2018 (7) TMI 377 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Held that - What has been written by the Assessing Officer in the remand report is that there were certain undisclosed loans and advances for which the assessee group made disclosure of additional income. This exhibits that the assessee group voluntarily made disclosure of certain undisclosed loans/advances and offered additional income to that extent. It implies that the creditors which have been instantly added u/s 68 do not form part of the undisclosed loans/advances which were surrendered by the assessee group for which some incriminating material was found. Be that as it may, it is apparent from the assessment order itself, as has been candidly admitted by the ld. DR as well, that there is no reference to any incriminating material in the assessment order qua these creditors/advances in respect of which addition made - decided in favour of assessee.

Summary

Issues:
- Validity of addition made under section 68 of the Income-tax Act, 1961 based on unsecured loans.
- Interpretation of provisions under Section 153A of the Act in relation to completed assessments and incriminating material found during a search.

Analysis:

Issue 1: Validity of addition under section 68:
The appeals involved challenges to additions made under section 68 of the Income-tax Act, 1961, based on unsecured loans. The Assessing Officer added a substantial amount to the originally assessed income due to the failure of the assessee to prove the identity, capacity, and genuineness of the transactions related to the unsecured loans. However, the ld. CIT(A) deleted the addition, citing the absence of incriminating material found during the search. The Tribunal upheld the deletion, emphasizing that no incriminating material was discovered regarding the loans in question. The judgment highlighted the importance of incriminating material in making additions under section 153A, and in the absence of such material, the originally determined income should be maintained without further additions.

Issue 2: Interpretation of Section 153A provisions:
The judgment extensively discussed the interpretation of Section 153A of the Act in light of the Hon'ble jurisdictional High Court's ruling in Kabul Chawla vs. CIT case. It clarified that post a search under section 132 of the Act, the assessee must file returns for the preceding six assessment years. The Tribunal emphasized that assessments pending at the time of the search shall abate, and the Assessing Officer must compute the total income afresh. The judgment stressed that additions under Section 153A should be based on incriminating material found during the search. It highlighted that completed assessments can only be revisited based on such incriminating material and not arbitrarily. The Tribunal applied this interpretation to the appeals, concluding that the ld. CIT(A) was justified in deleting the additions made under section 68 for both the Saluja Construction Company Ltd. and Shri Vinod Saluja.

In conclusion, the Tribunal dismissed all appeals, affirming the deletion of additions made under section 68 and interpreting the provisions of Section 153A in line with the legal principles established by the Hon'ble jurisdictional High Court.