Additions under s.68 based on directors' surreptitious statements during search unsustainable; s.153A jurisdiction not justified for earlier years

HC held that additions under s.68 based on directors' statements recorded during a search could not be sustained because the statements were recorded behind the assessee's back, no opportunity to cross-examine was afforded, and there was no corroborative evidence; seizure material and other records contradicted those statements. The Court also held the assumption of jurisdiction under s.153A unjustified for preceding assessment years, as the surrendered amount related only to the year of search and seized documents were not incriminating for earlier years. Appeal allowed for the assessee.

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Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961.
2. Assumption of jurisdiction under Section 153A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act, 1961:

The Revenue challenged the ITAT's decision to delete additions made under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) had added Rs. 3.60 crores to the assessable income of the Assessee on the grounds that the share premium and share application money were unexplained credits. The AO concluded that the Assessees failed to provide sufficient evidence to prove the identity, creditworthiness of the investors, and the genuineness of the transactions. The AO also noted that the affidavits provided by the Assessees were undated and not countersigned by a Notary/Oath Commissioner.

The CIT (A) upheld the AO's decision, emphasizing that the statements made by Mr. Tarun Goyal and Mr. Anu Aggarwal during the search constituted significant evidence. The CIT (A) referenced the case of CIT v. Anil Kumar Bhatia to support the jurisdiction under Section 153A.

The ITAT, however, found the additions unjustified. It noted that the Assessees had provided substantial evidence, including bank statements and confirmations from the share applicant companies. The ITAT highlighted that the AO had not issued any summons to the directors of the share applicant companies or verified the records, thus failing to substantiate the allegations.

The High Court agreed with the ITAT's findings, emphasizing that the Assessees had discharged their burden of proof by providing necessary documentation. The Court pointed out that the AO did not conduct due verification and relied on presumptions.

2. Assumption of jurisdiction under Section 153A of the Income Tax Act, 1961:

The Revenue also challenged the ITAT's decision on the assumption of jurisdiction under Section 153A. The ITAT held that there was no incriminating material for each of the Assessment Years (AYs) other than the year of search (AY 2008-09) to justify the assumption of jurisdiction under Section 153A.

The High Court reiterated the legal position established in previous cases, including Commissioner of Income Tax (Central-III) v. Kabul Chawla, which stated that in the absence of incriminating material, completed assessments could not be disturbed. The Court noted that the statements made by Mr. Anu Aggarwal and the documents A-1, A-4, and A-11 did not constitute incriminating material for the preceding AYs.

The Court also highlighted that the statement of Mr. Tarun Goyal was not provided to the Assessees, and he was not produced for cross-examination, thus rendering his statement unreliable.

Conclusion:

The High Court upheld the ITAT's decision, concluding that the additions made under Section 68 were rightly deleted and the assumption of jurisdiction under Section 153A was not justified. The Court dismissed the Revenue's appeals, emphasizing that the Assessees had provided sufficient evidence to discharge their burden of proof and that the AO had failed to conduct proper verification.

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