2023 (3) TMI 427 - AT - Income Tax

Assessment proceedings completed u/s 153A - unexplained investment of the assessee u/s 69 - HELD THAT - Assessee has produced sufficient documents to substantiate that the loan/booking advance of Siddha Group were made by independent entities from their own funds reflected in the audited balance sheet and there is no evidence that such loan/booking advance are funded by the assessee or any other entity acting on behalf of the assessee. There is a complete lack of evidence in the hands of ld. AO which could indicate that the investment made in the Siddha Group in the form of loan and booking money is made by the assessee and the alleged addition seems to be made purely on suspicion, surmises and conjectures. The only evidence which ld. AO had was the statement given by the assessee during the course of search which has been retracted within three days himself and therefore, there remains no sanctity to refer/rely on such a statement which has been retracted within three days of the date of search. Even otherwise on legal grounds also since no incriminating material has been referred to by ld. AO which has a direct nexus with the assessee nor is there any material which could throw any light that the assessee has parked its unaccounted funds with the Siddha Group as loans and advances/booking money of the Siddha Projects the proceedings carried out u/s 153A of the Act deserves to be quashed since for AY 2014-15 AY 2015-16 the original returns were duly submitted on 11.06.2014 21.08.2015 and the time limit for issuance of notice u/s 143(2) of the Act stood expired and no proceedings u/s 143(3)/147 of the Act were pending on the date of search, therefore, both the assessment years were completed assessment years which cannot be abated and for such completed assessment year, no additions can be made unless until supported by incriminating material found during the course of search belonging/pertaining to the assessee - Decided against revenue.

Summary

Issues Involved:
1. Legality of the assessment proceedings under section 153A of the Income Tax Act, 1961.
2. Justification of additions made under section 69 of the Income Tax Act, 1961.
3. Validity of the retracted statement of the assessee.
4. Requirement of incriminating material found during the search.
5. Jurisdiction of the Assessing Officer to make additions based on suspicion and assumptions.

Detailed Analysis:

1. Legality of the Assessment Proceedings under Section 153A:
The Tribunal examined whether the assessment under section 153A was justified in the absence of any incriminating material. It was noted that the original returns for AY 2014-15 and AY 2015-16 were filed, and no proceedings under section 143(3) or 147 were pending as of the date of the search. The Tribunal referred to several judicial pronouncements, including CIT vs. Kabul Chawla, PCIT vs. Meeta Gutgutia, and PCIT vs. Kurele Paper Mills (P.) Ltd., which establish that no additions can be made under section 153A unless supported by incriminating material found during the search. The Tribunal concluded that since no such material was found, the assessment proceedings under section 153A were not justified.

2. Justification of Additions Made under Section 69:
The Assessing Officer (AO) made additions under section 69, treating unsecured loans and booking advances received by Siddha Group as the assessee's unexplained investments. The Tribunal observed that the AO's conclusions were based on assumptions and suspicions without any concrete evidence. The Tribunal noted that the loans and advances were made by independent entities with their own legal identities and audited financial statements. The AO failed to establish any direct connection between the assessee and the alleged investments. The Tribunal upheld the CIT(A)'s decision to delete the additions, emphasizing that the AO's actions were based on mere suspicion and conjecture.

3. Validity of the Retracted Statement of the Assessee:
The AO relied heavily on a statement given by the assessee during the search, which was later retracted within three days. The Tribunal noted that the retraction was made via a sworn affidavit, and no incriminating material was found to support the initial statement. The Tribunal held that the retracted statement could not be used as the sole basis for making additions, especially in the absence of corroborative evidence.

4. Requirement of Incriminating Material Found During the Search:
The Tribunal reiterated the legal position that for completed assessments, any addition under section 153A must be based on incriminating material found during the search. The Tribunal found that no such material was discovered in the assessee's case. The documents seized during the search did not indicate any undisclosed income or investments by the assessee. The Tribunal cited multiple judgments to support this view, including the Hon'ble Delhi High Court's decision in Kabul Chawla and the Hon'ble Calcutta High Court's decision in Veerprabhu Marketing Ltd.

5. Jurisdiction of the Assessing Officer to Make Additions Based on Suspicion and Assumptions:
The Tribunal criticized the AO for making additions based on suspicion and assumptions without any tangible evidence. It emphasized that the AO must provide concrete evidence and acceptable reasoning to support any additions. The Tribunal found that the AO failed to discharge this burden and that the additions were not sustainable in law. The Tribunal upheld the CIT(A)'s decision to delete the additions, noting that the AO's actions were arbitrary and lacked a factual basis.

Conclusion:
The Tribunal dismissed the Revenue's appeals for AY 2014-15 and AY 2015-16, upholding the CIT(A)'s decision to delete the additions made by the AO under section 69. The Tribunal emphasized the need for incriminating material to support any additions under section 153A and criticized the AO for relying on assumptions and a retracted statement without corroborative evidence.