Zoom Developers SEZ [Indore] Pvt. Ltd Vs A.C.I.T (ITAT Delhi)
ITAT Delhi held that the additions/disallowance, devoid of any incriminating material found during the course of search, cannot validate the assessment orders framed u/s 153C of the Act. Accordingly, assessment orders u/s 153C cannot be sustained and liable to be quashed.
Facts- A search and seizure operation u/s. 132 of the Act was conducted on 23.07.2015 and on subsequent dates at the residential as well as office premises of Shri Deepak Aggarwal, Shri Mukesh Kumar and Others group of cases based at Delhi. Allegation was that this group was found to be a group of entry operators providing accommodation entries to beneficiaries. Various incriminating papers/documents were found and seized during the course of search and seizure operation in the group case and statements were recorded during the course of search and seizure operation and on subsequent dates, confirmed the belief of the department that the group was involved in providing accommodation entries.
During the course of search and seizure operations, incriminating papers/documents were found related to the captioned assessees and on the basis of such impounded material, satisfaction note was drawn on 23.03.2018 in the case of searched person and the other person [captioned assessee] u/s. 153C of the Act.
AO initiated proceedings u/s 153C of the Act and completed proceedings by making addition on account of commission on accommodation entries on account of bogus purchases and bogus sales being 3% of the accommodation entries provided and further made disallowance on account of assumed expenditure which the assessee must have incurred in running its business of providing accommodation entries.
CIT(A) deleted the addition on account commission on accommodation entries and partly confirmed the disallowance of adhoc expenditure.
Conclusion- The Hon’ble Supreme Court in the case of Singhad Technical Education Society 397 ITR 344 has held that when the seized documents did not establish any co-relation document wise with the assessment years in question, then the validity of the assessment so framed was legally unsustainable.
Held that we are of the considered view that the additions/disallowance, devoid of any incriminating material found during the course of search, cannot validate the assessment orders framed u/s 153C of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
ITA No. 674/DEL/2021 to ITA No. 678/DEL/2021 are appeals of Zoom Developers SEZ [Indore] Pvt. Ltd preferred against the order of the ld. CIT(A) – 26, New Delhi dated 07.02.2020 pertaining to A.Ys 2012-13 to 2016-17.
2.ITA No. 679/DEL/2021 to ITA No. 683/DEL/2021 are appeals of M/s Startle Constructions Pvt Ltd preferred against the order of the ld. CIT(A) – 26, New Delhi dated 07.02.2020 pertaining to A.Ys 2012-13 to 2016-17.
3. ITA No. 688/DEL/2021 to ITA No. 692/DEL/2021 are appeals of Tyagi Portfolio Management Pvt. Ltd preferred against the order of the ld. CIT(A) – 26, New Delhi dated 07.02.2020 pertaining to A.Ys 2012-13 to 2016-17.
4. ITA No. 693/DEL/2021 to ITA No. 697/DEL/2021 are appeals of Jaguar Equity Ltd preferred against the order of the ld. CIT(A) – 26, New Delhi dated 07.02.2020 pertaining to A.Ys 2012-13 to 2016-17.
5. Representatives of both the sides agreed that the underlying facts in the issues are identical in all these appeals. Assessment orders and orders of the first appellate authority are identically worded, though the quantum may differ. Therefore, on such, concession, all these appeals are disposed of by this common order for the sake of convenience and brevity.
6. In all the captioned appeals, the challenge is two-fold –
– firstly, the assessee has challenged the validity of the assessments made u/s 153C of the Income-tax Act, 1961 [the Act, for short] and;
– secondly, the assessee has challenged the adhoc disallowance of assumed expenditure partly sustained by the ld. CIT(A).
7. As mentioned elsewhere, the underlying facts in the issues are identical. We have heard the representatives of both the sides on the facts of ITA No. 693/DEL/2021 for A.Y 2012-13 in the case of Jaguar Equity Ltd.
8. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
9. Briefly stated, the facts of the case are that pursuant to Warrant of Authorization, a search and seizure operation u/s 132 of the Act was conducted on 23.07.2015 and on subsequent dates at the residential as well as office premises of Shri Deepak Aggarwal, Shri Mukesh Kumar and Others group of cases based at Delhi.
10. Allegation was that this group was found to be a group of entry operators providing accommodation entries to beneficiaries. Various incriminating papers/documents were found and seized during the course of search and seizure operation in the group case and statements were recorded during the course of search and seizure operation and on subsequent dates, confirmed the belief of the department that the group was involved in providing accommodation entries.
11. During the course of search and seizure operations, incriminating papers/documents were found related to the captioned assessees and on the basis of such impounded material, satisfaction note was drawn on 23.03.2018 in the case of searched person and the other person [captioned assessee] u/s 153C of the Act. Satisfaction Note in the case of the “Other Person” i.e. the assessee reads as under:
