2024 (3) TMI 768 - AT - Income Tax

Assessment u/s 153A - completed assessments to be interfered with by the A.O. while making the assessment u/s 153A - incriminating material unearthed during the course of search or not? - HELD THAT - Statement of Sh. Ashok Jain was recorded during the course of search on 22/04/2016 which was subsequently retracted. From a perusal of the statement, it is found that the statement was not corroborated by any incriminating material and therefore no credence can be given to the said statement, which has been subsequently retracted. In view of consideration of the judgement of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT it has been held that completed assessments can be interfered with by the A.O. while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search. Hon'ble Supreme Court in the case of Meeta Gutgutia 2018 (7) TMI 569 - SC ORDER upheld the decision of the Hon'ble High Court of Delhi 2017 (5) TMI 1224 - DELHI HIGH COURT . The aforesaid judgements have lucidly pronounced that the case of completed assessment can be interfered only on the basis of some incriminating material found during the course of search. The case of the assessee for the assessment years before us are completed assessments and there were no proceedings pending on the date of the search conducted i.e. 20.04.2017. In the case of the assessee, the AO has not referred to any incriminating document which was seized, during the course of search proceedings and the additions made in the Assessment Orders are not based upon any incriminating material or documents found during the course of search. Further, we also find that in the case of Pr. CIT Vs. Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT has affirmed the ratio of Kabul Chawla (supra). Since, the revenue has not brought anything on record to prove that the additions have been made on the basis of the material found and seized during the search conducted u/s. 132 of the Income Tax Act, 1961, we find no reason to interfere with the order of the ld. CIT(A). Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition on account of share capital and premium.
2. Deletion of addition on account of commission expense.
3. Reliance on the decision of Kabul Chawla and its implications.
4. Validity of the CIT(A) order on the grounds of law and facts.

Summary:

1. Deletion of Addition on Account of Share Capital and Premium:
The Revenue contested the CIT(A)'s decision to delete an addition of Rs. 6,25,00,000/- made by the AO concerning share capital and premium received by the assessee company. The tribunal examined the records and upheld the CIT(A)'s decision, finding no incriminating material to support the AO's addition.

2. Deletion of Addition on Account of Commission Expense:
The Revenue also challenged the deletion of an addition of Rs. 17,18,750/- related to commission expenses incurred by the assessee. The tribunal, after reviewing the material, found that the CIT(A) rightly deleted the addition due to a lack of incriminating evidence.

3. Reliance on the Decision of Kabul Chawla:
The tribunal noted that the CIT(A) relied on the Delhi High Court's decision in CIT vs Kabul Chawla, which established that additions under \u/s 153A must be based on incriminating material found during the search. The tribunal reiterated the legal position that completed assessments can only be disturbed if incriminating material is discovered during a search.

4. Validity of the CIT(A) Order:
The tribunal found the CIT(A)'s order to be neither perverse nor erroneous. It emphasized that the AO's additions were not based on any incriminating documents found during the search. The tribunal also referenced the Supreme Court's affirmation of the Delhi High Court's judgment in Kabul Chawla and similar decisions in other cases, reinforcing the principle that completed assessments can only be reassessed based on incriminating material.

Conclusion:
The tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s deletions of additions due to the absence of incriminating material found during the search. The tribunal's decision was pronounced in the open court on 14/03/2024.