ITAT Ahmedabad Judgments — April 2023

The Tribunal dismissed the appeal of the assessee primarily on the grounds of inordinate delay and lack of satisfactory explanation. The assessee filed the appeal with a delay of 921 days and sought adjournment without providing a convincing reason or an affidavit for condonation. The Tribunal noted that the assessee had not appeared on several occasions and had consistently sought adjournments. Citing precedents from the Hon'ble Supreme Court and other ITAT benches, the Tribunal emphasized that delay cannot be condoned without a satisfactory explanation and that the appellant must prove diligence and absence of negligence. The assessee's vague reasoning, including travel out of India and engaging a counsel, was deemed insufficient. Consequently, the application for condonation of delay was rejected, and the appeal was dismissed without delving into the merits of the grounds raised regarding the notice under section 143(2) and the exemption under section 54B.

Regarding Ground No. 1 (rent expenses), the Tribunal upheld the Ld. CIT(A)'s order. It reasoned that it is not for the department to decide the type of expenditure an assessee should incur. The AO's jurisdiction is limited to verifying the reality of the expenditure and its nexus with the business purpose. The assessee's explanation for leasing the property for business expansion in Mumbai, a commercial hub, was accepted, and the Revenue failed to point out any falsity. The Tribunal agreed that the expenses were incurred for the purpose of business. Regarding Ground No. 2 (share purchase), the Tribunal upheld the Ld. CIT(A)'s deletion of the addition. It was established that Suraj Stainless Ltd. was a listed company on BSE and NSE. As per Section 2(18)(b)(A) of the Act, such a company qualifies as a 'company in which public are substantially interested'. Therefore, the shares purchased fell outside the purview of Section 56(2)(viia)(ii), and the addition was rightly deleted. Regarding Grounds Nos. 3 and 4 (Section 153A assessment scope), the Tribunal dismissed these grounds as the Ld. CIT(A) had already ruled in favor of the Revenue, holding that the assessment under Section 153A was unabated and not restricted to incriminating material found during search. The Ld. DR fairly agreed with this position. The Tribunal found no reason to interfere with the CIT(A)'s order on these grounds.

The Tribunal held that the assessment year 2010-11 was unabated, as the time limit for issuing a notice under Section 143(2) had expired on September 30, 2011, prior to the search conducted on July 3, 2012. Therefore, the assessment for this year had attained finality. The Tribunal relied on the jurisdictional Gujarat High Court's decision in PCIT vs. Saumya Construction Pvt. Ltd. (387 ITR 529) and other precedents, including CIT vs. Kabul Chawla (Delhi High Court), PCIT v. Rameshbhai Jivraj Desai (Gujarat High Court), Sunrise Finlease (P.) Ltd. (Gujarat High Court), Desai Construction (P.) Ltd. (Gujarat High Court), and PCIT v. Devangi (Gujarat High Court). These decisions consistently held that in the case of an unabated assessment year, no addition can be made under Section 153A unless based on incriminating material found during the search. The Tribunal further held that share application money received by the assessee cannot be construed as incriminating material found during the search. Consequently, the addition made by the AO under Section 68 in an unabated assessment year, in the absence of any incriminating material unearthed during the search, was incorrect. The CIT(A) was therefore justified in deleting the addition. The Tribunal also noted the ITAT Kolkata decision in M/s. Garg Brothers Pvt. Ltd. vs DCIT, which supported the view that no addition can be made in Section 153A assessment for unexplained share capital in the absence of incriminating material.

The Tribunal held that for unabated assessment years, the Assessing Officer can make additions under Section 153A only if there is incriminating material unearthed during the search that was not produced or disclosed in the original assessment proceedings. The Tribunal agreed with the assessee and the CIT(A)'s finding that the bank entries, already reflected in the return of income, did not constitute incriminating material found during the search. The Tribunal noted that the jurisdictional High Court and Tribunal have consistently held this position, referencing the decision in CIT vs. Kabul Chawla. Therefore, the addition of Rs. 1,78,35,069/- made by the AO on account of unexplained investment was deleted. The Tribunal did not expressly leave any issue undecided.

The Tribunal held that for unabated assessment years, the Assessing Officer can make additions under Section 153A only if there is incriminating material unearthed during the search that was not produced or disclosed in the original assessment proceedings. The Tribunal agreed with the assessee and the CIT(A)'s finding that the bank entries, already reflected in the return of income, did not constitute incriminating material found during the search. The Tribunal noted that the jurisdictional High Court and Tribunal have consistently held this position, referencing the decision in CIT vs. Kabul Chawla. Therefore, the addition of Rs. 1,78,35,069/- made by the AO on account of unexplained investment was deleted. The Tribunal did not expressly leave any issue undecided.

The Tribunal held that for unabated assessment years, the Assessing Officer can make additions under Section 153A only if there is incriminating material unearthed during the search that was not produced or disclosed in the original assessment proceedings. The Tribunal agreed with the assessee and the CIT(A)'s finding that the bank entries, already reflected in the return of income, did not constitute incriminating material found during the search. The Tribunal noted that the jurisdictional High Court and Tribunal have consistently held this position, referencing the decision in CIT vs. Kabul Chawla. Therefore, the addition of Rs. 1,78,35,069/- made by the AO on account of unexplained investment was deleted. The Tribunal did not expressly leave any issue undecided.

The Tribunal held that for unabated assessment years, the Assessing Officer can make additions under Section 153A only if there is incriminating material unearthed during the search that was not produced or disclosed in the original assessment proceedings. The Tribunal agreed with the assessee and the CIT(A)'s finding that the bank entries, already reflected in the return of income, did not constitute incriminating material found during the search. The Tribunal noted that the jurisdictional High Court and Tribunal have consistently held this position, referencing the decision in CIT vs. Kabul Chawla. Therefore, the addition of Rs. 1,78,35,069/- made by the AO on account of unexplained investment was deleted. The Tribunal did not expressly leave any issue undecided.

The Tribunal held that the CIT(A) erred in its reasoning regarding the period for assessment under section 153C. The Tribunal, relying on the Gujarat High Court's decision in Shri Anil Kumar Gopi Kishan Agarwal Vs. ACIT, held that the period of six assessment years for the purpose of section 153C should be reckoned from the date of the search conducted under section 132 of the Act, not from the date the materials were handed over to the AO of the other person. The search in this case was conducted on 09-11-2016. The assessment year relevant to the previous year of the search (2016-17) is 2017-18. Therefore, the six assessment years preceding 2017-18 are 2016-17, 2015-16, 2014-15, 2013-14, 2012-13, and 2011-12. Since the assessment year in dispute is 2011-12, it falls within the prescribed six-year period. Consequently, the Tribunal disagreed with the CIT(A)'s finding that the assessment year was outside the preview of section 153C based on the date of handing over of materials. However, the Tribunal confirmed the CIT(A)'s decision to quash the assessment order, implying that the quashing was based on other grounds not fully detailed in the provided excerpt, particularly referencing a point about the absence of a 'searched person' in the case, which was not elaborated upon. The appeal filed by the Revenue was dismissed.

The Tribunal held that the Ld. CIT(A) was judicially correct in condoning the delay and that the objection of the Revenue is dismissed. The Tribunal noted that the assessee had not filed a return in response to the Section 153A notice, leading to an ex-parte assessment. However, the Ld. CIT(A) had treated the original return filed under Section 139(1) as the return in response to the Section 153A notice. The Tribunal observed that the assessee has now paid the entire self-assessment tax of Rs. 1,07,83,908/- and has provided evidence of financial liquidity crunch faced. Following the decisions of Co-ordinate Benches and principles laid down in Collector, Land Acquisition v. MST Katiji, the Tribunal set aside the impugned order and restored the appeal to the file of the Ld. CIT(A) with a direction to entertain and dispose of the appeal on merits after giving proper opportunity to the assessee. The assessee was directed to cooperate with the Ld. CIT(A) and produce required details for expeditious adjudication.

The Tribunal held that the additions made to the assessee's total income concerning the HSBC, Geneva bank account and related income for AY 2007-08 were beyond the scope of Section 153A. This was because the assessments for the year had become final prior to the search, and crucially, no incriminating material was found during the search to support these additions. The Tribunal agreed with the CIT(A)'s finding that the assessment order was against the provisions of Section 153A. Consequently, the additions made by the AO were deleted. The Revenue's grounds of appeal were dismissed. The assessee's cross-objection, seeking adjudication on merits, became infructuous as the assessment order was quashed.

The Tribunal held that the Learned CIT(A) correctly deleted the addition of Rs. 9,82,40,715/- on account of unaccounted income (on-money) for land purchases. The Tribunal noted that the CIT(A) had found no material on record suggesting the assessee company was a party to the transfer of land from B Nanji Group to M/s. Shree Kanhai Reality Pvt Ltd. This finding was not controverted by the Revenue. Furthermore, the Tribunal observed that Shri Sanjay Thakkar, the promoter of the assessee company, had already owned up commission income to the tune of Rs. 3 crore from the impugned transaction and paid taxes on it before the Settlement Commission. Therefore, no addition in the hands of the assessee company could be sustained. The Tribunal also dismissed the Revenue's grounds regarding unaccounted brokerage and commission, as the CIT(A)'s findings were not controverted and Shri Sanjay Thakkar had already accounted for the commission income. The Tribunal dismissed the assessee's cross-objections challenging the validity of the assessment proceedings on the grounds that the additions on merits were deleted in favour of the assessee, making the technical issue unnecessary to decide. The appeals for AY 2010-11 were decided similarly to AY 2009-10.

The Tribunal held that the Learned CIT(A) correctly deleted the addition of Rs. 9,82,40,715/- on account of unaccounted income (on-money) for land purchases. The Tribunal noted that the CIT(A) had found no material on record suggesting the assessee company was a party to the transfer of land from B Nanji Group to M/s. Shree Kanhai Reality Pvt Ltd. This finding was not controverted by the Revenue. Furthermore, the Tribunal observed that Shri Sanjay Thakkar, the promoter of the assessee company, had already owned up commission income to the tune of Rs. 3 crore from the impugned transaction and paid taxes on it before the Settlement Commission. Therefore, no addition in the hands of the assessee company could be sustained. The Tribunal also dismissed the Revenue's grounds regarding unaccounted brokerage and commission, as the CIT(A)'s findings were not controverted and Shri Sanjay Thakkar had already accounted for the commission income. The Tribunal dismissed the assessee's cross-objections challenging the validity of the assessment proceedings on the grounds that the additions on merits were deleted in favour of the assessee, making the technical issue unnecessary to decide. The appeals for AY 2010-11 were decided similarly to AY 2009-10.