2017 (6) TMI 824 - AT - Income Tax

Addition u/s 68 - Held that - No addition can be sustained on the strength of statement of Shri Gupta. Therefore, we hold that in absence of details about the nature of income he was surrendering in the case of a particular company or person of a group and particular head income the statement of Shri Gupta cannot be taken as valid basis for making addition u/s 68 of the Act for A.Y 2005-06. Assessment u/s 153A - Held that - We hold that the addition made u/s 68 by the AO in the assessment order passed u/s 143(3) r.w.s 153A for A.Y 2005-06, were not based on any books of account or any other material not produced during the course of original assessment which alleged to have been found in the course of search or undisclosed income or property discovered during the course of search and seizure operation, then all the additions made in the assessment order deserve to be deleted as the assessment proceedings for A.Y 2005-06 were not abated but already completed on the date of search i.e. 24.9.2009. We hold that the impugned assessment order framed u/s 143(3) r.w.s 153A of the Act for A.Y 2005-06 dated 26.12.2011 is bad in law and thus the same is sustainable and deserve to be quashed and hence we quash the same.

Summary

Issues Involved:
1. Addition of ?2,95,00,000/- under Section 68 for unexplained cash credits.
2. Addition of ?1,47,500/- for alleged commission paid to obtain accommodation entries.
3. Admission of additional legal ground regarding the validity of additions made under Section 153A.

Issue-Wise Detailed Analysis:

1. Addition of ?2,95,00,000/- under Section 68 for unexplained cash credits:
The assessee challenged the addition of ?2,95,00,000/- made by the Assessing Officer (AO) under Section 68 for unexplained cash credits. The AO's assessment was based on the documents and statements obtained during the search and seizure operation. However, the Tribunal observed that the documents referred to by the AO, namely Annexure A-5 and Annexure A-1, did not pertain to the assessee company but to other entities. The Tribunal also noted that the statement of Shri Mahesh Garg did not mention the assessee company. Consequently, the Tribunal concluded that there was no incriminating material linking the assessee to the unexplained cash credits, and thus, the addition under Section 68 could not be sustained.

2. Addition of ?1,47,500/- for alleged commission paid to obtain accommodation entries:
The AO made an addition of ?1,47,500/- for alleged commission paid at a rate of 0.5% to obtain accommodation entries, based on the statement of Shri Mahesh Garg. However, the Tribunal found that the statement did not specifically mention the assessee company. Moreover, there was no incriminating material found during the search that could justify this addition. Therefore, the Tribunal held that the addition for alleged commission was not sustainable.

3. Admission of additional legal ground regarding the validity of additions made under Section 153A:
The assessee sought to introduce an additional ground challenging the validity of the additions made under Section 153A, arguing that the additions were not based on any incriminating material found during the search. The Tribunal admitted this additional ground, noting that it was a purely legal issue that did not require fresh investigation beyond the existing record. The Tribunal referenced the decision in the case of NTPC Ltd, which allows for the admission of legal issues at a belated stage if they go to the root of the matter.

Upon examining the additional ground, the Tribunal found that no incriminating material was discovered during the search that could justify the additions made under Section 153A. The Tribunal cited the decision in the case of Kabul Chawla, which states that completed assessments can only be interfered with based on incriminating material found during the search. Since the assessment for the relevant year was completed and no such material was found, the Tribunal concluded that the additions were not valid.

Conclusion:
The Tribunal quashed the assessment order for A.Y 2005-06, holding that the additions made under Section 153A were not based on any incriminating material found during the search. Consequently, the appeal of the assessee was allowed, and the grounds on merits were rendered academic and infructuous.