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2019 (8) TMI 1879 - AT - Income TaxAssessment u/s 153A - Addition of share capital / share application money - whether any incriminating material has been found or seized during the course of search? - HELD THAT - DR as contended that the CIT(A) has erred in law and on facts in holding that sec. 153A proceedings arise only if any incriminating material has been found or seized during the course of search in case of various judicial precedents as relying on E.N. Gopakumar 2016 (11) TMI 72 - KERALA HIGH COURT and CIT vs. Kesarwani Zarda Bhander 2017 (4) TMI 57 - ALLAHABAD HIGH COURT that such an assessment bar to assessee as the searched assessee s total taxable income than that based on the alleged incriminating material only. We are informed by both parties very fairly that hon'ble jurisdictional high court is yet to adjudicated upon this legal issue involving varying judicial prepositions by hon'ble non-jurisdictional high courts (supra). We therefore quote hon'ble apex court s landmark decision in CIT vs. Vegetable Products 1973 (1) TMI 1 - SUPREME COURT to decide this legal issue in assessee s favour. We reiterate that the search herein had not yielded any incriminating material against the assessee. Decided in favour of assessee.
Issues Involved:
1. Correctness of CIT(A)’s order reversing the Assessing Officer’s action deleting share capital/share application money. 2. Scope of additions in non-abated assessments under Section 153A/153C read with Section 143(3) of the Income Tax Act, 1961. 3. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962. 4. Validity of additions made by the Assessing Officer in the absence of incriminating material found during the search. Issue-wise Detailed Analysis: 1. Correctness of CIT(A)’s order reversing the Assessing Officer’s action deleting share capital/share application money: The Revenue challenged the CIT(A)'s decision to reverse the Assessing Officer's deletion of share capital/share application money. The CIT(A) had considered the appellant’s submissions and the remand report from the Assessing Officer, who did not object to the admission of fresh evidence. The CIT(A) found that no incriminating material was discovered during the search that would justify the additions made by the Assessing Officer. The CIT(A) relied on various judicial precedents to conclude that in non-abated assessments, additions should be based solely on incriminating material found during the search. 2. Scope of additions in non-abated assessments under Section 153A/153C read with Section 143(3) of the Income Tax Act, 1961: The appellant argued that in non-abated assessments, where the proceedings have reached finality, any additions should be confined to incriminating material found during the search. The CIT(A) agreed, citing several case laws, including All Cargo Global Logistics Ltd. V/s. DCIT and C.I.T. V/s. Continental Warehousing Corpn. (Ngava Sheva) Ltd., which support the view that additions in non-abated assessments must be based on incriminating material discovered during the search. The CIT(A) noted that no such material was found relating to the share capital/share premium in this case. 3. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962: The appellant submitted additional evidence under Rule 46A, including details of shareholders, bank statements, Memorandum & Articles of Association, and annual returns. The CIT(A) admitted these documents as the Assessing Officer did not object to their admission. The CIT(A) found that the appellant had provided sufficient details to establish the identity, creditworthiness, and genuineness of the transactions related to the share capital/share premium, thus ruling out any reason to treat the share application money as unexplained. 4. Validity of additions made by the Assessing Officer in the absence of incriminating material found during the search: The CIT(A) and the Tribunal both emphasized that the Assessing Officer’s additions were not sustainable in the absence of incriminating material found during the search. The Tribunal referred to the legal position established by various judicial precedents, including the Delhi High Court’s decision in C.I.T. V/s. Kabul Chawla, which held that completed assessments can only be interfered with based on incriminating material unearthed during the search. The Tribunal also noted that the jurisdictional High Court had not yet adjudicated on this issue, and thus, followed the Supreme Court’s decision in CIT vs. Vegetable Products to decide the issue in favor of the assessee. Conclusion: The Tribunal dismissed the Revenue’s appeals, affirming the CIT(A)’s findings that the additions made by the Assessing Officer were not justified in the absence of incriminating material found during the search. The Tribunal upheld the CIT(A)’s decision to delete the additions related to share capital and share premium, emphasizing the established legal position that such additions in non-abated assessments must be based on incriminating material discovered during the search.
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