2018 (10) TMI 259 - AT - Income Tax

Addition u/s 153A - Addition made towards share application money for want of incriminating materials found during the course of search relatable to such issue - Held that - In respect of abated assessments (i.e. pending proceedings on the date of search), fresh assessments are to be framed by the ld AO u/s 153A which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. In respect of unabated assessments, the legislature had conferred powers on the AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. This would be the correct understanding of the provisions of section 153A as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A would become redundant and would lose its relevance. Hence the arguments advanced by the DR in this regard deserves to be dismissed. The assessment framed u/s 143(1) for the Asst Year 2012-13, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share application money and share premium u/s 68 is hereby directed to be deleted. It is not in dispute that there was absolutely no incriminating material found during the course of search in the instant case with regard to the issue of share capital, share premium and the AO had only tried to explain the various layers through which the monies ultimately reached the assessee company. The other addition of commission of ₹ 35,000/- is only consequential to the first addition. - Decided against revenue

Issues Involved:

1. Deletion of addition towards share application money of ?70,00,000/-.
2. Deletion of addition of ?35,000/- on account of commission for getting accommodation entries.
3. Validity of assessment under section 153A without incriminating material.

Issue-wise Detailed Analysis:

1. Deletion of addition towards share application money of ?70,00,000/-:

The assessee filed its return of income for the Assessment Year (AY) 2012-13 declaring a total loss of ?60/-. A search and seizure operation was conducted on 7.11.2013 at the business and residential premises of the 'Dollar Group'. Following the search, a notice under section 153A was issued, and the assessee filed its return of income again declaring a total loss of ?60/-. The assessee argued that the year under consideration was an unabated assessment year as the time limit for issuing a notice under section 143(2) had expired. Therefore, the income assessed originally could not be disturbed unless incriminating material was found during the search. The Assessing Officer (AO) made an addition of ?70,00,000/- towards share application money under section 68 of the Act, claiming that the assessments under section 153A could be framed irrespective of incriminating materials found during the search.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition on the grounds that no incriminating material was found during the search related to the share capital and share application money. The CIT(A) relied on the jurisdictional precedents and the decision of the Hon’ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd, where it was held that in the absence of incriminating material, the originally assessed income should not be disturbed.

2. Deletion of addition of ?35,000/- on account of commission for getting accommodation entries:

The AO also made an addition of ?35,000/- towards commission paid for obtaining accommodation entries related to the share application money. The CIT(A) deleted this addition as well, citing the absence of any incriminating material found during the search. The deletion of this addition was consequential to the deletion of the addition towards share application money.

3. Validity of assessment under section 153A without incriminating material:

The primary argument was whether additions could be made under section 153A in respect of a concluded proceeding without any incriminating material found during the search. The tribunal noted that the assessment for AY 2012-13 was originally completed under section 143(1) and was a concluded proceeding as the time limit for issuing a notice under section 143(2) had expired. The tribunal referred to several judicial precedents, including the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla, which held that in the absence of any incriminating material, completed assessments could not be disturbed under section 153A.

The tribunal also referred to the decision of the Hon’ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd and the Hon’ble Supreme Court's dismissal of the Special Leave Petition (SLP) in a similar case, reinforcing that the addition under section 153A should be based on incriminating material found during the search.

Conclusion:

The tribunal held that the assessment for AY 2012-13, being a concluded assessment, could not be disturbed in the absence of any incriminating material found during the search. Consequently, the additions made by the AO towards share application money and commission were directed to be deleted. The appeal of the revenue was dismissed.

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