2023 (2) TMI 849 - AT - Income Tax

Assessment u/s 153A - unaccounted profits or investments made - purchases have been suppressed and the investments have been acquired at a much lower price and hence AO has made addition of suppressed income in the hands of the assessee - HELD THAT - In the present case, we note that ld. CIT (A) has given a categorical finding that there is nothing on record which suggest that assessee has incurred higher expenditure on purchase than reflected in the books of account. CIT (A) placed strong reliance upon the decision of Hon ble jurisdictional High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT which is fully applicable. Assessee has purchased share of 6 companies at the face value with book value of these shares on the date of purchase was much higher - In this regard, mere such submission cannot fortify the case of the assessee. In the case of K.P. Varghese 1981 (9) TMI 1 - SUPREME COURT duly expounded that there must be evidence to show that the actual consideration was more than the consideration shown in the books. In this regard, ld. Counsel of the assessee referred to catena of case laws. We find that this aspect is fully applicable in the assessee s case. No evidence whatsoever is on record that actual consideration paid is any how suppressed. Hence, the assessee s case is covered on the touchstone of Hon ble Apex Court in the case of K.P. Varghese (supra). Apart from the value of investment, another addition made by the AO is with regard to credit card payments. In this aspect, ld. CIT (A) has given a finding that there is no incriminating material and in this view of the matter, addition is not sustainable on the touchstone of Hon ble Delhi HIgh Court in the case of Kabul Chawla (supra). - Decided against revenue. Whether assessment should have been done under section 153C and not under section 153A ? - Section 153C permits documents found from another search to be sent to the AO of that person after due satisfaction and then on the basis of those documents assessment u/s 153C can be done. In the present case, material found at the premises of Rajiv Gupta has been taken as if they are material found during search at the assessee, Atul Kumar Gupta, which is not at all correct. Hence, the very basis of addition is missing. The assessment has been made u/s 153A and not u/s 153C, and this has led to a fatal error in the assessment order which is not curable. As rightly contended by the ld. Counsel of the assessee that the presumption u/s 132 (4A) cannot be extended to material found at somebody else place and de hors corroborating documents, these cannot be linked to the assessee. Assessee s plea that assessee s name is nowhere directly mentioned in these documents found at Rajiv Gupta place whereas it is mentioned as Dildar (Atul sir) which ipso facto cannot mean the assessee. Hence, we set aside the order of the authorities below and delete the addition in this regard.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained profit/investment under Section 69A.
2. Deletion of addition on account of unexplained HDFC credit card payment.
3. Legality of additions based on incriminating documents found during search operations.
4. Validity of assessment under Section 153A.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Profit/Investment under Section 69A:
The Revenue's appeal contested the deletion of additions totaling Rs. 7,99,55,358/- and Rs. 7,36,99,291/- for the two assessee on account of unexplained profit/investment under Section 69A. The AO claimed these additions were based on post-search inquiries and documents seized during the search. However, the CIT(A) found that no incriminating documents were provided by the AO to substantiate these additions. The CIT(A) relied on the judgment in Kabul Chawla (2016) 380 ITR 573 (Delhi), which states that completed assessments can only be interfered with if incriminating material is found during the search. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to provide any corroborating evidence to prove that the purchase price of the investments was suppressed.

2. Deletion of Addition on Account of Unexplained HDFC Credit Card Payment:
The AO added Rs. 26,14,151/- for unexplained HDFC credit card payments and mutual fund purchases, claiming these were made from undisclosed income. The CIT(A) deleted this addition, citing the lack of incriminating documents found during the search. The Tribunal upheld this decision, agreeing that the AO did not provide any specific documents indicating undisclosed income related to these payments.

3. Legality of Additions Based on Incriminating Documents Found During Search Operations:
The CIT(A) and the Tribunal both emphasized that for additions to be made under Section 153A, there must be incriminating material found during the search. The AO's reliance on post-search inquiries and documents seized from other premises was insufficient. The Tribunal noted that the AO failed to present any specific incriminating documents linking the assessee to the alleged undisclosed income. The Tribunal upheld the CIT(A)'s reliance on the Kabul Chawla judgment, which requires incriminating material to substantiate additions in completed assessments.

4. Validity of Assessment under Section 153A:
The Tribunal noted that the AO made the additions based on documents found during a search on Rajiv Gupta, not the assessee. The Tribunal held that the assessment should have been conducted under Section 153C, not 153A, as the documents were found from a third party. The Tribunal emphasized that the presumption under Section 132(4A) applies only to the person from whom the documents were seized. The Tribunal found that the AO's assessment under Section 153A was invalid and upheld the CIT(A)'s deletion of the additions.

Conclusion:
The Tribunal dismissed the Revenue's appeals for AY 2011-12 and allowed the assessee's appeals for AYs 2014-15, 2015-16, and 2016-17. The Tribunal upheld the CIT(A)'s decisions, emphasizing the need for incriminating material found during the search to substantiate additions under Section 153A. The Tribunal also highlighted the importance of conducting assessments under the correct section, noting that documents found from a third party should lead to assessments under Section 153C, not 153A.