2019 (11) TMI 1027 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - assessment framed by the A.O. in pursuant to the search and seizure action u/s 132 - HELD THAT - CIT(A) has considered all the relevant facts as well as binding precedents on this point and given the finding that an assessment framed U/s 153A of the Act in respect of a year which was not pending as on the date of search and which does not abate the same can be disturbed only on the basis of incriminating material. CIT(A) has held that in absence of incriminating material, the completed assessment can be reiterated and cannot be interfered with by the A.O. while making the assessment U/s 153A of the Act without any incriminating material unearthed during the course of search. The relevant facts leading to the conclusion that the A.O. has repeated the addition while framing the assessment U/s 153A of the Act pursuant to the search dated 22/07/2015 without any incriminating material found or seized during the course of search action is not in dispute. The revenue has supported its case only on the statements recoded by the A.O. during the course of assessment proceedings which in our considered view do not constitute incriminating material found or seized during the course of search. Further even those statements recorded by the A.O. have not resulted any fact or material to indicate any undisclosed income or unexplained cash credits which can be added U/s 68 of the Act. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A) in deleting the addition - Decided against revenue

Summary

Issues Involved:
1. Legality of additions made under Section 68 of the Income Tax Act, 1961.
2. Validity of reassessment proceedings under Section 153A without incriminating material.
3. Jurisdiction of the Assessing Officer (AO) to reassess completed assessments.

Detailed Analysis:

Issue 1: Legality of Additions Made Under Section 68 of the Income Tax Act, 1961

The primary issue revolves around whether the CIT(A) erred in deleting the addition of ?3,68,27,500/- made under Section 68 of the Act. The AO had made additions on account of share premium and share capital received by the assessee companies during the financial years relevant to the assessment years under consideration. The AO argued that the assets of the assessee company did not commensurate with the premium charged and that no business activity or income was shown by the assessee. The CIT(A) deleted these additions on the grounds that they were made without any incriminating material found during the search and seizure action.

Issue 2: Validity of Reassessment Proceedings Under Section 153A Without Incriminating Material

The Tribunal noted that the reassessment proceedings under Section 153A can only be initiated if there is incriminating material found during the search. It was observed that the AO had repeated the addition made in the earlier assessment orders without any new incriminating material found during the subsequent search on 22/07/2015. The Tribunal emphasized that the statements recorded by the AO during the assessment proceedings do not constitute incriminating material found during the search. Therefore, the reassessment proceedings under Section 153A were deemed invalid in the absence of any incriminating material.

Issue 3: Jurisdiction of the Assessing Officer to Reassess Completed Assessments

The Tribunal referred to the legal principle that completed assessments can only be interfered with by the AO while making an assessment under Section 153A if there is some incriminating material unearthed during the course of the search. Since the assessments for the relevant years were not pending as of the date of the search, the AO had no jurisdiction to make additions without any incriminating material. The Tribunal cited several judicial precedents, including the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla and the Hon'ble Rajasthan High Court in the case of Jai Steel (India) vs. ACIT, which support this view.

Conclusion:

The Tribunal upheld the order of the CIT(A) in deleting the additions made by the AO under Section 68 of the Act, as they were made without any incriminating material found during the search. The reassessment proceedings under Section 153A were deemed invalid in the absence of any incriminating material. The Tribunal emphasized that the AO had no jurisdiction to reassess completed assessments without any new incriminating material found during the search. Consequently, all six appeals by the revenue were dismissed.