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2019 (6) TMI 988 - AT - Income TaxInitiation of proceedings u/s 153A - addition of Unexplained cash credit U/s 68 - initiate the proceeding U/s 147/148 instead of making the addition in the proceeding U/s 153A - HELD THAT - No quarrel the AO was bound to proceed U/s 153A in pursuant to the search and seizure action however, if there is no incriminating material to reassess the income of the assessee then the AO legally cannot make the addition based on the information and evidence received from the Investigation Wing, Mumbai and consequently ought to have completed the reassessment U/s 153A without making any addition. We uphold the order of the ld. CIT(A) in deleting the addition made by the AO due to legal hurdle of making such addition without incriminating material but if the material and evidence received by the AO during the course of reassessment proceedings U/s 153A which was not available with the AO at the time of passing the assessment U/s 143(3) then, it is open to the AO to initiate the proceeding U/s 147/148 of the Act instead of making the addition in the proceeding U/s 153A - Appeal of the Revenue is dismissed.
Issues Involved:
1. Deletion of addition of ?65,00,000/- made by AO on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961. 2. Validity of AO's interference in completed assessment under Section 153A without incriminating material found during the search. Detailed Analysis: 1. Deletion of Addition of ?65,00,000/- under Section 68: The Revenue contested the deletion of an addition of ?65,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of unexplained cash credit. The AO based this addition on information from the Investigation Wing, Mumbai, indicating that the share application money received by the assessee from M/s Ansh Marchandise Pvt. Ltd. was an accommodation entry provided by the Praveen Jain group. The assessee argued that this addition was not sustainable as it was not based on any incriminating material found during the search and seizure action conducted on 31.07.2012. 2. Validity of AO's Interference in Completed Assessment under Section 153A: The assessee's return of income for the assessment year 2009-10 was initially scrutinized and assessed under Section 143(3) on 23.12.2011. Following a search and seizure action on 31.07.2012, the AO issued a notice under Section 153A and reassessed the income, adding ?65,00,000/- under Section 68 based on information received post-search. The CIT(A) deleted this addition, holding that in the absence of any incriminating material found during the search, the completed assessment could not be interfered with under Section 153A. Revenue's Argument: The Revenue argued that under Section 132 read with Section 153A, the AO is mandated to assess or reassess the total income for six assessment years preceding the year of the search. They contended that the proceedings under Section 153A are mandatory and that the AO was justified in making the addition based on information received from the Investigation Wing, even if the material was not found during the search on the assessee. Assessee's Argument: The assessee argued that since the assessment was completed before the date of search, it was not pending and thus could not be interfered with under Section 153A without incriminating material found during the search. The assessee relied on various judicial precedents, including decisions from Hon'ble High Courts, supporting the view that no addition can be made under Section 153A in the absence of incriminating material found during the search. Tribunal's Findings: The Tribunal upheld the CIT(A)'s decision, agreeing that in the absence of incriminating material found during the search, the AO could not make the addition under Section 153A. The Tribunal noted that while Section 153A mandates reassessment of six preceding years, any addition must be based on incriminating material found during the search if the assessment was not pending as on the date of the search. The Tribunal acknowledged that the AO had the option to initiate proceedings under Section 147/148 based on the information received from the Investigation Wing, provided the time limit for such proceedings had not expired. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming that the addition of ?65,00,000/- under Section 68 was not sustainable under Section 153A in the absence of incriminating material found during the search. The Tribunal clarified that the AO could initiate proceedings under Section 147/148 if the time limit allowed. Order: The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 17/06/2019.
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