2016 (5) TMI 1457 - AT - Income Tax

Additions u/s 153A - additions by invoking provisions of sec. 68 - Held that - We allow the appeals filed by the assessees on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein we have already held that in absence of any incriminating documents found and seized during the course of search the Assessing Officer is not justified in making the additions in nonabated assessment orders while passing the orders u/s 153A r.w.s. 143(3) of the Act. Thus we quash the non-abated assessment orders for the A.Ys. 2002-03 2003-04 & 2005-06. Accordingly this issue of incriminating material involved in the assessee s appeals allowed in favour of assessee Addition in respect of RIB Bonds on protective basis - addition u/s 68 - addition on ground as assessee has purchased this bond by his own money by paying cash to the donor - Held that - we find that during the course of search no such documents or evidences establish any payment of cash by the assessee to the donor. We also find that on merit this issue is covered by the decision of this bench in the case of ACIT vs. Phoolchand Agrawal 2012 (3) TMI 621 - ITAT INDORE as held that gifts of RIBs received by an assessee from one NRI cannot be treated as income of the assessee - addition made by the Assessing Officer u/s 68 of the Act on account of RIB gift and subsequently enhanced by the learned CIT(A) is not sustainable. Issue of genuineness of LTCG/STCG - AO found that there was sudden increase in price of these cos. and as such increase in price was abnormal and not based on fundamentals - Held that - During the course of assessment proceedings we find that there was no incriminating documents or loose papers or any other evidence was found or seized from the assessee that the transaction of long term capital gain or short term capital gain is not genuine. various documentary evidences placed on record and in the light of the various judicial pronouncements we are of the considered view that there was absolutely no justification for both the authorities below in disbelieving the genuineness of the long term capital gain and short term capital gain shown by the assessee in his return of income merely on guesswork conjectures and surmises. Accordingly these additions are directed to be deleted. - decided in favour of assessee

Issues Involved:
1. Additions under Section 153A without incriminating material.
2. Validity of assessment proceedings under Section 153A.
3. Enhancement of additions by CIT(A) without notice.
4. Genuineness of gifts in the form of Resurgent India Bonds (RIB).
5. Genuineness of Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG).
6. Charging of interest under Sections 234A and 234B.

Detailed Analysis:

1. Additions under Section 153A without incriminating material:
The assessee challenged the additions made by the Assessing Officer (AO) under Section 153A on issues where no incriminating material was found during the search. The Tribunal noted that the AO made additions based on entries in the Profit & Loss Account and Balance Sheet, which were already on record. The Tribunal held that in the absence of incriminating material, the AO cannot pass orders under Section 153A read with Section 143(3). The Tribunal quashed the non-abated assessment orders for the assessment years 2002-03, 2003-04, and 2005-06, and allowed the appeals of the assessee on this issue.

2. Validity of assessment proceedings under Section 153A:
The Tribunal observed that the AO framed the assessment under Section 153A without any incriminating material found during the search. The Tribunal referred to various judicial pronouncements, including the case of All Cargo Global Logistics Ltd. and the Delhi High Court's decision in Kabul Chawla, which held that in the absence of incriminating material, no additions can be made for completed assessments. The Tribunal allowed the assessee's appeals for the assessment years 2002-03, 2003-04, and 2005-06, and quashed the non-abated assessment orders.

3. Enhancement of additions by CIT(A) without notice:
The assessee argued that the CIT(A) enhanced the addition from Rs. 70,29,000 to Rs. 1,00,44,384 without giving notice of enhancement, which is a mandatory requirement under Section 251(2). The Tribunal held that the CIT(A) merely shifted the addition from one assessment year to another and there was no need for a specific notice under Section 251(2). The Tribunal dismissed the additional grounds taken by the assessee on this issue.

4. Genuineness of gifts in the form of Resurgent India Bonds (RIB):
The AO made additions under Section 68 on account of gifts received in the form of RIB, treating them as accommodation entries. The CIT(A) confirmed the addition and enhanced it. The Tribunal noted that the assessee had disclosed the receipt of RIB in the original return and furnished all necessary documents, including the transfer letters and bank statements. The Tribunal referred to various judicial pronouncements, including the case of Phoolchand Agrawal, and held that the addition was not sustainable. The Tribunal allowed the appeals of the assessee on this issue and deleted the additions.

5. Genuineness of Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG):
The AO treated the LTCG and STCG as unaccounted cash credits under Section 68, alleging that the transactions were sham. The CIT(A) confirmed the addition. The Tribunal observed that the assessee had furnished all necessary documents, including contract notes, Demat account statements, and bank statements. The Tribunal referred to various judicial pronouncements, including the case of Arun Kumar Agrawal (HUF) and Kamal Kumar Agrawal, and held that the transactions were genuine. The Tribunal deleted the additions and allowed the appeals of the assessee on this issue.

6. Charging of interest under Sections 234A and 234B:
The Tribunal noted that charging of interest under Sections 234A and 234B is consequential in nature and does not require separate adjudication. The Tribunal allowed the appeals of the assessee to the extent of the additions made.

Conclusion:
The Tribunal quashed the non-abated assessment orders for the assessment years 2002-03, 2003-04, and 2005-06, and deleted the additions made under Section 153A in the absence of incriminating material. The Tribunal also deleted the additions made on account of RIB gifts and LTCG/STCG, holding that the transactions were genuine. The appeals of the assessee were partly allowed.

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