SHYAM ALCOHOL AND CHEMICALS LIMITED,MUMBAI vs. DCIT-CENT-CIR 8(3), MUMBAI

These seven appeals filed by the assessee are directed against the common order dated 31.01.2024 passed by the learned Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter referred to as “the learned CIT(A)”] under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for A.Ys. 2010-11 to 2016-17. The impugned appellate order arises from the respective assessment orders dated 08.08.2018 passed by the Deputy Commissioner of Income Tax, Central Circle-8(3), Mumbai [hereinafter referred to as “the Assessing Officer”] under section 144 read with section 153A of the Act. Since these appeals emanate from the same search action and involve common facts and substantially identical issues, they were heard together and are being disposed of by this consolidated order. For the sake of convenience, the appeal in ITA No.1641/Mum/2025 for A.Y. 2010-11 is taken as the lead case.

The assessee has raised the following grounds of appeal for A.Y. 2010-11:

That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs.3,19,11,512/-on account of disallowance of expenses towards salary and purchases of shares debited to the Profit and Loss Account as unexplained expenditure u/s 37(1) of the Act made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 without appreciating the fact that expenses were linked with the business.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of Rs.20,97,42,739/- on account of receipt of share capital money, share application money unsecured loan, amount of sundry credits and other payables converted into unsecured loans through journal entries and repayment of unsecured loan, aggregating to Rs.20,97,42,739/- treated as unexplained cash credit u/s 68 of the Act, made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 without appreciating the fact that the genuineness of the transactions, identity of the lenders and their credit worthiness with regards to receipt of share capital money and share application money & unsecured loan along with journal entries converted into unsecured loan were prima facie proved by the appellant through documents before the learned Assessing Officer and the repayment of loan by no stretch of imagination was to be treated as unexplained cash credit u/s 68 of the Act and that the Id. CIT(A) has also erred in confirming the addition of Rs.47,148/- on account of the Negative cash balance of Rs.47,148/- treated as unexplained money u/s 69A of the Act, made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11.

That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the addition of 1,60,626/- on account of disallowance u/s 40A(3) of the Act, addition of Rs. 4,96,826/- on account of non-deduction of TDS on the sum amounting to Rs. 4,96,826/- debited to the profit & loss account treated as disallowable u/s 40a(ia) of the Act ; addition of Rs.3,19,11,512/- on account of disallowance of expenses towards salary & purchase of shares debited to the Profit and Loss Account treated as bogus in the nature of unexplained expenditure u/s 37(1) of the Act, addition of Rs.20,97,42,739/- on account of receipt of share capital money, share application money, unsecured loan, amount of sundry credits and other payables converted into unsecured loans through journal entries and repayment of unsecured loan, aggregating to Rs. 20,97,42,739/-treated as unexplained cash credit u/s 68 of the Act, and addition of Rs.47,148/- on account of the Negative cash balance of Rs.47,148/-treated as unexplained money u/s 69A of the Act, at page 80- 81 of the assessment order and at pages 62-67 of the appellate order when no incriminating documents qua the unabated assessment year 2011-12 were found during the search operation in the premises of the assessee to justify the impugned additions in line with the settled principle of law that additions in an order u/s 153A of the Income tax Act, 1961 for an unabated assessment year is to be strictly made on the basis of evidence found in the course of the search, or other post search material or requisition of documents and assets pertaining to the searched person or person in whose case requisition has been made, categorially with regards to the assessment year in question.

That on the facts and in the circumstances of the case and in law, decision of the Id. CIT(A) to uphold all the additions made by the learned Assessing Officer in absence of any incriminating documents qua the unabated AY 2011- 12 found during the course of search & seizure operation in the case of the appellant is contrary to the decision dated 20th April, 2023 of the Hon'ble Supreme Court of India in Civil Appeal No 6580 of 2021 in the case of Pr. CIT Central-3 Vs Abhisar Buildwel Pvt Ltd and the decision of Delhi High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) & Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) and the decision of 4 Jurisdictional Bombay High Court in the case of Commissioner of Income Tax- II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay).

That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the rejection of books of accounts of the assessee u/s 145(3) of the Act by the learned AO while passing the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010- 11 without appreciating that the facts and circumstances of the case did not warrant the rejection of the books of account and that the Id. CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 which entailed additions in respect of entries in the books of accounts of the appellant which had already been rejected u/s 145(3) of the Act.

That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in concurring with the decision of the learned AO to hold that the retraction of earlier admission made by Sri Vipul V. Bhatt in earlier statements recorded on oath u/s 132(4)/131 of the Act between 04.02.2016 to 12.05.2016 through an affidavit on 02.09.2016 submitted before the CIT(A)-50, Mumbai, was beyond "reasonable period" with regards to filing of the retraction and there was no conclusive evidences to prove that the statements during summon/survey/search actions were recorded under force and coercion by the departmental authorities and as such not maintainable while rejecting the validity of the retraction made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 which was based on the special audit conducted under Section 142(2A) of the Act without appreciating that the facts and circumstances of the case warranting a special audit did not exist as there was no such complexity in the accounts of the Appellant.

That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the additions made in the assessment order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 based on the statements of third parties without appreciating the fact that the Appellant was not granted an opportunity of cross examination of the third parties and that the Id.CIT(A) has also erred in not appreciating the fact that without any incriminating material found at the premises of the Appellant during the course of search, the statements recorded under section 132(4) did not have any evidentiary value.

That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in appreciating the fact the approval of the Range Additional Commissioner was obtained and granted in a mechanical way without any application of mind and the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 was passed on the very same day along with other cases in sizeable number and that the CIT(A) erred too in ignoring the contention of the appellant that the orders passed u/ 144 read with section 153A of the Act for AY: 2010-11 was time barred u/s 153B of the Act as the order was received on 13.08.2018, beyond 08.08.2018, the last date by which the order was to passed and served upon the appellant u/s 1538 of the Act, being dispatched from the office of the Assessing officer on 11.08.2018 as supported by the speed post tracking trails of India Post which was utilized to make the service of the order.

The appellant craves leave to add alter amend and or vary any of the above grounds of appeal relief claimed at any time before the decision of the appeal.”

The assessee has also filed the following revised additional grounds:

Briefly stated, a search and seizure action under section 132 of the Act was carried out in the case of the Gurnani Group on 04.02.2016. Consequential search proceedings were carried out on 05.02.2016 in the case of the assessee and other concerns which, according to the Department, were controlled by Shri Vipul Vidur Bhatt, who was engaged in providing accommodation entries. Pursuant thereto, notice under section 153A was issued on 10.01.2017.

The Assessing Officer referred the accounts for special audit under section 142(2A) of the Act. On the basis of the Special Audit Report, statements recorded during the search and investigation, and the entries appearing in the books, the Assessing Officer rejected the books of account under section 145(3) and completed the assessment under section 144 read with section 153A. For A.Y. 2010-11, the Assessing Officer made disallowances/additions under sections 40A(3), 40(a)(ia), 37(1), 68 and 69A in respect of cash payments, non-deduction of tax, salary and purchase of shares, share capital/share application money, unsecured loans, journal entries and repayment of loans.

In appeal before the learned CIT(A), the assessee challenged both the validity of the assessment proceedings and the additions on merits. The learned CIT(A) issued as many as 11 notices; however, the assessee neither filed any online written submissions nor availed itself of the opportunity of personal hearing. The learned CIT(A), therefore, observed that the assessee had maintained stoic silence despite several opportunities and had not furnished even an iota of evidence to controvert the additions. Relying substantially upon the findings recorded in the assessment order and the Special Audit Report, the learned CIT(A) confirmed the additions and dismissed the appeal.

Before us, the learned Authorised Representative (“learned AR”), at the outset, submitted that the assessments for A.Ys. 2010-11 to 2014- 15 were unabated on the date of search and that the issue is squarely covered by the decision of the coordinate Bench in Eager Corporation v. DCIT in ITA Nos.5220, 5221, 5257 and 5258/Mum/2024, order dated 12.02.2026. The learned AR submitted that, in the said case, following the decision of the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd., the additions were deleted in the absence of any incriminating material. He accordingly prayed that the additions for A.Ys. 2010-11 to 2014-15 be deleted. For A.Ys. 2015-16 and 2016-17, the learned AR submitted that the matters may be restored to the learned CIT(A), as they require factual verification. 8. As regards the assessments framed under section 144, the learned AR submitted that the assessee had replied to the show-cause notice dated 12.07.2018 and that the assessments were completed under section 144 consequent to the rejection of the books of account and estimation of profit. With regard to the alleged non-compliance before the learned CIT(A), the learned AR submitted that the learned CIT(A), at page 15, paragraph 6 of the appellate order, had recorded that the assessee filed submissions before him, on the basis of which a remand report was called for. He, therefore, contended that the observation of the learned CIT(A) regarding complete non-compliance was not correct to that extent.

Per contra, the learned Departmental Representative (“learned DR”) submitted that the assessments were completed under section 144 because the assessee failed to substantiate the entries appearing in its books. He drew our attention to paragraph 53 of the order of the learned CIT(A), wherein it was recorded that ten notices of hearing were issued between 22.02.2021 and 12.01.2024, but there was no response from the assessee. The learned DR further referred to the finding of the learned CIT(A) that the assessee had maintained stoic silence despite multiple opportunities and had not furnished even an iota of evidence. The learned DR also referred to the common panchnama drawn in the cases of the assessee, Shipra Fabrics Private Limited and Dolex Commercial Private Limited. He submitted that the Tribunal, by order dated 31.10.2025 in Dolex Commercial Private Limited v. DCIT, in ITA Nos.1595 to 1598/Mum/2025 for A.Ys. 2010-11 to 2013-14 and ITA Nos.1618 to 1620/Mum/2025 for A.Ys. 2014-15 to 2016-17, and by order dated 27.11.2025 in Shipra Fabrics Private Limited v. DCIT, in ITA Nos.4721 to 4726/Mum/2024 and ITA Nos.5006 to 5011/Mum/2024, restored the respective appeals to the file of the learned CIT(A) for de novo adjudication. The learned DR submitted that a similar course should be adopted in the present appeals.

We have heard the rival submissions and carefully perused the assessment orders, the impugned appellate order and the decisions relied upon by both sides. It is evident from paragraph 53 of the order of the learned CIT(A) that ten notices of hearing were issued, but the assessee did not file any online written submissions or avail itself of the opportunity of personal hearing. The relevant paragraph is reproduced below:

The learned AR has raised a legal ground that the assessments for A.Ys. 2010-11 to 2014-15 were unabated on the date of search and, therefore, in view of the decision of the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. (supra), no addition could be made in the absence of incriminating material. In support of this contention, the learned AR placed reliance on the decision of the coordinate Bench in Eager Corporation v. DCIT (supra), wherein the additions made for the unabated assessment years were deleted.

We note that the principle laid down by the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. (supra) is that, in respect of a completed or unabated assessment, no addition can be made under section 153A of the Act in the absence of incriminating material found during the course of search. The application of this principle to a particular assessment year, however, requires factual determination as to: first, whether the assessment was abated or unabated on the date of search; secondly, whether the material relied upon was found during the course of search; thirdly, whether such material is incriminating in nature; and, finally, whether it has a nexus with the assessee, the relevant assessment year and the particular addition. In Eager Corporation (supra), relied upon by the assessee, the Tribunal had specifically called for a report from the Assessing Officer. Even in that report, the Assessing Officer failed to identify any seized document or incriminating material relatable to the additions. It was on that verified factual foundation that the coordinate Bench held the additions to be beyond the scope of section 153A. In the appeals before us, the Department seeks to rely upon a common panchnama and documents stated to have been found during the search. Neither the assessment orders nor the impugned appellate order contains a clear, year-wise adjudication of these aspects in the context of the additional grounds now pressed before us.

We find that, in Dolex Commercial Private Limited v. DCIT (supra), arising from the same search and involving substantially identical assessment orders, the coordinate Bench observed as under:

Similarly, in Shipra Fabrics Private Limited v. DCIT (supra), the coordinate Bench observed as under:

It is noted that assessee is challenging the validity of the search proceedings, assessment proceedings and has raised ground of assessment order having passed beyond the period of limitation, apart from other issues contested on merits of the addition. In our considered opinion, the legal issues deserve to be verified by Ld. CIT(A) having regards to the assessment records. In the interest of justice, we, therefore, remit all the appeals to the Ld. CIT(A) to consider it de novo in accordance with law. Assessee is at liberty to furnish all evidence in support of its claim on legal issue as well as on merits. The Ld. CIT(A) is directed to investigate upon the evidence furnished by the assessee in accordance with law. Needless to say that proper opportunity of being heard may be granted to the assessee.

Considering the common search background, the substantially identical assessment orders and the necessity of verifying the legal issues 13 from the assessment records, we consider it just and proper to follow the course adopted in paragraph 5 of the order in Shipra Fabrics Private Limited (supra). Accordingly, all seven appeals are restored to the file of the learned CIT(A) for de novo adjudication in accordance with law.

The learned CIT(A) shall adjudicate the appeals afresh and shall first determine, year-wise, whether each assessment was abated or unabated on the date of search. In respect of every assessment year found to be unabated, the learned CIT(A) shall identify the precise material claimed by the Department to be incriminating and record a clear finding as to whether such material has a nexus with the assessee, the relevant assessment year and the particular addition. The assessee shall be at liberty to furnish all evidence in support of its legal grounds as well as its contentions on merits. Needless to say, the assessee shall be afforded a reasonable and effective opportunity of being heard. The assessee is directed to cooperate with the appellate proceedings and not seek adjournment without sufficient cause. All contentions are left open, and we express no opinion on the merits of any ground.

In the result, all seven appeals filed by the assessee are allowed for statistical purposes.