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2021 (11) TMI 707 - AT - Income TaxValidity of proceedings u/s.153A - addition u/s 68 - HELD THAT - As the credit for share application money was accepted in the regular assessment under 143(3) prior to search after making enquiries. The subscriber co. namely Antariksh Commerce Pvt. Ltd. and Escort Finvest Pvt. Ltd. were found to be group cos. The assessments of the subscriber companies carried out under S. 143(3) / 143(3) r.w.s. 147 were noted. It was further noted the same AO in the case of other group concern accepted the creditworthiness of these cos. for subscription of Pref. share capital. The adverse inference drawn by the AO was found to be unsubstantiated and in the realm of suspicion, surmises and conjectures. On legal position, the CIT(A) has referred to large number of judicial pronouncements. Without reiterating the different facets analyzed by the CIT(A), Complete force in his view. After detailed examination, the CIT(A) eventually set aside the additions made by the AO under s. 68 in the unabated search assessment without any iota of incriminating material to support the allegation of accommodation entries. We completely endorse his action on merits without demur. The objection of the Revenue is found to be unsubstantiated and dehors the tell-tale evidences and hence not sustainable. Additions on low yield - Whether incriminating material were found in the course of search operations showing any unaccounted production or unaccounted sales resulting from alleged low yield on production shown in the books? - HELD THAT - CIT(A) observed that assessee has furnished explanation on all the documents seized during the course of search and the explanation of the assessee were test checked with reference to seized material, books of accounts, bills/invoices and other evidences and found to be satisfactory. It was further noted that the AO has not pointed out any infirmity in the explanation of the Assessee. CIT(A) in our mind has analysed the factual matrix threadbare. Without repeating all the observations of the CIT(A), we find ourselves in complete agreement with the conclusion drawn by the CIT(A). CIT(A) has objectively analyzed the factual situation and found complete absence of any adverse material against the assessee which can support the allegation of the AO towards unaccounted production presumed on the basis of alleged low yield declared by the assessee. On facts, the CIT(A) has found that the yield declared by the assessee is neither low nor the book results could be impeached by some tangible material to indulge in rejection of books of accounts. We see no error whatsoever in the process of reasoning adopted by the CIT(A) while reversing the totally untenable action of the AO. We, thus, decline to interfere with the order of the CIT(A) on this score. Addition of excess stock of finished goods/ raw material stated to be discovered during the search - HELD THAT - CIT(A) took cognizance of certificate from registered valuer furnished by the assessee showing the density of broken coal which was found to be at par with what has been used by the assessee. We notice that the CIT(A) has adjudicated the issue in favour of the assessee after recording tell-tale facts, such as, DRV having admitted that no scientific or mechanical equipment was used by him for the purposes of valuation; no physical verification was carried out at all etc.. After having analyzed the facts and circumstances of the case, the CIT(A) has objectively concluded that addition to the total income on account of unexplained investment towards excess stock on account of coal is without any sound basis is patently unjustified. We find that the CIT(A) has arrived at his findings with very logical analysis in sync with factual matrix. Such finding of fact does not call for any interference for any reason. With reference to excess stock on account of iron ore or fines, the CIT(A) has observed that the dispute revolves around the rate adopted by the AO and there is no dispute regarding the total quantity - As noticed by the CIT(A) that the assessee has offered the income for taxation based on actual sales realization as iron ore fines are not purchased by the assessee. The sales register of the assessee was examined and the method was found satisfactory. Thus, having regard to the declarations already made by the assessee, no further additions were found sustainable in the absence of any evidence of adversial nature. In summation, we see no error in the conclusion drawn by the CIT(A) both on account of stock of coal and iron ore, in the absence of any concrete rebuttal thereof. We thus decline to interfere.
Issues Involved:
1. Additions under Section 68 of the Income Tax Act, 1961 regarding share application/share capital. 2. Additions on account of suppression of yield and unaccounted productions/sales. 3. Additions on account of excess stock of finished goods/raw material. 4. Legal objection regarding the jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act, 1961. Detailed Analysis: 1. Additions under Section 68 of the Income Tax Act, 1961 regarding share application/share capital: The AO observed that credits in respect of share application money amounting to ?5,08,90,000/- in AY 2006-07 did not satisfy the requirements of Section 68 of the Act. The AO alleged that the assessee failed to prove the genuineness and creditworthiness of the share applicants. However, the CIT(A) found merit in the assessee's plea, noting that the AO did not bring any documentary evidence against the assessee to demonstrate that the share application money was undisclosed income. The CIT(A) further observed that the assessee had provided sufficient documentary evidence, including PAN, address, bank statements, and audited financial statements of the subscribers, proving the identity and creditworthiness of the subscribers. The CIT(A) also noted that the same AO had accepted the addition to preference share capital in another group company, thereby contradicting his stance in the assessee's case. Consequently, the CIT(A) deleted the addition made by the AO under Section 68. 2. Additions on account of suppression of yield and unaccounted productions/sales: The AO made additions based on the assumption that the yield of sponge iron should be 60%, which the assessee failed to achieve. The AO alleged that the assessee had suppressed production and indulged in unaccounted sales. However, the CIT(A) found that the AO failed to establish the basis for adopting a 60% yield and that the yield declared by the assessee was comparable to other manufacturers in the industry. The CIT(A) also noted that the AO did not bring any incriminating material on record to support the allegation of unaccounted production or sales. The CIT(A) concluded that the variation in yield could be due to several factors, such as the quality of raw materials, and that the AO's addition was based on suspicion and conjecture. Consequently, the CIT(A) deleted the additions made by the AO on account of low yield and unaccounted production/sales. 3. Additions on account of excess stock of finished goods/raw material: The AO made additions based on the quantity assessment report of the Departmental Registered Valuer (DRV), which indicated excess stock of coal, dolomite, and iron ore fines. However, the CIT(A) found that the DRV was not competent to carry out the valuation and that the quantity assessment was based on incorrect assumptions, such as the density of coal. The CIT(A) also noted that the assessee had provided a certificate from another registered valuer indicating a different density for coal, which was more accurate. The CIT(A) concluded that the addition made by the AO on account of excess stock was not sustainable and deleted the addition. 4. Legal objection regarding the jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act, 1961: The assessee challenged the jurisdiction of the AO under Section 153A, arguing that in the absence of any incriminating material found during the search, the AO could not make additions/disallowances for the assessment years that were concluded and unabated prior to the search. The Tribunal agreed with the assessee, citing various judicial precedents that held that additions under Section 153A are permissible only where incriminating materials are found during the search. The Tribunal concluded that the AO's action to make additions for the assessment years 2006-07 to 2009-10, which were concluded and unabated, was not permissible in the absence of incriminating material. Consequently, the Tribunal allowed the assessee's cross-objections and quashed the additions made by the AO for these years. Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the assessee's cross-objections, concluding that the additions made by the AO under Section 153A were not sustainable in the absence of incriminating material and that the CIT(A) had rightly deleted the additions on merits.
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