2019 (12) TMI 199 - AT - Income Tax

Assessment u/s 153C - whether no incriminating material was found in respect of the assessee during the course of search - HELD THAT - Incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of the assessee, leave alone the question of any incriminating material for the year under appeal. Therefore, in our considered opinion, the action of the AO is based upon conjectures and surmises and hence, the addition made is not sustainable in the eyes of law. The issue in dispute is now no longer res integra in view of the decision case of Commissioner of Income Tax vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT In the present appeal before us, it is not in dispute that the no incriminating material was found in respect of the assessee during the course of search as is evident from the Assessment Order itself. During the course of hearing before us also, the Department could not negate this factual finding of the Ld. CIT (A) - CIT (A) in deleting the addition in dispute and dismiss the Revenue s appeal

Summary

Issues:
- Appeal by the department against the order of Ld. Commissioner of Income Tax (Appeals)-24, New Delhi pertaining to the assessment year 2009-10.
- Addition of ?1,11,00,000/- u/s 68 of the Income Tax Act on account of alleged bogus share capital.
- Challenge by the department against the deletion of the addition by Ld. CIT (A) based on the absence of incriminating material during the search.
- Interpretation of the legal position under Section 153A of the Income Tax Act, 1961 regarding assessments post a search operation.

Analysis:
1. The department appealed against the order of the Ld. CIT (A) concerning the assessment year 2009-10. The case involved the addition of ?1,11,00,000/- under section 68 of the Income Tax Act due to alleged bogus share capital.
2. The Assessing Officer (AO) made the addition during assessment proceedings u/s 153A as the required documents regarding creditworthiness, genuineness, and identity of investors were not provided. The Ld. CIT (A) deleted the addition based on legal grounds citing the absence of incriminating material during the search, following the judgment in CIT vs. Kabul Chawla.
3. The department challenged the action of Ld. CIT (A) in deleting the addition, arguing that the assessment should not be limited to incriminating documents only. However, the Tribunal found that the additions made by the AO lacked a basis in incriminating material, rendering them unsustainable in law.
4. The Tribunal referenced the legal position under Section 153A of the Income Tax Act as explained in the judgment of Commissioner of Income Tax vs. Kabul Chawla. It highlighted that assessments post a search operation should be based on seized material or related information, emphasizing the necessity of incriminating material for making additions.
5. Since no incriminating material was found during the search concerning the assessee, the Tribunal upheld the action of Ld. CIT (A) in deleting the addition. The Tribunal dismissed the department's appeal based on the factual findings and the legal interpretation provided by the judgment in the case of Kabul Chawla.
6. Ultimately, the Tribunal pronounced the order on 30th September 2019, dismissing the department's appeal based on the absence of incriminating material and the legal principles outlined in the judgment of Kabul Chawla.