2018 (6) TMI 471 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - incriminating material which seized has to pertain to the assessment years in question - Held that - In the instant case addition of ₹ 11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A - Decided in favour of assessee

Issues Involved:
1. Validity of Assumption of Jurisdiction under Section 153A.
2. Addition under Section 68 for Unexplained Cash Credits.
3. Applicability of Section 56(2)(viib) for Share Premium.
4. Levy of Interest under Sections 234A, 234B, 234C, and 234D.

Detailed Analysis:

1. Validity of Assumption of Jurisdiction under Section 153A:
The primary contention was whether the Assessing Officer (AO) had the jurisdiction to initiate proceedings under Section 153A of the Income Tax Act. The assessee argued that no incriminating material was found during the search, and the additions were based on post-search inquiries and statements recorded under Section 132(4). The Tribunal held that the assessments for the relevant year were not pending at the time of the search and had attained finality. Therefore, in the absence of any incriminating material found during the search, the AO did not have the authority to assume jurisdiction under Section 153A. The Tribunal relied on several judicial precedents, including CIT vs. Kabul Chawla and Pr.CIT vs. Meeta Gutgutia, which held that completed assessments could not be reopened under Section 153A without incriminating material.

2. Addition under Section 68 for Unexplained Cash Credits:
The AO made an addition of ?11.85 crores under Section 68, treating the share capital received by the assessee as unexplained cash credits. The AO concluded that the assessee failed to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted that the AO's findings were based on statements recorded and post-search inquiries, not on any incriminating material found during the search. The Tribunal emphasized that the assessee had provided substantial evidence, including the investor's PAN, address, bank statements, and financials, to substantiate the transactions. Since the investor company was assessed under Section 143(3) without any adverse findings, the Tribunal ruled that the addition under Section 68 was not justified.

3. Applicability of Section 56(2)(viib) for Share Premium:
The CIT(A) invoked Section 56(2)(viib) and Rule 11UA(1)(cb), holding that the share premium received by the assessee was excessive and unjustified. The Tribunal observed that the CIT(A) introduced this new ground without giving the assessee an opportunity to respond. The Tribunal held that the CIT(A) could not sustain an addition based on a new source of income not considered by the AO. Furthermore, the Tribunal noted that the book value of the shares was higher than the share premium charged, negating the applicability of Section 56(2)(viib).

4. Levy of Interest under Sections 234A, 234B, 234C, and 234D:
The Tribunal did not specifically address the levy of interest under Sections 234A, 234B, 234C, and 234D, as the primary grounds of appeal were decided in favor of the assessee, rendering the issue academic.

Conclusion:
The Tribunal concluded that the AO's assumption of jurisdiction under Section 153A was invalid in the absence of incriminating material found during the search. Consequently, the additions made under Section 68 and the invocation of Section 56(2)(viib) were also deemed unsustainable. The appeals filed by the respective assessees were allowed, and the additions made by the AO were deleted.

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