SANTOSH KUMAR KEDIA, HUF,KOLKATA vs. DCIT, CEN. CIR. 4(3), KOLKATA

Facts in brief are that the search action u/s 132 of the Act was conducted on 06.10.2015 at the residential as well as office premises on Kedia group and its key persons and in some business premises survey u/s 133A of the ‘at was conducted. The assessee is engaged into in the business of manufacturing of the coal tar pitch and its bye-product etc. During the course of search, certain incriminating material / documents pertaining to the assessee Shri Santosh Kumar Kedia, HUF were found and seized which according to the AO has a bearing on determination and assessment of income. Therefore proceedings u/s 153C of the Act were initiated by issuing notice thereby calling for the return of income. The assessee filed return of income on 25.09.2017 declaring total income of Rs. 10, 48,267/-. Thereafter the statutory notices were duly issued and served on the assessee. During the course of assessment proceedings, the assessee appeared before the AO and explained all the points raised by the AO. Finally the AO made addition on the basis of assessment framed u/s 143(3) vide order dated 30.01.2013 and also on the basis of records available before him. The AO made disallowance of Rs. 1,33,138/- towards addition made in original assessment but not incorporated in the assessee’s return of income filed u/s 153C of the Act. The second addition was made of Rs. 2,25,323/- in respect of interest expenses u/s 40(a)(ia) for non-deduction of tax at source for which payment was made to M/s Magma Leasing Ltd. Similarly, some cash payments in respect of repairs and maintenance were also disallowed by the AO to the tune of Rs. 2,13,598/- besides making disallowance of Rs. 925 claimed by the assessee against the income from other sources. Thus in the assessment framed u/s 153C/143(3) of the Act dated 29.12.2017 the above said four additions were made.

In the appellate proceedings, the Ld. CIT(A) simply dismissed the appeal of the assessee by holding that the AO has rightly followed the requisite procedure in

After hearing the rival contentions and perusing the material on record, we find from the perusal of the assessment order as well as appellate order and also the records available before us that there is no incriminating material found and seized during the course of search pertinent the assessee Mr. Santosh Kumar Kedia, HUF and the additions made were only on the basis of return of income of the assessee and details filed by the assessee. A search action was conducted on Kedia group on 06.10.2015 and the impugned assessment year involved is AY 2010-11. Therefore, apparently the assessment is unabated on the date of search and incriminating material found and seized during the course of search can only confer/vest jurisdiction upon the AO to make the addition in the assessment framed u/s 143(3)/153C of the Act. However, we find that there is no such incriminating material found and seized during search and accordingly additions made by the AO were without jurisdiction. It is for this reason, we are unable to agree with the conclusion drawn by the Ld. CIT(A) on this issue. The case of the assessee is supported by the decision of Hon’ble Supreme court in the case of Pr. CIT Vs. Abhisar Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC). Moreover, we are also supported by the decision of Co-ordinate Bench of Kolkata in the case of Trishul Hi-tech Industries vs. DCIT in IT(SS)A Nos. 84- 86/Kol/2011 for AY 2004-05 to 2006-07 wherein the Co-ordinate Bench concluded that the above interpretation which is with respect to Section 153A of the Act should also be extended to assessment framed u/s 153C of the Act. The Co-ordinate Bench held that it is absurd proposition that the person who is searched can only be assessed on the basis of incriminating material and other person who is assessed u/s 153C of the Act in connection with the same search should be assessed de hors any incriminating material. Consequently, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly the ground of appeal is allowed.

The issue raised in the other appeal is similar to one as decided by us in IT(SS)A No. 30/Kol/2024 for AY 2010-11. Therefore our decision in IT(SS)A No. 30/Kol/2024 for AY 2010-11 would, mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the assessee is allowed.

In the result, both the appeals of the assessee are allowed.