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Facts
The revenue filed an appeal against the CIT(A)'s order deleting additions made by the AO for AY 2018-19. These additions, totaling Rs. 2,09,09,574/-, were made under Section 68 for unexplained sundry creditors and unsecured loans, and under Section 69 for unexplained investment, following a search and seizure operation. The CIT(A) granted relief to the assessee, finding that the assessee had adequately explained the details of income, investment, and unsecured loans.
Held
The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the additions under Sections 68 and 69. The Tribunal held that the assessee had provided sufficient explanations and documentary evidence, which were also accepted by the AO in remand proceedings. Furthermore, it relied on the Supreme Court's ruling in PCIT Central-3 vs. Abhisar Buildwell Pvt. Ltd., emphasizing that in the absence of incriminating material unearthed during a search, additions cannot be sustained under Section 153A of the IT Act.
Key Issues
Whether additions under Sections 68 (unexplained sundry creditors, unsecured loan) and 69 (unexplained investment) were justified when the assessee provided explanations and evidence, and whether such additions can be sustained under Section 153A post-search in the absence of incriminating material, in light of the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd.
Sections Cited
143(3), 68, 69, 132, 153A, 142(1), 153, 12A, 147, 148, 271AAC
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: SH. PRADIP KUMAR KEDIA & SH. SUDHIR KUMAR
This appeal by the revenue is preferred against the order passed by the Commissioner of Income Tax (Appeals), Noida -3 (hereinafter referred as ‘CIT(A)’ dated 18.05.2023 pertaining to A.Y. 2018-19 under section 143(3) arises out of the assessment order passed by Dy commissioner of Income Tax Central circle Ghaziabad dated 02-08-20210f the Income Tax Act 1961(herein after referred as the act)
Aggrieved by the order of the Ld CIT(A), the revenue is in appeal before us by raising the following grounds:-
1. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 34,72,574/-made by the AO on account of unexplained sundry creditors u/s 68 of 1.T. Act, 1961 without considering the fact as elaborated in the assessment order
2. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 6,00,000/-made by the AO on account of unexplained unsecured loan/liability without considering the fact as claborated in the assessment order
3. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 1,68,37,000/-made by the AO on account of unexplained investment in the property without considering the fact as elaborated in the assessment order
4. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying the Judgment of Apex Court in the case of PCIT Central-3 vs. Abhisar Buildwell Pvt. Ltd and other in the Civil Appeal No. 6580 of 2021 dated 24.04.2023, whereas the Apex court in the case of PCIT Central-3 vs. Abhisar Buildwell Pvt. Lad has discussed the case of Mis Kesarwani Zarda Bhandar Sahson, Allahabad wherein it has been observed that the AO has the power to reassess the return of assessee not only for the undisclosed Income which was found during the search operation but also with regard to material that was available at the time of original assessment.”
The brief fact of the case is that the assessee society is a registered society u/s. 12A of the Act and its total application of income 85% for charitable purposes. The society runs an educational Institute in the name of HI-Tech Institute of Engineering &Technology at Delhi Hapur by pass , Ghaziaad.
3.1 A search and seizure operation u/s. 132 of the Act, was conducted on 30.07.2018 at the premises of assessee at R-2/83, Raj Nagar, Ghaziabad. Notice u/s. 153A of the Act was issued on 11.02.2021, the assessee in the compliance of the notice filed its return of income on 05.03.2021, declaring total income of Rs. Nil. Again notice u/s 142(1) of the Act was issued with questionnaire and the AO completed the assessment u/s.143(3) r.w.s. 153 of the Act on 02.08.2021. The AO made the total additions Rs 20909574/- on account of unexplained income, investment and unsecured loans / liability. The assessee preferred to file the appeal before the CIT(A) adjudicated the aforesaid issues and granted relief to the assessee and held that assessee has explained the details of income, investment and unsecured loan and set aside the addition made by the AO by observing as under :-
“6.4 in the ground of appeal no (1), the appellant had challenged addition of Rs 34,72.574/- made under section 68 of IT Act on account of unexplained sundry creditors. In the assessment order Ld. AO states that during the year under consideration, the assessee has shown sundry creditors of Rs. 34,72,574/- In its balance sheet as on 31.03.2018 and in the assessment proceedings, the assessee was asked to furnish the list of sundry creditors, their PAN, addresses and their confirmations to prove identity and creditworthiness of the creditors and the genuineness of the transactions with them. Ld. AO observes that the assessee has furnished its balance sheet and its annexures including that of sundry creditors, however, the addresses, PAN and confirmations have not been furnished. With these observations, Ld. AO considered the entire sundry creditors as unexplained and accordingly addition of Rs. 34,72,574/- was made u/s 68 of IT Act 6.5 On the other hand Ld. AR submits that the addition in the instant case has been made u/s 68 of the Act in respect of the outstanding balance of sundry creditors as on 31.03 2018. He submits that in the assessment proceedings, the details of only those sundry creditors were called for, where outstanding balances were more than Rs. 5,00,000/-, He submits that it is a matter of fact that none of the creditor's balance was above Rs. 5 lacs. Ld. AR further submits that during the remand proceedings the appellant had submitted the details of sundry creditors ie, name, addresses and PAN details of the parties and thus the said details have been verified by the department. Ld. AR relies on the observation of Ld. AO in the remand report in which Ld. AO observes that during appellate proceedings, the assessee appellant has furnished additional evidences in form of list of sundry creditors along with their PAN & addresses. Ld. AO further observes that the contentions of the assessee have been verified from assessment record and found to be acceptable as during entire proceedings, the assessee was not specifically asked to furnish the details of all the sundry creditors shown by it during the year under consideration. In the remand report the Ld. AO states that during remand proceedings, the assessee has furnished the list of all creditors along with their PAN and addresses which is forming part of audited balance sheet and since during the year under consideration the assessee had not shown any sundry creditor having value more than 5 lacs, the contentions of the assessee are acceptable.
6.6 From the facts of the case it has been found that Ld AO made addition of Rs 34,72,574/- u/s 68 of IT Act on account of outstanding balance of sundry creditors by making an observation that the required details ie. PAN and addresses of the outstanding sundry creditors have not been furnished by the appellant during the assessment proceedings. However matter of fact is that since all the outstanding credit balances of such creditors were below Rs. 5 lacs and since the information of only such creditors was called for as were above Rs. 5 lacs, the appellant did not furnish the Information. Now in the remand proceedings, all such details have been furnished.
Therefore looking to the facts and circumstances of the case, this addition of Rs. 34,72,574/-made u/s 68 of IT Act cannot be sustained.
6.7 In the ground of appeal no. (ii), the appellant had challenged addition of Rs. 6,00,000/- made under section 68 of IT Act considering the same as unexplained. In the assessment order Ld. AO states that during the year, the assessee has received unsecured loan of Rs. 6,00,000/- from M/s Anvil Ispat Agencies Pvt Ltd. During the assessment proceedings, the appellant submitted that the assessee had taken a house property on rent from M/s Anvil Ispat Agencies Pvt Ltd for the purpose of providing hostel facility to the students of the college (Hi-Tech Institute of Engineering and Technology is run by Society M/s Anand Educational Society) and the assessee was charged rent of Rs. 6,00,000/-, As an evidence, confirmed copy of ledger account of M/s Anvil Ispat Agencies Pvt Ltd was furnished along with the audited accounts of this concern of AY 2018-19 showing receipt of rental income of Rs. 6,00,000/-, In the assessment order Ld. AO observes that the requisite details ie. ITR, bank statements of the lender could not be furnished. In view of the same, the amount of Rs. 6,00,000/- outstanding as unsecured loans in the books of assessee has been treated as unexplained and added u/s 68 of IT Act.
6.8 On the other hand Ld. AR submits that the Ld AO had made an addition of Rs. 6,00,000/- u/s 68 of IT Act by considering the same as unsecured loan. Ld. AR submits that as a matter of fact the outstanding balance of said company in the books of assessee society as on 31.03.2017 was Rs. 10,80,000/-, the details of the same are as follows :-
Opening Additions Payment Closing Balance /TDS Balance 10,800,000 6,00,000/- 2,45,000/- 14,35,000/- Ld. AR submits that the said amount in actual belongs to M/s. Anvil ispat Agencies Pvt. Ltd. from whom assessee has taken residential property situated at KJ-80, Kavi Nagar, Ghaziabad, U.P on rent. The said property was taken on monthly rent basis of Rs. 50,000/-, totaling to Rs. 6,00,000/- per year. The assessee society has also deducted due TDS at the rate of 10% on the amounts payable. Ld. AR submits that the alleged amount of Rs. 6,00,000/- (In actual outstanding balance Rs. 14,35,000/- ) was actually expense payable as the aforementioned house property taken from Mis. Anvil Ispat Agencies Pvt. Ltd. was used for hostel purpose of the students of the college. It is submission of Ld. AR that due to an error on the part of the accounts team, the said party was classified as "unsecured loan" rather than "Sundry Creditor" in the books of accounts He submits that the confirmed copies of account of the said party were submitted along with copy of ITR during the assessment proceedings and the issue was explained in detail.
Ld. AR submits that as per the provisions of section 68 of the Income Tax Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year, hence it can be seen that in actual there is no unexplained cash credit case in the impugned transaction, the Ld AO seems to be misdirected at one hand she admits it to be an outstanding amount against rental expenditure and on the other hand, she considers it to be an unexplained credit, only due to a fact that said amount has wrongly been classified as "unsecured loan" in the balance sheet. Thus he submits that the instant amount is in no case an unexplained cash credit, that is in actual no amount has been received by the appellant from said party in the year under consideration, and in actual it is an expense, hence no addition can be made u/s 68 of IT Act 6.9 from the facts of the case it has been found that the appellant Le. M/s Anand Educational Society has taken a residential property situated at KJ-80, Kavi Nagar, Ghaziabad, UP on rent from M/s Anvil Ispat Agencies Pvt. Ltd. The said property was taken for a monthly rent of Rs. 50,000/- totaling to Rs. 8,00,000/- per year and the assessee society has also deducted due TDS at the rate of 10% on the amounts payable. In the assessment proceedings, the appellant explained the nature of transaction as also copy of ITR of Mis. Anvil Ispat Agencies Pvt. Ltd. was filed. However without conducting any inquiry Ld. AO concluded that this concern has not included rental income in its return. In-fact no credit entry has been received by the appellant from this party and the outstanding dues are created monthly on account of monthly rentals. In the remand report Ld. AO has concluded that from the perusal of the documents furnished, the contention of the assessee seems to be acceptable. Therefore looking to the facts and circumstances, there is no case of invocation of provisions of section 68 of IT Act in this issue. Hence the addition made by Ld. AO cannot be sustained.
6.10 In the ground of appeal no. (ii), the appellant challenges addition of Rs. 1,68,37,000/- made u/s 69 of IT Act on account of unexplained investment. In the assessment order Ld. AO observes that during the year under consideration, the assessee has taken a property on lease for 30 years, this property is situated at PSP- 1(B), Sun City Ghaziabad and the same was taken on lease on 13.03.2018 from M/s Sun City Hi Tech Infrastructure Pvt. Ltd. The premium paid on this property was Rs. 1,61,88,000/- and stamp duty paid is Rs.6,49,000/-, Ld. AO states that during assessment proceedings, the assessed has furnished the copy deed and a ledger account reflecting the payments, however, these payment of source of ling in the bank statements furnished by the assessee. No explanation of source of investment has been furnished, Ld. AD observes that in the assessment proceedings the appellant submitted that the payments have been made through bank account out of income received from fees receipts, examination fees, government grants etc., however the bans statement was not attached with the reply. Therefore Ld. AO concludes that the appellant failed to furnish documentary evidences, which may prove the source of the investment in the property on lease to the tune of Rs. 1,68,37,000/-. Therefore this amount has been considered as unexplained investment and added to the income of the assessee u/s 69 of IT Act 6.11 On the other hand Ld. AR submits that during the year under consideration appellant society has taken a piece of land admeasuring 4047 sq. meters on lease for 30 years from Mis. Suncity Hi-Tech Infrastructure Private Limited. The said land was taken for the development of educational Institution, as a matter of fact the Suncity Hi- Tech Infrastructure Pvt. Ltd. has been allotted with a large piece of land for the development of Hi-Tech Township under the Hi-Tech Policy of Uttar Pradesh. Ld. AR submits that as part of Government Policy every Township is required to have a mix of all types of plots, eg. it should have residential, commercial, hospital, educational institution etc. thus accordingly the appellant was allotted a piece of land for educational purposes only. Ld. AR submits that the appellant society was running an educational institution and the land which has been acquired is adjacent to present institution being run by the society. He submits that during the year under consideration the society got registered the lease agreement by paying lease amount in advance for 30 years for a consideration of Rs. 1,61,88,000/-. The copy of registered agreement has been enclosed at page no. 110 to 131 of the paper book. Ld. AR submits that the consideration for the said land has been paid in the following manner :
Date Mode of Payment Amount 13.02.2015 Banking channel 97,00,000/- Cheque No.219767 Punjab
National Bank 19.12.2019 Banking channel 1,50,00,000/- Cheque No.910841 Punjab national Bank And apart from above the details of amount paid for purchase of stamp duty is as under :
Date Mode of Amount Payment 12.03.2018 Banking 11,00,000/- channel payment mode to stock holding corporation of India Ltd. Ld. AR submits that out of the above, Rs. 6,49,000/- worth of stamp papers were purchased and the balance amount was refunded in subsequent year. He submits that the copy of ledger accounts of aforementioned payments along with respective bank statements depicting payments for the relevant period are placed at page no. 32 10 138 of the paper book. Ld. AR submits that these facts were presented before the Ld AO in the remand proceedings and that Ld. AO has accepted the same in the remand report dated 12.05.2023 6.12 in the remand report dt. 12.05.2023, Ld. AO states that during assessment proceedings, it was noticed that the assessee had taken a property at PSP-1(B), Sun City, Ghaziabad on lease on 13.03.2018 and paid premium for the same amounting to Rs: 1,61,88,000/- and further stamp duty of Rs. 6,40,000/- and since during assessment proceedings, the assessee could not furnish the bank statement in which the payments were getting reflected, the amount of Rs. 1,68,37,000/- was treated to have been invested from unexplained sources and hence added to the total income of the assessee. Now during appellate proceedings, the assessee appellant has furnished additional evidences in form of bank account statement, besides, the assessee has also furnished lease deed and ledger account as claimed to have been furnished during assessment proceedings and from perusal of lease deed dated 14.03.2018 between M/s Sun City Hi-Tech Infrastructure Pvt. Ltd. and the assessee trust, it is evident that the assessee had taken on lease a property bearing no. PSP 1(B) (in Part) situated at Sun City, Ghaziabad measuring area 4047 sq. meters for a period of 30 years and for the same premium of Rs. 1 61,88,000/- and stamp duty of Rs. 6,49,000/- was paid. Ld. AO states that it is also mentioned in the lease deed that the lease rent has been paid in advance by sub lease to lessor and further since the payment schedule of premium is not mentioned in the lease deed, the actual date of payment of lease premium is not ascertainable. Ld AO further observes that the bank account statements filed by the assessee have been examined and from the same it is noticed that Rs. 97 lacs were transferred to M/s Sun City Infra through cheques on 13.02.2015 from its PNB A/c No 06740001000100355502 and further amount of Rs. 1,50,00,000/- was transferred to M/s Suncity Infra through cheque no. 910841 in its PNB A/c No. non 06740001000100355502. As regards, source of stamp duty of Rs.6,49,000/-, the same is paid from 06740001000100355502.
6.13 From the facts of the case it is clear that source of amount of Rs. 1,68,37,000/-is explained and hence it is held that no addition can be made u/s 69 of IT Act in this regard.
6.14 During the appellate proceedings, Ld. AR also submitted that in this case in the year under consideration, addition is not based on the seized material and hence the assessment order cannot be made u/s 153A of IT Act. Ld. AR has placed reliance in the recent judgment of Hon'ble Supreme Court in case of PCIT Central-3 vs Abhisar Buildwell Pvt Ltd. and others in the Civil Appeal no. 6580 of 2021 and connected appeals filed by the Revenue as well as various other assessees in the judgment delivered on 24.04.2023 (Hon'ble Judges Sh. MR Shah and Sh. Sudhanshu Dhulia), in which following observation has been made:
……..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 AD 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 of 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
Insofar as the aforesaid Civil Appeals preferred by the assessee -M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 06.09.2016 passed in 269/2014, 15/2015, 15/2015, 268/2014 and 17/2015, as also, against the order dated 21.09.2017 passed in the review applications.
It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under Section 143(1)(a) or 143(3) of the Act, 1961 and to reassess the total income taking notice of undisclosed income even found during the search and seizure operation.
15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was assessment shoes not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee – M/s. Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs.
Insofar as the aforesaid discussion and the reasoning, all these appeals filed by the assessee - Dayawanti through legal heir against the impugned common judgment and order dated 27.10.2016 passed by the High Cost of Delhi of New Delle in 357/2018, 358/2015, 565/2015 and 566/2015 The Question before the High Court was, whether the Income Tax Appellate Tribunal was justified in holding the addition made on the basis of the incriminating material during the course of search.
16.1 in view of the aforesaid discussion and the reasoning, all these appeals filed by the assessee - Dayawanti through legal heir fail and the same deserve to be dismissed and are accordingly dismissed No costs Ld. AR submits that in view of this decision of Hon'ble Supreme Court, the issue stands settled that if there is no incriminating material, the assessment cannot be framed u/s 153A of IT Act.
6.15 Looking to the facts and circumstances of the case and latest decision of Hon'ble Supreme Court in case of PCIT Central-3 vs Abhisar Buildwell Pvt Ltd. and others in the Civil Appeal no 6580 of 2021 and connected appeals filed by the Revenue as well as various other assessees in the judgment delivered on 24.04.2023 (Hon'ble Judges Sh. MR Shah and Sh. Sudhanshu Dhulia), I am of the opinion that (i) addition of Rs. 34,72,574/- u/s 68 of IT Act on account of unexplained sundry creditors, (ii) addition of Rs. 6,00,000/- u/s 68 of IT Act on account of unexplained unsecured loan/ liability and (i) addition of Rs. 1,68,37,000/- u/s 69 of IT Act made on account of unexplained investment cannot be sustained and hence these additions are deleted, Concerned grounds of appeal are adjudicated accordingly.
6.16 In the ground of appeal no. (v), the appellant submits that Ld. AO has erred in initiating penalty proceeding u/s 271AAC of IT Act. In this regard, it is observed that no appeal lies against initiation of penalty proceedings, hence the submission of appellant is not tenable, therefore, the concerned ground of appeal is dismissed.
7. Result In the result, for statistical purposes the appeal is partly allowed.”
We have heard the rival submissions made by the parties and perused the relevant material available on record.
The Ld. DR has submitted that the Ld. CIT(A) had wrongly deleted the addition made by the AO. He has also submitted that Ld CIT(A) had relied the Judgment of Hon’ble Supreme Court in the case of ACIT Vs. Abhisar Buildwell Pvt. Ltd. 454 ITR 212 which was not applicable in the instant case.
The Ld. Counsel for the assessee has submitted that assessee has explained the sources of investment ,unsecured loan and income. Therefore the order of the Ld CIT(A) be upheld.
Perusal of the order of the CIT(A) reveals that remand report was called out by the Ld. CIT(A) and on the basis of the remand report the Ld. CIT(A) passed the impugned order and deleted the additions made by the AO ,therefore, we do not find any reason to interfere with the findings of the CIT(A). The appeal is liable to be dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 27.06.2024.