2018 (10) TMI 800 - AT - Income Tax

Tribunal allows respondent's defense, dismisses department's appeal on completed assessment

The Tribunal admitted the application under Rule 27, allowing the respondent to support the order even on a ground decided against it. Regarding the ... Assessment u/s 153A - Addition on account of share application money and share premium u/s 68 - incriminating material as found during the course of search - Held that:- Case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] held that though Section 153A does not say that addition should be strictly made on the basis of the evidence found in the course of the search, or other post search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be made without any reference or establishing any nexus with the seized material. Thus, as per this judgment, the existence of the seized material found during search is a must for making addition in those assessment years which have not abated. Therefore, in view of the above judgment above, it is our considered opinion that no addition could have been made u/s 68 of the Act in view of the fact that no incriminating material was found during the course of search to which this impugned addition could be related. - Decided in favour of assessee Issues Involved:1. Admissibility of the application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963.2. Legality of the addition of Rs. 80 lakh under Section 68 of the Income Tax Act, 1961, based on the absence of incriminating material found during the search.Detailed Analysis:1. Admissibility of the Application under Rule 27:The assessee filed an application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, arguing that the addition of Rs. 80 lakh was made without considering the fact that no incriminating documents were found during the search. The department opposed this application.Tribunal's Decision:The Tribunal admitted the application, stating that in an appeal before the ITAT, the respondent is entitled to support the order of the appellate authority even on a ground which has been decided against it, even though it may not have filed any appeal against such an order.2. Legality of the Addition under Section 68:The primary issue was whether the addition of Rs. 80 lakh could be justified in the absence of any incriminating material found during the search.Arguments by the Assessee:- The addition was not based on any incriminating material found during the search.- The statement of Shri Tarun Goyal, relied upon by the department, was recorded before the date of the search and, therefore, could not be considered as incriminating material.- The original assessment under Section 143(3) of the Act had already scrutinized and accepted the share capital.Arguments by the Department:- The department relied on the statement of Shri Tarun Goyal as incriminating material.- Cited various judicial precedents to support the contention that additions could be made even without incriminating material found during the search.Tribunal's Decision:- The Tribunal noted that the assessment order did not reference any incriminating material found during the search.- The statement of Shri Tarun Goyal was recorded before the search and could not be considered as incriminating material.- The original assessment had already scrutinized the share capital, and no new evidence was found during the search to justify the addition.- The Tribunal relied on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla, which held that in the absence of any incriminating material, the completed assessment could not be disturbed.Conclusion:The Tribunal held that no addition could have been made under Section 68 of the Act in the absence of any incriminating material found during the search. Consequently, the appeal filed by the department was dismissed.Final Judgment:The appeal filed by the department was dismissed, and the order pronounced in the open court on 10th October 2018.