2021 (10) TMI 507 - AT - Income Tax

Assessment u/s 153A - Whether no incriminating material was found in the premises of the assessee during the search action relating to the aforesaid share capital/share premium received by the assessee? - HELD THAT - Admittedly, the original assessment in this case was already completed and not abated as on the date of search. It is also an admitted fact that no incriminating material was found in the premises of the assessee during the search action relating to the aforesaid share capital/share premium received by the assessee. Now, the Ld. CIT(A) while deleting the addition in respect of the three parties has relied upon the decision of the Hon ble Delhi High Court in the case of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT wherein, it has been held that in case of completed assessment, no addition can be made in the absence of any incriminating material. We do not find any infirmity in the order of the Ld. CIT(A) in this respect. Since, the words and such other materials or information as are available with the Assessing Officer and relatable to such evidence do not find mention under the provisions of section 153A of the Act and further it has been held time and again by the various High Court that addition can be made in case of completed assessment as on the date of search only on the basis of incriminating material found during the search action, hence, in our view, the action of the Ld. CIT(A) in confirming the addition on the basis of sole statement of one dummy director, recorded during the survey action in case of that company, without confronting the same to the assessee, cannot be held to be justified. The impugned addition is, therefore, ordered to be deleted. In view of the above discussion, the appeal of the Revenue is hereby dismissed, whereas the appeal of the assessee is allowed.

Summary

Issues:
Cross appeals by Revenue and assessee against CIT(A) order for AY 2008-09.

Analysis:
The case involved cross appeals by the Revenue and the assessee against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09. The main issue revolved around additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, on account of unaccounted money introduced as share capital and share premium. The appeals were heard together as they raised common issues. The CIT(A) deleted additions for three parties due to lack of incriminating material during the search action and completion of original assessment before the search. However, an addition of ?75 lakhs from one company was upheld based on a statement by its director during a survey. The Revenue appealed against the deletion of the addition for three parties, while the assessee contested the addition from the specific company.

The ITAT upheld the CIT(A)'s decision on the three parties, citing precedents that additions cannot be made in completed assessments without incriminating material. However, regarding the addition from the specific company, the ITAT found the reliance on the director's statement during the survey action to be insufficient. The ITAT noted that the provisions cited by the CIT(A) were not applicable for the assessment year in question. The statement by the director, where he claimed to be a dummy director, was not conclusive evidence, especially since it was not confronted to the assessee for cross-examination. Citing a Supreme Court decision, the ITAT emphasized the importance of providing an opportunity for cross-examination before making additions based solely on statements. As the incriminating material was lacking and the statement alone was deemed insufficient, the ITAT ordered the deletion of the ?75 lakh addition. Consequently, the Revenue's appeal was dismissed, and the assessee's appeal was allowed.

In conclusion, the ITAT dismissed the Revenue's appeal and allowed the assessee's appeal, emphasizing the necessity of incriminating material and proper procedures in making additions during assessments.