No Addition u/s 153C can be made in Absence of any Incriminating Material for a Completed Assessment

The Chandigarh Bench of Income Tax Appellate Tribunal ( ITAT ) has held that no addition u/s 153Ccan be made in absence of any incriminating material for a completed assessment.

A search and seizure operation under section 132(1) was conducted at the business and residential premises of M/s Longowalia Group of Cases and the appellant, Mr. Sanjay Garg also was one of the persons covered in such search. The Assessing Officer (AO) required the assessee to submit complete details of Rs.70 lakhs which was received in AY 2011-12 from a Delhi-based company and the amount was shown under the head ‘current liability’ in the Balance Sheet. Without satisfying with the details, placing reliance on the concept of preponderance of probability, the AO added the amount of Rs.70 lacs u/s 68 of the Act and completed the assessment at Rs.85,45,490/. CIT (A) confirmed the order of AO against which the assessee filed an appeal before the ITAT.

Mr. Ashwani Kumar, CA, for the appellant, submitted the assessee had entered into an agreement during the assessment year under consideration with Delhi based, M/s Namo Resorts Private Limited to sell a property at Ludhiana which he co-owned with his brother and had received an advance of Rs.70 lacs, but the company with whom the agreement to sell had been entered into did not appear for the purpose of execution of the registry and, therefore, in terms of the agreement, the assessee forfeited the amount received as advance.

The appellant further submitted that the allegation of the AO that the amount remained unexplained in terms u/s 68 of the Act, was incorrect because the same stand was explained. In absence of any incriminating material found during the course of search, no addition could be made u/s 153A of the Act.

By relying the decision of Kerala High Court in the case of CIT Vs. K.P.Ummer, Mr. Ranjeet Kaur, counsel for the revenue submitted that when a notice u/s 153A of the Act is issued, it enables the Department to carry out assessment/re-assessment with respect to six immediately preceding years and this does not require any incriminating material recovered during search relating to those prior years in which there is no time left on the date of the search for framing of assessment u/s 143(3) of the Act.

The Tribunal observed that in the case of completed assessments, no addition can be made in the absence of any incriminating material. Though the Tribunal agrees with the decisions of High courts which hold otherwise and state that u/s 153A, addition in case of completed assessments need not be restricted to incriminating material, but in view of the Apex court decision in CIT vs Vegetable Products which states that where there are two reasonable constructions of a statute, the construction favoring the assessee should be adopted.

The Coram of Mr. N.K. Saini, Vice President, and Mr. Sudhanshu Srivastava, Judicial Member have held that “we hold that in absence of any incriminating material found during the course of search with respect to the impugned transaction, the AO did not have any power to make the impugned addition. We set aside the order of the CIT (A) and direct the AO to delete the addition”.

Refund of Duty Deposit paid on or after the Amendment of 2014 can invoke Section 35FF: CGST Panipat

The CGST Panipat Division had held that refund of duty deposit paid on or after the amendment of 2014 can invoke section 35FF of the Excise Act.

The appellant M/S Riba Textiles Limited registered for 100% EOU vide Customs Bonded Warehouse License and they were engaged in the manufacture and export of excisable goods. Interest was granted from the date of deposit as per the amended provisions of 35FF of the Central Excise Act, 1944. Before the insertion of Section 35FF of the Central Excise Act in 2008, there was no provision for the grant of an interest in case of delay in refund of pre-deposit made in pursuance to section 35F of the Central Excise Act, 1994. Section 35FF was inserted in Central Excise Act, 1944 vide Section 85 of the Finance Act, 2008. Section 35FF was further amended by the Finance Act, 2014 applicable w.e.f. 06.08.2014,

It was observed that from the very beginning interest @ 6 p.a. has been provided under section 35FF of the Central Excise Act, 1994, and provisions of amended section 35FF of the Central Excise Act, 1944 apply to only those deposits under section 35F of the Act, that was made on or after 06.08.2014.

It was that the party was entitled to claim only interest provided under the statute but they have claimed not only that which was not provided under the Central Excise Act, 1944 but also claimed interest over and above the rate notified by the government. Further contended that the party has not submitted anything in their defence against the show cause notice.

It was observed that the party failed to state their defence and they admitted the excess amount claimed amounting to Rs 1648109 for the period beyond the date of refund. All refund/rebate claims involving an amount of Rs. 5 lakhs or above should be subjected to pre-audit at the level of the jurisdictional Commissioner. In such cases, a suitable Order-in-original shall be passed by the Deputy/Assistant Commissioner of Central Excise. Since the claim is pre-audited with the concurrence of the Commissioner, the usual review proceedings under section 35E may not be necessary in such a case.

The Deputy Commissioner Maninder Kumar sanctioned the refund claim of the interest of Rs.6508274/- and the remaining claims of Rs.1648109/are rejected under Section 35FF of the Central Excise Act, 1944 and directed to made payment through e-payment (RTGS/NEFT).

Non-Filing of Appeal due to Lack of Communication b/w Tax Advisors and Board of Directors

The Pune bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri R.S. Syal, Vice President and Shri S.S. Viswanethra Ravi (Judicial Member) has held that the ground for non-filing of appeal due to lack of communication between tax advisors and the Board of Directors cannot be treated as a ‘reasonable cause’ for the condonation of delay under the provisions of the Income Tax Act, 1961.

The assessee, EnerCon Solutions Mauli Sugar Pvt. Ltd filed the appeal with a delay of 423 days. One Mr. Vijaykant Vikram Munde filed affidavit dated 13-07-2018 stating that the CIT(A) passed order in the year 2017, since then there was serious disputes in Board of Directors and shareholders about the business activities and the management and policies, as a result which disputes the dairy unit of the assessee situated at Kapadgaon Taluka Phaltan District Satara was forced to shut down w.e.f. 21-11-2017 and also the financial and legal records of the assessee were shattered and misplaced.

The assessee further contended that there is lack of communication between the tax advisors and the Board of Directors due to which the appeal could not be filed before this Tribunal within stipulated time. They further stated that this appeal was filed with a delay of 423 days when a call received from the office of Tax Recovery Officer regarding tax arrears and made enquiries with tax counsel, came to know that the appeal against the order of CIT(A) is required to be filed.

The Two-Meber bench noted that the Tribunal issued as many as 6 notices intimating the date of hearing to the assessee by Registered Post and all the notices were received except one which was returned unserved with endorsement dated 11-08-2021.

“On all the hearings above, we find no representation from the assessee. On perusal of the affidavit filed by the Directors of the assessee, we note that this appeal was filed when calls from the office of Tax Recovery Officer was received which, in our opinion, is not sufficient reason which really prevented the assessee in filing the appeal in time. Thus, we do not find any reasonable cause as explained in the said affidavit and the delay of 423 days are dismissed. Since, the delayis not condoned, the issues raised in the grounds of appeal becomes infructuous and are dismissed as such,” the Tribunal said.