TaxTMI 
TaxTMI 
2026 (7) TMI 277
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....ch u/s. 132 of the Act on 17.01.2018. Assessee is part of the Deesan Group which was subjected to search u/s. 132 of the Act. Certain documents were seized during the course of search conducted at assessee's premises as well as residential premises of the Directors. Thereafter, notice u/s. 153A of the Act issued on 08.03.2019, followed by notices u/s. 143(2) and 142(1) validly served upon the assessee. During the course of scrutiny proceedings, ld. Assessing Officer took note of the seized material which were confronted to the key person of the assessee company namely Mr. Pushpak Bansal whose statements were recorded u/s. 131 of the Act on 05.03.2018, i.e. post search. In these statements, it was submitted that there were old outstanding loans and sundry creditors amounting to Rs. 34.30 crore (outstanding loan of Rs. 5.96 crore towards capital purchase and outstanding sundry creditors of Rs. 28.34 crore) in the name of M/s. Autoriders Finance Limited which were no longer payable have been written off in the books under the head "Reserves and Surplus". However, when it was confronted that why the alleged sum has not been offered to tax, then Mr. Pushpak Bansal stated that "I am not ....
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.... huge losses out of which majority of losses have already been expired due to the provisions of Act. This is not totally incorrect. The chart submitted by assessee reveals that in the business of leasing of cars it has earned sizeable income for AY. 2004-05 and in another business, it suffered loss only for two assessment years i.e. AY. 2008-09 & AY. 2009-10. Further, it is stated that during AY. 2015-16, the Company has restructured its assessee has reversed its outstanding Balance Sheet, wherein, liability in which the outstanding liability of Rs. 28,34,10,884/- has been shown as payable. This submission of the assessee is also not at all acceptable. The seized papers unearthed are very clear, wherein, this liability was identified as old outstanding creditors for loan, which, are no longer payable and the assessee Company has written back, accordingly. On confronting the relevant seized loose paper on which such written back of liability position appeared, then and then, only, Shri Pushpak Bansal admitted in sworn statement and accordingly offered to tax said amount being written back of liability. The subsequent act of the assessee of restructuring of its Balance Sheet, wherein....
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.... based on the incriminating material found during the course of search and secondly ld.CIT(A) held that invoking of section 41(1) of the Act by the Assessing Officer is justified and thirdly while dealing with the alternate plea of the assessee ld.CIT(A) gave part relief to the assessee observing that assessee has not taken benefit of the accumulated losses to the extent of Rs. 27,30,42,267/- and therefore provisions of section 41(1) could not apply to this extent and only sustained the remaining addition of Rs. 1,03,68,617/-. Finding of ld.CIT(A) reads as under : "Findings and decision of Appellate Authority: 4.9 I have considered the assessment order, remand report, submissions of the appellant and the facts of the case. Briefly the facts are The appellant is a company engaged in the business of car rental, providing cars for self-drive. It had also earned income from car hiring, as well as, the business being tour operators. Autorider International Ltd. is a part of Autorider Group. This Company started its car rental business long back from 01.11.1994 by taking cars on lease basis from its sister concern Autorider Finance Ltd. This business of renting of car w....
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....k. Presently, I am not in a position to state as to why the same has not been offered to tax. Therefore, we hereby offer to appropriately disclose Rs. 28.34 crores for taxation as income of M/s. Autoriders International Ltd. for A. Y. 2015-16." 4.11 Further, the director of assessee as per his letter dated 16/03/2018 has categorically confirmed the above appropriate disclosure of income by Shri Pushpak Bansal. It is also admitted that assessee company AIL is engaged in the business of car rental, providing cars for self-drive, besides, it has earned income from car hiring and from the business being tour operators. AIL the required vehicles were obtained on lease basis from Autoriders Finance Limited (AFL). Assessee company AIL has obtained loans mainly from AFL and Empark Motors. As per books of accounts of assessee-AIL, in its balance sheet AFL is reflected as sundry creditor for a sum of Rs. 28,34,10,884/- 4.12 However, in the above backdrop on verification of Return of income (supra) filed in compliance with notice u/s. 153A of the Act; it was noticed that assessee failed to disclose above income of Rs. 28.34 crores despite his categorical admission of income ....
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....king additions in absence of any incriminating material found during the search action. The appellant has submitted that the addition bears no relation to any new material/documents/records found and seized during the search action. The additions have been made on the basis of annual reports pertaining to the appellant, which was already available with the Tax authorities. The appellant has submitted that on observation of the seized material and the explanation provided by the appellant, your honour would appreciate that all the seized material are nothing but the copies of annual reports, financials, income tax returns and ledgers account etc. of the appellant. It is also important to note that all the documents which were found at the time of search were recorded and no unrecorded transactions were found by the department during the search as well as post search proceeding. In short, the appellant contends that since no incriminating material was found during the course of search hence the addition made is bad in law ab-initio. 5.2 In this regard, remand report was called from the AO vide letter dated 23/06/21 specifically on this point as under: "2. In this ca....
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.... International Limited has written back Rs. 34.30 Crores during FY 2014-15 comprising of long outstanding loans of Rs. 5.96 towards capital purchases and Rs. 28.34 Crores towards long outstanding creditors. The company has written back an amount of Rs. 28.34 crores as amounts no longer payable in its reserves and surplus accounts. The same is ori account of amounts payable to M/s Autoriders Finance Ltd on account of lease charges payable during the course of leasing business carnal out by the company long back. Presently, I am not in a position to state as to why the same has not been offered to tax. Therefore, we hereby offer to appropriately disclose Rs. 28.34 crores for taxation as income of M/s Auloriders International Ltd for A.Y. 2015-16." 5. Further, the director of M/s Autoriders Finance Ltd during post search enquiries, has given a written submission dated 16/03/2018 and confirmed the disclosure made by the CFO as under:- 1. "We would like to submit that the AIL is a company which is into the business of car hiring. AIL receives income from the following avenues: • Car rentals • Providing car for self-drive â€....
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....1 dated 05/03/2018. He was confronted with the seized item No. 21 and the treatment in the books of accounts regarding this writing back of Rs. 28.34 crore in F.Y. 2014-15. He stated that he hereby offers to appropriately disclose Rs. 28.34 crores for taxation as income of M/s Auloriders International Ltd for A.Y. 2015-16. Further, the director of M/s Autoriders Finance Ltd during post search enquiries, has given a written submission dated 16/03/2018 and confirmed the disclosure made by Shri Pushpak Bansal. 5.5 Referring to above definition as per Oxford dictionary, incriminating material with reference to the present income tax proceedings would refer to any evidence which points to any undisclosed income or income in respect of which wrong claim or inaccurate claim has been made. Thus, the seized material inventorised as Bundle no. 21 (from pages 1 to 3019) combined with the statement of Shri Pushpak Bansal u/s. 132(4) dated 19/01/2018 and u/s. 131 dated 05/03/2018 and statement of the director of Autoriders Finance Ltd during post search enquiries dated 16/03/2018 are certainly evidence which point towards prima facie wrong claim by the appellant. All the above statemen....
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....or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1. For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first-mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. 6.3 Explanation 1 above which was inserted w.e.f 1/04/1997 clearly states that "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first-mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. Thus, there is no need of obtaining any consent from Autoriders Finance Limited whose liabilit....
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.... 2008-09 23,92,411 - 23,92,411 2009-10 - (14,11,147) (14,11,147) 2010-11 - 1,04,38,376 1,04,38,376 2011-12 - 16,08,860 16,08,860 Total (27,30,42,367) - (27,30,42,367) 7.3 The appellant has taken a plea that provisions of section 41(1) can be invoked only in a case where an allowance or deduction in the form of a loss or claim of expenditure or trading liability has been claimed in a particular year and in some later year some benefit in the form of cash or in any other manner or in the form of remission or cessation of the trading liability is obtained in respect of the earlier claim. then the benefit accruing in the later year would be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that later year. In other words, since the deduction or allowance has already been allowed in respect of a trading liability but at a later stage if the payment is not made in respect of the liability and the liability is written off then it is as good as the liability was never incurred. But since deduction has already been allowed in respect of this liability, the ces....
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....ion) from the A.Y. 1978-79 to 1992-93 to the extent of Rs. 140,46,06,586/-. As per the statement made by the Ld. counsel at the Bar the said loss has lapsed and assessee could not get the benefit due to the period of limitation is provided u/s. 72(3) of the Act or by reason of other statutory provisions. The first part of sec. 41(1) contemplates loss, expenditure or trading liability in some former years in which allowance or deduction has been made and the second part of the said section contemplates recoupment of such loss or expenditure or benefit in respect of "such" trading liability by way of remission or cessation in some subsequent years. The word "such" appearing in the second part of sub-section (1) of sec. 41 is significant in the context that the word "such" signifies that the recoupment or benefit must be in respect of loss or expenditure or trading liability mentioned in the first part of the said sub-section. The argument of the Ld. counsel is that to extent of the losses from the A.Y. 1978-79 to 1992-93 aggregating to Rs. 140.46,06,586/-, section 41(1) cannot be applied being it is a deeming provision as the assessee has not got any benefit in tax liability under th....
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....t has incurred losses in those years which could not be set off (lapsed) to the extent of Rs. 27,30,42,267. Since the loss could never be set off, the provisions of section 41(1) would not apply to that extent. 7.6 In view of the above discussion and respectfully following the decision of Hon'ble Pune ITAT B' in the case of Mula Pravara Electric Co-op. Society Ltd. V. Deputy Commissioner of Income-tax (Supra), addition u/s. 41(1) to the extent of Rs. 27,30,42,267/- deserves to be and accordingly deleted. Ground no. 3 is partly allowed. Ground no. 4: 8.1 In this ground the appellant has contended that the AO erred in not giving effect of provision of section 41(5) of the Act. The Ld. AO ought to have allowed the setoff of loses of ceased business as per the provisions of Section 41(5) of the Act. 8.2 In view of the decision of the appellate authority for ground no. 3, this ground becomes academic and need not be adjudicated. 9. With the result, appeal is partly allowed." 4. Aggrieved by the order of ld.CIT(A), both assessee and Revenue are in cross appeals before this Tribunal. 5. Ld. Counsel for the assessee firstly made su....
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....n question falls in the category of completed assessment as no notice u/s. 143(2) of the Act was issued and therefore in light of the judgment of Hon'ble Apex Court in the case of PCIT v. Abhisar Buildwell P. Ltd. (2023)454 ITR 212(SC) ld. Assessing Officer was not justified in making the impugned addition for the completed Assessment Year which is merely based on the information contained in the books of account and audited financial statements already disclosed with the regular return of income. 7. As regards the merits of the case regarding invoking of section 41(1) of the Act, he relied on the finding of ld.CIT(A) and further added that as the assessee paid sum of Rs. 3.00 crore subsequent to F.Y. 2014-15 to M/s. Autoriders Finance Limited the outstanding sundry creditors have reduced by Rs. 3.00 crore and are therefore less than the accumulated losses of preceding years at Rs. 27,30,42,267/- and therefore even the addition sustained by ld.CIT(A) at Rs. 1,03,68,617/- also deserves to be deleted. Reference made to the following documents placed in the paper book 1 and 2 as well as decisions referred and relied on in support of its grounds of appeal which reads as follows : ....
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....f the assessee 2016-17 478 309 (xiii) Unsecured loans ledger account in the books of the assessee 2017-18 479 17. Letter to DDIT (Inv.) giving page-wise explanation of seized material dated 16.03.2016 480 - 488 Certified that all the above documents are available with A.O. and CIT(A), Sr. No. Particulars Page No. 18. The Finance Bill, 2026 (relevant extract) 489 - 490 19. Judgment of the Hon'ble Bombay High Court in the case of Ashok Commercial Enterprises v. ACIT (459 ITR 100) (relevant pages) 491 - 498 20. Judgment of the Hon'ble Bombay High Court in the case of Sanjay Nathalal Shah v. ACIT (182 taxmann.com 847) 499 - 504 21. Judgment of the Hon'ble Bombay High Court in the case of Clear Channel India P. Ltd. v. DCIT in Writ Petition No. 4990 of 2025 dated 17.02.2026 505 - 515 22. Order of Chennai Bench of the Hon'ble Tribunal in the case of ACIT v. RPD Earth Movers P. Ltd. (174 ITD 717) 516 - 518 23. Order of Chandigarh Bench of the Hon'ble Tribunal in the case of Ashish Jain DCIT (205 ITD 455) 519 - 544 24. Order of Raipur Bench of the Hon....
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....ant prays that the action of Ld. AO may kindly be treated as bad in law and ordered to be deleted. 2. The Ld. CIT(A) erred in upholding addition to Rs. 1,03,68,617 u/s. 41(1) of the Income Tax Act, 1961 out of total addition made by the Ld. AO of Rs. 28,34,10,884. The appellant prays that the appeal: addition be treated as bad in law and ordered to be deleted. 9.1 Assessee has also raised additional grounds of appeal and requested for admission of the same as no facts are required to be investigated. The said additional grounds reads as follows : "1. The impugned assessment order passed under Section 143(3) r.w.s. 153A is bad-in-law and invalid as the Document Identification Number ('DIN') has not been quoted in accordance with CBDT Circular No. 19/2019 dated 14.08.2019, and therefore, the order deserves to be quashed. 2. The approval of Draft Assessment Order granted by the Joint. CIT, CR-Nashik u/s. 153D of the Act is bad-in-law and invalid as the Document Identification Number('DIN') has not been quoted in line with the CBDT Circular No. 19 of 2019 dated 14.08.2019 in the approval order and hence the impugned assessment order passed ....
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....removal of doubts, it is hereby clarified for the purposes of section 292B that no assessment under any of the provisions of this Act shall be invalid or shall be deemed to have been invalid on the ground of any mistake, defect or omission in respect of quoting of a computer generated Document Identification Number, if the assessment order is referenced by such number in any manner.". 13. From bare perusal of the above provision and also considering the intent of the legislature, we find that the purpose of introducing section 292BA of the Act is mainly that the assessment orders passed under the provisions of this Act should not be held to be invalid or shall be deemed to have been invalid on the ground of any mistake, defect or omission in respect of quoting of a computer generated DIN if the assessment order is referenced by such number in any manner. Now the contention of ld. Counsel for the assessee is that the approval u/s. 153D of the Act does not contain DIN therefore such approval is bad in law and invalid making the impugned assessment order invalid and bad in law. Ld. Counsel for the assessee submitted that in section 292BA of the Act only the word "assessment order" ....
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....shed as bad in law. 16. Before proceeding, we take note of the ratio laid down by the Hon'ble Apex Court in the case PCIT v. Abhisar Buildwell P. Ltd. (2023)454 ITR 212(SC) affirming the view of Hon'ble Delhi High Court of CIT vs. Kabul Chawla (2015), 61 taxmann.com 412 (Delhi) and the ratio laid down by Hon'ble Apex court reads as under:- "5. We have heard learned counsel for the respective parties at length. The question which is posed for consideration in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under section 132 or requisition under section 132A or not, i.e., whether any addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132 A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under section 132 or requisition under section 132A, the assessment has to be done under section 153A of the Act, 1961 and the AO thereafter has the jurisdi....
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....r each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment s....
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....ear, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under subsection (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or r....
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....the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. 9. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961. 9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other ....
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....rth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated un....
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.... the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy....
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....assess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. 17. Examining facts of the instant case in the light of ....
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..... Now whether the return of income, balance sheet and ledger account of sundry creditors and outstanding loans which are part of the books of account of the assessee can be termed as incriminating material. It is an admitted fact that the incriminating material has not been defined under the provisions of Income Tax Act. In the impugned order, ld.CIT(A) has referred to the definition as per Oxford Dictionary which provides that incriminating refers to any document, object, digital data or physical items that seems to show or suggest that someone has done something wrong or illegal. It is information that implies guilt and can be used as evidence in an investigation or trial." According to Cambridge Dictionary, incriminating material refers to "evidence, documents or other information that suggests or proves some is guilty of a crime or wrong doing". 20. Now examining the facts of the instant case in light of above definitions, we find that the return of income have been regularly filed for A.Y. 2014-15 till A.Y. 2017-18, books of account are regularly maintained and duly audited and audited financial statements have been e-filed on the income-tax portal as well as portal of Mini....
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....m part of the Net Profit for the year. The above discussion shows that the information based on which ld. Assessing Officer has made the addition has not been unearthed during the course of search but was very much available in the Income Tax Return prior to the search and appearing in the Audited financial statements attached to the ITR. Therefore, in our considered view, the seized material found during the course of search in the case of assessee is not in the nature of incriminating material based on which the impugned addition can be made. Therefore, in our considered view no incriminating material has been found during the course of search at the assessee's premises. 22. As far as second aspect as to whether the assessment year 2015-16 falls in the category of completed assessment, we find that the regular return of income has been filed on 15.09.2015. No notice u/s. 143(2) of the Act has been issued and as on the date of search no assessment for the impugned assessment year was pending, therefore A.Y. 2015-16 is a completed assessment. Thus, both the conditions, i.e. absence of incriminating material and the assessment year falling in the category of completed assessment ....
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....position of total loss as well as business loss which the assessee has filed which is as under: xxxxxxxxxxxxx xxxxxxxxxxxxx 10. From the above chart, it is seen that the assessee has continuously incurred business loss (other than depreciation) from the A.Y. 1978-79 to 1992-93 to the extent of Rs. 140,46,06,586/-. As per the statement made by the Ld. counsel at the Bar the said loss has lapsed and assessee could not get the benefit due to the period of limitation is provided u/s. 72(3) of the Act or by reason of other statutory provisions. The first part of sec. 41(1) contemplates loss, expenditure or trading liability in some former years in which allowance or deduction has been made and the second part of the said section contemplates recoupment of such loss or expenditure or benefit in respect of "such" trading liability by way of remission or cessation in some subsequent years. The word "such" appearing in the second part of sub-section (1) of sec. 41 is significant in the context that the word "such" signifies that the recoupment or benefit must be in respect of loss or expenditure or trading liability mentioned in the first part of the said sub-sect....