ASSTT. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE-1(4), AHMEDABAD vs. SAFARI BIOTECH PRIVATE LIMITED, AHMEDABAD

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ITSSA 42/AHD/2023Status: DisposedITAT Ahmedabad25 August 2023AY 2016-175 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the additions made by the Assessing Officer under Section 14A and Section 36(1)(iii) were not sustainable. The Tribunal noted that the assessment years were unabated and that the additions were based solely on the assessee's books of accounts, with no incriminating material found or seized during the search operation. The Tribunal relied on the Supreme Court's decision in 'Abhisar Buildwell Private Ltd.', which held that in unabated assessments, no additions can be made under Section 153A if no incriminating material is found during the search. The Tribunal also referred to a co-ordinate bench decision in 'DCIT Vs. Bina Divyangbhai Shah' which followed the 'Abhisar Buildwell' ruling and the Gujarat High Court's decision in 'PCIT v. Backbone Projects Limited'. Consequently, the grounds raised by the Revenue were found to be devoid of merit and were dismissed. The CIT(A)'s order deleting the additions was upheld.

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) for Assessment Years 2016-17 and 2017-18. The assessee, Safari Biotech Pvt. Ltd., engaged in trading and financing, had its premises searched on February 1, 2019, under Section 132 of the Income Tax Act, 1961. A notice under Section 153A was issued, and the assessee filed returns declaring a total loss. The Assessing Officer (AO) made additions under Section 14A (Rs. 45,38,728) and Section 36(1)(iii) (Rs. 2,27,99,512). The CIT(A) deleted these additions, holding that the assessment years were unabated and no incriminating material was found during the search. The Revenue's appeals are now before the ITAT.

What were the issues?

1. Whether the CIT(A) erred in deleting additions made under Section 14A and Section 36(1)(iii) on the ground that no incriminating material was found during the search, especially when an SLP is pending before the Supreme Court? 2. Whether the CIT(A) erred in deleting the addition of Rs. 45,38,728 made under Section 14A read with Rule 8D on technical grounds rather than merits? 3. Whether the CIT(A) erred in deleting the addition of Rs. 2,27,99,512 made under Section 36(1)(iii) on technical grounds rather than merits? Assessee's Contention: The assessee argued that the issue is covered by the Supreme Court judgment in 'Abhisar Buildwell Private Ltd.' and a co-ordinate bench decision in 'DCIT Vs. Bina Divyangbhai Shah', and therefore, the Revenue's appeal should be dismissed. Revenue's Contention: The Revenue supported the AO's order and argued that the CIT(A) erred in deleting the additions, citing the pendency of an SLP before the Supreme Court and arguing that the deletions were made on technical grounds without going into the merits.

Which sections of the Income-tax Act were involved?

Section 153A,Section 14A,Section 36(1)(iii),Section 132,Section 143(1),Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

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

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member

IT(SS)A Nos: 42 & 43/Ahd/2023 Assessment Years: 2016-17 & 2017-18

The Asstt. Safari Biotech Pvt. Ltd. Commissioner of 1/B, Natraj Society, Income Tax, Vs Gulbai Tekra, Central Circle-1(4), Ambawadi, Ahmedabad Ahmedabad PAN: AAJCS5842C (Appellant) (Respondent) Assessee Represented: Shri Prakash D Shah, A.R. Revenue Represented: Shri Sudhendu Das, CIT-DR Date of hearing : 23-08-2023 Date of pronouncement : 25-08-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These two appeals are filed by the Revenue as against separate appellate order both dated 15.02.2023 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment orders passed under section 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2016-17 & 2017-18.

I.T(SS).A Nos. 42 & 43/Ahd/2023 A.Ys. 2016-17 & 2017-18 Page No 2 ACIT Vs. Safari Biotech Pvt. Ltd.

2.

The brief facts of the case is that the assessee is engaged in Trading and Financing Activities. For the Assessment Year 2016- 17, the assessee filed its original Return of Income on 04-10-2016 declaring total loss of Rs. 4,20,63,639/-. The same was processed u/s. 143(1) of the Act.

2.1. Thereafter there was a search action u/s. 132 was conducted on Riddhi Siddhi Group on 01-02-2019 in which the assessee business premises was also covered. Pursuant thereto, notice u/s. 153A was issued on 07-11-2019, the assessee filed the Return of Income on 05-12-2019 declaring total loss of Rs. 4,20,63,639/-, in response to the u/s. 153A notice. Assessment was completed making addition on two counts namely: (i) Disallowance u/s. 14A of Rs. 45,38,728/- and (ii) Disallowance u/s. 36(1)(iii) of Rs. 2,27,99,512/-

3.

Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) after considering the submissions of the assessee, the assessment year being unabated year and in the absence of any incriminating material found or seized during the course of search and following Jurisdictional High Court Judgment in the case of CIT Vs. Saumya Construction Pvt. Ltd. reported in 387 ITR 529, Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla reported in (2015) 61 taxmann.com 412 and Hon’ble Gujarat High Court in the caseof PCIT Vs. Anil Bholabhai Patel dated 30-08-2017 in Tax Appeal No. 469 of 2017 and other various decisions deleted the additions made u/s. 14A as well as u/s. 36(1)(iii) of the Act and thereby allowed the assessee appeal.

I.T(SS).A Nos. 42 & 43/Ahd/2023 A.Ys. 2016-17 & 2017-18 Page No 3 ACIT Vs. Safari Biotech Pvt. Ltd.

4.

Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in giving relief to the assessee by holding that no incriminating materials were found with regard to the issue on which additions were made in the assessment order because an SLP on this issue is pending before the Hon'ble Supreme Court?" 2. In the facts and on the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 45,38,728 made on account of disallowance of expenditure u/s. 14A r.w.r. 8D of the Act on technical ground rather than going to the merits of the case. 3. In the facts and on the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,27,99,512/- on account of disallowance of interest expenses u/s. 36(1)(iii) of the Act on technical ground rather than going to the merits of the case. 4. 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. 5. 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. 5. Ld. CIT-DR appearing for the Revenue supported the order passed by the Assessing Officer.

6.

Per contra, the Ld. Counsel Shri Prakash D. Shah appearing for the assessee submitted that this issue is squarely covered by the recent Supreme Court Judgment which was followed by the Co- ordinate Bench of this Tribunal in IT(SS)A No. 40/Ahd/2023 dated 18-08-2023 in the case of DCIT Vs. Bina Divyangbhai Shah. Thus pleaded the Revenue appeal is liable to be dismissed.

7.

We have given our thoughtful consideration and perused the materials available on record. It is seen from the assessment order, there is no seized material based on which the additions were made by the Assessing Officer both u/s. 14A as well as u/s. 36(1)(iii)of

I.T(SS).A Nos. 42 & 43/Ahd/2023 A.Ys. 2016-17 & 2017-18 Page No 4 ACIT Vs. Safari Biotech Pvt. Ltd.

the Act, but the additions were been based only on the books of accounts of the assessee.

7.2. It is well settled principle of law by Hon’ble Supreme Court in the case of Abhisar Buildwell Private Ltd. that unabated assessments without incriminating material found during the course of search, no additions can be made u/s. 153A of the Act. Further the Co-ordinate Bench of this Tribunal in the case of Bina Divyangbhai Shah. (cited supra) held as follows: “……Further, importantly, in case of unabated/concluded assessments, no additions could be made in assessment framed u/s 153A pursuant to search, where no incriminating material was found during the course of search and seizure operations, as held by Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell Private Limited in Civil Appeal No. 6580 of 2021 , vide judgment and order dated 24.04.2023. The Hon’ble Gujarat High Court in a recent judgment and order dated 04.07.2023 in PCIT v. Backbone Projects Limited in R/Tax Appeal No. 88 of 2023 with R/Tax Appeal No. 205 of 2023, after considering the ratio of judgment and order passed by Hon’ble Supreme Court in the case of Abhisar Buildwell Private Limited(supra) has decided this issue in favour of the taxpayer by holding that no question of law arises in view of the law laid down by Hon’ble Supreme Court in the case of Abhisar Buildwell Private Limited(supra). The original assessment in the instant case is admittedly an unabated/concluded assessment and admittedly no incriminating material was found during the course of search conducted by Revenue w.r.t. these unsecured loans raised by the assesse. Thus, in our considered view the additions as were made by the AO of Rs. 78,52,200/- towards unsecured loan raised by the assesse are not sustainable in the eyes of law keeping in view that no incriminating material was found during the course of search operations conducted by Revenue u/s 132 on 19.11.2019, and the original assessment is an unabated/concluded assessment as time limit for issuance of notice u/s 143(2) expired on 30.09.2018, and hence, we order deletion of the additions of Rs. 78,52,200/- as were made by the AO, and we sustain the appellate order passed by ld. CIT(A) . We have relied upon the judgment and order of Hon’ble Supreme Court in the case of Abhisar Buildwell Private Limited (supra) and also recent judgment and order of Hon’ble Gujarat High Court in the case of PCIT v. Backbone Projects Limited (supra), to dismiss this appeal filed by the Revenue. The Revenue fails in this appeal. We order accordingly.”

7.3. Respectfully following the same, the Grounds raised by the Revenue are devoid of merits and the same is hereby dismissed.

I.T(SS).A Nos. 42 & 43/Ahd/2023 A.Ys. 2016-17 & 2017-18 Page No 5 ACIT Vs. Safari Biotech Pvt. Ltd.

8.

In the result, the appeal filed by the Revenue in IT(SS)A No. 42/Ahd/2023 is hereby dismissed.

9.

In IT(SS)A No. 43/Ahd/2023 wherein identical additions on account of Section 14A and Section 36(1)(iii) were made by the Assessing Officer without any incriminating material found during the course of search and the original assessment is an unabated assessment. Therefore the decision rendered in IT(SS)A No. 42/Ahd/2023 will be squarely applicable to the facts of the present case. Thus the grounds raised by the Revenue are devoid of merits and the same is hereby dismissed.

10.

In the result, the appeal filed by the Revenue in IT(SS)A No. 43/Ahd/2023 is hereby dismissed.

Order pronounced in the open court on 25-08-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 25/08/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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