The Income Tax Appellate Tribunal (ITAT) Chennai in a ruling has dismissed the appeal by the Revenue (Assistant Commissioner of Income Tax) and the Cross Objections by the assessee, Prakash Ferrous Industries Private Limited, against the order of the Commissioner of Income Tax (Appeals) 18, Chennai on 23.03.2023 for the assessment year 2020-21.
The Foundation and the Petition
The petition of the Revenue was on the grounds of the contention that the Commissioner of Income Tax (Appeals) (CIT(A)) erred in law and on particulars via deleting specific additions incurred under sections 69A and 69C of the Income Tax Act, 1961.
Such sections deal with unexplained money and unexplained expenditure, respectively. The taxpayer raised objections to the procedural aspects, including the issuance of notice under section 143(2) of the Act and the satisfaction note under section 153C.
Facts and Procedural History
An investigation under section 132 of the Act was performed dated 25.07.2019 at the premises of M/s. Sakthi Ferro Alloys India Private Limited and related entities, including a survey at Prakash Ferrous Industries Private Limited. It directed the seizure of various materials and the initiation of proceedings under section 153C against the taxpayer for the pertinent assessment year.
Additions were incurred to the income of the taxpayer at the time of such proceedings based on the unexplained money and expenditure revealed in loose sheets investigated at the time of the search. CIT(A) on the petition has deleted such additions directing to the Revenues petition to the Income Tax Appellate Tribunal.
ITAT’s Decision analysis
Deletion of Addition under Section 69A: The ITAT agreed with the deletion of the CIT(A) of the addition of ₹ 96,54,335, attributed to unexplained money because the seized loose sheets were not discovered at the premises of the taxpayers however in the cabin of an individual named Shri Manohar.
The Tribunal cited a lack of proof connecting such documents directly to the taxpayer and the failure of the Assessing Officer (AO) to furnish the taxpayer a chance to explain the documents.
Deletion of Addition under Section 69C: The ITAT carried the decision of CIT(A) to delete the addition of ₹ 3,84,840/-, connected to unexplained expenditure, because of insufficient proof and the failure of AO to demonstrate that the taxpayer has made unaccounted purchases from M/s. Emjay Steel Udyog Private Limited.
Issues with Notices under Section 143(2) and 153C: The Tribunal discovered that the issue of notice under section 143(2) was not compulsory for the finalization of assessment under section 153A, quoting the decision of the Hon’ble Delhi High Court’s in Ashok Chaddha v. ITO.
Similarly, it denied the objections of the taxpayer for the satisfaction note under section 153C, expressing that the taxpayer had received the same and explaining the typographical error in the assessment order.
Closure
The decision of the ITAT in ACIT vs. Prakash Ferrous Industries Private Limited emphasizes the procedural correctness and evidentiary standards’ importance in tax assessments.
The Tribunal through dismissing the petition of the revenue and the cross objections of the taxpayer reaffirmed the AO requirement to furnish clear proof and comply with the due process before making the additions to the income of the taxpayer under the Income Tax Act. For the tax council and taxpayers in managing identical issues, the same ruling provides an important reference point.
| Case Title | M/s. Prakash Ferrous Industries Private Limited |
| Case No. | I.T.A. No.693/Chny/2023 |
| Date | 20.12.2023 |
| Department by | Shri Nilay Baran Som, CIT |
| Assessee by | Shri Shashi Kumar Agarwal, CA |
| Chennai ITAT | Read Order |