2021 (11) TMI 134 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Unexplained receipt of share application/share capital - HELD THAT - Additions/disallowances made by the AO are clearly beyond the scope of authority vested under s.153A of the Act without discharging the burden to show presence of any incriminating material or evidence deduced as a result of search in so far as completed assessments are concerned. Additions made in assessments framed under s.153A of the Act in respect of captioned assessee pertaining to AYs. 2006-07 2009-10 are thus required to be struck down on this score itself. However, the assessments/re- assessments pending on the date of search i.e. AY 2010-11 AY 2011-12 in question which stood abated by operation of law will continue to be governed by ordinary powers of assessment under s.153A of the Act in accordance with law. Addition u/s 68 - The money has been taken from a group co. of a very sound financial standing, which was also returned without subscription. In contrast, the AO has failed to bring any positive evidence against the assessee for assailing the bonafides of share application money received from a sister concern holding a very high net worth. A reference was also made to PCIT vs. Himachal Fibers Ltd 2018 (8) TMI 873 - SC ORDER to submit that where the identity of share applicant was fully revealed and the AO did not conduct any enquiry thereon, he was not justified in resting his conclusions on surmises. It is thus the case of assessee that the Revenue is neither justified on facts nor on the touchstone of law to embark upon the impugned additions under s.68. After a detailed and objective scrutiny of factual legal position, the CIT(A) has set aside and reversed the additions carried out without showing any iota of incriminating material to support the allegation of accommodation entries in the abated as well as unabated search assessments. The share application money was found to be returned. The action of CIT(A) is in consonance with the binding precedent of Jurisdictional High Court. Hence, we see no reason to depart from the rationale of the decision of the CIT(A) on reversal of additions under s.68 of the Act pertaining to A.Y. 2006-07; 2009-10; 2010-11 2011-12 in question. Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of additions under Section 68 of the Income Tax Act in respect of share application money.
2. Jurisdiction under Section 153A of the Income Tax Act for making additions without incriminating material in concluded assessments.
3. Evaluation of evidence and documentary submissions by the assessee regarding share application money.

Detailed Analysis:

1. Legitimacy of Additions under Section 68:
The Revenue challenged the relief granted by the CIT(A) concerning additions made under Section 68 of the Income Tax Act for various assessment years. The CIT(A) reversed these additions, stating that the assessee had satisfactorily explained the nature and source of the share application money. The CIT(A) noted that the assessee provided detailed documentary evidence, including PAN, addresses, bank statements, and audited financial statements of the subscribers. The CIT(A) found that the share application money was received through banking channels and that the subscribers had sufficient net worth to justify the investments. Additionally, the CIT(A) observed that the share application money was refunded in subsequent years, further supporting the genuineness of the transactions.

2. Jurisdiction under Section 153A:
The assessee raised a legal objection regarding the jurisdiction of the AO under Section 153A to make additions unrelated to any incriminating material found during the search. The CIT(A) dismissed this objection, but the Tribunal found merit in the assessee's contention. The Tribunal noted that the scope of assessment under Section 153A is limited to incriminating evidence found during the search for concluded assessments. The Tribunal referred to several judicial precedents, including decisions from the Delhi, Gujarat, and Bombay High Courts, which held that additions in concluded assessments under Section 153A are permissible only if they are based on incriminating material found during the search.

3. Evaluation of Evidence and Documentary Submissions:
The CIT(A) and the Tribunal extensively evaluated the evidence and documentary submissions provided by the assessee. The CIT(A) observed that the AO did not provide any basis for the allegations regarding the non-maintenance of statutory records. The Tribunal noted that the AO did not conduct any field inquiries or bring any material evidence to discredit the documentary evidence provided by the assessee. The Tribunal also highlighted that the share application money was received from a group company with a high financial net worth and was refunded in subsequent years. The Tribunal found that the primary onus under Section 68 was satisfactorily discharged by the assessee, and the AO's adverse inference was based on mere suspicion and conjecture.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to reverse the additions made under Section 68 for the assessment years in question, finding that the assessee had satisfactorily explained the nature and source of the share application money. The Tribunal also allowed the assessee's cross objections regarding the jurisdiction under Section 153A, holding that additions in concluded assessments are not permissible without incriminating material found during the search. Consequently, the Revenue's appeals were dismissed, and the assessee's cross objections were allowed.