2024 (11) TMI 493 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Treatment of share capital as unexplained cash credit - incriminating documents during a search or not? - HELD THAT - AO has made the addition based on the general statement that unaccounted cash was introduced as share capital without referring to any specific documents. The documents produced by the Ld DR as incriminating material was the copy of cash book and ledger account of Shri NKV Krisha and Preetha ji, which are entries of regular books of account. We therefore hold that addition of share capital has not been made based on incriminating material found during search. AO in the assessment order u/s 153A has assessed income at Rs 9,40,000/- against returned loss of Rs 60,000 , thus making only addition of share capital of Rs 10,00,000 u/s 68 of the Act. Therefore, in view of case of Abhisar Buildwell (P) Ltd 2023 (4) TMI 1056 - SUPREME COURT addition cannot be sustained in present case without there being incriminating material. We accordingly delete the addition of share capital u/s 68 of Income Tax Act made by the AO - Assessee appeal allowed.

Summary

Issues:
1. Validity of additions made by the Assessing Officer without incriminating documents during a search.
2. Treatment of share capital as unexplained cash credit under Section 68 of the Income Tax Act, 1961.
3. Invocation of Section 115BBE of the Act by the Assessing Officer.

Analysis:

Issue 1:
The appeal was filed by the assessee for Assessment Year 2017-18 challenging the additions made by the Assessing Officer under Section 143(3) read with Section 153A of the Income Tax Act, 1961. The primary contention was that the additions were made without any incriminating documents found during the search operation. The Commissioner of Income Tax (Appeals) upheld the additions, stating they were based on incriminating material, including a pen drive seized during the search. However, the Authorized Representative argued that the additions were not based on incriminating material but on regular books of account. The Tribunal, after considering the submissions, held that the additions made without any incriminating material could not be sustained, citing a Supreme Court decision. Consequently, the addition was deleted.

Issue 2:
The Assessing Officer had made an addition of share capital introduced by individuals in cash under Section 68 of the Act. The Commissioner of Income Tax (Appeals) confirmed this addition, stating that it was to be taxed at a special rate under Section 115BBE. The Authorized Representative argued that the addition was made solely based on regular books of account and not on incriminating material. The Tribunal examined the documents presented and concluded that the addition of share capital was not supported by incriminating material found during the search. Relying on the Supreme Court decision, the Tribunal deleted the addition of share capital under Section 68 of the Act.

Issue 3:
The Assessing Officer invoked Section 115BBE of the Act in relation to the addition made under Section 68. The Commissioner of Income Tax (Appeals) affirmed this treatment. However, the Tribunal, after reviewing the facts and arguments, held that since the addition itself was not sustainable due to lack of incriminating material, the invocation of Section 115BBE was also not justified. Consequently, the Tribunal allowed the appeal of the assessee, thereby setting aside the additions made by the Assessing Officer.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the additions made without any incriminating material during the search were not valid. The Tribunal also emphasized the importance of incriminating material in such cases and deleted the additions of share capital made under Section 68 of the Income Tax Act, 1961.