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2021 (9) TMI 697 - AT - Income TaxAssessment u/s 153A - Unexplained share capital and share premium - statement of 3rd party relied - whether no incriminating documents found during the course of search? - Assessment year 2012-13 - HELD THAT - AO clearly stated that assessment order passed are based on the statement of Shri Mulchand Malu. In view of the above facts it is apparent that no evidence is available with the revenue with respect to the addition of ₹ 1.32 crores made during the year except the statement of Mr Malu. Naturally, merely the statement of third party cannot be considered an incriminating material unless is certain corroborative material substantiating or confirming the statement of that party is also found. Neither in the assessment order nor in the remand proceedings the learned assessing officer has stated that there is anything else against the assessee available corroborative the statement of Mr Malu. Admittedly, the assessment year 2012-13 is a concluded assessment and the date of issue of the notice u/s 153A read with section 153C is clearly dated 28.09.2016. In view of this, we constrain to hold that there is no incriminating material found during the course of search based on which the return income for the respective year can be disturbed. Only statement of 3rd party could not have been used for making an addition in the hands of the assessee in case of search in absence of any corroborative material. The learned departmental representative also could not produce any material other than the statement of Mr Malu for making the above addition. Assessment Year 2013-14 assessee has sought the cross examination of the persons whose statement are used by the ld AO. Naturally the persons is passed away and therefore, the cross examination could not be given. Even in that case also no fault can be found with the assessee and therefore, the statement recorded of that person could not have been used for making any addition in the hands of the assessee when the assessee has sought cross-examination of that person. The statement alone cannot be said to be any incriminating material based on which any addition can be made in the hands of the 3rd parties. Therefore on the solitary ground of appeals of the assessee are deserves to be allowed. As there was no incriminating material found during the course of search and both the assessment years are concluded the date on which the satisfaction is recorded by the ld AO of the assessee and therefore, no addition could have been made by the ld AO. Thus, on this ground the appeal of the assessee for both the years is allowed and orders of the lower authorities are reversed. - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment orders under Section 153A read with Section 153C of the Income Tax Act, 1961. 2. Reliance on the statement of a third party (Shri Mul Chand Malu) for making additions. 3. Whether the assessee discharged the onus under Section 68 of the Income Tax Act. 4. Absence of incriminating documents found during the search. 5. Denial of cross-examination of persons whose statements were relied upon by the AO. Issue-wise Detailed Analysis: 1. Validity of the Assessment Orders under Section 153A read with Section 153C: The appeals pertain to the assessment years 2012-13 and 2013-14. The assessee challenged the orders passed by the CIT(A) upholding the assessments made by the AO under Section 153A read with Section 153C. The tribunal noted that the original returns were filed and processed under Section 143(1), and no assessments were pending as of the search date. The tribunal emphasized that in the absence of any incriminating material found during the search, the assessments could not be reopened under Section 153A read with Section 153C, citing the Supreme Court’s mandate in the case of Shinghad Technical Education Society and the Delhi High Court's decision in CIT vs. Kabul Chawla. 2. Reliance on the Statement of Shri Mul Chand Malu for Making Additions: The AO made additions based on the statement of Shri Mul Chand Malu, who had allegedly provided accommodation entries to the assessee. The tribunal observed that the statement of a third party alone, without any corroborative material, cannot justify the additions. The tribunal relied on the Delhi High Court’s decision in Anand Kumar Jain, which held that a statement under Section 132(4) alone could not justify additions without corroborative evidence. 3. Whether the Assessee Discharged the Onus under Section 68: The assessee provided share application forms, confirmations, bank statements, income tax returns, and audited financial statements to substantiate the share capital and premium received. However, the AO held that the investor company was not found at the given address and did not produce the directors. The tribunal noted that the assessee had discharged its onus under Section 68 by providing the necessary documents and that the AO's reliance solely on the statement of Shri Mul Chand Malu was insufficient for making additions. 4. Absence of Incriminating Documents Found During the Search: The tribunal highlighted that no incriminating documents were found during the search that could substantiate the additions made by the AO. The tribunal reiterated that in the case of concluded assessments, no additions could be made in the absence of incriminating material, as held in the cases of Shinghad Technical Education Society and Kabul Chawla. 5. Denial of Cross-Examination: The assessee had requested the cross-examination of persons whose statements were relied upon by the AO, but this was denied. The tribunal observed that the denial of cross-examination violated the principles of natural justice. The tribunal noted that Shri Mul Chand Malu had passed away, and therefore, cross-examination could not be provided. In such cases, the statement could not be used for making additions, as held in the case of Kuber Khadayan. Conclusion: The tribunal allowed the appeals of the assessee for both assessment years, holding that the additions made by the AO were not justified in the absence of incriminating material and corroborative evidence. The orders of the lower authorities were reversed, and the assessments were set aside.
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