DCIT, CENTRAL CIRCLE-2(1), PUNE, PUNE vs. SHAILENDRA NATH AGARWAL, PUNE

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ITSSA 34/PUN/2024Status: DisposedITAT Pune26 November 2024AY 2009-108 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) had erred in adjudicating the appeals. The CIT(A) had allowed the appeals solely based on a remand report and the ratio of 'PCIT Vs Abhisar Buildwell Pvt. Ltd.', concluding there was an absence of incriminating documents. However, the Tribunal found that the remand reports, when read in conjunction with the seized material, statements, and assessment orders, clearly indicated the presence of incriminating material. The CIT(A) had misread the remand reports, which actually confirmed the existence of incriminating material with adverse findings against the assessees. The Tribunal also noted that the CIT(A) failed to comply with Section 250(6) of the Act by not stating the point of determination, decision, and clear reasons. Citing precedents like 'Pankaj Vs Ne-AC' (Bom) and 'Chennai Silk VS Asstt Commissioner (ST-FAC)' (Mad), the Tribunal held that orders passed without considering material on record are bad in law. Consequently, the impugned orders were set aside, and the matters were remitted to the National Faceless Appeal Centre (NFAC) for de-novo adjudication in accordance with law, with directions to grant virtual hearings and pass speaking orders.

What were the facts?

The Revenue filed appeals against orders of the Commissioner of Income Tax Appeals (CIT(A)) which had deleted additions made by the Assessing Officer (AO) under Section 153A read with Section 143(3) of the Income Tax Act, 1961. The assessment years involved are 2008-09 and 2009-10. The additions pertained to unexplained cash credit under Section 68, disallowance of interest, and disallowance of commission. The search action under Section 132 on the 'Agrawal Group' occurred on December 17, 2013, covering both assessees. The CIT(A) had allowed the assessees' appeals based on a remand report from the AO and the Supreme Court's decision in 'PCIT Vs Abhisar Buildwell Pvt. Ltd.', finding no incriminating material during the search.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition on account of accommodation entries received from bogus entities, by holding that the additions were not based on incriminating material found during the search, despite the AO having dealt with evidence from the search in the case of bogus entities and the assessee? (Question of law and fact, concerning Section 153A r.w.s. 143(3) and the definition of incriminating material). 2. Whether the CIT(A) erred in not appreciating that the assessee failed to substantiate the genuineness of the transactions during search and post-search proceedings? (Question of law and fact, concerning the burden of proof and substantiation of transactions). Revenue's Contention: The CIT(A) erred in deleting additions, failing to appreciate that the AO had exhaustively dealt with evidence from the search of bogus entities and the assessee, and that the assessee failed to substantiate the genuineness of transactions. The CIT(A) also erred in relying on a remand report that was misread. Assessee's Contention: Not explicitly recorded, but impliedly supported the CIT(A)'s finding of no incriminating material and relied on the ratio of 'PCIT Vs Abhisar Buildwell Pvt. Ltd.'.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 68,Section 250(6),Section 251(1)(a),Section 254(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH PUNE

Before: HON’BLE SHRI G. D. PADMAHSHALI & HON’BLE SHRI VINAY BHAMORE

For Appellant: Mr Rajiv Thakkar [‘Ld. AR’]
For Respondent: Mr Ajay kumar Kesari & Mr Arvind Desai [‘Ld. DR’]
Pronounced: 26/11/2024

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH PUNE BEFORE HON’BLE SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER AND HON’BLE SHRI VINAY BHAMORE, JUDICIAL MEMBER IT(SS)A No. 35/PUN/2024 Assessment Year : 2008-09 Deputy Commissioner of Income Tax, Central Circle-2(1), Pune. . . . . . . . Appellant

V/s Agarwal Group Corporate Holdings Pvt Ltd 309, Nanekarwadi, Chakan, Pune – 410 501. PAN: AAACK8705D . . . . . . . Respondent

And IT(SS)A No. 33 & 34/PUN/2024 Assessment Year : 2008-09 & 2009-10 Deputy Commissioner of Income Tax, Central Circle-2(1), Pune. . . . . . . . Appellant V/s Shailendra Nath Agarwal 9, Balaji Park, Aundh, Pune–411 007. PAN: AANPA4849A Appearances Assessee by : Mr Rajiv Thakkar [‘Ld. AR’] Revenue by : Mr Ajay kumar Kesari & Mr Arvind Desai [‘Ld. DR’] Date of conclusive Hearing : 26/09/2024 Date of Pronouncement : 26/11/2024 ORDER PER G. D. PADMAHSHALI, AM; This bunch of appeals is instituted by Revenue impugns separate DIN & Order No. ITBA/APL/S/250/2023-24/1061559948(1) dt. 27/02/2024, and ITBA/APL/S/250/2023-24/1061520485(1) & 1061520720(1) both dt. ITAT-Pune Page 1 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 26/02/2024 passed by Commissioner of Income Tax Appeals, Pune-12 [‘Ld. CIT(A)’ in short] u/s 250 of the Income Tax Act, 1961 [‘Act’ in short] which in turn arisen respective assessment orders of passed u/s 153A r.w.s 143(3) of the Act by Deputy Commissioner of Income Tax, Central Circle- 2(1), Pune [‘Ld. AO’ in short] involving assessment years 2008-09 & 2009- 10 [‘AY’ in short].

2.

Except variation in amount of additions made, the issues involved and intertwined with both assessee’s in this bunch of appeals are exactly same and are arising out of identical set of facts and findings of tax authorities permeating therein also being identical; hence at the request of the rival parties for the sake of brevity, these three appeals are heard for being disposed-off by this common & consolidated order u/s 254(1) of the Act.

3.

Succinctly stated common facts of this bunch of case are that; A search action u/s 132 of the Act on the ‘Agrawal Group’ was carried on 17/12/2013 wherein these both the assessee’s were covered. On the basis of documents/material seized in search proceedings etc., consequential assessments by separate orders were framed u/s 153A r.w.s. 143(3) of the Act wherein threefold additions in the hands of respective assessee’s for the assessment years under consideration were made viz; (1) unexplained cash credit u/s 68 of the Act (2) disallowance of interest and (3) disallowance of commission etc. ITAT-Pune Page 2 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 4. These additions and the assessments through separate appeals were challenged by these assessees before the first appellate authority. The Ld. CIT(A) allowed the appeals of these assessees on the basis of remand report from the Ld. AO and ratio of Hon’ble Supreme Court in ‘PCIT Vs Abhisar Buildwell Pvt. Ltd.’ [2023 149 taxmann.com 399 & 454 ITR 212 (SC)]

5.

Aggrieved by the first appellate adjudications, the Revenue came in present bunch of appeals on following common grounds; 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. x,xx,xx,xxx/- made on account of accommodation entries received by the assessee from the bogus entities by holding that the additions were not based on any incriminating material found during the course of search action without appreciating the fact that the Assessing Officer exhaustively dealt with the evidences and findings during search action in the case of bogus entities and in the case of the assessee.

2.

On the facts and in the circumstances of the case and in law, th CIT(A) has erred in not appreciating the fact that the assessee fail substantiate the genuineness of the said transactions during search acti well as post search proceedings. 3. The appellate craves leave to add, amend, modify or alter any of the ground. ITAT-Pune Page 3 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 6. We heard rival parties contention & submission and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short ‘ITAT-Rules’] perused the material placed on records, considered the facts, arguments & submission in the light of settled position of law, given thoughtful consideration to the case laws pressed into service which are also forewarned to the parties present. 7. Without touching the merits at the threshold, we observed that, the Ld. first appellate authority while allowing the appeals of the assessee has relied on the submission of the assessee made before him and by application of ratio laid in ‘PCIT Vs Abhisar Buildwell P. Ltd’. allowed the appeals. While doing so the Ld. CIT(A) founded the said relief to the assessee group on the basis remand report of the Ld. AO which were sought during the course of pending first appellate proceedings invoking provisions of rule 46A of Income Tax Rules, 1962. Thus, the sky whole commend in forming conclusion or findings about absence of incriminating documents/material was solitarily based on remand report. Since the dispute in first appeals ceased sheerly upon the conclusion of absence of incriminating documents which was read from the contents of remand reports, we delt with the remand reports and the documents/material seized in the course of searches undertaken in relation to these cases, statement of relevant parties recorded during the course of aforestated proceedings, and advanced accordingly.

ITAT-Pune Page 4 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 8. Accordingly, we have given our thoughtful consideration to the material seized in the course of searches conducted in the case of assessee group and other related parties, statements of parties recorded in the course of such searches and the remand reports called-up by the Ld. CIT(A) u/r 46A of Income Tax Rules, 1962 viz; dt. 25/09/2018 and 02/09/2022 in the case of ‘Agrawal Group Crop. Holdings Pvt. Ltd.’ and dt. 24/11/2021 and 30/08/2022 in the case of ‘Shailendra Nath Agrawal’ and the oral submissions / arguments advanced by the rival parties in the course of physical hearing. From the conjoint reading of these materials, it deciphered that, the Ld. AO during the assessment proceeding as well in first appellate proceeding through these remand report reiterated the presence of incriminating material. There was no iota of doubt whisper either in the assessment orders or in the aforestated remand reports about not constituting the seized materials/documents as ‘incriminating for the purpose of making additions and framing assessment u/s 153A r.w.s. 143(3) of the Act. This thus clearly show that, while adjudicating the first appeals, the Ld. CIT(A) misread the contents and proceeded erroneously. The conclusion thus drawn therefrom lead to misapplication of ratio relied upon. We also note, without carrying on any analysis of facts of these cases, noting down independent findings about presence of incrementing material on the basis of inquiry into materials/documents and without providing any reasoning in drawing conclusions the first appellate proceedings were ceased. ITAT-Pune Page 5 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 9. We are heedful to the restriction placed by clause (a) of sub-section (1) of section 251 of the Act which obligates the Ld. CIT(A) to adjudicate the issue either by confirming or annulling the addition or reducing or enhancing the addition made by the assessing officer without the right to remand the matter back. However, while exercising the jurisdiction u/s 251(1)(a) of the Act, the Ld. CIT(A) is mandated to state point of determination, its decision thereon and clear reasons therefore in terms of section 250(6) of the Act. This exercise by the Ld. CIT(A) is a pre-requisite and invariably necessary for each assessment year in each case irrespective of its repetition. It is a trite law as laid down by Hon’ble Supreme Court in case ‘Chandra Kishore Jha Vs Mahavir Prasad’ reported in 8 SCC 266 (SC), that ‘if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner’. In view hereof, we hold that, the impugned adjudication by the Ld. NFAC sidestepping the dictate is not in consonance with the provision of sub- section (6) of section 250 of the Act. 10. On the other hand, while adjudicating the legal issue the Ld. CIT(A) has tacitly accepted the submission of the respondent assessee’s and tuned blind eye to material brought on record including remand reports. It is said so, as while drawing conclusion about absence of incriminating material, the Ld. CIT(A) gravely mistaken in reading the remand report in favour of the assessee whereas the remand report glitteringly confirms the existence of ITAT-Pune Page 6 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 incriminating material on record with adverse findings against the claim of the respondent assessee’s and further the said fact was reiterated in subsequent remand reports. 11. We note that, the Hon’ble Jurisdictional High Court in ‘Pankaj Vs Ne- AC’ [2022, 286 Taxman 228 (Bom)] in similar circumstances annulled the order passed by the Revenue which blatantly ignored the reply filed on record by the aggrieved. While adjudicating the issue their Hon’ble lordship held that, the validity of the order would have to be judged from its contents, therefore, any order passed without considering the material on record, reports, reply filed or submission made is bad in law and deserves to be set- aside. The matter in result remanded back to the file for fresh consideration. On a similar line the Hon’ble Madras High Court in ‘Chennai Silk VS Asstt Commissioner (ST-FAC) [2023, 157 Taxmann.com 65 (Mad)] occasioned to considered the validity of assessment where the Revenue failed to effectively considered the reply or submission of aggrieved. Their Hon’ble Lordship therein categorically held that, failure on the part of the tax authorities to address any reply file in the course of proceedings by a speaking order would vitiate impugned proceedings. A similar ratio can be squinted in ‘Bhagyam Exports Vs AC-ST’ [2024, 160 Taxmaan.com 521 (Mad)], ‘PBL Transport Corp. Pvt. Ltd. Vs AC-ST’ [2024, TaxPub(GST) 210 (AP)]. These judicial precedents through rendered in context of assessment, but what is binding is the ratio laid therein. ITAT-Pune Page 7 of 8

DCIT Vs Agarwal Group Corp. Holdings Pvt. Ltd. & Anrs IT(SS)A No. 33 to 35/PUN/2024, AY 2008-09 & 2009-10 12. In absence of anything contrary brought to our notice by the rival parties warranting us to deviate from the aforestated judicial precedents, without offering any comments on merits of the case, in the light of judicial precedents (supra), we deem it fit to set-aside the impugned orders under challenge and remit these matters to the ‘National Faceless Appeal Centre [‘NFAC’ in short] instead of Ld. CIT(A) for de-novo adjudication in accordance with law on the basis of material already placed on records by rival parties. Needless to state that, the Ld. NFAC shall grant reasonable & effective virtual hearings to the assessee group in each case separately and pass a speaking order in terms of section 250(6) of the Act. Ordered accordingly. The ground of appeals accordingly stands party allowed.

13.

These three appeals of the Revenue in result stands PARTLY ALLOWED FOR STATISTICAL PURPOSES. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on the date mentioned hereinbefore.

-S/d- -S/d- VINAY BHAMORE G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; Dated : 26th November, 2024. Panaji; Dated 08th November, 2024 Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT Concerned. 4. The CIT(A) & NFAC Concerned. 5. DR, ITAT, ‘B’ Bench, Pune 6. गाड�फ़ाइल / Guard File. आदेशानुसार / By Order व�र� िनजी सिचव / Sr. Private Secretary आयकर अपीलीय �यायािधकरण, पुणे / ITAT, Pune.

ITAT-Pune Page 8 of 8

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