DEEPAK VEGPRO(P) LTD,ALWAR vs. ACIT, CENTRAL CIRCLE, ALWAR

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ITA 1026/JPR/2026Status: DisposedITAT Jaipur22 October 2026AY 2010-201114 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the initiation of assessment proceedings under Section 153A was not sustainable as there was no 'incriminating material' found during the search for the completed and un-abated assessment years. The statement of Shri Vijay Data regarding 'Dharmada/Charity' collected on sales bills, even if unutilized, was recorded in the books of accounts and subjected to audit. Therefore, it did not constitute 'incriminating material' to warrant proceedings under Section 153A. The Tribunal followed the decision in Hari Industries vs. CIT (Raj. H.C.) and Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd. (SC), stating that Dharmada/Charity collected and recorded in the books does not form part of taxable income, and the initiation of Section 153A proceedings was bad in law. Consequently, the addition on this ground was deleted. Regarding the disallowance of depreciation on subsidy for AY 2014-15, the Tribunal noted that it was also recorded in the books of accounts and no incriminating material was referred to by the AO. Relying on Supreme Court decisions, the Tribunal held that the subsidy was a capital receipt and the AO and CIT(A) erred in making the disallowance. The Tribunal also observed that the unutilized Dharmada/Charity funds lying for years had lost their sanctity and recommended the CBDT to take cognizance. The first and second questions were answered in the affirmative and negative, respectively. The fourth issue was also decided in favour of the assessee.

What were the facts?

The assessee, Deepak Vegpro (P) Ltd., is part of the Data Group. A search under Section 132 of the Income Tax Act, 1961, was conducted on the group's premises on October 14, 2015. The assessee's original assessments for Assessment Years (AY) 2010-11 to 2012-13 and 2014-15, initially framed under Section 143(3), had additions that were subsequently deleted by the Tribunal. Following the search, the Assessing Officer (AO) issued notices under Section 153A, and the assessee filed returns reflecting the same income as originally declared. The AO framed assessments under Section 143(3) read with Section 153A, making additions similar to the original assessments, along with new additions concerning 'Dharmada/Charity' and disallowance of depreciation for AY 2014-15. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed these additions, partly allowing the appeals. The assessee is now appealing these orders before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the assessment framed and additions made by the AO and confirmed by the CIT(A) under Section 153A in respect of completed assessments without any 'incriminating material' is liable to be quashed. 2. Whether the statement of Shri Vijay Data and VAT invoice of M/s Vijay Solvex Limited constitute 'incriminating material' sufficient to fasten liability under Section 143 read with Section 153A. 3. Whether the addition of Rs. 59,469.00 on account of Dharmada/Charity received by the assessee, as sustained by the CIT(A), is valid. 4. Whether the disallowance of Rs. 31,25,965.00 on account of depreciation, made by reducing the amount of subsidy received from the actual cost of fixed assets and sustained by the CIT(A) for AY 2014-15, is valid. Assessee's contentions: - The additions under Section 153A were made without any incriminating material. - The CIT(A) erred in not following judicial precedents regarding the non-taxability of Dharmada/Charity received, citing cases like CIT v/s Bijli Cotton Mills P Limited and Hari Industries V/s CIT. - The addition on account of Dharmada/Charity is illegal. - The disallowance of depreciation on subsidy is illegal and the subsidy is a capital receipt, citing Supreme Court decisions in Ponni Sugars and Chemicals Ltd. vs. CIT, CIT vs. Chaphalkar Brothers Pune, and CIT vs. Balaji Alloys & Ors. Revenue's contentions: - The Revenue, through the CIT, supported the findings of the CIT(A) regarding the additions, drawing attention to specific paragraphs in the assessment orders.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 43(1),Section 80IA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR “A” BENCH, JAIPUR

Before: SHRI KULDIP SINGH & SHRI PRAKASH

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR “A” BENCH, JAIPUR (PHYSICAL HEARING) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER & SHRI PRAKASH, ACCOUNTANT MEMBER ITA No: 1026 to1029/JPR/2026 Assessment Year: 2010-11 to 2012-13 & 2014-15

Deepak Vegpro (P) Ltd. The ACIT, Bhagwati Sadan Swami Central Circle, Vs Dayanand Marg, Alwar. Alwar. PAN: AAACD6118P (Respondent) (Appellant)

Assessee Represented: Sh. P.C. Parwal, C.A. Revenue Represented: Sh. Ananad Swaroop, CIT Date of hearing : 29-09-2026 Date of pronouncement : 22-10-2026 ORDER PER : KULDIP SINGH, JUDICIAL MEMBER:-

The Appellants, Deepak Vegpro (P) Ltd. (hereinafter referred to as the ‘assessee’) by filing aforesaid interconnected appeals with one additional issue in ITA No. 1029/JPR/2026, sought to set aside the impugned orders, all dated 23.02.2026, passed by the Commissioner of Income Tax (Appeals), Udaipur-2 [hereinafter referred to as the ‘CIT(A)’] on the identical grounds except difference in figure of additions, turnover etc. and for the sake of brevity, grounds of ITA No.

I.T.A No. 1026 to 1029/JPR/2026 Page No 2 Deepak Vegpro (P) Ltd.

1029/JPR/2026 for A.Y. 2014-15 are taken to dispose off all the

aforesaid appeals, on the grounds inter-alia that:-

1.0 Under the facts & circumstances of the case and in law, the addition made by AO in the assessment framed u/s 153A in respect of completed assessment without any incriminating material found in search is illegal, bad in law and thus the order so passed be quashed and Id Commissioner of Income-Tax (Appeals)-Udaipur-2 has erred in sustaining the same.

2.0 That the Id. CIT Appeals, has erred in law as well as on the facts and circumstances of the case in not following the principle of judicial precedent while deciding the non-taxability of Dharmada/Charity received of Rupees 59469.00 and has erred in not following the verdict of Hon.ble Supreme Court in the case of CIT v/s Bijli Cotton Mills P Limited 1979 116 ITR 60 SC, Rajasthan High Court in the case of Hari Industries V/s CIT 21 March 1984 1985 153 ITR 656 and order of its two predecessor CIT IV, Jaipur vide appeal order number 644/2018-19, 645/2018-19, 646/2018-19 dt. 06.01.2023, 24.1.203 and Income Tax Appellate Tribunal, Bench-Jaipur, Jaipur order in appeal number 1047/2019-2020 dated 29.4.2021, on same set of facts and without distinguishing them thus flouted the well established principle of judicial precedence, thus on this primary ground, the order so passed by CIT Appeals Udaipur-2, on this issue deserves to be quashed.

3.0 That the Id. Assessing officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rupees 59469.00 on account of Dharmada/charity received and Id Commissioner of Income-Tax (Appeals)-Udaipur-2 has erred in sustaining the same.

4.0 That the Id. Assessing officer has erred in law as well as on the facts and circumstances of the case in reducing the amount of subsidy received towards the actual cost of fixed assets and erred in making the disallowance of Rupees 3125965.00 on account of depreciation and added back the same to the income of the assessee company and ld. Commissioner of Income-Tax (Appeals)- Udaipur-2 has erred in sustaining the same.

5.

The assessee reserves the right to add, alter, modify, delete or amend all or any of the grounds of appeal before or at the time of hearing of appeal.”

I.T.A No. 1026 to 1029/JPR/2026 Page No 3 Deepak Vegpro (P) Ltd.

2.

Briefly stated, facts necessary for consideration and adjudication of the identical issues in all the aforesaid appeals, as taken from ITA No. 1029/JPR/2026 for A.Y. 2014-15 are: Assessee company is part of Data Group, Alwar, whose premises were searched u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) on 14.10.2015 and the search party has seized stock-in-trade, documents, books of accounts and/or loose papers. Appellant’s original return of income declaring total income at Rs. Nil was assessed u/s 143(3) of the Act and certain additions were made for all the assessment years 2010-11 to 2012-13 & 2014-15, which were subsequently deleted by the Tribunal. On the basis of search and seizure operation, the Assessing Officer issued notice u/s 153A of the Act and in response thereto assessee filed return of income claiming the same income recorded in the return of income filed u/s 139(1) of the Act. After considering the contentions and evidence brought on record by the assessee, the AO proceeded to frame the assessment u/s 143(3) r.w.s 153A of the Act by making identical additions as have been made in the original assessment framed u/s 143(3) of the Act besides the additions on account of

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“Dharmada/Charity” and the disallowance of depreciation in A.Y. 2014-15, which are the subject matter of this appeal. 3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeals, who has confirmed the addition by partly allowing the appeals. Being aggrieved with the impugned orders passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeals. 4. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file. 5. Undisputedly, the original assessment was framed in all the years under consideration u/s 143(3) of the Act by making certain additions vide orders dated 31.12.2017. It is also not in dispute that all the additions made by the Revenue were deleted by the Tribunal. It is also not in dispute that pursuant to the search and seizure operation, the assessee filed the same return as it has filed u/s 139(1) of the Act for all the years. 6. In the backdrop of the aforesaid undisputed facts and circumstances of the case, the first question arises for determination in all the aforesaid appeals is, “as to whether assessment framed and additions made by the AO and confirmed by the Ld. CIT(A) u/s 153A of the Act in respect of completed assessment without any “incriminating material” is liable to be quashed.”

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7.

Ld. AR for the assessee challenging the impugned initiation u/s 153A of the Act contended that the entire addition has been made by the Assessing Officer u/s 153A of the Act without having any incriminating material on record. However on the other hand Ld. DR for the Revenue in order to controvert the contentions raised by the Ld. AR, drew our attention to para 8.3/9.3 of the assessment year 2010-11 of Ld. CIT(A) and supported the findings returned on this issue. 8. It is pertinent to record over here that while framing the assessment u/s 143(3) of the Act, additions were made by making disallowance u/s 14A read with Rule 8D; disallowance u/s 80IA; and disallowance of claim of VAT reimbursement. 9. When we examine para 10 of the assessment order for A.Y. 2010-11, statement of Shri Vijay Data recorded u/s 132(4) of the Act, particularly question no. 26 regarding amount of Rs. 3,04,13,269.43 shown in the “Charity Ledger” of M/s Vijay Solvex Limited on 31.03.2015 and the amount of Rs. 1,14,08,453.06 shown in the “Charity Ledger” in M/s Deepak Vegpro Pvt. Ltd. The said statement was treated incriminating material. Shri Vijay Data answered that the company of Data group charge “Charity” at the

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time of issuing the bills and this amount is deposited in “Charity Ledger” and when we feel suitable this amount is used in charitable activities. He has further answered to the question no. 27 that huge balance as shown in the “Charity Ledger” is lying unutilized implying that this amount is kept for personal use. This statement is exhibit 16 of Annexure-AS-2 of party number A4 namely M/s Vijay Solvex Ltd., which is a group company of the assessee. Statement of Shri Vijay Data and VAT invoice are extracted for ready perusal as under:-

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I.T.A No. 1026 to 1029/JPR/2026 Page No 8 Deepak Vegpro (P) Ltd.

10.

Now the next question arises for consideration as to, “whether statement of Shri vijay Data and VAT invoice of M/s Vijay Solvex Limited is “incriminating material”

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sufficient to fasten the liability of the assessee as per assessment framed u/s 143 r.w.s. 153A of the Act”. 11. When we examine the facts and circumstances of the case, in the light of the fact that no assessment proceedings for the assessment years under consideration were pending on the date of search i.e. on 14.10.2015 and no “incriminating material” showing undisclosed income was found and seized, very initiation of assessment proceedings u/s 153A of the Act was not sustainable. 12. The Assessing Officer vide show cause notice dated 05.09.2017 required the assessee to file details of Dharmada/Charity charged by the company on the sale bills along with bank statement for the last 6 years including years under consideration and also show cause as to why “Dharmda” fund may not be treated as part of sale and accordingly as to why addition may not be made on this account. 13. Declining the reply filed by the assessee to the show cause notice, AO proceeded to hold that when the assessee is not a trust or society registered u/s 12AA or 10(23)(c) of the Act, nor the company registered u/s 25CC of the Act, it is not empowered to receive the donation as exempt income. At the same time the

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assessee being a private limited company is running for profit is not entitled to claim “Dharmada/Charity” as exempt income. The assessee has also accumulated the funds year on year basis and enjoy the same for his own use and accordingly, made an addition of Rs. 13,74,729/-, Rs. 3,52,38,047/-, Rs. 2,22,15,292/- and 6,78,17,824/- for A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2014-15 respectively. 14. When we examine the issue in the light of the fact that “Dharmada/Charity” collected by the assessee on its sales bill is duly recorded in the books of accounts/ledger, though remained accumulated for years together without spending it for charity, it does not fall in the category of “incriminating material”. 15. It is held by Hon’ble Jurisdiction High Court in case of Hari Industries vs. CIT (1985) 153 ITR 656 (Raj. H.C.) that the amount collected on account of “Dharmada/Charity” shall not form part of assessee’s taxable income, which is applicable to the facts of this case. Following the law laid down by Hon’ble Apex Court in case of Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd. 454 ITR 212 (SC)(2023), we are of the considered view that when the assessment year under considerations are completed and un-abated

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assessment years for which assessment u/s 143(3) of the Act were already framed and the assessee has duly recorded “Dharmada/Charity” fund collected during their business in their ledger account, which are regularly subjected to audit the statement of Mr. Vijay Data recorded u/s 132(4) of the Act cannot be considered as incriminating material, thus very initiation of the assessment proceedings u/s 153A are bad in law, hence not sustainable and consequently addition is also liable to be deleted. Hence first question framed is answered in affirmative and 2nd question framed is answered in negative. 16. So far as additional ground no. 4 raised by the assessee in A.Y. 2014-15 regarding disallowance of Rs. 31,25,965/- on account of deprecation claimed by the assessee on subsidy is concerned the same is duly recorded in the books of accounts. The Assessing Officer while returning its findings in para 11 of the order has not referred to any “incriminating material”, while making this addition. Ld. CIT(A) while deciding this issue has relied upon an order passed by his predecessor for A.Y. 2014-15, which has been restored to the AO by the Tribunal in ITA No. 729/JP/2023 dated 21.02.2024 and as such findings returned by Ld. CIT(A) on this issues are not sustainable.

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17.

The facts of this issue is the assessee has setup a manufacturing plant at Durgawati, Bihar, in which Government of Bihar has provided capital grant of 40% of the project cost subject to maximum Rs. 10 Crore and accordingly, the assessee has shown the grant in the books of accounts as capital subsidy. The Assessing Officer however by relying upon explanation 10 sub-section (1) of section 43 considered the amount of grant in proportion to various items of cost of project and proceeded to disallow claim of depreciation to the tune of Rs. 31,25,965/-. At the same time, Ld. CIT(A) by relying upon the order passed by his predecessor in assessee’s case for A.Y. 2014-15 upheld the disallowance made by the AO. 18. Ld. AR for the assessee by relying upon the decisions rendered by the Hon’ble Supreme Court in case of Ponni Sugars and Chemicals Ltd. vs. CIT 306 ITR 392 (SC), CIT vs. Chaphalkar Brothers Pune (2018) 161 DTR 41 (SC) and CIT vs. Balaji Alloys & Ors. 138 DTR 36 (SC) contended that such subsidy is a capital receipt. We have perused the decision relied upon by Ld. AR for the assessee, ratio of which is, “incentive received in the form of capital grant/excess refund subsidy and interest subsidy are capital

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receipts. So we are of the considered view that AO as well as Ld. CIT(A) have erred in making disallowance of Rs. 31,25,965/- on account of depreciation claimed by the assessee. 19. Even otherwise when the disallowance of depreciation claimed by the assessee is duly recorded in the books of accounts, which are subjected to audit, the Assessing Officer cannot initiate the proceedings u/s 153A of the Act on this ground, nor he has referred to any “incriminating material” while making this addition, thus it is outside purview of section 153A of the Act. 20. In view of our findings on legal issue in the preceding paras, the remaining issues on merits have become academic and needs no findings 21. Before parting with this order, we record our concern on the issue decided that “Dharmada/Charity” collected by the assessee during its business shall not constitute part of taxable income of the assessee, in view of the law laid down by Hon’ble Supreme Court in case of M/s D.J. Malpani vs. CCE (2019) 176 DTR 305 (SC). In the cases at hand the amount of Rs. 3,04,13,269/- and Rs. 1,14,08,453/- recorded in the charity ledger of M/s Vijay Solvex Ltd. and Deepak Vegpro Pvt. Ltd. respectively is lying unutilized for years

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together, which otherwise lost its sanctity as “charity fund” collected by the assessee as per its convenience. At present direct tax code is silent as to how to deal with such amount collected in the name of charity when not put into use for the purpose it is collected. The law must not be a mute spectators in such eventualities. So Hon’ble CBDT should take cognizance to deal with such huge amount collected in the name of “Dharmada/Charity” lying unutilized for years together. Copy of order, be sent to the Hon’ble CBDT for taking necessary cognizance. 22. Resultantly, all the appeals filed by the assessee are allowed. Order pronounced in the open court on 22-10-2026 . Sd/- Sd/-

(PRAKASH) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Jaipur Dated:- 22/10/2026. *Santosh. Copy of the order forwarded to: 1. The Appellant- 2. The Respondent- 3. CIT 4. CIT(A) 5. DR, ITAT, Jaipur. 6. Guard File By order, Asst. Registrar SANTOSH Digitally signed by SANTOSH KUMAR KUMAR MAURYA Date: 2026.10.26 MAURYA 09:58:02 +05'30'

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