DCIT CENTRAL CIRCLE-1, NOIDA vs. RMS DIVERSIFIED PVT. LTD., DELHI

As the assessee went in appeal it succeeded partly and therefore, now both the revenue and the assessee are in appeal here before us. In regard to these assessment years involved what was contended at the threshold by the ld. Counsel for assessee was that the years before this Tribunal involve both unabated Assessment Years from AY 2014-15 to 2018-19 and abated Assessment Year 2019-20. It was contended that in regard to unabated assessment years the thumb rule to be followed was that assessment could have been completed u/s 153A of the Act only on the basis of incriminating material found during the search and it was contended that no incriminating to 1530, 1643 & 1714/Del/2023 RMS Diversified Pvt. Ltd. (AY:2014-15 to 2019-20) material has been referred in the assessment orders. The ld. Counsel primarily relied the findings of AO to contend that not a single incriminating material is referred in the assessment. The decision of Hon’ble Supreme Court in the case of PCIT Vs. Abhishar Buildwell, 454 ITR 212 (SC) was relied to contend that the findings of Ld. CIT(A) relying the decision in various case laws to hold that provision of Section 153A of the Act laid down no restriction that the additions/disallowance can be made only on those issues which emanate from the seized materials or documents is not sustainable. As for abated AY involved it was contended additions are consequential to earlier years.

We have carefully gone through the material on record. As with regard to AY 2014-15 assessee is not in appeal and the department is in appeal and the assessee has filed an application under Rule 27 contending that the impugned order has been passed by Ld. CIT(A) on incorrect notion that assessment u/s 153A of the Act can be made dehors of any incriminating to 1530, 1643 & 1714/Del/2023 RMS Diversified Pvt. Ltd. (AY:2014-15 to 2019-20) material found during the search action conducted on the appellant. This year ld. CIT(A) has deleted the addition of Rs.17,94,00,000/-on the basis of evidence filed by the assessee similarly addition of Rs.3,33,50,200/- on account of share application money was found to be well explained.

In regard to AY 2015-16 we find that unsecured loans from 10 parties were found to be suspicious, however what was relied was not any of the incriminating material/information and AO made the addition questioning the identity, creditworthiness and genuineness of the lenders. The assessment order recorded that assessee has submitted mere old confirmations, balance sheet and profit and loss account and the ITR etc. of the lenders were not filed to prove the creditworthiness of the lenders. Certainly the addition is dehors of any incriminating material or information. to 1530, 1643 & 1714/Del/2023 RMS Diversified Pvt. Ltd. (AY:2014-15 to 2019-20) 6. Similarly in AY 2017-18 the additions are on account of unsecured loans taking from 3 parties. The ld. AO had relied the assessment of M/s SW Consultants Pvt. Ltd. to draw inferences holding that it is an entry providing company. However, the discussion of the AO has been not to examine the issue of unsecured loan but the issue has been examined in context to penny stock transactions though the allegation was that assessee has taken loan from companies operated by Raj Kumar Modi and Raj Kumar Modi is key person of M/s PMC Fincorp Ltd. which is engaged in accommodation entry providing in the form of LTCG/STCG/unsecured loan. In para 4.2 AO has examined the issue completely in context to penny stock companies. Thus, ld. DR could not dispute the fact that the conclusion to doubt the loan from M/s SW Consultants Pvt. Ltd. is not on the basis of any incriminating material/information found during the search.

Then in the assessment for AY 2018-19 and 2019-20 the additions are as a consequence to the additions made in previous years which we have found to be not on the basis of incriminating material/information. to 1530, 1643 & 1714/Del/2023 RMS Diversified Pvt. Ltd. (AY:2014-15 to 2019-20) 8. Ld. Tax authorities seems to have completed the assessments on the premises that there is no difference in abated and unabated years assessment so far the search assessments are concerned but the law as now stands settled by decision of Hon’ble Supreme Court in Abhishar Buildwell, (supra), that in case of unabated year assessments the additions can be only on the basis of incriminating material found and seized in the search, makes us sustain the contention of ld. Counsel that bereft of incriminating material/information found in search the additions and disallowance were made in AY 2014-15, 2015-16 and 2017-18. The additions in AY 2018-19 and 2019-20 are only consequential to earlier years and loose their substratum. Corresponding grounds raised by the assessee are thus sustained. Resultantly, appeals of the assessee are allowed and of the Revenue stands dismissed.