M/S. CHITTASWARUP AGRO FARMING PVT. LTD.,CHENNAI vs. ACIT, CC-1(2), CHENNAI

The AO during the course of assessment verified books of the assessee companies and added amount on account of increase in capital/ advance received during the year. Accordingly, , 1792, 1994 :- 5 -: & 1796/Chny/2025 additions were made by the AO. The quantum and nature of additions made in each of the assessee’s cases are detailed below: S.No. Company Name Nature of Addition A.Y Addition confirmed u/s.68 01 Betelnut Estates Pvt Ltd Share capital 1,00,000 2014-15 02 Anantram Orchards Pvt Ltd Advances 14,56,750 2018-19 03 Avanish Orchardes Pvt Ltd Advances 1,32,83,500 2018-19 04 Chittaswarup Agro Farming Advances 35,80,000 2018-19 Pvt Ltd

Before AO, assessee had contested the jurisdictional validity of notice issued under section 153A of the Act on the grounds that the assessment year under consideration is a non-abated assessment year and no incriminating documents were found during the course of search proceedings in regard to the addition involved. However, the AO did not accept the contentions of the assessee and assessments were completed making the above additions.

Being aggrieved by the assessment orders, the assessee companies preferred appeals before CIT(A). The CIT(A) confirmed the addition made by the AO. The CIT(A) held that the pen drive found in the premises of Mr. Badri Narayan Kota would constitute incriminating material found during search. On merits of the case , 1792, 1994 :- 6 -: & 1796/Chny/2025 (as regards the cases relating to addition on increase in advances), it was contended before CIT(A) that no fresh funds were received by the assessee for allotment of preferential shares during the year under consideration but only advances received in earlier years were converted to preference share capital. It was stated that since no fresh credit was received during the year, addition u/s 68 of the Act cannot be sustained. However, CIT(A) confirmed the addition based on the finding in AY 2019-20 where amount received towards capital and there is shift of amount from advance received to share capital. Further, with respect to addition on account of equity share capital in the case of Betelnut Estates Pvt Ltd., it was contended that the same had been duly recorded in the books of accounts and disclosed in the audited financials of the company, thus no addition was warranted. However, the CIT(A) confirmed the addition on the grounds that names of the shareholders were different in the ledger account and the audited financials.

Aggrieved by the orders of the CIT(A), assessee has preferred these appeals before the Tribunal. The assessee had raised a common legal ground (Ground No.2) in all the appeals stating there was no incriminating material found during the , 1792, 1994 :- 7 -: & 1796/Chny/2025 course of search and in the relevant appeals, assessments have become unabated. Therefore, the additions/disallowances made not based on incriminating material is bad in law. The Ld.AR took us through the documents seized during the search conducted u/s.132 of the Act and contended that there is no incriminating material found. It was reiterated by the Ld.AR since assessments in these cases are unabated, the additions/disallowances made de hors incriminating documents should be deleted. In support of his submission, the Ld.AR relied on the judgment of Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd., reported in [2023] 454 ITR 212 (SC).

In addition to the above, the Ld.AR submitted that the assessee has also raised an additional ground on the legal issue that no approval under section 153D was obtained by the AO before passing the assessment order. Further, it was also contended that there was no warrant in the name of the assessees company. Hence, the assessment orders passed under section 153A are void ab initio. It was stated that since the ground relating to the absence of incriminating documents is squarely covered in favour of the assessee and has attained finality in view of the judgment of the Hon’ble Apex Court in the , 1792, 1994 :- 8 -: & 1796/Chny/2025 case of Abhisar Buildwell (P) Ltd., supra, the other grounds of appeal may be left open.

The Ld.DR supported the orders of the AO and the CIT(A).

We have heard rival submissions and perused the material on record. The assessment years involved in the above appeals are assessment years 2014-15 and 2018-19. It is an admitted fact that for the above assessment years, the assessments are unabated in the case of all the aforesaid assessee companies. This fact is also duly admitted by the AO in the remand report submitted to the CIT(A) in the case of Betelnuts Estates Pvt. Ltd.

There was a search u/s.132 of the Act in the residential / business premises of Golden Shelters Pvt. Ltd., NKV Krishna Group on 16.10.2019. The office premises of the above- mentioned assessees companies were also covered in the search operation being the group concerns. During the course of search, a statement was recorded from Shri NKV Krishna and Shri Saravana Kumar on 19.10.2019 and 24.10.2019. Based on the statements, Annexure I, II and III were prepared on the basis of pen drive found and seized vide ANN/KP/BNC/ED/S1-(3) on , 1792, 1994 :- 9 -: & 1796/Chny/2025 17.10.2019 from the residence of Shri Badri Narayan Kota, wherein the details of unaccounted cash introduced in the group companies as unsecured loans/share application money were calculated. The copies of these annexures are on record from pages 1 to 16 of the paper-book filed by the assessees. During the assessment proceedings, assessees had contested the jurisdictional validity of the notice issued u/s.153A of the Act by stating that for the assessment years under consideration, the assessments are unabated and no incriminating documents were found during the course of search. Accordingly, it was contended that the addition/disallowance not based on incriminating material cannot be made in assessment u/s.153A of the Act. The AO however did not accept the contention and rejected the objection of the assessees. The CIT(A) confirmed the additions made by the AO by observing that pen drive found in the premises of Shri Badri Narayana Kota would constitute incriminating material found during the search.

On perusal of the search material, annexures I, II & III compiled by the search person based on the statements recorded and the seizure of pendrive, we find that for the relevant assessment years no incriminating documents relating to , 1792, 1994 :- 10 -: & 1796/Chny/2025 assessee’s were found. The names of the assessees company are appearing in Annexure II & III. However on perusal of the same, we find that for the assessment years 2014-15 & 2018-19, no amounts are mentioned. The details of the assessee companies in the said enclosures which are placed on record are as follows:- Appeal Number Name of the appellant Asst. year Annexure ITA 1792/CHNY/2025 Betelnut Estates Pvt Ltd 2014-15 Annexure III S no.25 ITA 1791/CHNY/2025 Anantram Orchards Pvt 2018-19 Annexure II Ltd S no.11 ITA 1796/CHNY/2025 Avanish Orchardes Pvt 2018-19 Annexure II Ltd S no.1 ITA 1794/CHNY/2025 Chittaswarup Agro 2018-19 Annexure II Farming Pvt Ltd S no.9

The CIT(A) has failed to appreciate the said pen drive did not contain any information whatsoever about the addition / disallowance made by the AO in the impugned assessment years. The Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd., supra, had clearly held that in a case of unabated assessment, no addition can be made in the absence of any incriminating material found during the course of search. As mentioned earlier, the assessment years under consideration are unabated assessments and thus, the AO could not have made the addition in the absence of incriminating material found during the course of search. , 1792, 1994 :- 11 -: & 1796/Chny/2025 15. On identical facts, the Chennai Bench of the Tribunal in another group company case, namely Reform Realty & Logistics Development Pvt. Ltd., vs. DCIT in (order dated 25.10.2024), had deleted the addition by observing as under:- 6. We have heard the rival submissions, and perused the materials available on record. The assessee-company as a part of group company of NKV Krishna group, where search was conducted on 16.10.2019 u/s 132 of I T Act. The A.O has made the addition of share capital of Rs. 5,00,000/- each introduced by Shri NKV Krishna and Smt. Preetha u/s. 68 of the Act. The Ld. CIT(A) has noted that the assessee has not been able to explain the source of cash deposit and the nature of cash recorded in the books of account and confirmed the addition. The Ld AR took us to the seized documents of Annexure-I, II, III and IV where details of introducing unaccounted cash into share application money and unsecured loan /loan and advance was listed and assessee company name does not figure in any of these documents. The AO has made the addition based on the general statement that unaccounted cash was introduced as share capital without referring to any specific documents. The documents produced by the Ld DR as incriminating material was the copy of cash book and ledger account of Shri NKV Krisha and Preetha ji, which are entries of regular books of account . We therefore hold that addition of share capital of Rs 10,00,000/ has not been made based on incriminating material found during search The AO in the assessment order u/s 153A has assessed income at Rs 9,40,000/- against returned loss of Rs 60,000 , thus making only addition of share capital of Rs 10,00,000 u/s 68 of the Act. Therefore, in view of Honorable Supreme Court decision in the case of Abhisar Buildwell (P) Ltd addition cannot be sustained in present case without there being incriminating material. We accordingly delete the addition of share capital of Rs.10,00,000 u/s 68 of Income Tax Act made by the AO .

In light of the aforesaid reasoning and relying on the judicial pronouncement cited supra, since additions made by the AO on account of unexplained cash credit / share capital are not , 1792, 1994 :- 12 -: & 1796/Chny/2025 based on information / material unearthed in search proceedings, the said additions are liable to be deleted. Accordingly, we delete the additions made in the aforementioned cases.

Since we have decided the issue on the legal ground, the other grounds raised by the assessee on merits and other legal issues are not adjudicated and are left open. It is ordered accordingly.

In the result, the appeals filed by the assessee’s are partly-allowed.