2021 (1) TMI 1006 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Bogus LTCG - CIT(A) deleted the addition holding that the assessee has discharged the onus cast on it by proving the identity and creditworthiness of the share applicants and the genuineness of the transaction - HELD THAT - A bare perusal of the assessment order shows that the addition is not based on any incriminating material found as a result of search but is based on the verification of the balance sheet of the assessee. The Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT has held that in absence of any incriminating material found as a result of search, no addition can be made in a completed assessment. Since the addition in the instant case is not based on any incriminating material found as a result of search in case of the assessee and it is a completed assessment, therefore, we are of the considered opinion that no addition could have been made by the AO in the instant case - Decided in favour of assessee.

Issues Involved:
1. Validity of the assessment under Section 153A in the absence of incriminating material.
2. Deletion of addition of ?2.50 crore made by the AO on account of unexplained share application money.
3. Maintainability of cross objections filed by the assessee.

Issue-wise Detailed Analysis:

1. Validity of the assessment under Section 153A in the absence of incriminating material:
The assessee argued that no incriminating documents were found during the search, and hence no addition could be made to the income already assessed. The assessee relied on the decision of the Hon’ble Delhi High Court in CIT vs. Kabul Chawla, which held that no addition can be made in the absence of incriminating material in case of completed assessments. The Tribunal accepted this argument, noting that the addition was based on the verification of the balance sheet and not on any incriminating material found during the search. The Tribunal cited various decisions, including Pr. CIT vs. Best Infrastructure (India) Pvt. Ltd. and Pr. CIT-Central -3 vs. Baba Global Ltd., to support this view. Consequently, the Tribunal allowed the grounds raised by the assessee in the cross objection, holding that no addition could have been made by the AO in the absence of any incriminating material found during the search.

2. Deletion of addition of ?2.50 crore made by the AO on account of unexplained share application money:
The AO had made an addition of ?2.50 crore under Section 68 of the Income Tax Act, citing that the assessee failed to prove the identity, creditworthiness, and genuineness of the share application money received. The assessee provided details and documents to substantiate the identity and creditworthiness of the share applicants and the genuineness of the transactions. The CIT(A) deleted the addition, holding that the assessee had discharged the onus cast on it. The Tribunal, while noting the arguments and evidence presented by the assessee, found that the CIT(A) had rightly deleted the addition. However, since the Tribunal allowed the cross objection on the ground of absence of incriminating material, the grounds raised by the revenue on this issue became academic and were not adjudicated.

3. Maintainability of cross objections filed by the assessee:
The revenue argued that the cross objections filed by the assessee were not maintainable as the grounds raised were never taken before the CIT(A) nor adjudicated by him. The Tribunal, however, held that a legal ground can be raised for the first time before the appellate authorities. The Tribunal referred to various decisions, including the Supreme Court's decision in NTPC vs. CIT, which explained that the power of the Tribunal in dealing with appeals is expressed in the widest possible terms. The Tribunal also noted that the decision in Neetee Clothing Pvt. Ltd., which the revenue relied upon, had been overruled by the Hon’ble Delhi High Court in Fast Booking India Pvt. Ltd. Consequently, the Tribunal rejected the revenue's arguments regarding the maintainability of the cross objections and proceeded to adjudicate the same.

Conclusion:
The Tribunal allowed the cross objections filed by the assessee, holding that no addition could be made in the absence of incriminating material found during the search. Consequently, the appeal filed by the revenue was dismissed as the grounds raised became academic in nature. The order was pronounced in the open court on 27.1.2021.

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