2018 (10) TMI 290 - AT - Income Tax

Tribunal Upholds CIT(A) Decisions on Section 153A Additions, Emphasizes Need for Incriminating Evidence

DCIT Central Circle-18, New Delhi Versus Landcraft Developers Pvt. Ltd.

The Tribunal upheld the CIT(A)'s deletions of additions made by the AO, emphasizing the requirement of incriminating evidence for additions under Section ... Assessment u/s 153A - Addition u/s 68 - unexplained share application money - Held that:- In present case, the assessment proceedings were already completed and unabated and no incriminating evidence found. Thus, the Revenue could not differ from the fact that there was no incriminating evidence found in the present case.- Decided in favour of assessee. Issues Involved:1. Deletion of addition of Rs. 6,65,00,000/- under Section 68 for unexplained share application money.2. Power of Assessing Officer (AO) to reassess returns based on material available at the time of original assessment.3. Deletion of addition of Rs. 50,00,000/- for unexplained unsecured loan and Rs. 77,71,138/- for interest earned on unsecured loans.4. Validity and tenability of the CIT(A)'s order on facts and in law.Detailed Analysis:Issue 1: Deletion of Addition of Rs. 6,65,00,000/- Under Section 68The Revenue challenged the deletion of an addition of Rs. 6,65,00,000/- made by the AO under Section 68 for unexplained share application money. The AO argued that the investment was routed through a sham enterprise, M/s Raffle Mercantile Pvt. Ltd., which allegedly utilized funds from bogus entry-providing companies. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)’s decision, noting that the assessment proceedings were already completed and unabated with no incriminating evidence found during the search. The Tribunal referenced the assessee’s own case for AY 2010-11, where similar additions were deleted, emphasizing that no incriminating material was found during the search, making the addition unsustainable.Issue 2: Power of AO to Reassess ReturnsThe Revenue cited the Allahabad High Court decision in Commissioner of Income Tax, Central Kanpur V. Raj Kumar Arora, which held that the AO has the power to reassess returns not only for undisclosed income found during search operations but also based on material available at the time of the original assessment. However, the Tribunal found this case law inapplicable, as the present case involved completed and unabated assessments with no incriminating evidence found during the search. The Tribunal reiterated that additions under Section 153A can only be made based on incriminating material discovered during the search, as established in the case of Kabul Chawla vs. CIT.Issue 3: Deletion of Addition of Rs. 50,00,000/- and Rs. 77,71,138/-The AO made additions of Rs. 50,00,000/- for unexplained unsecured loans and Rs. 77,71,138/- for interest earned on these loans. The CIT(A) deleted these additions, and the Tribunal upheld this decision, again noting the absence of incriminating evidence found during the search. The Tribunal emphasized that the assessment proceedings were already completed and unabated, and the additions were not based on any seized material, rendering them unsustainable under Section 153A.Issue 4: Validity and Tenability of the CIT(A)'s OrderThe Revenue argued that the CIT(A)’s order was perverse, erroneous, and not tenable on facts and in law. However, the Tribunal found that the CIT(A) had made a reasoned order based on the absence of incriminating evidence and the legal provisions established by the jurisdictional High Court. The Tribunal dismissed the Revenue's appeal, affirming that no addition could be made in an unabated assessment without incriminating material.ConclusionThe Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of the additions made by the AO. The Tribunal emphasized the necessity of incriminating evidence for making additions under Section 153A in unabated assessments and found the CIT(A)'s order valid and tenable. The decision was pronounced in open court on October 3, 2018.