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2019 (12) TMI 37 - AT - Income TaxAssessment u/s 153A - Unexplained cash credit u/s 68 - HELD THAT - Addition treating the share application money as unexplained cash credit u/s 68 was made in the present case by the AO in the assessment completed u/s 153A for A.Y. 2010-11 on the basis of bank account found during the course of search and since the said bank account as well as transactions reflected therein were duly disclosed by the assessee company in its return of income originally filed for A.Y. 2010-11, we find ourselves in agreement with the contention of the assessee that the same cannot be treated as incriminating material found during the course of search. Addition u/s 68 and confirmed by the CIT(A) thus was not based on any incriminating material found during the course of search and the same, in our opinion, is not sustainable being outside the scope of section 153A. Disallowance made by the AO and confirmed by the CIT(A) u/s 14A read with Rule 8D in both the years under consideration is also not sustainable as the same is not based on any incriminating material found during the course of search. We, therefore, delete the said additions made in both the years under consideration and allow these appeals of the assessee.
Issues Involved:
1. Addition of share application money as unexplained cash credit under Section 68. 2. Disallowance under Section 14A read with Rule 8D. Issue-wise Detailed Analysis: 1. Addition of Share Application Money as Unexplained Cash Credit under Section 68: The assessee, a company belonging to the Bhalotia Group, filed its return of income for A.Y. 2010-11 and 2011-12. A search under Section 132 was conducted on the Bhalotia Group, including the assessee, resulting in the issuance of a notice under Section 153A. The assessee's bank account showed receipt of share application money amounting to ?3,15,00,000/-. The AO issued notices under Section 131 to the concerned share applicants, which remained unserved or uncomplied. The assessee provided explanations and documents, but the AO found them unacceptable for several reasons, including lack of business activity and high premium on shares. Consequently, the AO treated the share application money as unexplained cash credits under Section 68, adding ?3,15,00,000/- to the assessee's total income. The assessee challenged the addition, arguing that no incriminating material was found during the search, and the bank account was already disclosed in its books. The Tribunal agreed with the assessee, citing precedents from the Delhi High Court and Kolkata High Court, which held that in the absence of incriminating material, additions under Section 153A are not sustainable. The Tribunal concluded that the bank account did not constitute incriminating material and deleted the addition of ?3.15 crores. 2. Disallowance under Section 14A read with Rule 8D: For A.Y. 2010-11, the assessee claimed exempt dividend income of ?17,90,211/- but offered disallowance under Section 14A only to the extent of ?1,41,111/-. The AO applied Rule 8D and worked out the disallowance at ?2,15,941/-, making a further disallowance of ?74,830/-. Similarly, for A.Y. 2011-12, the AO made an addition of ?2,12,571/- under Section 14A by applying Rule 8D. The assessee appealed against these disallowances, arguing that no incriminating material was found during the search to justify these additions. The Tribunal considered the submissions and found that the disallowances under Section 14A read with Rule 8D were not based on any incriminating material found during the search. Citing the same judicial precedents, the Tribunal held that such additions are not sustainable in the absence of incriminating material and deleted the disallowances for both years under consideration. Conclusion: The Tribunal allowed the appeals of the assessee, deleting the additions made under Section 68 for share application money and the disallowances under Section 14A read with Rule 8D, as they were not based on any incriminating material found during the search. The judgment emphasized the limited scope of assessments under Section 153A in cases where no incriminating material is found during the search.
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