2016 (2) TMI 490 - AT - Income Tax

Addition u/s 68 for unexplained cash credit for want of non-compliance - Held that - Respectfully following the judgment of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT wherein it has been held that Since no incriminating material was unearthed during the search, no additions could have been made to the income already assesseed , we hold that the completed assessments can be interfered with by the Assessing Officer only on the basis of some incriminating material unearthed during the course of search in the earlier assessment years. Since no incriminating material was found during the course of search with regard to the identity, genuineness and creditworthiness of the assessee company, we hold that the addition made by the ld. CIT(A) is unsustainable and deserves to be deleted - Decided in favour of assessee

Issues Involved:
1. Addition of share application money
2. Reliance on previous assessment order declared null and void
3. Lack of opportunity for being heard in assessment proceedings
4. Addition in absence of incriminating material found in search
5. Restriction on addition based on seized documents

Issue 1: Addition of Share Application Money
The case involved the appellant appealing against the addition of Rs. 10,00,000 as share application money. The Assessing Officer added this amount as unexplained cash credit under section 68 due to non-compliance by the assessee in providing necessary details like confirmation, bank statement, audited accounts, and ITR of the share allottee company. The appellant contended that all documents were produced for earlier assessment proceedings, establishing the identity of the shareholder and the legitimate banking channel used for remittances. The appellant argued that the invoking of deeming provision under section 68 was unwarranted. The appellant relied on various judgments to support their case. The Tribunal, following the judgment in CIT vs Kabul Chawla, held that since no incriminating material was found during the search regarding the identity, genuineness, and creditworthiness of the assessee company, the addition made by the CIT(A) was unsustainable and ordered the deletion of the addition.

Issue 2: Reliance on Previous Assessment Order Declared Null and Void
The appellant challenged the reliance on the finding of the Assessing Officer in the assessment order passed under Section 153A, which was declared null and void by the CIT(A) in a previous order. The appellant argued that the CIT(A) erred in confirming the addition without providing an opportunity to be heard against the material from the earlier assessment proceedings. The Tribunal noted the lack of incriminating material found during the search operations and held that additions could only be made based on such material. The Tribunal, following the principle established in the judgment of CIT vs Kabul Chawla, ruled in favor of the appellant and allowed the appeal.

Issue 3: Lack of Opportunity for Being Heard in Assessment Proceedings
The appellant contended that the addition of share application money was made without providing an opportunity to be heard against the material pertaining to the assessment order dated 26.12.2007. The appellant highlighted the failure to confront specific adverse material during the assessment proceedings, emphasizing the principles of justice, equity, and fair play. The appellant cited case law to support their argument. The Tribunal, considering the lack of incriminating material found during the search, deemed the addition unsustainable and ruled in favor of the appellant.

Issue 4: Addition in Absence of Incriminating Material Found in Search
The appellant argued that the addition of share application money in a completed assessment without any incriminating material found during the search was unjustified. The appellant emphasized the lack of specific adverse material provided or shown during the assessment proceedings. The Tribunal, following the precedent set in previous judgments, held that additions could only be made based on incriminating material unearthed during the search. As no such material was found regarding the identity, genuineness, and creditworthiness of the assessee company, the addition was deemed unsustainable and was deleted.

Issue 5: Restriction on Addition Based on Seized Documents
The appellant contested the CIT(A)'s decision to sustain the addition of share application money without restricting it based on seized documents. The appellant argued that no material was found or seized during the search operations related to share application money. The Tribunal, considering the lack of incriminating material and the principles of justice, equity, and fair play, ruled in favor of the appellant and allowed the appeal, deleting the addition.

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