2019 (9) TMI 380 - AT - Income Tax

Addition u/s 68 - unexplained share capital - assessee s investors / subscribers, Mr. C.N.Lyngdoh is an exempt assessee u/s 10(36) - whether assessee has not filed any documentary evidence as per the Assessing Officer as well. - HELD THAT - No merit in Revenue s instant arguments. It has come on record that this assessee before us had filed all the details of the exempt share applicant during the course of assessment. The Assessing Officer had not issued any process either sec. 131 or sec. 133(6) of the Act to assessee s investor(s). We therefore quote hon ble apex court s landmark decision in CIT vs. Orissa Corporation Pvt. Ltd . 1986 (3) TMI 3 - SUPREME COURT that an assessee can only file all of its supportive documents in favour of its claim proving genuineness and creditworthiness of the investor parties. We further reiterate that there is also no denial to the CIT(A) s clinching finding that the department has itself accepted all other transactions in Mr. Lyngdoh s case. Since the assessee before us has already discharged its onus before the Assessing Officer. The mere fact that its investor is an exempt assessee u/s 10(36) does not give the impugned share application money the colour of unexplained cash credits - confirm the CIT(A) s action deleting the impugned unexplained share application money - Decided in favour of assessee Assessment u/s 153A - Share capitals share premium and share application money addition - HELD THAT - Purpose of the impugned sec. 153A proceedings is to assess total income of the searched taxpayer rather than that based on incriminating material only. Hon ble jurisdictional high court has admittedly not adjudicated upon the instant legal issue as informed by the learned senior counsel as well as the department. We therefore quote hon ble apex court s decision in CIT vs. M/s Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT that the view favouring the assessee / taxpayer has to be adopted in such a backdrop involving conflicting judicial opinions of various hon'ble high courts and accordingly hold that the CIT(A) has rightly quashed the impugned assessment since not based on any incriminating material found or seized during the curse of search. - Decided against revenue Denial of telescoping benefit to the assessee - HELD THAT - No substance in Revenue s instant grievance as the purpose of telescoping is to avoid double addition qua the very income in the hands of taxpayer as held by the hon ble apex court s landmark decision in Anantharam Veerasinghaiah and Co. vs. CIT 1980 (4) TMI 2 - SUPREME COURT ). Coupled with this, the assessee s disclosure of its twin undisclosed income(s) stands accepted by the department itself. We conclude in these facts denied of the impugned telescoping benefit to the assessee would amount to a double addition. More so when its book treatment thereof under business income head has attained finality. - Decided against revenue

Summary

Issues Involved:
1. Withdrawal of appeals by the first assessee.
2. Deletion of Section 68 addition of share capital.
3. Addition of share capital, share premium, and share application money under Section 153A.
4. Granting of telescoping benefit regarding income disclosed during the course of search.

Issue-wise Detailed Analysis:

1. Withdrawal of Appeals by the First Assessee:
The first assessee, M/s SMS Smelters Ltd., decided to withdraw its four appeals (ITA Nos. 93-96/Gau/2017). The Revenue did not object to this withdrawal. Consequently, these appeals were dismissed as withdrawn.

2. Deletion of Section 68 Addition of Share Capital:
For the assessment year 2006-07, the CIT(A) deleted the addition of ?1,02,50,000/- made by the Assessing Officer under Section 68 of the Income Tax Act. The CIT(A) reasoned that the addition was beyond the scope of Section 147 as the reopening was based on transport subsidy, not share application money. The assessee provided account confirmation from Mr. C.N. Lyngdoh, a coal trader with regular transactions with the assessee, and all transactions were through cheques. The Assessing Officer had not issued any process under Sections 131 or 133(6) to verify the investor's details. The tribunal found no merit in the Revenue's arguments and upheld the CIT(A)'s deletion of the addition, citing the assessee's compliance with proving the genuineness and creditworthiness of the investor.

3. Addition of Share Capital, Share Premium, and Share Application Money under Section 153A:
For the assessment year 2007-08, the CIT(A) deleted additions of ?6,69,71,870/- (share capital), ?11,95,78,050/- (share premium), and ?7,24,50,080/- (share application money). The CIT(A) held that in non-abated assessments, additions should be based on incriminating material found during the search. The CIT(A) noted that no such material was found, and the Assessing Officer did not object to the admission of additional evidence. The tribunal upheld the CIT(A)'s decision, referencing various high court rulings supporting the view that completed assessments can only be interfered with based on incriminating material found during the search.

4. Granting of Telescoping Benefit Regarding Income Disclosed During the Course of Search:
For the assessment years 2012-13 and 2013-14, the CIT(A) granted telescoping benefit to the assessee by deleting additions of ?1,34,40,000/- to the extent of ?76,00,000/- in the former year and ?89,60,000/- in the latter year. The CIT(A) reasoned that the income disclosed during the search should be available to explain other additions. The tribunal found no substance in the Revenue's grievance, noting that denying the telescoping benefit would result in double addition. The tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's decision in Anantharam Veerasinghaiah and Co. vs. CIT, which supports avoiding double addition.

Conclusion:
- The first assessee's four appeals (ITA Nos. 93-96/Gau/2017) were dismissed as withdrawn.
- The Revenue's four appeals (ITA Nos. 91, 69, 76, and 77/Gau/2017) were dismissed.
- The latter assessee's two appeals (ITA Nos. 39-40/Gau/2017) were allowed, following the same reasoning as detailed discussions for the first assessee.
- The tribunal's order was pronounced on 06/09/2019.