D.C.I.T., CC-3(4), KOLKATA, KOLKATA vs. M/S. FOLLOWEL ENGINEERING LTD., KOLKATA

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ITSSA 26/KOL/2023Status: DisposedITAT Kolkata19 June 2023AY 2009-201061 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the orders of the CIT(A), dismissing all grounds raised by the Revenue. The Tribunal found that the Assessing Officer (AO) erred in making additions based on the alleged statements of third parties (entry operators) without providing the assessee an opportunity for cross-examination. It was held that such statements, especially when recorded much later than the assessment years in question and lacking a direct nexus to the assessee's transactions, cannot be construed as incriminating material. The Tribunal also noted that the AO failed to validly invoke Section 153A of the Act, as the prerequisite satisfaction for issuing notices was not met. The reliance on the statement of a key person was also deemed an extrapolation beyond the AO's jurisdiction, as the addition for the relevant assessment years could only be made upon valid invocation of the 4th proviso to Section 153A, which the AO failed to do. Therefore, the CIT(A) was found to have rightly deleted the additions on both legal and merits grounds.

What were the facts?

The appeals were filed by the Revenue against orders of the CIT(A) for Assessment Years 2008-09, 2009-10, and 2010-11, concerning M/s. Followel Engineering Ltd., M/s. Arunoday Holding Pvt. Ltd., and M/s. Supersonic Career Pvt. Ltd. The Revenue faced delays in filing these appeals, which were condoned by the Tribunal. The core of the dispute involved additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, relating to bogus unsecured loans and unexplained share application money. The CIT(A) had deleted these additions, leading to the present appeals by the Revenue.

What were the issues?

1. Whether the Learned CIT(A) erred in deleting the addition of Rs. 2,88,81,320/- made by the AO on account of bogus unsecured loan under Section 68 of the Income Tax Act, 1961, for AY 2008-09 (M/s. Followel Engineering Ltd.)? 2. Whether the Learned CIT(A) erred in deleting the addition of Rs. 7,07,70,000/- made by the AO on account of unexplained share application money under Section 68 of the Income Tax Act, 1961, for AY 2009-10 (M/s. Followel Engineering Ltd.)? 3. Whether the Learned CIT(A) erred in deleting the addition of Rs. 12,48,20,377/- made by the AO on account of bogus unsecured loan under Section 68 of the Income Tax Act, 1961, for AY 2009-10 (M/s. Followel Engineering Ltd.)? 4. Whether the Learned CIT(A) erred in deleting the addition of Rs. 4,70,00,000/- made by the AO on account of unexplained share application money under Section 68 of the Income Tax Act, 1961, for AY 2010-11 (M/s. Followel Engineering Ltd.)? 5. Whether the Learned CIT(A) erred in deleting the addition of Rs. 7,61,95,000/- made by the AO on account of bogus unsecured loan under Section 68 of the Income Tax Act, 1961, for AY 2010-11 (M/s. Followel Engineering Ltd.)? 6. Whether the Learned CIT(A) erred in deleting the addition of Rs. 7,35,00,000/- made by the AO on account of unexplained share application money under Section 68 of the Income Tax Act, 1961, for AY 2010-11 (M/s. Arunoday Holding Pvt. Ltd.)? 7. Whether the Learned CIT(A) erred in deleting the addition of Rs. 22,50,00,000/- made by the AO on account of bogus unsecured loan under Section 68 of the Income Tax Act, 1961, for AY 2010-11 (M/s. Arunoday Holding Pvt. Ltd.)? 8. Whether the Learned CIT(A) erred in deleting the addition of Rs. 1,62,00,000/- made by the AO on account of unexplained share application money under Section 68 of the Income Tax Act, 1961, for AY 2008-09 (M/s. Supersonic Career Pvt. Ltd.)? 9. Whether the Learned CIT(A) erred in deleting the addition of Rs. 1,00,71,821/- made by the AO on account of bogus unsecured loan under Section 68 of the Income Tax Act, 1961, for AY 2008-09 (M/s. Supersonic Career Pvt. Ltd.)? 10. Whether the Learned CIT(A) erred in deleting the addition of Rs. 3,50,00,000/- made by the AO on account of unexplained share application money under Section 68 of the Income Tax Act, 1961, for AY 2010-11 (M/s. Supersonic Career Pvt. Ltd.)? Assessee's Contention: The assessee argued that the AO could not assume jurisdiction under Section 153A as there was no incriminating material found during the search. The assessee also contended that statements of entry operators were not provided for cross-examination and could not be construed as incriminating material. Furthermore, the statements were recorded much later than the assessment years in question, lacking a direct nexus. The AO also erred in extrapolating the statement of a key person without fulfilling the prerequisites for Section 153A proceedings. Revenue's Contention: The Revenue's grounds of appeal indicate that they are challenging the deletion of additions made by the AO under Section 68 for bogus unsecured loans and unexplained share application money.

Which sections of the Income-tax Act were involved?

Section 68,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJPAL YADAV, HON’BLE & DR. MANISH BORAD, HON’BLE

For Appellant: Shri S.K. Tulsiyan, Advocate, Ms. Puja Somani, C.A
Hearing: 30/03/2023Pronounced: 19/06/2023

आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. संबंिधत आयकर आयु� / Concerned Pr. CIT 4. आयकर आयु� अपील / The CIT(A)- ( ) 5. िवभागीय �ितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाड� फाई/ Guard file.

आदेशानुसार/ BY ORDER, TRUE COPY

Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata

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