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2020 (10) TMI 749 - AT - Income TaxAssessment u/s 153A - Assessee argued absence of any incriminating material found during the course of search - Addition u/s 68 - credit worthiness of the loan creditors/share applicants and genuineness of the transaction - HELD THAT - The requirement that the incriminating material to have the co-relation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently no error having been committed by the ITAT in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the share capital. Therefore, the jurisdictional requirement of Section 153 A of the Act was not satisfied. Additions made under section 153A in the orders passed under section 153/143(3) of the Act are not in accordance with the law - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings under Section 153A in absence of incriminating material. 2. Validity of approval given under Section 153D. 3. Addition on merits concerning unsecured loans and share capital/share premium. Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 153A in Absence of Incriminating Material: The assessee challenged the validity of the assessment proceedings under Section 153A, arguing that no incriminating material was found during the search. The Tribunal noted that the addition made by the AO was not based on any incriminating material found during the search but on post-search inquiries. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. SMC Power Generation Limited, which held that the requirement for incriminating material to correlate with the addition applies to both Section 153A and Section 153C. The Tribunal also cited the Hon'ble Supreme Court decision in CIT vs. Singhad Technical Education Society, which emphasized the necessity of incriminating material for additions under Section 153A. Consequently, the Tribunal held that the additions made under Section 153A were not in accordance with the law and directed the deletion of the additions of ?16,77,983/- for AY 2009-10 and ?30 lakhs for AY 2010-11. 2. Validity of Approval Given Under Section 153D: The assessee argued that the approval given by the JCIT under Section 153D was not in accordance with the law, as it was a conditional approval. The Tribunal examined the approval letter and noted that it directed the AO to ensure the incorporation of seized documents and comments from the appraisal report in the final assessment order. The Tribunal referred to the decision in the case of Rishabh Buildwell P. Ltd., where a similar conditional approval was deemed invalid. However, since the Tribunal allowed the appeal on the legal ground of the absence of incriminating material, it did not adjudicate this issue further. 3. Addition on Merits Concerning Unsecured Loans and Share Capital/Share Premium: The AO made additions due to the assessee's failure to substantiate the creditworthiness of loan creditors and share applicants. The assessee argued that it had discharged its initial onus by filing requisite documents and that the AO did not issue notices under Section 131 or 133(6) to verify the creditors. The Tribunal noted that the AO made the additions based on the low income of the creditors and the failure of the assessee to produce the creditors for examination. However, since the Tribunal allowed the appeal on the ground of absence of incriminating material, it did not adjudicate this issue further. Conclusion: The Tribunal concluded that the additions made under Section 153A were not based on any incriminating material found during the search and, therefore, directed the deletion of the additions for AY 2009-10 and AY 2010-11. The Tribunal upheld the addition of ?37,133/- for AY 2009-10, as the assessee failed to disclose this income in the return filed in response to the notice under Section 153A. The appeals for AY 2009-10 and AY 2010-11 were partly allowed and allowed, respectively.
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