2024 (12) TMI 1325 - AT - Income Tax

Addition u/s 68 - bogus LTCG - Addition made to the income of the assessee of share capital and premium received during the year finding the same to be mere accommodation entries - CIT(A) deleted addition - HELD THAT - AO treated transaction as bogus accommodation entry based on information available with him that these entities were bogus paper companies managed and controlled by Shri Shirish Chandrakant Shah. Information was based on evidences gathered during search and survey action conducted on Shirish Shah which revealed him to be involved in providing accommodation entries through several dummy companies. CIT(A), however, deleted the addition made finding the evidences and statements relied upon by the AO for treating the share capital and premium received by the assessee during the year as bogus accommodation entries to be not sufficient or having no evidentiary value. CIT(A) has picked up each piece of evidence to discard it as having no evidentiary value when the AO had considered all of them together to make a case against the assessee. The approach of the CIT(A) in singularly dismissing each piece of evidence, we find, is totally incorrect, and we are of the view that the matter needs to be reconsidered by the CIT(A) after giving a holistic consideration to all the evidences and statements relied upon by the Assessing Officer for holding the share application and share premium received by the assessee during the year to be bogus accommodation entry. Decided in favour of revenue for statistical purposes. Assessment u/s 153C v/s 147 - HELD THAT - There is no merit on facts itself, in the ground raised by the assessee before us in the impugned CO that the assessment in the present case ought to have been framed in terms provisions of section 153C of the Act as opposed to having been framed u/s 147 of the Act, thus, rendering it invalid. Assessee, has been unable to demonstrate how the provisions of section 153C were applicable in the facts of the case. As per the admission of Assessee himself before us, no material pertaining to the assessee having been found during the search on Shri Shrish C Shah, there was no occasion, we hold, for assessment to be framed in terms of section 153C of the Act.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following issues:

Whether the CIT(A) erred in deleting the addition made by the Assessing Officer (AO) regarding the share capital and premium received by the assessee, treating them as bogus accommodation entries.
Whether the assessment should have been framed under Section 153C of the Income-tax Act, 1961, instead of Section 147, given the information was obtained during a search on a third party.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deletion of Addition by CIT(A)

Relevant Legal Framework and Precedents: The case involves Section 68 of the Income-tax Act, 1961, which deals with unexplained cash credits. The AO treated the share capital and premium received as unexplained, relying on evidence from a search on Shri Shirish C. Shah, who allegedly managed bogus companies providing accommodation entries.
Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not holistically consider the evidence presented by the AO. The CIT(A) dismissed each piece of evidence individually without appreciating the cumulative weight of the evidence.
Key Evidence and Findings: The AO relied on evidence from a search on Shri Shirish C. Shah, which included bank accounts, cheque books, and statements from dummy directors admitting to being mere name lenders. The CIT(A) dismissed these as lacking evidentiary value.
Application of Law to Facts: The Tribunal noted that the CIT(A) failed to consider the collective evidence that indicated the share capital was an accommodation entry. The Tribunal emphasized the need for the CIT(A) to reassess the evidence collectively.
Treatment of Competing Arguments: The Tribunal found that the CIT(A) did not adequately address the AO's arguments and evidence, leading to an incomplete assessment of the case.
Conclusions: The Tribunal remanded the issue back to the CIT(A) for a fresh adjudication, emphasizing a holistic consideration of all evidence.

Issue 2: Validity of Assessment under Section 147

Relevant Legal Framework and Precedents: The issue concerns whether the assessment should have been conducted under Section 153C, which applies when material pertaining to a third person is found during a search, rather than under Section 147.
Court's Interpretation and Reasoning: The Tribunal agreed with the Revenue that the assessment under Section 147 was valid, as no specific material pertaining to the assessee was found during the search on Shri Shirish C. Shah.
Key Evidence and Findings: The Tribunal noted that the search revealed general information about Shri Shirish C. Shah's involvement in providing accommodation entries, but no specific adverse material pertaining to the assessee was found.
Application of Law to Facts: The Tribunal found that the AO correctly proceeded under Section 147, given the absence of specific material pertaining to the assessee found during the search.
Treatment of Competing Arguments: The Tribunal dismissed the assessee's argument for applying Section 153C, as the necessary conditions were not met.
Conclusions: The Tribunal upheld the validity of the assessment under Section 147, dismissing the assessee's cross-objection.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal noted, "The approach of the ld. CIT(A) in singularly dismissing each piece of evidence, we find, is totally incorrect, and we are of the view that the matter needs to be reconsidered by the ld. CIT(A) after giving a holistic consideration to all the evidences and statements relied upon by the Assessing Officer."
Core Principles Established: The judgment emphasizes the importance of considering evidence collectively rather than individually and clarifies the applicability of Sections 147 and 153C based on the nature of the material found during a search.
Final Determinations on Each Issue: The Tribunal remanded the issue of the addition back to the CIT(A) for fresh consideration and upheld the validity of the assessment under Section 147, dismissing the assessee's cross-objection.