2015 (8) TMI 10 - AT - Income Tax

Addition 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.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961.
2. Alleged violation of Rule 46A of the Income Tax Rules, 1962.
3. Validity of proceedings initiated under Section 153A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act:
The Assessing Officer (AO) added Rs. 2,20,00,000 to the assessee's income under Section 68, questioning the creditworthiness and genuineness of three entities from whom the share application money was received. The AO's primary reasons were non-compliance with notices under Sections 131 and 133(6), failure to produce directors, and lack of bank statements and audited balance sheets. The CIT(A) deleted the addition after considering the assessee's submissions and documents, including share application forms, confirmations, ITRs, audited balance sheets, and bank statements. The CIT(A) also referred to the remand report in a related case where the AO had accepted the identity, creditworthiness, and genuineness of transactions with one of the entities. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not make adequate inquiries and ignored substantial evidence provided by the assessee.

2. Alleged Violation of Rule 46A:
The Revenue contended that the CIT(A) violated Rule 46A by admitting additional evidence without giving the AO an opportunity to examine it. However, the Tribunal found that the CIT(A) had relied on existing documents in the public domain, specifically the remand report in a related case. The Tribunal concluded that no new evidence was admitted, and the CIT(A) was within his rights to consider the remand report, thus rejecting the Revenue's contention of Rule 46A violation.

3. Validity of Proceedings under Section 153A:
The assessee's cross-objection challenged the proceedings under Section 153A, arguing that no incriminating material was found during the search. The Tribunal referred to the Special Bench decision in the case of All Cargo Global Logistics Ltd., upheld by the Bombay High Court, which held that no addition can be made under Section 153A for assessment years where no incriminating material is found during the search, unless the original assessment has abated. Since the original assessment had not abated and no incriminating material was found, the Tribunal upheld the assessee's contention and allowed the cross-objection, confirming that the additions made under Section 153A were invalid.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, upholding the CIT(A)'s deletion of the addition under Section 68 and confirming the invalidity of the proceedings under Section 153A in the absence of incriminating material.