2022 (5) TMI 1101 - AT - Income Tax

Assessment u/s 153A - unexplained addition u/s 69 - proof of incriminatory material seized during the search - HELD THAT - In the present case the addition made by the Assessing Officer in the absence of incriminatory material seized during the search, therefore, respectfully following the ratio laid down in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT i.e - in the absence of incriminating material seized during the search from the assessee no addition can be made, we inclined to allow the grounds of appeal and quash the Orders passed by the lower authorities, resultantly, the addition stands deleted. - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment under section 153A/143(3) of the Income Tax Act.
2. Jurisdiction of the Deputy Commissioner of Income Tax to initiate proceedings under section 153A.
3. Addition of Rs. 1,15,00,000 on account of sale of shares to SRD Resources Pvt. Ltd.
4. Addition of Rs. 3,00,00,000 on account of sale of shares to Kimsuk Krishna Sinha.
5. Application of section 69 of the Act.
6. Compliance with legal preconditions for initiating proceedings under section 153A.

Analysis:

1. The appeal challenged the assessment order for the assessment year 2007-08 under section 153A/143(3) of the Income Tax Act. The appellant disputed the total income determination by the Commissioner of Income Tax (Appeals) and argued that the initiation of proceedings under section 153A was without jurisdiction due to the absence of incriminating material found during the search.

2. The appellant contended that the Deputy Commissioner of Income Tax lacked jurisdiction to initiate proceedings under section 153A since no incriminating material was discovered during the search. The appellant argued that the assessment and additions made were not based on valid preconditions as required by section 153A of the Act.

3. Regarding the addition of Rs. 1,15,00,000 on account of the sale of shares to SRD Resources Pvt. Ltd., the appellant argued that the investment was explained and genuine, with no fresh material or evidence to conclude otherwise. The appellant highlighted that section 69 could not be applied to investments already recorded in the books of accounts.

4. Similarly, the addition of Rs. 3,00,00,000 on account of the sale of shares to Kimsuk Krishna Sinha was challenged by the appellant on similar grounds. The appellant emphasized that the investment was previously held to be genuine, and no new material justified a different conclusion. The appellant argued against the application of section 69 and emphasized the lack of inquiry by the assessing officer.

5. The Tribunal analyzed the legal position based on the Delhi High Court's judgment in CIT vs. Kabul Chawla, emphasizing the requirement of incriminating material for making additions under section 153A. The Tribunal concluded that in the absence of incriminating material, no additions could be made to the income already assessed, as seen in the present case.

6. Ultimately, the Tribunal allowed the appeal of the assessee, quashing the orders passed by the lower authorities and deleting the additions made. The Tribunal's decision was based on the absence of incriminating material during the search, aligning with the legal principles outlined in the Kabul Chawla case.