The Income Tax Appellate Tribunal (ITAT) Raipur Bench upheld the decision of Commissioner of Income Tax (Appeals) (CIT(A)) which deleted an Addition of 2.19 crore for the Assessment Year (AY) 2008-09, as no incriminating material was found during the Search and Seizure for Unabated AY.
The assessee, NRVS Steels Ltd is a Public Limited Company, is engaged in manufacturing of Sponge Iron through processing Iron Ore, coal and dolomite. A search and seizure operation u/s 132 of the IT Act, 1961 was carried out on various premises of the NR Group and its associates / concerns on 24.10.2017. Consequently, notice u/s 153A of the Income Tax Act, 1961 was issued on 01.08.2017 for the AY 2008-09 to 2017-18. In response to the notice, the assessee filed return of income for the AY 2008-09 to 2017-18 on 07.12.2019/25.12.2019.
During the assessment proceedings, Assessing Officer (AO) found that the assessee has received share application money/ share premium in AY 2008-09 to 2014-15 from various Kolkata based Investor Companies, aggregating to Rs.10,08,25,658/- including share capital and share premium.
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After considering the assesses response, AO proceeded to make additions of Rs.2,25,00,000/- for AY 2008-09, similar addition of Rs.2,25,00,000/- for the AY 2009-10 and 62,00,000/- for 2011-12 on account of undisclosed income under section 68 of the Act.
Being aggrieved with the addition, assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)), wherein the assessee partly succeeded, however the addition of Rs.2,19,00,000/- for the AY 2008-09 have been directed to be deleted.
The issue has been assailed before the Hon’ble Jurisdictional High Court simultaneously by the assessee under a writ petition, in disposal of which the issue qua assumption of jurisdiction of Ld. AO u/s 153A in opening the assessment beyond the period of 06 years has been decided in favor of the revenue vide order dated 03.12.2020.
Such judgment was not taken into consideration by the CIT(A), while passing the appellate order, therefore subsequently, when such vital information was brought to the knowledge of CIT(A) by the assessee seeking rectification of mistake apparent on record, a rectification order u/s 154 of the Act was passed on dated 01.06.2023, consequently, the decision of CIT(A) vide his earlier order dated 21.03.2022 to the extent of this issue has got corrected / nullified. The issue, therefore, as already decided in favor of the revenue by the Hon’ble Jurisdictional High Court, thus, the same is no more res-integra to be discussed further.
Dissatisfied by the decision of the CIT(A), now the department has challenged the findings of CIT(A) under the present appeal.
Since the addition on account of unexplained cash credit u/s 68 of the Act made by the Ld. AO was vacated by the Ld. CIT(A), considering that the year under consideration was an unabated assessment year and there was no incriminating material found during the search and seizure operation, it is also observed by Ld. CIT(A) that the material seized and considered as incriminating by the Ld. AO was also not correlated with the addition made, therefore, the addition u/s 68 was not sustainable.
Based on the submissions, it was the contention of department that the ground of appeal raised by the assessee company for the AY 2008-09 before the First Appellate Authority, stating that the there is no incriminating material /document found during the search in the premises of the assessee is not acceptable as certain documents in BS-11 pertinent to page no. 8,9, 10 and also the statement of the previous director of NRVS Steel Limited, Shri Rajesh Agrawal recorded on oath, along with dubious financials of investors companies are incriminating in nature.
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It was the submission that the assessee company has received share capital / premium from Kolkata based shell Companies and, therefore, the primary onus to establish the identity, creditworthiness and genuineness of the transaction was on the assessee, which the assessee in present case has failed to discharge.
The Respondent, Revenue, represented by Shri S. L. Anuragi, CIT-DR, submitted that the word “incriminating material” as used in courts of section 154A/153C needs to be understood in the context of events of misreporting and under-reporting as defined in section 270A(9) for the purpose of levy of penalty.
The phrase “incrementing material” is neither defined in section 153A nor defined in the Income Tax Act and hence the implication of this term is required to the understood in the context of misreporting and / or under reporting along with intent and purpose of the provisions of Search and Seizure under Income Tax Act, which clearly revealed, the existence of incriminating material to initiate the proceedings u/s 153A of the Act.
According to the submission of the department that there was incriminating material which provided appropriate jurisdiction for the purpose of framing assessment u/s 153A, therefore, the order of Ld. CIT(A) cannot be sustained on this issue that there was no incriminating material. The prayer of the CIT-DR was that the order of CIT(A) needs to be set aside, and additions made by the AO deserve to be restored.
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Contradicting to the submission of the department, AR on behalf of the assessee had submitted that the so-called incriminating material relied upon by the AO marked as BS-11 at page n. 8, 9, 10 and various statutory reports or forms which are already disclosed to the respective revenue departments also duly disclosed in the regular audited books of accounts of the assessee company for the relevant year. Further it is submitted that the forms which were furnished before the ROC in company law matters and nothing else, which had already been disclosed in the audited books of accounts, which are further declared in the original return of income filed.
AR further placed his reliance on the judgment of Supreme Court in the case of Abhisar Buildwell Taxmann.com SC dated 14.04.2023, wherein Hon’ble Apex Court has held that “In respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A.”
Based on the submissions, it was the prayer by AR that since there is no dispute in regarding the non-abated assessment years and no incriminating material unearthed during the search, therefore in absence of any incriminating material following the ratio of law propounded by Hon’ble Apex Court in the case of M/s Abhishar Buildwell (supra), wherein the principal laid down by Hon’ble Delhi High Court in the case of Kabul Chawla (supra) and Hon’ble Gujarat High Court in the case of Pr. CIT vs. Saumya Constructions Pvt. Ltd. (P.) Ltd have been affirmed.
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Under such facts and circumstances, the order of CIT(A), vacating the addition of unexplained cash credit u/s 68 of the Act deserves to be upheld.
The ITAT bench comprising of Ravish Sood, Judicial Member and Arun Khodpia, Accountant Member observed that there are issues regarding the trustworthiness of the Kolkata based company and the assessee has received Rs.2.19 crores and 2.25 crores, under the garb of share capital. According to AO the trustworthiness, identity and genuineness of the transaction could not be established by the assessee, therefore the additions was made under Section 68 of the Income Tax Act.
Herein, the court agreed with the observation of CIT(A) that the aforesaid loose papers are receipt of form for allotment and issue of equity share to investor companies and such documents cannot be termed as incriminating documents, this view was supported by the Commissioner of Income-tax v. Goldstone Cements Ltd. reported in [2023].
In view of the decision in the case of Goldstone Cements Ltd. it can be safely concluded that the documents furnished before ROC would not constitute the incriminating material.
In the present case, as the year concerned was an unabated assessment years and also documents surfaced during the search and seizure action are not in the nature of incriminating material, therefore respectfully following the principle laid down by the court in the case of Abhishar Buildwell (supra), the court considers the opinion of CIT(A) i.e to delete the addition of an amount 2.19 crore for the AY 2008-09, had rightly and judiciously and approve the same.
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So the grounds of appeal raised by the department was dismissed.
In Combined result, both the aforesaid appeals of Department were rendered as dismissed, and the cross objection of the assessee stood partly allowed, in terms of aforesaid observations.
The assessee was represented by Shri Sunil Kumar Agrawal a/w Shri Vimal Kumar Agrawal & Smt. Laxmi Sharma, CA’s
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