2024 (6) TMI 800 - AT - Income Tax

Assessment under Section 153A valid despite unsigned Panchnama when company named in search warrant

The ITAT Chandigarh upheld the validity of assessment u/s 153A after confirming the assessee company's name was mentioned in the original search warrant, ... Legality of assessment u/s 153A without a search or Panchnama - HELD THAT:- Bench had called for the original search warrant from the Department, which was produced. The name of the assessee company was found mentioned in the search warrant. ‘Panchnama’ does not bear the signature of Shri T.N. Singla, Director of the assessee Company, who is stated to have been present at the place of search at the time of the search - Whether it is necessary to have the names of the person searched in the ‘Panchnama’, the ld. DR has sought to place reliance on ‘MDLR’ [2013 (12) TMI 1116 - DELHI HIGH COURT] wherein, the Hon'ble Delhi High Court has held that since the 22 parties whose names were not mentioned, did not object to the order u/s 153A in the petition u/s 264 pursuant to the assessment order, such objection was not justified in the writ petition filed; that the assessment order under section 153A cannot and should not be permitted to become a matter of writ petition as the First Appellate Forum; and that the with the questions and issues raised in the writ petition the jurisdiction of the First Appellate Authority having not been invoked with the appeals preferred by the writ petitioners. As observed, the name of the assessee company has been mentioned in the search warrant, which was produced in the original by the Department before us. Therefore, this puts this entire controversy at rest and the Assessee’s objection in this regard is found to be unjustified and it is, accordingly, rejected, while rejecting Ground No. 2. Additions made are not based on any incriminating material found during the search - This assessment was abated, as the search was conducted on 16.02.2018. The appellant brought to our notice that no incriminating material was found during the search and provisions of section 153A were not applicable in this case. As the search was conducted on 16.02.2018 and as per Section 153A the assessment for 2017-18 and 2018- 19 were abated and the Assessing Officer was competent to pass assessment order u/s 153A r.w.s. 143(3) of the Act for these years. Hence ground Nos. 2, 3, 4 and 5 are hereby rejected. Unexplained cash credit - whether Addition was made by the AO without considering each credit separately on merit, while making addition holding that the purpose and utilization of funds which had not been explained by the assessee? - AO found the documentary evidence furnished by the assessee company to be unsatisfactory while the ld.CIT(A) observed that the creditworthiness cannot be established due to non-submission of documents, the AO and CIT(A) could have initiated proceedings under Sections 133(6) or 131 of the Act for further investigation. However, it is noteworthy that neither the AO nor the CIT(A) extended any such notice to the lender for additional inquiries. Instead, an addition of Rs. 3,70,000/- was made based on the directive of a third party. Neither enquiry was made by CIT(A) / AO before confirming the addition of Rs. 3,70,000/- nor any documentary evidence were sought from the assessee company, therefore the assessee company has now submitted copy of computation and confirmation of Sh. Vashisht Kumar Goyal as additional evidence. The submission of said documents are neither challenged nor disputed in the appeal by the department. Hence the addition of Rs. 3,70,000/- as advance received form Sh. Vashisht Kumar Goyal confirmed by ld.CIT(A) without considering the documents submitted by the assessee company should be deleted. Accordingly, ground of appeal No. 6 is accepted. Income deposited in cash by the assessee - assessee company has laid emphasis on the fact that as per bank statement of the company it is clear that the company has withdrawn Rs. 2,50,000/- on 25.05.2016 and the same were re-deposited on 30.05.2016, remaining Rs .8,00,000/- was declared as income of Rs.8,03,250/- by the assessee company - The copy of income account in the books of the company is available at paperbook page 303, which was also submitted before the AO during assessment proceedings. The AO neither discussed the same in the assessment order nor considered the copy of account which was already placed on record, while making the addition on the dictate of third party ignoring the fact that it has been duly recorded by the assessee company in the Prof it and Loss account of the company as at 31.03.2017. The aforesaid documents submitted by the assessee were neither challenged nor disputed by the department in the appeal. Hence, any receipt already shown as income in the Prof it and Loss Account cannot be added u/s 68 of the Act, without any specific reasons or evidence. Therefore, the addition of Rs. 10,50,000/- is wrong and needs to be deleted as it includes an amount Rs. 2,50,000/- withdrawn and re-deposited by the company and Rs. 8,00,000/- which was already declared by the company as income in its Profit and Loss Account for AY 2017-18. Accordingly, Ground No. 7 stands accepted. Addition u/s 68 - assessee contended that the AO did not make any adverse findings in the remand report and the entire investigation / proceedings of the AO revolves around stating the assessee company as shell company on the dictat of third party - AO made addition of all the credit entries in the bank account of the company ignoring all the proofs and documentary evidences submitted by the assessee during the assessment proceeding. However, same documents were submitted before the ld. CIT(A) during the appellate proceedings and the ld. CIT(A) granted relief of Rs. 1,88,03,250/- to the assessee after verification of all the documents and confirmed addition of Rs. 14,20,000/- without asking assessee for any other evidence or document during appellate proceeding for three years as no Show Cause Notice was issued or query was raised by the ld. CIT(A) . Accordingly, ground of appeal No. 8 is accepted. Disallowance against the loss claimed in the return of income - disallowance of depreciation on vehicle - HELD THAT:- We found that the very basis of the disallowance made is unsustainable in law and we hold so. Accordingly, both the additions are deleted, found to be based on no material , whatsoever and in direct opposition to the documentary evidence furnished by the assessee. Accordingly, Ground Nos. 9 and 10 are also accepted. Unexplained cash credit u/s 68 - CIT(A) allowing the appeal of the assessee by holding that identity and creditworthiness of the persons from whom such credits were received, were proved - HELD THAT:- It is despite the above inability of the Department to repel the evidence based stand taken by the assessee, that the Department has raised the issue that the genuineness of the transactions had not been established. We, on the basis of the preceding discussion, find ourselves unable to subscribe to this view of the Department. Accordingly, finding no merit therein, all the grounds raised by the Department are rejected and the appeal filed by the Department is dismissed. Issues Involved:1. Legality of assessment under Section 153A of the Income Tax Act, 1961.2. Validity of additions made without corroborative and incriminating material.3. Justification for upholding specific additions by the CIT(A).4. Disallowance of loss and depreciation.5. Department's appeal against deletion of additions by the CIT(A).Detailed Analysis:1. Legality of Assessment under Section 153A:- Grounds 2, 3, 4: The assessee contended that no search was conducted on the company, nor was any 'Panchnama' prepared in its name, making the assessment under Section 153A illegal and without jurisdiction. The CIT(A) and the Tribunal examined the original search warrant, which contained the name of the assessee company, thus justifying the initiation of proceedings under Section 153A. The Tribunal rejected these grounds, finding that the search warrant included the company's name, and upheld the legality of the assessment.2. Validity of Additions without Corroborative and Incriminating Material:- Ground 5: The assessee argued that the additions were not based on any incriminating material found during the search. The CIT(A) held that the Assessing Officer (AO) was not restricted to additions based only on incriminating material. The Tribunal referenced various judicial precedents, including the Supreme Court's decision in 'PCIT vs M/s Abhisar Buildwell P. Ltd.', which held that no addition can be made in the absence of incriminating material for completed/unabated assessments. Consequently, the Tribunal found merit in the assessee's argument and accepted Ground 5.3. Justification for Upholding Specific Additions by the CIT(A):- Grounds 6, 7, 8:- Ground 6: The addition of Rs. 3,70,000/- received from Sh. Vashisht Kumar Goyal was upheld by the CIT(A) without considering the documentary evidence provided by the assessee. The Tribunal found that the AO and CIT(A) ignored the documents submitted by the assessee and failed to conduct further inquiries. The Tribunal accepted Ground 6 and deleted the addition.- Ground 7: The addition of Rs. 10,50,000/- on account of cash deposits was upheld by the CIT(A) without justification. The Tribunal found that the assessee had explained the sources of the cash deposits and provided supporting documents. The Tribunal accepted Ground 7 and deleted the addition.- Ground 8: The addition of Rs. 14,20,000/- under Section 68 was upheld by the CIT(A) without considering the detailed evidence provided by the assessee. The Tribunal found that the AO acted on the direction of a third party and did not independently verify the evidence. The Tribunal accepted Ground 8 and deleted the addition.4. Disallowance of Loss and Depreciation:- Grounds 9, 10:- Ground 9: The disallowance of loss of Rs. 50,231/- was upheld by the CIT(A) without discussing the evidence provided by the assessee. The Tribunal found that the loss was substantiated by the assessee's books of account and deleted the disallowance.- Ground 10: The disallowance of depreciation on the vehicle amounting to Rs. 5,62,672/- was upheld by the CIT(A) without justification. The Tribunal found that the vehicle was used for business purposes and deleted the disallowance.5. Department's Appeal Against Deletion of Additions by the CIT(A):- Grounds i, ii, iii: The Department challenged the deletion of Rs. 1,88,03,250/- by the CIT(A), arguing that the assessee did not establish the genuineness of the transactions. The Tribunal found that the CIT(A) had thoroughly examined the evidence and found no adverse findings regarding the identity and creditworthiness of the persons from whom the credits were received. The Tribunal upheld the CIT(A)'s decision to delete the addition and dismissed the Department's appeal.Conclusion:- The appeal by the assessee (ITA-5/CHD/2023) was partly allowed, with several additions and disallowances being deleted.- The Department's cross-appeal (ITA-145/CHD/2023) was dismissed, upholding the CIT(A)'s deletion of the addition of Rs. 1,88,03,250/-.Order Pronounced on 19.03.2024.