2018 (10) TMI 181 - AT - Income Tax

Additions in the search assessment u/s 153A - incriminating material found during the course of search - reopening of assessment - Held that - In respect of abated assessments (i.e pending proceedings on the date of search) fresh assessments are to be framed by the AO u/s 153A which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. In respect of unabated assessments, the legislature had conferred powers on the AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. This would be the correct understanding of the provisions of section 153A as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A would become redundant and would lose its relevance. Hence the arguments advanced by the DR in this regard deserves to be dismissed. We hold that the assessment framed u/s 143(1) for the Asst Year 2012-13, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share application money and share premium u/s 68 is hereby directed to be deleted. It is not in dispute that there was absolutely no incriminating material found during the course of search in the instant case with regard to the issue of share capital, share premium and the AO had only tried to explain the various layers through which the monies ultimately reached the assessee company. The other addition of commission is only consequential to the first addition. Since the issue is addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the addition u/s 68 for the Asst Year 2012-13 and the commission of ₹ 72,500/-. Accordingly the grounds raised by the revenue in this regard are dismissed.

Summary

Issues Involved:
1. Whether the deletion of addition towards share application money of ?1,45,00,000/- by the CIT(A) was justified for lack of incriminating materials found during the search.
2. Whether the deletion of addition of ?72,500/- on account of commission for accommodation entries by the CIT(A) was justified for lack of incriminating materials found during the search.

Issue-Wise Detailed Analysis:

1. Deletion of Addition towards Share Application Money:
The assessee, a company incorporated on 15.9.2011, filed its return of income for the Assessment Year (AY) 2012-13, declaring a total loss of ?29/-. A search and seizure operation was conducted on 7.11.2013, and a notice under section 153A of the Income Tax Act, 1961 was issued. The assessee reiterated the declared loss in response. The assessee argued that since the original assessment was concluded, no addition could be made without incriminating material found during the search. The Assessing Officer (AO) added ?1,45,00,000/- towards share application money under section 68 of the Act, asserting that the assessments under section 153A could be framed irrespective of incriminating materials. The CIT(A) deleted the addition, observing no incriminating material was found during the search. The Tribunal upheld this view, referencing multiple judicial precedents, including the Delhi High Court in CIT vs Kabul Chawla and the Calcutta High Court in CIT vs Veerprabhu Marketing Ltd, which established that in the absence of incriminating material, concluded assessments should not be disturbed.

2. Deletion of Addition on Account of Commission for Accommodation Entries:
The AO also added ?72,500/- towards commission paid for accommodation entries, linked to the alleged unaccounted income from share capital. The CIT(A) deleted this addition as well, citing the lack of incriminating materials. The Tribunal, aligning with the CIT(A)'s reasoning, noted that the commission addition was consequential to the primary addition of share application money. Since the primary addition was deleted due to the absence of incriminating material, the consequential addition of commission was also not sustainable.

Conclusion:
The Tribunal dismissed the revenue's appeal, emphasizing that no incriminating material was found during the search to justify the additions made by the AO. The assessment for AY 2012-13, being a concluded assessment, could not be disturbed without such material. The Tribunal's decision was grounded in established judicial principles and precedents, ensuring that the additions made by the AO were not upheld in the absence of incriminating evidence.