2018 (1) TMI 1652 - AT - Income Tax

Assessment u/s 153A - Unexplained cash credits u/s.68 - HELD THAT - The assessee is engaged in the business of power generation. A search and seizure operation was conducted in the case of the assessee on 24th and 25th May, 2011. In pursuance to the same, notice u/s.153A of the Act was issued and impugned orders of assessments were passed. It is not in dispute that assessment for the assessment years 2006-07, 2007-08 and 2008-09 were completed prior to the date of search. In other words, the assessments for these assessment years were not abated. In the present appeals the Revenue has challenged the deletion of addition in assessment year on account of share application u/s.68 of the Act and bogus purchase of husk. We find that the above additions made by the AO in the impugned assessment years were not based on any incriminating material found during the course of the search. Revenue could not show any incriminating material, which was found during the course of the search on the basis of which above additions could have been made. It is a settled position of law that in an assessment made in pursuance to search in respective assessment years for which assessment proceedings were not abated, additions cannot be made de hors the incriminating materials found during the course of search. We, therefore, do not find any merit in these appeals of the Revenue. Accordingly, the appeals of Revenue for the assessment years 2006-07, 2007-08 and 2008-09 are dismissed. Bogus bill of husk - CIT(A) observed that in the assessment order the AO has not brought any incriminating material based on which the addition was made on account of bogus purchase of husk - No finding that the assessee has used coal in place of husk and obtained bogus bill of husk. No such material has been found during operation u/s 132 of the Act which even remotely suggests suppression of purchase of coal. CIT(A), therefore, observed that he was convinced that addition on account of inflated purchases has been made by the A.O on estimate basis in all the years without bringing any evidence on record in support of his contention. These findings of CIT(A) has not been rebutted by the Revenue by bringing any positive material on record. In absence of the same, we find no good reason to interfere with the findings of the CIT(A), which are confirmed and the grounds of appeal of the Revenue for assessment years 2009-10, 2010-11, 2011-12 and 2012-13 are dismissed.

Summary

Issues Involved:
1. Deletion of additions made by the AO on account of share application/capital received as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
2. Deletion of additions made by the AO on account of bogus purchases of husk.
3. Validity of assessment orders passed under Section 153A of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Deletion of Additions on Account of Share Application/Capital Received as Unexplained Cash Credits Under Section 68:

The Revenue challenged the deletion of additions made by the AO for the assessment years 2006-07 and 2007-08, where the AO had added amounts of ?12,71,00,000/- and ?6,51,50,000/- respectively as unexplained cash credits under Section 68. The AO's basis was the absence of statutory records and unserved notices to share applicants. However, the CIT(A) observed that the assessee had provided extensive evidence, including share application forms, PAN details, bank statements, and ROC certificates, proving the identity, creditworthiness, and genuineness of the transactions. The CIT(A) also noted that no incriminating documents were found during the search to suggest that the share application money was not genuine. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to bring any concrete evidence to counter the assessee's submissions and that the additions were not based on any incriminating material found during the search.

2. Deletion of Additions on Account of Bogus Purchases of Husk:

For the assessment years 2006-07 to 2012-13, the AO had disallowed ?10,00,000/- each year on account of bogus purchases of husk, suspecting that the assessee inflated the purchases to show higher production of electricity. The AO's suspicion was based on the return of letters sent to husk suppliers and the discovery of a blank bill book at the residence of one of the directors. The CIT(A) found that the AO's addition was based on mere suspicion without any substantive evidence. The assessee provided detailed records of husk purchases, payments made through banking channels, and audited accounts, which the AO did not effectively rebut. The Tribunal confirmed the CIT(A)'s findings, noting that no incriminating material was found during the search to support the AO's claims of bogus purchases.

3. Validity of Assessment Orders Passed Under Section 153A:

The assessee challenged the validity of the assessment orders passed under Section 153A for the assessment years 2006-07, 2007-08, and 2008-09, arguing that no incriminating materials were found during the search, and no assessment or reassessment proceedings were pending at the time of the search. The Tribunal agreed with the assessee, stating that in the absence of incriminating material, additions made in the assessment orders under Section 153A were not sustainable. Consequently, the Tribunal annulled the additions made for these years.

Conclusion:

The Tribunal dismissed the Revenue's appeals for all the assessment years under consideration, confirming the CIT(A)'s deletion of additions on account of unexplained cash credits and bogus purchases of husk. The Tribunal also allowed the assessee's cross objections for the assessment years 2006-07, 2007-08, and 2008-09, annulling the assessment orders passed under Section 153A due to the lack of incriminating material. The cross objections for the assessment years 2009-10 to 2012-13 were dismissed as they were in support of the CIT(A)'s order.