2023 (4) TMI 1103 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - whether incriminating material was found and seized during the course of search? - HELD THAT - Assessee has filed the original return of income under section 139 of the Income Tax Act and assessment was framed u/s 143(3) and no addition was made qua bogus share application. After the search, such an assessment can be disturbed or could be construed as abated only if incriminating material was found and seized during the course of search. Thus in the present case nothing was discovered during the course of search about this share application money. Taking the advantage of search, AO is reassessing the income of the assessee, which has already assessed in an assessment order u/s 143(3). The factum of share application money is already available in the books. It has to be assumed as examined in a scrutiny assessment. For buttressing this point, the judgment of the Hon ble Supreme Court in the case of CIT vs.- Kelvinator India Limited 2010 (1) TMI 11 - SUPREME COURT can be put into service - this addition is not sustainable, hence it is deleted. Disallowance of provision of expenses - AO has disallowed the deduction of this provision and correspondingly did not exclude from the work-in progress - CIT(Appeals) concurred with the ld. Assessing Officer by observing that assessee had claimed certain expenses, which were found to be in the nature of provisions and being unascertained liabilities, they cannot be allowed to the assessee - HELD THAT - A provision is being made in the accounts for contingent liability. Sometime a liability is discernible but its complete crystallization cannot be ensured on the basis of material available and therefore, a provision of certain expenses are being made and if a provision is found genuine reasonable qua need of the business based on earlier years feed back, then it can be allowed as a deduction namely in the case of assessee under Head No. 5 provision of Bank interest has been made. AO has disallowed the deduction of this provision and correspondingly did not exclude from the work-in progress. Both these things cannot be permitted simultaneously. There is no finding at the end of the ld. Assessing Officer that expenses are not genuine. He did not make any enquiry qua the nature of expenses and whether they can be termed as genuine or not. He simply took a short-cut method by treating the provision as disallowed. He has to verify if this provision has been included in the WIP or not. If included then it is to be adjudicated once it has not been allowed as a deduction then it is to be excluded from the WIP also. This expense be carried out after going through the detailed explanation of the assessee and ledger account, we are of the view that this issue be remitted to the file of ld. AO for fresh adjudication. Undisclosed investment - Statement recorded u/s 132(4) relied upon - HELD THAT - The CBDT is of the view that oftenly officials used to obtain confession from the assessee and stop further recovery of material. Such confessions have been retracted and then the addition could not withstand the scrutiny of higher authorities because no material was found supporting such addition. the Board has restrained the authorities from taking confession under section 132(4) of the Income Tax Act. There are a large number of decisions which suggest that without corroborating evidence, addition ought not to be made on the basis of a declaration made under section 132(4) of the Income Tax Act. A perusal of the above questionnaire reveals that name of the assessee is not discernable in the table of investor from Serial No. 1 to 6, neither it is reflected in the answer. In the answer, a declaration of the Director is confined which is relatable to six individuals alongwith HUF, so even there is no disclosure on behalf of the Company i.e. M/s. Agrim Infraproject Pvt. Limited. Therefore, this addition is not sustainable in the eyes of law. The addition is accordingly deleted.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Validity of assessment under section 153A of the IT Act, 1961.
3. Addition under section 68 of the IT Act, 1961.
4. Disallowance of provisions and expenses.
5. Reliance on statements and evidence collected during search.

Summary:

Violation of Principles of Natural Justice:
The assessee contended that the CIT(A) failed to consider the written submissions filed online and dismissed the case without proper consideration, violating natural justice principles.

Validity of Assessment under Section 153A:
The assessee argued that the assessment under section 153A was bad in law due to lack of satisfaction by the Assessing Officer and absence of incriminating material found during the search. The Tribunal agreed, stating that no fresh material was found during the search to justify disturbing the already assessed income.

Addition under Section 68:
The Assessing Officer added Rs. 4,70,00,000/- as unexplained cash credit under section 68, considering transactions with certain companies as bogus. The Tribunal deleted this addition, noting that the share application money was already in the books and no incriminating material was found during the search to support this addition.

Disallowance of Provisions and Expenses:
The Assessing Officer disallowed provisions amounting to Rs. 2,07,20,125/-, considering them as unascertained liabilities. The Tribunal remitted this issue back to the Assessing Officer for fresh adjudication, emphasizing that if provisions are included in the work-in-progress (WIP), they should be excluded from the WIP if disallowed as expenses.

Reliance on Statements and Evidence Collected During Search:
The addition of Rs. 1,75,00,000/- was based on the assessee's disclosure during the search. The Tribunal held that such additions should not be made solely on the basis of retracted confessions without corroborative evidence. The Tribunal deleted the addition, noting that the company's name was not mentioned in the statements and no corroborative evidence was provided.

Conclusion:
The Tribunal allowed the appeal for ITA No. 219/GAU/2019, allowed ITA No. 224/GAU/2019 for statistical purposes, and partly allowed ITA No. 222/GAU/2019.