LESHARK GLOBAL LLP ,MUMBAI vs. DCIT CC 4(1), MUMBAI

ITA 3179/MUM/2025Status: DisposedITAT Mumbai31 July 2025AY 2014-1575 pages
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What did the Tribunal hold?

The Tribunal held that the Focus Product Scheme (FPS) incentive received by the assessee is a capital receipt and not taxable under Section 2(24) of the Act. The reasoning was that the MEIS scheme was conceptualized as a policy instrument to reward exports, not as profit-linked assistance or cost-reimbursement. The tradable duty credit scrips were a fixed percentage of FOB value of eligible exports, akin to capital accretion rather than revenue inflow. The Tribunal emphasized strict construction of charging provisions and noted the absence of 'reward' in Section 2(24)(xviii), despite its use in the MEIS framework. For AY 2020-21, the addition was directed to be deleted, and any inadvertent duplication in the P&L account was to be rectified. For AY 2017-18 and 2018-19, similar claims regarding non-taxability of export incentives were allowed, treating them as capital receipts. For AY 2012-13 to 2016-17, where the claim was raised for the first time before the CIT(A), the matter was restored to the AO to examine the claim afresh on merits, as the CIT(A) had declined to entertain it due to the non-filing of a revised return. Other grounds not argued were dismissed as infructuous. The appeals for AY 2012-13 to 2018-19 were partly allowed for statistical purposes, and the appeal for 2020-21 was allowed.

What were the facts?

The assessee, Leshark Global LLP, filed appeals against the orders of the CIT(A)-52, Mumbai, concerning assessment years 2012-13 to 2018-19 and 2020-21. The appeals challenged assessments made under Section 143(3) read with Section 153A of the Income Tax Act, 1961. The core dispute involved additions made by the Assessing Officer (AO) on account of alleged cash loans advanced by the assessee and estimated interest earned thereon. The assessee contended that no incriminating material was found during the search conducted on its premises on 17.11.2017. The additions were based on documents seized from Mr. Nilesh Bharani during an independent search on 06.10.2017. The assessee's name did not appear in the search warrants or panchnamas related to Mr. Bharani's search.

What were the issues?

1. Whether the addition of Rs 2,20,00,000/- as unexplained investment under Section 69, and Rs 16,35,558/- as presumed interest income under Section 56, made in completed assessments for AY 2012-13, are valid when no incriminating material was found during the search of the assessee's premises, following the Supreme Court's decision in PCIT v. Abhisar Buildwell Pvt Ltd. 2. Whether the assessment order passed under Section 153A and the appellate order are bad in law because the material relied upon was found from a third party (Mr. Nilesh Bharani) and should have been assessed under Section 153C, following Supreme Court judgments in Vikram Sujitkumar Bhatia, Nilesh Bharani, and S S Con Build Pvt Ltd. 3. Whether the assessment order is invalid due to the lack of a Document Identification Number (DIN) as required by CBDT Circulars 19/2019 and 27/2019. 4. Whether the approval granted under Section 153D by the Additional CIT was mechanical and invalid. 5. Whether the additions made under Sections 69 and 56, based on Mr. Nilesh Bharani's statement and personal ledgers, are vitiated by infirmities such as denial of cash loans and interest by Mr. Bharani, retraction of statements, filing of an affidavit by Mr. Bharani denying allegations, and denial of inspection of original seized material. Assessee's Contentions: - Additions under Section 69 and 56 are invalid as no incriminating material was found during the search of the assessee's premises, relying on PCIT v. Abhisar Buildwell Pvt Ltd. - The assessment under Section 153A is bad in law as material was seized from a third party, necessitating assessment under Section 153C, citing Vikram Sujitkumar Bhatia, Nilesh Bharani, and S S Con Build Pvt Ltd. - The assessment order is invalid due to the absence of DIN. - Section 153D approval is mechanical. - Additions based on Mr. Bharani's statement and ledgers are unreliable due to contradictions, retractions, and denial of inspection. - Focus Product Scheme (FPS) incentive received under Foreign Trade Policy is a capital receipt and not taxable, as per purpose test and judicial pronouncements. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 69,Section 56,Section 153A,Section 153C,Section 153D,Section 132(4)

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Income Tax Appellate Tribunal, ‘A’ BENCH MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

Heard together (2 matters)

ITA No.3177/Mum/2025
ITA No. 3184/Mum/2025

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PER AMIT SHUKLA (J.M):

The aforesaid appeals have been filed by the assessee against order of ld. CIT(A)-52, Mumbai for the quantum of assessment passed u/s.143(3) r.w.s.153A for the A.Y.2012- 13 to 2018-19. 2. Since all the appeals involve common issue and are based on identical facts therefore, same were heard together and have been disposed of by way of this consolidated order.

3.

Both the parties agreed that if the appeal for the A.Y.2012- 13 is decided, the same finding will apply mutatis mutandis in other years also. Accordingly, the appeal for A.Y.2012-13 in ITA No. No.3177/Mum/2025 is taken as a lead case, wherein the assesse

The order continues below.

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