2018 (12) TMI 524 - AT - Income Tax

Tribunal dismisses Revenue's appeal, emphasizing incriminating material needed for Section 153A assessments.

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,63,00,000 towards share capital/share application money and share premium, as no ... Assessment u/s 153A - Addition towards share capital / share application money and share premium in the search assessment in the absence of any incriminating material found during the course of search to that effect - unabated assessments - Held that:- The assessment framed u/s 143(1) of the Act for the Asst Year 2009-10, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share application money u/s 68 of the Act is hereby directed to be deleted. Since the issue is addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the addition u/s 68 of the Act for the Asst Year 2009-10. - Decided in favour of assessee. Issues Involved:1. Legality of addition towards share capital/share application money and share premium in search assessment under Section 153A of the Income Tax Act, 1961, in the absence of any incriminating material found during the search.Issue-wise Detailed Analysis:1. Legality of Addition under Section 153A:Facts:The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted the addition of Rs. 1,63,00,000 towards share capital/share application money and share premium made by the Assessing Officer (AO) in a search assessment under Section 153A of the Income Tax Act, 1961. The AO had made the addition based on the belief that Section 153A assessments allow for reassessment of total income irrespective of incriminating materials found during the search.Arguments:- The assessee argued that the original assessment for the Assessment Year (AY) 2009-10 was completed under Section 143(1) and no incriminating material was found during the search relating to that year. Hence, the income assessed originally should not be disturbed.- The AO contended that Section 153A assessments clear all decks, allowing reassessment of total income regardless of incriminating materials found during the search.- The CIT(A) deleted the addition, observing that no incriminating documents/papers were seized during the search, and the assessment for AY 2009-10 was not pending on the date of the search.Legal Precedents:- The CIT(A) relied on the Jurisdictional Bench of Kolkata Tribunal and the Hon’ble Calcutta High Court's decision in the case of Veer Prabhu Marketing Ltd., supported by the CBDT's decision not to file an SLP in the Supreme Court and the Apex Court’s dismissal of an SLP on a similar issue in the case of Pr. CIT vs. Kurele Paper Mills Pvt. Ltd.- The assessee also cited several decisions supporting the contention that additions in Section 153A assessments require incriminating material found during the search (CIT vs. Veerprabhu Marketing Ltd., ACIT vs. Kanchan Oil Industries Ltd., CIT vs. Kabul Chawla, CIT vs. Continental Warehousing Corporation).- The Revenue argued that the expression 'incriminating material' is not found in the Act and relied on the Hon’ble Karnataka High Court's decision in Canara Housing Development Co vs. DCIT, which held that search assessments could be framed without incriminating materials.Tribunal's Findings:- The Tribunal analyzed the scheme of the Act, which provides for abatement of pending proceedings as on the date of search. It noted that the assessment for AY 2009-10 was completed under Section 143(1), and the time limit for issuance of notice under Section 143(2) had expired, making it a concluded proceeding.- The Tribunal held that the legislature does not differentiate between assessments originally framed under Sections 143(1), 143(3), or 147. Unless incriminating material is found during the search, the AO cannot disturb the findings of a concluded assessment.- The Tribunal cited several judicial precedents, including the Delhi Tribunal in Dy. CIT v. Aggarwal Entertainment (P.) Ltd., the Kolkata Tribunal in ACIT vs. Kanchan Oil Industries Ltd., and the Delhi High Court in CIT vs. Kabul Chawla, which supported the view that additions in Section 153A assessments require incriminating material.- The Tribunal also noted that the Hon’ble Supreme Court dismissed the Revenue's SLP against the Delhi High Court's decision in Kabul Chawla, reinforcing the requirement of incriminating material for additions in Section 153A assessments.- The Tribunal concluded that the assessment for AY 2009-10, being a concluded assessment on the date of search, should not be disturbed in the absence of incriminating material. Consequently, the addition made by the AO was directed to be deleted.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,63,00,000 towards share capital/share application money and share premium, as no incriminating material was found during the search. The appeal by the Revenue was dismissed, reinforcing the principle that additions in Section 153A assessments require incriminating material found during the search.Order Pronounced:The appeal of the Revenue is dismissed. Order pronounced in the Court on 07.12.2018.