2021 (10) TMI 903 - AT - Income Tax

Assessment u/s 153C - Addition u/s 68 - unexplained cash credits - HELD THAT - It has been well settled in case of CIT Vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT wherein upheld the order of the Tribunal that addition cannot be made for the assessment years for which there are no incriminating documents found during the course of search in the assessments framed u/s 153C. Seized incriminating material has to pertain to the assessment year in question and have co-relation, document-wise, with the assessment year. This requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S. 153A . No addition can be made where the assessment have not abated and were pending at the time of search, no addition can be made without any incriminating material. Thus, the finding by the ld. CIT (A) which is based on various judicial principles and on the facts of the case cannot be tinkered with without any contrary material or rebuttal by the Department, therefore same is confirmed. - Decided against revenue.

Issues Involved:
1. Deletion of addition made under Section 68 of the I.T. Act for unexplained cash credits.
2. Deletion of addition for unexplained expenditure on account of brokerage.
3. Reliance on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court.
4. Interpretation of "total income" under Section 153C/153A.
5. Restrictive interpretation of the scope of assessment under Section 153C/153A.
6. Applicability of the decision of the Hon’ble High Court of Karnataka in the case of Canara Housing Development Company Vs. DCIT.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 for Unexplained Cash Credits:
The Revenue contended that the Ld. CIT(A) erred in directing the A.O. to delete the addition of ?6,56,85,362/- made under Section 68 as unexplained cash credits. The A.O. had made this addition based on the identity, creditworthiness, and genuineness of transactions being unproved. However, the Ld. CIT(A) found that the addition was not based on any incriminating material found during the search and relied on the Delhi High Court's decision in CIT vs. Kabul Chawla, which states that no addition can be made in the absence of incriminating documents if the assessment is not abated.

2. Deletion of Addition for Unexplained Expenditure on Brokerage:
The Revenue also challenged the deletion of ?3,01,250/- as unexplained expenditure on account of brokerage. The A.O. had added this amount considering it as brokerage on alleged bogus share application. The Ld. CIT(A) deleted this addition as well, citing the same reasoning that no incriminating material was found during the search to justify such an addition.

3. Reliance on the Decision in the Case of Sh. Kabul Chawla:
The Revenue argued that the Ld. CIT(A) erred by relying on the decision in the case of Sh. Kabul Chawla, which the department had not accepted and had filed an SLP before the Hon’ble Supreme Court. The Tribunal noted that the Revenue did not contend that any additions were based on incriminating documents found during the search, thus supporting the Ld. CIT(A)'s reliance on the Kabul Chawla case.

4. Interpretation of "Total Income" under Section 153C/153A:
The Ld. CIT(A) concluded that the term "total income" used in Section 153C/153A refers only to undisclosed income discovered from seized/incriminating material. The Revenue argued against this interpretation, suggesting that "total income" should include any income, not just that unearthed during the search. The Tribunal upheld the Ld. CIT(A)'s interpretation, aligning with the jurisdictional High Court's decision in Kabul Chawla.

5. Restrictive Interpretation of the Scope of Assessment under Section 153C/153A:
The Revenue contended that the Ld. CIT(A) adopted a restrictive and pedantic interpretation of the scope of assessment under Section 153C/153A. The Tribunal found that the Ld. CIT(A)'s interpretation was consistent with judicial precedents, particularly the Kabul Chawla case, which limits additions to those based on incriminating material found during the search.

6. Applicability of the Decision of the Hon’ble High Court of Karnataka:
The Revenue cited the Hon’ble High Court of Karnataka's decision in Canara Housing Development Company Vs. DCIT, which held that "total income" includes income unearthed during the search and any other income. The Tribunal noted that the jurisdictional High Court's decision in Kabul Chawla, which restricts additions to those based on incriminating material, takes precedence.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the Ld. CIT(A)'s order to delete the additions made under Section 68 and for unexplained expenditure on brokerage. The Tribunal emphasized that no incriminating material was found during the search to justify the additions, and the case was covered by the jurisdictional High Court's decision in Kabul Chawla. The Tribunal also noted the well-settled law that no addition can be made in the absence of incriminating material when the assessment is not abated.

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