2018 (7) TMI 827 - AT - Income Tax

Assessment u/s 153A - Held that - There was no incriminating material found during the search proceedings and there was no investigation made by the Assessing Officer. Thus, the ratio laid down by the decision of the Hon ble Apex Court in the case of Lovely Export (2008 (1) TMI 575 - SUPREME COURT OF INDIA) will be applicable in the present case. Addition u/s 68 - Held that - Assessing Officer made enquiries but only part details were provided by the parties and since the part bank statement of the party revealed typical accommodation entry transactions. During Assessment Proceedings, all the evidences like ITR, Bank Statements, copy of PAN Card, names and addresses of the directors and audited balance sheet of the share applicant were submitted by the share applicant directly in response to notice u/s 133(6). Thus, the Assessing Officer as well as the CIT (A) has not at all considered all the documents which was provided by the Assessing Officer as well as before the CIT(A). Therefore, it will be pertinent to remand back this matter to the file of the Assessing Officer to take congnizance of the documents filed by the Assessee. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.

Summary

Issues Involved:
1. Deletion of additions under Section 68 of the Income Tax Act concerning accommodation entries.
2. Deletion of additions related to commission paid for procurement of accommodation entries.
3. Admissibility of additional evidence under Rule 46A.
4. Legal tenability of the CIT(A)'s orders.

Issue-wise Detailed Analysis:

1. Deletion of Additions under Section 68:

The Revenue challenged the deletion of additions made under Section 68 concerning accommodation entries through share application money from non-descript companies. The Assessing Officer (AO) had made these additions based on the failure of the assessee to establish the genuineness of the transactions, identity, and creditworthiness of the parties involved. Notices issued under Section 133(6) were not complied with, and the inspector's report indicated that certain entities did not exist at the given addresses. However, the CIT(A) deleted these additions, relying on the order for Assessment Year (A.Y.) 2006-07, where it was held that the share applicant companies were active, had filed returns regularly, and had sufficient resources for their investments. The CIT(A) noted that no incriminating material was found during the search, and the AO's observations were unsupported by material evidence. The Tribunal upheld the CIT(A)'s decision, finding no need to interfere with the findings, as the facts were identical to those in A.Y. 2006-07.

2. Deletion of Additions Related to Commission Paid:

The Revenue also contested the deletion of additions related to the commission paid for procuring accommodation entries. The AO had made these additions based on a commission rate of 5%. The CIT(A) deleted these additions, and the Tribunal upheld this decision, noting that the CIT(A) had rightly taken into consideration the evidence filed by the assessee during the assessment proceedings.

3. Admissibility of Additional Evidence under Rule 46A:

The Revenue argued that the CIT(A) erred in admitting additional evidence under Rule 46A. The CIT(A) admitted the additional evidence after forwarding the application under Rule 46A to the AO, who did not dispute the lack of reasonable opportunity for the assessee to present the evidence during the assessment proceedings. The Tribunal found that the CIT(A) had rightly admitted the additional evidence, as the inspector's report was not confronted to the assessee during the assessment or remand proceedings. The Tribunal dismissed the Revenue's ground on this issue.

4. Legal Tenability of the CIT(A)'s Orders:

The Revenue claimed that the CIT(A)'s orders were erroneous and not tenable in law and on facts. The Tribunal reviewed the CIT(A)'s detailed analysis and findings, which included the assessment of the share applicant companies' existence, their filing of returns, and their financial resources. The Tribunal found that the CIT(A) had rightly followed the order of A.Y. 2006-07 and that the findings were based on substantial evidence. Therefore, the Tribunal dismissed the Revenue's appeals for A.Y. 2008-09, 2009-10, and 2010-11.

Separate Judgment for A.Y. 2011-12:

For A.Y. 2011-12, the assessee appealed against the addition of ?3,00,000/- under Section 68. The CIT(A) had confirmed the addition based on the AO's findings that the share applicant company, M/s Indlon Hosiery Pvt. Ltd., was engaged in providing accommodation entries. The Tribunal noted that the assessee had submitted all required documents, including ITR, bank statements, PAN card, and audited balance sheet, directly in response to the notice under Section 133(6). The Tribunal found that the AO and CIT(A) had not considered all the documents provided by the assessee. Therefore, the Tribunal remanded the matter back to the AO for reconsideration, ensuring that the assessee is given an opportunity of hearing following the principles of natural justice.

Conclusion:

- ITA Nos. 54/Del/2014, 55/Del/2014, and 56/Del/2014 filed by the Revenue were dismissed.
- ITA No. 403/Del/2015 filed by the assessee for A.Y. 2011-12 was partly allowed for statistical purposes, remanding the matter back to the AO for reconsideration.