2017 (12) TMI 565 - AT - Income Tax

Assessment made u/s 153A - addition u/s 68 - Held that - There is no incriminating material qua the assessment year for which impugned addition has been made, we hold that such an addition cannot be roped in in the assessment order passed u/s 153A. Accordingly, same is directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of unexplained cash credit of ?3,28,07,000/- received as share application money, share premium, and share capital.
2. Deletion of addition of ?1,64,035/- being 0.5% of the amount paid as commission in lieu of accommodation entry.
3. Legal validity of the addition of ?3,29,71,035/- under section 68 of the IT Act without incriminating material found during the search.

Detailed Analysis:

1. Deletion of Addition of Unexplained Cash Credit:
The revenue challenged the deletion of an addition of ?3,28,07,000/- received as share application money, share premium, and share capital, arguing that it was unexplained cash credit. The assessee contended that no incriminating material was found during the search to justify this addition. The Tribunal noted that the original assessment for A.Y. 2004-05 had attained finality and was not pending at the time of search. The addition was based on records already disclosed in the balance sheets, and there was no evidence found during the search to indicate that the share application money was non-genuine. The Tribunal relied on the Delhi High Court’s decision in CIT vs. Kabul Chawala, which held that in the absence of incriminating material, no addition can be made in assessments that have attained finality.

2. Deletion of Addition of Commission Paid for Accommodation Entry:
The revenue also challenged the deletion of ?1,64,035/- being 0.5% of the amount paid as commission for accommodation entry. The Tribunal found that the Assessing Officer had made this addition on an ad hoc basis without any material or evidence found during the search. The Tribunal reiterated that additions in reassessment under section 153A must be based on incriminating material found during the search, which was not the case here.

3. Legal Validity of the Addition under Section 68:
The assessee raised a cross-objection challenging the addition of ?3,29,71,035/- under section 68 of the IT Act, arguing that it was not based on any incriminating material found during the search. The Tribunal examined the panchnama and statements recorded during the search and confirmed that no material or evidence was found relating to the share application money for A.Y. 2004-05. The Tribunal referred to the principle laid down by the Delhi High Court in Kabul Chawala, which mandates that additions in reassessments under section 153A should be based on incriminating material found during the search. The Tribunal concluded that since no such material was found, the addition was beyond the scope of section 153A and directed its deletion.

Conclusion:
The Tribunal allowed the assessee’s cross-objection, deleting the entire addition made by the Assessing Officer on the ground that it was beyond the scope of assessment under section 153A. Consequently, the revenue’s appeal was dismissed as infructuous and purely academic. The Tribunal’s decision emphasized the requirement of incriminating material for making additions in reassessments under section 153A, following the legal precedent set by the Delhi High Court in Kabul Chawala and other related judgments.