Suchitra Kamble, JM.
1. This appeal is filed by the assessee against the order dated 02.11.2016 passed by the CIT(A)-12, Ahmedabad for the Assessment Year 2011-12.
2. The assessee has originally raised the following grounds of appeal:
"1. Because, the Ld. AO has erred in law and on facts by invokingsection 153Cof the Act merely based on two documents related to the appellant recovered from the premises of third parties, without recording satisfaction on if the alleged documents are of incriminating nature and that they prima facie represent undisclosed income, thus, the entire assessment proceedings is void-ab-initio and the assessment order is prayed to be quashed being illegal.
2. Because, the Hon'ble CIT(A) has erred in law and on facts in confirming disallowance of repairs and maintenance expenses of Rs.9,68,619/- on Data Centre Building treating the transaction as bogus merely on IT(SS)A No.118/Ahd/2017 A.Ys. 2011-12surmises and conjecture without any positive evidence on record even though the recipient has brought the said amount to tax.
3. Because, the Hon'ble CIT(A) has erred on facts in confirming disallowance of unpaid service tax of Rs.72,42,478/- u/s. 43B of the Act though the appellant company followed exclusive accounting method with cash basis for service tax under theFinance Actand no liability to pay service tad arisen as at the end of the financial year.
4. Because the Hon'ble CIT(A) has erred in confirming disallowance of depreciation and addition of rent aggregating to Rs.51,956/- on Residential Flat though it was used exclusively for business purposes.
5. Because, the Hon'ble CIT(A) has erred in law and on facts in confirming an addition of Rs.63,84,556/- towards interest disallowance u/s.36(1)(iii) of the Act merely on surmise, when the appellant has sufficient interest free funds.
6. Because the Hon'ble CIT(A) has erred in law and on facts while confirming disallowance of expenditure u/s.40(a)(ia) aggregating to Rs.3,59,39,022/-, though the same amounts were offered to tax by the recipient and are squarely covered under the second proviso to 40(a)(ia) of the Act.
7 Because, the Hon'ble CIT(A) has erred in law and on facts in confirming disallowance of depreciation aggregating to Rs.95,36,182/- on Building and Computer Systems treating construction and purchase activities as bogus merely on surmise and conjecture without any positive evidence on record even though the recipients have brought these amounts to tax."
The assessee has also raised the following additional grounds of appeal:
"1.0 The Assessment Order passed by the learned Assessing Officer is without jurisdiction and void-ab-initio and is liable to be quashed, as proceedings initiated undersection 153Care without satisfying conditions envisaged under the Act and are thus illegal, time barred and bad in law.
2.0 In the facts and circumstances of the case issue of notice u/s. 153C of the Income Tax Act, 1961 is bad in law as the learned Assessing Officer(s) of the searched persons had failed to record satisfaction before initiation of the proceedings u/s. 153C of the Act. 3.0. The learned Assessing Officer had mentioned in the satisfaction that impugned seized documents belonged to the third parties and therefore passing of the assessment order pursuant to such satisfaction u/s. 153C is bad in law and liable to be quashed. The Assessment Order passed is bad in law in absence of seizure of any incriminating document belonging to the appellant. Neither any addition or disallowance was made on the basis of alleged seized documents nor any reference to seized material was made in connection with additions/disallowances.
5.0 The learned Commissioner of Income Tax appeals erred in law and on facts in passing an ex-parte order. The impugned order was passed without appreciating the fact that proper representation could not be made before him because its Promoter Director Shri Sanjay Gupta had been facing a lot of adversities on account of investigations launched by multiple agencies since 2013 onwards and in absence of availability of supporting staff.
6.0 The Assessment Order passed by the learned Assessing Officer u/s. 143(3) is without jurisdiction, illegal, void-ab-initio and unsustainable in law in absence of issuance and service of notice u/s. 153C r.w.s. 153A of the Income Tax Act, 1961 as the A.Y. 2011-12 falls within the period of six preceding years as provided u/s. 153C r.w.s. 153A(1)(b) of the Act."
The assessee has raised revised grounds of appeal which are reproduced as under:-:
1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming addition of Rs.51,956/- consisting of addition in respect of net annual value of house property amounting to Rs.32,000/- and disallowance of depreciation amounting to Rs.19,956/-.
2.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of depreciation amounting to Rs.14,09,243/- in respect of "Data Center".
3.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of depreciation amounting to Rs.63,06,302/- in respect of 154 computer sets. 4.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of depreciation amounting to Rs.18,20,637/- in respect of property at Sitapur. 5.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the disallowance amounting to Rs.3,59,41,020/- u/s.40a(ia) of theIncome Tax Act, 1961.
6.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of Rs.72,42,478/- u/s.43B of the Income Tax Act, 1961. The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of Rs.9,68,619/- in respect of repair and maintenance of "Data Center".
8.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming disallowance of Rs.63,84,556/- u/s.36(1)(iii) of theIncome Tax Act, 1961."
3. The assessee company belongs to 'Neesa Group' of Ahmedabad promoted by Shri Sanjay Gupta and engaged in the business of Software Development. A search action underSection 132of the Income Tax Act, 1961 was carried out in the group assets of Neesa group as well as residence of Shri Sanjay Gupta on 08.09.2010. A survey operation underSection 133Aof the Act was carried out in the name of the assessee herein. Subsequently, notice underSection 153Cof the Act read withSection 153Aof the Act was issued and served on the assessee. In response to the said notices the assessee through his Authorized Representative attended the proceedings and submitted details/explanation called for by the Assessing Officer. The Assessing Officer passed the order underSection 143(3)read withSection 145(3)of the Act on 25.09.2013 thereby making disallowance underSection 37amounting to Rs.9,68,619/-, disallowance of foreign travel expenses amounting to Rs.1,24,983/-, disallowance underSection 43Bamounting to Rs.72,42,478/-, disallowance regarding depreciation on residential flats amounting to Rs.51,956/-, interest disallowance underSection 36(1)(iii)amounting to Rs.83,20,509/-, disallowance underSection 2(22)(e)in respect of deemed dividend Rs.23,00,000/-, disallowances underSection 40(a)(ia)amounting to Rs.91,87,206/-, Rs.2,65,51,816/- & Rs.2,00,000/-. The Assessing Officer further made disallowance underSection 37(1)amounting to Rs.4,000/-, disallowances in respect of prior period expenses, bogus capital purchases, depreciation claim, bogus contract activity, depreciation claim and bogus assets and depreciation claim.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee in consolidated order for A.Ys. 2005-06 to 2010-11
5. The Ld. AR submitted that for A.Y. 2007-08 to 2010-11 the Tribunal has decided the issue regarding issuance of notice underSection 153Cwhich is bad in IT(SS)A No.118/Ahd/2017 A.Ys. 2011-12law as the Assessing Officer of the searched parties failed to record satisfaction record initiated underSection 153Cof the Act. Ld. AR further submitted that notice underSection 153Cof the Act should have been issued which the Revenue Authorities have failed to do so. Ld. AR pointed out paragraph no. 2 of the Assessment Order wherein notice underSection 142(1)was mentioned but there is no mention relating to notice underSection 153Cof the Act. Ld. AR further submitted that the Assessing Officer mentioned in the satisfaction that impugned seized documents belonged to the third parties and, therefore, passing of the assessment order underSection 153Cis bad in law. Ld. AR further submitted that in the absence of seizure of any incriminating document belonging to the assessee the addition cannot be made as the said documents belonged to the third party and not to that of the assessee. The Ld. AR further submitted that the CIT(A) has passed ex-parte order without giving opportunity of hearing to the assessee.
6. The Ld. D.R. submitted that as perSection 153Cof the Act, the notice was properly issued underSection 143(3)along with notice undersection 142(1)of the Act. Thus, the Assessing Officer has rightly issued the notice and the assessee is not stating correct facts. The Ld. DR further submitted that the assessee company is associated as integral part of Neesa Group promoted by Shri Sanjay Gupta and thus the documents belonged to the assessee.
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Tribunal in earlier Assessment Years i.e. for the A.Ys. 2007-08 to 2010-11 has decided this issue in favour of the assessee which was contested in additional ground by the assessee. After going through the records, it can be seen that the documents which were found in respect of search operation in Neesa Group of Companies was not part of the documents of the assessee company as the satisfaction itself pointed out the same. Thus the documents do not belong to the assessee and cannot be called as incriminating documents in respect of assessee's case. As regards contentions of the assessee that the details of sales made by the assessee was not correct proposition and the said documents belonged to the other group of companies. A mere mention of such details cannot be termed as the assessee's involvement in the said transactions or that the documents belonged to the assessee. The Tribunal in ITA(SS)A Nos.114 to 117/Ahd/2017 for A.Ys. 2007-08 order dated 22.04.2022, has clearly given a finding that even as per the Assessing Officer, while recording satisfaction the said document does not belong to the assessee but Neesa Infrastructure Limited. Therefore, the document in respect of Annexure B-1 92 clearly did not fulfill the criteria of belonging to the assessee so as to entitle the Assessing Officer to validly assume jurisdiction to initiate proceedings underSection 153Cof the Act. The Tribunal
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further gave observation that the documents which were taken into account by the Assessing Officer does not contain any information pertaining to the impugned A.Ys. and could not be formed the basis for assuming jurisdiction by the Assessing Officer but invokedSection 153Cof the Act in the present case. As regards 2nd document page no.26 of Annexure A-6 which is admittedly a ledger account of Euclid Solutions Pvt. Ltd. in the books of assessee. Thus, these documents also suffer from invocation/initiation of proceedings underSection 153Cand cannot be called as incriminating material in assessee's case. Thus, as per the decision of the Hon'ble Apex Court inCIT vs. Sinhgad Technical Education Society(2017) 397 ITR 344 (SC) held that jurisdiction underSection 153Ccannot be invoked when the incriminating material is not pertaining to the specific particular year in which it was invoked of the said assessee. Thus, the very basis of the assessment order for making the addition does not sustain in assessee's case for A.Y. 2011-12 as well and hence we allow the appeal of the assessee. There is no need to adjudicate the grounds on merits as the assessment itself is bad in law. 8. In the result, appeal of the assessee is allowed.