DCIT-CC-7(3), MUMBAI vs. M/S LOTUS ENGICON PVT. LTD., MUMBAI

The respondent craves leave to add, alter or modify any ground of cross objection.

The brief facts of the case are that a search action was carried out under section 132 of the Act on 09/10/2014 at the premises of Lotus group and their associates and at the residences of their directors. The search was concluded on 09/12/2014 and notices under section 153A(1)(a) of the Act was issued on 21/03/2016 and served on the assessee. In response to the notice, the assessee filed the return under section 153A and accordingly, the assessment was completed with an addition amount to Rs.17,60,500/- related to the unsecured loan from M/s Satyam Projects Ltd which was treated as non-genuine and bogus.So the addition was made under section 68 of the Act. The assessment order was assailed before the Ld. CIT(A). The assessee challenged the juri iction of the Ld.AO related to assessment under section 153A of the Act in absence of the incriminating material. The Ld.CIT(A) passed a speaking order and rejected the legal grounds of the assessee. But related to merit the ground of the appeal was allowed. Being aggrieved on the impugned appeal order, the revenue filed appeal and the assesse filed cross objection before the Tribunal. 3.1. Related to search proceeding and the appeal filed by the department, the assessee submitted a statement related determination of unabated years. The said chart is reproduced as below:- Sr.No. Name of the assessee Assessment Year Section of Assessment order Date of filing of Return Time Limit for issue of notice u/s 143(2) Date of search 1 Lotus Logistics and Developers Pvt Ltd 2010-11 153A r.w.s. 143(3) 29/09/2010 30/09/2011 09/10/2014 2 Lotus Spaces Pvt Ltd 2011-12 153A r.w.s. 143(3) 23/09/2011 30/09/2012 09/10/2014 3 Lotus Realtors 2012-13 153A r.w.s. 143(3) 28/09/2012 30/09/2013 09/10/2014 4 Lotus Engicon Pvt Ltd 2012-13 153A r.w.s. 143(3) 28/09/2012 30/09/2013 09/10/2014 5 Lotus Buildspace LLP 2013-14 153A r.w.s. 143(3) 28/09/2013 30/09/2014 09/10/2014

During the argument, the issue was challenged related to the legal ground which was filed by the assessee through cross objection. The assessee agitated that all the alleged assessment years are under category of the unabatedassessment or completed assessment. The alleged assessment under section 153A read with section 143(3) of the Act is unjustified and beyond juri iction as there is no incriminating material found during the course of search in unabated assessment year and the assessment was completed without any incriminating material which is contrary to the ruling of the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC) which categorically held that no addition can be made by the Assessing Officer in respect of completed or unabated assessments unless incriminating material is found during a search conducted under section 132 of the Act or a requisition under section 132A of the Act. Related to the merit of the case, the Ld.CIT(A) has considered that the addition itself is non genuine and the identity, creditworthiness of the transactions through bank was duly submitted by the assessee during the assessment proceedings. The observation of the Ld.CIT(A) is reproduced as below: - “7.6. In light of above, it is now important to examine the validity of addition based on the aforesaid statement which have been retracted by the respective parties. I find that the assessee group was covered under search action and no document or other assets were found in the course of search which could indicate that the assessee had obtained accommodation entry. It is stated by the AR that a search is a strict measure under the Act which invades the privacy of the assessee and even in these proceedings no concrete evidence was found except for mere oral confirmation of certain parties which also stand retracted later. My attention in this regard was invited to the CBDT Instruction F.No.286/98/2013-IT (INV.II) dated 18/12/2014 and letter dated 10/03/2003 issued by the Ministry of Finance & Company Affairs wherein it is stated that the search party must focus on collection of evidences and not merely admission/ confession of additional income.The Hon'ble Gujarat High Court has relying on the aforesaid instructions upheld the view that addition should not be made based on oral confession in the case of CIT v. Ramanbhai Patel (ITA no. 207 of 2008) and Chetnaben J Shah v. ІТО [IТА Nо. 1437 of 2007]. Thus, respectfully following the CBDT circular as well as the decision cited by the assessee (supra), I find that the addition cannot be sustained merely on the basis of the statements taken during the search devoid of any evidence/material to incriminate the assessee. Section 68 is not a charging section but a deeming fiction dealing with the burden of proof. The section casts initial onus u/s. 68 of the Act on the assessee to prove identity, genuineness and creditworthiness of the transaction to the satisfaction of the AO. If the assessee fails to do so or the explanation offered by him is not satisfactory to the AO, the AO is empowered to add the same to the total income of the assessee. The said power is to be exercised judiciously by the AO. Thus, once the initial onus is discharged by the assessee, the onus shifts on the AO to bring out fallacies in evidence brought by the assessee or by bringing new evidence that indicate the transactions undertaken by the assessee are non-genuine. Thus, the section deals with an equilibrium of onus of proof and must be viewed to evaluate as to whether the evidences brought by the assessee or AO weigh more and accordingly in whose favour the equilibrium bends. In the present case, on one hand, the assessee has placed evidence in the form of voluminous documents in relation to RBI compliances, ROC compliances, audit compliances and merger sanctioned by the Hon’ble Calcutta High Court. Further, the assessee has also placed on record the assessment orders of 6 merged companies for the A.Y 2010-11 and also that of the alleged investor – M/s. Satyam Projects Ltd for A.Y. 2010-11. I have also gone through the confirmation, ITR Acknowledgement, financial statements of the investor company and bank statements relating to the alleged transaction of partner’s contribution received of Rs.17,60,50,000/- by the assessee during the year under consideration. It is observed that the investor company is formed in 1981 and is registered NBFC since 1998 and is engaged into the business of finance andinvestment and has also engaged into trading in cloth in the year under consideration. The investor company has shown substantial turnover of Rs. 9.15 crores with an income of Rs.51,81,018/- offered in its return of income. The transaction are also carried out through account payee cheques. Even, in the subsequent years, it is seen that the lender company has earned substantial income as under:

The Ld. AR, however, restricted his arguments to the legal issue, relying upon the judgment of the Hon’ble Supreme Court in PCIT vs. Abhisar Buildwell (P) Ltd, (2023) 149 taxmann.com 399 (SC), which categorically held that no addition can be made by the Assessing Officer in respect of completed or unabated assessments unless incriminating material is found during a search conducted under section 132 of the Act or a requisition under section 132A of the Act. This view was reiterated when the Hon’ble Supreme Court dismissed the Revenue’s review petition in PCIT vs. Abhisar Buildwell (P.) Ltd. [(2023) 150 taxmann.com 257 (SC)]. 7. The Ld. AR also placed reliance on the following judicial precedents: i. Hon'ble Delhi High Court in PCIT vs. Meeta Gutgutia, (2017) 82 taxmann.com 287 (Delhi): It was held that invoking section 153A to reopen concluded assessments for years preceding the year of search was unjustified in the absence of incriminating material found during the search. The Hon'ble Supreme Court dismissed the Revenue’s SLP in PCIT vs. Meeta Gutgutia *(2018) 96 taxmann.com 468 (SC)]. taxmann.com 398 (Bom): The court held that where no incriminating material was found during a search, proceedings under section 153A were without juri iction. taxmann.com 3 (Bom): It was held that an assessment under section 153A could only be made based on incriminating material found during a search. (Nhava Sheva) Ltd, (2015) 58 taxmann.com 78 (Bom): The court ruled that in the absence of incriminating material, no additions could be made in respect of finalized assessments. The department accepted this proposition, as the Supreme Court's SLP in CIT vs. Continental Warehousing Corporation, [(2018) 93 taxmann.com 31 (SC)] did not raise this issue. 8. Abhisar Buildwell (P.) Ltd. (supra), which held as follows: "12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosedincome which is found during the course of search or pursuant to search or requisition. Therefore,only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the juri iction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the abated assessments. It does not provide that all completed/unabated assessments shall abate if the submission on behalf of the Revenue is accepted, in that case, second proviso to section 1534 and sub-section (2) of Section 1534 would be redundant and/or rewriting the said provisions, which is not permissible under the law.” Thus, as held by the Hon’ble Apex Court, incriminating evidence/material must necessarily be found during the course of a search conducted on the concerned assessee. In the present case, the material relied upon forms part of the assessee's regular books of accounts. Documents and schedules related to regular books of accounts cannot be treated as corroborating evidence for the purposes of incriminating material. 9. We heard the rival submission and considered the documents available in record. We note the argument of the Ld. DR cited the judgments which are relied by him are factually distinguishable and not related to assessment U/s 153A of the Act. In the instant case the search team did not unearth any incriminating material to show that loans taken by respective assessees are accommodation entries. Third party information, if not supported any cogent material, if any found during the course of search conducted in the hands of the assessee cannot be considered as incriminating material U/s 153A of the Act. We respectfully follow the ruling of Abhisar Buildwell (P.) Ltd. (supra) where the Hon’ble Apex Court emphasized the word“incriminating material”. The Ld. DR & the Ld. ACIT both were unable to produce any incriminating material that support the addition was made U/s 153A. Observing the impugned appellate order, the Ld. CIT(A) categorically has taken note that the addition cannot be sustained merely on the to incriminate the assessee. We respectfully follow the binding precedents of the Hon’ble Supreme Court, the Hon’ble Juri ictional High Court, and the Hon’ble Delhi High Court. Consequently, the impugned assessment order passed under Section 153A of the Act, in the absence of incriminating material, is held to be beyond juri iction, and the additions made therein are quashed. 10. Accordingly, the legal ground raised by the assessee is upheld. 11. Since the legal issue is adjudicated in favour of the assessee, the factual issues remain academic and do not require adjudication. ITAs No.1482, 2340, 2341 & 4044/Mum/2019 & Cos 109, 112/Mum/2021 & Cos 111 & 44/Mum/2019

The facts and circumstances in all these appeals and cross objections are identical to the appeal in ITA No.1484/Mum/2021 & CO No.43/Mum/2021. Therefore, the decision arrived at above, shall apply mutatis mutandis to these appeals and cross objections also. 13. In the result, all the appeals filed by the revenue are dismissed and the cross objections filed by the assessee are allowed. Order pronounced in the open court on 14th day of February 2025. (B R BASKARAN) JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 14/02/2025 Pavanan Copy of the Order forwarded to:

अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file.