Pravin Polymers Pvt. Ltd. v. ITO

Case snapshot

Sections / provisions: 254(2); 68; Rule 46A

Questions before the Court / Tribunal

• Additional evidence, Tribunal order and remand: The reported High Court judgment quashes the impugned Tribunal treatment and restores the matter for proper appellate examination of additional evidence, including use of statutory summons where appropriate.

Material facts and background

Briefly stated facts of the case are that the assessee is domestic

company and filed its return of income for the year under consideration on 29/10/2012 declaring total income at nil. In the case of the assessee, the Assessing Officer received an information from the Deputy Commissioner of Income-Tax (DCIT) Central Circle, Mumbai, who was assessing the case of Mr. Shirish C Shah. In the said information, he intimated that a search under section 132 of Income Tax Act, 1961 (in short ‘the Act’) was carried out at the

various premises of Sh. Shirsh C Shah, who happened to be engaged in providing bogus accommodation entries for long-term capital gain, share capital/ share premium, turnover, loan etc. through various entities including one company namely M/s Secunderabad Health Care Limited. The DCIT further intimated that the assessee has obtained accommodation entry by way of loan of Rs.25 lakh on 18/03/2011 from said company. In view of the information received, the Assessing Officer in the case of the assessee recorded reasons to believe that income escaped assessment and accordingly, issued notice under section 148 of Act on 31/03/2017. In response, the assessee submitted that return of income filed on 29/10/2012 might be treated as return of income in response to notice under section 148 of the Act. The assessee also e-filed return of income on 28/11/2017 declaring Nil income. In the reassessment proceeding completed on 27/12/2017 in terms of section 147 read with section 143(3) of the Act, the Assessing Officer made addition for loan of Rs.25 lakh received from Secunderabad Healthcare Limited along

with other loans totalling to Rs.1,75,79,740/- treating the same as unexplained cash credit in terms of section 68 of the Act. On further appeal, the Ld. CIT(A) deleted the addition. Aggrieved, the Revenue is by way of the appeal before the Tribunal whereas, the assessee has raised cross objections. 5.

Before us, the assessee has filed paperbook into volumes

containing pages 1-191 and 192 to 248 and also filed copy of decision of the Tribunal relied upon. 6.

In the ground Nos. one and two of the appeal, the Revenue has

Appellant / assessee submissions

followed the direction of the Tribunal via daily order sheet dated 24/01/2022, which constitute a mistake apparent from record. The assessee has filed a copy of the order sheet dated 24/01/2022. For ready reference, said order sheet is reproduced as under: “Learned DR seeks time to obtain necessary information & documents to ascertain as to why Assessment was made U/s.148 read with Sec 143(3). Learned Councel for the Assessee submitted that on the last date of hearing adjournment was sought by the DR for similar reason. One more opportunity is granted to DR to ascertain the facts as prayed. Adjourned to 29.03.2022. Both parties informed in the open court.”

various premises of Sh. Shirsh C Shah, who happened to be engaged in providing bogus accommodation entries for long-term capital gain, share capital/ share premium, turnover, loan etc. through various entities including one company namely M/s Secunderabad Health Care Limited. The DCIT further intimated that the assessee has obtained accommodation entry by way of loan of Rs.25 lakh on 18/03/2011 from said company. In view of the information received, the Assessing Officer in the case of the assessee recorded reasons to believe that income escaped assessment and accordingly, issued notice under section 148 of Act on 31/03/2017. In response, the assessee submitted that return of income filed on 29/10/2012 might be treated as return of income in response to notice under section 148 of the Act. The assessee also e-filed return of income on 28/11/2017 declaring Nil income. In the reassessment proceeding completed on 27/12/2017 in terms of section 147 read with section 143(3) of the Act, the Assessing Officer made addition for loan of Rs.25 lakh received from Secunderabad Healthcare Limited along

Revenue / respondent submissions

Without prejudice to the above, If Department has raised the violation of Rule 46A, the respondent would have made an application before the Appellate Tribunal to admit the additional evidence. II. Sufficient Opportunity of Hearing : The Assessing Officer has not given sufficient opportunity of hearing (Page 51) of paper book I) hence supplementary papers were filed before the CIT(A). Therefore, there is no violation of Rule 46A. III. Not dealt with the cases relied on by the Applicant : The Hon'ble Tribunal has not dealt with the decision of the Hon'ble Supreme Court, Jurisdictional High Court and Jurisdictional Tribunal, inter alia which were relied on by the Applicant at the time of hearing. IV. Non-compliance of Daily Order : Direction of the Hon'ble Tribunal via daily Order dated January 24, 2022 to the Departmental Representative to produce information/document to ascertain as to why the assessment was made under section 148 read with section 143(3) of the Act; The same was not complied by the Departmental Representative.

Rule 46A. The Ld. DR on the other hand submitted that regarding additional evidences filed before the Ld. CIT(A), during the course of

The Tribunal has further referred to the arguments of the Ld. DR that Ld. CIT(A) did not forward those documents to the Assessing Officer as per the procedure laid down in Rule 46A of the Rules. With reference to those arguments of the Ld. Departmental Representative, the Tribunal in para 17 observed that the Ld. CIT(A) was required to follow the procedure laid down in Rule 46A of the Rules. For ready reference, the finding of the Tribunal (supra) is reproduced as under: “17.

ground was raised by the revenue in respect of the violation of the Rule 46A of the Rules. In our opinion, the Tribunal has dealt the arguments of the Ld. DR on the issue of the addition. There was no requirement of raising any specific ground by the Department in

Thus, we find that it was the Ld. DR who sought adjournment

Court / Tribunal analysis and reasoning

on the basis of the arguments made before the bench and if adjournment was sought by the Ld. DR on any ground, then that adjournment sought is not relevant for adjudicating the issue in dispute by the Tribunal. Therefore we are of the opinion that there is no mistake apparent on record in the order of Tribunal on the allegation of not considering daily order sheet. 4.10 In

12. Further, the assessee has filed confirmation from the parties, bank statement of the loan creditor highlighting the debit entries in the statement and interest received, audited accounts of the loan creditors and therefore, according to the assessee, he had proved the identity source and genuineness of the loans. The assessee emphasized that since identity of the loan creditors was established and the loan was taken through banking channel , therefore, genuineness of the transaction cannot be doubted.

the said transaction were carried out through proper banking channel. From the aforesaid submissions it is evident that the complete details of investors were available on the records of the Ld A.O. 2.4.1.4 The Ld. AR further argued inalit was also brought to the novice of the Ld.O hat Shri Shirish Chandrakant Shah has retracted his statement given during the search and hence no cognizance of the same can be taken and in view of this retraction also the addition made us 68 of the Act was not justified. He has also submitted that the only basis of coming to conclusion that the impugned unsecured loans were not genuine, was the statement of Shri Shirish Chandrakant Shah. 2.4.1.5 During the course of Assessment Proceedings the learned AO asked the Appellant to produce investors before him for verification. As against

this the Appellant submitted having filed the requisite details as regards loans, the primary onus that lay upon him to prove the genuineness of the loans was already discharged. However, the AO did not accept the contentions of the appellant and after discussing the modus operandi explained by Shri Shirish Chandrakant Shah. during the course of search proceedings, based on the statement of Shri Shirish Chandrakant Shah & his associates recorded in the course of Search & Seizure Proceedings wherein they have confessed on oath that the companies controlled and operated by them are providing accommodation entries for share application money and unsecured loans, the Ld. AO has also held that the appellant is availing the bogus and accommodation entries by introducing/routing its own unaccounted money into books through entry providers and these entry providers do not have their own creditworthiness to fund such transactions & the entry providers are admittedly working for commission. 2.4.1.6 The Ld. AO has rejected the appellant's submission that no cognizance can be taken of the statement given by Shri Shirish Chandrakant Shah during the course of search proceedings in his case as...

11. The mandate under sub-section (4) gets honoured only when there is no other version from the assessee, vis-a-vis the statement. In such a case, the statement would constitute the basis for making block assessment even if the Department does not have any other material to buttress its case. However, if the statement is retracted by the person from whom it is said to have been recorded, it has to be subjected to the same test, as is done in matters of similar nature. This is particularly so, when the person, from whom it is recorded, is going to be visited with penal consequences. Subsection (4) of Section 132 of the Act cannot be taken as a provision laying down any new principle in the law of evidence. 12. For all practical purposes, the statement recorded under sub-section (4) of Section 132 of the Act, partakes the character of the one recorded by an investigating officer under Section 162 of Cr.P.C. Howsoever desirable, it may appear to be, it cannot be ascribed the status of a proven fact. At the most, it would constitute the basis for the prosecution to frame its case and correspondingly be a material for the defense to ensures that the prosecution sticks to its version....

Operative decision and relief

Technical education Society in Civil Appeal No. 11080 of 2017 has discussed the essential condition of material belonging

to person other than the searched person, for invoking section 153C of the Act as under: “20) Insofar as the judgment of the Gujarat High Court relied upon by the learned Solicitor General is concerned, we find that the High Court in that case has categorically held that it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act. This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well. The judgment of the Gujarat High Court in the said case went in favour of the Revenue when it was found on facts that the documents seized, in fact, pertain to third party, i.e. the assessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied”.

32. The decisions cited by the Ld. counsel are not applicable in the facts of the instant case as for invoking the provision of section 153C of the Act during relevant time the prime condition of material belonging to third/other person was to be fulfilled as held by the Hon’ble Supreme Court above in Sinshad Technical Education Society (supra).

33. In view of the above discussion, the cross objection of the assessee accordingly dismissed. 34. In the result, the appeal filed by the Revenues is allowed, whereas the cross objection filed by the assessee is dismissed. Order pronounced in the open Court on 29/04/2022. Sd/(KULDIP SINGH) JUDICIAL MEMBER

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai

Authorities and precedents appearing in the judgment

• Supreme Court has in the case of Navodaya Castle (P) Ltd. v. CIT (2015) 230
• Nemi Chand Kothari v. CIT
• Rubber Produce Co. Ltd vs State of Kerala reported in 91 ITR 18 has held
• CIT vs. Naresh Kumar Agarwal has held that
• IT Appeal No. 224 of 2003 in the case of CIT vs. Sunil Agganyal held as
• CIT v. Bharat General Reinsurance Co. Ltd
• CIT v. Archana R. Dhanwatey
• See Dy. CST v. Sreeni Printers
• Gujarat High Court in the case of DCIT vs Narendra
• Chetnaben J Shah vs. ITO in Tax Appeal No. 1437 of 2007
• Tolaram Daga vs CIT reported in
• High Court in the case of Addl. CIT vs Hanuman

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Additional evidence, Tribunal order and remand. The operative result is classified as Quashed / set aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Additional evidence, Tribunal order and remand. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• Maintain a date-and-payment matrix for transfer, agreement, possession, investment and construction; capital-gains exemptions commonly turn on this chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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