K.P.CONSTRUCTION,SAIDAPET vs. ACIT, CC-1(4), CHENNAI

आदेश / O R D E R PER V. DURGA RAO, JM:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-18, Chennai, dated 31.08.2021,

and pertains to assessment year 2015-16.

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appeal:

1 . The order of the CIT(A) is erroneous as the same is opposed to the facts of the case and provisions of law.

2.1. The order of assessment passed by the AO is illegal and void as the same has been initiated without recording of proper satisfaction as mandated by the Act.

2.2. The AO having failed to record satisfaction as per section 153C of the Act, the order of assessment is illegal, without jurisdiction and the CIT(A) erred in upholding the same.

3.1. The addition of sundry creditors made by the AO is unsustainable in law as the same has been made in the absence of incriminating material. Therefore, the CIT(A) erred in upholding the addition to the extent of Rs.4,88,195/-.

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4.1. The addition of sundry creditors made by the AO is illegal as the same has been made on a change of opinion.

4.2. The genuineness of sundry creditors having been examined by the AO during the scrutiny assessment and the AO having accepted the same, has made the addition by reviewing his own earlier order which is impermissible in law.

4.3. The addition being made on review of the earlier order of the AO, the CIT(A) ought to have deleted the same in full.

5.1.The order of assessment u/s.153C r.w.s.143(3) of the Act is illegal and the CIT(A) ought to have annulled the same as no proper approval was obtained by the AO as mandated u/s.153D of the Act.

5.2.The CIT(A) erred in failing to property adjudicate the ground raised by the appellant regarding the approval.

6.1. The CIT(A) erred in upholding the addition of sundry creditors to the extent of Rs.4,88,195/-.

6.2. The addition having been made contrary to the facts of the case and law and without provision of proper opportunity, the CIT(A) ought to have deleted the same in full.

6.3. The AO having neither assigned any reason nor section for the impugned addition, the CIT(A) erred in failing to delete the same.

firm engaged in the business of executing civil contract works for Public

Works Department and Railways. The firm is having three partners viz.,

Shri K.Periyasamy, Shri P. Narashimhan and Smt.J. Shanti. Out of three

partners, Shri K.Periyasamy had expired in November, 2015 and Shri P.

Narashimhan had also expired by August, 2018. Smt.Shanti is the only

surviving partner of the firm. A search action u/s.132 of the Act, was

conducted in the premise of M/s.K.P.Construction. Consequent to search

and based on incriminating material, proceedings u/s.153A /153C of the

Act, was initiated. In response to the notice u/s.153C of the Act, on

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10.09.2018, the assessee has filed return of income on 02.10.2018

declaring total income which was same as declared in the return of

income filed u/s.139 of the Act. The case was taken up for scrutiny and

during the course of assessment proceedings, the AO called upon the

assessee to file necessary books of accounts, bank statements and

confirmation from sundry creditors. Since, the assessee was not furnished

confirmation from sundry creditors, the AO has made addition of

Rs.5,29,52,166/- towards disallowance of sundry creditors and brought to

tax u/s.115BBE of the Act. The assessee carried the matter before the

Ld.CIT(A) and filed certain additional grounds including confirmations

from sundry creditors. The Ld.CIT(A) after considering details filed by the

assessee, allowed partial relief and out of additions made by the AO

towards disallowance of sundry creditors of Rs.5,29,52,166/-, directed the

AO to delete additions to the extent of Rs.5,24,63,941/- and sustained

balance addition to the extent of Rs.4,88,225/-. Aggrieved by the order

of the Ld.CIT(A), the assessee is in appeal before us.

by taking certain legal grounds challenging legality of order of the AO

u/s.143(3) r.w.s.153C of the Act. The Ld.Counsel for the assessee

referring to the additional grounds filed by the assessee, submitted that

the AO has made additions towards sundry creditors without any

inference to incriminating material as a result of search contrary to settled

decision by the decision of the Hon’ble Supreme Court in the case of PCIT

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v. Abhisar Buildwell (P) Ltd., reported in [2023] 149 taxmann.com 399

(SC), wherein, it has been clearly held that in the absence of

incriminating material found as a result of search, no addition can be

made in the assessment framed u/s.153C of the Act.

opposed petition filed by the assessee for admission of additional grounds

and submitted that the assessee could not explain ‘as to why’ it is not

raised legal ground challenging validity of assessment proceedings before

the First Appellate Authority. Further, the assessee could not establish

whether facts related to said additional grounds was already on record

before the AO. Therefore, additional grounds filed by the assessee should

not be admitted. The Ld.DR further submitted that as regards merit on

additional grounds filed by the assessee, the provisions of Sec.153C of

the Act, is very clear that the moment search taken place, the AO shall

have the power to assess/re-assess total income including undisclosed

income, if any, found as a result of search. Therefore, the AO has rightly

assessed, unproved sundry creditors when the assessee is not able to

establish identity of the sundry creditors by filing necessary confirmation

letters. Therefore, additional grounds filed by the assessee should be

rejected.

on record and gone through the orders of the authorities below. The

assessee has filed additional grounds challenging validity of assessment

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proceedings initiated u/s.153C of the Act and claimed that said grounds

are purely a legal ground which can be taken at any stage of proceedings

including pending proceedings before the Tribunal. As held by the Hon’ble

Supreme Court in the case of CIT v. National Thermal Power Co. Ltd.,

reported in [1998] 229 ITR 383 (SC), wherein, it has been clearly held

that the powers of appellate authorities are not limited only to adjudicate

the grounds raised by the assessee before the AO and also it can be

adjudicated along with any other legal issues that may be raised by a

party during pending proceedings. Therefore, by following the decision of

the Hon’ble Supreme Court in the case of CIT v. National Thermal Power

Co. Ltd., (supra), we admit additional grounds filed by the assessee for

adjudication.

u/s.153A / 153C of the Act, in absence of incriminating material found as

a result of search, is no longer res integra. The Hon’ble Supreme Court

in the case of PCIT v. Abhisar Buildwell (P) Ltd., (supra) has clearly held

that in absence of incriminating material found as a result of search, no

additions can be made in the assessment framed u/s.143(3) r.w.s.153A /

153C of the Act. In case, the assessment for the impugned assessment

year is unabated/concluded as a result of search. In the present case,

the proceedings were initiated u/s.153C of the Act, and for the purpose of

reference to the date of search as per explanation-1 to Section 153C of

the Act, the date should be reckoned as date of satisfaction note recorded

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by the AO of the searched person. In the present case, since, there is no

satisfaction note recorded by the AO before us, we have to consider the

date of issue of notice u/s.153C of the Act for the purpose of reckoning

the date referred to sec.153C of the Act. If you consider the date of

notice issued u/s.153C of the Act i.e. on 11.09.2018, the assessment for

the impugned assessment year is unabated/concluded, because, the

original assessment for the impugned assessment year has been

completed u/s.143(3) of the Act on 28.12.2017 which is much before the

date of search i.e. 11.09.2018. Since, assessment for the impugned

assessment year has been unabated/concluded as a result of search, in

our considered view, the AO is erred in making addition towards unproved

sundry creditors in the assessment framed u/s.143(3) r.w.s.153C of the

Act, because, such addition is not backed by any incriminating material

found as a result of search. Thus, we quashed the order passed by the

AO u/s.143(3) r.w.s.153C of the Act.

is allowed.

Order pronounced on the 05th day of April, 2024, in Chennai.

Sd/- Sd/- (वी. दुगा� राव) (मंजूनाथा.जी) (MANJUNATHA.G) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER

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चे�ई/Chennai, �दनांक/Dated: 05th April, 2024. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु$/CIT 4.िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF