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2015 (8) TMI 9 - AT - Income TaxAddition u/s. 68 - CIT(A) deleted the addition - validity of proceedings initiated under section 153A - Held that - The assessee has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences produced by the assessee and which were available before him on record of the department itself in reassessment proceedings of North Delhi Projects Pvt Ltd for the A.Y 2004-05 and in assessee s own case for AY 2005-06 as stated and when no incriminating documents/ evidence is found during the search to suggest that the M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd are sham entities and when its respective balance sheet speaks otherwise. CIT(A) rightly held that the AO was not justified in treating the amount of share application money received by the assessee company as its undisclosed income because there was no material in the hands of the AO which was collected during the search/enquiry conducted by him. Therefore, Ld. CIT(A), has rightly deleted the addition made under section 68 of the Act. - Decided against revenue. Violation of Rule 46A of the Income Tax Rules, 1962 - Held that - No new evidence was adduced before the Ld. CIT(A). He only took note of the already existing documents in the public domain. i.e. the remand report of the AO in a sister concern s case of assessee wherein, the AO candidly accepts the identity, creditworthiness and genuineness of the share holders company (M/s Caplin For AY 2006-07 i.e. in the same assessment year under consideration). Therefore, question of admission of additional evidence does not arise. The Ld. CIT(A) while discharging his appellate jurisdiction can take judicial notice of these documents and found the contention of the assessee was right and so there is nothing illegal or perverse in it and so there is no violation of Rule 46A. Moreover, the learned DR could not point out any additional evidence which has been adduced before the ld. CIT(A) for the first time to invoke Rule 46A. Hence, the contention raised by the Department regarding violation of Rule 46A, has no merits, therefore, we reject the ground - Decided against revenue. Taking note that the Hon ble Bombay High Court 2015 (5) TMI 656 - BOMBAY HIGH COURT has upheld the Special Bench decision of the Tribunal, in ALL Cargo (2012 (7) TMI 222 - ITAT MUMBAI(SB) ) we uphold the contention of the assessee that no addition can be made for this assessment year u/s 153A since no incriminating material was unearthed during the course of search and admittedly original assessment has not abated as on date of search. So we are inclined to follow the view of the Coordinate Bench as stated above. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961. 2. Violation of Rule 46A of the Income Tax Rules, 1962. 3. Validity of proceedings initiated under Section 153A of the Income Tax Act. 4. Validity of reassessment order under Section 153A in the absence of incriminating material. 5. Confirmation of assessment order under Section 153A despite no incriminating material found during the search. Detailed Analysis: 1. Deletion of Addition under Section 68: The Revenue challenged the deletion of an addition of Rs. 26,00,000 made by the AO under Section 68 of the Income Tax Act. The AO had added this amount as income from undisclosed sources, citing the failure of the assessee to prove the creditworthiness and genuineness of the entities from whom the share application money was received. The Tribunal upheld the CIT(A)'s decision to delete the addition, noting that the identity, creditworthiness, and genuineness of the transactions were established, referencing a similar case (ITA No. 2290/Del/2013) where the same issues were adjudicated in favor of the assessee. 2. Violation of Rule 46A: The Revenue contended that the CIT(A) violated Rule 46A by not providing a two-stage opportunity for the AO to examine additional evidence, as mandated by the Delhi High Court in the case of Manish Build Well Pvt. Ltd. The Tribunal found no merit in this contention, as the CIT(A) had appropriately considered the evidence and provided sufficient opportunity for the AO to respond. 3. Validity of Proceedings under Section 153A: The assessee argued that the proceedings under Section 153A were invalid as there was no search and seizure action initiated against them. The Tribunal dismissed this ground, noting that the assessee was indeed covered under the search operation on 20.08.2009, and the proceedings were initiated accordingly. 4. Validity of Reassessment Order under Section 153A: The assessee contended that the reassessment order under Section 153A was invalid in the absence of any incriminating material found during the search. The Tribunal agreed with the assessee, referencing the Special Bench decision in All Cargo Logistics Ltd., upheld by the Bombay High Court. The Tribunal held that no additions could be made under Section 153A without incriminating material, especially when the original assessment was completed under Section 143(3). 5. Confirmation of Assessment Order under Section 153A: The Tribunal examined whether the AO could make additions without any incriminating material during the search. The Tribunal concluded that additions based on no evidence or merely on surmises and conjectures are not sustainable. The Tribunal noted that the AO must rely on evidence unearthed during the search or already on record but overlooked during the original assessment. The Tribunal upheld the deletion of the addition made by the AO, as it was not based on any incriminating material found during the search. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. The Tribunal upheld the CIT(A)'s deletion of the addition under Section 68, found no violation of Rule 46A, and ruled that the reassessment under Section 153A was invalid in the absence of incriminating material. The Tribunal emphasized the necessity of incriminating evidence for making additions under Section 153A, aligning with the Special Bench decision in All Cargo Logistics Ltd. and the Bombay High Court's endorsement of the same.
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