2021 (8) TMI 897 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - unsecured loan treated as unexplained cash credit - HELD THAT - Indisputably the assessment in the instant year has not abated on the date of search. Keeping in view the said facts and circumstances we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating record found during the course of search. In the present case there is no such incriminating material and therefore the AO has no jurisdiction to make addition in the unabated assessment. Addition u/s 68 - Assessee has discharged its burden by furnishing documents to establish the identity creditworthiness of the lender genuineness of the transaction and source of funds of the lender etc. It is a well settled proposition that with regard to burden of proof viz. the claim for deduction and/or exemption is upon an assessee - in matters of addition and disallowance the same is on Revenue. Subsequently once the assessee has submitted evidences the burden on the assessee stood discharged and the onus to disprove lies and shifts to the revenue or on the other side by way of onus of proof. Therefore in absence of any evidence addition made merely on the basis of presumption and assumption cannot be sustained. The case of the assessee finds support from the decision in the case of Umacharan Shaw Bros. 1959 (5) TMI 11 - SUPREME COURT wherein it was held that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures and the conclusion is the result of suspicion which cannot take the place of proof in these matters. We also find merits in the without prejudice contention of the ld AR that under Section 68 assessee has no onus to explain the source of source as the 1st Proviso to section 68 of the Act was introduced via the Finance Act 2012 w.e.f. 1st April 1 2013. The provisions are applicable where the sum so credited consists of share application money share capital share premium. The impugned addition is made on account of not proving source of source of the alleged bogus loan entries. Therefore the provision doesn t apply in the case of the assessee. Hence the assessee only has to prove the source of the funds and not the source of source . - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of additions made under section 68 of the Income Tax Act, 1961, in the absence of incriminating evidence during the search.
2. Validity of the assessment under section 153A of the Income Tax Act, 1961, for unabated assessment years.
3. Merits of the addition of Rs. 2,12,87,885 as unexplained cash credit.

Detailed Analysis:

1. Legality of Additions under Section 68 in Absence of Incriminating Evidence:
The assessee challenged the addition of Rs. 2,12,87,885 under section 68, arguing that the assessment had not abated on the date of the search and that no incriminating material was found during the search. The Tribunal noted that the assessment for the relevant year had been completed under section 143(3) before the search, and no incriminating documents were found during the search. The Tribunal cited several judgments, including CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. and CIT v. Gurinder Singh Bawa, to support the view that additions in unabated assessments can only be made based on incriminating material found during the search. Consequently, the Tribunal held that the AO had no jurisdiction to make the addition in the absence of such material.

2. Validity of Assessment under Section 153A for Unabated Assessment Years:
The Tribunal examined whether the AO had the jurisdiction to make additions under section 153A for unabated assessment years without any incriminating evidence. The Tribunal referenced the judgments in All Cargo Global Logistics Ltd. v. DCIT and CIT v. Deepak Kumar Agarwal, which established that for unabated assessments, additions can only be based on incriminating material found during the search. The Tribunal concluded that since no such material was found, the assessment under section 153A was invalid.

3. Merits of the Addition of Rs. 2,12,87,885 as Unexplained Cash Credit:
On the merits, the Tribunal found that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transaction with Anchita Properties Pvt. Ltd. (APPL). The AO had accepted part of the loan as genuine, and the Tribunal held that the remaining part could not be considered unexplained cash credit. The Tribunal cited the decision in PCIT v. Ami Industries (India) (P.) Ltd., which emphasized that once the assessee has provided sufficient evidence, the burden shifts to the revenue to disprove it. The Tribunal noted that APPL had responded to notices and provided necessary documents, and no adverse findings were made by the AO. Therefore, the addition was deleted.

Conclusion:
The Tribunal allowed the appeals, holding that the additions made under section 68 were without jurisdiction due to the absence of incriminating material found during the search. Additionally, on merits, the assessee had successfully demonstrated the genuineness and creditworthiness of the loan transactions, warranting the deletion of the addition. The findings were applied mutatis mutandis to all related appeals, resulting in the allowance of all appeals filed by the assessee.