DCIT, Central Circle, Ghaziabad vs M/s Friends Charitable Society

Parties Involved

Facts Summary

A search and seizure operation under section 132 of the Act was conducted on 18.10.2019 at the residential and business premises of the persons/parties comprising M/s Alankit Group of cases. Various incriminating documents/material belonging to the assessee company were found and seized. Subsequently, notice under section 153C of the Act was issued to the assessee company on 2.3.2024 for the year under consideration. In response to notice under section 153C of the Act, the assessee filed its ITR on 8.3.2024 manually declaring income of Rs. NIL. Consequently, notice under section 143(2) of the Act was issued to the assessee company on 8.3.2024. AO noted that assessee obtained the accommodation entry of Rs. 1,58,00,000 and during the statement recorded on oath, Sh. Sunil Kumar Gupta accepted that commission was charged @3% for providing accommodation entry and the same was received in cash. AO noted that the assessee paid commission of Rs. 4,74,000/- for taking the above accommodation entry was treated as unexplained expenditure under section 69C of the Act and added to the income of the assessee. AO further noted that during the assessment proceeding the assessee was requested to furnish source of repayment of Rs. 50,00,000/- along with supporting documents, however the assessee failed to explain the source of above. Accordingly, the assessment was completed at Rs. 2,12,74,000/- under section 153C/143(3) of the Act by making the additions of Rs. 1,58,00,000/-; Rs. 4,74,000/- a…

Legal Issues

• 1. Whether the CIT(A) has erred in deleting the addition of Rs. 2,12,74,000 made by the AO by ignoring the facts that the addition made by the AO on the basis of incriminating documents related to other person found during search proceedings.
• 2. Whether the CIT(A) has erred in allowing the appeal of assessee and annulling the action of the AO i.e. initiation of proceedings under section 153C for AY 2010-11 without considering the facts that substitution of date of handing over of seized material in place of date of initiation of search as mentioned in the First Proviso under Section 153C was only a limited purpose to determine the years of abatement of assessment proceedings as provided in Second Proviso to Section 153A and not at all with reference to powers of AO to make assessment under section 153C, which was separately provided under Section 153C(1) itself by using the phrase for the relevant assessment year or years referred to in Sub Section (1) of Section 153A.
• 3. Whether the Ld. CIT(A) has erred by not considering the fact that even after amendment brought under section 153C(1) w.e.f. 1.4.2017 by inserting the expression ‘six assessment years immediately preceding the assessment year relevant to the previous year in which search conducted’. The First proviso has still not been amended. This forties the view that First proviso to Section 153C never dealt with the period of reckoning of six assessment years for the purposes of making assessment under section 153C(1).
• 4. Whether the CIT(A) has erred in allowing the appeal of assessee and annulling the action of the AO i.e. initiation of proceedings under section 153C for AY 2010-11 without considering the facts that under Second proviso to Section 153A only the abatement of proceedings in case of searched person was provided as on date of initiation of assessment under section 153A or Section 153C could be made due to initiation of search. Further, the act of abatement and the act of assessment are two different functions, having different connotations and purpose and hence the two cannot be equated / interchanged by any stretch of interpretation. The power to make assessment after initiation of search is separately provided in Section 153A(1) itself and not in Second Proviso to Section 153A. Therefore, First Proviso of Section 153C was entirely in different context and it clearly referred to section.
• 5. Whether the Ld. CIT(A) has erred in deleting the addition of Rs. 1,58,00,000 without appreciating the facts that the assessee has taken accommodation entry of Rs. 1,58,00,000 in the form of unsecured loan and said loan was deposited in the bank account of the assessee, which is covered under the definition of assets in view of the provisions of Explanation 2 to section 153A(1) of the Act.
• 6. That the order of the CIT(A) being erroneous in law and facts be set aside and order of the AO be restored.

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