2017 (12) TMI 346 - AT - Income Tax

Addition u/s 153A - absence of incriminating material found during the course of search - unexplained share capital - Held that - AO asked the assessee about the increase in the share capital and categorically stated that the assessee was asked to furnish the confirmation from all six persons but whom shares were allotted year by year alongwith the copies of their bank statement, audited account and ITRs for the year under consideration which were furnished by the assessee. The AO was satisfied with the details furnished by the assessee except for 1,00,000 shares of ₹ 10/- each allotted to M/s Jeevandhara Waters Pvt. Ltd. which were added to the income of the assessee and finally the assessment was framed at an income of ₹ 5,83,177/-. Thereafter, a search u/s 132 of the Act was again carried out on 19.01.2009 on the assessee company. However, the assessment was framed by making the addition of ₹ 1,05,00,000/- on account of share capital and another addition of ₹ 10,00,000/- which was included in the above said amount and already added on account of shares allotted to M/s Jeevandhara Waters Pvt. Ltd. It is, therefore, clear that no fresh incriminating material was found during the course of search which took place on 19.01.2009. Thus we delete the addition made by the AO in the absence of incriminating material found during the course of search held on 19.01.2009, by passing the assessment u/s 153A r.w.s. 143(3) of the Act on 29.12.2010, which was confirmed by the ld. CIT(A) vide impugned order. - Decided in favour of assessee.

Issues Involved:

1. Jurisdiction of assessment under section 153A.
2. Validity of search operations and issuance of notice under section 153A.
3. Addition of income based on share capital and share application money.
4. Incriminating material found during the search.
5. Interest computation under various sections.
6. Principles of natural justice.

Issue-Wise Analysis:

1. Jurisdiction of Assessment under Section 153A:

The main grievance of the assessee was the sustenance of addition made by the AO under section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during the course of search. The assessee contended that the assessment made under section 153A was without jurisdiction as no incriminating material was found during the search conducted on 19.01.2009. The tribunal noted that the AO had already examined the issue of share capital in the original assessment order dated 28.12.2007 and no new incriminating material was found during the subsequent search. The tribunal referred to the judgments in CIT Vs Kabul Chawla and Pr. CIT Vs Meeta Gutgutia, which held that in the absence of incriminating material, no additions can be made under section 153A.

2. Validity of Search Operations and Issuance of Notice under Section 153A:

The assessee argued that the search conducted was not valid as no search warrant was issued in the name of the appellant, and the notice under section 153A was neither validly issued nor served in accordance with the provisions of law. The tribunal observed that the jurisdiction of the AO under section 153A is to assess the total income for the year, not restricted to seized material, as per the judgment of the Hon’ble Delhi High Court in the case of Anil Kumar Bhatia. However, the tribunal found that no fresh incriminating material was found during the search conducted on 19.01.2009, and thus, the additions made were not justified.

3. Addition of Income Based on Share Capital and Share Application Money:

The AO made an addition of ?1,05,00,000 under section 68 of the Act on account of unexplained share capital and share application money. The assessee submitted that the issue of share capital had already been adjudicated in the original assessment order dated 28.12.2007. The tribunal noted that the AO had accepted the details furnished by the assessee in the original assessment except for ?10,00,000 relating to M/s Jeevandhara Waters Pvt. Ltd. The tribunal found that no new incriminating material was found during the subsequent search to justify the addition of ?1,05,00,000.

4. Incriminating Material Found During the Search:

The tribunal observed that no incriminating material was found during the search conducted on 19.01.2009, which could impinge upon the receipt of share capital. The tribunal referred to the judgment in the case of CIT Vs Kabul Chawla, which held that in the absence of any incriminating material, the completed assessment can be reiterated, and the abated assessment or reassessment can be made only on the basis of seized material. The tribunal concluded that the additions made by the AO were not justified in the absence of incriminating material.

5. Interest Computation Under Various Sections:

The assessee contended that interest under various sections could not have been included in the computation of tax demand. The tribunal did not specifically address this issue in detail but allowed the appeals of the assessee based on the lack of incriminating material found during the search.

6. Principles of Natural Justice:

The assessee argued that the issuance of notice under section 153A violated the principles of natural justice as the appellant was required to file the return without being provided copies of the seized material. The tribunal noted that the AO had already examined the issue of share capital in the original assessment and no new incriminating material was found during the subsequent search. Therefore, the tribunal concluded that the additions made by the AO were not justified.

Conclusion:

The tribunal allowed the appeals of the assessee for both assessment years 2005-06 and 2006-07, deleting the additions made by the AO under section 153A in the absence of incriminating material found during the search conducted on 19.01.2009. The tribunal emphasized that no additions can be made under section 153A without any incriminating material, as per the judgments in CIT Vs Kabul Chawla and Pr. CIT Vs Meeta Gutgutia.

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