TaxTMI 
TaxTMI 
2025 (9) TMI 311
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.... 78,71,592/- made by the AO on the ground that the assessee had suppressed its yield and had indulged in unaccounted production and sales? 3. Whether the ITAT was justified in holding that the action of the AO towards making additions in respect of concluded assessments towards undisclosed income is beyond the scope or authority vested under Section 153-A of the Act of 1961?" 2. The aforesaid questions of law arise on the following factual backdrop: - 3. The respondent/assessee incorporated on 23-5-1988 is engaged in the business of manufacture of re-rolled products such as heavy steel structural, joist and girder. A search and seizure operation under Section 132 of the IT Act was conducted at the premises of the assessee on 21-6-2011, pursuant thereto, assessment proceedings were carried out and assessment order was passed on 27-3-2014 under Section 153A read with Section 143(3) of the IT Act for the assessment year 2006-07, wherein the Assessing Officer made addition on the following issues: - 1. Unexplained cash credit under Section 68 of the IT Act to the tune of Rs. 8,80,00,000/- on account of alleged failure of the assessee to offer satisfactory explan....
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....estimating a production yield of 89% in the assessee's SMS Division relying on such estimated yield, the Assessing Officer computed purported unaccounted production and corresponding sales, thereby making substantial additions across multiple years, specifically, for the assessment year 2006-07, the AO made an addition of Rs. 78,71,592/-, which the CIT (Appeals) deleted by holding that the assessee has discharged the onus under Section 68 of the IT Act by producing comprehensive documentary evidence including ITRs, audit reports, bank statements, affidavits, Memorandum of Association/Articles of Association, board minutes and assessments of investors. The CIT (Appeals) further held that there is no incriminating material linking share money to undisclosed income and it was also held that the AO's case was based on conjectures. The CIT (Appeals) upheld genuineness and creditworthiness supported by scrutiny assessments of investor companies and also held that suspicion or returned notices were not sufficient to reject bona fide transactions relying upon the decision of the Supreme Court in the matter of Commissioner of Income-tax v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 (SC) &n....
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....s further noted that the credit for share application money was accepted in the regular assessment under s.143(3) of the Act concerning A.Y. 2006-07 prior to search after making due enquiries. The subscriber co. namely Antariksh Commerce Pvt. Ltd. and Escort Finvest Pvt. Ltd. were found to be group companies. The share application money Rs. 200 Lakhs received from Group co. namely Devi Iron & Power Ltd. was refunded in A.Y. 2009-10 through banking channel. The assessments of the subscriber companies carried out under S. 143(3) /S. 143(3) r.w.s. 147 were noted. A pertinent observation was made that the same AO in the case of other group concern (Mahamaya Steel Industries Ltd.) accepted the creditworthiness of the investor company namely 'Escorts Finvest Pvt. Ltd.' for subscription in Pref. Share Capital. The CIT(A) essentially noted that a substantial part of application money has been received from group cos. and a part of it also stood eventually returned. The adverse inference drawn by the AO was found by the CIT(A) to be unsubstantiated and in the realm of suspicion, surmises and conjectures. On legal position, the CIT(A) has referred to large number of judicial pronouncements. ....
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....e assessee's SMS Division, which the AO has proceeded on the basis of conjectures and surmises and which the CIT (Appeals) set-aside and the ITAT has concurred with the findings of the CIT (Appeals). 12. In this regard, the decision of the Supreme Court in the matter of Dhakeswari Cotton Mills Limited v. Commissioner of Income Tax, West Bengal (1954) 2 SCC 602 may be noticed herein in which their Lordships of the Constitution Bench of the Supreme Court dealing with the jurisdiction while making order under Section 23(3) of the Income Tax Act, 1922 and also considering the scope of power under Section 23(3) and limits thereon, held that while making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all, and observed as under:- "9. As regards the second contention, we are in entire agreement with the learned Solicitor General when he says that the Income Tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, ....