2021 (12) TMI 1351 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - unexplained share capital received from 24 persons - neither the creditworthiness of these creditors nor the genuineness of transactions were established as submitted by the AO in Assessment Order and Remand Report - CIT(A) was convinced that the assessee has successfully discharge the onus cast upon it by provisions of Section 68 of the Act and deleted the addition - HELD THAT - On these facts ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla . 2015 (9) TMI 80 - DELHI HIGH COURT which was followed in the case of Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT squarely apply where.has held that where no incriminating material was unearthed to show that there was violation by the assessee to disclose income/additions made by the Assessing Officer was not justified. - Decided in favour of assessee.

Summary

Issues:
1. Addition u/s 68 - Unexplained share capital
2. Discharge of onus by the assessee
3. Proper enquiry by the CIT(A)
4. Validity of assessment order under section 143(2)
5. Deletion of additions without incriminating material

Analysis:

Issue 1: Addition u/s 68 - Unexplained share capital
The Revenue challenged the deletion of addition u/s 68 made on account of unexplained share capital received from 24 persons. The AO contended that the creditworthiness and genuineness of transactions were not established. However, the CIT(A) held that the assessee successfully discharged the onus under section 68 by providing necessary documents and evidence. The Tribunal noted that no incriminating material was found during the search related to the impugned addition, as acknowledged by the CIT(A). Citing judicial precedents, the Tribunal emphasized the importance of establishing a nexus between the seized material and the additions made, ruling in favor of the assessee.

Issue 2: Discharge of onus by the assessee
The assessee contended that the CIT(A) should have quashed the assessment order due to the absence of a notice u/s 143(2) after filing the return in response to notice u/s 153A. Additionally, the assessee argued for the deletion of additions made by the AO without any incriminating material post-search. The Tribunal upheld the assessee's position, emphasizing the necessity of incriminating material to justify additions, as per the jurisdictional High Court's rulings in similar cases.

Issue 3: Proper enquiry by the CIT(A)
The Revenue argued that the CIT(A) failed to conduct a proper inquiry, despite issuing notices to share applicants. However, the Tribunal found in favor of the assessee, highlighting the CIT(A)'s duty to conduct relevant inquiries as required, as established by previous court decisions.

Issue 4: Validity of assessment order under section 143(2)
The assessee raised concerns about the validity of the assessment order under section 143(2) due to procedural lapses. However, the Tribunal did not delve deeply into this issue as the core focus was on the lack of incriminating material to support the additions made by the AO.

Issue 5: Deletion of additions without incriminating material
The Tribunal ultimately allowed the cross objection of the assessee, rendering the appeal of the Revenue otiose. The decision was based on the absence of incriminating material to justify the additions made, aligning with the legal principles outlined by the jurisdictional High Court. Consequently, the appeal of the Revenue was dismissed, while the cross objection of the assessee was allowed, leading to the final judgment in favor of the assessee.