2019 (5) TMI 406 - AT - Income Tax

Assessment u/s 153A - Bogus LTCG - HELD THAT - In absence of any incriminating material the addition cannot be made by the AO in the proceedings u/s 153A when the assessment for the year was not pending as on the date of search. Following the decision as relied upon the AR as well as the decision of this Tribunal in case of DCIT vs. M/s A.M. Exports 2019 (1) TMI 696 - ITAT JAIPUR we deleted the addition made by the AO on account of long term capital gain. Since, we have deleted the addition on the legal ground therefore, we do not propose to go into the merits of the issue regarding the genuineness of the transactions as raised in ground. Unaccounted transaction detected during the course of search and seizure action as recorded in the loose papers and other incriminating material found and seized - HELD THAT - Considering inflow as well as out flow of cash and cheques as recorded in the seized papers the CIT(A) took the peak of incoming cash at ₹ 7,14,920/- and sustained the addition to that extent. We find that in the statement recorded U/s 132(4) as well as Section 131 the assessee apart from specific amounts has also surrendered ₹ 93,00,000/- on account of sundry/ miscellaneous items of unaccounted expenses or irregularity in the books of accounts if any. The said amount of ₹ 93,00,000/- was surrendered by the assessee to cover any irregularity in the claim in the books of accounts. Disallowance made by the AO which are restricted by the CIT(A) is very well covered by the said amount of ₹ 93,00,000/- when the AO has not pointed out any other irregularity or discrepancy in respect of any other year cover under the search to consume or utilize the said sundry amount of ₹ 93,00,000/- surrendered by the assessee. Accordingly, the addition restricted by the CIT(A) is not sustainable when the assessee has already surrendered extra amount of ₹ 93,00,000/- to cover such irregularity. Addition on account of receipt recorded treating as unaccounted receipt of the assessee - addition restricted by the CIT(A) by applying N.P. rate of 13.28% on the said amount which comes - HELD THAT - Though the assessee has explained that this amount of ₹ 2,00,000/- is nothing but representing the imprest account maintained by the employees of the assessee who keep these details for making day to day payment for various sites. Since the assessee has already surrendered on account of miscellaneous/ irregularity of ₹ 93,00,000/- then the amount of ₹ 26,650/- confirmed by the CIT(A) is already covered by the said disclosure made by the assessee accordingly, the same is deleted. Addition made on account of difference between the surrendered recorded restricted by CIT(A) by applying the NP rate at 13.28% - HELD THAT - The assessee in the statement recorded U/s 132(4) of the Act has made surrendered of ₹ 1,67,00,000/- on account of unaccounted expenditure of the assessee. During the course of the assessment proceedings, the AO noted that the actual account of expenditure recorded in the seized material is ₹ 1,73,72,171/- and there is excess expenditure of ₹ 6,32,171/- which was added to the income of the assessee. CIT(A) restricted the addition by apply the NP @ 13.28% which comes to ₹ 83,952/-. We find that this amount of ₹ 83,952/- is also covered by the miscellaneous surrendered of ₹ 93,00,000/- by the assessee on account of the sundry/irregularity in the accounts of the assessee. Accordingly without going into the other contention raised by the AR when this amount is also covered by the said miscellaneous surrendered the addition is not justified and the same is deleted . A ppeal filed by the assessee are allowed.

Summary

Issues Involved:

1. Validity of addition made under Section 153A without incriminating material.
2. Addition of ?7,14,920 based on peak of incoming cash.
3. Addition of ?2,00,000 as unaccounted receipt.
4. Addition of ?6,32,171 as unaccounted expenditure.

Issue-wise Detailed Analysis:

1. Validity of Addition Made Under Section 153A Without Incriminating Material:

The assessee challenged the addition made under Section 153A on the grounds that no incriminating material was found during the search. The Tribunal noted that the original returns for AY 2010-11 and 2011-12 were filed and processed before the search, and no incriminating material was found during the search. The Tribunal relied on various judicial precedents, including the Hon'ble Delhi High Court's decision in *Kabul Chawla* and the Hon'ble Rajasthan High Court's decision in *Jai Steel (India)*, which held that in the absence of incriminating material, no addition can be made under Section 153A. The Tribunal concluded that the addition made by the AO was not sustainable as it was not based on any incriminating material found during the search.

2. Addition of ?7,14,920 Based on Peak of Incoming Cash:

The AO made an addition of ?30,09,720 based on entries in seized material, which the assessee claimed were recorded in the books of accounts. The CIT(A) restricted the addition to ?7,14,920 based on the peak of incoming cash. The Tribunal noted that the assessee had already surrendered ?1,35,00,000 on account of discrepancies in the books and an additional ?93,00,000 for miscellaneous irregularities. The Tribunal held that the addition of ?7,14,920 was covered by the surrendered amount and deleted the addition.

3. Addition of ?2,00,000 as Unaccounted Receipt:

The AO treated a receipt of ?2,00,000 recorded on seized documents as unaccounted, and the CIT(A) applied a net profit rate of 13.28%, confirming an addition of ?26,560. The assessee argued that the amount was part of an imprest account maintained by an employee and was covered by the surrendered amount of ?93,00,000 for miscellaneous irregularities. The Tribunal accepted the assessee's explanation and deleted the addition, noting that it was covered by the previously surrendered amount.

4. Addition of ?6,32,171 as Unaccounted Expenditure:

The AO made an addition of ?6,32,171 based on the difference between the actual unaccounted expenditure recorded in seized material and the amount surrendered by the assessee. The CIT(A) restricted the addition by applying a net profit rate, resulting in an addition of ?83,952. The Tribunal noted that the assessee had already surrendered ?93,00,000 for miscellaneous irregularities and held that the addition was covered by this amount. Consequently, the Tribunal deleted the addition.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, deleting the additions made by the AO on the grounds that they were either not based on any incriminating material found during the search or were covered by the amounts already surrendered by the assessee for miscellaneous irregularities.