2018 (1) TMI 1038 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - additions made without the incriminating material - Held that - As per the information available on record from the assessment order as well as the Ld.CIT(A) order, the addition was not made on the basis of any incriminating material but on the basis of the returns already filed. In this case, the return of income was filed on 31.03.2006 and the time limit for issue of notice u/s 143(2) has already been expired on 31.03.2007. Now it is settled issue that in search assessments, the addition cannot be made without the incriminating material in completed assessments. In the case of the assessee, there is no incriminating material found during the course of search on the issues on which the additions were made. - Decided in favour of assessee

Issues Involved:
1. Addition of ?23,90,000 as unexplained cash deposits.
2. Addition of ?62,83,906 as unexplained gifts.
3. Addition of ?1,72,05,000 as unexplained redeposit of cash.
4. Addition of ?10,72,500 as interest income not admitted.

Issue-wise Detailed Analysis:

1. Addition of ?23,90,000 as unexplained cash deposits:
The assessee argued that the addition of ?23,90,000 was beyond the scope of additions permissible under section 143(3) read with section 153A of the Income Tax Act, 1961, as it was not based on any incriminating material found during the search but on information already available in the regular return of income. The Tribunal agreed with the assessee, citing precedents that additions in search assessments cannot be made without incriminating material for completed assessments. The Tribunal deleted the addition, holding that the Assessing Officer (A.O.) had no jurisdiction to make such additions without incriminating material.

2. Addition of ?62,83,906 as unexplained gifts:
The A.O. treated the gifts received from the assessee's son as unexplained cash credits under section 68, questioning the identity, genuineness, and creditworthiness of the donor. The assessee argued that the gifts were disclosed in the regular return of income and supported by evidence. The Tribunal, following its earlier decision in a similar case, held that such gifts should not be doubted, especially when transactions are overseas and the donor's financial standing is evident. The Tribunal deleted the addition, emphasizing that without incriminating material found during the search, the A.O. had no jurisdiction to make such additions.

3. Addition of ?1,72,05,000 as unexplained redeposit of cash:
The A.O. added ?1,72,05,000, questioning the source of redeposit of cash initially withdrawn for purchasing agricultural land. The assessee contended that the transaction was recorded in the books of First Tek Pvt. Ltd., and no incriminating material was found during the search. The Tribunal, following its earlier decision, held that additions in completed assessments without incriminating material are unsustainable. The Tribunal deleted the addition, agreeing with the assessee that the source of redeposit was adequately explained and recorded in the books of accounts.

4. Addition of ?10,72,500 as interest income not admitted:
The A.O. added ?10,72,500 as interest income based on promissory notes found during the search, which the assessee had not admitted. The assessee did not press this ground during the appeal hearing. Consequently, the Tribunal dismissed the appeal on this issue as withdrawn.

Conclusion:
The Tribunal allowed the appeals of the assessee for the assessment years 2005-06 and 2007-08, deleting the additions made by the A.O. for unexplained cash deposits, gifts, and redeposit of cash. The Tribunal dismissed the appeal for the assessment year 2008-09 regarding the interest income, as the assessee did not press the issue. The revenue's appeals were dismissed, upholding the deletions made by the CIT(A). The Tribunal's decisions were based on the principle that additions in search assessments must be supported by incriminating material found during the search, especially for completed assessments.

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