DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -3(3), MUMBAI vs. PRATEEK APPARELS PRIVATE LIMITED, KARNATAKA

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ITA 2936/MUM/2025Status: DisposedITAT Mumbai04 August 2025AY 2014-1525 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 CIT(A)'s decision to delete the additions. Regarding the assessment under Section 153A for unabated years, the Tribunal agreed with the CIT(A) that such assessments must be based on incriminating material found during the search. Since the CIT(A) found no incriminating material relevant to the assessment year 2014-15, the additions made by the Assessing Officer (AO) were not sustainable. Consequently, the deletion of the addition of Rs. 10,00,000/- on account of slump sale, the disallowance of Rs. 64,95,363/- under Section 36(1)(iii), and the disallowance of Rs. 1,77,98,925/- for set-off of brought forward loss were affirmed. The Tribunal found no infirmity in the CIT(A)'s reasoning that for unabated assessments, the AO cannot make additions without unearthing incriminating material. The appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) for Assessment Years (AY) 2014-15 and 2018-19. The assessee, Prateek Apparels Private Limited, is engaged in manufacturing, trading, and retailing garments and apparel. A search and seizure action under Section 132 of the Income Tax Act, 1961, was conducted on the assessee on October 24, 2018. Subsequently, assessments under Section 153A were made, leading to certain additions and disallowances. The CIT(A) deleted these additions, prompting the Revenue's appeals. The appeals were heard together due to interlinked issues.

What were the issues?

1. Whether the assessment or re-assessment under Section 153A of the Income Tax Act, 1961, for an unabated year should be restricted only to incriminating material found during the search, or if the total income is to be brought to tax without restriction, particularly when a business transfer agreement for a slump sale was seized. 2. Whether the CIT(A) erred in deleting the addition of Rs. 10,00,000/- made on account of slump sale, considering the Supreme Court's decision in M/s Kesarwani Zarda Bhandar Sahson Allahabad regarding jurisdiction in unabated years with incriminating material. 3. Whether the CIT(A) erred in deleting the disallowance of Rs. 64,95,363/- made under Section 36(1)(iii) of the Act, relating to interest-free loans, given the statement recorded under Section 132(4) of a director and the Supreme Court's ruling in M/s Kesarwani Zarda Bhandar Sahson Allahabad. 4. Whether the CIT(A) erred in deleting the disallowance of Rs. 1,77,98,925/- made on account of set-off of brought forward loss, given the assessee's alleged failure to submit supporting details. Assessee's Contention: The additions and disallowances were legally untenable as the assessment under Section 153A was made without finding any incriminating material. The CIT(A) correctly deleted the additions based on the principle that for unabated years, additions can only be made on the basis of incriminating material found during the search. Revenue's Contention: The Revenue argued that Section 153A requires the total income to be brought under tax without any restrictions, and the seized business transfer agreement constituted incriminating material. They relied on the Supreme Court's decision in M/s Kesarwani Zarda Bhandar Sahson Allahabad.

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 132(4),Section 36(1)(iii),Section 37(1),Section 28

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri Shankarlal Jain & Shri Satish Kumar
For Respondent: Shri R A Dhyani, (CIT DR)
Hearing: 15.07.2025Pronounced: 04.08.2025

Heard together (2 matters)

ITA No. 2936/MUM/2025
ITA No. 3099/MUM/2025

Read from the judgment's own cause title. This page is filed under one of them.

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent.

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