Case Number: ITA 979/DEL/2021
Appellant: Jakhotia Polymers Pvt. Ltd., Telangana
Respondent: ACIT, CC-26, New Delhi
Assessment Year: 2011-12
Result: 2011-12
Case Filed on: 2021-08-16
Order Type: Final Tribunal Order
Date of Order: 2022-10-21
Pronounced on: 2022-10-21
This case involves an appeal filed by Jakhotia Polymers Pvt. Ltd. (hereinafter referred to as ‘the Assessee’) against the order dated 28.08.2021 of the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the addition made by the Assessing Officer (AO) under Section 153A of the Income Tax Act, 1961. The addition amounted to Rs. 55,000 on account of undisclosed income.
The Assessee, a private limited company incorporated on 14.10.1992, is engaged in the business of manufacturing polypropylene woven sack bags. The company’s directors include Shri Om Prakash Jakhotia (Managing Director), Smt. Lata Bai Jakhotia, and Shri Balkishan Jakhotia. A search under section 132 of the Act was conducted on 20.12.2012 at the residential and business premises of the Assessee, leading to the discovery of undisclosed income.
During the search, the Assessee admitted to undisclosed income of Rs. 21.42 crores for the assessment years 2011-12 and 2012-13. Subsequently, the Assessee and its associated companies filed settlement applications under section 245C(1) before the Income Tax Settlement Commission (ITSC), disclosing additional income. On 26.11.2014, the ITSC passed a final settlement order under section 245D(4), settling the undisclosed income at Rs. 7,48,04,200.
The Department challenged the ITSC order in the Delhi High Court, which quashed the ITSC order on 15.04.2019 and directed the AO to complete the assessments in accordance with the law.
The Assessee raised the following grounds of appeal:
On behalf of the Assessee, it was submitted that the addition of Rs. 55,000 was made based on the disclosure made during the ITSC proceedings, which was subsequently quashed by the Delhi High Court. The Assessee’s counsel argued that the disclosure was made to meet the eligibility criteria for settlement and was not based on actual incriminating evidence. The counsel relied on various judicial precedents, including the decision in CIT vs. AIMIL Ltd., to support their argument that no addition should be made without concrete evidence of undisclosed income.
The Departmental Representative (DR) supported the lower authorities’ order, arguing that the disclosure made before the ITSC constituted valid evidence for the addition.
The Tribunal, comprising Shri Shamim Yahya (Accountant Member) and Shri Anubhav Sharma (Judicial Member), observed that the addition was made solely based on the disclosure before the ITSC, without any corroborating incriminating material found during the search. The Tribunal noted that the Delhi High Court had quashed the ITSC’s order, which invalidated the basis for the addition.
The Tribunal referred to several judicial precedents, including the decision of the Hon’ble Gujarat High Court in the case of Commissioner vs. Maruti Fabrics [2014] 47 taxmann.com 298, where it was held that no addition could be made solely based on disclosures made before the Settlement Commission without corroborating evidence.
The Tribunal also highlighted that the CBDT Instruction F. No. 286/2/2003-IT (INV. II), dated 10-3-2003, and Letter F.No.286/98/2013-IT (INV.II), dated 18-12-2014, emphasized that confessions or surrenders obtained without incriminating evidence should be disregarded.
Considering these factors, the Tribunal concluded that the addition of Rs. 55,000 was unjustified and directed the AO to delete the addition.
The Tribunal concluded that the addition under Section 153A of the Income Tax Act was not warranted as it was based solely on the disclosure made before the ITSC, without any incriminating material. The Tribunal allowed the Assessee’s appeal and directed the deletion of the impugned addition.
Order: The appeal of the Assessee is allowed, and the impugned addition is directed to be deleted.
Order pronounced in the open court on 21.10.2022.
-Sd/- (SHAMIM YAHYA, ACCOUNTANT MEMBER) -Sd/- (ANUBHAV SHARMA, JUDICIAL MEMBER)
Date:- 21.10.2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
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