2023 (1) TMI 131 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - unexplained share capital received from 21 persons - HELD THAT - We are of the considered opinion that the decision of Hon ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT is applicable in the facts and circumstances of the case. It is undisputed that no incriminating material was found during search and this is an unabated assessment. Hence, respectfully following the precedent, we hold that the addition is not sustainable on jurisdiction ground. - Decided in favour of assessee.

Summary

Issues:
1. Addition u/s 68 for unexplained share capital.
2. Burden of proof on the assessee.
3. Proper inquiry conducted by the CIT (A).
4. Jurisdictional issue of notice u/s 143(2) and incriminating material for additions u/s 153A.

Addition u/s 68 for unexplained share capital:
The case involved the Revenue appealing the deletion of an addition u/s 68 for unexplained share capital received from 21 persons. The AO had raised concerns about the creditworthiness and genuineness of the transactions. The AO issued summons and notices to the alleged share applicants, but responses were lacking. The CIT (A) decided in favor of the assessee, leading to the appeal. The Tribunal noted the lack of incriminating material found during the search and ruled that the addition was not sustainable, as it was an unabated assessment.

Burden of proof on the assessee:
The Revenue contended that the burden of proof was not discharged by the assessee, citing a High Court judgment. The CIT (A) was criticized for not conducting a proper inquiry. However, the Tribunal held that the CIT (A) had the authority to conduct relevant inquiries, but the lack of incriminating material during the search influenced the decision in favor of the assessee.

Proper inquiry conducted by the CIT (A):
The Revenue argued that the CIT (A) failed to appreciate the need for a proper inquiry. The Tribunal clarified that while the CIT (A) had the duty to conduct inquiries, the absence of incriminating material rendered the addition unsustainable. The Tribunal emphasized the importance of establishing creditworthiness and genuineness, which the Revenue failed to prove.

Jurisdictional issue of notice u/s 143(2) and incriminating material for additions u/s 153A:
The assessee raised jurisdictional issues regarding the notice u/s 143(2) and the presence of incriminating material for additions u/s 153A. The Tribunal highlighted that no incriminating material was found during the search, leading to the conclusion that the addition was not sustainable. Citing relevant case law, the Tribunal ruled in favor of the assessee on jurisdictional grounds, rendering the Revenue's appeal on merits irrelevant.

In conclusion, the Tribunal allowed the assessee's cross objections and deemed the Revenue's appeal as infructuous due to the lack of incriminating material and jurisdictional issues, ultimately ruling in favor of the assessee.