2016 (8) TMI 53 - AT - Income Tax

Unexplained purchase u/s 69C - unexplained purchases - admission of additional grounds - Held that - No incriminating material belonging to the assessee was seized and in both the cases additions were made for unexplained purchases under section 69C of the Act on the basis of the statement of third-party recorded subsequent to the search. Thus, respectfully following the judgment of the Hon ble Jurisdictional High Court in the cases of R.R.J. Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT ) and Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ), we hold that since in the case, as on the date of search, the assessments already stood completed, therefore, no addition could have been made in the year under consideration in absence of any incriminating material, and accordingly, the additions made by the Assessing Officer are directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained purchase under Section 69C.
2. Acceptance of cash transactions by the assessee.
3. Deletion of addition on account of expenses and depreciation.
4. Evidentiary value of statements not confronted to the assessee.
5. Validity of notice and assessment order under Section 153C.
6. Admissibility of additional grounds raised by the Revenue.
7. Jurisdiction of the Assessing Officer in making additions under Section 153C.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Purchase under Section 69C:
The Revenue argued that the CIT(A) erred in deleting the addition of ?33,03,880/- made on account of unexplained purchases under Section 69C. However, the Tribunal found that the purchases were duly reflected in the regular books of accounts and no incriminating material was found during the search. The addition was based on a third-party statement recorded post-search, which was not sufficient to justify the addition.

2. Acceptance of Cash Transactions by the Assessee:
The Revenue contended that the CIT(A) erred in accepting cash transactions for sale and purchase by the assessee. The Tribunal noted that the transactions were reflected in the regular books of accounts, and no independent proof of sale/purchase was found except bank transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of incriminating evidence.

3. Deletion of Addition on Account of Expenses and Depreciation:
The Tribunal upheld the CIT(A)'s decision to delete the addition of ?3,81,596/- made on account of expenses and depreciation, as the Revenue failed to provide sufficient evidence to support the addition.

4. Evidentiary Value of Statements Not Confronted to the Assessee:
The CIT(A) held that statements of various persons without being confronted to the assessee have weak evidentiary value. The Tribunal agreed, emphasizing that the addition was based on a third-party statement recorded post-search, which was not sufficient to justify the addition.

5. Validity of Notice and Assessment Order under Section 153C:
The assessee challenged the validity of the notice issued under Section 153C and the assessment order passed under Section 153C/143(3), arguing that the documents found during the search did not belong to the assessee and were part of the working papers of the C.A. The Tribunal found that the seized documents were not incriminating and were duly reflected in the regular books of accounts. Therefore, the notice issued under Section 153C was deemed illegal and without jurisdiction.

6. Admissibility of Additional Grounds Raised by the Revenue:
The Tribunal admitted the additional grounds raised by the Revenue, noting that they were purely legal in nature and did not require further examination of facts. However, the Tribunal dismissed the additional grounds, citing the substantive right of appeal and the procedural issue not affecting the substantial rights of the assessee.

7. Jurisdiction of the Assessing Officer in Making Additions under Section 153C:
The Tribunal held that since no incriminating material was found during the search, no additions could have been made in the completed assessments under Section 153C r.w.s. 153A. The Tribunal relied on the judgment of the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla, which held that in the absence of incriminating material, the completed assessment can only be reiterated.

Conclusion:
The Tribunal allowed the cross objections of the assessee, holding that no addition could have been made in the absence of any incriminating material. Consequently, the appeals of the Revenue were rendered infructuous and dismissed. The decision was pronounced in the open court on 27th July, 2016.