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TMI Blog2024 (2) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In its appeal, the assessee has raised a common jurisdictional issue and submitted that since the assessment in these assessment years was already concluded before the date of search and therefore the same was not abated as per the second proviso to section 153A of the Act, no additions can be made in absence of any incriminating material found during the course of search. Thus, before dealing with the issues raised by both sides on merits, we will examine this jurisdictional issue in the assessment years 2012-13 to 2015-16. With the consent of the parties, the assessment year 2012-13 is considered as the lead year. 4. The brief facts of the case pertaining to the aforesaid jurisdictional issue, as emanating from the record, are: The assessee is a co-operative credit society and is a registered Multi-State Co-operative Urban Credit Society established under the Multi-State Co-operative Societies Act, 2002 and is involved in the facility of providing credits and other banking facilities to its members. The assessee is also providing ATM card facility and RTGS facility to its members. The assessee has operations in Maharashtra, Gujarat, Madhya Pradesh, Andhra Pradesh, Karnataka, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved on the assessee. On the perusal of the documents found during the course of the search, the Assessing Officer ("AO") vide show cause notice dated 03/12/2019 noted that there is non-compliance in maintaining proper KYC documents, non-compliance in collecting KYC details from the depositors, irregularities found in account opening forms of society, and non-compliance of Rule 114B in respect of cash deposits. Accordingly, the assessee was asked to show cause as to why the total case deposited in its books should not be considered and taxed as unexplained cash credit under section 68 of the Act. In response thereto, the assessee filed its detailed submission before the AO on 18/12/2019. During the assessment proceedings, the AO also directed a special audit under section 142(2A) of the Act in the case of the assessee. 6. The AO on the basis of the details provided by the assessee and various evidences gathered during the search and seizure action as well as the report of the Special Auditor, vide order dated 07/05/2021 passed under section 143(3) read with section 153A of the Act, came to the conclusion that the assessee is not a bank within the provisions of the Banking Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of provision for standard assets, provision for gratuity, prior period expenses, and disallowances under section 40A(3) and section 40(a)(ia) of the Act as well as the disallowance of deduction claimed under section 80P of the Act. 7. The learned CIT(A), vide impugned order, dismissed the ground challenging the additions made vide order passed under section 153A of the Act in the absence of incriminating material found during the course of the search on the basis that large no. of incriminating material in the form of KYC discrepancies, pay-in slips, and other evidences were found during the course of the search. The learned CIT(A) further held that once it is accepted that the assessee is in the business of mobilisation of savings and provision of credit facilities, the entire transactions cannot be added as income of the assessee. However, the onus remains with the assessee to show that it has reasonably discharged its onus to explain the nature and source of any amount credited in its books of account. The learned CIT(A) further held that as regards the deposit slips it is quite inconceivable that the assessee, which claims to be a co-operative society, is unable to pinpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us. 8. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that on the date of search action under section 132 of the Act, i.e. on 26/05/2017, resulting in the present appeals, no assessment for the assessment years 2012-13 to 2015-16 was pending, and therefore the same was not abated as per the second proviso to section 153A of the Act. We find that the Hon'ble jurisdictional High Court in CIT v/s Continental Warehousing Corporation (Nhava Sheva) Ltd., (2015) 374 ITR 645 (Bom.), held that no addition can be made in respect of assessments which have become final if no incriminating material is found during the search. We further find that the Hon'ble Supreme Court affirmed this position in PCIT v/s Abhisar Buildwell (P.) Ltd., [2023] 454 ITR 212 (SC), by observing as under:- "14. In view of the above and for the reasons stated above, it is concluded as under: i) to iii) ........ iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to note that the coordinate bench specifically directed that the order has been passed on peculiar facts and circumstances of the case and therefore should not be taken as precedent while deciding such cases. However, from the perusal of the aforesaid order, we find that the coordinate bench very succinctly analysed the meaning of the expression "incriminating material" on the basis of judicial interpretation made by different judicial forums in para-25 of its order. Therefore, without going into the adjudication of a similar issue, in view of the observation of the coordinate bench, as noted above, we are of the considered view that the meaning assigned to the expression "incriminating material" by the coordinate bench in the aforesaid decision can be considered to determine whether the materials/documents found during the course of search and survey action at the premises of the assessee in the present case constitute incriminating material. In para-25 of the aforesaid decision dated 06/02/2023, the coordinate bench of the Tribunal analysed the meaning of the expression "incriminating material" as under:- "25. Before we look into the relevant 'incriminating mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regularly maintained or the returns filed with the authorities from time to time, etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie prove that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in the ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be 'incriminating' in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid observations of the AO with regard to various deficiencies would tantamount to "incriminating material". However, even then, the AO made the addition under section 68 of the Act on the basis that the assessee has failed to prove the identity of the creditors, genuineness of the transaction, and creditworthiness of the depositors. It is pertinent to note that the learned CIT(A), after agreeing with various factors in favour of the assessee as noted in para 7.43 of its order, came to the conclusion that addition under section 68 of the Act of the entire transaction is not warranted. 13. In the present case, it is worth noting that the assessee received the money in the normal course of its business as a co-operative credit society, i.e. through repayment of loans by its members or deposits by its members, etc. Further, it is not disputed that the assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into its bank account. The violation of provisions of Rule 114B by the depositors in certain cases and Rule 114E by the assessee also cannot lead to the conclusion that the money deposited in the members' account belong ..... X X X X Extracts X X X X X X X X Extracts X X X X
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