2022 (10) TMI 652 - AT - Income Tax

Assessment u/s 153A - Addition of receipt of share premium and unsecured loan as unexplained cash credit u/s.68 - incriminating material found during the course of search or not? - HELD THAT - As brought on record that except the statement u/s.132(4) AO did not place any reliance on any incriminating material seized during the course of search for the purpose of framing an addition u/s.68 of the Act in the instant case. The very same issue was the subject matter of adjudication by the erstwhile ld. AO in the re-assessment proceedings completed for A.Y.2009-10 u/s.143(3) r.w.s. 147 wherein it was accepted as genuine. This itself goes to prove that there could not be any incriminating material that could be found during the course of search relatable to these additions. Only basis for making the addition is statement recorded u/s.132(4) of the Act which has been duly admitted by the ld. AO both in the assessment order as well as in the remand proceedings - It is trite law that statement u/s.132(4) of the Act cannot be considered as an incriminating material unless it is corroborated by some other evidence found during the course of search and the said statement cannot be relied upon solely for the purpose of making an assessment. The decisions in this regard have already been dealt elaborately by the CIT(A) as detailed hereinabove The assessment for A.Y.2009-10 is a concluded assessment as on the date of search in the instant case and assessment has been framed by the ld. AO by making additions u/s.68 of the Act without reference to any incriminating material found during the course of search relatable to such additions. This issue is very well settled by the decision of Continental Warehousing Corporation 2015 (5) TMI 656 - BOMBAY HIGH COURT - Decided against revenue.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act.
2. Use of statements recorded under Section 132(4) as evidence.
3. Treatment of share premium and unsecured loans as unexplained cash credits under Section 68.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act:
The primary contention was whether the AO had the jurisdiction to make additions under Section 153A for an assessment year that was not abated, solely based on statements recorded during the search. The Tribunal observed that the assessment for the year in question was already concluded and no incriminating material was found during the search. The Tribunal upheld the CIT(A)'s finding that the AO could not make additions without any incriminating material, relying on established legal precedents such as the decision of the Hon'ble Jurisdictional High Court in the case of Continental Warehousing Corporation reported in 374 ITR 645 (Bom).

2. Use of Statements Recorded under Section 132(4) as Evidence:
The Tribunal discussed the legal standing of statements recorded under Section 132(4). It was noted that such statements do not constitute incriminating material unless corroborated by other evidence found during the search. The Tribunal referenced multiple judicial precedents, including CIT vs. Harjeev Aggarwal and CIT vs. Best Infrastructure (India) Pvt. Ltd., to assert that statements alone, without any supporting incriminating material, cannot form the basis for additions under Section 153A. The Tribunal found that the AO relied solely on the statement of one of the directors, which was later retracted, and no corroborating material was found during the search.

3. Treatment of Share Premium and Unsecured Loans as Unexplained Cash Credits under Section 68:
The AO had treated the receipt of share premium of Rs. 4,50,00,000 and unsecured loans of Rs. 1,87,500 as unexplained cash credits under Section 68. The Tribunal noted that during the original assessment proceedings, the assessee had provided all necessary documents to establish the identity, creditworthiness, and genuineness of the transactions. These transactions were accepted as genuine in the original assessment. The Tribunal found that the AO did not bring any new incriminating material during the search to dispute these transactions. The Tribunal upheld the CIT(A)'s decision to delete the additions, noting that the AO's reliance on statements without any corroborative evidence was insufficient to justify the additions.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order. It concluded that the AO did not have jurisdiction to make additions under Section 153A in the absence of any incriminating material found during the search. The Tribunal emphasized the necessity of corroborating statements recorded under Section 132(4) with tangible evidence to sustain any additions. The Tribunal's decision was based on a thorough analysis of legal precedents and the factual matrix of the case.