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2022 (10) TMI 1277 - AT - Income TaxAssessment u/s 153A - additions made by the AO without any incriminating evidence found at the time of search - HELD THAT -In the instant cases the assessment of AY 2015-16 was not pending as on the date of search and hence it would fall under the category of unabated/finalized/completed assessments . There is also no dispute with regard to the fact that the search officials did not unearth any incriminating material during the course of search warranting interference of the issues already stood concluded in unabated assessment. Hence the decisions rendered in the case of Continental warehousing Corporation (Nhava Sheva) Ltd. 2015 (5) TMI 656 - BOMBAY HIGH COURT and Gurinder Singh Bawa 2015 (10) TMI 1761 - BOMBAY HIGH COURT in our view shall squarely apply to the facts of the present case. Accordingly we hold that the AO in the absence of any incriminating material found during the course of search relating to the impugned additions was not justified in assessing them in this year. We set aside the orders passed by CIT(A) in the hands of these assessees for AY 2015-16 and direct the AO to delete the additions made in this year in the impugned assessment order. Addition made u/s 68 - assessee has availed accommodation entries by way of capital gains in order to convert unaccounted money into accounted one - HELD THAT - AO has simply relied upon the report of the investigation department and held that the long term capital gains declared by the assessee are not genuine. No other material was brought on record by the AO to prove that the assessee has indeed availed only accommodation entries. We noticed that the assessee has furnished all documents relating to purchase and sale of securities. The shares have entered into and exited from his demat account. The purchase and sale transactions have been routed through the bank accounts of the assessee. All these documentary evidences produced by the assessee have not been disproved. Accordingly decision rendered in the said case of Shyam R Pawar 2014 (12) TMI 977 - BOMBAY HIGH COURT is squarely applicable to the facts of the present case. We hold that the tax authorities are not justified in disbelieving the long term capital gains declared by the assessee. Accordingly we set aside the order passed by CIT(A) on this issue and direct the AO to delete the addition relating to assessment of sale consideration realised on sale of shares of Divine Multimedia Ltd. Claim for deduction of Education Cess - In view of the retrospective amendment brought in by Finance Act 2022 holding that the education cess is not allowable as deduction we hold that the claim of the assessee is not tenable. Accordingly we reject this ground of the assessee.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in the judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of Additions in the Absence of Incriminating Materials (AY 2015-16) The legal framework revolves around Section 153A of the Income Tax Act, which permits the assessment or reassessment of income for six years preceding the year of a search. The Court examined whether the Assessing Officer (AO) could interfere with completed assessments without any incriminating material found during the search. The Court relied on precedents from the Bombay High Court, notably in the cases of Continental Warehousing Corporation and Gurinder Singh Bawa, which established that in the absence of incriminating material, completed assessments should not be disturbed. The Court concluded that since no incriminating material was found during the search, the AO was not justified in making additions for AY 2015-16. The Court set aside the orders of the lower authorities and directed the AO to delete the additions. 2. Reopening and Additions under Section 68 (AY 2012-13) The issue concerned the reopening of the assessment under Section 147 and the addition of the sale value of shares as income under Section 68. The assessee argued that the transactions were genuine, supported by documentation such as contract notes, demat account entries, and bank statements. The Court referenced the Bombay High Court's decision in Shyam Pawar, which held that mere reliance on investigation reports without disproving the documentary evidence provided by the assessee was insufficient to establish that the transactions were not genuine. The Court found that the AO had not provided substantial evidence to counter the assessee's documentation. Consequently, the Court directed the deletion of the addition related to the sale of shares. 3. Deduction of Education Cess The claim for deduction of education cess was rejected based on a retrospective amendment by the Finance Act, 2022, which clarified that education cess is not allowable as a deduction. This amendment was applied to the assessment years 2012-13 and 2017-18, leading to the rejection of the assessee's claim. SIGNIFICANT HOLDINGS The Court reaffirmed the principle that completed assessments cannot be reopened without incriminating evidence found during a search. This holding aligns with the precedents set by the Bombay High Court, emphasizing the need for a nexus between the search findings and the additions made. For the issue of reopening assessments and additions under Section 68, the Court upheld the requirement for the AO to substantiate claims of non-genuine transactions with concrete evidence, rather than relying solely on investigation reports. The Court also upheld the legislative amendment regarding the non-deductibility of education cess, reinforcing its applicability to the relevant assessment years. In conclusion, the appeals for AY 2012-13 and 2015-16 were allowed, with the appeal for AY 2017-18 being partly allowed, reflecting the Court's adherence to established legal principles and legislative amendments.
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