9911796707
TMI Blog2025 (3) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of Rs. 3,56,69,245/- A.Y. 2017-18 solely based on the reason of absence of nexus with the seized material even though the time limit is available for issue of notice u/s 143(2) of the Act (upto 30.09.2018) as on the date of search le 02/05/2018? 2. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in treating the assessment for A.Y. 2017-2018 as completed/unabated even though it is abated assessment? 3. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in giving a finding that the disallowance of depreciation of Rs. 3,56,69,245/- cannot be made for A.Y. 2017-18 in the absence of incriminating seized material by wrong application of the ratio of Hon'ble Apex Court decision in the case of M/s Abhisar Buildwell Pvt Ltd (Civil Appeal no. 6580 of 2021)? 4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in wrongly relying on the remand report finding of addition not having nexus with seized material without adjudicating the fact whether the assessment for A.Y 2017-18 is abated assessment or unabated assessment? 5. Any other ground that may be urged at the time of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brief facts of the case are that, the assessee company is engaged in the business of EPC business in mining, construction and infrastructure sector which includes power, roads, irrigation and infrastructure of industrial sites etc. The assessee filed it's original return of income for the Assessment Year 2017-18 on 28.10.2017 admitting total income of (-) Rs. 4,99,72,655/ and the same was processed u/sec.143(1) of the Income Tax Act, 1961 [in short "the Act"]. A Search and Seizure operation u/sec.132 of the Act was conducted in the case of assessee i.e., M/s. AMR India Limited & Others on 02.05.2018. As such, the case of the assessee was covered u/sec.132 of the Act. Consequent to search, a notice u/sec.153A of the Act dated 24.01.2019 was issued to the assessee. In response to the said notice, the assessee filed it's return of income on 27.02.2019 admitting total income of (-) Rs. 4,99,72,655/-. 4.1. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noted that as per the information received from the Assistant Commissioner of Income Tax, Central Circle-1(3), Ahmedabad that, a search and seizure operation u/sec.132 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found during the course of search proceedings, material found in the case of Shri Kewalchand Jain which cannot be used in the hands of the assessee u/sec.153A of the Act. The assessee further submitted that the assessment for the impugned assessment year 2017-2018 is unabated/concluded as on the date of search because, the search in the case of the assessee was conducted on 02.05.2018 and by that time, the time limit for issuance of notice u/sec.143(2) of the Act has been expired. Therefore, once the assessment is unabated, no addition can be made without any reference to incriminating material found as a result of search. Since the material relied upon by the Assessing Officer is not found in the course of search proceedings of the assessee, but, found in the course of search in the case of Shri Kewalchand Jain, additions made by the Assessing Officer on the basis of said incriminating material cannot be sustained. In this regard, he relied on the decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd., [2023] 454 ITR 212 (SC). 5.1. The learned CIT(A) after considering the relevant submissions of the assessee and also taking note of various reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search, the AO cannot assess or reassess taking into consideration the other material in respect of 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 fulfilment 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." 6.3.1. Applying the judgment of Hon'ble Supreme Court in the case of Pr. CIT (Central-3) Vs. Abhisar Buildwell Pvt. Ltd. (Civil Appeal No.6580 of 2021) to the facts of the case of the appellant, the Assessing Officer in the remand report dated 1.1.03.2024 has relied on Para 14(iv) of the judgment of Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii). Any information received by the Assessing Officer of searched person, while completing assessment u/s 153A of the Act, can be used to determine assessee's total income, only when there is some incriminating material seized during the search action in assessee's own case. In case, no material is seized during assessee's own search, other incriminating material received from any other source, howsoever good, cannot be used against the assessee as clearly mentioned in Para 14(iv) of the above Supreme Court decision in respect of completed/ unabated assessment. 6.3.2. Applying the above observations to the facts of the present case, from the "Note not to the assessee" reproduced in the remand report dated 11.03.2024, it is clear that nothing incriminating was found during the search action conducted in case of the appellant for the current AY 2017-18 and the addition of Rs. 3,56,69,245/ was made based on information received from ACIT, Central Circle-1(3), Ahmedabad. The aforesaid information received from ACIT, Central Circle-1(3), Ahmedabad can be considered as incriminating material for assessment proceedings u/s 153C in case of the appellant as this information w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n machinery by following decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), without appreciating the fact that the assessment year in question is abated as on the date of search which is evident from the date of search in the present case i.e., 02.05.2018. Learned DR further submitted that the assessee has filed it's return of income for the year under consideration on 28.10.2017 and the "due date" for issue of notice u/sec.143(2) of the Act will expire on 30.09.2018. The search in the case of assessee was conducted on 02.05.2018 and by the time of search, the time limit to issue notice u/sec.143(2) was not expired. Therefore, the assessment is abated as per the first proviso to sec.153A of the Act and once the assessment is abated, then the Assessing Officer shall have power to assess or reassess the total income including the undisclosed income, if any, found as a result of search and this principle is supported by the decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra). The learned CIT(A) without appreciating the relevant facts, simply deleted the additions made by the Assessing Officer. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, the Assessing Officer shall have power to assess/re-assess the total income, including undisclosed income, if any, found as a result of search. This view is followed by the decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) in para-14(iv) wherein it has been held that in case no incriminating material is unearthed during the course of search, the Assessing Officer cannot assess/re-assess taking into consideration of other material in respect of completed assessment/un-abated assessment. Meaning thereby, in respect of completed-unabated assessment, no addition can be made by the Assessing Officer, in absence of any incriminating material found during the course of search u/sec.132 or requisition u/sec.132A of the Act. However, in the assessment is abated as on the date of search, the Assessing Officer shall assess or re-assess the total income taking into consideration the incriminating material and any other material including books of accounts. In the present case, going by the date of search in the case of assessee i.e., on 02.05.2018, the assessment for the assessment year 2017-2018 is abated. Therefore, in our considered view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded u/sec.131 of the Act from Shri Mahesh Kumar Reddy, Managing Director of the assessee company. In response, the assessee vide it's letter dated 29.04.2021 submitted that the assessee was executing a civil contract work at Khammam District for excavation work of Pranahita-Chevella lift irrigation scheme package-50, which in turn, was sub-contracted to various sub-contractors. The assessee has sub-contracted part of work to Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., and entered into work agreements with these two parties. The assessee further contended that Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., has submitted their bills after completion of work, for which, the assessee has made payment through proper banking channel, after deducting applicable TDS as per law. The assessee further submitted that the allegation of the Assessing Officer that the sub-contractor in question did not exist in the address given is devoid of merit, because there is no details as to when the said enquiry was conducted and in absence of any details, the assessee is not in a position to comment upon the observation of the Assessing Officer. Therefore, he s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the Assessing Officer used the material other than that seized during the course of search action in the case of assessee, as per para-14(iv) of the decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra) the addition made by the Assessing Officer cannot be sustained. Thus, directed the Assessing Officer to delete the addition made towards disallowance of sub-contract payment amounting to Rs. 15,85,52,155/- made to two subcontractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. 15. Aggrieved by the order of the learned CIT(A), the Revenue is in appeal before the Tribunal. 16. The Learned CIT-DR Ms. M. Narmada submitted that that the learned CIT(A) erred in deleting the additions made by the Assessing Officer towards disallowance of payment to sub-contract work amounting to Rs. 15,85,52,155/- made to two sub-contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd. by following decision of Hon'ble Supreme Court in the case of PCIT vs., Abhisar Buildwell P. Ltd. (supra), without appreciating the fact that the assessment year in question is abated as on the date of search which is evident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the Assessing Officer made disallowance of payment made to two sub-contractors viz., Rayon Infrastructure Pvt. Ltd., and Sunil Hitech Engineers Ltd., amounting to Rs. 15,85,52,155/- on the basis of survey operation conducted u/sec.133A of the Act and material found during the course of survey operation coupled with the statement recorded from Shri Subbarami Reddy, Chief Financial Officer and Shri Mahesh Kumar Reddy, Managing Director of the assessee company. It is also not in dispute that a search and seizure operation u/sec.132 of the Act was conducted in the case of assessee on 02.05.2018. The assessment for the assessment year 2018-2019 is abated as on the date of search i.e., 02.05.2018 which is evident from the date of filing return of income on 27.02.2019 and the time limit available for issue of notice u/sec.143(2) of the Income Tax Act, 1961 i.e., on 30.01.2020. Since the time limit available for issue of notice u/sec.143(2) of the Act as on the date of the search, in our considered view, the assessment for the assessment year 2018-2019 is abated in terms of first proviso to sec.153A of the Act and consequently, the Assessing Officer shall have power to assess/re-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, the Counsel who is appearing before the Tribunal has advised us to file cross objections against the appeals filed by the Revenue before the Tribunal on the issues which has been decided against the assessee by the learned CIT(A). Therefore, the assessee has taken steps to file the present cross objections. Further, our Counsel due to some medical exigencies in the family could not look into the pending adjudication of appeals before the Tribunal consequent to filing of Department's appeals and in the process, there was 205 days delay in filing the cross objections before the Tribunal. However, the said delay is neither wilful nor for want of any undue benefit, but, beyond the control of the assessee. Therefore, in the interest of justice, the delay of 205 days in filing the above two cross objections may be condoned. 21. The Learned DR, on the other hand, strongly opposed the petitions filed by the assessee for condonation of delay in filing cross objections and submitted that the reasons given by the assessee in their affidavits did not come under any 'reasonable cause' as provided under the Act for condonation of huge delay. Therefore, the cross objections filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contents of statement recorded from Shri Kewalchand Jain, the additions made by the Assessing Officer on the basis of third party statement without providing such statement to the assessee, the additions cannot be sustained. In this regard, he relied upon the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 taxmann.com 3 (SC) and Kishanchand Chellaram vs. CIT 125 ITR 713 (SC). Therefore, she submitted that additions made by the Assessing Officer towards disallowance of depreciation should be deleted. 24. The Learned CIT-DR MS. M. Narmada, on the other hand, supporting the order of the Assessing Officer submitted that the Assessing Officer has brought-out clear facts in light of statement recorded from Shri Kewalchand Jain during the course of search and as per the said statement he is clearly admitted to have provided accommodation entries without any actual business activity of supplying old machinery to the assessee. Although, the assessee claimed to have made payment through proper banking channel, but, mere payment by cheque does not prove the genuineness of the transaction, more particularly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery from M/s Pradeep Kumar Babulal & Co. is bogus in nature which are not supported by necessary bills and vouchers. On the other hand, assessee has furnished all the evidences including relevant work order, tax invoice and delivery challans of goods purchased from M/s Pradeep Kumar Babulal & Co. and also filed relevant bank statement to prove payment through proper banking channel. Once the assessee has filed all relevant evidences in support of purchase of old machinery from a person or entity, then, it is for the Assessing Officer to disprove the claim of the assessee company by taking on record contrary material to disprove the claim of the assessee-company. However, in the present case, the Assessing Officer except the statement of Shri Kewalchand Jain, nothing has been brought on record to disprove the claim of the assessee. It is well settled principle of law by the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 taxmann.com 3 (SC) that any additions made on the basis of third party statement without providing the statement to the other person for his comment or rebuttal, is contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered view, the Assessing Officer cannot make additions only on the basis of statement recorded from few employees of assessee by stating that the employee who signed work order is not aware of sub-contractors and payment made to them. In our considered view, in an organisation when many employees are dealing with various works, it is not necessary for a person who signed the work order is aware of the persons who executed the contract work. Therefore, only on the basis of statement of an employee, no adverse inference can be drawn on sub-contract payments made by the assessee, more particularly, when the assessee has furnished all evidences to substantiate it's claim. Further, the Assessing Officer has rested his finding only on the basis of enquiry conducted on two sub-contractors and observed that on perusal of commission enquiry, rightly it is noticed that these companies never exist at the premises where they were registered. Further, Shri Subbarami Reddy, Chief Financial Officer of the assessee company also stated that they never knew that these companies do not exist in their registered address, but, the particulars mentioned by the above two companies in the work ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
