BHASKAR TEA AND INDUSTRIES PRIVATE LIMITED. ,KOLKATA vs. ACIT, C.C-1(1), KOLKATA, KOLKATA

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ITSSA 145/KOL/2023Status: DisposedITAT Kolkata21 March 2024AY 2013-143 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made by the AO is not sustainable in law. The primary document (SVM-2) was found during a survey on M/s SVM Impex & Finance Pvt. Ltd., a group company, and not during a search on the assessee, thus not constituting incriminating searched material. The Tribunal noted that for additions in an unabated assessment year, the AO must rely on incriminating seized material. In the absence of such material found during a search on the assessee, the AO has no jurisdiction to make an addition. The Tribunal further observed that even if the document was found from a third party during a search/survey pertaining to the assessee, the AO should have framed the assessment under Section 153C. The Tribunal also found that both the AO and the CIT(A) failed to provide any substantive material to corroborate the disclosure made by Shri Srivardhan Mohta. Relying on the decision of the Hon'ble Apex Court in CIT Vs S. Khadher Khan (2013) 352 ITR 480(SC), the Tribunal concluded that a disclosure cannot be the sole ground for addition without corroborating material. Therefore, the addition was deleted. The issue of whether the assessment should have been framed under Section 153C was implicitly addressed by stating that the AO had no jurisdiction to make the addition under the circumstances.

What were the facts?

The assessee, Bhaskar Tea & Industries Pvt. Ltd., is in appeal before the Income Tax Appellate Tribunal (ITAT), Kolkata Bench 'B', against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Years 2012-13 and 2013-14. The appeals arise from additions made by the Assessing Officer (AO) based on a survey conducted on M/s SVM Impex & Finance Pvt. Ltd. on March 18, 2015. The AO relied on a document (SVM-2) found during this survey, which indicated cash payments to director Shri Srivardhan Mohta, routed to the assessee. The assessment years in question were unabated at the time of the search, and the time limit for issuing notices under Section 143(2) had expired. The assessee had filed returns in response to notices under Section 153A and subsequently revised them, retracting a sum of Rs. 2.50 crores due to the absence of incriminating material.

What were the issues?

1. Whether the addition made by the AO is sustainable in law when the primary document (SVM-2) relied upon was found during a survey on a group company (M/s SVM Impex & Finance Pvt. Ltd.) and not during a search on the assessee, and the assessment year was unabated at the time of the search? (Question of law and fact, turning on Section 153A and Section 153C of the Income Tax Act, 1961). Assessee's Contention: The assessee argued that the addition is not sustainable as the document SVM-2 was found during a survey on a group company, not during a search on the assessee. Furthermore, since the assessment year was unabated and the notice under Section 143(2) had expired, the AO lacked jurisdiction to make additions without incriminating material found during a search on the assessee. The assessee also contended that the disclosure made by Shri Srivardhan Mohta during the survey/search was not backed by any corroborating incriminating material, and their retraction of the disclosed amount was justified. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, it notes that both the AO and the CIT(A) failed to bring on record substantive material to corroborate the disclosure made by the assessee.

Which sections of the Income-tax Act were involved?

Section 153A,Section 153C,Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH: KOLKATA

Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]

आयकर अपील�य अ�धकरण, कोलकाता पीठ “बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA �ी राजेश कुमार लेखा सद�य एवं , �ी संजय शमा� �या�यक सद�य के सम� [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.(SS) A. No. 144 & 145 /Kol/2023 Assessment Years: 2012-13 & 2013-14

Bhaskar Tea & Industries Pvt. Ltd. Vs. ACIT, Central Circle-1(1), Kolkata

(PAN: AABCB 4084 F)

( अपीलाथ� ) !यथ�( ) Appellant / Respondent /

CORRIGENDUM Per Rajesh Kumar, AM: By virtue of application preferred by the assessee submitting that inadvertent mistakes are found in page 4 para 7 in the last line which are corrected by substituting “M/s SVM Impex & Finance Pvt. Ltd.” in place of “M/s SVM Enterprises Pvt. Ltd.” There is another mistakes found in page 5, 8th line wherein “u/s 153C” is substituted for “153A” of the Act and page 15, 3rd line is substituted as “In our opinion, it is settled position that disclosure made by Shrivardhan Mohta during the course of search” in place of “In our opinion, it is settled position that disclosure made by the assessee during the course of survey”. The impugned order is hereby corrected and the corrected part shall be read as under:

“7. After hearing the rival contentions and perusing the material on record, we find that undisputedly the assessment in the instant year is unabated on the date of search as no assessment proceedings were pending on the date of search and also time period of issuing notice u/s 143(2) had already expired. Therefore in order to make addition in unabated assessment year, the AO has to rely and refer to the incriminating seized material during the course of search in absence of which the AO has no jurisdiction to make an addition in the present case. We note that the material as referred by the AO i.e. SVM-2 in which the information qua cash being paid to director Shri Srivardhan Mohta, which was being routed to Bhaskar Tea and Industries Pvt Ltd., was found and seized during the course of survey on M/s SVM Impex and Finance Pvt. Ltd. on 18.03.2015 meaning thereby that the said document was not found during the course of search and does not constitute an incriminating searched material. In our opinion, the addition made by the AO on the basis of said document is not sustainable in the eyes of law as the document marked as SVM-2 was found during the course of survey on group company and not during the search on the assessee. In that scenario where the document was found from the premises of any person other than the assessee during the course of search/survey which pertains to the assessee, then the AO has to frame assessment u/s 153C of the Act after following the correct methodology.

2 I.T.(SS)A. Nos. 144 & 145/Kol/2023 Assessment Years: 2012-13 & 2013-14 Bhaskar Tea & Industries Pvt. Ltd. 13. After hearing the rival contentions and perusing the material on record, we find that undisputedly the assessment was unabated assessment on the date of search as there was no pending assessment proceedings and the time limit for issuing notice u/s 143(2) of the Act had already expired. Mr. Mohta made disclosure in the hands of assessee company during the course of survey/search which was not backed by any incriminating material seized. Therefore after filing the return of income in response to notice issued u/s 153A of the Act on 23.09.2016, the assesse revised the same on 20.12.2016 by retracting Rs. 2.50 crores on the ground that there being no incriminating material found during the course of survey/search and thus the retraction was justified by the assessee. In the present case, we note that both the authorities below i.e. the AO as well as Ld. CIT(A) have failed to bring on record any substantive material to corroborate disclosure made by the assessee. In our opinion, it is settled legal position that disclosure made by Shrivardhan Mohta during the course of survey cannot be sole ground to make the addition unless there is some corroborating substantive material is brought on record by the AO or by the Ld. CIT(A). The case of the assessee finds support from the decision of the Honble Apex Court in CIT Vs S. Khadher Khan (2013) 352 ITR 480(SC). Therefore the view taken by the ld. CIT appears to be incorrect and cannot be sustained. The ground no. 3 is allowed by setting aside the appellate order on this issue and AO is directed to delete the addition.” Hence this corrigendum is issued to modify the order accordingly.

Order is pronounced in the open court on 21st March, 2024

Sd/- Sd/-

(Sonjoy Sarma /संजय शमा�) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य

Dated: 21st March, 2024

SM, Sr. PS

3 I.T.(SS)A. Nos. 144 & 145/Kol/2023 Assessment Years: 2012-13 & 2013-14 Bhaskar Tea & Industries Pvt. Ltd.

Copy of the order forwarded to:

1.

Appellant- Bhaskar Tea & Industries Pvt. Ltd., 6/2, Queens Park, Ballygung, Kolkata-700019 2. Respondent – ACIT, Central Circle-1(1), Kolkata 3. Ld. CIT(A)-20, Kolkata 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)

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