MAHADHAN AGRITECH LIMITED (FORMERLY KNOWN AS SMARTECHEM TECHNOLOGIES LTD ) ,MUMBAI V. COMMISSIONER OF INCOME TAX (APPEALS)-50, MUMBAI

ITA 2226/MUM/2024

AI Insights

The case involves Mahadhan Agritech Ltd. (formerly known as Smartchem Technologies Ltd.), which appealed against the order of the Commissioner of Income-tax (Appeals) concerning various disallowances and additions made during the assessment year 2015-16 under section 153A of the Income Tax Act. The primary issues revolved around the disallowance of depreciation on goodwill, the addition of inflated capital expenditure, and the disallowance of interest on delayed payment of TDS. The Tribunal examined the legal provisions under sections 153A, 69A, and 115JB of the Income Tax Act, along with the principles of natural justice and the concept of incriminating material in the context of search and seizure operations.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471386 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Other Referred Cases: M/s SEW Infrastructure Ltd. in ITA 1717 to 1720/Hyd/2017 and 1722/Hyd/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANYOGITA NAGPAL
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Set aside; Revised return; Bad and doubtful debts; Depreciation; Fair market value; Document seized; Documents seized; Capital expenditure; Principle of natural justice; TDS; Search and seizure; Notional interest; Scheme of amalgamation; Bogus
• Section: 143(3); 195; 143(1); 271(1)(c); 153A; 22; 69A; 37; 115JB; 37(1); 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 2226/MUM/2024 Assessment Year: 2015-16 Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.), Survey No. 93, Sai Hira, Mundhwa, Pune-411036. Vs. CIT(A)-50, DCIT Cen. 8(1), 656, Aayakar Bhavan, Mumbai-400021. PAN NO. AACCA 5046 P Appellant Respondent Assessee by : Mr. Vijay Mehta Revenue by : Smt. Sanyogita Nagpal, CIT-DR Date of Hearing : 28/11/2024 Date of pronouncement : 24/02/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 31.03.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – 50, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2015-16 in relation to search assessment order passed u/s 153A of the Income- raised in its appeal by the assessee are reproduced as under: 1(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowances made in the order u/s 153A in utter disregard of the express provisions of the Act since no incriminating material has been found during the course of search and seizure carried out us 132 of the Act. 1(b) That on the facts and in the circumstan Ld. CIT(Appeals) was not justified and grossly erred in not considering the cardinal principle of law that the scope of assessment u/s 153A in respect of completed/unabated assessment is limited only to undisclosed income unearthed during the course of search 1(c) That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in holding incriminating materials were unearthed during the course of search & seizure carried out u/s 132 of the of the facts of the case. 1(d). That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a), 1(b) & 1(c) taken herein above, the Ld CIT (Appeals) was not justified and grossly erred in confirming additions made u/s 69A of alleged inflated capital expenditure without appreciating the fact that no incriminating material had been found referable to the assessment year under consideration, during the course of search & seizure carried out u/s 132 of the Act. 1(e) That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in holding that the concept of incriminating material is not applicable for disallowance of interest on delayed payment of TDS and provision for doubtful debts on the contention that the abovementioned claims were lodged for the first time in the return of income filed u/s 153A. 2. That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the denial of the claim of depreciation on goodwill and / or other intangible assets while computing total income under the normal provisions of the Act. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) -tax Act,1961 (in short ‘the Act’). The grounds by the assessee are reproduced as under: That on the facts and in the circumstances of the case, the CIT(Appeals) was not justified and grossly erred in confirming allowances made in the order u/s 153A in utter disregard of the express provisions of the Act since no incriminating material has been found during the course of search and seizure carried out us 132 of the Act. That on the facts and in the circumstances of the case, the CIT(Appeals) was not justified and grossly erred in not considering the cardinal principle of law that the scope of assessment u/s 153A in respect of completed/unabated assessment is limited only to undisclosed income unearthed ing the course of search That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in holding incriminating materials were unearthed during the course of search & seizure carried out u/s 132 of the Act in utter disregard of the facts of the case. That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a), 1(b) & 1(c) taken herein above, the Ld CIT (Appeals) was not justified and grossly erred in additions made u/s 69A of alleged inflated capital expenditure without appreciating the fact that no incriminating material had been found referable to the assessment year under consideration, during the course of search & seizure carried out e Act. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in holding that the concept of incriminating material is not applicable for disallowance of interest on delayed payment of TDS and provision for doubtful debts on the contention that the abovementioned claims were lodged for the first time in the return of income filed u/s 153A. That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the denial of the claim of depreciation on goodwill and / or other intangible assets while computing total income under the normal provisions of the Act. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 2 ITA No. 2226/MUM/2024 1961 (in short ‘the Act’). The grounds by the assessee are reproduced as under: That on the facts and in the circumstances of the case, the CIT(Appeals) was not justified and grossly erred in confirming allowances made in the order u/s 153A in utter disregard of the express provisions of the Act since no incriminating material has been found during the course of search and seizure ces of the case, the CIT(Appeals) was not justified and grossly erred in not considering the cardinal principle of law that the scope of assessment u/s 153A in respect of completed/unabated assessment is limited only to undisclosed income unearthed That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in holding incriminating materials were unearthed during the course of Act in utter disregard That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a), 1(b) & 1(c) taken herein above, the Ld CIT (Appeals) was not justified and grossly erred in additions made u/s 69A of alleged inflated capital expenditure without appreciating the fact that no incriminating material had been found referable to the assessment year under consideration, during the course of search & seizure carried out That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in holding that the concept of incriminating material is not applicable for disallowance of interest on delayed payment of TDS and provision for doubtful debts on the contention that the abovementioned claims were lodged for the first time in the That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the denial of the claim of depreciation on goodwill and / or other intangible assets while computing total income under the normal 3. That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the additions of undisclosed income us 69A on account of alleged inflated capital expenditure while co the normal provisions of the Act. 4. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of provision for doubtful debts while computing total income under the normal provisions of the Act. 5. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) disallowance of notional interest on investments made in the subsidiary company while computing total income under the normal provisions of the Act. 6. That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming addition of depreciation on goodwill and/or other assets while computing book profit u/s 115JB of the Act. 7. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the addition of depreciation on the alleged inflated cap expenditure while computing book profit u/s 115JB of the Act. 2. The briefly sated facts of the case are that the assessee originally filed its return of income electronically on gross total income of processed under Section 143(1) Act selected for scrutiny assessment. During the course of scrutiny assessment, on 22.12.2017 computation of income along with a revised return, w enhanced claim of depreciation, including on goodwill, was made. The assessee asserted that such revision was necessitated due to a scheme of amalgamation involving the ‘Technical Ammonium Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the additions of undisclosed income us 69A on account of alleged inflated capital expenditure while computing total income under the normal provisions of the Act. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of provision for doubtful debts while computing total income under the normal provisions of the Act. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming disallowance of notional interest on investments made in the company while computing total income under the normal provisions of the Act. That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming addition of depreciation on goodwill and/or other assets while computing book profit u/s 115JB of the Act. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the addition of depreciation on the alleged inflated cap expenditure while computing book profit u/s 115JB of the Act. The briefly sated facts of the case are that the assessee originally filed its return of income electronically on 30.11.2015 gross total income of Rs. 4,25,66,100/-. Said return was duly cessed under Section 143(1) Act. Subsequently, the case was selected for scrutiny assessment. During the course of scrutiny 22.12.2017, the assessee submitted a modified computation of income along with a revised return, w enhanced claim of depreciation, including on goodwill, was made. The assessee asserted that such revision was necessitated due to a scheme of amalgamation involving the ‘Technical Ammonium Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 3 ITA No. 2226/MUM/2024 That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming the additions of undisclosed income us 69A on account of alleged mputing total income under That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of provision for doubtful debts while computing That on the facts and in the circumstances of the case, the Ld. was not justified and grossly erred in confirming disallowance of notional interest on investments made in the company while computing total income under the That on the facts and in the circumstances of the case, the Ld CIT(Appeals) was not justified and grossly erred in confirming addition of depreciation on goodwill and/or other intangible assets while computing book profit u/s 115JB of the Act. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the addition of depreciation on the alleged inflated capital expenditure while computing book profit u/s 115JB of the Act. The briefly sated facts of the case are that the assessee originally 30.11.2015, declaring a return was duly . Subsequently, the case was selected for scrutiny assessment. During the course of scrutiny , the assessee submitted a modified computation of income along with a revised return, wherein an enhanced claim of depreciation, including on goodwill, was made. The assessee asserted that such revision was necessitated due to a scheme of amalgamation involving the ‘Technical Ammonium Nitrate and Fertilizers’ unit, which had been duly sancti Hon’ble National Company Law Tribunal (NCLT) on 30.03.2017 Notably, this sanction was granted subsequent to the filing of the original return of income. However, the said revised return was filed beyond the statutory period prescribed under th returns. Consequently, the revised return as non consideration while passing the assessment order under 143(3) of the Act on 27.12.2017 assessee preferred an appeal before the Authority challenging the non depreciation claim. It is stated that the said appeal is presently pending adjudication. 2.1 Subsequently, a search and seizure action u/s 132 of the Act was carried out on 15.11.2018 on entities forming part notice u/s 153A of the Act was issued on 01.01.2020. In respons to the notice u/s 153A of the Act, the assessee filed return of income on 29.01.2020 declaring the revised computation filed during original assessment proceedings vide letter dated 22/12/2017. In said return, the assessee claimed total l losses due to claim of depreciation on intangibles i.e. goodwill acquired on account of purchase of ‘T Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) Nitrate and Fertilizers’ unit, which had been duly sancti Hon’ble National Company Law Tribunal (NCLT) on 30.03.2017 Notably, this sanction was granted subsequent to the filing of the original return of income. However, the said revised return was filed beyond the statutory period prescribed under the Act for revising returns. Consequently, the Assessing Officer (AO) revised return as non-est in law and did not take it into consideration while passing the assessment order under 143(3) of the Act on 27.12.2017. Aggrieved by the said assessee preferred an appeal before the Ld. First Appellate challenging the non-consideration of the revised depreciation claim. It is stated that the said appeal is presently pending adjudication. Subsequently, a search and seizure action u/s 132 of the Act was carried out on 15.11.2018 on the assessee along with other of ‘Deepak Fertilizers Group’. Consequently, a 3A of the Act was issued on 01.01.2020. In respons to the notice u/s 153A of the Act, the assessee filed return of income on 29.01.2020 declaring the same income as computed in the revised computation filed during original assessment proceedings vide letter dated 22/12/2017. In said return, the total losses at Rs.245,84,05,861/ losses due to claim of depreciation on intangibles i.e. goodwill account of purchase of ‘Technical Ammonium Nitrate Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 4 ITA No. 2226/MUM/2024 Nitrate and Fertilizers’ unit, which had been duly sanctioned by the Hon’ble National Company Law Tribunal (NCLT) on 30.03.2017. Notably, this sanction was granted subsequent to the filing of the original return of income. However, the said revised return was filed e Act for revising Assessing Officer (AO) treated the est in law and did not take it into consideration while passing the assessment order under Section . Aggrieved by the said order, the Ld. First Appellate consideration of the revised depreciation claim. It is stated that the said appeal is presently Subsequently, a search and seizure action u/s 132 of the Act the assessee along with other ’. Consequently, a 3A of the Act was issued on 01.01.2020. In response to the notice u/s 153A of the Act, the assessee filed return of the same income as computed in the revised computation filed during original assessment proceedings vide letter dated 22/12/2017. In said return, the osses at Rs.245,84,05,861/- including the losses due to claim of depreciation on intangibles i.e. goodwill echnical Ammonium Nitrate and Fertilizers’ unit examination, questioned the legitimacy of the depreciation claimed on the intangibles, particularly the goodwill, which arose from the acquisition of a demerged entity from another related company. After considering extensive submissions, statements recorded during the search proceedings, and material seized, the AO concluded that the assessee was not eligible for depreciation on intangibles, including goodwill, amounting to The Assessing Officer also made addition for inflated capital expenditure claimed by the assessee incurred through two entities namely’ M/s Onshore Construction Company Pvt. Ltd Ray Construction Ltd Assessing Officer also disallowed interest on delayed payment of deducted at source ( provision for doubtful manner, the Assessing Officer the Act on 25.07.2022 a provisions of the Act and book profit at Rs.1131,615,332/ MAT provisions. Aggrieved, the assessee filed appeal before the Ld. CIT(A) and assailed the assessment order on the validity of the reassessment as well as additions/disallowance on merit. However could not succeed before the Ld. CIT(A). 3. Before us, the Ld. counsel for the assessee filed a Paper Book in two volumes from page 1 to 194 and 195 to 312. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) unit. The Assessing Officer (AO) estioned the legitimacy of the depreciation claimed on the intangibles, particularly the goodwill, which arose from the acquisition of a demerged entity from another related company. After considering extensive submissions, statements recorded earch proceedings, and material seized, the AO concluded that the assessee was not eligible for depreciation on intangibles, including goodwill, amounting to Rs. 221,71,03,313/ The Assessing Officer also made addition for inflated capital claimed by the assessee incurred through two entities Onshore Construction Company Pvt. Ltd Ray Construction Ltd’ amounting to Rs.48,53,865/ Assessing Officer also disallowed interest on delayed payment of source (TDS) amounting to Rs.2,42,966/ doubtful debts amounting to Rs.30,00,000/ manner, the Assessing Officer assessed total income u/s the Act on 25.07.2022 at loss of Rs.22,69,46,622/ the Act and book profit at Rs.1131,615,332/ . Aggrieved, the assessee filed appeal before the Ld. CIT(A) and assailed the assessment order on the validity of the reassessment as well as additions/disallowance on merit. However t succeed before the Ld. CIT(A). Before us, the Ld. counsel for the assessee filed a Paper Book in two volumes from page 1 to 194 and 195 to 312. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 5 ITA No. 2226/MUM/2024 Assessing Officer (AO), upon estioned the legitimacy of the depreciation claimed on the intangibles, particularly the goodwill, which arose from the acquisition of a demerged entity from another related company. After considering extensive submissions, statements recorded earch proceedings, and material seized, the AO concluded that the assessee was not eligible for depreciation on Rs. 221,71,03,313/-. The Assessing Officer also made addition for inflated capital claimed by the assessee incurred through two entities Onshore Construction Company Pvt. Ltd’. and ‘M/s Rs.48,53,865/-. Further, the Assessing Officer also disallowed interest on delayed payment of tax Rs.2,42,966/- and 30,00,000/-. In this assessed total income u/s 153A of loss of Rs.22,69,46,622/- under normal the Act and book profit at Rs.1131,615,332/- under . Aggrieved, the assessee filed appeal before the Ld. CIT(A) and assailed the assessment order on the validity of the reassessment as well as additions/disallowance on merit. However Before us, the Ld. counsel for the assessee filed a Paper Book 4. The ground No relates to the validity of the reassessment assailed in relation to addition of depreciation capital expenditure and interest The assessee is mainly been found qua the additions/disallowance made during the year under consideration could have been made in the case of the assessee consideration. This c each addition/ disallowance 4.1 The assessee also made an alternative prayer claim for deduction or allowance could be made in the return filed in response to notice under section 153 the claim of depreciation on intangible assets and provision for doubtful debts are not tenable 4.2 In ground No. 2, depreciation on goodwill has challenged addition of undisclosed income on account of inflated capital expenditure on merit. In ground No. 3, the assessee has challenged disallowance of provision for doubtful debts on merit. In view of above, we are adjudicating of each addition/disallowance. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) The ground Nos. 1(a) to 1(e) of the appeal of the assessee relates to the validity of the reassessment assailed in relation to of depreciation and provision for doubtful debts capital expenditure and interest on delayed payment of the TDS. is mainly agitated that no incriminating material had been found qua the additions/disallowance made during the year and being non abated assessment, no addition made in the case of the assessee for the year under . This claims of assessee, need to be examined qua each addition/ disallowance, which has been disputed before us. The assessee also made an alternative prayer claim for deduction or allowance could be made in the return filed ice under section 153A of the Act and therefore the claim of depreciation on intangible assets and provision for doubtful debts are not tenable 2, the assessee has challenged disallowance of on goodwill on merit. In ground No. 3, the assessee has challenged addition of undisclosed income on account of inflated capital expenditure on merit. In ground No. 3, the assessee has challenged disallowance of provision for doubtful debts on In view of above, we are adjudicating the grounds of each addition/disallowance. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 6 ITA No. 2226/MUM/2024 the appeal of the assessee relates to the validity of the reassessment assailed in relation to and provision for doubtful debts, inflated delayed payment of the TDS. that no incriminating material had been found qua the additions/disallowance made during the year and being non abated assessment, no addition for the year under need to be examined qua uted before us. The assessee also made an alternative prayer that no fresh claim for deduction or allowance could be made in the return filed ct and therefore the claim of depreciation on intangible assets and provision for the assessee has challenged disallowance of o. 3, the assessee has challenged addition of undisclosed income on account of inflated capital expenditure on merit. In ground No. 3, the assessee has challenged disallowance of provision for doubtful debts on grounds in respect 4.1 Firstly, we are taking issue of on intangibles including goodwill in dispute are that in transactions as under are involved: (a) First entity is M/s Deepak Fertilizers and Corporation Ltd. (in short ‘Deepak Fertilizers’) public company limited by shares, and was incorporated on 31/05/1979, having its registered office at of the ‘Deepak Fertilizers’ rest 49.01% shares are held by others. The company w at three prominent verticals, namely (i) industrial chemicals (“IC”), (ii) Technical Ammonium (b) The second entity namely ‘Fertichem’) is an unlisted public company incorporated on 10/10/2012 having its registered office at Pune i.e. (address same as ‘De with its nominees holds the entire equity share capital of ‘Fertichem’. The company was engaged in manufacturing and trading of fertilizers, petroleum and their byproducts. (c ) The third entity involved in Technologies Ltd. i.e. the assessee ( in short the ‘Smartchem’), which was incorporated on 21/01/1987 having registered office at Village Ponnada, Andhra Pradesh, which was changed to the state Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) Firstly, we are taking issue of disallowance of depreciation including goodwill. The facts in brief qua the issue in transactions of amalgamation involved: M/s Deepak Fertilizers and Pertoc in short ‘Deepak Fertilizers’), which is a listed public company limited by shares, and was incorporated on 31/05/1979, having its registered office at Pune. 50.99% in shares of the ‘Deepak Fertilizers’ are held by its promoters and group and rest 49.01% shares are held by others. The company w at three prominent verticals, namely (i) industrial chemicals (“IC”), Technical Ammonium Nitrate (“TAN”) and (iii) Fertilizers. The second entity namely M/s SCM Fertichem Ltd ‘Fertichem’) is an unlisted public company limited by shares was incorporated on 10/10/2012 having its registered office at Pune i.e. ‘Deepak Fertilizers’). The Deepak Fertilizers’ along with its nominees holds the entire equity share capital of ‘Fertichem’. The company was engaged in manufacturing and , petroleum and their byproducts. he third entity involved in the transaction is M/s Smartchem i.e. the assessee ( in short the ‘Smartchem’), which was incorporated on 21/01/1987 having registered office at Village Ponnada, Andhra Pradesh, which was changed to the state Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 7 ITA No. 2226/MUM/2024 disallowance of depreciation The facts in brief qua the issue amalgamation, three entities Pertochemicals , which is a listed public company limited by shares, and was incorporated on Pune. 50.99% in shares are held by its promoters and group and rest 49.01% shares are held by others. The company was operating at three prominent verticals, namely (i) industrial chemicals (“IC”), and (iii) Fertilizers. M/s SCM Fertichem Ltd ( in short limited by shares was incorporated on 10/10/2012 having its registered office at Pune i.e. . The Deepak Fertilizers’ along with its nominees holds the entire equity share capital of ‘Fertichem’. The company was engaged in manufacturing and , petroleum and their byproducts. M/s Smartchem i.e. the assessee ( in short the ‘Smartchem’), which was incorporated on 21/01/1987 having registered office at Village Ponnada, Andhra Pradesh, which was changed to the state of Maharastra, for filing a jurisdiction of the Hon’ble Bombay High Court. The Deepak fertilisers along with its nominees hold entire equity share capital of ‘Smartchem’. 4.2 M/s Deepak Fertilizers and entered into a schem business and Technology Ammonium Nitrate (TAN) in two stages. The scheme Company Law Tribunal ( NCLT), Mumbai Bench on 30/03/2017 with effective/appointed d 4.3 In first stage, M/s ‘fertilizer undertakings ‘Fertichem’)’ under a slump sale/exchange at book written down value (WDV) w.e.f. 01.01.2015, Rs.743 crores, against which equity shares of Rs.10 each to 4.4 In second stage ‘Fertichem fertilizer undertaking to at fair market valuation of Rs. 2517 Crores under demerger scheme. Against the said assessee) allotted equity shares to the shareholders of (i.e. Deepak Fertilizers above fair market value Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) of Maharastra, for filing a scheme of arrangement within the jurisdiction of the Hon’ble Bombay High Court. The Deepak fertilisers along with its nominees hold entire equity share capital of Deepak Fertilizers and Smartchem i.e. the assessee entered into a scheme of arrangement for transferring business and Technology Ammonium Nitrate (TAN)’ The scheme got sanction of Hon’ble National Company Law Tribunal ( NCLT), Mumbai Bench on 30/03/2017 with effective/appointed date of 1/1/2015. In first stage, M/s Deepak Fertilizers transferred fertilizer undertakings’ to ‘M/s SCM Fertichem Pvt. Ltd. (in short under a slump sale/exchange at book written down value (WDV) w.e.f. 01.01.2015, for a lump sum consideration of against which ‘Fertichem’ issued certain number of equity shares of Rs.10 each to ‘Deepak Fertilizer’. In second stage ‘Fertichem’ demerged/transferred TAN an fertilizer undertaking to Smartchem’ i.e. assessee w.e.f. 01.01.2015 at fair market valuation of Rs. 2517 Crores under demerger Against the said demerger/transfer ‘Smartchem assessee) allotted equity shares to the shareholders of Deepak Fertilizers) as per share entitlement ratio of 1:1. above fair market value of Rs.2517 crores determined Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 8 ITA No. 2226/MUM/2024 scheme of arrangement within the jurisdiction of the Hon’ble Bombay High Court. The Deepak fertilisers along with its nominees hold entire equity share capital of Smartchem i.e. the assessee ring the ‘Fertilizer to the assessee got sanction of Hon’ble National Company Law Tribunal ( NCLT), Mumbai Bench on 30/03/2017 transferred ‘TAN’ and Pvt. Ltd. (in short under a slump sale/exchange at book written down lump sum consideration of certain number of transferred TAN and w.e.f. 01.01.2015 at fair market valuation of Rs. 2517 Crores under demerger Smartchem’ (i.e. the assessee) allotted equity shares to the shareholders of ‘Fertichem’ ) as per share entitlement ratio of 1:1. Out of determined, the ‘intangible asset’ in the form of goodwill was Rs.1777,73,12,360/- 4.5 Pursuant to the NCLT order, the books of account of all the three entities were revised from appointed date i.e. 1/01/2015. Consequently, no transfer of intangibles from ‘Deepak Fertilizers transfer of same unit via demeger from ‘Fertichem’ to ‘Smartchem’, intangibles at Rs.1777,73,12,360/ account of the assessee was claimed. 4.6 In this arrangement, the transferred by way of a slump Rs.743 crores and on the same day the same business was transferred by way of demerger to Samrtchem determining fair market value justified the two step transfer of TAN and Fertilizer divis of complexity and Stock Exchange Regulations. The assessee claimed depreciation assessee by way of the acqu 4.7 But the Assessing Officer referred to found during the course of search action, which was Debashish Banergee, Vice President Mehta, Chairman of Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) in the form of goodwill was - . 4.5 Pursuant to the NCLT order, the books of account of all the entities were revised from appointed date i.e. 1/01/2015. Consequently, no transfer of intangibles under slump sale on unit Deepak Fertilizers’ to ‘Fertichem’ was recorded , but on transfer of same unit via demeger from ‘Fertichem’ to ‘Smartchem’, ntangibles at Rs.1777,73,12,360/- was recorded in the books of account of the assessee and depreciation on the intangible asset In this arrangement, the ‘TAN’ and ‘fertilizer transferred by way of a slump sale/ exchange to Rs.743 crores and on the same day the same business was transferred by way of demerger to Samrtchem i.e. the assessee fair market value at Rs.2517 crores. The assessee justified the two step transfer of TAN and Fertilizer divis complexity and Stock Exchange Regulations. The assessee claimed depreciation on the intangibles created in the hands of the assessee by way of the acquisition of the demerged entity. he Assessing Officer referred to an e-mail commun found during the course of search action, which was Debashish Banergee, Vice President(Finance) and Shri Sailesh C Mehta, Chairman of M/s Deepak Fertilizers, and observed that Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 9 ITA No. 2226/MUM/2024 in the form of goodwill was valued at 4.5 Pursuant to the NCLT order, the books of account of all the entities were revised from appointed date i.e. 1/01/2015. under slump sale on unit corded , but on transfer of same unit via demeger from ‘Fertichem’ to ‘Smartchem’, was recorded in the books of intangible asset fertilizer’ unit were exchange to ‘Fertichem’ at Rs.743 crores and on the same day the same business was i.e. the assessee by Rs.2517 crores. The assessee justified the two step transfer of TAN and Fertilizer division in view complexity and Stock Exchange Regulations. The assessee created in the hands of the isition of the demerged entity. mail communication found during the course of search action, which was between Shri and Shri Sailesh C and observed that two stage transfer of the business was carried out the profits of the unit. of the search team that the goodwill created by the assessee in its books of accounts by way of scheme of slump sale and demerger was nothing but a subsequently questions were various management personal during the course of the search promoter group CMD and Shri Supas Jain President(corporate finance) explain the purpose of scheme of arrangement and real intent behind the alleged scheme of real motive/intent of the group concern in carrying two step sale and demerger of fertilizer and TAN business was only to avoid taxes because the business was retained with the promoters and management also remained same e The transfer was only on the papers and hence there was no question of restructuring business for effective management. According to the Assessing Officer, the valuation done by the valuer M/s Sharp and Tannon was also not based on real it was based on the fabricated projections. T noted that e-mail communication by Shri Debashish Banergee clearly demonstrated the intent of the scheme for reducing the tax Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) stage transfer of the business was carried out for the profits of the unit. The Assessing Officer referred to observation search team that the goodwill created by the assessee in its books of accounts by way of scheme of slump sale and demerger a scheme devised to evade the taxes subsequently questions were put up by the search team various management personals of the Group. According to the AO, uring the course of the search statement of Shri Sailesh C. Mehta promoter group CMD and Shri Supas Jain, (corporate finance) was recorded , but they failed to explain the purpose of scheme of arrangement and real intent behind the alleged scheme of restructuring. In view of the real motive/intent of the Deepak Fertilizers, the assessee and its group concern in carrying two steps arrangement by way of demerger of fertilizer and TAN business was only to avoid taxes because the business was retained with the promoters and management also remained same even after transfer of the unit was only on the papers and hence there was no question of restructuring business for effective management. According to the Assessing Officer, the valuation done by the valuer M/s Sharp and Tannon was also not based on real on the fabricated projections. The Assessing Officer mail communication by Shri Debashish Banergee clearly demonstrated the intent of the scheme for reducing the tax Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 10 ITA No. 2226/MUM/2024 avoiding tax on referred to observation search team that the goodwill created by the assessee in its books of accounts by way of scheme of slump sale and demerger he taxes, hence, by the search team to the According to the AO, Shri Sailesh C. Mehta Associate Vice was recorded , but they failed to explain the purpose of scheme of arrangement and real intent restructuring. In view of the AO, the e assessee and its arrangement by way of slump demerger of fertilizer and TAN business was only to avoid taxes because the business was retained with the promoters and ansfer of the unit. was only on the papers and hence there was no question of restructuring business for effective management. According to the Assessing Officer, the valuation done by the valuer projections and he Assessing Officer mail communication by Shri Debashish Banergee clearly demonstrated the intent of the scheme for reducing the tax liabilities of the group. The assessee on the o that scheme of slump sale and demerger was NCLT, Mumbai and the Assessing Officer has not raised objections before the NCLT amalgamation or demerger are nothing contrary has been unearthed d search. However, the Assessing Officer facts regarding the tax implications and the real intent of the scheme was not before the Hon’ble NCLT. 4.8 During the appellate proceedings before the Ld. CIT(A), the assessee contented that no incriminating material was found qua the depreciation on the goodwill as all the documents in respect of scheme of slump sale and demerger were already available in the public domain and only statement or questions and answer were made during the course of the search proceedings without any incriminating material found during the course of the search. The Ld. CIT(A) however is of the opinion that on the basis of the documents which were not produced in the course of the original assessment course of the search. According to him it was revealed during the course of the search that entire scheme of business arrangement was a sham transaction with the only intent to defraud the revenue by evading taxes and therefore the facts found qua the addition in dispute during the course of the search Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) liabilities of the group. The assessee on the other hand that scheme of slump sale and demerger was approved NCLT, Mumbai and the Assessing Officer has not raised before the NCLT. It was submitted that amalgamation or demerger are available in public domain nothing contrary has been unearthed during the course of the he Assessing Officer was of the view that entire facts regarding the tax implications and the real intent of the scheme was not before the Hon’ble NCLT. During the appellate proceedings before the Ld. CIT(A), the assessee contented that no incriminating material was found qua the depreciation on the goodwill as all the documents in respect of scheme of slump sale and demerger were already available in the public domain and only statement or questions and answer were made during the course of the search proceedings without any incriminating material found during the course of the search. The Ld. CIT(A) however is of the opinion that the assessment was made n the basis of the documents which were not produced in the course of the original assessment proceedings and found in the course of the search. According to him it was revealed during the course of the search that entire scheme of business arrangement sham transaction with the only intent to defraud the revenue by evading taxes and therefore the facts of incriminating material found qua the addition in dispute during the course of the search Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 11 ITA No. 2226/MUM/2024 ther hand contented approved by the NCLT, Mumbai and the Assessing Officer has not raised any that documents of public domain and uring the course of the of the view that entire facts regarding the tax implications and the real intent of the During the appellate proceedings before the Ld. CIT(A), the assessee contented that no incriminating material was found qua the depreciation on the goodwill as all the documents in respect of scheme of slump sale and demerger were already available in the public domain and only statement or questions and answer were made during the course of the search proceedings without any incriminating material found during the course of the search. The assessment was made n the basis of the documents which were not produced in the and found in the course of the search. According to him it was revealed during the course of the search that entire scheme of business arrangement sham transaction with the only intent to defraud the revenue of incriminating material found qua the addition in dispute during the course of the search was established. The Ld. CIT(A) accordingly, rejected the c of the assessee that no incriminating material was found qua the issue in dispute. submissions made before the no incriminating material was found qua the issue of deprec on intangibles including goodwill. The relied on the finding of ld CIT(A) on the issue in dispute and submitted that the email communication found during the search revealed the real intent of the scheme to defraud the Revenu which is a material in the nature of incriminating. of the ‘e-mail communication has been reproduced assessment order. 4.9 The Ld. counsel for the assessee prayer and submitted that a fresh claim can’t be made in proceedings under section 153A of the Act, hence the claim of depreciation, is not eligible for consideration in proceedings u/s 153A of the Act. He referred the Tribunal in the case of M/s SEW Infrastructure Ltd. in ITA 1717 to 1720/Hyd/2017 and 1722/Hyd/2017 for assessment year 2009-10 to 2012 fresh claim could have been made in the return of income response to notice u/s 153A of the Act. claim of depreciation on goodwill was not made in the original Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) . The Ld. CIT(A) accordingly, rejected the c of the assessee that no incriminating material was found qua the issue in dispute. Before us the ld Counsel reiterated the submissions made before the AO and ld CIT(A) and submitted that no incriminating material was found qua the issue of deprec on intangibles including goodwill. The ld DR on the other hand relied on the finding of ld CIT(A) on the issue in dispute and submitted that the email communication found during the search revealed the real intent of the scheme to defraud the Revenu which is a material in the nature of incriminating. T mail communication’ which is basis of dispute before us reproduced by the AO on page 24 of the impugned The Ld. counsel for the assessee however made an alternative submitted that a fresh claim can’t be made in proceedings under section 153A of the Act, hence the claim of depreciation, is not eligible for consideration in proceedings u/s referred to the decision of the Special Bench of the Tribunal in the case of M/s SEW Infrastructure Ltd. in ITA 1717 to 1720/Hyd/2017 and 1722/Hyd/2017 for assessment 10 to 2012-13 and 2014-15 and submitted that fresh claim could have been made in the return of income response to notice u/s 153A of the Act. He submitted that since the claim of depreciation on goodwill was not made in the original Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 12 ITA No. 2226/MUM/2024 . The Ld. CIT(A) accordingly, rejected the contention of the assessee that no incriminating material was found qua the Before us the ld Counsel reiterated the ld CIT(A) and submitted that no incriminating material was found qua the issue of depreciation DR on the other hand relied on the finding of ld CIT(A) on the issue in dispute and submitted that the email communication found during the search revealed the real intent of the scheme to defraud the Revenue, The relevant part which is basis of dispute before us y the AO on page 24 of the impugned made an alternative submitted that a fresh claim can’t be made in proceedings under section 153A of the Act, hence the claim of depreciation, is not eligible for consideration in proceedings u/s Special Bench of the Tribunal in the case of M/s SEW Infrastructure Ltd. in ITA 1717 to 1720/Hyd/2017 and 1722/Hyd/2017 for assessment and submitted that no fresh claim could have been made in the return of income filed in He submitted that since the claim of depreciation on goodwill was not made in the original return of income and therefore following the decision of the Hon’ble Special Bench in the case of M/s SEW Infrastruc the assessee is not entitled for making fresh claim. Hence, the issue of disallowance of depreciation on goodwill is rendered infructuous as far as the proceedings u/s 153A of the Act is concerned. The Ld. counsel submitted that the asses original assessment which was denied to the as appeal on that issue is pending before the Ld. First Appellate Authority in relation to appeal filed against the original assessment proceedings. Therefore, as far depreciation on goodwill made in the 153A proceedings entertained following the finding of the Hon’ble Special Bench (supra). The ld DR did not object to the prayer of the assessee for not pressing the ground of de claim. 4.10 We have carefully considered the rival submissions of the parties and have perused the relevant material on record concerning the validity of the additions made under the 153A proceedings. Since the prayer, contending that its claim for depreciation on goodwill/intangibles is legally untenable under deem it appropriate to refrain from adjudicating on the issue of the existence of incriminating material dispute and accordingly, leave this issue open. Furthermore, the Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) return of income and therefore following the decision of the Hon’ble Special Bench in the case of M/s SEW Infrastructure Ltd (supra), the assessee is not entitled for making fresh claim. Hence, the issue of disallowance of depreciation on goodwill is rendered infructuous as far as the proceedings u/s 153A of the Act is concerned. The Ld. counsel submitted that the assessee made said claim during original assessment which was denied to the assessee and further issue is pending before the Ld. First Appellate Authority in relation to appeal filed against the original assessment proceedings. Therefore, as far as the facts that claim depreciation on goodwill made in the 153A proceedings entertained following the finding of the Hon’ble Special Bench The ld DR did not object to the prayer of the assessee for not pressing the ground of depreciation on goodwill being a fresh We have carefully considered the rival submissions of the parties and have perused the relevant material on record concerning the validity of the additions made under the proceedings. Since the assessee has made an alternative prayer, contending that its claim for depreciation on goodwill/intangibles is legally untenable under Section 153A deem it appropriate to refrain from adjudicating on the issue of the existence of incriminating material in relation to the matter in dispute and accordingly, leave this issue open. Furthermore, the Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 13 ITA No. 2226/MUM/2024 return of income and therefore following the decision of the Hon’ble ture Ltd (supra), the assessee is not entitled for making fresh claim. Hence, the issue of disallowance of depreciation on goodwill is rendered infructuous as far as the proceedings u/s 153A of the Act is concerned. The Ld. see made said claim during sessee and further issue is pending before the Ld. First Appellate Authority in relation to appeal filed against the original assessment facts that claim of the depreciation on goodwill made in the 153A proceedings, cannot be entertained following the finding of the Hon’ble Special Bench The ld DR did not object to the prayer of the assessee for preciation on goodwill being a fresh We have carefully considered the rival submissions of the parties and have perused the relevant material on record concerning the validity of the additions made under the Section assessee has made an alternative prayer, contending that its claim for depreciation on Section 153A, we deem it appropriate to refrain from adjudicating on the issue of the in relation to the matter in dispute and accordingly, leave this issue open. Furthermore, the assessee’s contention that a fresh claim cannot be entertained under Section 153A Bench of the Tribunal (supra) reproduced as under: “33. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the assessee cannot make a fresh claim of deduction under Chapter VI-A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to notice issued under Section 153A of the Act, pursuant to search conducted under Section 132 of the Act, in unabated/ completed assessment as on the date of search. In case of abated assessments, like the AO who can make assessment based on incriminating materials and any other information made available to him, including information furnished in return of income, the assessee may claim all deductions towards any income income and fresh assessment. In view of the above, the questions referred are answered as under: i) Whether an assessee can make a claim for deduction under Chapter VIA of Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Act ? (ii) If yes, under which circumstances ? Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) assessee’s contention that a fresh claim cannot be entertained Section 153A finds support in the decision of the Bench of the Tribunal (supra). The relevant part of said decision reproduced as under: 33. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the assessee cannot make a fresh claim of deduction under Chapter e Income Tax Act, 1961, for the first time, in the return of income filed in response to notice issued under Section 153A of the Act, pursuant to search conducted under Section 132 of the Act, in unabated/ completed assessment as on the date of search. In case of abated assessments, like the AO who can make assessment based on incriminating materials and any other information made available to him, including information furnished in return of income, the assessee may claim all deductions towards any income or expenditure, as if it is a first return of income and fresh assessment. In view of the above, the questions re answered as under: i) Whether an assessee can make a claim for deduction under Chapter VIA of Income Tax Act, 1961, for time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Yes (ii) If yes, under which circumstances ? I. In case of unabated/ Completed assessment/s, no fresh claim can be made under chapter VI Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Act. II. in case of abated assessment/s, fresh claim Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 14 ITA No. 2226/MUM/2024 assessee’s contention that a fresh claim cannot be entertained finds support in the decision of the Special relevant part of said decision is 33. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the assessee cannot make a fresh claim of deduction under Chapter e Income Tax Act, 1961, for the first time, in the return of income filed in response to notice issued under Section 153A of the Act, pursuant to search conducted under Section 132 of the Act, in unabated/ completed assessment as on the date of search. In case of abated assessments, like the AO who can make assessment based on incriminating materials and any other information made available to him, including information furnished in return of income, the assessee may claim all deductions expenditure, as if it is a first return of income and fresh assessment. In view of the above, the questions In case of unabated/ Completed assessment/s, im can be made under chapter VI-A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the in case of abated t/s, fresh claim 4.11 The Special Bench has made it clear that in case of unabated/completed assessment in the return of income filed in response to notice u/s 153A of the Act for the first time. Since in the instant case also the search was conducted on 15.11.2018 and therefore, the assessment years 2018-19 to 2013-14 were six assessment years relevant to search period assessment u/s 143(3) of the Act assessment year 2015 prior to the date of the search pending as on the date of the search and the assessment year under consideration falls in the category of In such circumstances, no fresh claim in respect of depreciation goodwill/intangible could have been assessee is permitted to withdraw said claim and the grounds are rendered 5. The ground No. 4 of the appeal relates to disallowance of provision of the doubtful debt amounting to counsel for the assessee submitted that while return of income for computing Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) can be made under chapter VI-A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a conducted under section 132 of the Act. cial Bench has made it clear that in case of unabated/completed assessment, no fresh claim can be entertained in the return of income filed in response to notice u/s 153A of the Act for the first time. Since in the instant case also the search was d on 15.11.2018 and therefore, the assessment years 14 were six assessment years relevant to search period assessment u/s 143(3) of the Act. The assessment year 2015-16 was already completed on 13.07.2017 date of the search, therefore, no assessment was pending as on the date of the search and the assessment year under consideration falls in the category of ‘unabated assessment In such circumstances, no fresh claim in respect of depreciation could have been entertained, accordingly assessee is permitted to withdraw said claim and the are rendered infructuous. he ground No. 4 of the appeal relates to disallowance of doubtful debt amounting to Rs.30 counsel for the assessee submitted that while filing the original return of income for computing the total income u/s 115JB of the Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 15 ITA No. 2226/MUM/2024 can be made under chapter A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a Search under section cial Bench has made it clear that in case of no fresh claim can be entertained in the return of income filed in response to notice u/s 153A of the Act for the first time. Since in the instant case also the search was d on 15.11.2018 and therefore, the assessment years 14 were six assessment years relevant to search he assessment for 16 was already completed on 13.07.2017 i.e. therefore, no assessment was pending as on the date of the search and the assessment year unabated assessment’. In such circumstances, no fresh claim in respect of depreciation on entertained, accordingly the assessee is permitted to withdraw said claim and the relevant he ground No. 4 of the appeal relates to disallowance of Rs.30 lakhs. The Ld. filing the original the total income u/s 115JB of the Act, provision for doubtful debt added to the book profit income under the normal provisions of the Act. that assessee had not disallowed under the normal provisions become bad debt and thus assessee company had the same. The assessee claimed in 153A assessment proceedings for allowing the said claim as bed debt written off. submitted that this claim was also not made income filed and therefore, assessee is claim in the return filed in response to The ld DR did not object to the arguments of the learned counsel for the assessee for not pressing this ground for the reason that claim of return of bad deb section 153A of the A 5.1 We have had rival submissions of the parties and perused the relevant material on record provision for doubtful debt amounting to arguments of the learned counsel for assessee that this claim of the assessee being a fresh claim made in the return filed under section 153A of the Act is not permitted in law, we are not adjudicating on the ground of the assessee challenging existence of incriminating material qua the issue in dispute. We a the ld counsel for assessee, that the claim for provision for bad and Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) doubtful debt amounting to Rs.30 lakhs added to the book profit but same was not added while compu income under the normal provisions of the Act. It not disallowed the same while computing income under the normal provisions as same was highly probable to become bad debt and thus assessee company had The assessee claimed in 153A assessment proceedings for allowing the said claim as bed debt written off. The Ld. counsel submitted that this claim was also not made in the regular return of and therefore, assessee is not eligible for making fresh return filed in response to notice u/s 153A of the Act. The ld DR did not object to the arguments of the learned counsel for the assessee for not pressing this ground for the reason that claim of return of bad debt being a fresh claim made in return under A of the Act, was not permitted in law. have had rival submissions of the parties and perused the elevant material on record qua the issue of disallowance of provision for doubtful debt amounting to ₹ 30 lakhs arguments of the learned counsel for assessee that this claim of the assessee being a fresh claim made in the return filed under section not permitted in law, we are not adjudicating on the ground of the assessee challenging existence of incriminating material qua the issue in dispute. We agree with the contentions the ld counsel for assessee, that the claim for provision for bad and Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 16 ITA No. 2226/MUM/2024 amounting to Rs.30 lakhs was added while computing was submitted computing income same was highly probable to become bad debt and thus assessee company had not disallowed The assessee claimed in 153A assessment proceedings The Ld. counsel the regular return of not eligible for making fresh /s 153A of the Act. The ld DR did not object to the arguments of the learned counsel for the assessee for not pressing this ground for the reason that claim t being a fresh claim made in return under have had rival submissions of the parties and perused the qua the issue of disallowance of lakhs. In view of the arguments of the learned counsel for assessee that this claim of the assessee being a fresh claim made in the return filed under section not permitted in law, we are not adjudicating on the ground of the assessee challenging existence of incriminating gree with the contentions of the ld counsel for assessee, that the claim for provision for bad and doubtful debt turned into debt written off is not tenable for claim in the return of income filed under section 153A of the fresh claim. Therefore, Special Bench in the case of SEW Infrastructure Ltd. ( claim of the assessee entertained and accordingly the assessee is permitted to withdraw the said claim. The ground No 4 of the appeal ground Nos. 1(a) to infructuous. 6. In relation to ground No. 1 (d there was no incriminating material qua the addition of inflated capital expenditure. However, the Ld. Departmental Representative (DR) referred to the finding of the Ld. CIT(A to various ‘whatsApp of Shri Pandurang Landge (President Projects). 6.1 The facts in brief qua issue in dispute are that during the course of the search a found from the mobile including Shri Pandurang Landge (President Projects) and Shri Sailesh Mehta, wherein movement of ‘Deepak Fertilizers’ gro employees of the assessee recorded on oath u/s 153A of the Act on 19.11.2018 Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) ubtful debt turned into debt written off is not tenable for claim in the return of income filed under section 153A of the Therefore, respectfully, following the finding of the Special Bench in the case of SEW Infrastructure Ltd. ( claim of the assessee for provision for doubtful debt entertained and accordingly the assessee is permitted to withdraw The ground No 4 of the appeal and 1(c) of assessee are accordingly In relation to ground No. 1 (d), the Ld. counsel submitted that there was no incriminating material qua the addition of inflated capital expenditure. However, the Ld. Departmental Representative to the finding of the Ld. CIT(A) wherein he has referred pp’ messages found from the mobile of Shri Pandurang Landge (President Projects). The facts in brief qua issue in dispute are that during the course of the search assessment various ‘whatsapp’ the mobile instruments of the employees of the assessee including Shri Pandurang Landge (President Projects) and Shri wherein movement of unaccounted group entities and suppliers were employees of the assessee Shri Pandurang Landge in his statement recorded on oath u/s 153A of the Act on 19.11.2018 Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 17 ITA No. 2226/MUM/2024 ubtful debt turned into debt written off is not tenable for claim in the return of income filed under section 153A of the Act, being a following the finding of the Special Bench in the case of SEW Infrastructure Ltd. (supra), the for provision for doubtful debt also cannot be entertained and accordingly the assessee is permitted to withdraw relevant part of ccordingly dismissed as ), the Ld. counsel submitted that there was no incriminating material qua the addition of inflated capital expenditure. However, the Ld. Departmental Representative ) wherein he has referred from the mobile instrument The facts in brief qua issue in dispute are that during the ’ messages were of the employees of the assessee including Shri Pandurang Landge (President Projects) and Shri unaccounted cash between were found. The Shri Pandurang Landge in his statement recorded on oath u/s 153A of the Act on 19.11.2018 admitted the cash transactions and therefore Shri Sailesh Mehta CMD of Deepak Fertilizer group had cash was generated by way of inflating capital expenditure with two entities namely M/s Onshore Construction Company and M/s Ray Construction Pvt. Ltd. The relevant finding of the Assessing Officer is reproduced as under: “5.12 It is clear from the above facts and evidences found during the course of search proceedings that the company has booked inflated capital expenditure with Onshore Construction Co. Pvt. Ltd. and Ray Construction Ltd. 5.13 Evidences in form data etc. were seized/ and survey operation on Deepak Group. They are analyzed in detail as under: 5.14 It is seen that during the course of Search Proceedings u/s 132 at Deepak the Act, Shri Pandurang Landge has admitted that he was involved in the transactions of booking of inflated capital expenditure for Deepak Group. messages communication which were the Mobile backup of Shri Pandurang Landge. On perusal to the communication, it is seen that Shri Pandurang Landge has arrange cash from above said 4 parties on behalf of CMD Sailesh Mehta and the assessee company. 5.15 The conversati found in phone of Shri Pandurang Landge and Shri Sailesh Mehta which reflected the transfers of cash to Shri Naresh Mehta and Shri Deepak Desai. Same messages have been explained in detail by Shri Pandurang Landge and been confirmed by Shri Sailesh Mehta. 5.16 It is clear from the above facts and evidences found during the course of search proceedings that the assessee company has booked inflated capital expenditure which has returned back the money in cash. Th the books of accounts to expend out of books cash transactions. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) and therefore Shri Sailesh Mehta CMD of Deepak also confirmed the generation of cash cash was generated by way of inflating capital expenditure with two entities namely M/s Onshore Construction Company and M/s Ray Construction Pvt. Ltd. The relevant finding of the Assessing Officer d as under: 5.12 It is clear from the above facts and evidences found during the course of search proceedings that the company has booked inflated capital expenditure with Onshore Construction Co. Pvt. Ltd. and Ray Construction Ltd. 5.13 Evidences in form of documents, mobile data, computer data etc. were seized/ impounded during the course of search and survey operation on Deepak Group. They are analyzed in detail as under: - 5.14 It is seen that during the course of Search Proceedings u/s 132 at Deepak Group. In the statement recorded u/s 132(4) of the Act, Shri Pandurang Landge has admitted that he was involved in the transactions of booking of inflated capital expenditure for Deepak Group. The same is explained in the messages communication which were found and Seized from the Mobile backup of Shri Pandurang Landge. On perusal to the communication, it is seen that Shri Pandurang Landge has arrange cash from above said 4 parties on behalf of CMD Sailesh Mehta and the assessee company. 5.15 The conversation between Shri Pandurang Landge were found in phone of Shri Pandurang Landge and Shri Sailesh Mehta which reflected the transfers of cash to Shri Naresh Mehta and Shri Deepak Desai. Same messages have been explained in detail by Shri Pandurang Landge and same has been confirmed by Shri Sailesh Mehta. 5.16 It is clear from the above facts and evidences found during the course of search proceedings that the assessee company has booked inflated capital expenditure which has returned back the money in cash. The said cash has not been recorded in the books of accounts to expend out of books cash transactions. Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 18 ITA No. 2226/MUM/2024 and therefore Shri Sailesh Mehta CMD of Deepak also confirmed the generation of cash. This cash was generated by way of inflating capital expenditure with two entities namely M/s Onshore Construction Company and M/s Ray Construction Pvt. Ltd. The relevant finding of the Assessing Officer 5.12 It is clear from the above facts and evidences found during the course of search proceedings that the company has booked inflated capital expenditure with Onshore Construction of documents, mobile data, computer impounded during the course of search and survey operation on Deepak Group. They are analyzed in 5.14 It is seen that during the course of Search Proceedings u/s Group. In the statement recorded u/s 132(4) of the Act, Shri Pandurang Landge has admitted that he was involved in the transactions of booking of inflated capital The same is explained in the found and Seized from the Mobile backup of Shri Pandurang Landge. On perusal to the communication, it is seen that Shri Pandurang Landge has arrange cash from above said 4 parties on behalf of CMD on between Shri Pandurang Landge were found in phone of Shri Pandurang Landge and Shri Sailesh Mehta which reflected the transfers of cash to Shri Naresh Mehta and Shri Deepak Desai. Same messages have been same has 5.16 It is clear from the above facts and evidences found during the course of search proceedings that the assessee company has booked inflated capital expenditure which has returned e said cash has not been recorded in the books of accounts to expend out of books cash transactions. So it is held that capital expenditure booked with both the parties i.e. Ray Construction Limited and Onshore Construction Company Pvt. Ltd whose name has Pandurang Landge statement is inflated.The whole façade created by assessee shows to evade taxes. Merely presenting of documents and making payment through bank is in itself not sufficient to justify the genuineness of the transactio 5.17 In this regard, it is found that assessee company has generated the cash by debiting inflated capital expenditure with parties namely Onshore Construction Co. Pvt. Ltd. and Ray Construction Ltd 5.18 In the backdrop of the similar facts and circumst evidences and parties/vendors involved, in one of the group concerns, namely, Deepak Fertilizer Petrochemical Corporation Limited (DFPCL), the inflated capital expenditure has been determined @10% of total capital expenditure booked by the company from such parties. 5.19 Accordingly, following the precedent, the basis of inflated capital expenditure has been identified @10% of total capital expenditure booked by the company from such parties. The Working of calculation of Inflated capital expenditure 2015-16 is as under: (1) Onshore Construction Company Pvt. Ltd. A.Y. STL Books (A) 2015-16 1,80,87,980 (2) Ray Construction Ltd. A.Y. STL Books (A) 2015-16 3,04,50,672 Total (1+2) A.Y. Onshore Construction Co. Pvt. Ltd. 2015-16 18,08,798 Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) So it is held that capital expenditure booked with both the parties i.e. Ray Construction Limited and Onshore Construction Company Pvt. Ltd whose name has been mentioned in Shri Pandurang Landge statement is inflated.The whole façade created by assessee shows to evade taxes. Merely presenting of documents and making payment through bank is in itself not sufficient to justify the genuineness of the transaction. 5.17 In this regard, it is found that assessee company has generated the cash by debiting inflated capital expenditure with parties namely Onshore Construction Co. Pvt. Ltd. and Ray Construction Ltd 5.18 In the backdrop of the similar facts and circumst evidences and parties/vendors involved, in one of the group concerns, namely, Deepak Fertilizer Petrochemical Corporation Limited (DFPCL), the inflated capital expenditure has been determined @10% of total capital expenditure booked by the rom such parties. 5.19 Accordingly, following the precedent, the basis of inflated capital expenditure has been identified @10% of total capital expenditure booked by the company from such parties. The Working of calculation of Inflated capital expenditure 16 is as under:- (1) Onshore Construction Company Pvt. Ltd. STL Books (A) % of Calculation @ 90% (B) 1,80,87,980 1,62,79,182 (2) Ray Construction Ltd. STL Books (A) % of Calculation @ 90% (B) 3,04,50,672 2,74,05,605 Onshore Construction Co. Pvt. Ltd. Ray Construction Ltd. 18,08,798 30,45,067 Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 19 ITA No. 2226/MUM/2024 So it is held that capital expenditure booked with both the parties i.e. Ray Construction Limited and Onshore Construction been mentioned in Shri Pandurang Landge statement is inflated.The whole façade created by assessee shows to evade taxes. Merely presenting of documents and making payment through bank is in itself not 5.17 In this regard, it is found that assessee company has generated the cash by debiting inflated capital expenditure with parties namely Onshore Construction Co. Pvt. Ltd. and Ray 5.18 In the backdrop of the similar facts and circumstances, evidences and parties/vendors involved, in one of the group concerns, namely, Deepak Fertilizer Petrochemical Corporation Limited (DFPCL), the inflated capital expenditure has been determined @10% of total capital expenditure booked by the 5.19 Accordingly, following the precedent, the basis of inflated capital expenditure has been identified @10% of total capital expenditure booked by the company from such parties. The Working of calculation of Inflated capital expenditure for A. Y Difference as per contractual Price (A- B) 18,08,798 Difference as per contractual Price (A- B) 30,45,067 Total 48,53,865 5.20 The seized documents messages as mentioned above in detailed speaks of booking of inflated capital expenditure by the assessee company and the same has been received back in cash. Also, the money received by the assessee in cash is outside the books o cash received by the assessee company outside the books of accounts at the time of booking of capital expenditure becomes the income of the assessee. The cash received by the assessee partakes of the character of commercial receipts of th and is therefore, liable to be assessed as income according to the accepted principle of commercial accounting. The statement recorded u/s 132(4) is validly recorded statement by authorized officer and has evidentiary value. The statement record 132(4) of Income Tax Act, 1961 of Shri Sailesh Mehta (CMD) and all the Key Personnel's of Deepak group are fully supported by the document sized and data back of mobile phones i.e. digital evidence.” 6.2. Before the ld CIT(A) , t no incriminating material qua the issue of capital expenditure, but ld CIT(A) rejected the contention of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: “8.4 During the search proceedings, from the wha messages from the mobile of Shri Pandurang Landge( President Projects), it was found that he was indulged in handling cash transactions for the Deepak Group Companies. In the answer to question no 21 Shri Landge has accepted that Shri Naresh Mehta an cash on behalf of the company. In the answer to question no 22 he explained the meaning of \"Drawing\" means 1 lac and in answer to question no 23 he explained \"Contribution\" means Rs. ler in cash. He has admitted that after confirmation from Mahesh Agrahara, Commercial Head he has written \"6.7 contribution done\" means that cash of Rs. 6.7cr was handed over either to Deepak Desai or Naresh Mehta as per the instruction of the CMD. In the answer to question no 25 he has explained generation which is from the extra work claims settlement with the contractors. The amount of extra work is returned in cash. In the answer to question no 28 he has specifically stated that amount of 200 against Onshore means an amount of Rs. 200 lacs or 2cr taken in cash from Onshore Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) The seized documents and data backup of mobile messages as mentioned above in detailed speaks of booking of inflated capital expenditure by the assessee company and the same has been received back in cash. Also, the money received by the assessee in cash is outside the books of accounts. Thus, cash received by the assessee company outside the books of accounts at the time of booking of capital expenditure becomes the income of the assessee. The cash received by the assessee partakes of the character of commercial receipts of the assessee and is therefore, liable to be assessed as income according to the accepted principle of commercial accounting. The statement recorded u/s 132(4) is validly recorded statement by authorized officer and has evidentiary value. The statement record 132(4) of Income Tax Act, 1961 of Shri Sailesh Mehta (CMD) and all the Key Personnel's of Deepak group are fully supported by the document sized and data back of mobile phones i.e. digital Before the ld CIT(A) , the assessee challenged that there was no incriminating material qua the issue of capital expenditure, but ld CIT(A) rejected the contention of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: 8.4 During the search proceedings, from the wha messages from the mobile of Shri Pandurang Landge( President Projects), it was found that he was indulged in handling cash transactions for the Deepak Group Companies. In the answer to question no 21 Shri Landge has accepted that Shri Naresh Mehta and Shri Deepak Desai handle the cash on behalf of the company. In the answer to question no 22 he explained the meaning of \"Drawing\" means 1 lac and in answer to question no 23 he explained \"Contribution\" means Rs. ler in cash. He has admitted that after nfirmation from Mahesh Agrahara, Commercial Head he \"6.7 contribution done\" means that cash of Rs. 6.7cr was handed over either to Deepak Desai or Naresh Mehta as per the instruction of the CMD. In the answer to question no 25 he has explained the source of cash generation which is from the extra work claims settlement with the contractors. The amount of extra work is returned in cash. In the answer to question no 28 he has specifically stated that amount of 200 against Onshore means an f Rs. 200 lacs or 2cr taken in cash from Onshore Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 20 ITA No. 2226/MUM/2024 and data backup of mobile messages as mentioned above in detailed speaks of booking of inflated capital expenditure by the assessee company and the same has been received back in cash. Also, the money received f accounts. Thus, cash received by the assessee company outside the books of accounts at the time of booking of capital expenditure becomes the income of the assessee. The cash received by the assessee e assessee and is therefore, liable to be assessed as income according to the accepted principle of commercial accounting. The statement recorded u/s 132(4) is validly recorded statement by authorized officer and has evidentiary value. The statement recorded u/s 132(4) of Income Tax Act, 1961 of Shri Sailesh Mehta (CMD) and all the Key Personnel's of Deepak group are fully supported by the document sized and data back of mobile phones i.e. digital challenged that there was no incriminating material qua the issue of capital expenditure, but ld CIT(A) rejected the contention of the assessee. The relevant 8.4 During the search proceedings, from the whatsapp messages from the mobile of Shri Pandurang Landge( President Projects), it was found that he was indulged in handling cash transactions for the Deepak Group Companies. In the answer to question no 21 Shri Landge has accepted d Shri Deepak Desai handle the cash on behalf of the company. In the answer to question no 22 he explained the meaning of \"Drawing\" means 1 lac and in answer to question no 23 he explained \"Contribution\" means Rs. ler in cash. He has admitted that after nfirmation from Mahesh Agrahara, Commercial Head he \"6.7 contribution done\" means that cash of Rs. 6.7cr was handed over either to Deepak Desai or Naresh Mehta as per the instruction of the CMD. In the answer to the source of cash generation which is from the extra work claims settlement with the contractors. The amount of extra work is returned in cash. In the answer to question no 28 he has specifically stated that amount of 200 against Onshore means an f Rs. 200 lacs or 2cr taken in cash from Onshore Construction Pvt. Ltd. and given to Deepak Desai or Naresh Mehta. Similarly the figure 562.56 against Ray means 5.62cr cash taken from Ray Construction. In the answer to question no 30 he has also given the handling the cash transactions on behalf of Onshore Construction Company Pvt. Ltd., Ray Construction and other. In the answer to question no 31, he has also stated that this practice has been followed since last 2 8.4.2 These whatsapp messages from the mobile of Shri Landge were also confronted to Shri Deepak Desai. He has also accepted the cash transactions carried out by Shri Landge. The facts regarding the cash transactions were also confronted to Shri Naresh Mehta during the search. He has also stated that he was handling the cash as per the statement given by Shri Landge. 8.4.3 Shri Shailash Mehta (CMD) in the answer to question no 18 has confirmed that cash. In the answer to question no,19 he has explained the details of methods of cash generation which is exactly similar as stated by Shri Pandurang Landge. In the answer to question no 20 he has also confirmed cash received of Rs. 5.60cr from M/s Ray Constr no 22 he confirms the statement given by Shri Landge that 6.7 contributions means total 6.7cr cash handed over either to Deepak Desai and Shri Naresh Mehta as per the standing instructions. He has also accepted that the ca crores was required for some work in Delhi. 8.5 From the above it is evident that the appellant is indulged in generating cash regularly from the contractors namely M/s Ray Construction, M/s Onshore Construction, Jobby Engineering Pvt. Ltd, and Pvt. Ltd. The cash is mainly handled by Shri Pandurang Landge on the instruction of Shri Shailash Mehta and the same is handed over either to Shri Naresh Mehta or Shri Deepak Desai. Thus, conclusive evidences regarding the receipts from the contractors namely M/s Ray Construction, M/s Onshore Construction and other parties are unearthed. It is fact that the cash received back is not recorded in the regular books of accounts. Thus, the incriminating material in the form messages and specific admission of cash generation by Shri pandurang Landage and Shri Shailesh Mehata are unearthed during the search. Hence, the contention of the Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) Construction Pvt. Ltd. and given to Deepak Desai or Naresh Mehta. Similarly the figure 562.56 against Ray means 5.62cr cash taken from Ray Construction. In the answer to question no 30 he has also given the details of the persons who are handling the cash transactions on behalf of Onshore Construction Company Pvt. Ltd., Ray Construction and other. In the answer to question no 31, he has also stated that this practice has been followed since last 2-3 years. 4.2 These whatsapp messages from the mobile of Shri Landge were also confronted to Shri Deepak Desai. He has also accepted the cash transactions carried out by Shri The facts regarding the cash transactions were also confronted to Shri Naresh Mehta in his statement recorded during the search. He has also stated that he was handling the cash as per the statement given by Shri Landge. 8.4.3 Shri Shailash Mehta (CMD) in the answer to question no 18 has confirmed that \"drawing\" means payment made in h. In the answer to question no,19 he has explained the details of methods of cash generation which is exactly similar as stated by Shri Pandurang Landge. In the answer to question no 20 he has also confirmed cash received of Rs. 5.60cr from M/s Ray Construction. In the answer to question no 22 he confirms the statement given by Shri Landge that 6.7 contributions means total 6.7cr cash handed over either to Deepak Desai and Shri Naresh Mehta as per the standing instructions. He has also accepted that the cash of Rs 10 crores was required for some work in Delhi. 8.5 From the above it is evident that the appellant is indulged in generating cash regularly from the contractors namely M/s Ray Construction, M/s Onshore Construction, Jobby Engineering Pvt. Ltd, and National Builders Infrastructure Pvt. Ltd. The cash is mainly handled by Shri Pandurang Landge on the instruction of Shri Shailash Mehta and the same is handed over either to Shri Naresh Mehta or Shri Deepak Desai. Thus, conclusive evidences regarding the receipts from the contractors namely M/s Ray Construction, M/s Onshore Construction and other parties are unearthed. It is fact that the cash received back is not recorded in the regular books of accounts. Thus, the incriminating material in the form of whatsapp messages and specific admission of cash generation by Shri pandurang Landage and Shri Shailesh Mehata are unearthed during the search. Hence, the contention of the Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 21 ITA No. 2226/MUM/2024 Construction Pvt. Ltd. and given to Deepak Desai or Naresh Mehta. Similarly the figure 562.56 against Ray means 5.62cr cash taken from Ray Construction. In the answer to question details of the persons who are handling the cash transactions on behalf of Onshore Construction Company Pvt. Ltd., Ray Construction and other. In the answer to question no 31, he has also stated that this 4.2 These whatsapp messages from the mobile of Shri Landge were also confronted to Shri Deepak Desai. He has also accepted the cash transactions carried out by Shri The facts regarding the cash transactions were also in his statement recorded during the search. He has also stated that he was handling 8.4.3 Shri Shailash Mehta (CMD) in the answer to question \"drawing\" means payment made in h. In the answer to question no,19 he has explained the details of methods of cash generation which is exactly similar as stated by Shri Pandurang Landge. In the answer to question no 20 he has also confirmed cash received of Rs. uction. In the answer to question no 22 he confirms the statement given by Shri Landge that 6.7 contributions means total 6.7cr cash handed over either to Deepak Desai and Shri Naresh Mehta as per the standing sh of Rs 10 8.5 From the above it is evident that the appellant is indulged in generating cash regularly from the contractors namely M/s Ray Construction, M/s Onshore Construction, Jobby National Builders Infrastructure Pvt. Ltd. The cash is mainly handled by Shri Pandurang Landge on the instruction of Shri Shailash Mehta and the same is handed over either to Shri Naresh Mehta or Shri Deepak Desai. Thus, conclusive evidences regarding the cash receipts from the contractors namely M/s Ray Construction, M/s Onshore Construction and other parties are unearthed. It is fact that the cash received back is not recorded in the of whatsapp messages and specific admission of cash generation by Shri pandurang Landage and Shri Shailesh Mehata are unearthed during the search. Hence, the contention of the appellant that no incriminating material was unearthed is factually incorrect a 6.3 On merit of addition the assessee contented that Shri Naresh Mehta and Shri Deepak Desai both were not the employees of the company and Pandurang Landge, Sh Sailesh Mehta and Mahe merely acting as conduit made in the hands of the assessee. The Ld. CIT(A) however rejected the contention of the assessee observing as under: “12.13.2 As already discussed above in detail, during the search from the Whats App of Shri Pandurang Landge, it was seen that he was indulged in cash transaction alongwith other persons. In the statement recorded u/s 132(4), he has categorically admitted that he is handling the cash transactions on the instruction of Shri Shailesh Mehta, CMD of the group companies and the cash is handled by Shri Naresh Mehta and Shri Deepak Desai. Shri Shailesh Mehta, CMD, has also admitted that the WhatsApp messages pertains to the cash trans generated on account of inflation of expenditure related to the contractors namely Onshore construction and Ray construction Private Limited. Both Shri Sailesh Mehta and Shri Pandurang Landge has explained the method of generation of source is explained from the inflation of capital expenditure. It is a fact that the Onshore construction and Ray construction Private Limited are the contractors related to the construction of NPK plant at Taloja and the expenditure of the s in the books of account of appellant. From this fact, it is evident that the cash generated is related to the appellant company. The appellant company is the owner of entire cash transactions and the same is specifically admitted by these pe statements recorded u/s 132(4) of the IT Act. Further, Shri Naresh Mehta, Shri Déepak Desai and others, they were handling the cash on behalf of the a that addition is not made in the hands of these persons who were handling the alleged cash transactions. Hence the contention of the appellant that addition is made w/s 69A in the hands of the conduit is misleading. The fact established Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) appellant that no incriminating material was unearthed is factually incorrect and hence not acceptable.” addition u/s 69A of the Act, before the ld CITA) , the assessee contented that Shri Naresh Mehta and Shri Deepak Desai both were not the employees of the company and , Sh Sailesh Mehta and Mahesg Agrahara were merely acting as conduit and hence no addition u/s 69A could be made in the hands of the assessee. The Ld. CIT(A) however rejected the contention of the assessee observing as under: 12.13.2 As already discussed above in detail, during the search from the Whats App messages retrieved from the mobile Pandurang Landge, it was seen that he was indulged in cash transaction alongwith other persons. In the statement recorded u/s 132(4), he has categorically admitted that he is he cash transactions on the instruction of Shri Shailesh Mehta, CMD of the group companies and the cash is handled by Shri Naresh Mehta and Shri Deepak Desai. Shri Shailesh Mehta, CMD, has also admitted that the WhatsApp messages pertains to the cash transactions which has been generated on account of inflation of expenditure related to the contractors namely Onshore construction and Ray construction Private Limited. Both Shri Sailesh Mehta and Shri Pandurang Landge has explained the method of generation of cash and the source is explained from the inflation of capital expenditure. It is a fact that the Onshore construction and Ray construction Private Limited are the contractors related to the construction of NPK plant at Taloja and the expenditure of the same is debited in the books of account of appellant. From this fact, it is evident that the cash generated is related to the appellant company. The appellant company is the owner of entire cash transactions and the same is specifically admitted by these persons in the statements recorded u/s 132(4) of the IT Act. Further, Shri Naresh Mehta, Shri Déepak Desai and others, they were handling the cash on behalf of the appellant. It is also a fact addition is not made in the hands of these persons who handling the alleged cash transactions. Hence the contention of the appellant that addition is made w/s 69A in the hands of the conduit is misleading. The fact established Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 22 ITA No. 2226/MUM/2024 appellant that no incriminating material was unearthed is before the ld CITA) , the assessee contented that Shri Naresh Mehta and Shri Deepak Desai both were not the employees of the company and Shri sg Agrahara were and hence no addition u/s 69A could be made in the hands of the assessee. The Ld. CIT(A) however rejected 12.13.2 As already discussed above in detail, during the messages retrieved from the mobile Pandurang Landge, it was seen that he was indulged in cash transaction alongwith other persons. In the statement recorded u/s 132(4), he has categorically admitted that he is he cash transactions on the instruction of Shri Shailesh Mehta, CMD of the group companies and the cash is handled by Shri Naresh Mehta and Shri Deepak Desai. Shri Shailesh Mehta, CMD, has also admitted that the WhatsApp actions which has been generated on account of inflation of expenditure related to the contractors namely Onshore construction and Ray construction Private Limited. Both Shri Sailesh Mehta and Shri Pandurang cash and the source is explained from the inflation of capital expenditure. It is a fact that the Onshore construction and Ray construction Private Limited are the contractors related to the construction of ame is debited in the books of account of appellant. From this fact, it is evident that the cash generated is related to the appellant company. The appellant company is the owner of entire cash transactions rsons in the statements recorded u/s 132(4) of the IT Act. Further, Shri Naresh Mehta, Shri Déepak Desai and others, they were ppellant. It is also a fact addition is not made in the hands of these persons who handling the alleged cash transactions. Hence the contention of the appellant that addition is made w/s 69A in the hands of the conduit is misleading. The fact established from the findings of the search and admission in the statement recorded is that the appellant is found to be the owner of such cash. Therefore, the same needs to be assessed in the hands of the appellant. Accordingly the contention of the appellant is rejected. 12.14 The further contention of the not correct in adding the uncounted cash @ of 10% of the expenditure debited in the books of account. The dates of transactions as per WhatsApp messages are 8th and 9th June 2018 and hence it is outside the period covered u/s 1 IT act. 12.14.2 Shri Pandurang Landge in the answer to question number 31 of specifically mentioned that the practice of generation of cash is followed since last 2 to 3 years. This shows the appel generating the cash regularly from the expenses debited to the contractors. This fact is also corroborated by the WhatsApp messages and specific admission of the same by Shri Sailesh Mehta and Shri Pandurang Landge. Hence, the AO has correctly disallowed 10% on the expenditure debited against M/s Ray construction Ltd and Onshore Company Private Ltd. 6.4 We have heard the rival submissions of the parties and perused the relevant material on record. The Counsel for the assessee submitted that the Assessing Officer is dated 8 the assessment year evidence was also found on application of the alleged cash generation. According to him extra generation does not have any basis statement on oath supports the extrapolation. not controvert that the ‘whatsapp’ chat found during the search are not qua the year under considerat quantum of cash inflated assessed in the year of search, inflation of Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) from the findings of the search and admission in the statement recorded is that the cash pertains to the appellant. Hence, the appellant is found to be the owner of such cash. Therefore, the same needs to be assessed in the hands of the appellant. Accordingly the contention of the appellant is rejected. 12.14 The further contention of the appellant is that the AO is not correct in adding the uncounted cash @ of 10% of the expenditure debited in the books of account. The dates of transactions as per WhatsApp messages are 8th and 9th June 2018 and hence it is outside the period covered u/s 153A of the Shri Pandurang Landge in the answer to question number 31 of statement recorded u/s 132(4) of the IT act has specifically mentioned that the practice of generation of cash is followed since last 2 to 3 years. This shows the appel generating the cash regularly from the expenses debited to the contractors. This fact is also corroborated by the WhatsApp messages and specific admission of the same by Shri Sailesh Mehta and Shri Pandurang Landge. Hence, the AO has correctly llowed 10% on the expenditure debited against M/s Ray construction Ltd and Onshore Company Private Ltd.” We have heard the rival submissions of the parties and perused the relevant material on record. The Counsel for the assessee submitted that the ‘WhatsApp’ chat referred by the Assessing Officer is dated 8th and 9th June , 2019 and not pertain to the assessment year under consideration. He submitted that no evidence was also found on application of the alleged cash generation. According to him extrapolation of the alleged cash generation does not have any basis and no seized statement on oath supports the extrapolation. The ld DR also could not controvert that the ‘whatsapp’ chat found during the search are not qua the year under consideration and only on the basis of quantum of cash inflated assessed in the year of search, inflation of Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 23 ITA No. 2226/MUM/2024 from the findings of the search and admission in the statement cash pertains to the appellant. Hence, the appellant is found to be the owner of such cash. Therefore, the same needs to be assessed in the hands of the appellant. appellant is that the AO is not correct in adding the uncounted cash @ of 10% of the expenditure debited in the books of account. The dates of transactions as per WhatsApp messages are 8th and 9th June 53A of the Shri Pandurang Landge in the answer to question statement recorded u/s 132(4) of the IT act has specifically mentioned that the practice of generation of cash is followed since last 2 to 3 years. This shows the appellant is generating the cash regularly from the expenses debited to the contractors. This fact is also corroborated by the WhatsApp messages and specific admission of the same by Shri Sailesh Mehta and Shri Pandurang Landge. Hence, the AO has correctly llowed 10% on the expenditure debited against M/s Ray We have heard the rival submissions of the parties and perused the relevant material on record. The Counsel for the chat referred by the June , 2019 and not pertain to consideration. He submitted that no evidence was also found on application of the alleged cash of the alleged cash and no seized material or The ld DR also could not controvert that the ‘whatsapp’ chat found during the search are ion and only on the basis of quantum of cash inflated assessed in the year of search, inflation of cash has been estimated in the year under consideration. In view of these facts, we are of material exits qua the i hence, no addition could have been qua the issue of inflated expenditure. Accordingly, we set aside the finding of the ld CIT(A) on the issue in dispute and allow the ground no. 1(d) of the appeal. Since , we have already held that no addition could have been made for inflation of capital expenditure without the aid of material found qua the assessment are not required to adjudicate the ground No. 3 raised challenging the addition on merit. 7. In relation to ground No. 1(e on delayed payment of the TDS, the Assessing Officer made addition observing as under: “6.1 During the assessment proceeding, it is seen from Schedule no.34(c) of Tax Audit Report that being interest on delayed payment of TDS u/s.201(1A) or u/s.206C(7) of the Act has been shown of Rs. 2,42,966/ assessee was required to show cause as to why the claim of interest on delayed payment of TDS of Rs.2,42,966/ not be disallowed u/s. 37 of the Act. 6.2 In response, the assessee has filed its submission and the same is reproduced hereunder; \"It is submitted is compensatory and not penal in nature. The assessee would like to lay emphasis on the fact that the expenses that are penal in nature shall be disallowed 37 and thus, the assessee has correctly claimed the said intere for the year under Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) cash has been estimated in the year under consideration. In view of are of considered opinion that no incriminating material exits qua the issue in dispute for year under consideration, no addition could have been qua the issue of inflated expenditure. Accordingly, we set aside the finding of the ld CIT(A) on the issue in dispute and allow the ground no. 1(d) of the appeal. e , we have already held that no addition could have been made capital expenditure without the aid of material found qua the assessment year under consideration, we are not required to adjudicate the ground No. 3 raised challenging the addition on merit. In relation to ground No. 1(e) i.e. the disallowance of interest on delayed payment of the TDS, the Assessing Officer made ving as under: During the assessment proceeding, it is seen from Schedule no.34(c) of Tax Audit Report that being interest on delayed payment of TDS u/s.201(1A) or u/s.206C(7) of the Act has been shown of Rs. 2,42,966/-. In this regard, the as required to show cause as to why the claim of interest on delayed payment of TDS of Rs.2,42,966/- not be disallowed u/s. 37 of the Act. 6.2 In response, the assessee has filed its submission and the same is reproduced hereunder; \"It is submitted that the interest on delayed payment is compensatory and not penal in nature. The assessee would like to lay emphasis on the fact that the expenses that are penal in nature shall be disallowed 37 and thus, the assessee has correctly claimed the said interest while computing its income for the year under consideration.\" Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 24 ITA No. 2226/MUM/2024 cash has been estimated in the year under consideration. In view of considered opinion that no incriminating ssue in dispute for year under consideration, no addition could have been qua the issue of inflated capital expenditure. Accordingly, we set aside the finding of the ld CIT(A) on the issue in dispute and allow the ground no. 1(d) of the appeal. e , we have already held that no addition could have been made capital expenditure without the aid of incriminating under consideration, we are not required to adjudicate the ground No. 3 raised challenging the disallowance of interest on delayed payment of the TDS, the Assessing Officer made During the assessment proceeding, it is seen from Schedule no.34(c) of Tax Audit Report that being interest on delayed payment of TDS u/s.201(1A) or u/s.206C(7) of the . In this regard, the as required to show cause as to why the claim of should 6.2 In response, the assessee has filed its submission and that the interest on delayed payment is compensatory and not penal in nature. The assessee would like to lay emphasis on the fact that the expenses that are penal in nature shall be disallowed 37 and thus, the assessee has correctly st while computing its income 6.3 The submission of the assessee has duly been considered. However, the same is not found to be acceptable. The interest is paid for default in respect to statutory liabilities and this int expenditure. Further, interest on TDS has not incurred wholly and exclusively for the purpose of the business and therefore, the same is not allowable as deduction u/s 37(1) of the Act. Thus, interest paid on delay payme 2,42,966/- is hereby disallowed u/s.37(1) of the Act. Penalty proceedings u/s 271(1)(C) of the Income Tax Income Tax Act, 1961 are initiated separately for furnishing inaccurate particular of income. 7.1 We have heard rival submission of the parties and perused the relevant material on record. Before us the ld Counsel for the assessee submitted disallowance of interest on delayed payment of TDS was during the course of search action and referred to Schedule of the Tax Auditor R reference of any incriminating material qua the issue in dispute. This assessment year being unabated, no addition could have made without the aid of incrimination material as held by the hon’ble Supreme Court in Abhisar Buildwell P ltd (supra). The ground Nos. 1(e) of the appeal is accordingly allowed. 8. The ground No. 5( notional interest expenditure on investment made in subsidiary company amounting to 8.1 We have heard rival submissions of the parties and the relevant material qua Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) The submission of the assessee has duly been considered. However, the same is not found to be acceptable. The interest is paid for default in respect to statutory liabilities and this interest cannot be treated as business expenditure. Further, interest on TDS has not incurred wholly and exclusively for the purpose of the business and therefore, the same is not allowable as deduction u/s 37(1) of the Act. Thus, interest paid on delay payment of TDS of Rs. is hereby disallowed u/s.37(1) of the Act. Penalty proceedings u/s 271(1)(C) of the Income Tax Income Tax Act, 1961 are initiated separately for furnishing inaccurate particular of income.” We have heard rival submission of the parties and perused the relevant material on record. Before us the ld Counsel for the assessee submitted no incriminating material qua the disallowance of interest on delayed payment of TDS was course of search action and the Assessing Officer h referred to Schedule of the Tax Auditor Report(TAR). reference of any incriminating material qua the issue in dispute. This assessment year being unabated, no addition could have made out the aid of incrimination material as held by the hon’ble Supreme Court in Abhisar Buildwell P ltd (supra). The ground Nos. accordingly allowed. 5(five) of the appeal is related to disallowance of notional interest expenditure on investment made in subsidiary company amounting to ₹ 62. 59 lakhs. We have heard rival submissions of the parties and the relevant material qua the issue in dispute. We find that this Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 25 ITA No. 2226/MUM/2024 The submission of the assessee has duly been considered. However, the same is not found to be acceptable. The interest is paid for default in respect to statutory erest cannot be treated as business expenditure. Further, interest on TDS has not incurred wholly and exclusively for the purpose of the business and therefore, the same is not allowable as deduction u/s 37(1) of nt of TDS of Rs. Penalty proceedings u/s 271(1)(C) of the Income Tax Income Tax Act, 1961 are initiated separately for furnishing We have heard rival submission of the parties and perused the relevant material on record. Before us the ld Counsel for the no incriminating material qua the qua the disallowance of interest on delayed payment of TDS was found the Assessing Officer has (TAR). There is no reference of any incriminating material qua the issue in dispute. This assessment year being unabated, no addition could have made out the aid of incrimination material as held by the hon’ble Supreme Court in Abhisar Buildwell P ltd (supra). The ground Nos. related to disallowance of notional interest expenditure on investment made in subsidiary We have heard rival submissions of the parties and perused the issue in dispute. We find that this disallowance has been made in the original assessment order passed under section 143(3) of the A addition is still pending before the addition has been merely repeated in the instant assessment passed under section 153 adjudicated in the appeal order and consequential effect would only be given while computation of the income under section 153 issue pertains to original assessment proceeding, we are not required to adjudicate the issue in dispute in appeal arising from proceeding under section 153A of the Act. The ground No. five of the appeal of the assessee is accordingly dismissed as infructuo 9. The ground No under MAT provisions for asset and depreciation of inflated capital expenditure computing book profit u/s 115JB of the Act. the claim of depreciation on intangible assets under the book profit observing as under: “16.3 I have considered the assessment order and submission of the appellant. The appellant has contended that, the addition made while computing book profit 11SJB is in gross violation of principle of natural justice as the AO has not given any opportunity to the appellant during assessment proceedings regarding this adjustment. 16.3.2 During the appeal proceedings, adequate opportunities have been given t written submissions. Thus, natural justice has been provided Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) disallowance has been made in the original assessment order ed under section 143(3) of the Act and appeal against addition is still pending before the Ld First Appellate addition has been merely repeated in the instant assessment passed under section 153A of the Act. Therefore it has to be adjudicated in the appeal filed against the original assessment order and consequential effect would only be given while computation of the income under section 153A of the A ssue pertains to original assessment proceeding, we are not required to adjudicate the issue in dispute in appeal arising from proceeding under section 153A of the Act. The ground No. five of the appeal of the assessee is accordingly dismissed as infructuo ground Nos. 6 and 7 of the appeal related to addition under MAT provisions for addition of depreciation on the and depreciation of inflated capital expenditure computing book profit u/s 115JB of the Act. The Ld. CIT(A) the claim of depreciation on intangible assets under the book profit 16.3 I have considered the assessment order and submission of the appellant. The appellant has contended that, the addition made while computing book profit 11SJB is in gross violation of principle of natural justice as the AO has not given any opportunity to the appellant during assessment proceedings regarding this adjustment. 16.3.2 During the appeal proceedings, adequate opportunities have been given to the appellant to furnish written submissions. Thus, natural justice has been provided Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 26 ITA No. 2226/MUM/2024 disallowance has been made in the original assessment order ct and appeal against said Ld First Appellate Authority. This addition has been merely repeated in the instant assessment order of the Act. Therefore it has to be against the original assessment order and consequential effect would only be given while A of the Act. Since the ssue pertains to original assessment proceeding, we are not required to adjudicate the issue in dispute in appeal arising from proceeding under section 153A of the Act. The ground No. five of the appeal of the assessee is accordingly dismissed as infructuous. of the appeal related to addition depreciation on the intangible and depreciation of inflated capital expenditure while The Ld. CIT(A) rejected the claim of depreciation on intangible assets under the book profit 16.3 I have considered the assessment order and submission of the appellant. The appellant has contended that, the addition made while computing book profit u/s 11SJB is in gross violation of principle of natural justice as the AO has not given any opportunity to the appellant during 16.3.2 During the appeal proceedings, adequate o the appellant to furnish written submissions. Thus, natural justice has been provided to the appellant during the appeal proceedings and the grievance has been redressed 16.3.3 In this regard, the appellant mainly relying on the decision of hon'ble Supre Limited vs CIT has contended that the AD cannot disturb the book profit and has no jurisdiction to go behind the net profit shown in the profit and loss account, except to the extent provided in the explanation to section 1 16.3.4 I have considered the contention of the appellant. As already discussed above, the appellant has debited the depreciation on artificially created intangible assets on account of slump sale and demerger. It is already held that the scheme of ar colorable device with the only intent to evade the tax and accordingly the depreciation claimed on goodwill and intangible asset is disallowed. As per the clause (lia) of explanation 1 to section 115 JB, the book profit depreciation debited to the statement of profit and loss account excluding the depreciation on account of revaluation of assets. Hence, as per the clause (iia) only allowable depreciation needs to be adjusted for comput The depreciation on intangible assets is due to revaluation of the same. As the depreciation claimed on the intangible assets is disallowed, the same needs to be adjusted to determine the book profit. enhancing the book profit by the depreciation disaalowed on account of intangible asset is confirmed. Accordingly, appeal on this ground 9.1 Further, the depreciation pertaining to inflated capital expenditure while computing book profit disallowed by Assessing Officer has been sustained by the Ld. CIT(A) observing as under: “17.4 As aready discussed in details while deciding ground no 2, the appellant company was found to be indulged in inflating the capital expenses related to the two parties. I have already confirmed the additions made by the A.O on this ground. Thus to the extent of cash component, the capital Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) to the appellant during the appeal proceedings and the grievance has been redressed 16.3.3 In this regard, the appellant mainly relying on the decision of hon'ble Supreme Court in case of Apollo Tyres Limited vs CIT has contended that the AD cannot disturb the book profit and has no jurisdiction to go behind the net profit shown in the profit and loss account, except to the extent provided in the explanation to section 115JB. 16.3.4 I have considered the contention of the appellant. As already discussed above, the appellant has debited the depreciation on artificially created intangible assets on account of slump sale and demerger. It is already held that the scheme of arrangement of transfer of asset is a colorable device with the only intent to evade the tax and accordingly the depreciation claimed on goodwill and intangible asset is disallowed. As per the clause (lia) of explanation 1 to section 115 JB, the book profit needs to be reduced by the amount of depreciation debited to the statement of profit and loss account excluding the depreciation on account of revaluation of assets. Hence, as per the clause (iia) only allowable depreciation needs to be adjusted for computing book profit. The depreciation on intangible assets is due to revaluation of the same. As the depreciation claimed on the intangible assets is disallowed, the same needs to be adjusted to determine the book profit. Hence, the action of AO in he book profit by the depreciation disaalowed on account of intangible asset is confirmed. Accordingly, appeal on this ground is DISMISSED.” Further, the depreciation pertaining to inflated capital expenditure while computing book profit disallowed by Assessing Officer has been sustained by the Ld. CIT(A) observing as 17.4 As aready discussed in details while deciding ground no 2, the appellant company was found to be indulged in inflating the capital expenses related to the two parties. I ave already confirmed the additions made by the A.O on this ground. Thus to the extent of cash component, the capital Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 27 ITA No. 2226/MUM/2024 to the appellant during the appeal proceedings and the 16.3.3 In this regard, the appellant mainly relying on the me Court in case of Apollo Tyres Limited vs CIT has contended that the AD cannot disturb the book profit and has no jurisdiction to go behind the net profit shown in the profit and loss account, except to the extent 16.3.4 I have considered the contention of the appellant. As already discussed above, the appellant has debited the depreciation on artificially created intangible assets on account of slump sale and demerger. It is already held that asset is a colorable device with the only intent to evade the tax and accordingly the depreciation claimed on goodwill and As per the clause (lia) of explanation 1 to section 115 JB, the needs to be reduced by the amount of depreciation debited to the statement of profit and loss account excluding the depreciation on account of revaluation of assets. Hence, as per the clause (iia) only allowable ing book profit. The depreciation on intangible assets is due to revaluation of the same. As the depreciation claimed on the intangible assets is disallowed, the same needs to be adjusted to Hence, the action of AO in he book profit by the depreciation disaalowed on account of intangible asset is confirmed. Accordingly, appeal Further, the depreciation pertaining to inflated capital expenditure while computing book profit disallowed by the Assessing Officer has been sustained by the Ld. CIT(A) observing as 17.4 As aready discussed in details while deciding ground no 2, the appellant company was found to be indulged in inflating the capital expenses related to the two parties. I ave already confirmed the additions made by the A.O on this ground. Thus to the extent of cash component, the capital expenditure has been inflated. Accordingly the depreciation pertaining to seuch expenditure needs to be disallowed while computing the boo the bogus expenditure has to be adjusted to reflect the correct position. Hence, the A.O is correct to add back the depreciation pertaining to bogus capital expenditure for the purpose of computing book profit us Accordingly the appeal on this ground 9.2 We have heard rival submissions of the parties and perused the relevant materials on record. grounds raised is whether any adjustment to the book profit otherwise than adjustment Act is permissible. As far as claim of depreciation on goodwill is concerned, same was not available in basis of which book profit was declared while filing original return of income. The book profit which has been declared while filing the return in response to notice under section 153A of the A same as was declared whi therefore this also being in the nature of a fresh claim, entertained following the decision of the special bench of the Tribunal in the case of M/s SEW infrastructure Ltd (supra). 9.3 As far as deprec concerned, the provisions of section 115 depreciation claimed as per companies A thereafter reducing the depreciation account excluding the depreciation on account of revaluation of assets. There is no provision under the section 115JB of the Act to Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) expenditure has been inflated. Accordingly the depreciation pertaining to seuch expenditure needs to be disallowed while computing the book profit. While computing the book profit, the bogus expenditure has to be adjusted to reflect the correct position. Hence, the A.O is correct to add back the depreciation pertaining to bogus capital expenditure for the purpose of computing book profit us 115JB of the I.T.Act. Accordingly the appeal on this ground is DISMISSED. We have heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute in the grounds raised is whether any adjustment to the book profit adjustment prescribed under section 115 ct is permissible. As far as claim of depreciation on goodwill is concerned, same was not available in the books of accounts on the basis of which book profit was declared while filing original return of income. The book profit which has been declared while filing the se to notice under section 153A of the A same as was declared while filing original return of income and therefore this also being in the nature of a fresh claim, entertained following the decision of the special bench of the Tribunal in the case of M/s SEW infrastructure Ltd (supra). depreciation on inflated capital expenditure is the provisions of section 115JB provides for adding the ation claimed as per companies Act to the book profit and thereafter reducing the depreciation debited in profit and loss the depreciation on account of revaluation of assets. There is no provision under the section 115JB of the Act to Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 28 ITA No. 2226/MUM/2024 expenditure has been inflated. Accordingly the depreciation pertaining to seuch expenditure needs to be disallowed while k profit. While computing the book profit, the bogus expenditure has to be adjusted to reflect the correct position. Hence, the A.O is correct to add back the depreciation pertaining to bogus capital expenditure for the 115JB of the I.T.Act. DISMISSED.” We have heard rival submissions of the parties and perused The issue in dispute in the grounds raised is whether any adjustment to the book profit ed under section 115JB of the ct is permissible. As far as claim of depreciation on goodwill is the books of accounts on the basis of which book profit was declared while filing original return of income. The book profit which has been declared while filing the se to notice under section 153A of the Act is not le filing original return of income and therefore this also being in the nature of a fresh claim, it cannot be entertained following the decision of the special bench of the Tribunal in the case of M/s SEW infrastructure Ltd (supra). iation on inflated capital expenditure is JB provides for adding the ct to the book profit and debited in profit and loss the depreciation on account of revaluation of assets. There is no provision under the section 115JB of the Act to give effect to depreciation disallowed by the AO in normal proceedings. Therefore dispute in relation to depreciation on inflated capital expenditure are set aside. Accordingly, the ground dismissed whereas ground No. 10. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 24/02/2025 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) give effect to depreciation disallowed by the AO in normal herefore, the finding of the Ld. CIT(A) on the issue in elation to depreciation on inflated capital expenditure Accordingly, the ground No. 6 of the appeal is dismissed whereas ground No. 7 of the appeal is allowed. 10. In the result, the appeal of the assessee is partly allowed. ced in the open Court on 24/02 - KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Mahadhan Agritech Ltd. (Formerly known as Smartchem Technologies Ltd.) 29 ITA No. 2226/MUM/2024 give effect to depreciation disallowed by the AO in normal Ld. CIT(A) on the issue in elation to depreciation on inflated capital expenditure of the appeal is is allowed. 10. In the result, the appeal of the assessee is partly allowed. /02/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "