced that the company is of no worth and therefore the transaction of issue of shares to the assessee company is only a colorable device adopted by the group companies of Amrapalli Group using the assessee as a conduit. 10.1 The fact remains that nothing with respect to the shares of ACFSL allotted to the assessee were found during search on the assessee, that even otherwise what was found with ACFSL was only the share certificates issued to the assessee, the transaction being duly accounted for in the books of the assessee, which therefore by no stretch can be said to be incriminating material. Even otherwise as per the AO himself the fact of allotment of shares of ACFSL to the assessee had nothing to do with any undisclosed income of the assessee, the assessee being used as a conduit by the group companies. This is evident also from the fact that no addition on account of the said allotment of shares was made to the income of the assessee in the assessment framed u/s 153A of the Act. 10.2 Therefore the share certificates of ACFSL cannot be treated as incriminating material found during search on the assessee. 11. With respect to the Client Code Modifications allegedly resorted to by the assessee paragraph No.2.3 of the letter filed by the Assessing Officer reveals that he was in possession of information regarding M/s. ACFSL resorting to CCM, and this information was not revealed on account of any document found during search action but was gathered from analysis of the CCM data received from NSE. With respect to the assessee resorting to CCM, 8 IT(SS)A Nos. 340 & 341/Ahd/2018 & CO Nos. 77 & 78/Ahd/2020 Assessee : Amraworld Agrico Ltd AY : 2008-09 & 2010-11 the case of the AO is that, from the aforestated information he has deduced the same. 11.1 Clearly, as per the AO himself, even with regard to CCM, on account of which addition was made to the income of the assessee in assessment framed u/s 153A of the Act, there was no material, leave aside incriminating, found during search conducted on the assessee 12. In view of above, considering the settled position of law by the decision of Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (supra) and noting the fact that no incriminating material was found during the search in the case of the assessee and the impugned year being year where assessment was unabated, we do not find any infirmity in the order of the learned CIT(A) holding the assessment order passed to be invalid. The appeal filed by the Revenue is, therefore, dismissed. 13. In effect, both the appeals and cross-objections are dismissed. Order pronounced in the open Court on 5 th July, 2023 at Ahmedabad. Sd/-Sd/- (RAJPAL YADAV) VICE-PRESIDENT (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 05/07/2023 **bt आदेशकᳱᮧितिलिपअᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent. 3. संबंिधतआयकरआयुᲦ/ Concerned CIT 4. आयकरआयुᲦ)अपील (/ The CIT(A)- 5. िवभागीयᮧितिनिध ,आयकरअपीलीयअिधकरण,/DR,ITAT, Ahmedabad, 6. गाडᭅफाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायकपंजीकार (Asstt.. Registrar) आयकरअपीलीयअिधकरण ITAT, Ahmedabad