2022 (8) TMI 602 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - objection of the assessee are that no assessment proceedings were pending in respect of the assessment year under consideration as on the date of the search and also addition has been made without any reference to incriminating material - HELD THAT - We find that Revenue has not challenged the fact of non-pendency of any assessment on the date of search. From the assessment order, we find that addition in dispute in ground No. 5 and 6 have been made on the basis of ITS details. Regarding the ground No. 7 also though the AO has not referred to any incriminating material but the Ld. CIT(A) has made general observation that the assessee was engaged in obtaining accommodation entries. We find that there is no specific reference of any incriminating material for sustaining the addition in dispute of ₹32,50,000/- which was made by the Assessing Officer under section 68 of the Act. Both the conditions of the decision in the case of Kabul Chawal 2015 (9) TMI 80 - DELHI HIGH COURT that for making addition under section 153A of the Act, firstly, the assessment proceedings should be pending as of the date of the search and secondly, there should be incriminating material for making the addition, are not fulfilled. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction and validity of the order passed under section 143(3) read with section 153A.
2. Addition of loan amounts as accommodation entries.
3. Addition of interest on accommodation loans.
4. Disallowance of interest expense as per loose papers.
5. Addition of interest income based on ITS details.
6. Addition of labor charges based on ITS details.
7. Addition of loan amounts as unexplained cash credit under section 68.

Issue-wise Detailed Analysis:

1. Jurisdiction and Validity of the Order Passed Under Section 143(3) Read with Section 153A:
The assessee argued that the order passed by the DCIT under section 143(3) read with section 153A was without jurisdiction, invalid, and bad in law. However, this ground was not pressed by the assessee's counsel, and therefore, it was dismissed as infructuous.

2. Addition of Loan Amounts as Accommodation Entries:
The assessee contended that the Ld. CIT(A) erred in upholding the addition of Rs. 60,00,000/- as accommodation entries. This ground was also not pressed by the assessee's counsel and was dismissed as infructuous.

3. Addition of Interest on Accommodation Loans:
The assessee challenged the addition of Rs. 4,25,343/- as interest on the above accommodation loan. This ground was not pressed by the assessee's counsel and was dismissed as infructuous.

4. Disallowance of Interest Expense as per Loose Papers:
The assessee argued against the disallowance of interest expense amounting to Rs. 1,24,600/- as per loose papers. This ground was not pressed by the assessee's counsel and was dismissed as infructuous.

5. Addition of Interest Income Based on ITS Details:
The assessee contended that the addition of Rs. 1,21,423/- as interest income based on ITS details was not justified as it was not based on any incriminating material found during the search. The Tribunal noted that the addition was made solely based on ITS details without any incriminating material found during the search. Citing the decision of the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawala, the Tribunal held that no addition can be made without incriminating material if no assessment proceedings were pending as on the date of the search. Therefore, the addition was deleted.

6. Addition of Labor Charges Based on ITS Details:
The assessee challenged the addition of Rs. 3,00,660/- as labor charges based on ITS details. The Tribunal found that the addition was made based on ITS details without any incriminating material found during the search. Following the decision in the case of CIT v. Kabul Chawala, the Tribunal deleted the addition.

7. Addition of Loan Amounts as Unexplained Cash Credit Under Section 68:
The assessee contested the addition of Rs. 32,50,000/- as unexplained cash credit under section 68. The Tribunal observed that there was no specific reference to any incriminating material for sustaining the addition. The Ld. CIT(A) made general observations about the assessee's involvement in accommodation entries without specific incriminating material. The Tribunal, following the decision in the case of CIT v. Kabul Chawala, deleted the addition as the conditions for making such an addition were not fulfilled.

Assessment Year 2009-10:

1. Jurisdiction and Validity of the Order Passed Under Section 143(3) Read with Section 153A:
The assessee argued that the order passed by the DCIT under section 143(3) read with section 153A was without jurisdiction, invalid, and bad in law. This ground was not pressed by the assessee's counsel and was dismissed as infructuous.

2. Addition of Interest on Alleged Bogus Loan Taken in A.Y. 2008-09:
The assessee contended that the addition of Rs. 5,19,530/- as interest on alleged bogus loan taken in A.Y. 2008-09 was not justified. This ground was not pressed by the assessee's counsel and was dismissed as infructuous.

3. Addition of Loan Amounts as Unexplained Cash Credit Under Section 68:
The assessee challenged the addition of Rs. 38,75,000/- as unexplained cash credit under section 68. The Tribunal noted that the assessment under section 143(3) for the year under consideration was completed on 15/12/2011, and thus, there was no pendency of the assessment as on the date of the search. The addition was made without any reference to incriminating material. Following the decision in the case of CIT v. Kabul Chawala, the Tribunal deleted the addition as the conditions for making such an addition were not fulfilled.

Conclusion:
The appeals for both assessment years were allowed partly, with the Tribunal deleting the additions made without incriminating material as per the principles laid down in the case of CIT v. Kabul Chawala. The grounds not pressed by the assessee's counsel were dismissed as infructuous.

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