2013 (12) TMI 131 - AT - Income Tax

Tribunal upholds deletion of additions by AO citing lack of incriminating material

The tribunal upheld the CIT(A)'s decision to delete additions made by the Assessing Officer (AO) on various grounds, including unexplained share ... Validity of assessment u/s 153A – Held that:- Assessing Officer has issued a notice u/s 142(1) read with section 153A - No separate notice prescribed in the Income-tax Rule u/s 153A - Notice issued u/s 142(1) read with section 153A of the Act was sufficient to comply the legal requirement of notice to be issued u/s 153A of the Act - The assessee himself has replied to the Assessing Officer that the return filed on earlier date may be taken as return filed in response to the notice u/s 153A – Decided against assessee. Non-issuance of notice u/s 143(2) – Held that:- The Assessing Officer issued notice u/s 142(1) of the Income-tax Act, 1961 and notice u/s 143(2) - A questionnaire was issued for the A. Y. 2006-07, copy of the handwritten questionnaire was also placed on records wherein 13 details were asked by the Assessing Officer - The Assessing Officer has served on the assessee a notice requiring him to produce evidences on which the assessee relied in support of the return – Following Ashok Chaddha vs. ITO [2011 (7) TMI 252 - Delhi High Court] - There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) - The two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him – Decided against assessee. Share application money – Held that:- The assessee submitted the related documents of the investors to the Assessing Officer to prove the genuineness of the amount received as application money - The Assessing Officer has not raised any doubt for the authenticity of the above details and documents filed by the assessee - The Assessing Officer has also not made any enquiry for issuing notice u/s 133(6) or summons u/s 131 - No incriminating documents were found and seized during the search operation – Following CIT vs. Orissa Corporation [1986 (3) TMI 3 - SUPREME Court] - The evidences submitted by the assessee cannot be thrown out without any enquiry specially when there is no material to implicate the assessee in a collusive arrangement - The details submitted show that the investors companies were sister concerns of the assessee and having the same address and common directors - The Assessing Officer has not pointed out any specific defects in the details submitted by the assessee – Decided against Revenue. Unsecured loans received from directors – Held that:- The assessee submitted the required details including the address of the Directors and creditors and also the ledger accounts of these persons - The copy of the bank statement from where the money was received was also furnished, the acknowledgement of return of income, computation of income and PAN of both the Directors/creditors were also submitted - The Assessing Officer has not made any further enquiry in this regard and has not pointed out any defect in the documents submitted - The transactions were carried out through banking channels and necessary confirmations were also filed – The transactions were treated to be genuine - No incriminating document found and seized during the search operation with regard to the loans taken from the directors/creditors – Decided against Revenue. Issues Involved:1. Deletion of addition on account of unexplained share capital/share application money.2. Validity of assessment proceedings under section 153A/143(3) without serving statutory notice under section 153A.3. Validity of assessment proceedings without issuing statutory notice under section 143(2).4. Addition made without incriminating material found during the course of search.5. Deletion of addition on account of unsecured loans received from directors.Detailed Analysis:1. Deletion of Addition on Account of Unexplained Share Capital/Share Application Money:The revenue appealed against the deletion of Rs.18.59 crores added due to unexplained share capital/share application money. The assessee provided comprehensive documentation, including acknowledgments of return, balance sheets, bank statements, and confirmations. The CIT(A) deleted the addition, noting the absence of any adverse findings or specific defects in the documents provided by the assessee. The tribunal upheld CIT(A)'s decision, emphasizing that the Assessing Officer (AO) did not conduct any inquiry or issue notices under sections 133(6) or 131 to verify the details provided by the assessee. The tribunal referenced several judicial precedents supporting the assessee's position, including CIT vs. Sophia Finance Ltd. and CIT vs. Lovely Exports P Ltd.2. Validity of Assessment Proceedings under Section 153A/143(3) Without Serving Statutory Notice under Section 153A:The assessee contended that the assessment proceedings were invalid due to the absence of a formal notice under section 153A. The tribunal found that the AO issued a notice under section 142(1) read with section 153A, which was sufficient to meet the legal requirements. The assessee responded to this notice, and the tribunal concluded that there was no irregularity or illegality in the notice issued. The tribunal upheld the CIT(A)'s order on this issue.3. Validity of Assessment Proceedings Without Issuing Statutory Notice under Section 143(2):The assessee argued that the assessment proceedings were invalid due to the absence of a notice under section 143(2). The tribunal referenced the ITAT Delhi Bench's decision in M/s. Dangson Hotel & Restaurants, which held that the AO can proceed with the assessment even if the assessee fails to file a return in response to a notice under section 153A. The tribunal also cited the Hon'ble Delhi High Court's decision in Ashok Chaddha vs. ITO, which stated that there is no specific requirement for issuing a notice under section 143(2) for assessments under section 153A. The tribunal dismissed the assessee's contention and upheld the CIT(A)'s order.4. Addition Made Without Incriminating Material Found During the Course of Search:The assessee contended that the addition made by the AO was not sustainable as it was made without any incriminating material found during the search. The tribunal noted that the AO did not find any adverse material or statements during the search operation. The CIT(A) deleted the addition, observing that the AO did not conduct any inquiry or issue notices to verify the details provided by the assessee. The tribunal upheld the CIT(A)'s decision, emphasizing the lack of any material implicating the assessee in a collusive arrangement.5. Deletion of Addition on Account of Unsecured Loans Received from Directors:The revenue appealed against the deletion of Rs.22.37 crores added due to unsecured loans received from the assessee's directors. The assessee provided detailed documentation, including names, addresses, bank statements, and confirmations of the directors. The CIT(A) deleted the addition, noting that the AO did not conduct any inquiry or point out any defects in the documents provided by the assessee. The tribunal upheld the CIT(A)'s decision, emphasizing that the identity, creditworthiness, and genuineness of the transactions were established beyond doubt.Conclusion:The tribunal dismissed the revenue's appeals and the assessee's cross-objections, upholding the CIT(A)'s orders on all issues. The tribunal emphasized the importance of conducting inquiries and verifying details before making additions, and referenced several judicial precedents supporting the assessee's position. The tribunal's decision was pronounced in open court on October 1, 2013.