SHRI KAMLESHBHAI P SAVALIYA,AHMEDABAD V. THE JT. CIT ,(OSD) CENTRAL CIRCLE-2(2), AHMEDABAD

CO 23/AHD/2021

AI Insights

The case involves two appeals by the Revenue against the orders of the CIT(A) for the assessment year 2013-14, concerning Shri Kamlesh P. Savaliya and Shri Rameshbhai N. Antala. The appeals were related to additions made under Section 68 of the Income Tax Act, which were treated as unexplained cash credits. The CIT(A) had deleted these additions, stating that no incriminating material was found during the search operation that justified the additions. The Revenue challenged this decision, arguing that the CIT(A) erred in law and fact by not appreciating the scope of Section 153A and the implications of the search operation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472280 (ITAT-AHMEDABAD)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: CIT v. Saumya Construction Pvt. Ltd., CIT (Central)-III vs. Kabul Chawla, PCIT Central-3 Vs. Abhisar Buildwell P. Ltd., Wellknown Technologies Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: S.N SOPARKAR
• Keywords: Set aside; Unexplained cash credit; Document seized; Documents seized; Search and seizure; Accommodation entries; Bogus
• Section: 143(3); 142(1); 153A; 68; 13; 153C; 142(2A)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “B“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD सु\u0016ी सुिच\u0019ा का\u001aले, \u0011ाियक सद\u001c एवं \u0016ी मकरंद वसंत महादेवकर, लेखा सद\u001c क े सम\"। ] ] BEFORE Ms SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /IT(SS)A No.35/Ahd/2021 With C.O No.23/Ahd/2021 िनधा \u000fरण वष\u000f /Assessment Year : 2013-14 Joint Commissioner of Income Tax(OSD), Central Circle-2(2), Ahmedabad. बनाम/ v/s. Shri Kamlesh P. Savaliya, 8, Shaligram-1, Bunglows, Nr. Avelon Hotel, Thaltej Shilaj Road, Ahmedabad. \u0013थायी लेखा सं./PAN: ADGPS0460H AND आयकर अपील सं /IT(SS)A No.36/Ahd/2021 With C.O No.24/Ahd/2021 िनधा\u000fरण वष\u000f /Assessment Year : 2013-14 Joint Commissioner of Income Tax(OSD), Central Circle-2(2), Ahmedabad. बनाम/ v/s. Shri Rameshbhai N. Antala, 16, Sahajanand Villa, Opp. Vrundavan-9, B/h. Devine High Land, Sola, Ahmedabad. \u0013थायी लेखा सं./PAN: ACQPA2986B अपीलाथ%/ Appellant) (&' यथ%/ Respondent) Revenue by : Shri V Nandakumar, CIT-DR Assessee by : Shri S.N Soparkar, Sr.Advocate सुनवाई की तारीख/Date of Hearing : 12/02/2025 घोषणा की तारीख /Date of Pronouncement: 21/02/2025 IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 2 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: These are two appeals filed by the Revenue against separate orders of the Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as “CIT(A)”], both dated 06/01/2021, arising out of assessment orders passed under Section 153C read with Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as “the Act\"] for the assessment year 2013-14 in respect of the two assessees. The assessees have also filed cross- objections challenging certain aspects of the orders of the Assessing Officer [hereinafter referred to as “AO”]. Since the issues involved, the nature of additions, and the search operation giving rise to these proceedings are identical, we find it appropriate to dispose of these appeals and cross- objections by way of this common order for the sake of convenience. 2. In case of both the appeals the revenue filed common rectified grounds of appeal which are – (In case of both ITA No.IT(SS)A/35/AHD/2021 and IT(SS)A/36/AHD/2021) 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that any addition during the assessment u/s 153A has to be confined to the incriminating material found during the course of search u/s. 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or reassess the total income of those six assessment years, and that the scheme of assessment or reassessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 3 153BI specifically states that the provisions of Chapter- XIV-B, under which sec. 158BB falls, would not be applied where a search was initiated u/s.132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee, and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs. 4,54,00,000 / - made u/s 68 of the Act. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the assessee failed to establish the creditworthiness and genuineness of transactions with Kolkata lased shell companies i.e. Ganga Marketing Pvt. Ltd., Gemini Vanijya Pvt. Ltd. and Subhlabh Commodeal Pvt. Ltd. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 8. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. Grounds of Cross Objections (CO/23/Ahd/2021 and CO/24/Ahd/2021) filed by the assessee in both the appeals of the assessee are – 1. The order passed by CIT (A) considering various legal and factual aspects does not required any interference as the order passed by CIT (A) is supported by judicial precedents from Hon'ble Supreme Court and various Hon'ble High Courts. 2. The order passed by CIT (A) reversing order u/s 153A r.w.s. 143(3) on legality as well as on merits does not required further judicial review. 3. Ld. CIT (A) has correctly appreciated facts that no incriminating material was found during search and accordingly the order u/s 153A r.w.s. 143(3) quashed by him does not required any further judicial review. 4. Ld. CIT (A) has correctly appreciated factual and legal submissions and deleted addition made u/s 68 of the Act of Rs. 4,54,00,000/- 5. The Respondent craves liberty to add, amend, alter, modify, or append any or all the above grounds in cross objection. Facts of the case IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 4 4. A search operation under Section 132/133A of the Act was conducted on 06/03/2018 and subsequent dates in the case of SSS Group, which included the residence of the assessees. Pursuant to the search, the AO initiated proceedings under Section 153A for the assessees and completed assessments, making additions under Section 68, treating the credits received from certain Kolkata-based entities as unexplained cash credits. The details of assessment and the additions are as follows: Particulars Shri Kamleshbhai Purshottambhai Savaliya Shri Rameshbhai Narsinhbhai Antala Assessment Order Date 30/12/2019 29/12/2019 Section Invoked 153A r.w.s 143(3) 153A r.w.s 143(3) Original Return Filing Date 30/09/2013 28/09/2013 Original Declared Income (Rs.) 12,22,330 8,40,950 Notice under Section 153A Issued on 28/01/2019 30/01/2019 Return Filed under 153A on 23/08/2019 23/08/2019 Income Declared in Revised Return (Rs.) 12,22,330 8,40,950 Additions Made by AO u/s 68 of the Act (Rs.) 4,54,00,000 4,54,00,000 Total Assessed Income (Rs.) 4,66,22,330 4,62,40,950 4.1 The additions in respect of both the assessee were related to amounts received from following entities: Sl. No. Name of Entity Amount Received (Rs.) 1 Ganga Marketing Pvt. Ltd. 80,00,000 2 Gemini Vanijya Pvt. Ltd. 60,00,000 3 Shubhlabh Commodeal Pvt. Ltd. 3,14,00,000 Total 4,54,00,000 5. The AO alleged that these were accommodation entries provided by the above entities. The amounts were purportedly part of bogus IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 5 compensation expenses booked in the books of Shrimate Infrastructure LLP. The cash was allegedly routed back to the original source through multiple layers of transactions. During the assessment proceedings the assessees submitted that the transactions under question were part of a compensation structure related to Shrimate Infrastructure LLP (formerly Shrimate Infrastructure Pvt. Ltd.). The assessees further submitted that in lieu of the debited expenses in the books of Shrimate Infrastructure LLP cash was generated as detailed below: Sl. No. Particulars Amount (Rs.) 1 Bhaskar Steel & Ferro Alloy Ltd. 11,79,29,000 2 Brahm Alloys Pvt. Ltd. 11,58,79,500 3 SRMB Srijan Ltd. 11,37,47,000 Total 34,75,55,500 4 Less: Commission Expenses Incurred (@1%) -34,75,500 Cash Received Back 34,40,79,945 5 Add: Amount Received Back on Account of Cheques Issued / Refunds of Amounts Initially Received from Said Parties 3,90,00,000 Grand Total Cash Received (Feb 2013 - March 2013) 38,30,79,945 5.1 The assessee further submitted that the cash so generated was partly (Rs. 22,70,00,000/-) used to obtain accommodation entries as detailed below: Particulars Ganga Marketing Pvt. Ltd. (Rs.) Gemini Vanijya Pvt. Ltd. (Rs.) Shubhlabh Commodeal Pvt. Ltd. (Rs.) Total (Rs.) Shri Kamleshbhai Purshottambhai Savaliya 80,00,000 60,00,000 3,14,00,000 4,54,00,000 Shri Rameshbhai Narsinhbhai Antala 80,00,000 60,00,000 3,14,00,000 4,54,00,000 Shri Gopalbhai Patel 2,40,00,000 1,80,00,000 0 4,20,00,000 IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 6 Shri Mavjibhai Patel 0 0 9,42,00,000 9,42,00,000 Total (Rs.) 4,00,00,000 3,00,00,000 15,70,00,000 22,70,00,000 5.2 The assessee also submitted following application of funds – Amount Paid by/to Shrimate Infrastructure LLP (Formerly as Private Limited Co.) Shaligram Buildcon Private Limited Total (Rs.) Kamleshbhai Savaliya 4,01,00,000 46,00,000 4,47,00,000 Rameshbhai Antala 4,01,00,000 46,00,000 4,47,00,000 Gopalbhai Patel 12,03,00,000 1,45,00,000 13,48,00,000 Amount paid by Shaligram Buildcon Pvt. Ltd. to Shrimate and in-turn received by Shaligram Buildcon from Kamleshbhai, Rameshbhai, and Gopalbhai 16,80,00,000 (16,80,00,000) - Total 21,73,00,000 69,00,000 22,42,00,000 5.3 The assessee argued that the actual beneficiary of the transactions was Shrimate Infrastructure LLP, which had already claimed the amounts as compensation expenses in its books. The funds were merely circulated and ultimately routed back to Shrimate, meaning no real income was generated for taxation. The assessee contended that taxing these amounts would result in double taxation, which is against the principles of tax law. The assessee relied on the Wellknown Technologies Pvt. Ltd. (ITA No.2912,2913,2914,2915/Mum/2018) case, where the ITAT Mumbai held that only disallowance of expenses was justified, but taxing the same routed funds was impermissible. It was further argued that Section 68 was not applicable in this case since the transactions were already explained, and detailed documentary evidence had been submitted. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 7 5.4 The AO concluded that the funds received from Ganga Marketing Pvt. Ltd., Gemini Vanijya Pvt. Ltd., and Shubhlabh Commodeal Pvt. Ltd. were accommodation entries, as the amounts were subsequently routed back to Shrimate Infrastructure LLP. Since the case of Shrimate Infrastructure LLP was under special audit u/s 142(2A) and the findings were still awaited, the AO disregarded the assessee's explanation and treated the amount of Rs. 4.54 crore as unexplained cash credits under Section 68. 6. The assessee preferred an appeal before CIT(A). The assessee challenged the validity of the assessment under Section 153A, arguing that no incriminating material was found during the search, and since the original return was not pending, the assessment was unabated, making the addition unsustainable. The assessee contended that the AO failed to conduct a proper inquiry, as no summons were issued to the directors of the alleged shell companies, and despite submitting supporting documents such as bank statements, PAN, and ITRs, the AO did not disprove their authenticity. The addition under Section 68 was claimed to be unjustified, as the assessee had established the identity, creditworthiness, and genuineness of transactions, while the AO failed to substantiate the allegation that the credits were unexplained. The assessee further argued that there was no direct nexus between the alleged bogus transactions and their case, as the AO linked them to Shrimate Infrastructure LLP without proving the assessee’s involvement, making any addition, if valid, applicable to Shrimate Infrastructure LLP rather than the assessee. Additionally, the assessment was alleged to have been conducted in violation of natural IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 8 justice, as the AO did not provide an opportunity to rebut allegations or examine adverse material. 6.1 The CIT(A) observed that the assessments for the relevant year had already been completed under Section 143(3) on 19.02.2016. Referring to the proviso to Section 153A, the CIT(A) held that in cases of completed assessments, additions could only be made based on seized incriminating material. Since no such material was found during the search, the AO was not justified in making the addition. Further, the CIT(A) noted that the AO had raised the issue of unexplained cash credits based on queries under Section 142(1), rather than on any seized documents. The assessee had furnished confirmation, PAN details, and bank statements of the creditor entities, which the AO did not effectively rebut. The AO also referred to data from a digital device seized from Shaligram House but failed to establish any nexus between the transactions and the alleged unexplained credits. Citing various judicial precedents, including the decision of Hon’ble Gujarat High Court in case of CIT v. Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016) and decision of Hon’ble Delhi High Court in case of CIT (Central)-III vs. Kabul Chawla ( [2015] 61 taxmann.com 412), the CIT(A) emphasized that no addition could be made in unabated assessments without incriminating material. 6.2 On the grounds relating to additions u/68 of Rs. 4,54,00,000/- CIT(A) examined the facts and found that the assessee had satisfactorily explained the source, identity, and genuineness of the deposits. The CIT(A) observed that the actual beneficiary of the transactions was Shrimate Infrastructure LLP, which had claimed these payments as compensation expenses in its books. The funds received by the assessees were routed back to Shrimate, IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 9 making it a mere conduit in the entire transaction. The CIT(A) further observed that the AO did not dispute the movement of funds from Shrimate to various concerns, including the assessees, and back to Shrimate. The transactions were verifiable through bank accounts, and no infirmity was found in the assessee’s detailed working of the fund flow. The CIT(A) held that in the absence of any seized or incriminating documents, an addition under Section 68 was not sustainable. The CIT(A) also noted that the assessee had submitted documentary evidence, including ledger confirmations, bank statements, and agreements showing the nature of transactions. The CIT(A) further noted that the same AO had completed the assessment of Ganga Marketing Pvt. Ltd. under Section 153C, accepting the entire transaction chain from Shrimate through the assessees and others. However, while no addition was made in Ganga Marketing Pvt. Ltd.’s case, the addition was made in the hands of the assessees for the same transaction, which was not justified. The CIT(A) relied on the ITAT Mumbai ruling in Wellknown Technology Pvt. Ltd., which held that a mere routing of funds without any unexplained income component cannot be taxed under Section 68. Accordingly, the CIT(A) deleted the addition. 7. Aggrieved by the orders of CIT(A) the revenue is in appeal before us. The grounds of appeal filed by the Revenue primarily challenge the CIT(A)’s interpretation of Section 153A of the Income Tax Act, 1961. 8. During the course of hearing before us the AO of both the assessees submitted factual report in the matter under appeal. Key aspects of this report are highlighted below: 1. Assessment under Section 153A: The AO justified the addition of Rs. 4.54 crores under Section 68 of the Act, stating that the assessee failed to satisfactorily explain the credits received from three Kolkata-based IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 10 companies. The AO argued that the search operation revealed a modus operandi involving accommodation entries. 2. Basis of Addition: The AO cited seized digital data, financial statements, and bank transactions showing that funds transferred by Shrimate Infrastructure Pvt. Ltd. to Kolkata-based paper companies were ultimately routed back to key persons of the Shaligram Group, including the assessee. 3. Seized Documents: The report states that incriminating documents, including a profit and loss account of Shrimate Infrastructure Pvt. Ltd. with handwritten entries, were found during the search. The AO's factual report refers to Loose Paper No. 147 of Annexure-A/3 (Part-A/9A) found during the search action. This document allegedly contains part cash receipts from Brahm Alloys Pvt. Ltd., Bhaskar Steel & Ferro Alloys Ltd., and SRMB Shrijan Ltd., which were Kolkata- based entities. These transactions were recorded against compensation/damages payments. The AO's analysis of Shrimate's ledger indicated that Rs. 34.75 crores were debited as bogus compensation/damages, which were later ploughed back as unsecured loans. 9. During the course of hearing the Departmental Representative (DR) relied on the order of AO and argued that the addition was made on the basis of documents seized during the course of search operation. The DR further argued that the Ao can make addition on the basis of all the material available in addition to incriminating material. To support his contention he pointed out the para 14 (iii) of the judgement of Hon’ble Supreme Court in case of PCIT Central-3 Vs. Abhisar Buildwell P. Ltd. (Civil Appeal No. 6580 of 2021) which is reproduced below: (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; IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 11 10. During the course of the hearing, the Authorised Representative (AR) of the assessee placed reliance on the order of the CIT(A), contending that the Assessing Officer (AO) issued notices under Section 153A of the Act, 1961, on the following dates: - 28-01-2019 in the case of Kamaleshbhai Parshottambhai Savalia, and - 30-01-2019 in the case of Ramesh Narsinhbhai Antala. 10.1 The AR further submitted that original returns of income had already been filed by both assessees prior to the search proceedings. At the time of issuing the notices under Section 153A, no assessment proceedings under Section 143(3) were pending against the assessees. Consequently, the assessments for the respective years were unabated, meaning that any additions could only be made on the basis of incriminating material found during the course of search proceedings conducted under Section 132 of the Act. The AR argued that the AO failed to refer to any incriminating material while framing the assessment orders. To substantiate this claim, the AR invited the our attention to Point No. 39 and Point No. 44 of the notice issued under Section 142(1) dated 14-09-2019, wherein the AO had made reference to certain documents found, seized, and impounded during the search and survey action. However, the assessment order was not framed based on those documents, thereby contradicting the requirement that additions in unabated assessments must be based solely on incriminating material. The AR further contended that since the addition made in the assessment order was not based on any of the incriminating material referred to in the notice under Section 142(1), the addition was legally unsustainable. To strengthen the argument, the AR placed reliance on the following judicial precedents: - Decision of the Co-ordinate Bench in the case of Sharadaben Arvindbhai Patel [IT(SS)A No. 448 & 465/Ahd/2019]. In this case, the Co-ordinate Bench had dismissed the revenue’s appeals by holding that additions could not be sustained IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 12 in the absence of incriminating material. The Jurisdictional Gujarat High Court upheld the Tribunal’s decision by dismissing the Revenue’s appeal in R/Tax Appeal No. 187 of 2023, thereby affirming that no addition could be made in an unabated assessment unless based on seized incriminating material. - - Decision of the Co-ordinate Bench in the case of JMC Projects (India) Ltd. Vs. The ACIT (OSD)-1, Range-4, Ahmedabad. In the said case the Co-ordinate Bench, while adjudicating similar issue, relied on the landmark judgment of the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC). In this judgment, the Apex Court reaffirmed the principle that in cases of completed/unabated assessments, any addition must be strictly based on incriminating material found during the course of search, failing which the completed assessment must remain undisturbed. 11. We have heard the rival submissions and perused the material on record. The key issues before us are whether the additions made under Section 68 in unabated assessments were justified in the absence of any incriminating material and whether the CIT(A) erred in deleting the additions. 11.1 It is undisputed that the original assessments were completed prior to the date of search, and no assessment proceedings under Section 143(3) were pending at the time of search. Therefore, as per settled law, additions under Section 153A can only be made based on incriminating material. We have considered the factual report submitted by the AO during the course of hearing before us. The AO’s reliance on Loose Paper No. 147 and digital data from Shaligram House was first raised only during the appellate proceedings before us. These documents were not referenced in the assessment order, which is a critical flaw in the Revenue’s case. Judicial precedents have consistently held that if a document is not relied upon in the assessment order, it cannot later be used to justify an addition. The CIT(A) has correctly applied the binding precedent of the Hon’ble Gujarat High Court in CIT v. Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016) and the Hon’ble Delhi High Court’s decision in CIT (Central)-III v. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 13 Kabul Chawla [2015] 61 taxmann.com 412, which categorically hold that in the case of unabated assessments, additions can only be made based on seized incriminating material and general observations or post-search investigations cannot override this requirement. 11.2 The DR’s reliance on para 14(iii) of Abhisar Buildwell (supra) is misplaced in the present case. While the Hon’ble Supreme Court in that case permitted the AO to consider both seized material and other available information, the precondition remains that the AO must first establish that incriminating material was actually found in the case of unabated assessments. In the present case, the AO has not demonstrated any cogent incriminating material linking the assessee to the alleged accommodation entries. The CIT(A) rightly concluded that the AO's observations in the factual report were based on post-search inquiries and not on seized documents that were referenced in the assessment order. Therefore, in the absence of specific incriminating material, Hon’ble Supreme Court’s ruling in Abhisar Buildwell (supra) does not support the Revenue’s stand. To summarise our findings, we state that – - We find no infirmity in the order of CIT(A) in deleting the addition of ₹4.54 crores under Section 68, as the AO has failed to demonstrate the existence of seized incriminating material justifying the addition. - The AO’s factual report and reliance on post-search inquiries cannot form the basis for sustaining the addition in an unabated assessment. - The reliance of the DR on Abhisar Buildwell (supra) is misplaced, as the prerequisite condition of seized incriminating material is not met in the present case. 11.3 After considering the overall findings and analysing the submissions, arguments, and material on record, we proceed to deal with each ground. Since similar contentions have been raised across multiple grounds, there is an inevitable element of repetition in our discussion. However, for the sake IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 14 of clarity and completeness, we proceed to address each ground separately while avoiding redundant elaboration where the principles have already been discussed. 11.4 On Ground No 1 – Revenue’s argument - The CIT(A) failed to appreciate that Section 153A requires the AO to assess/reassess the total income for six assessment years and that not allowing additions in the absence of incriminating material would nullify the scheme of Section 153A. This ground lacks merit. The Hon’ble Gujarat High Court in CIT v. Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016) and the Hon’ble Delhi High Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 412 have categorically held that in case of completed/unabated assessments, additions can only be made if based on incriminating material found during the search. The CIT(A) has correctly applied these precedents in deleting the additions. Therefore, this ground is dismissed. 11.5 On Ground No. 2 – Revenue’s argument - The CIT(A) failed to appreciate that Section 153A requires the AO to assess/reassess the total income for six assessment years and that not allowing additions in the absence of incriminating material would nullify the scheme of Section 153A. The argument of the Revenue is legally untenable. The Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra) reaffirmed that in case of unabated assessments, the addition must be based on incriminating material found during the search. The reliance of the Revenue on para 14(iii) of the Abhisar Buildwell judgment is misplaced, as the AO has failed to demonstrate any specific incriminating material linking the assessee to the addition made under Section 68. Thus, this ground is dismissed. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 15 11.6 On Ground No. 3 - Revenue’s Argument - The CIT(A) failed to appreciate that Section 158BB (computation of undisclosed income in block assessments) required additions to be based on evidence found during the search, whereas Section 153A contains no such restriction. 11.7 The argument of the Revenue is legally incorrect. The courts have consistently held that for unabated assessments, any addition under Section 153A must be supported by incriminating material found during search. The CIT(A) correctly applied the principles laid down by the Hon’ble Gujarat High Court in Saumya Construction Pvt. Ltd. (supra) and Hon’ble Delhi High Court in Kabul Chawla (supra) to delete the additions. This ground is dismissed. 11.8 On Ground No. 4 - Revenue’s Argument - The CIT(A) erred in not appreciating that certain income unrelated to search and seizure may arise in any of the six years under assessment, and such income would escape taxation if not assessed under Section 153A. 12. The Revenue’s argument is hypothetical and contrary to settled law. The Co-ordinate Bench, in Sharadaben Arvindbhai Patel [IT(SS)A No. 448 & 465/Ahd/2019], has already held that in the absence of incriminating material, completed assessments should remain undisturbed. This view has been upheld by the Hon’ble Gujarat High Court in R/Tax Appeal No. 187 of 2023. In the present case, no seized document was relied upon in the assessment order to justify the addition. Hence, this ground is dismissed. 12.1 On Ground No. 5 - Revenue’s Argument - The CIT(A) erred in deleting the addition of Rs. 4,54,00,000/- made under Section 68 of the Act. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 16 The deletion by CIT(A) is legally justified. The AO has not referred to any incriminating material in the assessment order to substantiate the addition under Section 68. The factual report submitted by the AO during appellate proceedings cannot retrospectively justify an addition if the same was not relied upon in the original assessment order. Additionally, we note the contradiction pointed out by the CIT(A) in the assessment approach of the AO. The AO accepted the transactions as genuine in the case of parties such as Ganga Marketing Pvt. Ltd. under Section 153C but proceeded to treat the same transactions as unexplained cash credits in the hands of the assessees. The same entries cannot be treated differently in different hands, unless backed by cogent evidence. If the AO believed the amounts were unexplained, an addition should have been made in the hands of the entry providers, but no such addition was made, exposing the inherent inconsistency in the AO’s approach. Furthermore, the aspect of double taxation cannot be ignored. The funds originated from Shrimate Infrastructure LLP, where they were already debited as compensation expenses. The same amount has been subjected to tax again in the hands of the present assessees, despite the fact that the transactions were part of a circular fund movement, ultimately returning to Shrimate Infrastructure LLP. The Tribunal, in Wellknown Technologies Pvt. Ltd. (ITA No. 2912, 2913, 2914, 2915/Mum/2018, ITAT Mumbai), has held that merely routing funds through different entities without introducing unexplained income does not warrant taxation under Section 68. Thus, in the absence of incriminating material, due to the contradiction in the Revenue's stand, and to prevent double taxation, we uphold the order of the CIT(A) and dismiss this ground of appeal. IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 17 12.2 On Ground No. 6 - Revenue’s Argument- The CIT(A) failed to appreciate that the assessee did not establish the creditworthiness and genuineness of transactions with the Kolkata-based shell companies— Ganga Marketing Pvt. Ltd., Gemini Vanijya Pvt. Ltd., and Subhlabh Commodeal Pvt. Ltd. 12.3 The CIT(A) carefully examined the facts and documentary evidence submitted by the assessee, including ledger confirmations, bank statements, PAN details, and agreements. The AO did not conduct independent inquiries or summon the directors of these companies. Additionally, the same AO completed the assessment of Ganga Marketing Pvt. Ltd. under Section 153C without making any addition, despite accepting the entire transaction flow from Shrimate Infrastructure LLP. Thus, this ground is dismissed. 12.4 On Ground No. 7 - Revenue’s Argument - The CIT(A) erred in not upholding the order of the AO. 12.5 The AO’s order suffers from a fundamental jurisdictional defect, as the addition was made in an unabated assessment without reference to any incriminating material. The CIT(A) rightly applied binding judicial precedents and deleted the addition. This ground is dismissed. 12.6 On Ground No. 8 - Revenue’s Argument - The CIT(A) order should be set aside, and the AO’s order should be restored. 12.7 The order of CIT(A) does not suffer from any infirmity, and the Revenue has not brought any cogent material on record to rebut the findings of CIT(A). The appeal of the Revenue is based on misinterpretation IT(SS)A Nos.35-36/Ahd/2021 with C.O No.23-24-Ahd-2021 JCIT(OSD) vs. Kamleshbhai P Savaliya & Rameshbhai N Antalia Asst. Year :2013-14 18 of Section 153A and incorrect reliance on Abhisar Buildwell (supra). Accordingly, this ground is dismissed. 12.8 No interference is warranted in the well-reasoned orders of the CIT(A), which is in accordance with binding judicial precedents. 13. Therefore, in the combined result the appeals filed by the Revenue in IT(SS)A No.35 and 36/Ahd/2021 are dismissed in their entirety. The cross- objections filed by the assessees in CO No. 23 and 24/Ahd/2021 are allowed. Order pronounced in the Open Court on 21st February, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 21/02/2025 Manish, Sr. PS आदेश की !ितिलिप अ\"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ# / The Appellant 2. !$थ# / The Respondent. 3. संबंिधत आयकर आयु% / Concerned CIT 4. आयकर आयु% ) अपील ( / The CIT(A)-Income Tax Department 5. िवभागीय !ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स$ािपत !ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 20.2.2025 2. Date on which the typed draft is placed before the Dictating Member. : 20.2.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 21.2.25 6. Date on which the fair order comes back to the Sr.P.S./P.S. : "