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Facts
Search and seizure operations were conducted on K.K. Builders, a partnership firm, leading to assessments under Section 153A for AY 2008-09 and 2009-10. Significant additions were made based on seized incriminating material and statements recorded under Section 132(4). The CIT(A) confirmed these additions. For AY 2008-09, the appellant filed an appeal before the Tribunal with a delay of 168 days, seeking condonation for pursuing an alternative remedy under Section 154.
Held
The Tribunal dismissed the appeal for AY 2008-09, declining to condone the delay as the appellant failed to show sufficient cause or bona fide pursuit of an alternative remedy. For both assessment years, the Tribunal upheld the additions, affirming that incriminating material was found and the appellant had declared additional income, which, as per the Supreme Court in Abhisar Buildwell P. Ltd., allows the AO to make further additions.
Key Issues
1. Whether the delay in filing the appeal before the Tribunal should be condoned. 2. Whether additions made under Section 153A were valid in the presence of incriminating material and whether Section 153D approval was correctly granted. 3. Applicability of the Supreme Court's decision in Abhisar Buildwell P. Ltd. regarding additions post-search.
Sections Cited
132, 153A, 153D, 132(4), 154, 69C
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against the orders of the Commissioner of Income Tax (Appeals)-3, Kochi [CIT(A)], dated 16.03.2023 for Assessment Years (AY) 2009-10 & 2008-09.
– AY: 2008-09 2. Brief facts of the case are that the appellant is a partnership firm engaged in the business of real estate, execution of civil contracts and running of bars and restaurants. Search and seizure & 759/Coch/2023 K.K. Builders operations were conducted u/s. 132 of the Income Tax Act, 1961 (the Act) in the business premises of the appellant. During the course of search and seizure operations certain incriminating material was stated to be found and seized by the Department. Based on this incriminating material notice u/s. 153A was issued for AY 2008-09 on 21.06.2013. In response to the notice u/s. 153A the appellant filed return of income declaring income of Rs. 1,80,87,120/- on 05.08.2013. Against the said return of income, the assessment was completed by the DCIT, Circle-2, Kozhikode (hereinafter called "the AO") vide order dated 30.03.2015 passed u/s. 153A(a) of the Act at a total income of Rs. 5,91,44,803/- after making the following disallowances/additions: - i) Unaccounted income from sale of IMFL Rs. 34,24,645/- ii) Unaccounted income from sale of Food Rs. 2,42,515/- iii) Unaccounted income from sale of Beverage Rs. 1,91,544/- iv) Addition u/s. 69C Rs. 2,98,05,603/- v) Addition on account difference in gross receipts Rs. 73,93,476/- 3. Being aggrieved, an appeal was filed before the CIT(A), contesting that no addition can be made u/s. 153A of the Act in the absence of any incriminating material found as a result of search and seizure operation. The ld. JCIT had granted approval u/s. 153D of the Act without proper application of mind. However, the CIT(A) after consideration of the above submissions held that the additions were made based on the statement recorded u/s. 132(4) of the Act & 759/Coch/2023 K.K. Builders from the partners of the appellant firm and also based on the incriminating material found during the search and seizure operation. Accordingly the CIT(A) confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before us in the present appeal.
At the outset there is a delay in filing the appeal by 168 days. The appellant had filed a petition seeing condonation of delay on the ground that it is under the bona fide belief that the CIT(A) would grant relief based on the decision of the Hon'ble Supreme Court in the case of CIT v. Abhisar Buildwell P. Ltd. [2023] 454 ITR 212 (SC) pursuant to the application moved by the appellant u/s. 154 of the Act. After rejection of 154 application on 20.12.2023 appeal was filed immediately on 21.12.2023 before this Tribunal. Thus, it is prayed that the delay had occurred on pursuit of alternative remedy.
On the other hand, the learned Sr. DR vehemently opposed condonation of delay.
We have heard the rival contentions and perused the material available on record. In the present case the order passed by the CIT(A) was served on the appellant on 16.03.2023. The appeal is required to be filed within a period of 60 days, i.e. on or before 15.05.2023 whereas the appeal was filed on 30.10.2023, thus resulting in a delay of 168 days. It is stated before us that the delay had occurred on account of pursuing alternative remedy u/s. 154 of & 759/Coch/2023 K.K. Builders the Act before the CIT. The said application u/s. 154 appears to have been filed on 05.04.2023 vide application dated 03.04.2023. The said application came to be disposed by the learned CIT vide order dated 17.10.2023. No doubt the pursuing other alternative remedy constitutes a reasonable sufficient cause for delay in filing the appeal provided the appellant was prosecuting other proceedings bonafidely and not proceeding with some ulterior motive or negligence in prosecuting other case or was deliberatively delaying the filing of the appeal. In the present case no material was placed before us to establish the bonafide in prosecuting the alternative remedy. The very fact the CIT has dismissed the application u/s. 154 would clearly demonstrate it is a vexatious proceedings. Furthermore, despite pursuing alternative remedy, nothing prevented the appellant from filing the appeal before this Tribunal in time. In this circumstance, we are of the considered opinion that the appellant had not made out sufficient reasonable cause for filing the appeal in time. Accordingly, it is not a fit case for condoning the delay. Therefore, we are inclined to condone the delay. Appeal dismissed on account of delay and latches.
– AY : 2009-10 8. Brief facts of the case are that the appellant is a partnership firm engaged in the business of real estate, execution of civil contracts and running of bars and restaurants. Search and seizure operations were conducted u/s. 132 of the Act in the business & 759/Coch/2023 K.K. Builders premises of the appellant. During the course of search and seizure operations certain incriminating material was stated to be found and seized by the Department. Based on this incriminating material notice u/s. 153A was issued for AY 2009-10 on 21.06.2013. In response to the notice u/s. 153A, the appellant filed return of income declaring additional income of Rs. 76,60,800/- on 05.08.2013. Against the said return of income, the assessment was completed by the DCIT, Circle-2, Kozhikode (hereinafter called "the AO") vide order dated 30.03.2015 passed u/s. 153A(a) of the Act at a total income of Rs. 9,44,62,326/- after making the following disallowances/additions: - i) Unaccounted income from sale of IMFL Rs. 43,51,512/- ii) Unaccounted income from sale of Food Rs. 3,32,130/- iii) Unaccounted income from sale of Beverage Rs. 5,90,874/- iv) Depreciation claim disallowed Rs. 3,43,38,880/- v) Income from sale of tenancy rights Rs. 73,93,476/- 9. Being aggrieved, an appeal was filed before the CIT(A), contesting that no addition can be made u/s. 153A of the Act in the absence of any incriminating material found as a result of search and seizure operation. The ld. JCIT had granted approval u/s. 153D of the Act without proper application of mind. However, the CIT(A) after consideration of the above submissions held that the additions were made based on the statement recorded u/s. 132(4) of the Act from the partners of the appellant firm and also based on the
Being aggrieved, an appeal was filed before the CIT(A), contending that in the absence of seized material pertaining to the assessment year under consideration, no notice u/s. 154 can be made. It is further contended that granting of approval by the ld. JCIT u/s. 153D is illegal as it was granted without application of mind. He also challenged the additions on merit. The learned CIT(A) placing reliance on the decision of the Hon'ble Kerala High Court in the case of G.N. Gopakumar v. CIT [2016] 75 traxmann.com 215 upheld the validity of issue of notice u/s. 153A even in the absence of incriminating material. Similarly, the CIT(A) upheld validity of approval granted by CIT u/s. 153D of the Act. The CIT(A) also sustained the addition by holding that the additions were made on the basis of seized material and the statement recorded from the authorised persons.
Being aggrieved, the appellant is in appeal before us in the present appeal.
The learned counsel for the assessee contended that; (i) the issue of notice u/s. 153A is void ab initio for want of incriminating material found in the course of search and seizure proceedings; (ii) granting of approval u/s. 153D by the JCIT is in violation of law as the approval was granted without any application of mind; and (iii)
& 759/Coch/2023 K.K. Builders the AO ought not to have made additions in the absence of any incriminating material placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Abhisar Buildwell P. Ltd. [2023] 454 ITR 212 (SC).
On the other hand, the ld. CIT-DR vehemently opposed the above submissions and submitted that there was incriminating material found as a result of search and seizure operations and statement of the appellant was recorded u/s. 132(4) of the Act admitting that the appellant was indulged in concealing income. He further submitted that the ratio of the decision in the case of decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd. (supra) has no application to the facts of the present case, inasmuch as, there was very much incriminating material found as a result of search and seizure action.
We have heard the rival contentions and perused the material available on record. The issue that arises for our consideration is whether the AO is justified in making additions in pursuant to the notice issued u/s. 153A of the Act. It is settled position of law that in the absence of incriminating material found as a result of search and seizure action no addition can be made as held by the Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd. (supra). In the present case, a mere perusal of the assessment order it would be apparent that the AO made a reference to the sized material as well as the statement recorded from the appellant u/s. 132(4) of the Act.
& 759/Coch/2023 K.K. Builders On the basis of such search material the AO made additions. Furthermore, the appellant himself had declared additional income in the return of income filed in response to notice u/s. 153A of the Act. Thus, ispo facto, it would clearly demonstrate that there was enough incriminating material indicating existence of undisclosed income. The Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd. (supra) further lays down that once there is incriminating material found as a result of search and seizure action u/s. 132 of the Act there are no fetters on the AO to make other additions.
In the light of the above discussion, the contentions raised by the assessee are devoid of any merit. Accordingly the appeal is dismissed. The appellant had not made any pleadings on the merits of the additions. Therefore, the appeal filed by the assessee deserves to be dismissed.
In the result, the appeals filed by the assessee stand dismissed.
Order pronounced in the open court on 14th May, 2025.