2016 (10) TMI 498 - AT - Income Tax

Unexplained cash credit u/s 68 - assessments framed u/s 153A - bifurcation of abated and unabated assessments - non incriminating material found during the course of search - Held that - We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are to be framed by the ld AO u/s 153A of the Act which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the legislature had conferred powers on the ld AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld DR in this regard deserves to be dismissed. In view of the aforesaid findings we hold that the additions towards share application monies in the sums of ₹ 20,00,000/- and ₹ 72,00,000/- for the Asst Years 2008-09 and 2009-10 respectively , which were unabated / concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search. Hence we hold that the ld AO ought to have only followed the old assessed income either u/s 143(3) or 143(1) of the Act for the relevant years. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the additions made towards share application money. Accordingly the grounds raised by the assessee are allowed. - Decided in favour of assessee

Issues Involved:
1. Legality of additions under Section 68 of the Income Tax Act in the absence of incriminating material found during the course of search.
2. Validity of the assessment framed under Section 153A of the Income Tax Act for concluded assessments without incriminating material.
3. Justification of the additions made towards share application monies as unexplained cash credit.

Issue-wise Detailed Analysis:

1. Legality of Additions under Section 68 in Absence of Incriminating Material:
The core issue was whether the CIT(A) was justified in upholding the additions of ?20,00,000/- and ?72,00,000/- as unexplained cash credit under Section 68 in the search assessments framed under Section 153A, despite the absence of any incriminating material found during the search. The Tribunal noted that the Assessing Officer (AO) had admitted in his remand report that no incriminating materials were found during the search concerning the share capital addition. The Tribunal referenced multiple judicial precedents, including the Delhi High Court ruling in CIT vs. Kabul Chawla, which held that completed assessments could only be interfered with based on incriminating material unearthed during the search.

2. Validity of Assessment Framed under Section 153A for Concluded Assessments:
The Tribunal examined whether assessments under Section 153A could be framed for concluded assessments without incriminating material. It was established that for concluded assessments (where assessments were already completed under Section 143(1) or 143(3) and no proceedings were pending on the date of search), the AO could not disturb the findings unless incriminating material was found during the search. The Tribunal reiterated that the scheme of Section 153A differentiates between abated (pending) and unabated (concluded) assessments, and additions in unabated assessments require incriminating material.

3. Justification of Additions Towards Share Application Monies:
The AO had added ?20,00,000/- and ?72,00,000/- as unexplained cash credits under Section 68, citing the inability of the assessee to prove the identity, genuineness, and creditworthiness of the share subscribers. The assessee argued that the additions were made without any incriminating material found during the search, and the necessary details of share subscribers were provided, including income tax return acknowledgements and financial statements. The Tribunal noted that the CIT(A) had dismissed the assessee's plea based on indirect evidence of unaccounted income and accommodation entries found during the search. However, the Tribunal held that in the absence of incriminating material specifically related to the share application monies, the additions could not be justified.

Conclusion:
The Tribunal concluded that the additions of ?20,00,000/- and ?72,00,000/- for the assessment years 2008-09 and 2009-10, respectively, were not justified in the absence of incriminating material found during the search. The Tribunal emphasized that the AO should have adhered to the previously assessed income under Section 143(3) or 143(1) for the relevant years. Consequently, the appeals of the assessee were allowed, and the additions were deleted.

Order Pronounced:
The order was pronounced in the open court on 07.10.2016, allowing the appeals of the assessee.

← Previous Next →