Pr. Commissioner Of Income Tax (Central) vs. Tarun Devcon (P) Ltd.

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ITA/125/2024HC Madhya Pradesh21 November 2024Bench: HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI4 pages
For Petitioner: Siddharth Sharma
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal. It noted that a similar issue had been considered in ITA No.113/2024 (Pr. Commissioner of Income Tax (Central) Vs. Shri Kalyanika Infra Mega Ventures Pvt. Ltd.), which was dismissed by this Court vide order dated 28/8/2024. The Court held that the present appeal also stands dismissed in light of the order passed in the aforementioned case. The order dated 28/8/2024 shall apply mutatis mutandis to the facts and circumstances of the present case. No specific finding on the merits of the issues raised in the appeal was recorded by the High Court, as the dismissal was based on precedent.

What were the facts?

The appellant, Pr. Commissioner of Income Tax (Central), filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 23/11/2023 passed by the Income Tax Appellate Tribunal (ITAT), Jabalpur. The ITAT's order was in relation to ITA No.49/JAB/2018 concerning Assessment Year 2014-15. The appeal challenges the ITAT's decision to annul a Section 143(3) assessment and delete an addition of Rs. 2,88,00,000/- made by the Assessing Officer (AO) on account of unexplained cash credit. The dispute centers on whether the assessment should have been framed under Section 153C of the Act, and if the seized documents were incriminating.

What were the issues?

1. Whether, on the facts and in law, the ITAT was justified in annulling the Section 143(3) assessment on the ground that it should have been framed under Section 153C, without appreciating that seized documents were not incriminating, barring assessment under Section 153C as per the Supreme Court in Abhishar Buildwell P. Ltd.? (Question of law) 2. Whether, on the facts and in law, the ITAT was justified in holding that mere financials of an entity seized during a search are incriminating material? (Question of law) 3. Whether, on the facts and in law, the ITAT erred in annulling the Section 143(3) assessment on the ground that it should have been made under Section 153C, thereby deleting the addition of Rs. 2,88,00,000/- made under Section 68, considering that (a) absence of incriminating material invalidates assessment under Section 153C read with Section 153A, (b) jurisdictional requirement for Section 153C is AO's satisfaction that seized material bears on total income, and no such basis existed, (c) handing over seized material is insufficient if not incriminating, (d) AO cannot be compelled to be satisfied, and non-recording of satisfaction is conclusive, and (e) a Section 143(3) assessment is not annulled by a search? (Mixed question of law and fact) 4. Whether, on the facts and in law, the ITAT was justified in quashing the Section 143(3) assessment and deleting the addition of Rs. 2,88,00,000/- on account of unsecured loan from M/s Little Star Securities Pvt. Ltd., without appreciating that the lender was a bogus company providing accommodation entries and the loan contravened the Companies Act 2013? (Mixed question of law and fact) 5. Whether, on the facts and in law, the ITAT's findings suffer from perversity due to failure to allude to relevant facts, misreading evidence, and misinterpreting the legal position, as per Sudarshan Silk and Sarees? (Question of law) Assessee's Contention (implied from the questions): The assessment should have been under Section 153C, and the seized documents were not incriminating. The Section 143(3) assessment was wrongly annulled. The addition under Section 68 was unjustified. Revenue's Contention (implied from the questions): The ITAT erred in annulling the Section 143(3) assessment and deleting the addition. The seized documents were not necessarily required to be incriminating for the assessment to proceed under Section 143(3). The lender was bogus and the loan was in contravention of law.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 153C,Section 68,Section 153A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SMT. JUSTICE ANURADHA SHUKLA ON THE 21st OF NOVEMBER, 2024 INCOME TAX APPEAL No. 125 of 2024 PR. COMMISSIONER OF INCOME TAX (CENTRAL) Versus TARUN DEVCON (P) LTD. Appearance: Shri Siddharth Sharma - Advocate for appellant. Shri Abhijeet Awasthi - Deputy Advocate General for respondent. ORDER Per: Justice Sushrut Arvind Dharmadhikari Instant appeal is filed by the appellant-Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 23/11/2023 passed by the Income Tax Appellate Tribunal (ITAT), Jabalpur in ITA No.49/JAB/2018 for the Assessment Year 2014-15. 2. The following substantial question of law has been proposed in this appeal : "1. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in annuling the 143(3) assessment on the ground that the assessment should have been framed under Section 153 C of the Act, without appreciating that since seized documents in the instant case are not of incriminating nature, the AO is legally barred from framing assessment u/s 1 ITA-125-2024 NEUTRAL CITATION NO. 2024:MPHC-JBP:57050 Signed by: ARUN KUMAR MISHRA Signing time: 11/21/2024 4:55:57 PM Signature Not Verified

153C as confirmed by the Hon'ble Supreme Court judgment in the case of Abhishar Buildwell P. Ltd. [ TS-202-SC-2023]? 2. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in holding that the mere financials of any entity, which were seized during search action are incriminating material? 3. Whether on the facts and circumstances of the case and in law, Hon'ble ITAT has erred in annulling the assessment made u/s 143(3) on the ground that assessment should have been made u/s 153C and thereby deleting the addition of Rs.2,88,00,000/- made by the AO on account of unexplained cash credit u/s 68 which was confirmed by the Ld. CIT(A) without appreciating that : (a) in the absence of incriminating material having been found and seized, it would invalidate an assessment u/s 153C read with section 153A, in case the assessment had been made by the AO u/s 153C, as recently confirmed in the judgment delivered by Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd. [TS-202-SC-2023]? (b) for a case to fall u/s 153C, the jurisdictional requirement is the satisfaction of the AO that the books of accounts and documents or assests seized or requisitioned have a bearing on the determination of the total income of the assessee and, in the instant case, there was no basis for the AO to proceed u/s 153C, since no incriminating material in relation to the assessee was found during the search conducted as per seized material handed over to the AO? (c) the mere handing over of the seized material to the AO was not 2 ITA-125-2024 NEUTRAL CITATION NO. 2024:MPHC-JBP:57050 Signed by: ARUN KUMAR MISHRA Signing time: 11/21/2024 4:55:57 PM Signature Not Verified

sufficient to take up assessment u/s 153C since there is nothing incriminating about the material seized in the present case? (d) the AO cannot be compelled to be satisfied, since doing so would amount to questioning the judgment of the AO in the matter and, accordingly, the non-recording of satisfaction by the AO is to be taken as conclusive of his being not satisfied in the matter and, therefore, the question of abatement of the pending assessment in such a case does not arise? (e) the assessment u/s 143(3) is the determination of total income and an instance of search does not annul or dilute the same in the present case? 4. Whether, on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in quashing the assessment order u/s 143(3), made in consequence of the case being selected for complete scrutiny through CASS, and deleting the addition of Rs.2,88,00,000/- made on account of unsecured loan of Rs.2,88,00,000/- from M/s Little Star Securities Pvt. Ltd. without appreciating the facts of the case brought on record by the Assessing Officer including that this 'lender' is an identified/established bogus company having no business and provided accommodation entries only and further, as established by learned CIT(A), that this loan is received in contravention of the Companies Act 2013? 5. Whether on the facts and circumstances of the case and in law, the findings given by ITAT in its order suffers from perversity as it failed to allude to relevant facts, misread the evidence and its probative value and the legal position, which itself gives rise to question of law in view of ratio of decisions in several cases including the case of Sudarshan Silk and Sarees 3 ITA-125-2024 NEUTRAL CITATION NO. 2024:MPHC-JBP:57050 Signed by: ARUN KUMAR MISHRA Signing time: 11/21/2024 4:55:57 PM Signature Not Verified

(SUSHRUT ARVIND DHARMADHIKARI) JUDGE (ANURADHA SHUKLA) JUDGE 300 ITR 205 (SC)? AND/OR Any other question of law that may arise during the course of hearing based on the relevant law in view of the factual backdrop in the instant matter?" 3. Similar issue came up for consideration before this Court in ITA No.113/2024 [Pr. Commissioner of Income Tax (Central) Vs. Shri Kalyanika Infra Mega Ventures Pvt. Ltd.]. Vide order dated 28/8/2024 this Court had dismissed the appeal. In view of aforesaid, this appeal also stands dismissed in the light of order dated 28/8/2024 passed in ITA No.113/2024. Order dated 28/8/2024 shall apply mutatis mutandis to the facts and circumstances of the present case. 4. A complete copy of order dated 28/8/2024 passed in ITA No.113/2024 be placed in the record the present case. Arun*

4 ITA-125-2024 NEUTRAL CITATION NO. 2024:MPHC-JBP:57050 Signed by: ARUN KUMAR MISHRA Signing time: 11/21/2024 4:55:57 PM Signature Not Verified

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