2013 (7) TMI 844 - AT - Income Tax

Unexplained cash credit on account of sale of shares - Addition u/s 68 - CIT(A) allowed part relief - Held that - The issue involved in deletion of addition on account of sale of shares of M/s MP Investment and Quest Financial Services Ltd. respectively and expenditure for arranging these bogus entries has been affirmed by the ITAT in the proceedings u/s. 143(3) earlier. No new material has been brought forward to make these additions revenue appeal dismissed. As regards addition sustained by CIT(A) on sale of shares of M/s Nagehswar Investment Ltd. and for obtaining accommodation entries @ 2% interest of justice requires that assessee be confronted with the material on which CIT(A) is making reliance. The source of these additions have also to be brought on record and assessee be confronted in this regard. As decided in Kapurchand Shrimal Vs. CIT 1981 (8) TMI 2 - SUPREME Court appellate authority has the jurisdiction as well as duty to correct he errors in all proceedings under appeal and issue appropriate direction to the authority whose order is in appeal before it. In favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer under Section 68 of the I.T. Act, 1961 for unexplained cash credit.
2. Deletion of addition made for undisclosed expenditure on brokerage for arranging accommodation entries.
3. Jurisdiction and procedural compliance in assessments under Section 153A read with Section 143(3) of the I.T. Act.
4. Treatment of long-term capital gains on sale of shares as accommodation entries.
5. Admissibility of new material found during post-search enquiries.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 for Unexplained Cash Credit:
The Revenue challenged the deletion of Rs. 48,70,250/- made by the Assessing Officer as unexplained cash credit on account of the sale of shares of M/s M.P. Investment and Quest Financial Services Ltd. The Assessing Officer had treated the sale consideration as accommodation entries. However, the Ld. Commissioner of Income Tax (A) deleted the addition, and this deletion was affirmed by the ITAT, Agra Bench. The ITAT Delhi upheld the deletion, noting that no new material had surfaced in the assessment under Section 153A read with Section 143(3), and the previous order of the Tribunal had settled the issue.

2. Deletion of Addition for Undisclosed Expenditure on Brokerage:
The Revenue also contested the deletion of Rs. 97,417/- added by the Assessing Officer for undisclosed expenditure on brokerage for arranging accommodation entries. Similar to the first issue, the Ld. Commissioner of Income Tax (A) deleted this addition, and the ITAT, Agra Bench affirmed the deletion. The ITAT Delhi upheld the deletion, emphasizing that no new material had emerged to justify the addition.

3. Jurisdiction and Procedural Compliance in Assessments under Section 153A/143(3):
The assessee argued that the assessment order under Section 153A read with Section 143(3) was invalid due to lack of jurisdiction, non-recording of requisite satisfaction, and non-compliance with mandatory conditions. The Ld. Commissioner of Income Tax (A) did not quash the assessment order, and the ITAT Delhi did not find sufficient grounds to overturn the Ld. Commissioner of Income Tax (A)'s decision on procedural grounds.

4. Treatment of Long-term Capital Gains on Sale of Shares as Accommodation Entries:
In the case of Mithilesh Kumar Tripathi, the Assessing Officer had added Rs. 1,49,48,490/- as accommodation entries from the sale of shares, which was deleted by the Ld. Commissioner of Income Tax (A) and affirmed by the ITAT, Agra Bench. However, the Ld. Commissioner of Income Tax (A) sustained the addition of Rs. 97,26,760/- for the sale of shares of M/s Nageshwar Investment Ltd., citing new material from post-search enquiries. The ITAT Delhi remitted this issue back to the Assessing Officer, directing that the assessee be confronted with the new material and given an opportunity to rebut it.

5. Admissibility of New Material Found During Post-search Enquiries:
The Ld. Commissioner of Income Tax (A) sustained the addition related to M/s Nageshwar Investment Ltd. based on new material found during post-search enquiries, including SEBI's findings of price rigging and trading irregularities. The ITAT Delhi noted that the assessee was not confronted with this new material and remitted the issue back to the Assessing Officer for fresh consideration, ensuring the assessee is given an opportunity to respond to the new findings.

Conclusion:
The ITAT Delhi upheld the deletion of additions related to M/s M.P. Investment and Quest Financial Services Ltd. due to lack of new material. However, the issue of addition related to M/s Nageshwar Investment Ltd. was remitted back to the Assessing Officer for fresh consideration, ensuring procedural fairness by confronting the assessee with the new material. Both Revenue appeals were dismissed, and the assessee's appeal was allowed for statistical purposes.