2022 (5) TMI 1031 - AT - Income Tax

Assessment u/s 153A - Whether no incriminating material found in the said search against the assessee? - addition u/s 68 - HELD THAT - It is seen that, while making addition u/s 68 of the Act, the Ld. A.O has not referred any incriminating material/document found at the time of search which relate to the impugned addition. No incriminating material during the search which relate to the impugned addition has not been disputed by the Ld. DR and has not placed any material to contradict the above said facts. By looking into the above facts and circumstances, we are of the opinion that the ratio laid down by the Jurisdictional High Court in the case of CIT Vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT is squarely applicable, wherein it is held that when there is no incriminating material was unearthed during the course of search in respect of an issue, then no addition in respect of such an issue can be made in the assessment u/s 153A 153C. The similar view has been taken in the case of Mount Echo Build Well Pvt. Ltd. 2021 (12) TMI 1351 - ITAT DELHI - In the light of the above decision of the Jurisdictional High Court and the decision of the Tribunal which are binding precedent, we allow the appeal filed by the assessee and delete the addition made by the A.O which was sustained by CIT(A). Accordingly, we allow the Assesssee s Grounds of appeal.

Summary

Issues:
1. Jurisdiction to assess the appellant u/s. 153A of the Act
2. Issuance of jurisdictional notice u/s. 143(2) of the Act
3. Addition of Rs.40,00,000 out of total share capital
4. Treatment of share capital as unexplained cash credit u/s. 68
5. Observance of principles of natural justice in making additions
6. Charging of interest u/s 234A, 234B, and 234C of the Income-Tax Act, 1961
7. Deletion of addition u/s. 68 made on account of unexplained share capital

Analysis:

Issue 1: Jurisdiction to assess the appellant u/s. 153A of the Act
The assessee challenged the jurisdiction of the assessing officer (AO) to assess them under section 153A of the Income Tax Act, 1961. The contention was that no incriminating material was found during the search and seizure operation, and therefore, the addition made by the AO was not based on any evidence from the search. The Tribunal referred to the judgment in CIT Vs Kabul Chawla and held that without any incriminating material, no addition can be made under section 153A. The appeal of the assessee was allowed based on this reasoning.

Issue 2: Issuance of jurisdictional notice u/s. 143(2) of the Act
The assessee contended that the AO did not issue and serve the jurisdictional notice u/s. 143(2) of the Act before framing the assessment order u/s. 143(3)/153A. However, the Tribunal's decision did not specifically address this issue in the detailed analysis provided.

Issue 3: Addition of Rs.40,00,000 out of total share capital
The AO had added Rs.40,00,000 out of the total share capital of Rs.2,89,50,000 as unexplained cash credit u/s. 68. The CIT(A) sustained this addition partially. The Tribunal, following the judgment in CIT Vs Kabul Chawla, allowed the appeal of the assessee and deleted the addition made by the AO.

Issue 4: Treatment of share capital as unexplained cash credit u/s. 68
The Revenue appealed against the deletion of the addition made on account of unexplained share capital. The Tribunal analyzed the evidence and held that the onus of the assessee was discharged, as there was no incriminating material found during the search to support the addition. The appeal of the Revenue was dismissed as infructuous.

Issue 5: Observance of principles of natural justice in making additions
The assessee raised concerns about the principles of natural justice not being observed in confirming the addition of Rs.40,00,000. However, the Tribunal did not provide a detailed analysis of this issue in the judgment.

Issue 6: Charging of interest u/s 234A, 234B, and 234C of the Income-Tax Act, 1961
The CIT(A) had upheld the charging of interest u/s 234A, 234B, and 234C by the AO. The Tribunal's decision did not specifically address this issue in the detailed analysis provided.

Issue 7: Deletion of addition u/s. 68 made on account of unexplained share capital
The Revenue challenged the deletion of the addition made on account of unexplained share capital. The Tribunal, based on the absence of incriminating material and the principles laid down in previous judgments, allowed the appeal of the assessee and deleted the addition, rendering the Revenue's appeal infructuous.