2014 (5) TMI 545 - AT - Income Tax

Tribunal Rules Assessing Officer's Additions under Section 153A of Income Tax Act Unsustainable without Incriminating Material

The Tribunal held that additions made by the Assessing Officer under Section 153A of the Income Tax Act were unsustainable without incriminating material ... Addition made u/s 68 of the Act - Additions not supported by seized and incriminating material u/s 153A of the Act - Unexplained sundry creditors and unexplained share application money – Held that:- Following Shri Govind Agarwal Versus ACIT [2014 (2) TMI 810 - ITAT MUMBAI] - The basis for addition on account of ‘sundry creditors’ (purchases) is merely the ‘financial statements’ filed by the assessee - Similar is the case with regard to the addition on account of ‘share application money’ - there is no seized material or incriminating material to support the additions made by the AO on account of ‘unexplained sundry creditors’ (purchases) and on account of ‘share application money’ - the additions are not sustainable – Decided in favour of Assessee. Issues Involved:1. Sustainability of additions not supported by seized or incriminating material under Section 153A of the Income Tax Act.2. Validity of additions under Section 68 of the Income Tax Act for unexplained sundry creditors and share application money.Detailed Analysis:1. Sustainability of Additions Not Supported by Seized or Incriminating Material Under Section 153A of the Income Tax Act:The core issue in the appeals was whether the additions made by the Assessing Officer (AO) under Section 153A of the Income Tax Act were sustainable when no incriminating material was found during the search. The assessee argued that the additions were made solely based on financial statements and not on any incriminating material discovered during the search. The Tribunal referenced several judgments, including the Rajasthan High Court's decision in the case of Jai Steel (India) vs. ACIT, which held that for completed assessments, additions under Section 153A must be based on incriminating material found during the search. The Tribunal concluded that in the absence of such material, the AO's role is limited to reiterating the returned income and not making routine additions.2. Validity of Additions Under Section 68 of the Income Tax Act for Unexplained Sundry Creditors and Share Application Money:The AO made additions under Section 68 for unexplained sundry creditors and share application money. The Tribunal examined the AO's order and found that the basis for these additions was the financial statements filed by the assessee, with no reference to any incriminating material. The Tribunal reiterated that additions under Section 153A must be supported by incriminating material found during the search. Since no such material was found, the additions were deemed unsustainable. The Tribunal cited multiple judgments, including the Special Bench decision in All Cargo Global Logistics Ltd., which supports the view that routine additions cannot be made in the absence of incriminating material.Conclusion:The Tribunal allowed the assessee's cross objections, holding that the additions made by the AO under Section 153A were not sustainable in the absence of incriminating material. Consequently, the appeals filed by the Revenue were dismissed as academic. The Tribunal's decision emphasized the necessity of incriminating material for making additions under Section 153A, aligning with the legal precedents set by higher judicial authorities.Order Pronouncement:The Tribunal pronounced the order in the open court on 07th May, 2014, allowing the assessee's cross objections and dismissing the appeals filed by the Revenue.