2019 (1) TMI 1452 - AT - Income Tax

Reopening of assessment - disallowing STT debited to P&L Account, income-tax debited, disallowance u/s 14A and preliminary expenses - addition u/s 68 - assessment proceedings u/s 153A/143(3) - Held that - In the case of CIT vs. Raj Kumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT wherein it has been held that the AO has power to reassess returns of the assessee not only for undisclosed income found during the search operation, but also with regard to material available at the time of original assessment. Similar view has been taken in the case of CIT vs. Kesarwani Zarda Bhandar Sahson, Allahabad 2017 (4) TMI 57 - ALLAHABAD HIGH COURT wherein it has been held that the Assessing Officer has power to reassess returns of the assessee not only for undisclosed income found during search operation, but also with regard to material available at the time of original assessment. Thus we are unable to accept the contention of the ld. counsel for the assessee that in the absence of any incriminating material found during the course of search, the initiation of proceeding u/s 153A are not valid. Therefore, the legal ground raised by the assessee stands dismissed. Coming to the merit of the case, it is an admitted fact that in the order passed u/s 147/143(3) on 31st December, 2009, the Assessing Officer had examined the issue of share premium and share application money. On the basis of various details filed by the assessee as required by the Assessing Officer, no addition was made and the issue of share premium was accepted without making any addition. When the assessee during the course of reassessment proceedings had filed the requisite details such as the copies of share applications, bank statements including details of allotment, premium charge, etc., and nothing adverse was found during the course of search proceedings and considering the fact that nothing adverse during post search inquiries was found to negate the documents already filed at the time of the reassessment proceedings, the present Assessing Officer, on the same set of material cannot take a different view than the view already taken by his predecessor at the time of original assessment merely because a search has taken place. Addition made by the Assessing Officer and sustained by the CIT(A) is not justified. Accordingly, AO is directed to delete the addition made by him u/s 68 - Appeal filed by the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of addition of ?17,42,00,000/- received as Share Capital and Share Premium under section 68 of the IT Act.
2. Jurisdiction of the Assessing Officer in revisiting the issue of share capital already examined in the original assessment under section 147.
3. Legality of the addition made under section 153A in the absence of any incriminating material found during the search.

Issue-wise Detailed Analysis:

1. Validity of Addition of ?17,42,00,000/- under Section 68:
The assessee company issued equity shares of ?87,12,500/- with a premium of ?16,55,37,500/- during the assessment year 2008-09. The Assessing Officer (AO) made an addition of ?17,42,50,000/- under section 68, citing the assessee's failure to provide details justifying the premium and proving the identity, creditworthiness, and genuineness of the share applicants. The CIT(A) upheld this addition, noting that the assessee had minimal business activity and the substantial cash found during the search constituted incriminating material. The Tribunal, however, found that the original assessment had already examined and accepted the share capital and premium, and no new incriminating material was found during the search to justify the addition. Thus, the Tribunal directed the deletion of the addition.

2. Jurisdiction of the Assessing Officer in Revisiting Share Capital Issue:
The assessee argued that the issue of share capital was already examined and finalized in the original assessment under section 147/143(3). The CIT(A) and AO revisited the issue during the assessment under section 153A, citing the cash found during the search as incriminating material. The Tribunal found that the AO had already reviewed and accepted the share capital details during the original assessment, and no new material was found during the search to warrant a different conclusion. Hence, the AO did not have the jurisdiction to revisit the same issue based on the same set of facts.

3. Legality of Addition under Section 153A in Absence of Incriminating Material:
The assessee contended that no incriminating material was found during the search to justify the addition under section 153A. The Tribunal noted that the original assessment was completed, and the details related to share capital and premium were already on record and accepted by the AO. The Tribunal referred to various judicial precedents, including the decision of the Hon'ble Delhi High Court in CIT vs. Kabul Chawla, which held that no addition can be made under section 153A in the absence of incriminating material found during the search. The Tribunal concluded that the fixed deposits seized during the search were part of the regular books of account and did not constitute incriminating material. Therefore, the addition made by the AO under section 153A was not justified.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the addition of ?17,42,50,000/- under section 68 was not justified as the issue of share capital was already examined and accepted in the original assessment, and no new incriminating material was found during the search. The Tribunal directed the AO to delete the addition, thereby partly allowing the appeal filed by the assessee.