PRIYA BLUE INDUSTRIES PVT.LTD.,BHAVNAGAR vs. THE DY.CIT., CENTRAL CIRCLE-1(1),, AHMEDABAD

ITSSA 27/AHD/2022Status: DisposedITAT Ahmedabad08 May 2024AY 2017-1817 pages
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What were the facts?

The assessee, Priya Blue Industries Pvt. Ltd., engaged in ship breaking, recycling, and scrap sales, filed appeals against assessment orders for Assessment Years 2014-15 to 2018-19. A search action under Section 132 of the Income Tax Act, 1961, was conducted on the assessee's premises on November 19, 2019. Although no incriminating materials were found during the search, statements were recorded under Section 132(4). Subsequently, a notice under Section 153A was issued, and the assessee filed returns. The case was referred to the Transfer Pricing Officer (TPO) due to international transactions. The TPO made an upward adjustment of Rs. 1,01,71,910/- for provision of services rendered to Associate Enterprises (AEs) and corporate guarantee given to AEs. The Assessing Officer (AO) passed an assessment order under Section 143(3) r.w.s. 92CA(3) r.w.s. 153A. The Commissioner of Income Tax (Appeals) partly allowed the appeal, deleting the addition for corporate guarantee but confirming the addition for provision of services.

What did the Tribunal hold?

The Tribunal held that the assessment years 2014-15 to 2018-19 were unabated assessments. Following the Supreme Court's decision in 'Abhisar Buildwell (P.) Ltd.', which upheld the principles laid down in 'CIT vs. Kabul Chawla' and 'Saumya Construction', the Tribunal ruled that no addition can be made in respect of completed or unabated assessments in the absence of any incriminating material found during the search. The Tribunal noted that while the CIT(A) had confirmed the addition for provision of services, the fundamental requirement for making additions under Section 153A in unabated years is the existence of incriminating material. Since no such material was found, the assessment orders for these years were deemed to be without jurisdiction. Therefore, the grounds raised by the assessee were allowed. The Tribunal quashed the assessment orders for the relevant assessment years.

What were the issues?

1. Whether the addition made on account of benchmarking of provision of services rendered to Associate Enterprises (AEs) amounting to Rs. 26,81,910/- is sustainable in the absence of any incriminating material found during the search, considering the assessment years are unabated? Assessee's contention: The assessee argued that since the assessment years are unabated and no incriminating material was found during the search, any addition made under Section 153A is without jurisdiction. The assessee relied on the Supreme Court decision in 'Abhisar Buildwell (P.) Ltd.' which followed the Delhi High Court's decision in 'CIT vs. Kabul Chawla' and Gujarat High Court's decision in 'Saumya Construction', holding that no addition can be made in respect of completed/unabated assessments in the absence of incriminating material. Revenue's contention: The revenue argued that the addition was based on evidence found during the search, including statements recorded under Section 132(4) and corroborating information from the AEs' website, proving that employees of the assessee were working for the AE and their salary costs were not recovered. The CIT(A) observed that the addition was based on incriminating materials found during the search.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 92CA(1),Section 92CA(2),Section 92CA(3),Section 40A(2)(b),Section 132(4)

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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH

PER BENCH:- These five appeals are filed by the Assessee as against separate appellate orders all dated 17.08.2022 passed by the Commissioner of Income Tax(Appeals)-11, Ahmedabad arising out of the assessment order passed under section 143(3) r.w.s. 92CA(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2014-15 to 2018-19. Since the issue involved in these appeals are identical, for the sake of convenience, the same are disposed of by this common order.

I.T.(SS)A Nos. 24 to 28/Ahd/2022 A.Ys. 2014-15 & 2018-19 Page No 2 Priya Blue Industries P. Ltd. vs.

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