2019 (10) TMI 913 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 as unexplained cash credits - HELD THAT - Since the assessment for the year under consideration was not pending as on the date of search, there was no abatement and the addition made by the Assessing Officer in the unabated assessment completed under section 153A on account of share capital and share premium amount by treating the same as unexplained cash credit was not sustainable as the same was not made on the basis of any incriminating material found during the course of search. We accordingly uphold the impugned order of the ld. CIT(Appeals) deleting the said addition made by the Assessing Officer and dismiss this appeal of the Revenue. See M/s. Shantinath Financial Services Ltd. 2019 (10) TMI 878 - ITAT KOLKATA

Issues Involved:
1. Jurisdiction of the AO under section 153A/143(3) to make additions in absence of incriminating material.
2. Validity of additions under section 68 for share capital and share premium without incriminating evidence.
3. Interpretation of legal provisions and judicial precedents concerning assessments under section 153A.

Issue-wise Detailed Analysis:

1. Jurisdiction of the AO under section 153A/143(3) to make additions in absence of incriminating material:
The core issue was whether the Assessing Officer (AO) had jurisdiction to make additions under section 153A/143(3) without any incriminating material found during the search. The Tribunal noted that the scope of assessment under section 153A is limited to undisclosed income based on incriminating material found during the search for completed assessments. The Tribunal cited various judicial precedents, including the Hon’ble Calcutta High Court's decisions in the cases of Salasar Stock Broking Limited and Veerprabhu Marketing Limited, which consistently held that additions in search assessments must be based on incriminating material. The Tribunal upheld the CIT(A)'s decision that the AO lacked jurisdiction to make the additions as no incriminating material was found during the search.

2. Validity of additions under section 68 for share capital and share premium without incriminating evidence:
The AO had treated the share capital and share premium received by the assessee as unexplained cash credits under section 68, as the assessee failed to establish the identity and capacity of the share subscriber companies. However, the CIT(A) deleted these additions on the ground that they were not based on any incriminating material found during the search. The Tribunal supported this view, emphasizing that the AO’s additions were not justified as they were not based on any incriminating evidence. The Tribunal referred to several judgments, including those from the Delhi High Court in the case of Kabul Chawla, which reiterated that no additions could be made in the absence of incriminating material.

3. Interpretation of legal provisions and judicial precedents concerning assessments under section 153A:
The Tribunal analyzed the legal position and judicial precedents to determine the scope of assessments under section 153A. It categorized assessments into completed and pending/abated assessments, explaining that for completed assessments, additions can only be made based on incriminating material found during the search. The Tribunal noted that the Hon’ble Calcutta High Court had consistently taken a view in favor of the assessee, requiring incriminating material for making additions under section 153A. The Tribunal also considered contrary views from other judicial pronouncements but chose to follow the consistent view of the jurisdictional High Court.

Conclusion:
The Tribunal concluded that since no incriminating material was found during the search, the AO's additions under section 68 were not sustainable. It upheld the CIT(A)'s order deleting the additions and dismissed the Revenue's appeals. Consequently, the cross-objections filed by the assessee became infructuous and were also dismissed. The Tribunal's decision was pronounced in the open court on 16th October 2019.

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