2020 (10) TMI 1390 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 treating certain balances, as available in the books of accounts, as unexplained - CIT (A) allowed assessee appeal and deleted addition on the ground that since no incriminating material was found during the search conducted, the re-assessment could not be sustained as relied on the earlier decision of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT also confirmed by Meeta Gutgutia 2018 (7) TMI 569 - SC ORDER - HELD THAT - Since, the decision of the ld. CIT (A) is based on the judgments of the Hon ble Jurisdictional High Court and the Hon ble Apex Courts, we hereby decline to interfere with the order of the ld. CIT (A). In the result, the appeal of the department is liable to be dismissed.

Summary

Issues:
1. Appeal by Revenue against CIT(A) order regarding deletion of addition u/s 68 of the Act.
2. Appeal by Assessee against CIT(A) order upholding validity of assessment and rejection of additional evidence.

Analysis:
1. The Revenue filed an appeal against the CIT(A) order deleting an addition under section 68 of the Income Tax Act. The Revenue contended that the CIT(A) erred in law and on facts by deleting the addition of Rs. 8,46,11,456. The Revenue argued that the CIT(A) wrongly relied on a Delhi High Court order in the case of Kabul Chawla, stating that Section 153A does not restrict assessment to seized documents. The Revenue raised grounds challenging the correctness of the CIT(A) order.

2. The Assessee filed an appeal against the CIT(A) order upholding the validity of the assessment and rejecting additional evidence. The Assessee argued that the CIT(A) erred in not admitting additional evidence under Rule 46A of the Income Tax Rules. The Assessee contended that the CIT(A) failed to provide a fair opportunity for presenting evidence related to a loan received. The Assessee also argued that the CIT(A) should have exercised power under section 131 of the Income Tax Act to summon the creditor before holding the credits as unexplained.

3. The facts of the case revealed that a search and seizure action was conducted on the Vatika group, including the individual Assessee, under section 132 of the Income Tax Act. The assessment was completed under section 153A for the assessment year 2006-07. The Assessing Officer made an addition of Rs. 8,46,11,456 for loans and advances received during the year. However, no incriminating material was found related to these loans during the search operation, and the assessment order did not refer to any seized material regarding the loans.

4. The CIT(A) deleted the addition based on the judgment of the Delhi High Court in the case of CIT Vs. Kabul Chawla, which stated that additions under section 153A are not valid if no incriminating material was found during the search. The Tribunal declined to interfere with the CIT(A) order, citing precedents from the High Court and Supreme Court supporting the decision.

5. Regarding the Assessee's appeal, the Tribunal found that the CIT(A) did not provide a sufficient reasoning for rejecting additional evidence under Rule 46A. The Tribunal referred the matter back to the CIT(A) to make a clear decision on admitting the additional evidence, citing relevant case laws. The Tribunal directed the CIT(A) to pass a fresh order, specifying the clauses of Rule 46A applicable and providing a reasonable opportunity to the Assessing Officer if additional evidence is to be admitted.

6. In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the Assessee's appeal for statistical purposes, directing the CIT(A) to re-examine the issue of admitting additional evidence in accordance with the law.