2019 (6) TMI 142 - AT - Income Tax

Assessment u/s 153A - search and seizure action u/s 132 - addition regarding share capital including share premium u/s 68 - HELD THAT - Since the addition in the instant case was not based on any incriminating material found during the course of search, but, on the basis of balance sheet filed by the assessee in the return of income, therefore, we hold that the addition made by the Assessing Officer u/s 68 on account of increase in share capital which has been upheld by the CIT(A) is not justified. Accordingly, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition. see MOON BEVERAGES LTD. AND HINDUSTAN AQUA LTD. VERSUS ACIT, CENTRAL CIRCLE- 15, NEW DELHI 2018 (6) TMI 471 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition under Section 68 of the Income Tax Act.
2. Validity of assessment under Section 153A without incriminating material.

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act:

The primary issue revolves around the addition of ?6 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of share capital and share premium received by the assessee from three companies. The AO questioned the identity, genuineness, and creditworthiness of the investors, citing that the investing companies had minimal business activities and meager earnings, making it improbable for them to have sufficient funds for investment. Despite the assessee providing various documents such as PAN details, bank statements, audited financial statements, and confirmations from the investor companies, the AO was not satisfied and made the addition under Section 68.

The CIT(A) upheld the AO's decision, leading the assessee to appeal before the Tribunal. The Tribunal noted that the assessee had already been assessed under Section 143(3) prior to the search, and the additions were made based on the balance sheet filed during the assessment proceedings, not on any incriminating material found during the search.

2. Validity of Assessment under Section 153A without Incriminating Material:

The Tribunal emphasized that the addition of ?6 crores was not based on any incriminating material found during the search but on the balance sheet. Referring to various judicial precedents, the Tribunal held that in the absence of incriminating material, no addition could be made under Section 153A. The Tribunal cited the Delhi High Court's decision in CIT vs. Kabul Chawla, which held that completed assessments can only be interfered with if incriminating material is found during the search.

The Tribunal also referred to the Supreme Court's decision in CIT vs. Sinhgad Technical Education Society, which upheld that additions could not be made without incriminating material related to the assessment year in question. The Tribunal reiterated that statements recorded under Section 132(4) do not constitute incriminating material unless they relate to evidence of undisclosed income unearthed during the search.

Conclusion:

The Tribunal concluded that the addition of ?6 crores under Section 68 was not justified as it was not based on any incriminating material found during the search. The Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition. Consequently, the appeals filed by the assessee for the respective assessment years were allowed, and the addition on merit was not adjudicated as it became academic in nature.