2019 (1) TMI 1082 - AT - Income Tax

Proceedings u/s 153A - Unexplained credit addition u/s 68 - proof on incriminating material find to make the additions - Held that - 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 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 - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Share Premium as Unexplained Credit under Section 68 of the Income Tax Act.
2. Allocation of Director’s Remuneration/Sitting Fee to Exempt Unit under Section 80IA.

Issue-wise Detailed Analysis:

1. Addition of Share Premium as Unexplained Credit under Section 68 of the Income Tax Act:

The revenue challenged the order of the Commissioner of Income-tax (Appeals) [CIT(A)], who deleted the addition of ?30 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, treating the share premium received by the assessee as unexplained credit. The AO had initially accepted the share capital as genuine in the assessment under Section 143(3) but later, in the assessment under Section 153A post-search, treated the share premium as unexplained.

The CIT(A) observed that all 22 companies involved were existing assessees regularly filing returns, and there was no contrary evidence to support the AO's subsequent view. The CIT(A) held that the assessee had discharged its primary onus of establishing the transaction twice, and the AO's conclusion lacked basis. The CIT(A) also noted an error in the AO's computation, where the addition proposed was ?29,70,00,000 but the final addition was ?30,00,00,000.

The Tribunal upheld the CIT(A)'s decision, noting that no incriminating material was found during the search related to the assessee. The Tribunal referred to the case of M/s Mool Chand Steels P. Ltd. (MSL), another group company, where similar additions were deleted by the CIT(A) and confirmed by the Tribunal. The Tribunal emphasized that in the absence of incriminating material, the revenue cannot reopen concluded assessments, citing the decision in CIT vs. Kabul Chawla (380 ITR 573).

The Tribunal also considered the revenue's reliance on the case of Sohail Financials Ltd., where investments at huge premiums were questioned. However, the Tribunal found no reason to apply this ratio to the present case, as no incriminating material was found against the assessee.

2. Allocation of Director’s Remuneration/Sitting Fee to Exempt Unit under Section 80IA:

The AO had added a sum of ?7467, being the share of director’s remuneration/sitting fee, to the total income earned by allocating it to the exempt unit. The CIT(A) deleted this addition, holding that each expense cannot be allocated to the unit enjoying concessional taxation, and it is not mandated by law or factually liable. The CIT(A) noted that a director serves the whole company, not just a specific unit, and the negligible sum of ?7467 could not be considered misreported.

The Tribunal upheld the CIT(A)'s decision, agreeing that the allocation of the director’s remuneration/sitting fee to the exempt unit was not justified.

Conclusion:

The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection. The Tribunal quashed the assessment order dated 31.3.2014, holding that reopening the proceedings in the absence of incriminatory material was bad in law. The Tribunal pronounced the order in the Open Court on 10th December 2018.