2017 (8) TMI 443 - AT - Income Tax

Assessment u/s 153A - addition based on any incriminating material found during the course of search - Procurement of accommodation entries through share application money from non-descript companies - addition u/s 68 - CIT(A) has deleted the additions after considering the assessments of six share applicants out of eight and has categorically recorded a finding that the additions so made are not based on any incriminating material found during the course of search Held that - It is now settled that in the cases of search, no addition can be made unless there is incriminating material found in the search to support such additions. However, in the instant case, there is no material on record and there is no whisper in the assessment order as well as in the order of ld. CIT(A) to show as to what material was found at the time of search, which led the Assessing Officer to make the impugned addition. The search memo is not available before us to know about the material found in the search. CIT(A) has also not recorded any finding as to the material found in the course of search. Therefore, unless it is ascertained as to what material was found on search and whether it was incriminating or not, the decision of making addition by the Assessing Officer and its deletion by the ld. CIT(A) cannot be supported. Besides, the ld. CIT(A) has admitted the additional evidences u/s. 46A. The impugned order shows that the ld. CIT(A) called for the remand report of the AO, but we do not find in the impugned order as to what was the rebuttal or contention of the Assessing Officer in the said remand report on admission of additional evidence, whatsoever, submitted before the ld. CIT(A). We, accordingly restore the matter to the file of ld. CIT(A) for deciding the appeal afresh after making proper examination of records in the light of observations made above Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Addition of ?1,50,00,000 under section 68 of the Income Tax Act for procurement of accommodation entries through share application money.
2. Deletion of addition of ?75,000 for commission paid on procuring accommodation entries.
3. Admission of additional evidence under Rule 46A.
4. Validity of the order of the Commissioner of Income Tax (Appeal) regarding the above additions.

Analysis:

Issue 1: Addition of ?1,50,00,000 under section 68
The Assessing Officer (AO) added ?1,50,00,000 to the total income of the assessee under section 68, treating it as accommodation entry received in the form of share application money. The ld. CIT(A) deleted this addition after considering assessments of six share applicants and finding no evidence during the search to support the Revenue's allegation. The Tribunal noted that no incriminating material was found during the search to justify the addition. The ld. CIT(A) admitted additional evidence under Rule 46A without proper examination, leading to the matter being remanded for a fresh decision.

Issue 2: Deletion of addition of ?75,000 for commission
The AO also made an addition of ?75,000 for alleged commission paid by the assessee on procuring accommodation entries. This addition was deleted by the ld. CIT(A) based on the lack of incriminating material found during the search. The Tribunal upheld the deletion, emphasizing the necessity of incriminating material to support such additions.

Issue 3: Admission of additional evidence under Rule 46A
The ld. CIT(A) admitted additional evidence under Rule 46A, but the Tribunal found that proper examination and consideration of this evidence were lacking. The matter was remanded for a fresh decision after proper examination of records and giving the parties a reasonable opportunity to be heard.

Issue 4: Validity of the order of the Commissioner of Income Tax (Appeal)
The Tribunal found that the ld. CIT(A) did not provide a clear rationale for deleting the additions, as no incriminating material was found during the search. The lack of evidence supporting the additions and the admission of additional evidence without thorough examination led to the remand of the case for a fresh decision. The appeal of the Revenue was allowed for statistical purposes, and the cross objection of the assessee was dismissed as the matter was remanded to the ld. CIT(A).