FRONTIER COMMERCIAL CO. LTD.,FARIDABAD vs. DCIT, CENTRAL CIRCLE- II, FARIDABAD

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ITA 7348/DEL/2017Status: DisposedITAT Delhi26 July 2023AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessments were non-abated and no incriminating material was found during the search, the additions made under section 153A were bad in law. The jurisdiction was exercised without any incriminating material.

What were the facts?

The assessee's premises were searched, leading to notices under section 153C r.w.s. 153A of the Act for six assessment years. Additions were made for bogus freight charges in AY 2011-12 and AY 2012-13, which were confirmed by the CIT(A).

What were the issues?

Whether additions can be made under section 153A in the absence of incriminating material found during a search for non-abated assessments. Whether the assumption of jurisdiction under section 153A r.w.s. 153C was valid.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A,Section 143(3),Section 37(1),Section 147,Section 148

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI

Before: SH. N.K.BILLAIYA & SH.ANUBHAV SHARMA

For Appellant: Dr. Rakesh Gupta, Adv. And Sh
For Respondent: DR &
Hearing: 20.07.2023Pronounced: 26.07.2023

Heard together (2 matters)

ITA No. 7347/Del/2017
ITA No. 7348/Del/2017

Read from the judgment's own cause title. This page is filed under one of them.

Both the appeals have been preferred by the Assessee against the order dated 05/09/2017 & 06/09/2017 of CIT(A)-Karnal (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. IT/73/GGN/2015-16 & IT/74/GGN/2015-16 respectively arising out of an 7347 & 7348/Del/2017 appeal before it against the order dated 31.03.2015 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Central Circle-II, Faridabad (hereinafter referred as the Ld. AO). As they involve common question they are taken up together for disposal.

2. The residential as well as business/ office premises of M/s. SRS Group of cases were subject to search and seizure operation on 09.05.2012. The assessee who was showing income from business and profession was served notice u/s 153C r.w.s. 153A of the Act on 18.09.2014 and based upon same the assessee was asked to file return of income for six assessment years and the assessment was completed by making addition of Rs. 87,74,362/- on account of bogus freight charges in the year 2011-12 and Rs. 85,67,376/- in A.Y. 2012-13. Ld. CIT(A) has confirmed the same and the assessee is in appeal raising following grounds, as reproduced for AY 2011-12:-

“1. That having regard to the fact and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and issuing of notice u/s 153A r.w.s. 153C of the Act, more so when the notice was issued in the name of non-existing entity.

2.

That in any case and in any view of the matter, the assessment framed under section 153A(l)(b) of the Act, is bad in law and against the facts and circumstances of the case.

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making a disallowance of freight charges of Rs. 87,74,362/- u/s 37(1) of the Income Tax Act, 1961, that too in the proceedings u/s 153C of the Act, and more-so by alleging failure of the assessee to produce bills and vouchers.

4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs. 87,74,362/- is bad in law and against the facts and circumstances of the case.

5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order without giving adequate opportunity of being heard.

7347 & 7348/Del/2017

6. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned additions are bad in law and against the facts and circumstances of the case.

7. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.”

3.

Heard and perused the record.

4.

On hearing the Ld. AR and DR it comes up that in assesssee’s own case for A.Y. 2008-09 and 2010-11 ITA no. 7338.Del.2017 and 7346.Del.2017 by order dated 08.09.2020 the additions were deleted by the Co-ordinate Bench primarily for the reason that disallowance on freight charges were made in the absence of any incriminating material found during the course of search. Admittedly, as the notice in the case in hand was issued on 18.06.2014 the relevant A.Y. fall in the category of non-abated assessments and now it is settled by judgment of Hon’ble Supreme Court of India in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd. (2023) 454 ITR 212 (SC) that in respect of completed assessments/ non-abated assessments no addition can be made in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132(A).

5.

Ld. DR has relied the findings of Ld. AO in para no. 3 to submit that post search inquiry has revealed that the companies were floated by the assessee group, SRS Group, and these companies have shown purchases/ sales within the group companies without actual work being carried out by these companies and only bills are issued. He has submitted that the post search inquiries arise out of incriminating evidences found during the search. However, the aforesaid contention was duly rebutted on behalf of the assessee by the Ld. AR submitting that first of all Ld. AO has not discussed any incriminating material/ documents which were seized and in any case if post search inquiries and findings are to be 7347 & 7348/Del/2017 relied then too in the light of judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd. (supra) the course open to the Revenue is by virtue of powers u/s 147/148 of the Act.

6.

The Bench finds the arguments of ld. AR quite sustainable as apparently in the para 3 of the order of ld. AO no such document or evidence is specifically discussed. Furthermore, it comes up that when the assessment orders for A.Y. 2010-11 available at page no. 96 to 98 of the paper book and for A.Y. 2008-09 available at page no. 78 to 80 of the paper book are considered it makes it apparent that Ld. AO has just reproduced the same set of findings in all these assessment orders which being subject matter of appeal before the Tribunal were not sustained by order dated 08.09.2020.

7.

Thus, the Bench is of considered opinion that the jurisdiction to complete assessment u/s 153A(1)(b) r.w.s. 143(3) of the Act was exercised in regard to relevant assessment years without there being any incriminating material and accordingly, the ground no. 1 raised on behalf of the assessee challenge in the assumption of jurisdiction u/s 153A r.w.s. 153C is allowed and the remaining grounds on merits are left with no merits requing adjudication. Consequently, the ground no. 1 of both the appeals is allowed and both the appeals of assessee are allowed. The impugned assessment orders are quashed.

Order pronounced in the open court on 26th July, 2023.

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