2018 (12) TMI 1266 - AT - Income Tax

Tribunal upholds CIT(A)'s orders on Section 68 additions, emphasizing need for incriminating material

ACIT, Central Circle- 30, New Delhi Versus Ankush Saluja, Archana Saluja And Saluja Construction Co. Ltd.

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s orders that deleted additions made under Section 68 of the Income Tax Act. ... Assessment u/s 153A - Addition u/s 68 on account of unexplained cash credits - Held that:- CIT (DR) failed to establish that the additions made in the case of Assessee were based on any incriminating material found in the course of search U/s 132 of I.T. Act. On perusal of the Assessment Orders and on further perusal of impugned appellate orders of Ld. CIT(A), it is found that nowhere it is the case of Revenue that the aforesaid additions made in the Assessment Order were based on any incriminating material found in the course of search U/s 132 of I.T. Act. It is also not in dispute that no assessments were pending in the case of any of the three assessee on the date of search u/s 132 of I.T.Act. Thus additions to be deleted - Decided in favour of assessee. Issues Involved:1. Deletion of additions made under Section 68 of the Income Tax Act on account of unexplained cash credits.2. Interpretation of the term 'total income' under Section 153A of the Income Tax Act.3. Scope of assessment under Section 153A of the Income Tax Act.4. Reliance on the judgment in the case of CIT vs. Kabul Chawla by the jurisdictional High Court.5. Relevance and definition of 'incriminating documents' under the Income Tax Act.6. Validity of additions in the absence of incriminating material during search.Issue-wise Detailed Analysis:1. Deletion of Additions Made Under Section 68 of the Income Tax Act:The Revenue challenged the deletion of additions made under Section 68 of the Income Tax Act for unexplained cash credits in the cases of the three assessees. The CIT(A) had directed the Assessing Officer (AO) to delete these additions, which were not based on any incriminating documents found during the search under Section 132 of the Income Tax Act. The Tribunal upheld the CIT(A)'s decision, noting that the additions were not supported by any incriminating material found during the search.2. Interpretation of the Term 'Total Income' Under Section 153A of the Income Tax Act:The Revenue contended that the CIT(A) erred in interpreting the term 'total income' under Section 153A to mean only the undisclosed income discovered from seized or incriminating material. The Tribunal referred to the judgment in CIT vs. Kabul Chawla, which held that in the absence of any incriminating material, the completed assessment can only be reiterated and no fresh addition can be made. The Tribunal found that the CIT(A)'s interpretation was consistent with the legal position established in Kabul Chawla.3. Scope of Assessment Under Section 153A of the Income Tax Act:The Revenue argued that the CIT(A) adopted a restrictive interpretation of the scope of assessment under Section 153A. The Tribunal, however, reiterated that the scope of assessment under Section 153A is limited to the income unearthed during the search, as per the judgment in Kabul Chawla. The Tribunal emphasized that in the absence of any incriminating material, no additions could be made for the completed assessment years.4. Reliance on the Judgment in the Case of CIT vs. Kabul Chawla:The Revenue objected to the CIT(A)'s reliance on the judgment in CIT vs. Kabul Chawla, arguing that the decision had not been accepted by the department and an SLP was filed before the Supreme Court. The Tribunal noted that the pending SLP did not detract from the binding nature of the jurisdictional High Court's judgment. The Tribunal upheld the CIT(A)'s reliance on Kabul Chawla, stating that the decision was applicable to the facts of the case.5. Relevance and Definition of 'Incriminating Documents' Under the Income Tax Act:The Revenue contended that the term 'incriminating document' is not defined in the Income Tax Act and is open to various interpretations. The Tribunal referred to multiple judicial precedents, including Kabul Chawla and Vijay Bhai N. Chandrani vs. ACIT, which emphasized that additions under Section 153A must be based on incriminating material found during the search. The Tribunal concluded that in the absence of any such material, the additions made by the AO were not justified.6. Validity of Additions in the Absence of Incriminating Material During Search:The Tribunal found that in all three cases, the additions made by the AO were not based on any incriminating material found during the search. The Tribunal referred to the earlier judgments and orders, including those in the cases of Ankush Saluja and Saluja Construction Co. Ltd., which held that no additions could be made under Section 153A in the absence of incriminating material. The Tribunal upheld the CIT(A)'s orders deleting the additions and dismissed the Revenue's appeals.Conclusion:The Tribunal dismissed the appeals filed by the Revenue, upholding the CIT(A)'s orders that deleted the additions made under Section 68 of the Income Tax Act. The Tribunal emphasized the importance of incriminating material found during the search for making additions under Section 153A and relied on the judgment in CIT vs. Kabul Chawla to support its decision. The Tribunal concluded that the Revenue failed to establish that the additions were based on any incriminating material, and therefore, the CIT(A)'s orders were justified.