2021 (6) TMI 949 - AT - Income Tax

Tribunal upholds CIT(A) order, dismisses Revenue appeals. Section 153A additions require incriminating material.

Deputy Commissioner of Incometax, Cent ral Circle-1 (4), Ahmedabad Versus Smt. Sonal D. Vora And (Vice-Versa) And Deputy Commissioner of Income-tax, Central Circle-1 (4), Ahmedabad Versus Smt. Niruben Vithalbhai Patel

The Tribunal upheld the order of the CIT(A), deleting the additions made by the Assessing Officer. It found that reassessment proceedings under Section ... Assessment u/s 153A - bogus LTCG on sale of shares - Whether incriminating material was found at the premises of the assessee? - HELD THAT:- We find no cogent document forthcoming from the Revenue controverting such statement made by Shri Shirish Chandrakant Shah. Therefore, nowhere in the material as referred by the Ld. AO in the assessment proceeding practically proves that there was any relation between the said Shri Shirish C. Shah and the appellant - AO’s order that the statement of Mr. Damodar Attal has through been relied upon by him but it is a fact the Shri Damodar Attal has never admitted such transaction of shares of the said company made by the appellant or his group as bogus in nature. Furthermore, neither any incriminating material was found at the premises of the assessee which could prove that the appellant at any stage obtained alleged bogus LTCG on sale of shares of the said company from Shirish Chandra Shah or his group. No such mentioning in any document found during search at the premises of the assessee is available on record which indicates any nexus with transaction carried out by the appellant in such shares of the Chandini Textiles & Engineering Ltd. nor does it suggest accommodative entries ever. Therefore, it is a fact that no documents found during the course of search from the premises of the appellant which could be terms as incriminating in nature as prescribed under Section 153A of the Act as already taken care in SMT. SONAL UDAY VORA AND (VICE-VERSA) [2020 (12) TMI 350 - ITAT AHMEDABAD] The Revenue before us has failed to draw our attention to any material which is incriminating in nature found during such course of search at the premises of the assessee and therefore, respectfully relying upon the judgment passed by the Co-ordinate Bench and the issue involved in the common search proceeding in our considered opinion the assessment order passed under Section 153A is beyond the ambit, scope and purview of Section 153A. Keeping in view of the different pronouncement made by different judicial forums including the Jurisdictional High Court in the case of CIT vs. Saumya Construction Pvt. Ltd. [2016 (7) TMI 911 - GUJARAT HIGH COURT] and the judgment passed by the Hon’ble Delhi High Court in the matter of CIT (Central)-III vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] as already discussed by the Co-ordinate Bench in IT(SS)A No. 179/Ahd/2018, we find no merit in disallowing the claim of exempt long-term capital gain on the count of undisclosed income. The same is not sustainable in the eye of law in the absence of any incriminating documents found during the search which has properly considered by the Ld. CIT(A). - Decided against revenue. Issues Involved:1. Maintainability of reassessment proceedings under Section 143(3) read with Section 153A of the Income Tax Act, 1961.2. Validity of additions made based on alleged bogus long-term capital gains (LTCG) on the sale of shares.3. Relevance of incriminating material found during search proceedings.Detailed Analysis:1. Maintainability of Reassessment Proceedings under Section 143(3) read with Section 153A:The primary issue raised was the maintainability of reassessment proceedings under Section 143(3) read with Section 153A of the Income Tax Act, 1961. The assessee argued that since the original return of income was filed on 28.09.2011, and the time limit for issuing a notice under Section 143(2) had expired, the reassessment could not be initiated in the absence of any incriminating material. The Tribunal supported this argument, citing the case of DCIT vs. Smt. Sonal Uday Vora, where it was held that reassessment cannot be made without any incriminating material found during the search.2. Validity of Additions Made Based on Alleged Bogus LTCG on Sale of Shares:The Revenue contended that the shares of Chandini Textiles & Engineering Ltd. were manipulated to provide exempt long-term capital gains. Evidence found during the search, including a 'DV sheet' and statements from key employees, suggested that these were bogus transactions. However, the Tribunal found that no incriminating material was found at the assessee's premises during the search. The Tribunal cited several judicial precedents, including the case of CIT vs. Kabul Chawla, which established that in the absence of incriminating material, completed assessments could not be reopened to make additions.3. Relevance of Incriminating Material Found During Search Proceedings:The Tribunal emphasized that for reassessment under Section 153A, incriminating material must be found during the search. The Tribunal cited judgments from the Hon'ble Delhi High Court and the Hon'ble Gujarat High Court, which clarified that additions could only be made based on material found during the search. In this case, since no incriminating material was found at the assessee's premises, the additions made by the Assessing Officer were not sustainable. The Tribunal noted that the documents relied upon by the Assessing Officer were found at the premises of a third party, Shirish Shah, and were considered 'dumb documents' with no direct linkage to the assessee's transactions.Conclusion:The Tribunal upheld the order of the CIT(A), which deleted the additions made by the Assessing Officer. The Tribunal found that the reassessment proceedings under Section 153A were not maintainable in the absence of incriminating material found during the search at the assessee's premises. Consequently, the appeals filed by the Revenue were dismissed, and the cross-objections filed by the assessee were also dismissed as infructuous. The judgment reaffirmed the principle that additions under Section 153A could only be made based on incriminating material found during the search, ensuring that assessments are not arbitrary or without a nexus to the seized material.