2019 (4) TMI 1906 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - commission charged @0 .5% on (such share application money of ₹ 50 lakhs), transaction at ₹ 25,000/- u/s.69C - whether no proceedings were pending before the assessing officer on the date of search and no incrementing material was found/unearthed by the search team? - HELD THAT - Undisputedly, the assessment year under question i.e. Assessment Year 2010-11 which was not pending before the Assessing Officer on the date of search on 29.05.2012 (first search), it was also not pending on the date of second search on 02.03.2016 therefore, the assessment which is not pending before the Assessing Officer is an unabated proceeding and the Assessing Officer is empowered to make any addition only based on incriminating materials found/unearthed during search. This is a settled position of law and is no longer res integra. Therefore, we delete the addition made by AO to the tune of ₹ 50 lakhs. Commission charged @ .5% on such genuine (share application money of ₹ 50 lakhs) transaction at ₹ 25,000/- u/s.69C also deleted as consequential in nature. - Decided in favour of assessee.

Issues Involved:
1. Addition of ?50 lakhs under section 68 of the Income Tax Act.
2. Addition of ?25,000 under section 69C of the Income Tax Act for commission on share application money.

Issue-wise Detailed Analysis:

1. Addition of ?50 lakhs under section 68 of the Income Tax Act:
The core issue revolves around the addition of ?50 lakhs made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, on account of unexplained cash credits. The assessee, a limited company engaged in the textile business, was subjected to two search and seizure operations on 29.05.2012 and 02.03.2016. The original return of income for the assessment year 2010-11 was filed on 12.10.2010, and the assessment was completed under section 143(1) on 14.04.2011.

Upon the first search on 29.05.2012, the assessment was completed under section 153A read with section 143(3) on 30.03.2015, with no adverse inference regarding the share capital raised during the relevant year. However, following the second search on 02.03.2016, the AO issued a notice under section 153A, leading to an assessment on 31.12.2017, adding ?50 lakhs under section 68.

The assessee contended that no incriminating material was found during the second search, making the addition untenable. The Tribunal noted that in the absence of any incriminating material found during the search, the AO could not make additions under section 153A for the unabated assessment years, as established by judicial precedents, including the Supreme Court's decision in Pr.CIT vs Meeta Gutgutia. The Tribunal relied on the principle that in the absence of incriminating material, additions for completed assessments are not permissible. Consequently, the Tribunal deleted the addition of ?50 lakhs.

2. Addition of ?25,000 under section 69C of the Income Tax Act:
The second issue pertains to the addition of ?25,000 under section 69C for alleged commission expenses on the share application money of ?50 lakhs. The AO had made this addition on the premise that the commission was paid to raise the share capital.

Given that the Tribunal had already deleted the addition of ?50 lakhs under section 68, the related commission expense of ?25,000 under section 69C was also deemed unsustainable. The Tribunal noted that the commission charge was interlinked with the share application money, and since the primary addition was deleted, the consequential addition of ?25,000 was also deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting both the additions of ?50 lakhs under section 68 and ?25,000 under section 69C, emphasizing the necessity of incriminating material for making additions in assessments under section 153A for unabated years. The judgment underscores the principle that without incriminating evidence, additions to previously assessed income are not justified.

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