2022 (10) TMI 647 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Share transactions are bogus and are to be treated as the assessee's unexplained income - incrementing material found during the search or not? - HELD THAT - The additions made by the AO while passing the assessment order u/s153A for the assessment year 2012-13 are not sustainable. We found force in the arguments of the ld. AR of the assessee and also convince with the findings of the CIT(A) who has after considering the facts on record taken a considered view that the looking to the facts of the case on technical ground, he has considered the appeal of the assessee and before giving his findings he has called for the remand report also and the equal chance were given to revenue place their case. DR appearing on the behalf of the revenue has merely relied on the investigation done at the time of search simultaneous survey conducted in the investor company. In all these processes we have not seen any reasons as to why and how the order of the ld. CIT(A) is not correct. There is no admission of either party of any undisclosed income. CIT(A) has after considering the details arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment 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. Merely the surveys conducted parties are not available after 8 years it is not the fault of the assessee and without 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 co- ordinate bench decision is also binding on us in the absence of any contrary judgement. Appeal of the revenue is dismissed

Summary

Issues Involved:

1. Legality of additions under section 153A for assessments completed prior to the date of search.
2. Deletion of addition of Rs. 5,20,00,000 on account of unexplained share premium under section 68.
3. Deletion of addition of Rs. 5,95,00,000 on account of unexplained unsecured loans under section 68.

Issue-wise Detailed Analysis:

1. Legality of Additions under Section 153A:

The primary issue was whether additions could be made under section 153A in respect of assessments that were completed before the date of search, without any incriminating material found during the search. The Tribunal held that "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." This principle was supported by several judicial pronouncements, including the Hon'ble Rajasthan High Court in Jai Steel (India) Ltd. and the Hon'ble Delhi High Court in Kabul Chawla. The Tribunal reiterated that "completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search."

2. Deletion of Addition of Rs. 5,20,00,000 on Account of Unexplained Share Premium:

The AO had made an addition of Rs. 5,20,00,000 on account of unexplained share premium under section 68, based on the observation that the companies investing in the assessee's shares were found to be non-existent during the survey. However, the Tribunal noted that the original assessment under section 143(3) had already accepted the share premium as genuine and that "no incriminating material was found during the course of search" to warrant a reassessment. The Tribunal emphasized that the AO's reliance on surveys conducted at incorrect addresses could not be considered incriminating material. The Tribunal concluded that "the addition made by the AO u/s 143(3) r.w.s. 153A on account of share premiums is legally not tenable and hence is not liable to be sustained."

3. Deletion of Addition of Rs. 5,95,00,000 on Account of Unexplained Unsecured Loans:

Similar to the share premium issue, the AO had added Rs. 5,95,00,000 on account of unexplained unsecured loans under section 68, based on the non-existence of the lending companies during the survey. The Tribunal found that the original assessment had already verified and accepted the unsecured loans as genuine. It was noted that "the AO has not claimed any incriminating material found during the search & seizure operation in the case of the appellant in respect of the aforesaid share premium received by the appellant company." The Tribunal held that "the addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable and hence is not liable to be sustained."

Conclusion:

The Tribunal dismissed the revenue's appeal, emphasizing that in the absence of any incriminating material found during the search, no additions could be made under section 153A for assessments that were already completed. The Tribunal upheld the CIT(A)'s decision to delete the additions on account of unexplained share premium and unsecured loans, reiterating the principle that completed assessments can only be disturbed based on incriminating material unearthed during the search.