Tribunal deletes additions under Income Tax Act, invalidates assessments under Section 153A

The Tribunal allowed the appeals, deleting the additions under Section 68 of the Income Tax Act as the assessees proved the legitimacy of the amounts received as advances against the sale of shares. The Tribunal held that the assessments under Section 153A were invalid due to the absence of incriminating material found during the search, following precedents that additions in un-abated assessments require such material. The onus of proving identity, genuineness, and creditworthiness of creditors was met by the assessees, leading to the dismissal of the additions.

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Issues Involved:
1. Legitimacy of the addition under Section 68 of the Income Tax Act, 1961.
2. Validity of the assessment under Section 153A of the Income Tax Act, 1961.
3. Onus of proving the identity, genuineness, and creditworthiness of the creditors.

Detailed Analysis:

Legitimacy of the Addition under Section 68:
The primary issue in these appeals was whether the amounts received by the assessees as advances against the sale of shares could be considered unexplained cash credits under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) made additions on the grounds that the assessees failed to prove the identity, genuineness, and creditworthiness of the creditors. The CIT(A) upheld the AO's decision, emphasizing that the assessees could not provide sufficient evidence regarding the capacity of the companies from which the advances were received. The CIT(A) noted that during a survey operation, no accounts or documents related to the alleged purchase of shares were found, and the individuals present could not provide any substantial evidence.

Validity of the Assessment under Section 153A:
The assessees argued that the additions were misplaced as the amounts were received towards the sale consideration of shares and not as loans or share applications. They contended that the capital gains from these transactions were declared and taxed in the subsequent assessment year (2009-2010). The Tribunal noted that the assessments for the year 2008-09 were un-abated, meaning no incriminating material was found during the search that could justify the additions. The Tribunal cited several decisions, including the Delhi High Court's ruling in CIT(Central)-III vs. Kabul Chawla, which established that additions in un-abated assessments could only be made based on incriminating material found during the search.

Onus of Proving Identity, Genuineness, and Creditworthiness:
The Tribunal observed that the assessees had disclosed the receipt of advances in their regular books of account and had paid capital gains tax on the sale of shares in the subsequent year. The Tribunal found that the department had accepted the capital gains as genuine for the assessment year 2009-2010. The Tribunal concluded that the additions were not based on any search material and thus could not be sustained. The Tribunal emphasized that the onus was on the assessee to prove the identity, genuineness, and creditworthiness of the creditors, but in the absence of any incriminating material found during the search, the additions were unsustainable.

Conclusion:
The Tribunal allowed the appeals of the assessees, deleting the additions made by the AO under Section 68. The Tribunal held that the assessments under Section 153A could not sustain the additions in the absence of incriminating material found during the search. The stay petitions filed by the assessees were dismissed as infructuous. The Tribunal's decision was pronounced on 19/04/2018.

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