THE JT. CIT(OSD), CENTRAL CIRCLE-2(2), AHMEDABAD vs. M/S. SANGANI INDUSTRIES LLP, AHMEDABAD

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ITSSA 64/AHD/2021Status: DisposedITAT Ahmedabad14 February 2024AY 2017-188 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) has erred in deleting the additions made by the Assessing Officer. The Tribunal noted that the search was conducted on March 6, 2018, and the assessment was framed under Section 153A. The Department's contention was that incriminating material was found during the search which substantiated that the assessees had obtained accommodation entries. The Tribunal referred to the decision in Pr.CIT Vs. Saumya Construction P.Ltd. (Guj.) 387 ITR 529, which was relied upon by the Department. This decision lays down that an assessment under Section 153A can be made if there is incriminating material found during the search, and it is not necessary for such material to be found from the premises of the assessee. The CIT(A) had deleted the additions primarily on the ground that the incriminating material was found from a third party and not from the assessee's premises, and that Section 153C should have been invoked. The Tribunal disagreed with this reasoning. The Tribunal found that the AO had made additions based on seized documents that indicated the assessees had received accommodation entries. The Tribunal held that the CIT(A) erred in deleting the additions and restored the order of the AO. The specific amounts added were Rs. 3,70,00,000/- for AY 2013-14 and Rs. 2,30,00,000/- for AY 2017-18.

What were the facts?

These appeals by the Department challenge orders of the CIT(A) for Assessment Years 2013-14 and 2017-18, concerning M/s. Sangani Industries Pvt. Ltd. and M/s. Sangani Industries LLP respectively. A search action under Section 132 of the Income Tax Act, 1961, was conducted on March 6, 2018, in the 'SSS Group'. The Assessing Officer (AO) initiated assessment proceedings under Section 153A. The AO observed that the assessees accepted unsecured loans from M/s. Gemini Vanijya Pvt. Ltd. and M/s. Gurukul Vinimay Pvt. Ltd., which were allegedly involved in providing accommodation entries. Incriminating documents, including an Excel file mentioning 'entry', were found from the premises of Shri Sandeep K. Andani, suggesting the assessees benefited from accommodation entries. The AO added Rs. 3,70,00,000/- (for AY 2013-14) and Rs. 2,30,00,000/- (for AY 2017-18) as unexplained credit entries under Section 68.

What were the issues?

1. Whether the Ld. CIT(A) erred in not considering that assessment under Section 153A was framed when a search warrant under Section 132 was executed in the case of the assessees (AY 2013-14 & 2017-18)? 2. Whether the Ld. CIT(A) erred by not considering that incriminating material was found and seized during the search at Signature Complex, Ahmedabad, substantiating that the assessees obtained accommodation entries from various concerns like Gurukul and Gemini (AY 2013-14 & 2017-18)? 3. Whether the Ld. CIT(A) erred by not considering the decision of the Hon'ble Jurisdiction High Court in Pr.CIT Vs. Saumya Construction P.Ltd. (387 ITR 529 (Guj)) which states that assessment should be connected with incriminating material found during search, and not necessarily from the assessee's premises (AY 2013-14 & 2017-18)? 4. Whether the Ld. CIT(A) erred in law by holding that the addition of Rs. 3,70,00,000/- (AY 2013-14) and Rs. 2,30,00,000/- (AY 2017-18) is not tenable and deleting the said additions (AY 2013-14 & 2017-18)? Assessee's Contentions (as reflected in CIT(A)'s order): - No assessment proceedings were pending for the assessment year at the time of search. - No communication in the assessment order stated that the addition was based on incriminating material found during the search. - Additions under Section 153A are unsustainable in the absence of incriminating material found during the search of the assessee's premises, especially in unabated assessments. - The seized material (Excel file with 'entry') was found from a third party (Shri Sandeep K. Andani), not the assessee's premises. Therefore, Section 153C should have been invoked. - The word 'entry' in the seized material does not necessarily mean incriminating information. - The amounts were received from associated concerns, and such transactions cannot be considered accommodation entries. - All required confirmations under Section 68 were furnished, and no infirmity was found by the AO. - Reliance on the Investigation Wing's report was incorrect as the companies' registered addresses were changed with due approval. Revenue's Contentions (as reflected in grounds of appeal): - The Ld. CIT(A) erred in not considering that the assessment under Section 153A was framed after the search warrant execution. - The Ld. CIT(A) erred by not considering that incriminating material was found during the search, substantiating accommodation entries. - The Ld. CIT(A) failed to properly consider the decision in Pr.CIT Vs. Saumya Construction P.Ltd., which allows additions based on incriminating material found during search, even if not from the assessee's premises. - The Ld. CIT(A) erred in deleting the additions made by the AO under Section 68.

Which sections of the Income-tax Act were involved?

Section 132,Section 133A,Section 139(1),Section 142(1),Section 143(2),Section 153A,Section 153C,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Parin S Shah, A.R
For Respondent: Shri Sudhendu Das, CIT D.R
Hearing: 08.01.2024

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.(SS)A. No. 63/Ahd/2021 (Assessment Year: 2013-14) Joint Commissioner of Income Vs. M/s. Sangani Industries Pvt. Ltd. Tax (OSD), 215, Signature Complex, Central Circle-2(2), Opp. Suvarna Bunglows, 100 Feet Ahmedabad Ring Road, Thaltej, Ahmedabad [PAN No.AAQCS3258M] (Appellant) .. (Respondent) I.T.(SS)A. No. 64/Ahd/2021 (Assessment Year: 2017-18) Joint Commissioner of Income Vs. M/s. Sangani Industries LLP, Tax (OSD), SF S/218, Signature Complex, Central Circle-2(2), Opp. Suvarna Bunglows, Thaltej, Ahmedabad Ahmedabad [PAN No.ACUFS9263P] (Appellant) (Respondent) .. Appellant by : Shri Parin S Shah, A.R. Respondent by: Shri Sudhendu Das, CIT D.R.

Date of Hearing 08.01.2024 14.02.2024 Date of Pronouncement

O R D E R PER SIDDHARTHA NAUTIYAL, JM:

These appeal have been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeals)-12, (in short “Ld. CIT(A)”), Ahmedabad vide orders dated 26.03.2021 passed for Assessment Years 2013-14 & 2017-18. Since common facts and issues for consideration are involved for all the years under consideration before us, all appeals are being disposed of by way of a common order.

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 2 -

2.

The Department has raised the following grounds of appeal:-

IT(SS)A No. 63/Ahd/2021(A.Y. 2013-14) “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that in the case of Sangani Industries Pvt. Ltd. and Sangani Industries LLP warrant of authorisation u/s 132 of the Act was executed on 06.03.2018, where assessment was framed u/s 153A of the Act?

2.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred by not considering the fact that the during the search incriminating material was found and seized from Signature Complex, Hebatpur Road, Nr. Zydus Hospital, Ahmedabad i.e. Page No. 59 of Annexure-A/2 which substantiate that the assessee has obtained accommodation entry(s) from various concerns like Gurukul, Gemini.

3.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred by not considering the decision of Hon'ble Jurisdiction High Court in its proper perspective in the case of Pr.CIT Vs. Saumya Construction P.Ltd. 387 ITR 529 (Guj), as this judgment lays the principle that assessment should be connected with something found during the search or requisition, viz. incriminating material which reveals undisclosed income. This decision nowhere states that addition u/s 153A can only be made if incriminating material is found during search from the premises of the concerned assessee.

4.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in holding that legally the addition of Rs.3,70,00,000/- is not tenable in the eyes of law and thus deleting the said addition. 5. 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.3,70,00,000/- made by the AO u/s 68 of the I.T. Act

6.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” IT(SS)A No. 64/Ahd/2021 (A.Y. 2017-18) “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that in the case of Sangani Industries LLP warrant of authorisation u/s 132 of the Act was executed, where assessment was framed u/s 153A of the Act?

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 3 - 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred by not considering the fact that the during the search incriminating material was found and seized from Signature Complex, Hebatpur Road, Nr. Zydus Hospital, Ahmedabad i.e. Page No. 59 of Annexure-A/2 which substantiate that the assessee has obtained accommodation entry(s) from various concerns like Gurukul, Gemini. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred by not considering the decision of Hon'ble Jurisdiction High Court in its proper perspective in the case of Pr.CIT Vs. Saumya Construction P. Ltd. 387 ITR 529 (Guj), as this judgment lays the principle that assessment should be connected with something found during the search or requisition, viz. incriminating material which reveals undisclosed income. This decision nowhere states that addition u/s 153A can only be made if incriminating material is found during search from the premises of the concerned assessee. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in holding that legally the addition of Rs.2,30,00,000/- is not tenable in the eyes of law and thus deleting the said addition. 5. 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.2,30,00,000/- made by the AO u/s 68 of the IT. Act. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”

3.

The brief facts of the case are that search and survey action was conducted under Section 132 / 133A of the Act on 06.03.2018 in the cases related to Sangani, Satyam and Shaligram group. The assessee had filed return of income under Section 139(1) of the Act on 08.10.2013 declaring total income at Rs. NIL. Thereafter, in furtherance of action under Section 132 of the Act, search assessment proceedings were initiated and a notice under Section 153A of the Act was served upon the assessee. Thereafter, notices under Section 143(2) and under Section 142(1) of the Act alongwith detailed questionnaire were issued and served upon the assessee. Upon

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 4 - verification of the details, the Assessing Officer observed that assessee has accepted huge amount by way of unsecured loans from M/s. Gemini Vanijya Pvt. Ltd. and M/s. Gurukul Vinimay Pvt. Ltd. The Assessing Officer was of the view that various incriminating papers seized during the course of search action in “SSS Group” (Sangani, Satyam and Shaligram) indicates that these entities are involved in providing accommodation entries to the group. The Assessing Officer observed that during the year under consideration the assessee had received a sum of Rs. 2,30,00,000/- by way of unsecured loan from M/s. Gemini Vanijya Pvt. Ltd. and the said entity is found to be a paper company involved in providing accommodation entry. The said fact is established from plethora of seized incriminating documents unearthed during the course of search action in “SSS Group”. The Assessing Officer observed that an excel file was found from the premises of Shri Sandeep K. Andani in which the word “entry” has been mentioned which means that the group has obtained cheque by offering unaccounted cash through various persons / entities. From the same it is clear that the assessee is the beneficiary of accommodation entry from M/s. Gemini Vanijya Pvt. Ltd. for the period A.Y. 2012-13 to A.Y. 2017-18. Further, the Assessing Officer observed that on conducting enquiry it was found that the above entities are not existing at their addresses. Accordingly, the Assessing Officer held that the assessee has obtained accommodation entry of Rs. 3,70,00,000/- from M/s. Gemini Vanijya Pvt. Ltd. and M/s. Gurukul Vinimay Pvt. Ltd. and such credit entry in the books of accounts of the assessee remained unexplained. Accordingly, the Assessing Officer made an addition of Rs. 3,70,00,000/- in the hands of the assessee for the impugned assessment year.

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 5 - 4. In appeal, Ld. CIT(A) allowed the appeal of the assessee and deleted the additions by observing that as on the date of initiation of search no assessment proceedings were pending for this assessment year. Further, there is no communication in the contents of the assessment order that the addition was made on the basis of any incriminating material found and seized during search. The CIT(A) held that various judgments / decisions of Jurisdictional High Court, Jurisdictional Tribunal and other Courts have held that in absence of incriminating material / evidence, addition / disallowance cannot be sustained within the meaning of Section 153A of the Act in case of unabated assessments. The CIT(A) observed that the seized material which was referred to by the Assessing Officer is on account of digital data found and seized from the residential premise of Mr. Sandeep K. Andani and such seized material was not found from the premises of the assessee. Further, on perusal of the seized material CIT(A) held that the word “entry” can in no sense mean that the said page consists of any information which is incriminating in nature. Further, CIT(A) was of the view that since the seized materials were found from the premises of a third party, the Assessing Officer ought to have invoked the provision of Section 153C of the Act in case of the assessee in respect of materials found and seized at the place of a third person. Accordingly, Ld. CIT(A) placed reliance on various judicial precedents to hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not any material found in the search of any other persons. Since in the instant case, the addition is based on material found and seized from third party, the Assessing Officer was not justified in making the addition while framing the

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 6 - assessment under Section 153A of the Act in the case of the assessee. Further, without prejudice to the above, the CIT(A) was of the view that the Assessing Officer erred in holding that the assessee had received the aforesaid amount by way of “accommodation entry” since the same had been received by the assessee from M/s. Gemini Vanijya Pvt. Ltd. and M/s. Gurukul Vinimay Pvt. Ltd., which are the associated concerns of the assessee. The CIT(A) was of the view that Assessing Officer completely ignored the fact on record that the amount from an associated concern could not be in the nature of an accommodation entry. Further, the CIT(A) was of the view all the required confirmations as required under Section 68 of the Act were duly furnished before the Assessing Officer and no infirmity was found in the same by the Assessing Officer. Further, the CIT(A) also held that reliance on the Assessing Officer on the report of Investigation Wing is incorrect for the reason that the registered address of the said companies was duly changed after taking the requisite approval from the Regional Director of Registrar of companies on 25.09.2013 by M/s. Gemini Vanijya Pvt. Ltd and M/s. Gurukul Vinimay Pvt. Ltd on 12.09.2013. The said information was available in the public domain at of the company websites of the Ministry of Corporate Affairs. Accordingly, Ld. CIT(A) was of the view that the requisite condition of “satisfaction” of the Assessing Officer was not satisfied in the instant set of facts. Accordingly, the Ld. CIT(A) allowed the appeal of the assessee for the impugned assessment year.

5.

The Department is in appeal before us against the aforesaid order passed by Ld. CIT(A). On going through the facts of the instant case and the arguments of the Ld. D.R. and the Counsel for the assessee, we are of

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 7 - the considered view that there is no infirmity in the order of Ld. CIT(A), looking into the instant facts, so as to call for any interference. Firstly, we observe that Ld. CIT(A) has correctly observed that from the perusal of the seized material, there is no mention of the words “accommodation entry” and it would be wrong to come to the conclusion that the term “entry” as appearing in the seized material should be read as “accommodation entry”. Further, we observe that Ld. CIT(A) at Paras 8-11 of his order has correctly placed reliance on the decision of CIT vs. Kabul Chawla 380 ITR 573 and on the case of CIT vs. Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016) which have held that Assessing Officer has no jurisdiction to make addition in the orders passed under Section 153A of the Act which is not pertaining to any undisclosed income or seized material when proceedings are closed and have attained finality. In the instant facts Ld. CIT(A) after a detailed examination of the material on record, has come to the conclusion that the material seized during the course of search does not qualify as “incriminating material” since there is no clear indication that the assessee was in receipt of accommodation entry for the impugned assessment year, on the basis of material seized found during the course of search. Further, in our considered view Ld. CIT(A) has correctly placed reliance on the Jurisdictional High Court in the case of Saumya Construction Pvt. Ltd. (supra) and on the case of Kabul Chawla (supra) to come to the conclusion that in case of unabated assessments, no additions can be made under Section 153A of the Act in absence of any specific incriminating material found during the course of search. Further, the Department has not been able to establish as to how the material seized from the premises of Mr. Sandeep K. Andani qualifies as “incriminating material”, in the instant

IT(SS)A Nos. 63 & 64/Ahd/2021 JCIT(OSD) vs. M/s. Sangani Industries Pvt. Ltd. & M/s. Sangani Industries LLP Asst. Years –2013-14 & 2017-18 - 8 -

facts. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.

6.

Since the facts and issues for consideration are similar in the case of Assessment Year 2017-18 as well, and the basis of rendering of decision by Ld. CIT(A) is also on similar grounds, our observations for A.Y. 2013-14 would apply to A.Y. 2017-18 as well in the case of M/s. Sangani Industries LLP.

7.

In the result, the appeal of the Department is dismissed for both the Assessment Years under consideration before us. This Order pronounced in Open Court on 14/02/2024

Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 14/02/2024 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 13.02.2024 2. Date on which the typed draft is placed before the Dictating Member 13.02.2024 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 14.02.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .02.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 14.02.2024 7. Date on which the file goes to the Bench Clerk 14.02.2024 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………………………………

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