SEN FERRO ALLOYS (P) LTD.,KOLKATA V. A.C.I.T., CC - 4(3), KOLKATA

ITA 2376/KOL/2024

AI Insights

The case involves Sen Ferro Alloys (P) Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), Kolkata-27, affirming the AO's addition of Rs. 30,00,000 to the assessee's income as unexplained expenditure under section 69C of the Income Tax Act, 1961. The addition was based on information that the assessee had made cash payments to Majee Group, allegedly involved in illegal coal sales. The Tribunal found that the assessment should have been conducted under section 153C, as the incriminating material was related to a third party's search, not directly to the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126282 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2021-2022
• Other Referred Cases: Shyam Sunder Khandelwal [2024] 161 taxmann.com 255(Rajasthan), Sejal Jewellary [2025] 171 taxmann.com 846(Bombay), Sri Dinakara Suvarna, [2022] 143 taxmann.com 362 (Karnataka)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHUMITA DAS
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Unexplained expenditure; Search and seizure; Grounds of appeal; Addition of Rs. 30,00,000; Dismissed; Business or profession; HRA; Commissioner; Commissioner of Income Tax; Cash receipts/payments; Extraneous consideration; 153C; 153A; Special provisions
• Section: 148; 143(3); 132; 153A; 69C; 153C

Judgement Text

" आयकर अपीलȣय अͬधकरण,“एस.एम.सी” Ûयायपीठ,कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER आयकर अपील सं/ITA No.2376/KOL/2024 (Ǔनधा[रण वष[ / Assessment Years : 2021-2022) Sen Ferro Alloys (P) Ltd., C/o S.N.Ghosh&Associates,Advs 2, Garstin Place, 2nd Floor, Suite No.203, Off Hare Street, Kolkata-700001 Vs ACIT, CC-4(3), Kolkata PAN No. :AAICS0672B (अपीलाथȸ /Appellant) .. (Ĥ×यथȸ / Respondent) Ǔनधा[ǐरतीकȧओरसे /Assessee by : Shri Somnath Ghosh & Shri Sarnath Ghosh, Advocates राजèवकȧओरसे /Revenue by : Ms. MadhumitaDas, Addl.CIT सुनवाई कȧ तारȣख / Date of Hearing : 17/04/2025 घोषणा कȧ तारȣख/Date of Pronouncement : 21/04/2025 आदेश / O R D E R This is an appeal filed by the assessee against the order dated 27.09.2024, passed by the ld. CIT(A), Kolkata-27, for the Assessment Year 2021-2022, on the following grounds of appeal :- 1. FOR THAT the Ld Commissioner of Income Tax (Appeals). Kolkata 27 failed to appreciate that none of the conditions precedent existed for and/or were fulfilled by the Ed. Assistant Commissioner of Income Tax, Central Circle 4(3) Kolkata for his specious action of invoking the mischief u/s 69C of the Income Tax Act, 1961 in respect of the alleged purchase conceived in the present context and the alleged addition upheld on that basis in the amount of Rs. 30.00.000/- is therefore ab initio void, ultra vires and ex-facie null in law 2 FOR THAT on a true and proper interpretation of the scope of the provisions of s. 69C of the Income Tax Act, 1961. the Ld. Commissioner of Income Tax (Appeals). Kolkata-27 was absolutely in error in upholding the specious addition of Rs. 30,00,000/- resorted to by the Id. Assistant Commissioner of Income Tax, Central Circle 4(3), Kolkata on account of alleged purchase without considering the matter in the proper perspective and such spurious conclusion reached on extraneous considerations not germane to the issue in dispute is totally arbitrary, unwarranted, and perverse. ITA No.2376/KOL/2024 2 3 FOR THAT the td Commissioner of Income Tax (Appeals). Kolkata-27 erred in sustaining the purported addition of Rs. 30,00,000/- made the Ld Assistant Commissioner of Income Tax, Central Circle 4(3). Kolkata on the allegation of unexplained expenditure within the prescription contained u/s. 69C of the Act and the adverse conclusion reached on that behalf in violation of the statutory prescription is completely unfounded, unjustified and untenable in law. 4 FOR THAT the specious approach of the Ld. Commissioner of Income Tax (Appeals), Kolkata-27 of misreading evidence, considering improper facts, failing to consider proper position in law and thus coming to an erroneous finding in sustaining the addition in the sum of Rs. 30,00,000/- made by the Ld Assistant Commissioner of Income Tax, Central Circle 4(3), Kolkata on the manifestly wrong application of the provisions of s. 69C of the Income Tax Act. 1961 is wholly illegal, illegitimate, and infirm in law. 2. At the time of hearing, ld. counsel raised the legal issue that the assessment framed u/s.143(3) of the Act, dated 28.12.2022 to be invalid in the eyes of law. 3. Facts in brief are that the assessee filed its return of income electronically on 09.03.2022 declaring total income at Rs. 22,40,040/-. The assessee is engaged in the business of manufacturing of Sponge Iron and trading coal and has shown mainly, income under the head profits & gains from business or profession and income from other sources. The case of the assessee was selected for scrutiny through CASS and statutory notices were duly issued and served on the assessee. In para 2.1 page 2 of the assessment order, the AO noted that a credible information was received, uploaded on the Insight Portal, regarding Majee Group being engaged in sales of illegal coal and that the assessee company i.e. M/s Sen Ferro Alloys Pvt. Ltd. had purchased coal by making cash payments, amounting to Rs.30,00,000/-, to Majee Group ITA No.2376/KOL/2024 3 during the year ended on 31.03.2021, relevant to A.Y.:2021-22. It was also noted by the AO in para 2.2 that as per the information received from DDIT(Inv.), Unit-2(4), Kolkata a search and seizure operations u/s 132 of the Act was conducted on Majee Group & Ors on 05.11.2020. During the course of search proceedings, it has been found that Majee Group was primarily engaged in sales of illegal coal. Incriminating documents pertaining to cash receipts/payments by Majee Group have been seized from residence and office premises of Anup Majee at Salt Lake and residence of cash handler Niraj Singh. The AO further in para 2(5) has noted that as per the search finding in the case of Majee Group and on conjoint analysis of documents discussed, it was found that the assessee has made huge cash payments amounting to Rs.30,00,000/- to Majee Group. Thereafter the AO issued notice u/s.142(1) of the Act, which was duly replied by the assessee, however, the AO rejected the contention of the assessee and treated the payments made to M/s Majee Group as unexplained expenditure u/s.69C of the Act and added the same to the total income of the assessee. 4. In the appellate proceedings, the ld. CIT(A) dismissed the appeal of the assessee by affirming the order of the AO. 5. After hearing the rival contentions and perusing the material on record, we find that the material discovered during the course of search on M/s Majee Group during the course of which it was found that the assessee company has made payments of Rs.30 lakhs in cash to the said person. According to the assessee the assessment should have been ITA No.2376/KOL/2024 4 framed u/s.153C r.w.s.143(3) of the Act as there was exclusive provisions provided in the Act to deal with the cases where some incriminating material found qua the assessee during the course of search on the third party and, therefore, the assessment framed by the AO u/s.143(3) of the Act is bad in law. In support of his contentions, ld. AR relied on the following decisions :- i) Shyam Sunder Khandelwal [2024] 161 taxmann.com 255(Rajasthan); ii) Sejal Jewellary [2025] 171 taxmann.com 846(Bombay); and iii) Sri Dinakara Suvarna, [2022] 143 taxmann.com 362 (Karnataka) 5. Ld. Counsel submitted that in all these above decisions it has been held that the provisions of Sections 153A to 153C of the Act are special provisions which prevail upon the regular provisions of the assessment or reassessment u/s.147, 148 & 143(3) of the Act. Therefore, when the basis for initiation of action u/s.148 of the Act was material seized relating to or belonging to the assessee during the course of search conducted on third party, then notice issued u/s.148 of the Act and the consequential assessment order was to be quashed. Accordingly, the ld. AR prayed that the assessment framed by the AO and confirmed by the ld.CIT(A) deserved to be quashed. 6. Ld. Sr. DR relied on the orders of the authorities below and submitted that the assessment was framed validly by the AO on the basis of material found during the course of search on third party. Moreover, the issue has not been raised before any of the authorities below and should not be taken at this stage. ITA No.2376/KOL/2024 5 7. After hearing the rival contentions and perusing the material on record, we find that undisputedly the basis for initiation of proceedings u/s.147 r.w.s.148 of the Act was the incriminating material seized during the course of search on third party namely M/s Majee Group conducted on 05.11.2020 and, therefore, the assessment framed u/s.143(3) of the Act is to be treated as invalid as the proper course of framing assessment would have been u/s.153C of the Act, which is an exclusive provisions provided under the Act for such type of cases. We further note that the section start with non-obstante clause overriding the other provisions available in the Act for framing the assessment and, therefore, enjoys a prevalence over the other provisions provisions relating to assessment u/s 143(3) and re-assessment u/s 147/148 of the Act. Therefore , we respectfully following the decisions as referred to above before us, quash the assessment framed by the AO. The legal ground raised by the assessee is consequently allowed. 8. Since, we have already quashed the assessment so framed by the ld. AO, therefore, other grounds raised by the assessee on merit, are not required to deliberated upon at this stage. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21 /04/2025. Sd/- (RAJESH KUMAR) लेखा सदèय/ACCOUNTANT MEMBER कोलकाताKolkata; Ǒदनांक Dated 21 /04/2025 Prakash Kumar Mishra, Sr.P.S. आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the Order forwarded to : ITA No.2376/KOL/2024 6 आदेशानुसार/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलाथȸ/ The Appellant- 2. Ĥ×यथȸ/ The Respondent- 3. आयकरआयुƅ(अपील) / The CIT(A), 4. आयकरआयुÈत/ CIT 5. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड[फाईल / Guard file. स×याͪपतĤǓत //True Copy// "