2018 (8) TMI 1764 - AT - Income Tax

Assessment framed u/s 153A - Held that - No incriminating material was found at the time of search and drawing support from the judgment of the Hon ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT we have no hesitation to quash the assessment order framed u/s 153A of the Act.

Summary

Issues involved:
1. Addition of share capital/premium by AO.
2. Validity of assessment order framed u/s 153A of the Income-tax Act, 1961.

Issue 1: Addition of share capital/premium by AO:
The Revenue appealed against the deletion of the addition of Rs. 3 crores made by the AO on account of share capital/premium. The AO had framed the assessment u/s 143(3) of the Act earlier and had called for the assessee to prove the identity, credit worthiness, and genuineness of the share capital issued during the year. However, during the subsequent search operation, no incriminating documents related to share capital were found. The AO revisited the share application money amounting to Rs. 3 crores while framing the assessment u/s 153A of the Act. The ITAT considered the legal position as per the Hon'ble Delhi High Court's ruling in Kabul Chawla, emphasizing that assessments under Section 153A must be based on seized material. Since no incriminating material was found during the search, the ITAT concluded that the assessment order framed u/s 153A was not valid, and the addition of share capital/premium was deleted.

Issue 2: Validity of assessment order framed u/s 153A of the Income-tax Act, 1961:
The assessee, in its cross objection, contended that the assessment order framed u/s 153A of the Act should be quashed as no incriminating material related to share capital was found during the search operation. The ITAT referred to the legal principles outlined in Kabul Chawla, emphasizing that assessments under Section 153A must be based on seized material. The ITAT noted the absence of any incriminating material during the search and the completion of the assessment u/s 143(3) without adverse inferences regarding share capital. Relying on the judgment of the Hon'ble Delhi High Court and considering the past assessment history, the ITAT concluded that the assessment order framed u/s 153A was not valid and quashed it. As a result, the cross objection filed by the assessee was allowed, and the appeal of the Revenue was dismissed.

In conclusion, the ITAT, following the legal precedent and the absence of incriminating material during the search, ruled in favor of the assessee, quashing the assessment order framed u/s 153A of the Act and deleting the addition of share capital/premium made by the AO.