2022 (9) TMI 1367 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - unexplained credits of LTCG - Addition of amount of commission paid for acquiring such alleged bogus long term capital gain was also added u/s 69C - CIT(A) accepted the contentions of the assessee and held that no addition could be made as no incriminating material was found with respect to the Long Term Capital Gain by alleging the same as non-genuine - HELD THAT - We have gone through the grounds of appeal raised by the revenue and it appears that the revenue has not challenged the findings of the ld. CIT(A) on the very legal ground decided by ld. CIT(A) against the revenue. Thus, it is clear that this legal aspect of the decision is not challenged by the revenue before us. Thus, it is undisputed that when there is no incriminating material no addition could be made in the order passed u/s. 153A of the r.w.s. 143(3) of the Act. Thus no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. CIT(A) has after considering the detailed arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment years which are already completed after making the proper enquiries by the AO, and those assessment cannot be allowed to again reframed merely based on the search and that too without any fresh evidence or any fresh material unearthed during search no fresh addition can be made on the issue which are already settled. Even, the ld. CIT(A) has based on the arguments of the assessee followed the jurisdictional High Court decision and Tribunals orders and even this coordinate bench decision is also binding on us in the absence of any contrary judgement. Whether section 153A mandates the existence of incriminating material in respect of the assessments that have concluded/are not pending on the date of search in order to assess or re-assess them? - In our considered view the said issue is no longer res integra as the same has already been decided by a Division Bench of the Hon'ble Supreme Court in the case of CIT v. Sinhgad Technical Education 2017 (8) TMI 1298 - SUPREME COURT After having recorded the satisfaction, as per the requirement of section 153C(1) of the Act, the books of account or documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over the other person and the said officer shall issue notice and assess or re-assess the income of the other person in accordance with the provisions of section 153A of the Act. It will thus be seen that once the requirement of satisfaction wherein the Assessing Officer of the searched person records that documents belong to the other person is met, the assessment or reassessment of the income of the other person shall have to take place in accordance with section 153A of the Act. Assessment of concluded/ not pending assessment on the date of search to be based on incriminating material. Section 153A of the Act was the subject matter of interpretation by the Hon'ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and several other High Courts across the country which uniformly held that the existence of incriminating material, in respect of the assessment years whose assessments stood concluded on the date of search, is a mandatory requirement to assess or reassess those years. The requirement that the incriminating material to have the corelation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently, in our considered view we do not find any error having been committed by the ld. CIT(A) in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the long term capital gain reflected in the return of income filed by the assessee. Therefore, the jurisdictional requirement of Section 153 A of the Act was not satisfied. - Decided against revenue. Protective addition based on Pen drive found in search - As submitted that it is respective parties who were demanding, further interest @ 2.4% in addition to what has been recorded in the books. The additional interest which the assessee or its group concern never paid and there is no evidence of any such further sums paid and found as paid in the course of search - HELD THAT - Similar issue we have decided 2022 (9) TMI 1334 - ITAT JAIPUR where in the arguments, facts are similar in group search case and the bench noticed that interest which is actually paid is duly recorded in the books of accounts and there is no other material which is found even the person under whom possession the PAN Drive is found his statement is not recorded. This action itself shows that department find this evidence as dump documents and is not evidence relied upon. The statement of the person from whom the evidence his found is also not checked on its correctness and veracity. Therefore, based on the finding that the revenue has not made any substantive addition in the persons in whose name the interest as alleged addition income is not added and the ld. AR of the assessee categorically proved that there is no incriminating other document found recording the payment of the additional interest. Based on these observations we vacate the disallowance made for an amount made on protective basis. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition under Section 68 for unexplained credits of LTCG.
2. Deletion of addition under Section 69C for commission paid for acquiring accommodation entries.
3. Addition of interest payment from undisclosed sources based on excel sheets found in a pen drive.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 for Unexplained Credits of LTCG:
The Department challenged the deletion of the addition of Rs. 11,96,03,020/- under Section 68 for unexplained credits of Long Term Capital Gains (LTCG). The assessee had declared LTCG from the sale of shares of M/s Splash Media & Infra Ltd. The Assessing Officer (AO) considered these gains as bogus based on the modus operandi of providing accommodation entries through penny stocks, as revealed in various searches and statements recorded by the Investigation Wing. However, the assessee argued that the transactions were genuine, supported by documentary evidence such as contract notes, demat statements, and bank statements. The CIT(A) found that no incriminating material was found during the search to justify the addition under Section 68. The Tribunal upheld the CIT(A)'s decision, emphasizing that in the absence of incriminating material, no addition could be made for completed assessments under Section 153A.

2. Deletion of Addition under Section 69C for Commission Paid for Acquiring Accommodation Entries:
The Department also contested the deletion of Rs. 71,76,181/- added under Section 69C for commission allegedly paid to acquire bogus LTCG entries. The AO had presumed that the assessee paid a commission for these accommodation entries. The assessee denied any such payments, and no direct evidence of commission payment was found. The CIT(A) deleted the addition, and the Tribunal confirmed this, noting that the AO's addition was based on presumptions without corroborative evidence.

3. Addition of Interest Payment from Undisclosed Sources Based on Excel Sheets Found in a Pen Drive:
The assessee challenged the addition of Rs. 2,86,948/- made by the AO as interest payment from undisclosed sources. This addition was based on entries in an excel sheet found in a pen drive during the search. The assessee argued that the entries in the pen drive were not prepared by them and were not corroborated by any actual payments or TDS deductions. The Tribunal found that the AO had not verified the authenticity of the entries in the pen drive and that no substantive addition was made based on these entries. Consequently, the Tribunal deleted the protective addition made by the AO, emphasizing that additions based on mere suspicion without corroborative evidence are not sustainable.

Conclusion:
The Tribunal dismissed the Department's appeals, upholding the CIT(A)'s deletion of additions under Sections 68 and 69C, and allowed the assessee's cross-objections, deleting the addition of interest payment from undisclosed sources. The Tribunal emphasized the necessity of incriminating material for making additions in completed assessments under Section 153A and the insufficiency of presumptions and unverified entries as a basis for additions.