2023 (2) TMI 119 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - incriminating Material found during the search or not? - HELD THAT - A careful reading of the statement shows that there is nothing incriminating found or said by Shri Maninder Singh Sahni nor any adverse inference has been drawn by him in his statement. As mentioned elsewhere, the assessee had filed its return of income on 30.09.2013 accompanied by statement of account, which means that transaction of share application money of Rs. 2 crores and loan of Rs. 10 lakhs from TMR Projects Pvt Ltd must have been reflected in the return of income so filed. Therefore, it cannot be said that only after search and seizure operation filed, the Revenue came to know about share application money received by the assessee as there is no such mention in the body of the assessment order or in the body of the order of the first appellate authority. We have the benefit of the assessment order of TMR Projects Pvt Ltd for Assessment Year 2013-14. The said assessment order is framed u/s 143(3) of the Act after thorough scrutiny and in the said assessment order, the same statement of Shri Maninder Singh Sahni has been extracted which has been made the basis for making additions. In the entire assessment order framed after thorough scrutiny, there is no whisper about the transaction between TMR Projects Pvt Ltd and the assessee relating to the share application money and the loan. Assessment of TMR Projects Pvt Ltd was completed by making addition of Rs. 15.07 lakhs being 1% of the commission earned on providing accommodation entries relating to sales. That addition was also deleted by this Tribunal 2021 (9) TMI 1471 - ITAT DELHI wherein the Tribunal observed that addition is dehors of any incriminating material and the ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT squarely apply. Since Rs. 2.10 crores has come from TMR Projects Pvt Ltd and since no addition has been made in the hands of the giver for want of incriminating material, the same transaction cannot be accepted as based upon any incriminating material in the hands of the taker , i.e the assessee. Facts on record show that TMR Projects Pvt Ltd has received money from Tyagi Portfolio (P) Ltd and Mokul Overseas (P) Ltd and the loan received from Tyagi Portfolio (P) Ltd has been refunded by TMR Projects Pvt Ltd subsequently during the F.Y. itself. Therefore, on merits also, additions do not survive - no hesitation in quashing the assessment order and directing the Assessing Officer to delete the impugned additions. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment order without incriminating material found during search.
2. Addition of share capital u/s 68 of the Act.
3. Addition of unsecured loan u/s 68 of the Act.
4. Addition of unexplained expenditure u/s 69C of the Act.
5. Disallowance of preliminary expenses.

Issue-wise Detailed Analysis:

1. Validity of Assessment Order Without Incriminating Material Found During Search:
The assessee contended that the assessment was completed as no notice u/s 143(2) was served within the stipulated period, making it a completed assessment year. The search conducted did not yield any incriminating material specific to the assessee, and the additions made were dehors of any such material. The Tribunal referenced the case of Kabul Chawla, where it was held that no addition can be made in the absence of incriminating material found during the search. The Tribunal found that the statement of the director, Shri Maninder Singh Sahni, did not contain any incriminating information. Thus, the assessment order was quashed.

2. Addition of Share Capital u/s 68 of the Act:
The Assessing Officer added Rs. 2 crores received as share capital from TMR Projects Pvt Ltd, citing lack of explanation for the credit entry. The Tribunal noted that the same transaction was scrutinized in the assessment of TMR Projects Pvt Ltd, where no adverse inference was drawn. The Tribunal held that since the share capital was already disclosed in the return of income and no incriminating material was found during the search, the addition was unjustified.

3. Addition of Unsecured Loan u/s 68 of the Act:
Similarly, the Assessing Officer added Rs. 10 lakhs received as an unsecured loan from TMR Projects Pvt Ltd. The Tribunal observed that the transaction was part of the regular financial dealings, disclosed in the return of income, and scrutinized in the assessment of TMR Projects Pvt Ltd. Therefore, the addition was deemed baseless and was directed to be deleted.

4. Addition of Unexplained Expenditure u/s 69C of the Act:
The Assessing Officer added Rs. 2.10 lakhs as unexplained expenditure, assuming it was commission paid for obtaining accommodation entries. The Tribunal found no evidence of such expenditure during the search and noted that the source of funds was explained. Consequently, the addition was deleted.

5. Disallowance of Preliminary Expenses:
The Assessing Officer disallowed Rs. 80,861/- as preliminary expenses. The Tribunal, considering the submissions and records, found the disallowance to be based on conjectures and directed its deletion.

Conclusion:
The Tribunal quashed the assessment order and directed the deletion of all additions, citing the absence of incriminating material and adherence to the principles laid down in the case of Kabul Chawla. The appeal of the assessee was allowed.