2017 (4) TMI 1008 - AT - Income Tax

Tribunal allows appeals for 2004-05 & 2007-08, remands to AO for re-examination.

ACIT, Central Circle-19, New Delhi Versus NY Dox Services Ltd

ACIT, Central Circle-19, New Delhi Versus NY Dox Services Ltd - TMI Issues Involved:1. Deletion of addition under Section 68 of the Income Tax Act, 1961.2. Validity of addition in search assessment under Sections 153C/153A without incriminating material.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68:The revenue challenged the deletion of additions of Rs. 23,265,000 for AY 2004-05 and Rs. 32,123,000 for AY 2007-08 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The AO had added these amounts as unexplained cash credits, arguing that the assessee failed to satisfactorily explain the source and nature of these credits.The assessee, engaged in providing medical transcription services and remote accounting, had shown significant increases in share capital. The AO noted that the funds were received from various paper/shell companies controlled by the Today Group, which were used to transfer unaccounted money through accommodation entries.The CIT(A) deleted the additions, holding that no incriminating material was found during the search to justify the additions under Sections 153C/153A. The CIT(A) also noted that the assessee had furnished details such as PAN, audited financial statements, and bank statements to substantiate the genuineness of the transactions and creditworthiness of the investors.2. Validity of Addition in Search Assessment under Sections 153C/153A:The revenue argued that the CIT(A) erred in holding that no addition could be made in the search assessment under Sections 153C/153A without incriminating material. The revenue pointed out that during the search and survey operations, it was found that the companies providing funds were merely paper companies with no real business activities, controlled by the Today Group. Statements from various individuals and documents seized during the search indicated that these companies were used to route unaccounted money.The tribunal noted that the AO had relied on substantial evidence, including statements from key persons, survey reports, and documents found during the search, to establish that the funds were unaccounted money routed through paper companies. The tribunal found that the CIT(A) had not properly appreciated these evidences.Tribunal’s Decision:For AY 2007-08, the tribunal set aside the deletion of the addition of Rs. 32,123,000 and remanded the matter back to the AO, directing the AO to grant the assessee another opportunity to prove the identity, creditworthiness, and genuineness of the transactions. The tribunal also directed the CIT(A) to re-examine the material unearthed during the search and decide if the addition was based on incriminating material.For AY 2004-05, the tribunal followed a similar approach, setting aside the deletion of the addition of Rs. 23,265,000 and remanding the matter back to the AO with similar directions.Conclusion:The appeals for AY 2004-05 and AY 2007-08 were allowed for statistical purposes, with directions to re-examine the evidence and provide the assessee an opportunity to substantiate the transactions. The tribunal emphasized that the additions should be based on incriminating material found during the search.