2021 (12) TMI 533 - AT - Income Tax

Assessment u/s 153C/153A - Addition u/s 68 - HELD THAT - Whatever document which has been mentioned in the seized document, are ROC, TDS returns banks cheque books for payment of taxes, fees, etc. pertaining to the assessee. Ostensibly, such documents cannot be held to be incriminating and ld. CIT(A) has already noted that none of these documents are the basis or premise of the impugned additions. Another fact noted in the appellate order is that the AO himself has concurrently assessed all the investor companies right from the Assessment Year 2009-10 to 2012-13 and similar additions have been made in respect of the same amount in their hands which again does not warrant any addition in the hands of the assessee company. The documents as mentioned in the seized document has already been held to be not incriminating in nature which has been duly explained by the assessee and appreciated by the ld. CIT(A) in the foregoing paragraphs as noted above. Apart from that, even before us there has been no rebuttal that the impugned additions are based on any incriminating seized documents which is also evident from the grounds raised by the Revenue wherein it has been stated that SLP has been filed against the decision of Hon ble Delhi High Court in the case of Kabul Chawla ( 2015 (9) TMI 80 - DELHI HIGH COURT - any statement recorded of a different person in the case of another search cannot be held to be incriminating material for the purpose of assessment within the scope of Section 153A and Section 153C has held by the Ld. CIT (A) following the decision of Hon ble Jurisdictional High Court. Hon ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT wherein 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. No addition can be made where the assessment have not abated and were pending at the time of search, no addition can be made without any incriminating material. Thus, the finding by the ld. CIT (A) which is based on various judicial principles and on the facts of the case cannot be tinkered with without any contrary material or rebuttal by the Department, therefore same is confirmed. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act on account of unexplained cash credits.
2. Deletion of addition of unexplained expenditure on account of brokerage.
3. Reliance on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court.
4. Interpretation of the term 'total income' in Section 153C/153A.
5. Scope of assessment under Section 153C/153A.
6. Comparison with the decision of the Hon’ble High Court of Karnataka in the case of Canara Housing Development Company Vs. DCIT.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68:
The Revenue challenged the deletion of ?21,65,41,000/- added under Section 68 for unexplained cash credits. The Tribunal observed that the Assessing Officer (AO) did not base the addition on any incriminating material found during the search. The documents mentioned were related to ROC, TDS returns, and cheque books, which were not incriminating. The Tribunal upheld the CIT(A)'s decision, which relied on the Delhi High Court's ruling in CIT vs. Kabul Chawla, stating that no addition can be made without incriminating evidence when the assessment is not abated.

2. Deletion of Addition of Unexplained Expenditure on Brokerage:
The AO added ?10,82,700/- as unexplained expenditure on brokerage. The CIT(A) deleted this addition, noting that it was not based on any incriminating material found during the search. The Tribunal affirmed this decision, emphasizing that no addition can be made without incriminating documents, as per the ruling in CIT vs. Kabul Chawla.

3. Reliance on the Decision in the Case of Sh. Kabul Chawla:
The Revenue argued that the CIT(A) erred by relying on the Kabul Chawla case, which was under challenge before the Supreme Court. The Tribunal noted that the Revenue did not present any incriminating material justifying the additions. The Tribunal upheld the CIT(A)'s reliance on the Kabul Chawla decision, which restricts additions to those based on incriminating material found during the search.

4. Interpretation of 'Total Income' in Section 153C/153A:
The CIT(A) concluded that 'total income' in Section 153C/153A refers only to undisclosed income discovered from seized/incriminating material. The Tribunal supported this interpretation, citing the lack of incriminating evidence and the precedent set by the Kabul Chawla case.

5. Scope of Assessment under Section 153C/153A:
The Revenue contended that the CIT(A) adopted a restrictive interpretation of Section 153C/153A. The Tribunal found that the AO did not base the additions on any incriminating material and upheld the CIT(A)'s interpretation, consistent with the Kabul Chawla ruling.

6. Comparison with the Decision of the Hon’ble High Court of Karnataka:
The Revenue referenced the Karnataka High Court's decision in Canara Housing Development Company Vs. DCIT, which held that 'total income' includes both search-unearthed and other income. The Tribunal noted that the Delhi High Court's ruling in Kabul Chawla, which restricts additions to those based on incriminating material, was more pertinent to the case at hand.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the additions. The Tribunal emphasized that no additions could be made without incriminating material when the assessment is not abated, in line with the Delhi High Court's ruling in CIT vs. Kabul Chawla. The Tribunal also referenced the Supreme Court's decision in CIT Vs. Sinhgad Technical Education Society, which supports the necessity of incriminating material for additions under Section 153C.