2020 (7) TMI 566 - AT - Income Tax

Assessment u/s 153A - Addition of unsecured loans as undisclosed in u/s. 68 - HELD THAT - there is no reference whatsoever to the incriminating material found during the course of search upon the assessee on the basis of which this addition of unsecured loan has been done in the hands of the assessee under section 153A. It is settled law that in the interest of justice issue can be raised before quasi judicial authorities without any specific ground raised in grounds of appeal. This is particularly so for legal ground. Moreover no tax can be levied except that leviable as per the provisions of law. It is also settled law that there is no estoppel as to law. If an amount is not exigible to tax as per the provisions of law the same cannot be brought to tax on the ground of concession or otherwise. From the records, it is manifestly clear that the assessment years for assessment year 10- 11 and years preceding to this were not pending at the time of search. Hence assessment for these assessment years did not abate. Hence no addition in these assessment years under section 153A is permissible without incriminating material found during search. In the present case we have already given a finding that the addition is not based upon any incrimination material found upon search in the case of the assessee. This aspect is only of academic interest as addition has not been made by the assessing officer as deemed dividend. In the case of CIT versus Surat Cotton Spinning Weaving Mills 1993 (4) TMI 64 - BOMBAY HIGH COURT once the assessing officer has assessed a particular receipt under a particular head of income the amount is no more available to him for assessment under another head Moreover the issue that in case of search and seizure assessment under section 153 A no addition can be made without incriminating material found during search is settled by honourable Supreme Court in the case of Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT . Since we have already held that these additions are not sustainable in assessment u/s 153A. Decided in favour of assessee.

Issues Involved:
1. Addition of unsecured loans as undisclosed income under Section 68 of the Income Tax Act.
2. Assessment of deemed dividend under Section 2(22)(e) of the Income Tax Act.
3. Requirement of incriminating material for additions under Section 153A in non-abated assessments.
4. Validity of additions based on statements without corroborative evidence.

Detailed Analysis:

1. Addition of Unsecured Loans as Undisclosed Income (Section 68):

The core issue in these appeals is the addition of unsecured loans as undisclosed income under Section 68 of the Income Tax Act. The Assessing Officer (AO) noted that during the search and seizure operation on Loha Ispat Group, it was found that several entities provided unsecured loans to the assessee, which were suspected to be accommodation entries. The AO observed that the assessee failed to substantiate the genuineness, identity, and creditworthiness of these loan creditors. The AO concluded that these entities were bogus and had no creditworthiness, thus treating the loans as unexplained cash credits under Section 68.

The assessee contended that the loans were part of accommodation transactions within the Loha Ispat Group and that the amounts were already taxed in the hands of Loha Ispat Ltd. The AO, however, rejected this explanation, stating that the assessee did not provide any proof to substantiate the correlation between the loans and the transactions of Loha Ispat Ltd.

2. Assessment of Deemed Dividend (Section 2(22)(e)):

The AO also held that the amounts could be taxed as deemed dividend under Section 2(22)(e) of the Act, as the loans were routed through various dummy companies and ultimately sourced from Loha Ispat Ltd., a company in which the assessee held substantial shares. However, the AO did not make a separate addition under this section since the addition was already made under Section 68.

3. Requirement of Incriminating Material for Additions (Section 153A):

The assessee argued that the additions were not based on any incriminating material found during the search, which is a prerequisite for making additions in non-abated assessments under Section 153A. The CIT(A) and the AO referred to the search findings in Loha Ispat Group but did not provide specific details of incriminating material directly related to the assessee.

The Tribunal noted that for assessments not pending at the time of search, no addition could be made without incriminating material found during the search. It was observed that the AO relied on the assessee's statements without corroborative evidence and did not conduct further inquiries to substantiate the addition.

4. Validity of Additions Based on Statements Without Corroborative Evidence:

The Tribunal emphasized that the AO cannot accept a part of the assessee's statement and reject the other part without any inquiry. The assessee's statement that the loans were accommodation entries from Loha Ispat Ltd. should be considered in its entirety. The AO's reliance on the assessee's admission without corroborative evidence was not sufficient to make the addition under Section 68.

The Tribunal also referred to the principle of "approbate and reprobate," stating that the AO cannot selectively accept and reject parts of the same statement. The Tribunal found that the AO did not issue notices to the loan creditors or examine their financials to establish their creditworthiness.

Conclusion:

The Tribunal set aside the order of the CIT(A) and decided the issue in favor of the assessee. It held that the additions under Section 68 were not sustainable as they were not based on incriminating material found during the search and were solely based on the assessee's uncorroborated statements. The Tribunal also noted that the AO's alternative argument under Section 2(22)(e) was not applicable as the addition was not made under this section.

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