2020 (4) TMI 822 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - incriminating material found in search or not ?- HELD THAT - Assessee has already filed original return of income accompanied by P L A/c, balance-sheet. In the original return of income, the assessee has disclosed the receipt of ₹ 7 lakhs from Shri Praveen Kumar as per balance-sheet. Copy of the ledger account shows that it is already disclosed in the books of account of the assessee. Therefore, receipt of ₹ 7 lakhs from Shri Praveen Kumar as advance was already disclosed in the original return of income. Further, on the date of search, the return was not pending as same was completed because no proceedings were initiated against the assessee for passing the original assessment. Further the original assessment order were passed in the Group cases in which the Ld. CIT, Central-(2), New Delhi, has invoked jurisdiction under section 264 of the I.T. Act, 1961 and all the matters were restored to the file of A.O. for passing the Order afresh, as per Law. Thus, all the facts with regard to receipt of ₹ 7 lakhs from Shri Praveen Kumar was disclosed to the Revenue Department in the original return of income. therefore, mere recovery of the Agreement to Sell, through which, advance of ₹ 7 lakhs was received by assessee from Shri Praveen Kumar could not be treated as incriminating material found in search. Thus, there is no recovery of any incriminating material during the course of search against the assessee so as to make any of the additions against the assessee. The issue is, therefore, covered by Judgments of Hon ble jurisdictional High Court in the cases of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT . Identical issue have considered and decided in the Group cases of M/s. Alankar Saphire Developers and following the reasons for decision in the same case of the Group, we set aside the Orders of the authorities below and delete all the additions. The additional ground is, therefore, allowed - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 153A of the Income Tax Act.
2. Condonation of delay in filing the appeal.
3. Admission of additional evidence under Rule 46A.
4. Additions under Section 68 of the Income Tax Act.
5. Disallowance of administrative and general expenses.

Detailed Analysis:

1. Jurisdiction under Section 153A of the Income Tax Act:
The primary issue was whether the Assessing Officer (A.O.) could proceed under Section 153A when no incriminating documents or assets were found during the search. The Tribunal noted that the original returns were filed, and assessments were completed before the search. The A.O. made additions based on items already disclosed in the original returns, which were not supported by any incriminating material found during the search. The Tribunal relied on the judgment of the Hon’ble Delhi High Court in CIT vs. Kabul Chawla, which held that completed assessments could only be interfered with under Section 153A based on incriminating material unearthed during the search. The Tribunal concluded that no additions could be made under Section 153A in the absence of incriminating material, thus favoring the assessee.

2. Condonation of Delay in Filing the Appeal:
The Tribunal upheld the Ld. CIT(A)’s decision to condone the 20-day delay in filing the appeal. The assessee explained that the delay was due to the pressure of completing multiple assessments and pending writ petitions. The Ld. CIT(A) found the reasons sufficient and relied on the Supreme Court judgments in Smt. Prabha vs. Ramprakash Kalra and Vedabhai alias Vyjayantibhai Baburao Patil vs. Santaram Baburao Patil, which advocate a pragmatic approach in condoning delays. The Tribunal agreed with this reasoning and dismissed the Revenue’s grounds against the condonation of delay.

3. Admission of Additional Evidence under Rule 46A:
The Tribunal found no merit in the Revenue’s contention that the Ld. CIT(A) admitted additional evidence under Rule 46A. It was noted that the Ld. CIT(A) confirmed the substantive addition under Section 68 and only deleted a minor addition related to administrative expenses based on the material already on record. The Tribunal held that the issue of jurisdiction under Section 153A is a legal matter that can be raised at any time, and thus, there was no violation of Rule 46A.

4. Additions under Section 68 of the Income Tax Act:
The Ld. CIT(A) confirmed the addition of ?2,13,70,020/- under Section 68 on merits, as the assessee failed to discharge the onus of proving the identity, creditworthiness, and genuineness of the share capital transactions. However, the Tribunal did not delve into the merits of this addition, as the jurisdictional issue under Section 153A was decided in favor of the assessee, making the discussion on merits academic.

5. Disallowance of Administrative and General Expenses:
The A.O. disallowed ?82,685/- claimed as administrative and general expenses due to the assessee’s failure to furnish evidence. The Ld. CIT(A) deleted this addition, finding that the details of these expenses were referred to in the assessment and proceedings under Section 264. The Tribunal upheld this deletion, noting that the Ld. CIT(A) based the decision on material already on record.

Conclusion:
The Tribunal dismissed all the Departmental Appeals and allowed the appeals and cross-objections of the assessee. The key takeaway is the emphasis on the necessity of incriminating material for making additions under Section 153A when original assessments are completed, as per the binding precedent set by the Hon’ble Delhi High Court. The Tribunal also upheld the pragmatic approach in condoning delays and found no violation of Rule 46A in the admission of evidence.

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