2023 (5) TMI 955 - AT - Income Tax

Assessment u/s 153A - addition to the total income of the assessee of the regular items - addition u/s 68 on account of unexplained credit of share application money and premium by holding that no assessment can be made in absence of incriminating materials - HELD THAT - Hon ble Gujarat High Court in the case of Saumya Construction Pvt. Ltd. 2016 (7) TMI 911 - GUJARAT HIGH COURT has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during the course of search. The word incriminating has not been defined under the Act but it refers to those materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously these documents had bearing on the total income of the assessee. Coming to the case on hand we note that addition was made based on the statement of director of investing companies recorded in an independent proceedings u/s 132/133A/131(1) and the finding of inquiry or investigation was carried in case of investing companies without referring to incriminating document found from the premises of the assessee in this regard which would have made basis for the addition in the assessment. Accordingly we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts.

Summary

Issues involved:
The judgment involves the issue of whether an addition of Rs. 15 crores made under section 68 of the Income Tax Act on account of unexplained credit of share application money and premium can be deleted in the absence of incriminating materials found during a search operation.

Summary:

Issue 1: Addition under section 68 of the Act without incriminating material:
The Revenue appealed against the deletion of the addition of Rs. 15 crores made under section 68 of the Act on account of unexplained credit of share application money and premium. The Revenue argued that the assessment under section 153A of the Act should not be restricted to incriminating material only. The Assessee contended that no addition can be made in the absence of incriminating material found during the search. The Learned CIT(A) deleted the addition based on the judgment of the Hon'ble Gujarat High Court, emphasizing that assessments under section 153A can only be made on the basis of material collected during the search. The Revenue challenged this decision.

Issue 1 Details:
The assessment was framed under section 143(3) read with section 153A of the Act, adding Rs. 15,00,00,000/- on account of unexplained credit of share application money and premium. The Assessee argued that no addition can be made without incriminating material found during the search. The Learned CIT(A) referred to relevant case laws and deleted the addition, stating that assessments under section 153A must be based on material collected during the search. The Revenue contended that the assessment should not be limited to incriminating material only, but the Tribunal upheld the CIT(A)'s decision based on established legal principles.

Issue 2: Interpretation of Section 153A and incriminating material requirement:
The Tribunal clarified that completed assessments cannot be disturbed without incriminating material found during a search. The word 'assess' in Section 153A relates to abated proceedings, while 'reassess' pertains to completed assessments. The Tribunal emphasized the need for incriminating material to make additions in assessments under section 153A. In this case, the addition was based on statements of directors without incriminating documents found during the search.

Issue 2 Details:
The Tribunal cited the judgment of the Hon'ble Gujarat High Court, stating that additions can only be made on the basis of material collected during the search. The Tribunal noted that the addition in this case was not supported by incriminating material found during the search. The Tribunal held that regular items disclosed in the books of accounts cannot be added without incriminating material. The Tribunal upheld the CIT(A)'s decision to delete the addition, as no contrary evidence was presented by the Revenue.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the deletion of the addition of Rs. 15 crores under section 68 of the Act. The judgment emphasized the requirement of incriminating material for making additions in assessments under section 153A, highlighting the importance of legal principles in such cases.