Loading judgment…
Facts
The assessee filed an appeal against the CIT(A)'s order for AY 2011-12, which arose from an addition made under section 153A based on a search. The assessment year was completed prior to the search. The assessee contended that no incriminating material was found during the search, making the addition illegal. The addition of Rs. 7,02,705/- was made on account of Dharmada/charity collected, which the assessee claimed was a liability and not income.
Held
The Tribunal held that for completed and unabated assessment years, additions under Section 153A can only be made if there is incriminating material found during the search. Since no such material was found concerning the Dharmada/charity ledger for the assessment year in question, the addition made by the AO was deemed illegal. The reliance on the Apex Court's decision in PCIT vs. Abhisar Buildwell P. Ltd. was found to be squarely applicable.
Key Issues
Whether addition can be made under Section 153A for a completed assessment year without any incriminating material found during search.
Sections Cited
143(3), 153A, 132, 147, 148, 132A, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI MANISH BORAD, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA. No. 154/JPR/2024
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh euh"k cksjkM] ys[kk lnL; ,oa Mk0 ,l- lhrky{eh] U;kf;d lnL; ds le{k BEFORE: SHRI MANISH BORAD, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ fu/kZkj.k o"kZ@Assessment Years : 2011-12 Saurabh Agrotech (P) Ltd. cuke DCIT, Vs. 20,21 and 22 Old Industrial Area, Central Circle, Alwar. Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCS4522P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri. Ajay Malik (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 27/03/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 28/03/2024 vkns'k@ ORDER PER: MANISH BORAD, AM This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-4, Jaipur dated 08.01.2024 [Here in after referred as “CIT(A)”] for the assessment year 2011-12, which in turn arise from the order dated 31.12.2017 passed under section 143(3) r.w.s. 153A of the Income Tax Act, [Here in after referred as “Act” ] by the AO.
The assessee has marched the present appeal on the Saurabh Agrotech (P) Ltd. Vs. DCIT following grounds:- “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 Abhisar Buildwell, 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. Assessing officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rupees 2444090.00 under section 14A of the Income Tax Act, 1961 and the ld Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in confirming the same by not deciding the issue on merit, though all the material and submissions were before him.
3. That the Id. Assessing officer has erred in law as well as on the facts and circumstances of the case in making a disallowance of Rupees 1989115.00 within the meaning of section 801B of the Income Tax Act, 1961 and the ld Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in confirming the same by not deciding the issue on merit, though the all the material and submissions were before him.
4. That the Id. Assessing officer has erred in law as well as on the facts and circumstances of the case in making an addition of Rupees 702705.00 on account of Dharmada/charity collected and Id Certified True Copy Commissioner of Income-Tax (Appeals)-IV, Jaipur has erred in sustaining the same.
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.”
3. At the outset, the ld. Counsel for the assessee requested for not pressing grounds No. 2 and 3. Accordingly, ground No. 2 and 3 are dismissed as not pressed.
Saurabh Agrotech (P) Ltd. Vs. DCIT 4. So far as remaining grounds are concerned the grievance of the assessee is two fold, firstly that the alleged addition is uncalled for because no incriminating material was found during the course of search regarding the alleged issue and since the assessment year in question is completed assessment year, no addition is called for and second fold of contention is on the merit of the case is regarding the addition of Rs. 7,02,705/- made on account of Dharmada/charity ledger. The ld. Counsel for the assessee submitted that the assessee deserves to succeed on the legal issue raised in ground No. 1 as the same is squarely covered by the ratio laid down by the Hon’ble Apex Court in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd. 454 ITR 0212 (SC) (2023). He submitted that the search was conducted on 14.10.2015 u/s 132 of the Act. The assessment year in question i.e. A.Y. 2011-12 which has already passed through the scrutiny proceedings u/s 143(3) of the Act. A.Y. 2011- 12 falls in the category of completed and non abated assessment. The impugned addition pertains to the amount transferred to Dharmada/charity collected during the year but these entries are duly reflected in the audited accounts and during the course of search no other incriminating material was found and the impugned Saurabh Agrotech (P) Ltd. Vs. DCIT addition is made only on the basis of post search enquiry. Therefore in absence of incriminating material, no addition is called for.
5. On the other hand, Departmental Representative apart from heavily relied on the finding of the ld. CIT(A) and further, submitted that during the course of search certain information were asked about the balances lying in the Dharmada/charity account and on not receiving any satisfactorily reply, the additions have been made and therefore the addition deserves to be confirmed.
We have heard the rival contentions, perused the material placed on record before us. The ld. AO has made an addition for the Dharmada/charity received during the year of Rs. 7,02,705/-, treating it as income of the year, disregarding the claim of the assessee that the alleged sum is credited under the liability head and charity/donation are given out of the said amount and is not in the nature of the income of the assessee. The impugned addition has been made in the proceedings carried out on account of the search u/s 132 of the Act at the Date Group, Alwar on 14.10.2015. Admittedly, the assessee company which is a member of Data Group, regularly file its return of income. For the year in question Saurabh Agrotech (P) Ltd. Vs. DCIT i.e. A.Y. 2011-12, the assessee filed its return of income u/s 139(1) of the Act on 20.09.2011 declaring income of Rs. 65,15,530/-. The case of the assessee selected for scrutiny and assessment u/s 143(3) of the Act was completed before the date of search i.e. on 14.10.2015. Therefore, the assessment year i.e. A.Y. 2011-12 falls under the category of complete and non abated assessment year. As per scheme for the assessment of search cases carried out during 01.06.2003 to 31.03.2021, six assessment years (this assessment year) prior to the year of search, notices u/s 153A of the Act are to be issued and assessment proceedings have to be carried out. However, for the completed and non abated assessment years, the addition can be made only on the basis of incriminating material found during the course of search and having nexus with the addition made in the hands of the assessee. The Hon’ble Apex Court Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd. (supra) adjudicating at similar issue as laid down the ratio which can be read in para 11 to 14 of the order of the Hon’ble Apex Court and the same is reproduced as under:- “ 11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each Saurabh Agrotech (P) Ltd. Vs. DCIT assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AG would have the jurisdiction to assess or reassess the 'total income taking into consideration the Incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under Saurabh Agrotech (P) Ltd. Vs. DCIT sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AD would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AD would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law.
Saurabh Agrotech (P) Ltd. Vs. DCIT 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
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 1534; 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 AD 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.
Saurabh Agrotech (P) Ltd. Vs. DCIT 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.”
Examining the facts of the instant case in light of the judgment of the Hon’ble Apex Court referred (supra), we find the assessment year 2011-12 is completed and un abated assessment years. The case of the assessee was selected for normal scrutiny and assessment was completed u/s 143(3) of the Act prior to the date of service i.e. 14.10.2015. Now the alleged addition is regarding the Dharmada/charity amount received during the year. We observe that whenever, the assessee raises bills, it charge a small percentage towards Dharmada/charity and such amount is used for charitable activity as and when found to be suitable. During the course of search Mr. Vijay date was asked the question about the charity ledger account maintained in the case of Vijay Solvex Limited and Deepak Vegpro Private Limited. Both concerns are the group concerns of data group. The questions were asked about the charity ledger of these two companies and certainly did not include the ledger account or any other information about the assessee company. Based on the questions raised during the course search u/s 132 of the Act the ld. AO during the Saurabh Agrotech (P) Ltd. Vs. DCIT course of assessment proceedings, referring only to the statement u/s 132(4) of the Act and without referring to any incriminating material found during the course of search u/s 132 of the Act came to the conclusion that the amount credited by the assessee in the Dharmada/charity account is in the name of the income. It is an admitted fact that the assessee is maintaining the charity/ledger account in its book which are regularly maintained and audited and are part of the financial statement furnished along with income tax return and even the same has passed through scrutiny proceeding for A.Y. 2011-12. Except referring to the statement u/s 132(4) of the Act and that two specifically asked regarding other too group company, no incriminating material found during the course of search has been referred by the ld. AO in the assessment order.
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 legal Saurabh Agrotech (P) Ltd. Vs. DCIT issue raised in ground No. 1 and since we have allowed the legal ground, the impugned addition of Rs. 7,02,705/- stands deleted.
Ground No. 4 raised in the merit of the case but dealing with the same is merely academic in nature since, we have already allowed the legal ground and deleted the impugned addition. Thus ground No. 4 is dismissed as infructuouse.
Remaining grounds are general and consequential in nature which needs no adjudication.
In the result, the appeal filed by the assessee is partly allowed as per terms indicated above.