SAURABH AGROTECH PRIVATE LIMITED,ALWAR vs. DCIT, CENTRAL CIRCLE, ALWAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA Nos. 711 & 712/JP/2024 fu/kZkj.k o"kZ@Assessment Years : 2010-11 & 2012-13 cuke Saurabh Agrotech Pvt. Ltd. DCIT, Vs. 20, 21 and 22, Old Industrial Central Circle, Alwar Area, Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCS 4522 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal, CA jktLo dh vksj ls@ Revenue by : MS Alka Gautam, CIT (Through V.C) lquokbZ dh rkjh[k@ Date of Hearing : 06/11/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 02/01/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

These two appeals are filed by the assessee aggrieved from the order of Commissioner of Income Tax (Appeal), Jaipur-4 [ for short CIT(A)] for the assessment years 2010-11 & 2012-13 dated 30.04.2024. The said order of the ld. CIT(A) arise as against the order dated 31.12.2017 passed under section 143(3) r.w.s 153A of the Income Tax Act, by DCIT, Central Circle, Alwar. facts and are almost common, except the difference in figure disputed in each year, therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order.

Therefore, for the purpose of the present discussions, the case of is taken as a lead case.

1. Under the facts & circumstances of the case and in law, the addition made by AO in the assessment framed u/s 153A in respect of completed assessment without any incriminating material found in search is illegal, bad in law, which is against the order of Hon.ble Supreme Court in the case of Pr. Commissioner of Income-Tax v/s Abhisar Buildwell (P) Limited (2023) 293 Taxman 141, thus the order so passed be quashed and the ld Commissioner of Income-Tax (Appeals) has erred in confirming the same.

& 712/JP/2024 Sourabh Agrotech Pvt Ltd vs. DCIT 2. That the ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in law as well as on the facts and circumstances of the case in not following the orders of Income Tax Appellate Tribunal, Bench-Jaipur, Jaipur in the assessee’s own case for the assessment years 2011-12 vide order number ITA/154/JPR dated 28.03.2024, as submitted before him during the course of appellate proceedings, as mentioned in para number 4 on page number 8-9 of the order appeal againt, having the same set of facts and circumstances and without distinguishing them, thus the order so passed is against the well established principle of judicial precedence and consistency as upheld by apex court in the case of Radhasaomi Satsang V/s Commissioner of Income-Tax 193 ITR 321 (SC) and Parshuram Pottery Works v/s Income Tax Officer 106 ITR 1 (SC), thus the order so passed is in total disregard of the Income Tax Appellate Tribunal, Bench- Jaipur, Jaipur order as well as of apex court decision as referred to hereinabove and deserves to be quashed.

3. That the ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in law as well as on the facts and circumstances of the case in making the following observation in 2 para on page number 10 of the appellate order:-

“The appellant has relied upon judgments in support of its arguments, however the below referred judgement of hon.ble Supreme Court and hon.ble High Courts have not been referred in such judgments.”

The appellant relied upon the judgement of hon.ble Supreme Court as given in the case of Pr. Commissioner of Income-Tax v/s Abhisar Buildwell (P) Limited (2023) 293 Taxman 141 as mentioned inpara number 2 on page number 5 to 8 of the appellate order and by making the above quoted observation, the learned Commissioner of Income-Tax (Appeals)-IV, Jaipur has questioned the decision of hon.ble Supreme Court, which is against the law of land and also violative of article 141 of the Constitution of India, thus the order so framed by ld Commissioner of Income-Tax (Appeals)-VI, Jaipur is illegal, against the law of the land, violative of article 141 of the Constitution of India and thus deserves to be quashed.

4. That the ld. Assessing Officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rs. 652391.00 on account of Dharmada/charity collected and ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in sustaining the same.

5. The assessee reserves the right to add, alter, modify, delete or amend all or any of the grounds of appeal before or at the time of hearing of appeal.”

1. Under the facts & circumstances of the case and in law, the addition made by AO in the assessment framed u/s 153A in respect of completed assessment without any incriminating material found in search is illegal, bad in law, which is against the order of Hon.ble Supreme Court in the case of Pr. Commissioner of Income-Tax v/s Abhisar Buildwell (P) Limited (2023) 293 Taxman 141, thus the order so passed be quashed and the ld Commissioner of Income-Tax (Appeals) has erred in confirming the same.

2. That the ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in law as well as on the facts and circumstances of the case in not following the orders of Income Tax Appellate Tribunal, Bench-Jaipur, Jaipur in the assessee’s own case for the assessment years 2011-12 vide order number ITA/154/JPR dated 28.03.2024, as submitted before him during the course of appellate proceedings, as mentioned in para number 4 on page number 8-9 of the order appeal againt, having the same set of facts and circumstances and without distinguishing them, thus the order so passed is against the well established principle of judicial precedence and consistency as upheld by apex court in the case of Radhasaomi Satsang V/s Commissioner of Income-Tax 193 ITR 321 (SC) and Parshuram Pottery Works v/s Income Tax Officer 106 ITR 1 (SC), thus the order so passed is in total disregard of the Income Tax Appellate Tribunal, Bench- Jaipur, Jaipur order as well as of apex court decision as referred to hereinabove and deserves to be quashed.

3. That the ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in law as well as on the facts and circumstances of the case in making the following observation in 2 para on page number 10 of the appellate order:-

“The appellant has relied upon judgments in support of its arguments, however the below referred judgement of hon.ble Supreme Court and hon.ble High Courts have not been referred in such judgments.”

The appellant relied upon the judgement of hon.ble Supreme Court as given in the case of Pr. Commissioner of Income-Tax v/s Abhisar Buildwell (P) Limited (2023) 293 Taxman 141 as mentioned inpara number 2 on page number 5 to 8 of the appellate order and by making the above quoted observation, the learned Commissioner of Income-Tax (Appeals)-IV, Jaipur has questioned the decision of hon.ble Supreme Court, which is against the law of land and also violative of article 141 of the Constitution of India, thus the order so framed by ld Commissioner of Income-Tax (Appeals)-VI, Jaipur is illegal, against the law of the land, violative of article 141 of the Constitution of India and thus deserves to be quashed.

4. That the ld. Assessing Officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rs. 1193228.00 on account of Dharmada/charity collected and ld. Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in sustaining the same.

5. Succinctly, the fact as culled out from the records are that a search and seizure action u/s 132 of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the members/concerns of Data Group, Alwar on 14/10/2015 of which the Assessee is one of the members. Pursuant to the search action notice under section 153A of the Act was issued and served upon the Assessee on 06/09/2016 requiring him to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 within 15 days of the service of the said notice. The assessee filed its return u/s 139 on 30/09/2010 declaring income of Rs. 64,31,790/- income and revised return declaring income Rs. 54,22,650/- on dated 17/03/2012. In response to the notice u/s 153A, a return of income declaring Rs. 54,22,660/- income was e-filed by the assessee company on 24.01.2017. The assessee primarily derives its income from business. wherein information and details pertaining to the case of the assessee relevant to assessment of its income were called for u/s 142(1) of the Act by means of a questionnaire. In that proceeding ld. AO observed that originally, the assessment was completed u/s. 143(3) on 30.03.2013 at total income of Rs. 1,35,02,430/- by making disallowance of Rs. 23,34,959/-u/s. 14A & Rs.10,82,649/-u/s. 801B and other addition u/s. 80IA and interest free advance. Against that order the assessee filed appeal before the Ld. Commissioner of Income Tax (Appeals), Alwar against the assessment order. The Id. CIT(A) partly allowed appeal of the assessee vide his order dated 06.01.2015 in Appeal No. 153/2013-14. The Ld. CIT(A) sustained the disallowance u/s. 14A and partly sustained the disallowances u/s. 80IB made by the AO. Against that order of the ld. CIT(A) both the assessee as well as the revenue challenged that order before the Tribunal.

The Income Tax Appellate Tribunal decided both appeals [ITA No. 258/JP/2015] of the assessee and [ITA No. 243/JP/2015] of the Department, vide its order dated 18.10.2016. The Hon'ble ITAT set aside the order of the Ld. CITA(A) and restored both above issues to the file of the AO. In compliance to the order of the ITAT the income was again assessed u/s 254/143(3) vide order dated 31.03.2017 and finally assessed Rs. 54,22,650/- only (after claiming deductions u/s 80IA). Therefore, assessee was asked to show cause by ld. AO vide letter dated 07/12/2017 as to why its income u/s 153(A) should not be considered at 94,52,560/- against return income of Rs. 54,22,650/- and addition of balance amount may not be made accordingly. After considering the submission dated 09/12/2017 and after giving all the appeal effects, it has been observed that the income has finally been determined u/s 254/143(3) at Rs. 94,52,560/-.

In this way, as of now on account of Revenue, the order of AO prevails.

The appeal of the assessee is pending before ld. CIT(A), but still pending for adjudication Hence, the income of the assessee was determined at Rs. 94,52,560/- against Rs. 54,22,650/- filed in response to notice u/s 153A of Income Tax Act, 1961. Resulted into addition of Rs. 40,29,910/-.

5.2 During the search proceeding the statement of Shri Vijay Data u/s. 132(4) was recorded on 14.10.2015. He was asked vide Q. No. 26 about the amount of Rs.3,04,13,269.43/- shown in the 'Charity Ledger' in M/s.

Vijay Solvex Limited on 31.03.2015 and the amount of Rs. 1,14,08,453.06/- shown in the 'Charity Ledger' in M/s. Deepak Vegpro Pvt. Ltd. He replied that the companies of Data group charge 'Charity' at the time of issuing the bills and this amount is deposited in 'Charity ledger' and when we feel vide Q.No.27, about the huge balance (as discussed above) shown in the 'Charity ledger' which is lying unutilized and this implies that this amount is kept for personal use. The AR of the group was asked to submit the complete detail of ‘Dharmada’ account along with Bank statement of last six years of Data group and proof of utilization of ‘Dharmada Fund’ of last six year. During the course of assessment proceedings, the assessee vide query letter dated 05.09.2017, was specifically asked at point no. 30 to furnish complete details of Dharmada/Charity charged by company on sale bills along with bank statement for last six years including year under consideration for all the group companies including assessee company.

Reply was submitted on 09/12/2017 ld. AO did not found it tenable, because assessee has not furnished any justification that how the amount charged from buyer on the name of so called Charity / Dharmada does qualify the requirement to justify it as Charity / Dharmada and why it should not be a part of sale consideration. Ld. AO noted that just by mentioning a certain percent of total sale consideration as Dharmada in sale bills does’t change the nature of receipts. The buyer pays the total amount as sale consideration only he is compelled to pay this so-called Dharmada in order to purchase the goods and he does not have any concerned in respect of company. The Dharmada fund was always kept with it only and control over the utilization of the said fund was always remained with assessee only who neither spent it itself nor even donated it to any charitable institute, not even kept it in any specified mode either u/s 11(4) of the Act.

Therefore, the amount collected for an amount of Rs. 6,52,391/- as Dharmada was added back to the income of the assessee and accordingly the assessment was completed.

“7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The Ld. AO has made addition of Rs. 6,52,391 on account of dharmada/charity collected as part of sale. The Ld. AO has established that the assessee has collected huge sum of Rs. 3,04,13,269.43 as dharmada over the years and nothing has been spent by it for any charitable purpose. As per assessment order the assessee has not furnished any justification regarding how the amount charged from buyer on name of so called Charity/Dharmada does qualify the requirements to justify it as Charity/Dharmada. Specific evidences were collected on the issue during the search proceedings and the appellant could not justify and could not explain the issue in statement recorded during the search action.

7.3 It is noticed in the assessment order that the assessee was specially asked to provide the details of the utilization/ application of the fund towards the objects for which it was collected from the customers. It was noted from the ledger account & 712/JP/2024 Sourabh Agrotech Pvt Ltd vs. DCIT of this dharmada for six years, including the year under consideration that the assessee has not spent this amount on charitable or religious purpose but just accumulated the fund year by year in its books which shows that assessee was not intended to spent this receipts on charity at all. Secondly, assessee has not only accumulated the fund in its own hand but enjoyed interest earning also thereon year by year without offering that for any tax.

7.4 The appellant has been collecting money from the customers in the name of charity but the appellant has not spent any money for several years. In the present case the appellant himself is collecting the charity funds and also himself is keeping the funds for expenditure on charitable purposes however the judgment cited by the appellant are different in the nature as in those cases the funds were handed over by the assesses to the charitable organizations. This issue has also been discussed by the Learned Assessing Officer in the assessment order. The appellant is silent and has not explained the issue in his appeal and has relied upon the judgments in support of his appeals which indicates that the factual position is undisputed. The facts in the judgments relied upon by the appellant are different. As noted in the assessment order also in the judgments the collecting taxpayer who was collecting the Dharmada transferred the same to a separate registered trust and it was the legal obligation of the separate trust to fulfill the legal requirements and spend the money for charitable purposes.

7.5 The present appeal on the ground is squarely covered by the judgement of Hon'ble Supreme Court in Commissioner of Income-tax v. Amritsar Transport Co. (P.) Ltd. [1993] 68 Taxman 56 (SC)/[1993] 201 ITR 816 (SC)/[1993] 111 CTR 316 (SC)[31-03-1993]. Hon'ble Supreme Court distinguished the case from earlier judgement in the case of CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 (SC) on the ground that the revenue's case herein is that though collected in the name of Dharmada, the amounts were neither meant for any charitable purpose nor were they spent on charitable purposes and decided in favour of the Revenue.

7.6 The Id. AO has noted after detailed analysis that if the question is whether these receipts were voluntary donation - the answer would be emphatically a big NO. The appellant has prime facie used the principles of trust and dharmada for the purposes of collecting money for his own benefit as the funds are being utilized in the business apparently and no separate funds bank accounts are maintained and even the interest income is being earned by the appellant on such funds, meaning thereby that the funds are not being utilized for the purposes

In view of the discussion itself this ground of Appeal is liable to be dismissed. The same is discussed further in view of the examination of the provisions applicable to trusts.

7.7 As stated in the assessment order assessee is not a Trust or Society registered under 12AA or 10(23)(c) of the I.T.Act, which makes an assessee eligible to receive donation as exempt income. Assessee is a registered company under the Companies Act under section 149 (3) and not under 25 of the companies act which pertains to registration of non-profit making company. Assessee is a private/public limited company which purely runs on commercial principles. Looking at the broader picture and facts of the case even if it can be said that the assessee himself has created an unregistered charitable trust within his organization, the appellant has not spent the money and it was required to keep those funds in modes specified under section 11. As per section 11 the trust is required to spend at least 85% of the voluntary contributions received during the year on charitable purposes. However the appellant has not done so. Further it is not the case of the appellant that he has obtained registration under section 12A/12AA. The appellant has also not complied with the legal provisions of trust and exemption provisions under section 11 and 12 regarding the registration of trust and regarding the application of the voluntary contribution and the investment of the unspent contribution. The appellant has prime facie used the principles of trust and dharmada for the purposes of collecting money for his own benefit as the funds are being utilized in the business apparently and no separate funds bank accounts are maintained and even the interest income is being earned by the appellant on such funds as noticed by the learned AO, meaning thereby that the funds are not being utilized for the purposes for which these are being collected and the nomenclature of dharmada is just a façade and colourable device. The appellant has also not shown that the trust is registered under the state government relevant laws and it is a settled law that in case the trust is not registered under the state government laws as applicable in that case the exemption under section 11 and 12 is not available. The exemption under section 11 and 12 is also not eligible to the appellant own account of misuse of the trust structure for non- chartiable/personal benefits.

7.8 In view of the detailed discussion the appellant is not entitled to exemption benefit regarding the money collected in name of dharmada and thus not entitled

7. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submissions in respect of the various grounds raised by the assessee and the same is reproduced herein below:

1. Assessee is engaged in the business of manufacturing of oil & oil cakes and trading of oil & oil seeds. It filed its return of income on 30.09.2010 declaring income of Rs.64,31,790/- which was revised on 17.03.2012 at income of Rs.54,22,650/-.

2. A search was carried out on Data Group, Alwar on 14.10.2015 of which assessee is one of the member. The AO completed the assessment u/s 153A vide order dt. 31.12.2017 at income of Rs.1,01,04,951/- in which he added the difference of Rs.40,29,910/- for which the addition was made in the original assessment proceedings against which appeal is pending before Ld. CIT(A). Apart from this in the assessment framed u/s 153A, addition of Rs.6,52,391/- was made by treating dharmada/charity as part of sale.

3. Before the CIT(A) assessee raised an additional ground of appeal stating that addition made without incriminating material found in search is bad in law. For this proposition it relied on the decision of Hon’ble Supreme Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 and the decision of Hon’ble ITAT, Jaipur Bench in its own case for AY 2011-12 in dt. 28.03.2024.

4. The Ld. CIT(A), however, at Para 4.4 by relying on the decision of Hon’ble Supreme Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. and other decisions upheld the validity of addition made by AO in the order passed u/s 153A of the Act. The relevant finding of CIT(A) is as under:- (a) At Para 4.4, Page 10 he referred to Para 7.1 of the order of Hon’ble Supreme Court where the Hon’ble Court has referred to the legal provision summarized by Delhi High Court in case of Kabul Chawla wherein at Para 38(vii) it held that completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. (b) He referred to Para 7.2 where the Hon’ble Supreme Court referred to Para 16 of the decision of Gujarat High Court in case of Saumya Construction to highlight that the assessment should be connected with something found during search or requisition that is incriminating material which reveals undisclosed income. (c) He referred to Para 14(iii) of the decision of Hon’ble Supreme Court where it is held that in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns. (d) Accordingly it held that incriminating material is not restricted to the seized material and therefore incriminating material; for the purpose of section 153A has to be necessarily construed to be in the nature of prima facie evidence only (including a circumstantial evidence). (e) In light of above, Ld. CIT(A) at Page 13 of its order observed that provisions of section 153A/153C are not normal assessment provisions like 143(3), rather they are curative provisions to plug the mischiefs of evasion of taxable income based on evidences found in pursuance to search and if on account of search, the facts and circumstances suggest that any entry already appearing in the books of accounts or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature of income from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/facts coming to fore now will definitely constitute an incriminating material for which he applied the Haydens’s Rule of Mischief. (f) The Ld. CIT(A) at Page 15 & 16 further referred to the decision of ITAT Delhi Bench in case of MGF Automobiles Ltd and some other decisions to highlight that any statement made by searched person during examination may be used in evidence in any proceedings under the Act. Since in the present case specific queries has been asked in the statement recorded during search about the charity fund collected by the assessee and an invoice found during search is referred in the assessment order, it shows that assessee was collecting charity amount as part of invoice and no expenditure was being done out of the same, the amount so collected is taxable as per the principal laid down by Hon’ble Supreme Court in case of CIT Vs Amritsar Transport Company Private Limited (1993) 201 ITR 816.

Submission:-

1. At the outset it is submitted that the Ld. CIT(A) has not properly appreciated the decision of Hon’ble Supreme Court in case of Abhisar Buildwell Private Limited. In fact the Hon’ble Supreme Court after referring to the decision of Delhi High Court in case of Kabul Chawla and Gujarat High Court in case of Saumya Construction, at Para 14 of its order concluded as under:-

“14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.”

2. From the above it can be noted that the Hon’ble Supreme Court in Para 14(iv) has categorically held that in respect of completed assessments/unabated assessments no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be reopened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act. If the interpretation as made by the Ld. CIT(A) is accepted then the direction of Hon’ble Supreme Court that the completed/unabated assessments can be reopened by AO u/s 147/148 of the Act would become otiose. Further the statement recorded in search cannot be held to be incriminating material as held in the following cases:-

PCIT (Central) & Ors. Vs. Anand Kumar Jain (HUF) & Ors. (2021) 432 ITR 0384 (Del) (HC) The relevant Para 8 is reproduced as under:-

is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the Explanation to s. 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment.

PCIT Vs. Vikas Telecom Ltd. (2022) 209 DTR 373 (Del) (HC) The head note of this decision reads as under:-

Search and seizure—Assessment under s. 153C—Scope vis-a-vis absence of incriminating material—CIT(A) as also the Tribunal, have found that the AO has not made use of any seized documents while making additions to the total income of the assessee under s. 68—Books and papers seized relating to the assessee were not relevant to the additions made by the AO under s. 68—Addition was not therefore sustainable

DCIT Vs. Frost Falcon Distilleries Ltd. (2021) 207 DTR(Trib.) 1 (Del) (Trib.) In the absence of any incriminating material, addition could not be made by treating the share capital received by the assessee as unaccounted money by relying solely on the statement of a dummy director of the investor company recorded during the survey action in the case of that company without confronting the same to the assessee.

CIT Vs. Dilbagh Rai Arora (2019) 177 DTR 220/263 Taxman 30 (All.) (HC) The relevant Para 15 to 18 & 22 are reproduced as under:-

“15. We have perused the record of the case. The respondent-assessee has filed his return on 30th Oct., 2006 and offered Rs. 24 crores for taxation. Assessee has filed the return and disclosed income from house property, income from other sources and loss on long-term capital gain on the sale of immovable property. The assessee has further disclosed profit from trading in commodity exchange and has also filed evidence in support of his claim. The assessing authority has added back Rs. 7 crores only on the ground that at the time of survey dt. 1st Sept., 2005 the assessee had made a disclosure of sum of Rs. 31 crores for taxation in the year under consideration. But, no incriminating materials and documents had been brought on record for addition of such amount. The CIT(A) while allowing the appeal of the assessee has deleted the said amount, which was being confirmed by the impugned order. The assessee-respondent in the statement given on 6th Oct., 2005, has surrendered Rs. 18 crores on account of investment made in purchase of jewellery/precious stones and Rs. 6 crores were surrendered as cash in hand duly shown in the books of account, balance Rs. 7 crores were surrendered with stipulation that details of the same would be given in due course of time.

& 712/JP/2024 Sourabh Agrotech Pvt Ltd vs. DCIT 17. The addition can only be made, if there is incriminating material or the surrounding circumstances reveal that there is any material to justify the addition.

PCIT Vs. Best Infrastructure India Pvt. Ltd. (2017) 397 ITR 82/ 159 DTR 257 (Del.) (HC) The head note of this decision reads as under:-

Search and seizure—Assessment under s. 153A—Scope vis-a-vis incriminating material—Statements of AG make it plain that the surrender of the sum of Rs. 8 crores was only for the assessment year in question and not for each of the six assessment years preceding the year of search—Secondly, when AG was confronted with A-1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for—Even these, therefore, could not be said to be incriminating material qua each of the preceding assessment years—Further, statements recorded under s. 132(4) do not by themselves constitute incriminating material—Tribunal was fully justified in concluding that the assumption of jurisdiction under s. 153A qua the assessees was not justified in law In the assessment order the AO has referred to the statement of Sh. Vijay Data and the invoice scanned is with reference to the dharmada collected by M/s Vijay Solvex Ltd. and Deepak Vegpro Pvt. Ltd. There is no reference or any document relating to the assessee in the statement of Sh. Vijay Data. Therefore the dharamada collected by the assessee in the invoices which is credited in Dharmada a/c in the books of accounts cannot be said to be an incriminating material.

3. Reliance is further placed on the following decisions where it is held that in the absence of incriminating material no addition can be made u/s 153A/153C in case of completed/unabated assessments:

PCIT Vs. S.S. Con Build (P.) Ltd. (2023) 293 Taxman 491 (SC) SLP dismissed against impugned order of High Court that where no incriminating material was found during search operations pertaining to relevant AY in question, AO could not have proceeded to frame assessment u/s 153A.

PCIT Vs. King Buildcon (P) Ltd. (2023) 227 DTR 393 (SC) In view of the fact that during the search no incriminating material was found, no addition could be made in the assessment u/s 153A in respect of completed/unabated assessments.

PCIT Vs. Kutch Salt and Allied Industries Ltd. (2023) 294 Taxman 124 (Guj.) (HC) Where no incriminating material was found during search, no addition can be made in respect of competed/unabated assessment.

PCIT Vs. Rajesh Mohanbhai Patel (2023) 294 Taxman 279 (Guj.) (HC) Where assessment of assessee for relevant AY was completed and subsequently search was conducted at premises of assessee in pursuance to which AO passed assessment order u/s 143(3) r.w.s. 153A(1)(b) and made addition u/s 68 on account of alleged bogus long term capital gain, since no incriminating material was found during course of search with regard to issue of addition made in assessment order, impugned addition was to be set aside.

4. In the assessee’s own case for AY 2011-12, the Hon’ble ITAT at Para 7 & 8 of its order held as under:-

8. Under these given facts and circumstances of the case ratio laid down by the Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell P. Ltd. (supra) is squarely applicable on the facts of the instant case and in favour of the assessee. Therefore, the ld. AO erred in making the impugned addition in the hands of the assessee for completed/non abated assessment years. Finding of ld. CIT(A) is set aside and the assessee succeeds on the & 712/JP/2024 Sourabh Agrotech Pvt Ltd vs. DCIT legal issue raised in ground No. 1 and since we have allowed the legal ground, the impugned addition of Rs. 7,02,705/- stands deleted. The above decision was placed before the Ld. CIT(A) but he has not followed the same without any discussion. In view of above, addition made by the AO without any incriminating found in search is uncalled for and the same be deleted.

Ground No.4 That the ld. Assessing officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rupees 652391.00 on account of Dharmada/charity collected and ld Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in sustaining the same. AO Page 4 to 10 & CIT(A) Page 56 to 63

Facts & Submission:-

3. The Ld. CIT(A) at Para 3.2, Page 61-63 of the order observed that assessee has not spent the amount for charitable purpose but accumulated the funds in its books which shows that it is not intended to be spent on charity. Further assessee enjoyed interest earning on such fund without offering that for tax. He relied on the decision of Hon’ble Supreme Court in case of CIT Vs. Amritsar Transport Company Private Limited (19933) 201 ITR 816. Accordingly he confirmed the order of AO.

4. It is submitted that right from inception the assessee used to realize certain amount of dharmada from its customers on sale of mustard oil which is separately depicted in the bills. This amount is earmarked for charity and as such it is not income from business liable to tax. Since this amount is earmarked for charity, it is not a part of sales consideration. The various observations made by AO & CIT(A) are incorrect and irrelevant in as much as assessee has spent such amount for charitable purpose. This issue is also covered by the decision of Hon’ble Rajasthan High Court in case of Hari Industries Vs. CIT (1985) 153 ITR 656 where it is observed as under:-

The Learned Counsel for the assessee has placed reliance on CIT vs. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC), which has settled the controversy. The Supreme Court in that case held that "dharmada" means anything given in charity for religious or charitable purposes. Among the trading and commercial community, payment for "dharmada" is regarded as a gift for charitable purposes. It was further held that when the customers or brokers paid the amounts to the respondent earmarking them for dharmada those payments were validly earmarked for charity. The assessee was under an obligation to spend them only for charitable purposes. Therefore, the amounts received as "dharmada" were not its trading receipts. It has been further held that the "dharmada" amount could not be regarded as a part of price or surcharge on the price of goods purchased by the customers. Even though the "dharmada" was collected through the sale bills and every purchaser had to pay "dharmada" if he had to purchase goods from the assessee, still it did not make the payment of "dharmada" involuntary inasmuch as it was out of his own volition that the purchaser purchased the goods from the assessee. Therefore, the amount of "dharmada" should not be held to be part of price, but a payment for specific purpose for being spent on charitable purpose. The Supreme Court went further to hold that even though the "dharmada" amount was of a compulsory nature and the assessee had discretion as regards the manner in which and the time when it should spend for charitable purposes, or even if the assessee did not keep the amounts in a separate bank account, the "dharmada" amount could not be held to be part of price. The assessee holds the amount in trust. The Supreme Court approved the cases of the Allahabad High Court in Thakur Das Shyam Sunday vs. Addl. CIT (1974) 93 ITR 27(All) (FB) and of the Punjab High Court in CIT vs. GheruLal Bal Chand (1978) 111 ITR 134(P&H) and followed its earlier authority in CIT vs. Tollygunge Club Ltd. (1977) 107 ITR 776 (SC) and confirmed the decision of the Allahabad High Court in Bijli Cotton Mills Ltd. vs. CIT (1970) 76 ITR 194(All) . The Punjab and Haryana High Court in Nathu Ram Shiv Narayan vs. CIT (1982) 134 ITR 625(P&H) , has held that the definition of charitable purpose in s. 2(15) of the Act was of a very wide amplitude. The donations made by the assessee did not involve any process or carrying on of any activity for profit. Therefore, the payments made to the Bank Employees' Union and backward classes were held to be for charitable purposes. In this view of the matter, we hold that the amount of Rs. 7,984 collected by the assessee as "dharmada" through its sale bills did not constitute, part of sale price and, as such, it is not taxable income of the assessee.

5. The Ld. CIT(A) has referred to the decision of Hon’ble Supreme Court in 201 ITR 816. However in this decision Hon’ble Supreme Court directed the ITAT to state the question of law as framed by the revenue for the opinion of the High Court u/s 256(2) of the Act. Thus this decision nowhere states that dharmada is assessable as revenue receipt. As against this Hon’ble Supreme Court in a three judges bench in case of M/s D.J. Malpani Vs. CCE (2019) 176 DTR 305 in an excise matter by relying on its decision in case of CIT Vs. Bijli Cotton Mills 116 ITR 60 at Para 18 & 23 of its order held as under:

“18. We find from the facts of the case before us that the receipts on account of Dharmada were voluntary, earmarked for charity and in fact credited as such. Though the payment as Dharmada has been found to be voluntary, it would make no difference to the true character and nature of the receipts even if there were found to be paid compulsorily because the purchaser, purchased the goods out of their own volition. The purchase of the goods is the occasion and not consideration for the Dharmada paid by the customer as held in Bijli Cotton Mills (supra) vide para 15: - "15.. .... It is true that without payment of "Dharmada" amount the customer may not be able to purchase the goods from the assessee but that would not make the payment of "Dharmada" amount involuntary inasmuch as it is out of his own volition that he purchases yarn and cotton from the assessee. The "Dharmada" amount is, therefore, clearly not a part of the price, but a payment for the specific purpose of being spent on charitable purposes. . .......... “23. In the circumstances we hold that when an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods.” In view of above, addition made by AO and confirmed by Ld. CIT (A) be deleted.”

8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee the addition made pursuant to the search in the proceeding u/s. 153A the addition can only be made if during search incriminating material found. The assessment is completed assessment in the earlier round the assessment u/s. 143(3) has already been completed. The ld. AO as well as that of the ld. CIT(A) has simply relied upon the statement of Shri Vijay Datta wherein also the name of the assessee company was not referred. Whether that statement along be considered as incriminating material and that too of the transaction already recorded in the regular books of accounts. Even on merits the issue wherein that addition was directed to deleted.

Commissioner of Income-Tax v/s Abhisar Buildwell (P) Limited (2023) 293 Taxman 141.

10.1 The brief facts related to the dispute in this case are that a search and seizure action u/s 132 of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the members/concerns of Data Group, Alwar on 14/10/2015 of which the Assessee is one of the members.

Pursuant to the search action notice under section 153A of the Act was issued and served upon the Assessee on 06/09/2016 requiring him to file a true and correct return of income as prescribed under Rule 12 of the The assessee filed its return u/s 139 on 30/09/2010 declaring income of Rs. 64,31,790/- income and revised return declaring income Rs. 54,22,650/- on dated 17/03/2012. In response to the notice u/s 153A, a return of income declaring Rs. 54,22,660/- income was e-filed by the assessee company on 24.01.2017. The assessee primarily derives its income from business. Ld. AO based on the statement of Shri Vijay Data u/s. 132(4) which was recorded on 14.10.2015, wherein he was asked vide Q. No. 26 about the amount of Rs.3,04,13,269.43/- shown in the 'Charity Ledger' in M/s. Vijay Solvex Limited on 31.03.2015 and the amount of Rs. 1,14,08,453.06/- shown in the 'Charity Ledger' in M/s. Deepak Vegpro Pvt. Ltd. He replied that the companies of Data group charge 'Charity' at the time of issuing the bills and this amount is deposited in 'Charity ledger' and when they feel suitable, this amount is used in charitable activities. He was further asked vide Q.No.27, about the huge balance (as discussed above) shown in the 'Charity ledger' which is lying unutilized and this implies that this amount is kept for personal use. The AR of the group was asked to submit the complete detail of ‘Dharmada’ account along with Bank statement of last six years of Data group and proof of utilization of ‘Dharmada Fund’ of last six year. During the course of assessment proceedings, the assessee vide furnish complete details of Dharmada/Charity charged by company on sale bills along with bank statement for last six years including year under consideration for all the group companies including assessee company.

Reply was submitted on 09/12/2017 ld. AO did not found it tenable, because assessee has not furnished any justification that how the amount charged from buyer on the name of so called Charity / Dharmada does qualify the requirement to justify it as Charity / Dharmada and why it should not be a part of sale consideration. Ld. AO noted that just by mentioning a certain percent of total sale consideration as Dharmada in sale bills does’t change the nature of receipts. The buyer pays the total amount as sale consideration only he is compelled to pay this so-called Dharmada in order to purchase the goods and he does not have any concerned in respect of the accounting treatment of such Dharmada in the books of assessee company. The Dharmada fund was always kept with it only and control over the utilization of the said fund always remained with assessee only who neither spent it itself nor even donated it to any charitable institute, not even kept it in any specified mode either u/s 11(4) of the Act. Therefore, the amount collected for an amount of Rs. 6,52,391/- as Dharmada was added completed.

10.2 As we note that the addition so made was not supported by any material having the nature of incriminating material, therefore, the facts of the case of the assessee are similar to the case decided by the apex court in the case of Principal Commissioner of Income Tax, Central-3 Versus Abhisar Buildwell P. Ltd. [ 293 Taxman 141 (SC) ] wherein the highest court has held that;

Respectfully following the finding so given being binding in nature we do not see any reason to sustain the addition of Rs.6,52,391.00 on account of Dharmada/charity recorded in the regular books of account as the same has been added without referring to any incriminating material. Based on this observation ground no. 1 to 3 raised by the assessee are allowed.

Ground no. 4 raised by the assessee being on merits of the case since we have considered the appeal of the assessee on technical ground we do not consider to deal with the grounds raised by the assessee on merits. Ground no. 5 being general in nature does not require any adjudication.

In terms of these observations, the appeal of the assessee in ITA no.

711/JP/2024 is allowed.

711/JP/2024 for the Assessment Year 2010-11 shall apply mutatis mutandis in the case of Saurabh Agrotech Pvt. Ltd. in for the Assessment Year 2012-13.

In terms of these observations, the appeal of the assessee in is allowed. In the result, both the appeal of the assessee is allowed. Order pronounced in the open court on 02/01/2025.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 02/01/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sourabh Agrotech Private Ltd., Alwar izR;FkhZ@ The Respondent- DCIT, Central Circle, Alwar 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA Nos. 711 & 712/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत