2017 (12) TMI 472 - AT - Income Tax

Addition u/s 68 - assessment u/s 153A - Held that - As the assessee submitted before Ld. CIT(A) that original return of income was filed under section 139(1) of the Act on 30th May, 2008 which was assessed under section 143(3) on returned income of ₹ 4,97,60,866. It is, therefore, clear that prior to the search the assessment under section 143(3) was completed. It is also an admitted fact that during the course of search and seizure no incriminating evidence as regards the addition under section 68 of the act were found and seized during the course of search. Therefore, no assessment/re-assessment were pending as on the date of search. In the absence of any incriminating material during the course of search, the Ld. CIT(A) was justified in relying upon the decision of the Hon ble Delhi High Court in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) for the purpose of deleting the addition - Decided in favour of assessee.

Issues:
Challenge to deletion of addition under section 68 of the I.T. Act based on unexplained cash credit.

Analysis:
1. The Revenue appealed against the deletion of addition under section 68 of the I.T. Act, challenging the order of the Ld. CIT(A)-30 for the A.Y. 2007-2008. The appeal was based on unexplained cash credit found during a search and seizure operation under section 132 of the I.T. Act in the Saluja group of cases.

2. The Assessing Officer (A.O.) issued a notice under section 153C r.w.s. 153A of the I.T. Act to the assessee, who had taken unsecured loans from various parties. The A.O. treated the unsecured loans as unexplained under section 68 of the I.T. Act, resulting in an addition of &8377; 11,90,57,300. The assessment was completed under section 153C r.w.s.153A of the I.T. Act.

3. The assessee contended before the Ld. CIT(A) that no addition could be made without recovery of incriminating material during the search and seizure operation. Citing the decision of the Hon'ble Delhi High Court in CIT vs. Kabul Chawla, the assessee argued that since the original assessment was already completed under section 143(3) of the I.T. Act, no addition could be made in the absence of incriminating material.

4. The Ld. CIT(A) considered the explanation provided by the assessee and deleted the addition, aligning with the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla. The Ld. CIT(A) highlighted that the assessment order was not based on any incriminating document, supporting the decision to delete the addition.

5. The Ld. D.R. representing the Revenue argued that incriminating documents were not necessary for finalizing assessments under sections 153A/153C. The D.R. emphasized strict interpretation of tax statutes and cited decisions from various High Courts to support the Revenue's position.

6. Despite notification, the assessee did not appear for the hearing. The Tribunal considered the submissions of the Ld. D.R. and reviewed the case law, including the decision of the Hon'ble Delhi High Court in CIT vs. Kabul Chawla, which emphasized the requirement of incriminating material for assessments under section 153A.

7. The assessee's original return of income was filed and assessed under section 143(3) before the search, with no incriminating evidence found during the search related to the addition under section 68. The Ld. CIT(A) justified relying on the Kabul Chawla decision to delete the addition, despite the pending SLP before the Hon'ble High Court.

8. The Ld. CIT(A) did not find any merit in the Revenue's case for interference, as no incriminating documents were discovered during the search to support the addition under section 68. The Tribunal dismissed the department's appeal, upholding the decision of the Ld. CIT(A) to delete the addition.

This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the arguments presented by both the Revenue and the assessee, along with the Tribunal's decision based on relevant case law and legal provisions.

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