The judgment establishes the importance of incriminating material in assessment proceedings under Section 153A, the principle of natural justice in cross-examination of witnesses, and the requirement for assessments to be based on seized material in the context of Section 68.

JUDGMENT :

S. Muralidhar, J.

1. These are two appeals by the Revenue. ITA No.86 of 2018 is directed against an order dated 28th February, 2018 passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) in IT (SS) A No.02/CTK/2018 for the Assessment Year (AY) 2012-13. ITA No.85 of 2018 by the Revenue is directed against an order dated 22th March, 2018 passed by the ITAT in IT (SS) A No.03/CTK/2018 for the AY 2013-14. Since the appeals are directed against the orders of the ITAT allowing the appeals of the same Assessee but for different AYs and the factual backgrounds are similar, both the appeals are being disposed of by this common judgment.

2. In both appeals, the common questions sought to be urged by the Revenue are whether the ITAT was justified in deleting additions made under Section 68 of the Income Tax Act, 1961 (Act) to the taxable income of the Assessee by not treating the corresponding unsecured loan as bogus and sham transactions. In both appeals the contention is that the creditor M/s. Uniworth Agency Pvt. Ltd. (UAPL) was merely a paper company established for the purposes of bogus accommodation entries and that the Assessing Officer (AO) could not examine the Directors of UAPL due to failure of the UAPL as well as the Assessee.

3. This Court has heard the submissions of Mr. R.S. Chimanka, learned Senior Standing Counsel for the Appellant (Revenue) and Mr. R.V. Easwar, learned Senior Counsel appearing for the Assessee (Respondent).

4. The background facts are that the Assessee is a company engaged in the business of construction of residential and commercial buildings apart from complexes, malls along with real estate development. For both AYs 2012-13 and AY 2013-14 the Assessee filed its returns disclosing ‘Nil’ income.

5. On 6August, 2014 a search and seizure operation was carried out under Section 132 of the Act in the business premises of the company and the residential premises of the Directors at Cuttack. On 29th April, 2015 notices under Section 153A of the Act were issued pursuant to which returns of income for the respective AYs were filed by the Assessee on 10th August, 2015 again disclosing ‘Nil’ income. This was followed by notices under Sections 142(1) and 143(3) of the Act being served on the Assessee.

6. For AY 2012-13 the assessment was completed by the AO on 28th December, 2016 determining the total income as Rs.6.92 crores and on the same date, a separate assessment order was passed for AY 2013-14 determining the total income as Rs.3.06 crores. The appeals filed by the Assessee against the respective assessment orders were dismissed by the Commissioner of Income Tax (Appeals) [CIT (A)] by order dated 13th November, 2017. Being aggrieved, the Assessee preferred further appeals to the ITAT which have been allowed by the respective impugned orders for the two AYs.

7. The ITAT noted that for both AYs in question, the Assessee claimed to have received a corresponding loan amount from UAPL i.e. Rs.6.92 crores by cheque for the AY 2012-13 and Rs. 3.06 crores through banking channels for the AY 2013-14. The fact that the Investigating Officer (IO) examined the Directors of the UAPL was also not in dispute. The both the loans were disclosed by the Assessee in the returns filed in the books of account produced before the AO.

8. For AY 2012-13 the ITAT noted that the time limit for issuance of notice under Section 143(2) of the Act with reference to the original return filed by the Assessee on 30th September, 2012 expired on 30th September, 2013 and by that date, no notice was issued to the Assessee. Thus, the original return of income became final on 30September, 2013 i.e. before the date of search. In other words, the assessment of AY 2012-13 had not abated. During the course of search, tally account of the Assessee was found which also evidenced the fact of disclosure of the loan amounts received from UAPL through banking channels. This was prior to the date of search.

9. It is in the above contex