2021 (3) TMI 315 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - HELD THAT - As the undisputed fact is that the additions made in this order passed u/s 153A r.w.s. 143(3) of the Act. are not based on any incriminating material found during search and as the assessment for the Assessment Year 2011-12 has not abated, we delete the additions by the Assessing Officer applying the principles laid down in M/s. Salasar Stock Broking Ltd. 2016 (8) TMI 1131 - CALCUTTA HIGH COURT on this issue. Even otherwise, on merits all the share applicant companies have been assessed to tax by the Income Tax Department and their assessment orders are passed u/s. 143(3) of the Act. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Legality of the order passed by the CIT(A).
2. Consideration of submissions and evidence by CIT(A).
3. Validity of the assessment order under the influence of higher authorities.
4. Assessment of share capital and share premium as unexplained cash credit.
5. Compliance with notice under Section 131 by the assessee.
6. Admissibility of additional grounds of appeal.
7. Requirement of incriminating material for additions under Section 153A.
8. Merits of the evidence provided for share application money.

Detailed Analysis:

1. Legality of the Order Passed by the CIT(A):
The assessee contended that the order of the CIT(A) was "arbitrary, illegal and bad in law." The Tribunal admitted the additional grounds of appeal, which were legal in nature and did not require further verification of facts, following the judgment of the Supreme Court in NTPC Ltd. vs. CIT.

2. Consideration of Submissions and Evidence by CIT(A):
The assessee argued that the CIT(A) dismissed the appeal summarily without considering the submissions and evidence on record. The Tribunal found that the additional grounds raised by the assessee were legal and admitted them, emphasizing that all related facts were on record.

3. Validity of the Assessment Order Under the Influence of Higher Authorities:
The assessee claimed that the assessment order was influenced by higher authorities and thus null and void. The Tribunal did not specifically address this issue separately but focused on the broader legal context and the requirement for incriminating material.

4. Assessment of Share Capital and Share Premium as Unexplained Cash Credit:
The Assessing Officer (AO) added ?60,00,000/- under Section 68 of the Act, treating the share application money and share premium from four companies as unexplained cash credits. The AO held that these companies were paper entities and the creditworthiness and genuineness of the transactions were not proved. The Tribunal, however, noted that the assessments of these share applicant companies were completed under Section 143(3) of the Act, thereby proving their identity.

5. Compliance with Notice Under Section 131 by the Assessee:
The assessee argued that they had complied with the notice under Section 131, submitting all relevant details and evidence to prove the identity, genuineness, and creditworthiness of the transactions. The Tribunal found no incriminating material during the search that could justify the additions made by the AO.

6. Admissibility of Additional Grounds of Appeal:
The Tribunal admitted the additional grounds of appeal, which were legal in nature, following the Supreme Court judgment in NTPC Ltd. vs. CIT. The Tribunal emphasized that all facts related to these grounds were on record.

7. Requirement of Incriminating Material for Additions Under Section 153A:
The Tribunal held that no incriminating material was found during the search, which is a prerequisite for making additions under Section 153A for an assessment year that has not abated. The Tribunal cited several judgments, including those of the Calcutta High Court and the Delhi High Court, which supported the view that additions under Section 153A require incriminating material found during the search.

8. Merits of the Evidence Provided for Share Application Money:
On merits, the Tribunal noted that all necessary information and documents to prove the identity, capacity, and genuineness of the share applicant companies were provided. The Tribunal referred to several cases where it was held that no addition could be made in the hands of the assessee company if the assessments of the share applicant companies were completed under Section 143(3) of the Act.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the additions made under Section 153A were not based on any incriminating material found during the search. The Tribunal emphasized that the assessment for the Assessment Year 2011-12 had not abated, and thus, no addition could be made without incriminating material. The Tribunal also noted that the share applicant companies were assessed to tax under Section 143(3), proving their identity. The appeal was allowed on legal grounds, making the adjudication on merits an academic exercise.