2019 (1) TMI 696 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - absence of incriminating documents - Held that - The only ground of the Assessing Officer is that these are accommodation entries, however the Assessing Officer has not pointed out any discrepancy in the documentary evidence filed by the assessee either in the bank account statement or in the financial statement of the loan creditors. Once the loan creditors have accepted the transactions and which is also established from the relevant record then the said documentary evidence cannot be rejected merely on the basis of the statement recorded U/s 132(4) of the Act, which is also not an admission on the part of the assessee. Statement recorded U/s 132(4) of the Act cannot be considered as an incriminating material found and seized during the search. Accordingly, in view of documentary evidence produced by the assessee which established the fact of transaction of loan taken by the assessee, their identity, capacity and genuineness being routed through the banking channel at the time of receipt as well as repayment of the loan alongwith payment of interest which was subjected to TDS, we do not find any error or illegality in the finding of the CIT(A) qua this issue, hence, we uphold the same. - Decided in favour of assessee.

Issues Involved:
1. Validity of Additions Without Incriminating Documents Under Section 153A.
2. Deletion of Addition of ?4,82,00,000 Under Section 68 of the Income Tax Act.

Detailed Analysis:

1. Validity of Additions Without Incriminating Documents Under Section 153A:
The primary issue is whether additions can be made under Section 153A in the absence of incriminating documents found during the search. The assessee's original return was filed on 11/10/2010, and the assessment was completed under Section 143(1), which was not pending as of the search date on 03/04/2013. The Assessing Officer (AO) based the reassessment solely on the statement recorded under Section 132(4) during the search, without any incriminating material.

The assessee argued that since no incriminating material was found during the search, no addition could be made under Section 153A. This was supported by multiple judicial precedents, including the Delhi High Court's ruling in CIT vs. Kabul Chawla and Pr.CIT vs. Meeta Gutgutia, which held that completed assessments could only be disturbed based on incriminating material found during the search. The Rajasthan High Court in Jai Steel (India) vs. ACIT also supported this view, emphasizing that in the absence of incriminating material, completed assessments should be reiterated.

The Tribunal upheld the CIT(A)'s decision, agreeing that the additions made by the AO were not based on any incriminating material found during the search and were therefore not legally tenable.

2. Deletion of Addition of ?4,82,00,000 Under Section 68 of the Income Tax Act:
The second issue concerns the deletion of the addition of ?4,82,00,000 under Section 68, which pertains to unexplained cash credits. The AO had made this addition based on the statement of the managing partner recorded under Section 132(4), where he initially admitted to receiving accommodation entries. However, this statement was later retracted during post-search investigations.

The assessee provided substantial documentary evidence to establish the identity, creditworthiness, and genuineness of the loan transactions, including confirmations from loan creditors, PAN card copies, ITRs, audit reports, balance sheets, and bank statements. The AO did not find any discrepancies in these documents.

The Tribunal noted that the assessee had discharged its onus by providing sufficient evidence, and the AO failed to bring any contrary material to disprove the documentary evidence. The Tribunal also highlighted that the statement under Section 132(4) alone could not be considered incriminating material, especially when the statement was retracted and clarified during post-search investigations.

The Tribunal upheld the CIT(A)'s decision to delete the addition, emphasizing that the AO's reliance on the statement under Section 132(4) without any corroborative incriminating material was not justified.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming that:
1. Additions under Section 153A cannot be made in the absence of incriminating material found during the search.
2. The deletion of the addition of ?4,82,00,000 under Section 68 was justified as the assessee had provided sufficient evidence to prove the genuineness of the loan transactions, and the AO failed to provide any contrary evidence.

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