2021 (9) TMI 216 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Section 68 additions for unexplained capital.

Dy. Commissioner of Income Tax, Central Circle-31 Versus M/s Aakriti Hotels Pvt. Ltd.

The Tribunal upheld the CIT(A)'s decision to delete additions made under Section 68 of the IT Act for unexplained share capital, premium, and investment ... Assessment u/s 153A - addition u/s 68 - whether material seized during search operations suggesting concealed income? - HELD THAT:- It is an admitted fact that on the date of search, the assessment for the Assessment Years 2009-10 and 2010-11 had attained finality and were not pending on the date of search. Hence, the assessment for the Assessment Years 2009-10 and 2010-11 cannot be treated as abated assessments. Further, it is also an admitted position that the additions which have been made by the Assessing Officer u/s. 68 is neither based on any seized documents or any incriminating material found during the course of search. As the additions made in the order passed U/s. 153A, for the captioned assessment years which are unabated assessments, cannot be made, because same are beyond the scope of assessments u/s. 153A as the same are without any incriminating documents found during search. Hence on legal grounds the impugned additions are deleted. - Decided in favour of assessee. Issues Involved:1. Deletion of addition made under Section 68 of the IT Act on account of unexplained share capital and premium for A.Y. 2009-10 and A.Y. 2010-11.2. Deletion of addition made under Section 68 of the IT Act on account of unexplained investment in property for A.Y. 2010-11.3. Validity of the addition made by the Assessing Officer within the scope of Section 153A without any incriminating material found during the search.Issue-wise Detailed Analysis:1. Deletion of addition made under Section 68 of the IT Act on account of unexplained share capital and premium for A.Y. 2009-10 and A.Y. 2010-11:The Revenue challenged the deletion of additions amounting to Rs. 73,47,29,400 for A.Y. 2009-10 and Rs. 9,00,00,000 for A.Y. 2010-11 made under Section 68 of the IT Act on account of unexplained share capital and premium. The Assessing Officer (AO) had made these additions based on the perusal of the audited balance sheet, noting an increase in subscribed share capital and a significant amount of security premium. However, the Ld. CIT(A) deleted these additions after concluding that the assessee had explained the identity, genuineness, and creditworthiness of the parties involved, and the AO failed to make further inquiries. The Tribunal upheld the CIT(A)'s decision, emphasizing that the additions were not based on any incriminating material found during the search, and the assessments for these years were non-abated as per the second proviso to Section 153A.2. Deletion of addition made under Section 68 of the IT Act on account of unexplained investment in property for A.Y. 2010-11:For A.Y. 2010-11, the AO also made an addition of Rs. 7,64,22,000 under Section 68 on account of unexplained investment in property, based on the difference between the stamp duty value and the transaction value. The Ld. CIT(A) deleted this addition, stating that there was no evidence suggesting unaccounted payment by the assessee for the property purchase. The Tribunal agreed with the CIT(A), noting that the purchase deed of the property seized during the search could not be treated as incriminating material, as merely a difference in stamp duty value and transaction value does not indicate unexplained investment. Furthermore, the provisions of Section 56(2) were not applicable to the company assessee during the relevant year.3. Validity of the addition made by the Assessing Officer within the scope of Section 153A without any incriminating material found during the search:The respondent-assessee raised a legal ground under Rule 27 of the ITAT Rules, challenging the validity of the additions made by the AO within the scope of Section 153A, arguing that such additions cannot be made unless there was material seized during the search operations suggesting concealed income. The Tribunal admitted this legal ground, noting that both assessment years in question were non-abated as per the second proviso to Section 153A and that no incriminating documents were found during the search. The Tribunal referred to several judicial precedents, including the Hon'ble Delhi High Court's decisions in the cases of CIT Vs. Kabul Chawla and Principal Commissioner of Income-tax, Central -2, New Delhi v. Meeta Gutgutia, which held that additions in assessments under Section 153A can only be made based on incriminating material found during the search. The Tribunal concluded that the AO's additions were beyond the scope of Section 153A as they were not based on any incriminating material, and therefore, the additions were deleted on legal grounds.Conclusion:The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s deletions of the additions made under Section 68 of the IT Act for unexplained share capital, premium, and investment in property, as these additions were not based on any incriminating material found during the search, and the assessments for the relevant years were non-abated. The decision was announced on 17/08/2021.