2021 (10) TMI 1100 - AT - Income Tax

Tribunal upholds CIT(A) decision on Section 153A assessments, requires incriminating material for reopening.

The Tribunal upheld the CIT(A)'s decision that assessments under Section 153A can only be reopened based on incriminating material found during a search. ... Assessment u/s 153A - Addition u/s 68 - whether unsupported entries appearing in the books of account can also fall under the term ‘incriminating documents’ ? - HELD THAT:- In completed assessments, the additions u/s 153A can only be made on the basis of some incriminating material. The argument of learned CIT, D.R. that unsupported entries, recorded in the books of account, also comes under the definition of incriminating material, is of no force as these entries cannot be called incriminating as the assessee had recorded such transactions in the books of account. They are also not ‘unsupported’, but are duly and properly supported by documentary evidences, such as bank statements, Demat statements and real time transactions through screen based trading on recognized stock exchanges. Simply because certain persons have admitted to have provided these entries as accommodation entries, cannot make these entries incriminating unless such persons are subjected to cross examination by the assessee. As in case of completed assessments, the additions can only be made on the basis of incriminating material respectfully following the judgment of Hon'ble Supreme Court in the case of Meeta Gutgutia [2018 (7) TMI 569 - SC ORDER] and Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] we do not find any infirmity in the order of learned CIT(A). Therefore, the appeals filed by the Revenue are dismissed. Issues Involved:1. Validity of notice under Section 153A in absence of incriminating material.2. Reliance on dismissed SLP in Meeta Gutgutia case.3. Application of Delhi High Court's decision in Kabul Chawla.4. Interpretation of the term 'incriminating' under Section 153A.5. Assessment based on unsupported entries in books of accounts.6. Post-amendment interpretation of Section 153C.7. Definition of 'incriminating' under other statutory provisions.8. Penalty under Section 270A(10) based on recorded entries.9. Evaluation of statements recorded under Section 133A and 131(1A).10. Opportunity for the Assessing Officer to present a remand report.11. Bogus credit entries as incriminating material.12. Burden of proof under Section 68.13. Legal provisions misread by CIT(A).Detailed Analysis:1. Validity of Notice under Section 153A in Absence of Incriminating Material:The Tribunal upheld the CIT(A)'s decision that the assessments could only be reopened based on incriminating material found during the search. The Tribunal cited the judgment of the Hon'ble Supreme Court in the case of Meeta Gutgutia, which affirmed that in the absence of any incriminating material, the invocation of Section 153A is not justified.2. Reliance on Dismissed SLP in Meeta Gutgutia Case:The Tribunal noted that the CIT(A) correctly relied on the dismissal of the Revenue's SLP in the Meeta Gutgutia case by the Supreme Court. The Tribunal affirmed that the dismissal of the SLP upheld the Delhi High Court's decision that additions under Section 153A must be based on incriminating material found during the search.3. Application of Delhi High Court's Decision in Kabul Chawla:The Tribunal agreed with the CIT(A) that the decision in Kabul Chawla was applicable. The Delhi High Court in Kabul Chawla held that in cases of completed assessments, additions can only be made based on incriminating material found during the search. This decision was upheld by the Supreme Court, reinforcing its applicability.4. Interpretation of the Term 'Incriminating' under Section 153A:The Tribunal dismissed the Revenue's argument that unsupported entries in books of accounts could be considered incriminating. It held that the term 'incriminating' refers to material that has a bearing on the total income and is not recorded in the books of accounts. The Tribunal emphasized that entries recorded in the books, supported by documentary evidence, cannot be termed as incriminating.5. Assessment Based on Unsupported Entries in Books of Accounts:The Tribunal found no merit in the argument that unsupported entries in the books of accounts could be considered incriminating. It noted that the entries in question were duly supported by bank statements, Demat statements, and real-time transactions through recognized stock exchanges.6. Post-Amendment Interpretation of Section 153C:The Tribunal clarified that the CIT(A) did not rely on the Supreme Court's decision in Sinhgad Technical Education Society, which pertained to Section 153C before its amendment. The assessment in the present case was under Section 153A, making the decision inapplicable.7. Definition of 'Incriminating' under Other Statutory Provisions:The Tribunal dismissed the Revenue's argument that the term 'incriminating' should be inferred harmoniously with other statutory provisions. It held that the term should be understood in the context of materials found during the search that have a direct bearing on the total income.8. Penalty under Section 270A(10) Based on Recorded Entries:The Tribunal noted that the CIT(A) correctly held that entries recorded in the books of accounts cannot be considered incriminating for the purpose of imposing penalties under Section 270A(10).9. Evaluation of Statements Recorded under Section 133A and 131(1A):The Tribunal agreed with the CIT(A) that statements recorded under Section 133A are not conclusive evidence. The CIT(A) noted that the statements relied upon by the Assessing Officer were recorded under Section 133A, which does not carry the same weight as statements recorded under Section 132(4).10. Opportunity for the Assessing Officer to Present a Remand Report:The Tribunal found no fault with the CIT(A)'s decision not to call for a remand report from the Assessing Officer. The CIT(A) had provided a detailed analysis and found no incriminating material to justify the additions.11. Bogus Credit Entries as Incriminating Material:The Tribunal dismissed the Revenue's argument that bogus credit entries recorded in the books of accounts could be considered incriminating. It noted that the CIT(A) had allowed relief based on the absence of incriminating material found during the search.12. Burden of Proof under Section 68:The Tribunal upheld the CIT(A)'s decision that the burden under Section 68 could not be discharged merely by filing confirmations and financial statements of shell companies. The CIT(A) had allowed relief based on the legal issue that additions in completed assessments could only be made based on incriminating material.13. Legal Provisions Misread by CIT(A):The Tribunal found no merit in the Revenue's argument that the CIT(A) misread the legal provisions. It upheld the CIT(A)'s detailed analysis and reliance on judicial precedents, including the decisions in Kabul Chawla and Meeta Gutgutia.In conclusion, the Tribunal dismissed the appeals filed by the Revenue and upheld the CIT(A)'s orders, finding no infirmity in the CIT(A)'s decisions. The petitions filed by the assessees under Rule 27 were also dismissed as not pressed.