2024 (3) TMI 765 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - incriminating material found during the search or not? - grievance of the Assessee is that the additions made by the Assessing Officer do not emanate from the search proceedings, as no incriminating material was found, pertaining to the year under consideration - HELD THAT - Hon'ble Supreme Court, having found no merit therein. In PCIT vs. M/s Abhisar Buildwell P. Ltd. 2023 (4) TMI 1056 - SUPREME COURT has held, agreeing with Kabul Chawla ( 2015 (9) TMI 80 - DELHI HIGH COURT that in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or re-assess taking into consideration the other material in respect of the completed assessment / unabated assessment; that meaning thereby, that in respect of completed / unabated assessment, no addition can be made by the Assessing Officer in the absence of any incriminating material found during the course of search u/s 132 - Further, as correctly contended on behalf of the Assessee, Ashisar Buildwell has been followed in the case of Pr. CIT v Sandeep Aggarwal (HUF) 2023 (10) TMI 569 - BOMBAY HIGH COURT wherein, it has been held that the clarification issued by the Hon'ble supreme Court in the case of Abhisar Buildwell and U.K. Paints , has been issued in the context of re-assessment proceedings u/s 147 and 148 of the Act as well. The additions for the year under consideration have been made by the Assessing Officer only on the directions of the third party, without having in his possession any incriminating material unearthed during the search proceedings, for the year under consideration, which is indirect contravention of the afore discussed case laws. Moreover, the additions wrongly made represented all the credit entries in the bank account of the Assessee company. Regarding these credit entries, sufficient credible documentary information had been furnished by the Assessee, by way of evidence, during the assessment proceedings, including the source thereof, which cogent voluminous documentary evidence the Department was been not able to rebut. The Assessing Officer, rather, having not been satisfied therewith, had not deemed it necessary to undertaken any inquiry in this regard. Also, no material was brought on record to establish that the bank entries were unexplained entries. This being so, the provisions of section 68 of the Act were wrongly applied. Decided in favour of assessee. Addition of all credit entries in the assessee's bank account - HELD THAT - The assessee company had clearly mentioned in its written submission the list of documents attached as annexure to substantiate its claim, if somehow, only the bank statement was available with the CIT(A) then the CIT(A) could have asked the assessee to furnish all other documents as mentioned in the written submission. No such inquiry was made by the CIT(A). Neither the CIT(A) nor AO asked the appellant submit any other documentary evidence with regard to the amount received or given back to Sh. SK Arora. CIT(A) wrongly confirmed the addition made by the AO on the plea that the company did not submit any documentary evidence other than the bank statement but on the other hand the CIT(A) himself is mentioning the list of documents submitted by the assessee, thereby contradicting his own statement. CIT(A) ought to have raised any query or issued any notice asking the assessee to submit the same. But no such query was raised nor any notice was issued to the assessee in this regard. Additionally, the CIT(A) confirmed the addition made by the AO for an absurd reason without giving any findings on the documents which was already submitted by the assessee company during the assessment proceeding and remand proceeding. AO found the documentary evidence furnished by the assessee company to be unsatisfactory while the CIT(A) observed that the assessee company failed to submit any documentary evidence other than bank statement, they could have initiated proceedings u/s 133(6) or 131 for further investigation. However, it is noteworthy that neither the AO nor the CIT(A) extended any such notice to the lender for additional inquiries. Instead, an addition of Rs. 10,00,000/- was made based on the directive of a third party.On the contrary the same AO has assessed the case of Shri SK Arora for the same assessment year wherein the returned income of Shri SK Arora has been accepted by the AO. Ground No. 6 is accepted and the addition of Rs. 10 lacs is deleted. Addition made purpose and utilization of funds which had not been explained by the assessee - HELD THAT - Addition has been so confirmed without taking into consideration the documentary evidence filed by the assessee. It remains undisputed that these were squared up loans and advances, the company having given advance of Rs. 4 lacs to Shri Rakesh Kumar on 28.10.2013 and the same having been received back through banking channel, on 09.11.2013, in respect of which, the assessee has placed on record before the authorities below, the copy of account of Shri Rakesh Kumar in the books of the assessee company. Neither the AO nor the CIT(A) extended any such notice to the lender for additional inquiries. Instead, an addition was made based on the directive of a third party. Neither enquiry was made by CIT(A) / AO before confirming the addition nor any documentary evidence were sought from the assessee company, therefore the assessee company has now submitted copy of computation, ITR-V and bank account statement of Sh. Rakesh Kumar as additional evidence along with confirmation which was submitted before CIT(A) and AO. The submission of said documents are neither challenged nor disputed in the appeal by the department. Addition of all the credit entries in the bank holding that the purpose and utilization of the funds was not explained by the assessee - HELD THAT - The taxing authorities, however, against all cannons of the principles of natural justice, have simply brushed aside these voluminous documentary evidence, without even referring to the same in their respective orders. It stands established on record that the amount was returned to the lender by the assessee. The cash book of the lender shows that the amount was deposited on 20.08.2013. The bank statement makes it clear that it was withdrawn on 06.08.2013. This has nowhere been put to challenge by the ld. CIT(A) and the observation that there was immediate deposit in cash of Rs. 3 lacs and that the source thereof had not been explained, is not borne out from anything on record in contrast to the evidence furnished by the assessee. Further, in case of doubt, the authorities ought to have raised queries from the assessee, which was not done. No enquiry was also carried out from the lender HUF. No proceedings were initiated either u/s 133(6) or 131 of the Act, for further investigation into the matter, if any such investigation was required. As such, both the authorities were, in fact, satisfied with the explanation of the assessee and as such, there was no reason for making the addition or for confirming the same at the hands of the ld. CIT(A). Addition of sum received by the assessee company from Shri Sahil Singla - AO while making the addition, has alleged that the purpose and utilization of the funds could not be explained by the assessee - HELD THAT - CIT(A) neither rebutted the documentary evidence brought on record by the assessee, nor did he ask the assessee the submit any other documentary evidence concerning the amount received and given back by the assessee to Shri Sahil Singla and Smt. Kiran Singla. In fact, documents furnished by the assessee in the evidence were not even commented upon adversely by the ld. CIT(A). Rather, they were not at all commented upon, leading to the conclusion that these documents were not at all looked into by the ld. CIT(A). In the absence of any rebuttal to such documentary evidence, the ld. CIT(A) erred in confirming the addition. Whereas the ld. CIT(A) observed that the assessee company had failed to submit any documentary evidence other than the bank statements, no proceedings, either under Section 133(6), or Section 131 of the Act, were taken out, for making any further investigation into the matter. Addition on account of income deposited in cash - addition included cash deposit by the assessee company in its bank account, holding that the purpose and utilization of such funds had also not been explained by the assessee -HELD THAT - Despite the assessee having discharged its burden of furnishing documentary evidence in support of the amount deposited, neither the AO, nor the CIT(A) on receipt of the documentary evidence put any question to the assessee, or initiated any enquiry, either u/s 133(6) of the Act, or u/s 131 thereof. It stands made out that the assessee had earned the income of Rs. 7 lacs from leasing out of vehicle of the company. The copy of account of hire charges, which had been furnished before both the taxing authorities, stands filed before us also. It formed part of the books of account submitted by the assessee company during the assessment proceedings, shown as income in the Profit Loss Account. Neither of the authorities below have rebutted this documentary evidence, rendering their respective orders to be orders passed as a result of misreading and non reading of material documents brought on record. Disallowance of loss - since the assessee company had not undergone any business activity during the year under consideration and the assessee company had failed to produce the bills/vouchers of the expenses claimed by it, the genuineness of the expenses claimed could not be proved - HELD THAT - AO was incorrect in holding that the assessee had not produced its books of account, bills and vouchers for the assessment proceedings. Since the Department had taken the same on CD, the books of account, also comprised of the bills and vouchers were already in the possession of the Department. Assessee is also correct when it contends that the books of account were examined by the AO at the time of sending his Deviation Note to the Investigation Wing. Further still, even during the remand proceedings, the assessee had submitted the books of account before the AO, on 16.02.2022. On the basis of the above, we find the addition to be unsustainable Disallowance of depreciation on vehicle - HELD THAT - It is seen that the documents furnished by the assessee in support of its claim have nowhere been rebutted by either of the authorities below. Particularly, the Registration Certificate alongwith the other documents filed has nowhere been rebutted. This being so, the very basis of the disallowance made is unsustainable in law and we hold so. Accordingly, the addition is deleted, found to be based on no material, whatsoever and in direct opposition to the documentary evidence furnished by the assessee. Unexplained cash credit u/s 68 - Assessing Officer had wrongly held the assessee company as shell company without any substance or cogent reason, and the ld. CIT(A) has rightly declared this company as a genuine company and not a shell company. The status of the company has already been decided by us in our order of the company for assessment year 2012-13 and 2013-14 on the same facts, wherein we have confirmed it as a genuine company and not as shell company. It is despite the above inability of the Department to repel the evidence based stand taken by the assessee, that the Department has raised the issue that the genuineness of the transactions had not been established. We, on the basis of the preceding discussion, find ourselves unable to subscribe to this view of the Department. Accordingly, finding no merit therein, all the grounds raised by the Department are rejected and the appeal filed by the Department is dismissed.

Summary

Issues Involved:
1. Validity of assessment under Section 153A of the Income Tax Act.
2. Additions upheld by CIT(A) without justification.
3. Additional grounds raised by the assessee.
4. Disallowance of loss and depreciation.
5. Department's cross-appeal on deletion of addition.

Summary:

Issue 1: Validity of Assessment under Section 153A
The assessee contended that the assessment under Section 153A was invalid as no search was conducted on the company, nor was any Panchnama prepared in its name. The Tribunal found that the search warrant did contain the name of the assessee company, thus rejecting the assessee's objection and upholding the validity of the assessment.

Issue 2: Additions Upheld by CIT(A) Without Justification
The Tribunal examined various additions upheld by CIT(A) including amounts received from different individuals and entities. The Tribunal found that the assessee had provided sufficient documentary evidence to substantiate the transactions, which were not properly considered by the lower authorities. Consequently, the Tribunal deleted the additions of Rs. 10 lacs, Rs. 4 lacs, Rs. 20 lacs, Rs. 1 lac, Rs. 3 lacs, Rs. 7 lacs, and Rs. 45 lacs.

Issue 3: Additional Grounds Raised by the Assessee
The additional grounds raised by the assessee were not pressed and thus rejected.

Issue 4: Disallowance of Loss and Depreciation
The Tribunal found that the disallowance of loss of Rs. 2,97,834/- and depreciation on the vehicle to the extent of Rs. 9,11,484/- was not justified. The assessee had provided sufficient evidence which was not properly considered by the lower authorities. The Tribunal deleted these disallowances.

Issue 5: Department's Cross-Appeal on Deletion of Addition
The Department challenged the deletion of Rs. 2,77,01,650/- by CIT(A). The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided adequate documentary evidence supporting the identity, creditworthiness, and genuineness of the transactions. The Department's appeal was dismissed.

Conclusion:
The Tribunal partly allowed the assessee's appeal, deleting several additions and disallowances made by the lower authorities. The Department's cross-appeal was dismissed.