Income Tax Appellate Tribunal - Ahmedabad
M/S. New India Angadia Service, ... vs Ito, Ward-1(3)(4), Ahmedabad on 29 July, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
(CONDUCTING THROUGH VIRTUAL COURT)
BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER &
Ms. MADHUMITA ROY, JUDICIAL MEMBER
IT(SS)A Nos.378&379/Ahd/2018
(Assessment Years: 2010-11 & 2011-12)
M/s. New India Angadia Service Vs. ITO
413, Khetar Palni Pole, Ward-1(3)(4),
Manekchowk, Ahmedabad-380001 Ahmedabad
[PAN No. AAEFN0459N]
(Appellant) .. (Respondent)
Appellant by : Shri K. C. Thaker, AR
Respondent by: Shri O. P. Sharma, CIT-DR
Date of Hearing: 27/07/2021
Date of Pronouncement: 29/07/2021
ORDER
PER Ms. MADHUMITA ROY - JM:
Both the appeals filed by the assessee are directed against the orders both dated 25.10.2018 passed by the Ld. CIT(A)-6, Ahmedabad arising out of the orders both dated 30.12.2016 passed by the ITO, Ward-1(3)(4), Ahmedabad under Section 143(3) r.w.s. 153A of the Income Tax Act, 1961 for A.Ys. 2010-11 & 2011-12 respectively.
Since both the appeals pertains to the same assessee and the issues involved are common these are heard analogously and are being disposed of by a common order for the sake of convenience.
IT(SS)A No. 378/Ahd/2018 (A.Y. 2010-11):-
2. The appellant has challenged the disallowance of interest paid of Rs. 3,17,664/-
in a search proceeding where no incriminating material found. Under the circumstances the disallowance so made is invalid, without sanction of law and the same is liable to be deleted as the case made out by the appellant before us.
-2- IT(SS)A Nos.378&379/Ahd/2018
M/s. New India Angadia Service vs. ITO
A.Ys. 2010-11 & 2011-12
3. The assessee firm engaged in the business of Angadia Services filed its return of income for A.Y. 2010-11 on 28.06.2010 declaring total income at Rs. 1,74,480/- which was duly processed under Section 143(1) of the Act. Subsequently, a search under Section 132 of the Act was carried out at the branch office of the assessee at Kalaburagi on 30.03.2015 relevant to Assessment Year 2015-16. Notice under Section 153A of the Act was issued requesting the assessee to file its return of income for A.Y. 2010-11. In response to the same on 25.11.2006 the return of income declaring income of Rs. 1,74,480/- was filed by the assessee. Notice under Section 143(2) r.w.s. 153A and under Section 142(1) of the Act dated 28.11.2016 was issued.
4. The facts pertain to the issue is this that the assessee paid interest of Rs. 3,17,664/- on unsecured loans at 12%. The Ld. AO though accepted the unsecured loans as genuine but disallowed interest paid thereon on assumption basis although to independent and corroborative evidence was relied upon for such disallowance. Ultimately the same was confirmed by the First Appellate Authority. Hence, the instant appeal before us.
5. At the time of hearing of the instant appeal, the Ld. Advocate appearing for the assessee submitted before us that the assessment of the year under consideration was not pending and is unabated. The time of issuance of notice under Section 143(2) had already expired on the date of search. Further that it was submitted by the Ld. AR that various additions were made not on the basis of any incriminating material found during the course of search rather the documents submitted by the assessee before the authorities below. The crux of the argument of the Ld. AR is this that the interest on loans which are recorded in the books of accounts and items of cash credit cannot form the basis of addition in the relevant assessment year where the assessment is not pending and has not been abated since there are items of normal income tax assessment and cannot be subject matter of assessment under Section 153A or 153C.
-3- IT(SS)A Nos.378&379/Ahd/2018
M/s. New India Angadia Service vs. ITO
A.Ys. 2010-11 & 2011-12
It was further submitted by the Ld. AR that the issue is squarely covered by the judgment passed by the Hon'ble Jurisdictional High Court in the matter of PCIT vs. Saumya Construction Pvt. Ltd., reported in (2016) 387 ITR 0529 which was followed by the Ld. CIT(A) in subsequent Assessment Years 2012-13 and 2013-14 a copy of each of the said orders have been duly filed before us.
6. On the contrary the Ld. DR relied upon the order passed by the Revenue.
7. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. We have further perused the order passed by the Ld. CIT(A) in A.Y. 2012-13 and 2014-15 in assessee's own case. The relevant portion of the same is reproduced hereinbelow:-
"5. I have carefully considered the submissions made on behalf of the appellant and perused the assessment record so far it relates to addition on account of interest I find that there cannot be any dispute about the fact that the disallowance of interest has been made on appreciation of the accounts like balance sheet filed with the return of income. The Assessing Officer has not referred to or indicated that there was anything found during the search which provided the basis for the disallowance of interest of Rs.3,63,800/-. The return of income was filed on 25-7-2012, followed by intimation u/s 143(1) and no notice u/s 143(2) was issued till the date of search i.e. 30-3-2015 meaning thereby that assessment had become final and was not abated. The appellant has challenged validity of additions made for the year under consideration in ground No: 1. Thus the assessment was not pending and did not abate. Taking support from the judgments including the judgment of jurisdictional High Court in the case of Principal CIT vs. Saumya Construction (P) Ltd [2016] 387 ITR 529, it was contended that in such a case where the assessment is not pending on the date of search and is unabated, addition could not be made of items of such income unless there is incriminating material found during the course of search. I have considered the facts of the-case and the submission of the appellant as also, the legal position emerging from the various judicial pronouncements including the judgments of the jurisdictional Gujarat High Court in the case of Pr. CIT vs Saumya Construction (P) Ltd [2016] 387 ITR 529 as also, judgments in the case of CIT Central vs Kabul Chawla [2015] 380 ITR 573 (Delhi), CIT vs Continental Warehousing Corporation Ltd [2015] 374 ITR 645 (Bom). The above judgments are followed in several decisions by the various Income tax Appellate Tribunals. I find that the assessment for the year under consideration was not pending and hence did not abate but became final since time for issuing notice u/s 143(2) had already expired on the date of search. The various additions made in the assessment is not based on any incriminating material found during the course of searcj. This is evident from the assessment order in which the AO has considered the various issues "from the details submitted by the assessee including Balance Sheet". Thus the interest on loans which are recorded in the books of account and items of cash credit cannot form the basis of addition in the year for which assessment is not pending and has not been abated since these are items of normal income tax assessment and cannot be subject matter of assessment u/s 153A or 153C. Similar issue has also been dealt with in the case of Jayesh Stee! Pvt Ltd by CIT(Appeal)-12 Ahmedabad vide his order in Appeal No: CIT(A)-
-4- IT(SS)A Nos.378&379/Ahd/2018
M/s. New India Angadia Service vs. ITO
A.Ys. 2010-11 & 2011-12
12/219,221/DCIT -CC-2(3)/14-15 dated 2.11.2016 in which also, following the judgment of jurisdictional high Court, it is held that in the finally concluded assessments framed u/s 153A/153C, the AO is not authorized to "interfere" except on the basis of and except having been prompted by incriminating seized documents relatable to that assessment year and that additions made dehors any incriminating seized material in case of unabated assessments are without requisite authority and are deleted. Certain orders issued by present incumbent in CIT(A)-12, Ahmedabad handling Assessments completed by the Central Charge were brought to my notice wherein a similar view is being taken even in year 2018. In view of this factual position and considering the legal position emerging from the judgments of Hon'ble Gujarat High Court and the High Court of Delhi as mentioned above as also, from the judgments of other Hon'ble High Courts and Hon'ble ITAT relied on in the said judgments, I am inclined to agree with the appellant that additions made by the AO in the instant case of unabated assessment is not permissible since they are not made on the basis of any incriminating material found during the course of search . This legal ground no.1 is thus allowed.
The appellant has also made submissions on merits also. It is contended, that no addition could be made when the entries of interest on loans are substantiated from the books of account as based on details furnished to the AO and such accounts are not rejected, but since the issue is adjudicated on the ground of legality in favour of the appellant, the ground no. 2 pertaining to addition do not require adjudication. Ground no. 1 & 2, 2A & 2B are allowed."
8. It appears that the Ld. CIT(A) in the earlier year on the identical facts and deleted the additions made by the Ld. AO in the unabated assessment since the same were not made on the basis of any incriminating material found during the course of search relying upon the principle laid down by the Jurisdictional High Court in the case of PCIT -Vs- Saumya Construction Pvt. Ltd., reported in (2016) 387 ITR 529, the judgments passed in the matter of CIT -vs- Kabul Chawla, reported in (2015) 380 ITR 573 (Delhi) and CIT -vs- Continental Warehousing Corporation Ltd (2015) 374 ITR 645 (Bom.). The Jurisdictional High Court in the matter of Saumya Construction Pvt. Ltd. (supra) while laying down the ratio observed as follows:-
"...it was not case of revenue that any incriminating material in respect of AY under consideration was found during course of search-At relevant time when notice came to be issued u/s. 153A, assessee filed its return of income-Much later, at fag end of period within which order u/s. 153A was to be made, in other words, when limit for framing assessment as provided u/s. 153 was about to expire, notice had been issued seeking to make proposed addition of Rs. 11,05,51,000/- on basis of the material which was not found during course of search, but on basis of statement of another person-It was admitted position that no incriminating material was found during course of search, however, it was on basis of some material collected by AO much subsequent to search, that additions came to be made--On behalf of revenue, it had been submitted that if any incriminating material was found, notwithstanding that in relation to year under consideration, no incriminating material was found, it would be permissible to make additions and disallowance in respect of all six AYs-In opinion of this court, said submission did not merit acceptance, inasmuch as, assessment in respect of each of six AYs was separate and
-5- IT(SS)A Nos.378&379/Ahd/2018 M/s. New India Angadia Service vs. ITO A.Ys. 2010-11 & 2011-12 distinct assessment-U/s. 153A, assessment had to be made in relation to search or requisition, namely, in relation to material disclosed during search or requisition-If in relation to any AY, no incriminating material was found, no addition or disallowance could be made in relation to that AY in exercise of powers u/s. 153A and earlier assessment should have to be reiterated-In this regard, this court was in complete agreement with view adopted by Rajasthan HC in case of Jai Steel (India), Jodhpur v. Assistant CIT (supra)-Besides, as rightly pointed out by assessee, controversy involved stands concluded by decision of this court in case of CIT-1 v. Jayaben Ratilal Sorathia (supra) wherein it had been held that while it could not be disputed that considering section 153A, AO could reopen and/or assess return with respect to six preceding years; however, there must be some incriminating material available with AO with respect to the sale transactions in particular AY-It was not possible to state that order passed by Tribunal suffered from any legal infirmity so as to give rise to question of law, much less, substantial question of law, warranting interference-Appeal, was, accordingly, dismissed"
9. The addition in the appeal in hand indeed has been made on the basis of the books of accounts and the details furnished to the Ld. AO and not on the basis of any incriminating material found during the course of search. Hence, respectively relying upon the judgment passed by the different judicial forums we delete the addition made under Section 143(3) r.w.s 153A of the Act. The appeal preferred by the assessee is, thus, allowed.
IT(SS)A No. 379/Ahd/2018 (A.Y. 2011-12):-
10. The identical issue involved in the case has already been dealt with by us in IT(SS)A No.378/Ahd/2018 for A.Y. 2010-11 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeal preferred by the assessee is allowed.
11. In the combined result, both the appeals filed by the assessee are allowed.
This Order pronounced in Open Court on 29/07/2021
Sd/- Sd/-
(AMARJIT SINGH) (Ms. MADHUMITA ROY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 29/07/2021
Tanmay
-6- IT(SS)A Nos.378&379/Ahd/2018
M/s. New India Angadia Service vs. ITO
A.Ys. 2010-11 & 2011-12
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आय
ु त(अपील) / The PCIT- Ahmedabad.
5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड' फाईल / Guard file.
आदे शानुसार/BY ORDER,
स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation 27.07.2021& 28.07.2021
2. Date on which the typed draft is placed before the Dictating Member 29.07.2021
3. Other Member.............
4. Date on which the approved draft comes to the Sr.P.S./P.S... 29 .07.2021
5. Date on which the fair order is placed before the Dictating Member for pronouncement...
6. Date on which the fair order comes back to the Sr.P.S./P.S.......
7. Date on which the file goes to the Bench Clerk 29.07.2021
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................