2018 (12) TMI 826 - AT - Income Tax

Initiation of proceedings u/s 153A - addition u/s 68 - Held that - In assessee s case under consideration, on the date of search, no assessment for these three years (that is, assessment years 200910, 201011 and 201112) were pending. The issue of share capital was before the AO during the original assessment proceedings and in original assessment proceedings under section 143(3)/143(1), the assessing officer examined the issue relating to share capital/share premium. Assessment u/s 153A was made by assessing officer after search and no any incriminating documents/papers seized during the search operation, therefore, without incriminating material the addition should not be made. Therefore, keeping in view the ratio decided by the Hon ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT since there is no incriminating material unearthed during search in respect of the concluded assessments, no addition/disallowance could be made by the AO for AYs 2009-10, 2010-11, 2011-12 - Decided in favour of assessee.

Issues Involved:
1. Justification of additions made in the assessment order without incriminating documents.
2. Validity of adjudicating appeal without addressing other grounds on merit.
3. Deletion of addition made under Section 68 of the Income Tax Act on account of share application money.
4. Additional ground raised by Revenue regarding deletion of addition in Assessment Year 2010-11.

Detailed Analysis:

1. Justification of Additions Made in the Assessment Order Without Incriminating Documents:
The Revenue challenged the deletion of an addition of ?1,30,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of share application money. The AO had added this amount as unexplained cash credit, citing non-compliance by the investor companies to summons issued under Section 131(1)(d) and 133(6) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition on the grounds that the AO could not make additions in search assessments under Section 153A/153C without incriminating material found during the search. The Tribunal upheld the CIT(A)'s decision, emphasizing that the addition must be based on incriminating material found during the search and that the AO cannot start a fresh assessment without such material.

2. Validity of Adjudicating Appeal Without Addressing Other Grounds on Merit:
The Revenue contended that the CIT(A) adjudicated the appeal without addressing other grounds on merit. However, the Tribunal noted that the main issue was the absence of incriminating material, which was sufficient to decide the appeal. The Tribunal found no fault in the CIT(A)'s approach, as the addition made by the AO was not based on any incriminating documents found during the search.

3. Deletion of Addition Made Under Section 68 of the Income Tax Act on Account of Share Application Money:
The AO had treated the share application money received from four investor companies as unexplained cash credit under Section 68. The assessee argued that all the shareholders were body corporates, assessed to income tax for several years, and the share application money was received through banking channels. The CIT(A) deleted the addition, noting that the AO did not have jurisdiction to make such additions without incriminating material. The Tribunal upheld this deletion, reiterating that in the absence of incriminating documents found during the search, the AO could not make additions in completed assessments.

4. Additional Ground Raised by Revenue Regarding Deletion of Addition in Assessment Year 2010-11:
The Revenue raised an additional ground regarding the deletion of an addition of ?4,78,038/- in Assessment Year 2010-11. The Tribunal dismissed this ground, stating that the appeal was already dismissed on the legal ground of absence of incriminating documents during the search.

Conclusion:
The Tribunal dismissed the Revenue's appeals for the assessment years 2009-10, 2010-11, and 2011-12, upholding the CIT(A)'s deletion of additions made by the AO. The Tribunal emphasized that additions in search assessments under Section 153A/153C must be based on incriminating material found during the search, and in the absence of such material, the AO cannot make additions in completed assessments. The Tribunal also noted that the AO's power to assess or reassess total income under Section 153A is limited to cases where incriminating material is found during the search.

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