2019 (7) TMI 119 - AT - Income Tax

Assessment u/s 153A - additions u/s 68 - share application money - absence of incriminating material during search - HELD THAT - We find that the assessment for the assessment year 2011-12 was already completed when search action u/s 132 was carried out at the premises of the assessee. No incriminating material found during the search in respect of the addition made by the AO therefore the addition made by the AO in the impugned assessment year is without jurisdiction. Thus the legal ground raised by the assessee is allowed and the assessment order is held as invalid consequent upon the entire addition made therein are directed to be deleted.

Issues Involved:
1. Validity of assessment orders.
2. Deletion of additions under section 68 of the Income-tax Act.
3. Creditworthiness and genuineness of unsecured loans.
4. Opportunity for cross-examination.
5. Interest liability under sections 234A, 234B, 234C, and 234D.

Detailed Analysis:

1. Validity of Assessment Orders:
The assessee argued that the reassessment made by the Assessing Officer (AO) under section 153A was invalid due to the absence of incriminating material found during the search. The Tribunal observed that the original assessment for the year under consideration was already completed, and no incriminating material was found during the search. The Tribunal held that the addition made by the AO was beyond his jurisdiction in the absence of incriminating material found during the search. Consequently, the assessment order was held invalid, and the entire addition made therein was directed to be deleted.

2. Deletion of Additions under Section 68:
The Revenue challenged the deletion of additions made by the AO under section 68 on account of unsecured loans. The Tribunal noted that the assessee had furnished all requisite details and documents, such as PAN, balance-sheet, and confirmation of account, to substantiate the identity, creditworthiness, and genuineness of the lender companies. The Tribunal upheld the deletion of additions by the Commissioner of Income-tax (Appeals) (CIT(A)), observing that the assessee had discharged its burden under section 68 and that the AO had not provided any adverse findings to rebut the evidences furnished by the assessee.

3. Creditworthiness and Genuineness of Unsecured Loans:
The AO had made additions based on the report from the Deputy Director of Income-tax, Kolkata, which suggested that the lender companies were shell companies. The Tribunal noted that the assessee had provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal also observed that the AO had not issued any summons or notices to the lender companies for verification. The Tribunal upheld the CIT(A)'s finding that the assessee had discharged its burden under section 68 and that the addition was unjustified.

4. Opportunity for Cross-Examination:
The assessee contended that the AO had relied on the statements of third parties without providing an opportunity for cross-examination. The Tribunal agreed with the assessee's contention, noting that the statements recorded at the back of the assessee were not shared with the assessee, and no opportunity for cross-examination was provided. Consequently, the Tribunal held that such statements could not be used against the assessee, and the additions based on third-party information were liable to be deleted.

5. Interest Liability under Sections 234A, 234B, 234C, and 234D:
The assessee challenged the interest liability maintained by the CIT(A) under sections 234A, 234B, 234C, and 234D of the Income-tax Act. The Tribunal did not specifically address this issue as it had already held the assessment order invalid and directed the deletion of the entire addition made therein.

Conclusion:
The Tribunal allowed the appeals of the assessee for the assessment year 2011-12, holding the assessment order invalid and directing the deletion of the entire addition made therein. The appeals filed by the Revenue for the assessment years 2014-15 and 2015-16 were dismissed, upholding the deletion of additions made by the CIT(A) under section 68 on account of unsecured loans. The Tribunal affirmed the CIT(A)'s findings that the assessee had discharged its burden under section 68 and that the additions were unjustified in the absence of incriminating material found during the search.

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