RAMESTH DAIMAND PVT. LTD.,LUCKNOW V. D/ACIT CENTRAL-1, LUCKNOW

ITSSA 560/LKW/2024

AI Insights

The case involves M/s Ramestha Diamond Pvt. Ltd., which filed appeals against the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2013-14 to 2015-16. The appeals were against the additions made under sections 68 and 69 of the Income Tax Act, 1961, following a search and seizure operation. The main contention was that no incriminating material was found during the search, and thus the additions were invalid. The Tribunal considered similar cases and Supreme Court rulings, which established that in the absence of incriminating material, no additions can be made to the income of completed/unabated assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 43622 (ITAT-LUCKNOW)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Other Referred Cases: PCIT Vs. Abhisar Buildwell (P.) Ltd, Smt. Shashi Agarwal vs. DCIT, Ocean Dream Infrastructures Pvt. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAMITA S. PANDEY
• Assessee Lawyers: AKSHAY AGRAWAL
• Keywords: Condonation of delay; Additional evidence; Principle of natural justice; Block assessment
• Section: 144; 250; 132; 153A; 68; 153C

Judgement Text

"I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘A’, LUCKNOW BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 M/s Ramestha Diamond Pvt. Ltd., M-17, Dobariyal Complex, Gole Market, Mahanagar, Lucknow. PAN:AADCR3702J Vs. Dy./A.C.I.T. (Central)-1, Lucknow. (Appellant) (Respondent) O R D E R PER BENCH: (A) These three appeals have been filed by the assessee pertaining to assessment years 2013-14 to 2015-16 against impugned appellate orders dated 18/07/2024 (DIN & Order No.ITBA/APL/S/250/2024- 25/1066799003(1), dated 09/07/2024 (DIN & Order No.ITBA /APL/S/250/ 2024-25/1066535553(1) and dated 18/07/2024 (DIN & Order No.ITBA/APL/S/250/2024-25/1066816111(1) respectively of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The assessee has raised similar grounds in all the three appeals. For the sake of brevity the grounds Appellant by Shri Akshay Agrawal, Advocate Respondent by Smt. Namita S. Pandey, CIT (D.R.) I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 2 taken by the assessee in assessment year 2013-14 are reproduced as under: “1. That no incriminating material was found during the search proceedings related to which the addition has been made by the learned assessing officer. The order passed u/s 153A is invalid & bad in law. Without prejudiced to the above ground No. 1 2. That the leaned Assessing officer has passed the order u/s 153A read with section 144 of the Income Tax Act is against the principles of natural justice and the learned CIT(Appeal) has passed the order u/s 250 just relying on the order passed by the learned Assessing officer. 3. That the order passed by the learned CIT (Appeal) is without accepting the additional evidences filed before him. The evidences have not been accepted as per rule 46A of the Income Tax rules, 1961 and is against the principles of natural justice. 4. That the order passed by the learned CIT(Appeal) is not in the interest of justice as per section 250(4) of the Income Tax Act, 1961. The learned CIT(Appeal) has not made any finding on the evidences enclosed and passed the order relying on the order passed by the learned Assessing officer. 5. The learned assessing officer has passed the order without application of mind and without verifying the records already available with him. The Assessing officer should have used the power under section 142(2) of the Income Tax Act, 1961. 6. That the order passed u/s 153A was being approved by the learned Joint Commissioner of Income tax without application of mind. The order is bad in law and deserves to be quashed.” (A.1) The appeal for assessment year 2014-15 is filed beyond the time limit prescribed u/s 253(3) of the I. T. Act. The assessee has requested for I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 3 condonation of delay in filing of the appeal, u/s 253(5) of the I. T. Act. As per noting of Registry, the appeal is time barred by 6 days. The learned Departmental Representative for Revenue expressed to condonation of delay of aforesaid period of 6 days. We find that request for condonation of delay has been made on medical grounds. The application is supported by relevant documents such as affidavit and medical paper. In view of the foregoing, the delay in filing of the appeal for assessment year 2014-15, vide I.T.(SS)A. No.560/Lkw/2024 is condoned, and the appeal is admitted for decision on merits. (B) In this case, a search & seizure operation under section 132 of the Income Tax Act, 1961 (hereinafter referred as “I.T.Act”) was conducted in the case of the assessee, in pursuance whereof assessment orders, all dated 31/12/2018 were separately passed under section 153A read with section 144 of the I.T. Act and additions amounting to Rs.4,05,00,000/- in assessment year 2014-15 and Rs.4,50,55,342/- in assessment year 2014-15 respectively were made under section 68 of the I.T. Act. In assessment year 2015-16, additions of a total amount of Rs.1,45,19,782/- were made u/s 68 and 69 of the I. T. Act. The assessee filed appeals against the aforesaid assessment orders in the office of the Ld. CIT(A). During appellate proceedings, the assessee took the ground, inter-alia, that the Assessing Officer erred in law as well as on facts in making addition to the returned income without any incriminating documents being found during the course of search. However, the learned CIT(A) did not consider this submission favourably, and dismissed the appeals of the assessee. Aggrieved, the assessee has filed the present appeals in Income Tax Appellate Tribunal (“ITAT” for short). I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 4 (C) At the time of hearing, the Ld. Counsel for the assessee submitted that the issue as to whether addition can be made in a search assessment in the absence of any incriminating material is now well settled in favour of the assessee by the order of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/(2023) 454 ITR 212 (SC). He further submitted that the Lucknow Bench of ITAT in the case of Smt. Shashi Agarwal (2024) 167 taxmann.com 687 (Lucknow Trib.), considered aforesaid decision of Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd (supra) and decided the issue in favour of the assessee relying on the same. He also submitted that moreover, in the case of Ocean Dream Infrastructures Pvt. Ltd. vs. DCIT (Order dated 21/01/2025 in I.T.A. No.146 and 147/Lkw/2023) also, identical issue has been decided by Lucknow Bench of Income Tax Appellate Tribunal in favour of the assessee. He further submitted that in the present appeals also, the additions made by the Assessing Officer are not based on any incriminating documents found in the course of search. Relying on the aforesaid cases of Abhisar Buildwell (P.) Ltd (supra), Smt. Shashi Agarwal (supra) and Ocean Dream Infrastructures Pvt. Ltd. (supra), he contended that the additions made in the assessment orders should be deleted. The Ld. Departmental Representative for Revenue supported the orders of the Assessing Officer as well as Ld. CIT(A) and relied on the same. (D) We have heard the rival parties and have gone through the material placed on record. In the case of Smt. Shashi Agarwal (supra), co-ordinate bench of ITAT Lucknow has decided the matter in favour of the assessee, relying in the case of Abhisar Buildwell (P.) Ltd (supra), on the issue whether additions can be made in a search assessment in the absence of any incriminating material found during search. The relevant portion of the order of Smt. Shashi Agarwal vs. DCIT (supra) is reproduced as under: - I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 5 “(C) We have heard both sides. We have perused materials on record. There is no dispute regarding relevant facts. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Further, as no assessment proceedings were pending at the time of search & seizure operation u/s 132 of the Act on 08/07/2016, the case of the assessee falls in the category of unabated/completed assessments within the meaning of orders passed by Hon'ble Supreme Court in the cases of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and within the meaning of order passed in the case of Kabul Chawla 380 ITR 573 (Delhi), which stands approved by Hon'ble Supreme Court by dint of orders of Hon'ble Supreme Court in the case of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra). Further, in paragraph 14 of the aforesaid order of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra), the Hon'ble Supreme Court concluded as under: “14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 6 completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.” (C.1) Hon'ble Supreme Court in the case of U. K. Paints (Overseas) Ltd. (supra) widened the application of the order in the case of Abhisar Buildwell (supra) to assessments conducted u/s 153C of the IT Act also. In both orders of Hon'ble Supreme Court i.e. in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), the Hon'ble Supreme Court held that in respect of the completed/unabated assessments, no additions can be made in assessment order passed u/s 153A or passed u/s 153C of the IT Act in respect of which incriminating materials were not found in the course of search action u/s 132A of the Act; although Hon'ble Supreme Court held that the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers u/s 147/148 of the IT Act subject to fulfillment of the conditions as envisaged/mentioned u/s 147/148 of the IT Act. Thus, although the powers of the Assessing Officer u/s 147/148 of the IT Act were saved by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), subject to fulfillment of conditions envisaged u/s 147/148 of the IT Act; it has been categorically held that in respect of completed/unabated assessments, no additions can be made u/s 153A or under section 153C of the Act if incriminating material I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 7 was not found / unearthed during the course of search u/s 132 of the IT Act in respect of the additions made. (C.2) The issue whether additions can be made in assessment orders passed u/s 153A or u/s 153C of IT Act in cases falling under unabated/completed assessments, when no incriminating material was found at the time of search u/s 132 of the IT Act, was a disputed issue in the past. While a view in favour of assessee was taken, for example, in cases such as CIT vs. Kabul Chawla (supra), Pr. CIT vs. Saumya Construction 387 ITR 523 (Guj), CIT vs. Continental Warehousing 374 ITR 645 (Bom.), Smt. Jami Nirmala vs. Pr.CIT 437 ITR 673 (Orissa), CIT vs. Veerprabhu Marketing Ltd. 388 ITR 574 (Cal.), Pr.CIT vs. Delhi International Airport (P.) Ltd. 443 ITR 574 (Kar.), Pr.CIT vs. Meeta Gutgutia 395 ITR 526 (Delhi), Dr. A. V. Sreekumar vs. CIT 404 ITR 642 (Ker.), Pr. CIT vs. Smt. Daksha Jain 2019 (8) TMI 474 (Rajasthan), etc.; courts took a view in favour of Revenue in cases reported as CIT vs. Rajkumar Arora (supra), CIT vs. Mahndipur Balaji 447 ITR 517 (All.), CIT vs. K. P. Ummer 413 ITR 251 (Ker.), Sunny Jacob Jewellers and Wedding Centre vs. DCIT 362 ITR 664 (Ker.), E. N. Gopakumar 75 taxmann.com 215 (Kerala), etc. The issue has now been finally settled by decisions of Hon'ble Supreme Court in the aforesaid cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) wherein view in favour of assessee has been taken. (C.2.1) In the present appeals before us, the additions have been made by the Assessing Officer in assessment orders passed u/s 153A of the IT Act. Further, we have already noted earlier that the relevant facts are not in dispute. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Furthermore, as no assessment proceedings were pending in the case of the assessee at the time when (on 08/07/2016) search u/s 132 of the IT Act was conducted, the case of the assessee in the present appeals before us, falls in the category of completed/unabated assessments within the meaning of orders passed by Hon'ble I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 8 Supreme Court in the case of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and in the case of CIT vs. Kabul Chawla (supra) which was approved by Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell (supra). In view of the foregoing, and having regard to the relevant facts and circumstances of the present case before us, and further, as representatives of both sides are in agreement with this, we are of the view that the issue in dispute is squarely covered in favour of the assessee by the orders of Hon'ble Supreme Court in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and by the aforesaid instruction No. 1 of 2023 of CBDT, which is binding on Revenue authorities. Accordingly, we direct the Assessing Officer to delete the additions made amounting to a total of Rs.2,24,81,900/- for assessment year 2015-16 and addition amounting to Rs.44,25,000/- for assessment year 2016-17. (C.2.2) Since we have directed that the aforesaid additions be deleted, the other issues regarding merits of the additions made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to make any order with regard to the merits of the various additions made.” (D.1) Identical view, in favour of the assessee, has also been taken by Lucknow Bench of ITAT, in the case of Ocean Dream Infrastructures Pvt. Ltd. (supra). (E) In view of the foregoing, and respectfully following the orders of the Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and DCIT vs U.K. Paints (Overseas) Ltd (2023) 150 Taxmann.com 108 (SC), and further, on due consideration of aforesaid Instruction of Central Board of Direct Taxes (CBDT) [Instruction No.1 of 2023 (F. No.279/Misc./M-54/2023- IT)] directing the field authorities to implement the aforesaid orders of Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and U.K. Paints (Overseas) Ltd (supra), in uniform manner; we direct the I.T.(SS)A. Nos.555, 560 & 556/Lkw/2024 Assessment Years:2013-14 to 2015-16 9 Assessing Officer to delete the aforesaid additions amounting to Rs.4,05,00,000/-, Rs.4,50,55,342/- and Rs.1,45,19,782/- respectively for assessment years 2013-14, 2014-15 and 2015-16. (F) In the result, all the appeals of the assessee are allowed for statistical purposes. (Order pronounced in the open court on 06/02/2025) Sd/. Sd/. (KUL BHARAT) (ANADEE NATH MISSHRA) Vice President Accountant Member Dated:06/02/2025 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. Concerned CIT 4. The CIT(A) 5. D.R. ITAT, Lucknow Asstt. Registrar "