2015 (7) TMI 5 - AT - Income Tax

Tribunal quashes assessments under Section 153A for lack of incriminating material

Assistant Commissioner of Income-tax and others Versus Shanti Kumar Surana and others

The Tribunal quashed the assessments framed under Section 153A for the relevant assessment years due to the absence of incriminating material found during ... Validity of assessment framed u/s. 153A - Held that:- In view of the second provision of section 153 of the Act, it is clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of search u/s. 132 of the Act shall abate. It means if on the date of initiation of search u/s. 132 of the Act, any assessment proceedings is initiated relating to any assessment year falling within the period of six assessment years it shall stand abated and revenue cannot proceeding with such proceedings pending assessment after initiation of search. But in case the assessment proceedings are not pending at the time of initiation of search u/s. 132 of the Act, the assessment proceedings will not abate. In view of the facts in entirety and the legal principles enunciated by Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd., [2015 (5) TMI 656 - BOMBAY HIGH COURT] in the case of Shaila Agarwal, [2011 (11) TMI 213 - ALLAHABAD HIGH COURT ] and in the case of All Cargo Global Logistics, [2012 (7) TMI 222 - ITAT MUMBAI(SB)], we are of the view that there is no incriminating material found during the course of search in the present case for these assessment years, except the statement of one Shri Sambhu Kr More, as admitted by the AO in his remand report dated 23.09.2011 and despite number of opportunities revenue could not produce any incriminating material before the Bench and the assessments are already completed for these assessment years originally, the assessments framed u/s. 153A of the Act is invalid and hence, quashed. - Decided in favour of assessee. Issues Involved:1. Validity of assessments framed under Section 153A of the Income-tax Act, 1961.2. Addition of share application money and loans as unexplained cash credits under Section 68 of the Act.3. Consequential disallowance of interest on loans and disallowance of expenses of exempted income by invoking the provisions of Section 14A of the Act.Issue-wise Detailed Analysis:1. Validity of Assessments Under Section 153A:The primary legal issue raised by the assessee was the validity of the assessments framed under Section 153A of the Act, arguing that there was no incriminating material found during the search that pertained to the relevant assessment years. The Tribunal noted that the assessments were originally completed under Section 143(3)/143(1) and no proceedings were pending before the authorities at the time of the search on 19.03.2009. The Tribunal emphasized that the assessments under Section 153A should be based on incriminating material found during the search. The Tribunal found that the revenue could not produce any incriminating material despite multiple opportunities, and the assessments were based solely on the statement of Shri Sambhu Kr More, which lacked evidentiary value. Consequently, the Tribunal quashed the assessments framed under Section 153A for the relevant assessment years.2. Addition of Share Application Money and Loans as Unexplained Cash Credits:The Assessing Officer (AO) added the share application money and loans as unexplained cash credits under Section 68 of the Act, based on the statement of Shri Sambhu Kr More, who alleged that he provided accommodation entries to the assessee in lieu of unaccounted cash. The AO also noted various transactions and cash deposits that were allegedly routed back to the assessee's companies. However, the CIT(A) found that the assessee had provided substantial documentary evidence, including loan confirmations, bank statements, and audited accounts of the lending companies, to prove the identity and creditworthiness of the loan creditors and the genuineness of the transactions. The CIT(A) observed that no incriminating documents were found during the search that suggested the assessee had introduced unaccounted cash through accommodation entries. The Tribunal upheld the CIT(A)'s findings, noting that the AO's reliance on the statement of Shri Sambhu Kr More, without any corroborative evidence, was insufficient to justify the additions under Section 68.3. Consequential Disallowance of Interest on Loans and Disallowance of Expenses of Exempted Income:The AO also made consequential disallowances of interest on loans and disallowed expenses of exempted income by invoking the provisions of Section 14A of the Act. The CIT(A) deleted these disallowances, finding that the assessee had provided adequate evidence to support the genuineness of the loan transactions and the corresponding interest payments. The Tribunal, having quashed the assessments under Section 153A, did not find it necessary to adjudicate on the merits of these disallowances, as the primary basis for the assessments was invalidated.Conclusion:The Tribunal quashed the assessments framed under Section 153A for the relevant assessment years due to the absence of incriminating material found during the search. Consequently, the additions made under Section 68 and the disallowances under Section 14A were also invalidated. The Tribunal's decision was based on the principles that assessments under Section 153A should be based on incriminating material and that mere statements without corroborative evidence are insufficient to justify additions.