2021 (5) TMI 399 - AT - Income Tax

Assessment u/s 153A - scope of assessments u/s 153C/ 153A - Addition u/s 68 - whether incriminating documents found during the course of search? - HELD THAT - Hon ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT wherein exactly similar legal/technical ground was taken for the first time before the ITAT. Further, the Hon ble Apex Court upheld the order of the Tribunal that addition cannot be made for the assessment years for which there are no incriminating documents found during the course of search in the assessments framed u/s 153C. Seized incriminating material has to pertain to the assessment year in question and have co-relation, document-wise, with the assessment year. This requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S. 153A. The sequitur of the judgment which can be culled out is that, seized incriminating material has to pertain to the assessment year in question and have co-relation, document-wise, with the assessment year. This requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S. 153A. This judgment of the Hon ble Supreme Court clearly clinches the issue in favour of the assessee in this case. Thus we hold that the additions made in the order passed u/s 143(3) r.w.s. 153C, for the captioned assessment years which are unabated assessments, cannot be made, because same are beyond the scope of assessments u/s 153C/ 153A as the same are without any incriminating documents found during search. - Decided against revenue.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer under Section 153C/153A.
2. Validity of additions made under Section 68 for share capital and premium.
3. Consideration of incriminating documents for unabated assessments.
4. Application of provisions inserted in Section 68 effective from 01.04.2013.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer under Section 153C/153A:
The Tribunal examined whether the period of six years for assessments under Section 153C should be reckoned from the date of recording the satisfaction note or from the date of the search. The Hon’ble Delhi High Court in CIT vs. RRJ Securities Ltd. clarified that the period of six years should be reckoned from the date of recording the satisfaction note. This principle was further reiterated in ARN Infrastructure India Ltd. v. ACIT. In the present case, the satisfaction note was recorded on 20.09.2013, making the relevant six assessment years from AY 2008-09 to AY 2013-14. Therefore, AY 2010-11 and 2011-12 were non-abated assessment years.

2. Validity of Additions Made Under Section 68 for Share Capital and Premium:
The Assessing Officer made additions under Section 68 for AY 2010-11 and 2011-12 based on the share capital and premium entries in the balance sheet. However, the CIT (A) deleted these additions on merits, stating that the assessee satisfactorily explained the identity, genuineness, and creditworthiness of the parties. The CIT (A) held that the AO failed to make further inquiries and that the addition was not sustainable without any incriminating document found during the search, as both years were unabated assessment years. The Tribunal upheld this view, noting that the AO did not disprove the evidence provided by the assessee.

3. Consideration of Incriminating Documents for Unabated Assessments:
The Tribunal emphasized that no incriminating documents related to the share capital or premium were found during the search. The documents listed were audited balance sheets and email exchanges for finalizing accounts, which were not incriminating. The Tribunal referenced the Hon’ble Delhi High Court decision in CIT vs. Kabul Chawla, which held that completed assessments can only be interfered with based on incriminating material found during the search. The Tribunal also cited the Hon’ble Supreme Court in CIT Vs. Sinhgad Technical Education Society, which stated that seized incriminating material must pertain to the assessment year in question.

4. Application of Provisions Inserted in Section 68 Effective from 01.04.2013:
The Tribunal noted that the first proviso to Section 68, which widened the onus on companies, was inserted w.e.f. 01.04.2013 and thus not applicable to the impugned assessment years (AY 2010-11 and 2011-12). The CIT (A) correctly observed that these provisions could not be applied retrospectively.

Conclusion:
The Tribunal concluded that the additions made under Section 68 for AY 2010-11 and 2011-12 were beyond the scope of assessments under Section 153C/153A as they were not based on any incriminating documents found during the search. Consequently, the Tribunal dismissed the Revenue’s appeals and upheld the deletion of the additions made by the CIT (A).

Order Pronounced:
The order was pronounced in the open court on 11/05/2021.