2023 (3) TMI 818 - AT - Income Tax

Assessment u/s 153C - Addition u/s 68 - unexplained share application money received by the assessee - modus operandi - incrementing material found during the search or not? - HELD THAT - We find that, nowhere any of the seized material or documents relates to the assessee company or can be said to pertaining to the assessee company. Nowhere there is any of the statement which has been incorporated and discussed in detail, wherein the name of the assessee company has been figured. It mostly speaks about that the Poddar group of companies were taking accommodation entries. Nowhere the Ld. AO has pointed out that any of the seized material; or in any of the statement; or there is any whisper in the assessment order that any such information also pertains to the assessee or assessee was also part of any such beneficiary of the accommodation entry scheme. Had it there been any information or material found during the course of search regarding assessee company or any of the subscriber companies that these are bogus, then the AO was justified not only acquiring the jurisdiction u/s 153C of the Act, but also making the addition, because that it would have been based on incriminating material or information pertaining to the assessee. AO, contains information regarding Emerging Supply Pvt. Ltd. who has received accommodation entry in the form of share premium and subsequent to various transfer entities as per the direction of Shri Ajay Podar was sum aggregating to Rs. 1.15 crores. Nowhere has it been brought on record that this money was transferred in the form of share application money or share premium in the case of the assessee company. All these might be incriminating materials, but those incriminating material should have some reference of the assessee company or something can be inferred in the case of the assessee company, i.e., it pertains to the assessee. In so far as the assessee is concerned, there is no such reference of any such material or neither any information nor it has been discussed in the entire assessment order. It is based on the entire premise that some modus operandi of Podar group for routing through their unaccounted money in the form of share application / share premium in the group entities was unearthed. Based on that, the Ld. AO has assumed that assessee is also part of the same modus operandi wherein assessee has brought its unaccounted money through the medium of share subscribers. There has to be prima facie material which pertains to the assessee found from the search to rope in the assessee company within the scope of section 153C of the Act to make the additions. Thus in absence of any information pertaining to the assessee or any documents found during the course of search of Podar entities, no addition can be made in the case of assessee company specially when the A.Y. 2012-13 had attained finality and was not abated either at the time of search or either at the time of recording of satisfaction. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the addition made under Section 68 of the Income Tax Act, 1961.
2. Jurisdiction under Section 153C of the Income Tax Act, 1961.
3. Presence of incriminating material to justify the addition.

Summary:

Issue 1: Legality of the Addition under Section 68:
The core issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition of Rs. 2,25,00,000/- made under Section 68 of the Income Tax Act, 1961, towards share application money received by the assessee. The Assessing Officer (AO) had treated the share capital amount received as bogus, citing the assessee's failure to prove the creditworthiness, identity of the subscribers, and genuineness of the share application money received.

Issue 2: Jurisdiction under Section 153C:
The assessee contended that the addition was not based on any incriminating material or evidence found during the search and was beyond the scope of Section 153C. The CIT(A) held that statements recorded during the search, though retracted, constituted incriminating material sufficient to proceed against the assessee under Section 153C.

Issue 3: Presence of Incriminating Material:
The Tribunal examined whether any incriminating material pertaining to the assessee was found during the search. The AO's assessment referred to various documents and statements from the Poddar group search, but none specifically related to the assessee. The Tribunal found that the seized material did not contain any information linking the assessee to the alleged bogus transactions. Consequently, the addition made by the AO was quashed on the grounds that it was not based on any incriminating material found during the search.

Conclusion:
The Tribunal quashed the addition made by the AO on the legal issue, ruling that in the absence of any incriminating material pertaining to the assessee, no addition could be made under Section 153C. As a result, the revenue's appeal was dismissed. The judgment was pronounced on 17/03/2023.