2018 (6) TMI 1378 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - Held that - Despite query from the bench, assessee did not given the details of plot transacted. This is with reference to the nature of the documents produced by the assessee to justify the identity of the company, creditworthiness of the company and the genuineness of the transactions. No hesitation in holding that the documents produced by the assessee do not inspire any confidence in all the 3 ingredients of section 68 in the present case. We are in disagreement on the issue of findings of the ld CIT(A) that transaction of the Cubic Resource are genuine. We are also in disagreement that cross examination of Shri S.K. Gupta should have been given to the assessee. According to us the assessee has failed to establish the creditworthiness and genuineness of the transaction. But for the only reason that the Ld. AO has invoked the provisions of section 153A of the income tax act to make this addition without any incriminating evidence, respectfully following the decision in Meeta Gutguttia (2017 (5) TMI 1224 - DELHI HIGH COURT) following the decision of CIT versus Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT , we agree with the order of the Ld. CIT A that there is no incriminating material found during the course of search with respect to this addition. In view of this, we dismiss ground No. 1 and 2 of the appeal of the revenue.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961.
2. Allowability of additional claims made under Section 153A.
3. Penalty under Section 271(1)(c) of the Income Tax Act.
4. Interest levied under Sections 234A and 234B.

Detailed Analysis:

1. Deletion of Addition Made Under Section 68:
The primary issue was whether the addition of ?40,00,000 made by the Assessing Officer (AO) under Section 68 as unexplained credit was justified. The AO based the addition on the grounds that the amount was received from a company controlled by an accommodation entry provider, Mr. S.K. Gupta. The AO argued that the company had negligible net worth and was used for issuing accommodation entries. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, stating that the assessee had discharged the initial onus by providing documentary evidence of the transaction, including receipts and refund details. The CIT(A) noted that no incriminating documents were found during the search, and the transaction was conducted through banking channels. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s order, emphasizing that the addition could not be made solely based on statements without corroborative evidence.

2. Allowability of Additional Claims Made Under Section 153A:
The assessee made additional claims for expenses in the returns filed under Section 153A, which were not claimed in the original returns. The AO disallowed these claims, stating that Section 153A is for the benefit of the revenue and not for the assessee. The CIT(A) and ITAT upheld the AO's decision, referencing the Supreme Court's ruling in CIT v. Sun Engineering Works Pvt. Ltd. and the Delhi High Court's decision in CIT v. Kabul Chawla, which clarify that assessments under Section 153A can only be disturbed based on incriminating material found during the search.

3. Penalty Under Section 271(1)(c):
The AO levied a penalty of ?4,43,47,750 under Section 271(1)(c) for furnishing inaccurate particulars of income by making additional claims in the return filed under Section 153A. The CIT(A) deleted the penalty, stating that the claim was based on a change in accounting principles and was a legal claim, even if it was untenable. The ITAT upheld the CIT(A)'s order, noting that mere disallowance of a claim does not warrant a penalty for furnishing inaccurate particulars of income.

4. Interest Levied Under Sections 234A and 234B:
The assessee contested the interest levied under Sections 234A and 234B. However, the CIT(A) and ITAT upheld the levy of interest, as the additional claims made by the assessee were disallowed, leading to an increase in taxable income and consequent interest liability.

Conclusion:
The ITAT dismissed the appeals of the revenue and the assessee, upholding the CIT(A)'s orders. The deletion of the addition under Section 68 was justified due to the lack of incriminating evidence. The additional claims made under Section 153A were disallowed as they were not based on undisclosed income or material found during the search. The penalty under Section 271(1)(c) was deleted, as the claim was legal and based on accounting principles. The interest levied under Sections 234A and 234B was upheld due to the disallowance of additional claims.