THE ACIT, CENTRAL CIRCLE-3, VADODARA vs. M/S. MERIT SALES PVT. LTD., VADODARA

ITSSA 83/AHD/2021Status: DisposedITAT Ahmedabad27 October 2023AY 2011-1212 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed the Commissioner (Appeals)'s order deleting an addition of Rs. 1.51 crores made to the assessee's income for AY 2011-12. The addition was for share capital/application money treated as unexplained cash credit under Section 68. The assessee company was incorporated in November 2010 and allegedly floated by an accommodation entry operator. The Assessing Officer (AO) issued a show cause notice after the assessee failed to prove the genuineness, identity, and creditworthiness of investors, citing difficulty in obtaining details from original shareholders who had sold their shares. The AO made the addition under Section 153A read with Section 143(3). The CIT(A) deleted the addition, holding that no assessment under Section 153A can be sustained without incriminating material found during a search.

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal. The Tribunal held that for assessments under Section 153A, in the case of completed/unabated assessments, no addition can be made by the Assessing Officer in the absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A. The Tribunal relied on the Supreme Court's decision in PCIT, Central-3 vs. Abhisar Buildwell Pvt. Ltd. (2023), which affirmed the principle that in the absence of incriminating material, additions cannot be made in respect of completed assessments under Section 153A. The Supreme Court had agreed with the views of the Delhi High Court in Kabul Chawla and the Gujarat High Court in Saumya Construction. The Tribunal noted that while completed assessments can be reopened under Section 147/148, this is subject to their conditions. Since the CIT(A) had deleted the addition on this technical ground, the Tribunal found no infirmity in the CIT(A)'s finding and dismissed the Revenue's grounds of appeal. As the issue was decided on a technical ground, other grounds on merit were rendered infructuous and also dismissed.

What were the issues?

1. Whether, in assessment proceedings under Section 153A, any addition must be confined to incriminating material found during a search under Section 132, despite no such stipulation in Section 153A. 2. Whether the scheme of Section 153A, requiring returns for six preceding assessment years and assessment/re-assessment of total income, would be rendered ineffective if no additions are allowed in the absence of seized incriminating material. 3. Whether the CIT(A) erred in not appreciating that Section 153BI excludes the application of Chapter XIV-B (block assessment) where a search is initiated after May 31, 2003, unlike Section 158BB which required evidence found during search. 4. Whether the CIT(A) erred in not appreciating that assessments related to issues not connected to the search could arise in the six years, and the CIT(A)'s interpretation would prevent assessing such income, contrary to legislative intent and the AO's duty to assess correct income, as held in Mahalaxmi Sugar Mills (SC). 5. Whether the CIT(A) erred in not appreciating decisions of the Delhi High Court in CIT vs. Anil Kumar Bhatia and Kerala High Court in E.N. Gopakumar vs. Commissioner of Income-tax (Central) which held that assessments in search cases can be concluded against the assessee, including additions, even without incriminating material. Revenue's Arguments: The Revenue argued that Section 153A does not stipulate that additions must be based solely on incriminating material found during a search. They contended that the scheme of Section 153A would be undermined if no additions could be made in the absence of such material. They also argued that Section 153BI excludes Chapter XIV-B, implying a different scope than block assessments. Furthermore, they submitted that assessments unrelated to the search could be made, and the CIT(A)'s interpretation would prevent this. They relied on CIT vs. Anil Kumar Bhatia (Delhi HC) and E.N. Gopakumar vs. CIT (Kerala HC).

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 68,Section 132,Section 153BI,Section 158BB,Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: Shri Waseem Ahmed & Shri T.R. Senthil Kumar

PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Revenue as against the appellate order dated 09-03-2021 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad, arising out of the assessment order passed under section 153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2011-12. I.T.(SS)A No. 83/Ahd/2021 A.Y. 2011-12 Page No 2 ACIT Vs. M/s. Merit Sales Pvt. Ltd.

2.

The brief facts of the case is that the assessee is a Private Limited Company incorporated on 19.11.2010 having

The order continues below.

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