2018 (1) TMI 88 - AT - Income Tax

Validity of additions made under section 153A - treatment given to statement under section 132(4) of Sh. Sampat Sharma - Held that - We find that in the case of best infrastructure (India) private limited (2017 (8) TMI 250 - DELHI HIGH COURT), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon ble Delhi High Court in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT). The grounds No. 1 and 1.1 of appeal are accordingly allowed.

Issues Involved:
1. Validity of proceedings under Section 153A of the Income Tax Act.
2. Legitimacy of the addition of ?55,00,000 as unexplained cash credits under Section 68 of the Act.
3. Adequacy of opportunity provided to the appellant.
4. Levy of interest under Sections 234A, 234B, 234C, and 234D of the Act.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 153A:
The appellant challenged the initiation of proceedings under Section 153A, arguing that no incriminating material was found during the search. The Tribunal referred to the judgment of the Hon'ble Delhi High Court in CIT vs. Kabul Chawla, which established that for completed assessments, no additions can be made without incriminating material. The Tribunal noted that the assessment for the year under consideration was completed under Section 143(3) before the search, and no incriminating material was found during the search. The Tribunal rejected the respondent's argument that documents impounded during a survey at the premises of the Chartered Accountant could be considered incriminating material found during the search. The Tribunal also dismissed the argument that statements recorded under Section 132(4) of the Act constituted incriminating material, citing the Hon'ble Delhi High Court's ruling in Principal CIT vs. Best Infrastructure (India) Private Limited and Commissioner of Income Tax vs. Harjeev Aggarwal.

2. Legitimacy of the Addition of ?55,00,000 as Unexplained Cash Credits:
The appellant argued that the addition of ?55,00,000 as unexplained cash credits under Section 68 was not based on any incriminating material found during the search. The Tribunal observed that the Assessing Officer had relied on the statement of the Director and the investigation report, but no direct incriminating material was found. The Tribunal concluded that since the assessment was completed before the search and no incriminating material was found, the addition could not be sustained. The Tribunal also noted that the appellant had provided sufficient evidence to discharge the burden under Section 68, but the lower authorities had ignored this evidence.

3. Adequacy of Opportunity Provided to the Appellant:
The appellant contended that the authorities had framed the order without granting sufficient opportunity, violating the principles of natural justice. The Tribunal did not specifically address this issue in detail, as the primary grounds for quashing the addition were based on the lack of incriminating material.

4. Levy of Interest under Sections 234A, 234B, 234C, and 234D:
The appellant challenged the levy of interest under Sections 234A, 234B, 234C, and 234D. The Tribunal did not delve into this issue separately, as the primary grounds for quashing the addition were the lack of incriminating material and the completed assessment before the search.

Conclusion:
The Tribunal allowed the appeal, holding that the addition of ?55,00,000 was made without any incriminating material found during the search and that the assessment for the year under consideration was completed before the search. Consequently, the addition was quashed, and the appeal was allowed partly. The other arguments on the merits were rendered academic and dismissed as infructuous. The decision was pronounced in the open court on 29th December 2017.

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