2017 (2) TMI 1252 - AT - Income Tax

Tribunal: Section 153A additions without incriminating material unjustified. Precedents cited.

The Tribunal held that additions made under Section 153A without incriminating material were not justified, citing precedents in CIT Vs. Kabul Chawla and ... Assessment u/s 153A - proof of incriminating material found in search - Held that:- The assessee has filed before us the copy of annual return furnished by it before the Registrar of Companies on 10th March, 2011. In Part VI of the annual return, the assessee is required to furnish the details of shares/debentures transfers since the date of last AGM. In the return, the assessee mentioned “As per list attached”. Then, in the list, the assessee has given the required details. The copy of the said list is annexed herewith as Annexure-A to this order. From this list, we find that it gives the details of date of share transfer, type of transfer, number of shares transferred, amount per share, ledger folio of transfer, transferor’s name and transferee’s name. At the outset, we find that this list pertains to shares transferred between financial year 2010-11. Therefore, this document is relevant to financial year 2010- 11 i.e., assessment year 2011-12. Admittedly, the appeals before us are of assessment years 2005-06 to 2008-09 and therefore, this document does not pertain to the year under appeal. On this ground alone, it can be said that no incriminating documents relevant to assessment year under consideration were found. However, we are also of the opinion that this document cannot be said to be incriminating document. A copy of an annexure to the annual return already furnished by the assessee with the Registrar of Companies before the date of search as a part of the annual return which is to be furnished in the statutory form can never be said to be an incriminating document. Moreover, the shares are transferred by one person to another. The assessee is neither transferor nor the transferee. So far as the assessee is concerned, no financial transaction took place by the assessee even during the financial year 2010-11. Thus respectfully following the decision in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) we hold that the additions are beyond the scope of assessment under Section 153A - Decided in favour of assessee. Issues Involved:1. Legality of additions made under Section 153A without incriminating material.2. Addition of unexplained cash credit under Section 68.3. Addition of unexplained expenditure under Section 69C.4. Applicability of the decisions in CIT Vs. Kabul Chawla and CIT Vs. RRJ Securities Ltd.Issue-wise Detailed Analysis:1. Legality of Additions Made Under Section 153A Without Incriminating Material:The primary issue was whether additions under Section 153A could be made without any incriminating material found during the search. The jurisdictional High Court in CIT Vs. Kabul Chawla and CIT Vs. RRJ Securities Ltd. held that in the absence of incriminating material, no additions under Section 153A can be made. The Tribunal noted that the document in question (pages 70 to 74 of Annexure A-1) was merely an annexure to an annual return filed with the Registrar of Companies and did not indicate any financial transaction by the assessee. Therefore, it could not be considered incriminating. Consequently, the Tribunal concluded that the additions were beyond the scope of Section 153A.2. Addition of Unexplained Cash Credit Under Section 68:The assessee challenged the addition of Rs. 2,46,00,000 under Section 68 on account of share capital. The Tribunal observed that the document cited by the Revenue did not pertain to the assessment year under consideration and was not incriminating. The Tribunal reiterated that the addition for unexplained share capital was not justified in the absence of any incriminating material for the relevant assessment year.3. Addition of Unexplained Expenditure Under Section 69C:The Tribunal also addressed the addition of Rs. 5,53,500 under Section 69C for alleged payment of commission. The Tribunal noted that the document relied upon by the Revenue did not indicate any financial transaction by the assessee and pertained to a different financial year. Thus, the Tribunal held that the addition under Section 69C was not sustainable.4. Applicability of the Decisions in CIT Vs. Kabul Chawla and CIT Vs. RRJ Securities Ltd.:The Tribunal extensively referred to the decisions in CIT Vs. Kabul Chawla and CIT Vs. RRJ Securities Ltd., which established that completed assessments could only be interfered with on the basis of incriminating material found during the search. The Tribunal concluded that since no incriminating material was found for the relevant assessment years, the additions made under Section 153A were not justified.Conclusion:The Tribunal held that the additions of Rs. 2,46,00,000 and Rs. 5,53,500 were beyond the scope of assessment under Section 153A of the Act and deleted the same. For the subsequent assessment years (2006-07, 2007-08, and 2008-09), the Tribunal noted that similar grounds and facts were involved and deleted the respective additions for unexplained share capital and alleged expenditure on commission. The Tribunal also addressed the appeals of Best City Developers India Pvt. Ltd. for AY 2007-08 and 2008-09, concluding that no incriminating material was found and thus, the additions were deleted. All appeals of the assessees were allowed.