Income Tax Act, 1961 Thereby Deleting The Addition Made Under Section 153A/143(3) Of The Income Tax Act, 1961 In Absence Of Incriminating Documents Without Cons v. – Continental Warehousing Corporation Ltd. Reported In (2015) 64 Taxman.com (Sc) Where Slp Was Admitted Against An Order Of High Court That No Addition Can Be M

Form No.(J2) IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE Present : THE HON’BLE JUSTICE T.S. SIVAGNANAM A N D THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA IA NO.GA/2/2018(Old GA/1615/2018) ITAT/199/2018 PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA -Versus-M/S. SHALIMAR PELLET FEEDS LIMITED For the Appellant: Ms. Sucharita Biswas, Adv. Mr. Soumen Bhattacharyya, Adv.For the Respondent: Mr. J. P. Khaitan, Sr. Adv. Mr. Siddhartha Das, Adv. Ms. Swapna Das, Adv. Heard on : 07.12.2021 Judgment on : 07.12.2021 T. S. SIVAGANANAM, J. : This appeal of revenue filed underSection 260A of the Income Tax Act, 1961 (the ‘Act’ in brevity) isdirected against the order dated 17[th] October, 2012 passed by theIncome Tax Appellate Tribunal, Kolkata “C” Bench (the ‘Tribunal’ in short) in ITA No.948 to 952/Kol/2017 for the assessment years2008-09 to 2011-12 and 2013-14. The revenue has raised for the following substantial questions of law for consideration: “(a) Whether in the facts and circumstances of the case, the LearnedTribunal was justified in quashing the order under Section 263 ofthe Income Tax Act, 1961 for the assessment years 2008-09 to 2011-12 by holding the assessment orders for these assessment yearspassed by the assessing officer as not erroneous and prejudicial tointerest of revenue as the direction of Pr CIT for making additionson account of additional depreciation, suppression of sale anddisallowance in case of depreciation was not based on incriminatingmaterial ignoring the fact that these additions were not made bythe assessing officer in the assessment order and for making theseadditions, there is no requirement of incriminating material as perthe provisions of Section 153A of the Income Tax Act, 1961 ? (b)Whether in the facts and circumstances of the case, the LearnedTribunal has erred in treating the seized material marked as SHLA-4and SPG-2 as non-incriminating document and consequently aftertreating the order of assessing officer as non-erroneous, quashingthe order under Section 263 of the Income Tax Act, 1961 for AY2009-10 and nullifying the addition of Rs.3,24,49,403/- made by theassessing officer on the basis of order u/s 263 of the Act ? (c)Whether in the facts and circumstances of the case, the LearnedTribunal was justified in quashing the order under Section 263 ofthe Income Tax Act, 1961 for the assessment year 2013-14 by holdingthe assessment order passed for this assessment year is notTribunal was justified in quashing the order under Section 263 ofthe Income Tax Act, 1961 for the assessment year 2013-14 by holdingthe assessment order passed for this assessment year is not erroneous and prejudicial to interest of revenue ignoring the factthat the addition on account of disallowance of the additionaldepreciation was not made by the assessing officer and by wronglyholding the assessee company as engaged in manufacturingactivities?that the addition on account of disallowance of the additionaldepreciation was not made by the assessing officer and by wronglyholding the assessee company as engaged in manufacturingactivities?(d)Whether in the facts and on the circumstances of the case, thelearned Tribunal was justified in arriving at finding byinterpreting the term “Manufacture” occurring in the context ofSection 80IB that does not necessarily require that the endproduct of the manufacturing process by completely different fromthe ingredients, as regard its chemical composition, integralstructure or its use ?learned Tribunal was justified in arriving at finding byinterpreting the term “Manufacture” occurring in the context ofSection 80IB that does not necessarily require that the endproduct of the manufacturing process by completely different fromthe ingredients, as regard its chemical composition, integralstructure or its use ? (e)Whether in the facts and circumstances of the case, the learnedTribunal was justified in not appreciating that the process ofmanufacturing of poultry feeds does not amount to mere mixingtogether of all the different ingredients, without involving anychange in the chemical composition of the ingredients ?Tribunal was justified in not appreciating that the process ofmanufacturing of poultry feeds does not amount to mere mixingtogether of all the different ingredients, without involving anychange in the chemical composition of the ingredients ? (f)Whether in the facts and circumstances of the case, the learnedTribunal was justified in not appreciating that the process ofpreparation of poultry feeds does not amount to production of anarticle within the meaning of Section 80IB of the Income Tax Act,1961 and as such not eligible for deduction as claimed by theassessee ?Tribunal was justified in not appreciating that the process ofpreparation of poultry feeds does not amount to production of anarticle within the meaning of Section 80IB of the Income Tax Act,1961 and as such not eligible for deduction as claimed by theassessee ? (g)Whether in the facts and circumstances of the case, the LearnedTribunal has erred in quashing the order under Section 263 of theIncome Tax Act, 1961 for the assessment year 2009-10 withoutconsidering the merit of disallowance of depreciation claim @ 30 %on lorry which are not used for hiring business ?Tribunal has erred in quashing the order under Section 263 of theIncome Tax Act, 1961 for the assessment year 2009-10 withoutconsidering the merit of disallowance of depreciation claim @ 30 %on lorry which are not used for hiring business ? (h)Whether in the facts and circumstances of the case, the LearnedTribunal has erred in quashing the order under Section 263 of theTribunal has erred in quashing the order under Section 263 of the Income Tax Act, 1961 thereby deleting the addition made underSection 153A/143(3) of the Income Tax Act, 1961 in absence ofincriminating documents without considering the Apex Court’sadmission of SLP in the case of CIT – II – Versus – ContinentalWarehousing Corporation Ltd. Reported in (2015) 64 Taxman.com (SC)where SLP was admitted against an order of High Court that noaddition can be made without incriminating documents ? (i)Whether in the facts and circumstances of the case, the LearnedTribunal has erred in not considering the fact regarding admissionof SLP by Supreme Court in the case of CIT-Versus-RRJ SecuritiesLtd. Reported in 246 Taxman 62 (SC) where Section 153C read withSection 153A of the Income Tax Act, 1961 were initiated withoutincriminating documents ?” We have Ms. Sucharita Biswas, learned counsel assisted byMr. Soumen Bhattacharyya, learned advocate for theappellant/revenue and Mr. J. P. Khaitan, learned senior counselassisted by Mr. Siddhartha Das and Ms. Swapna Das, learnedadvocates for the respondent/assessee. There are five assessment years involved in this appealand the revenue has filed a single appeal challenging the commonorder passed by the tribunal. In so far as substantial questionno.(a) is concerned, it arose for all the assessment years.Substantial question nos.(b) and (g) arose for the assessment year2009-10; whereas substantial question nos.(c), (d), (e) and (f)arose for the assessment years 2008-09, 2010-11, 2011-12 and 2013-14. Substantial question nos.(h) and (i) are also common to all the assessment years. So far as assessment years 2008-09, 2010-11, 2011-12 and 2013-14 are concerned, all the appeals filed bythe revenue are below the threshold limit of the tax effectstipulated by the circular issued by the Central Board of DirectTaxes (CBDT). Therefore, the appeals with regard to theaforementioned four assessment years stand disposed of on theground of low tax effect. Consequentially, the questions of lawsought to the raised in those appeals for the relevant assessmentyears are left open. the assessment years. So far as assessment years 2008-09, 2010-11, 2011-12 and 2013-14 are concerned, all the appeals filed bythe revenue are below the threshold limit of the tax effectstipulated by the circular issued by the Central Board of DirectTaxes (CBDT). Therefore, the appeals with regard to theaforementioned four assessment years stand disposed of on theground of low tax effect. Consequentially, the questions of lawsought to the raised in those appeals for the relevant assessmentyears are left open. In so far as the assessment year 2009-10 is concerned, theCommissioner of Income Tax, Central-I, Kolkata (CIT), whileexercising his power under Section 263 of the Act, has stated thatthere are ample records and documents to indicate that theassessee company had made sales to M/s. Shalimar HatcheriesLimited as evident from the sales bill seized during the searchoperations forming part of the incriminating evidence. Further ithas been stated that seized materials were available. Theassessing officer ought to have made an enquiry regardingfinancial and business transactions of the assessee with M/s.Shalimar Hatcheries Limited. Further the CIT stated that from thetrial balance it is seen that the assessee had disclosed lorriesas assets and it is also evident from the balance sheet of theassesee for the year ending on 31[st] March, 2009 that depreciation was claimed at the rate of 30% and this should also have promptedthe assessing officer to make proper enquiries to ascertain theclaim of depreciation at the rate of 30% on the lorries. In theopinion of the CIT the issues are clearly linked with the seizeddocument and were required to be examined and verified by theassessing officer during the course of assessment proceeding underSection 143(3)read with Section 153A of the Act. Therefore, theCIT rejected the contention of the assessee that no incriminatingevidence related to transactions (sales) with Shalimar HatchariesLimited and disallowance of excess depreciation of lorries wasfound during the course of search assessment. CIT was of theopinion that such contention is not based upon facts and thereforenot true. Thus, the contention of the assessee that there was noincriminating material related to the transactions with M/s.Shalimar Hatachries Limited and disallowance of excessdepreciation on lorries was rejected. Consequently, the CIT cameto the conclusion that the order of the assessing officer waserroneous and prejudicial to the interest of revenue. The assesseecarried the matter on appeal to the tribunal contending thatbefore the CIT the assessee in their reply to the notice underSection 263 of the Act had brought to his notice that noincriminating materials were found in the course of search regarding the aforesaid items and therefore, the conclusion of theCIT was erroneous. regarding the aforesaid items and therefore, the conclusion of theCIT was erroneous. With regards to the show cause notice for the assessmentyear for consideration, namely, assessment year 2009-10. The CIThad placed reliance on the seized documents marked as SHLA-4 frompages 2 to 105 and SPG-2 from pages 18 to 20 as incriminatingdocuments found during the course of search. The assessee’scontention was that the seized documents marked as SHLA-4 frompages 2 to 105 contains only sales bill relating to the sales madeby the assessee to M/s. Shalimar Hatacharies Limited and suchinformation is already part of regular books of account of theassessee and there is nothing incriminating therein. The assesseefurther contended before the tribunal that they had filed adetailed reconciliation statement before the CIT to substantiatethe case that the same did not emanate from the seized material.The assessee also gave an explanation for the alleged differencewhich has been noted by the tribunal in paragraph-7.1 of theimpugned order. Further the assessee contended that the seizeddocuments in SPG-2 from pages 18 to 20 contains trial balance forthe period from 1.4.2012 to 31.3.2013 which are part of theregular books of account of the assessee and there is nothingincriminating therein and in any case the seized documents pertainto the assessment year 2013-14 and cannot be termed as incriminating for the assessment year 2009-10. Thus, the argumentof the assessee was that the CIT has ignored all the explanationsand submissions made by them and merely stated that the assessingofficer has not made enquiry with regard to the seized documentsand treated the order of the assessing officer as erroneous andprejudicial to the interest of revenue. The tribunal whileexamining the correctness of the stand taken by the assesseebefore it was required to examine the facts placed before it whichthe tribunal has noted in paragraph-7.1 of the impugned order.While deciding the controversy and rendering a finding, thetribunal in paragraph-9 held that the assessee has given anexplanation which is acceptable and there was nothing to disturbthe concluded assessment for the assessment year 2009-10. In ourconsidered view such conclusion appears to be without sufficientreason. We say so because when the assessee’s case was that theCIT had ignored the explanation and submission therefore, if thetribunal was of the view that the CIT did not consider theexplanation, it would have been well justified to accept theexplanation, submission and record a finding. The other optionopen would have been to send the mater back to CIT for re-examination of the explanation and submission of the assessee.Either of the two options had not been chosen by the tribunal but merely concluded by stating that the explanation offered by theassessee is acceptable without assigning any reasons therefor. Thus our considered view would be an incorrect manner ofrendering a conclusion which revolves entirely on facts anddocuments which were placed by the assessee before the CIT.Therefore, we are of the view that such finding of the tribunalrequires to be set aside and the matter has to be remanded back tothe Commissioner of Income Tax for fresh consideration on the saidaspect. merely concluded by stating that the explanation offered by theassessee is acceptable without assigning any reasons therefor. Thus our considered view would be an incorrect manner ofrendering a conclusion which revolves entirely on facts anddocuments which were placed by the assessee before the CIT.Therefore, we are of the view that such finding of the tribunalrequires to be set aside and the matter has to be remanded back tothe Commissioner of Income Tax for fresh consideration on the saidaspect. So far as the issue with regard to the claim for directionunder Section 80IB is concerned, it is submitted by the Counsel oneither side that such issue does not arise in the assessment year2009-10. In the result the appeals in so far as the assessmentyears 2008-09, 2010-11, 2011-12 and 2013-14 are dismissed on theground of low tax effect. Consequently, the substantial questionsof law raised in this appeal in so far as the assessment years, asindicated above, are left open. So far as the order of the tribunal pertaining to theassessment year 2009-10 on two issues, namely, sales bill anddepreciation on lorries is set aside and the matter is remanded tothe CIT for fresh consideration after giving an opportunity ofhearing to the respondent assessee. Since we have remanded thematter for fresh consideration by the CIT, we give liberty to the respondent assessee to raise all issues and more particularly theargument which has been placed before us that seized documents arenot incriminating materials including the merits of the matter aswell. Consequently, the order passed by the CIT for theassessment year 2009-10 is also set aside and the matter isremanded to the CIT for fresh consideration.The connected application for stay (IA No.GA/2/2018) alsostands closed. (T.S. SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.) A/s./S.De