Tribunal quashes assessment order for lack of incriminating material, upholds deletion of share application money addition

The Tribunal quashed the assessment order as it was based on no incriminating material found during the search, ruling it was bad in law. The addition made under section 68 regarding share application money was deleted by the CIT(A) and upheld by the Tribunal due to lack of incriminating material. The disallowance of loss by the Assessing Officer was not addressed as the assessment order was already quashed. The Tribunal allowed the assessee's cross-objection, quashed the assessment order, and dismissed the Revenue's appeal.

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Issues Involved:
1. Legality of the assessment order passed under sections 153C/143(3).
2. Deletion of addition made under section 68 regarding share application money.
3. Deletion of disallowance of loss by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order Passed Under Sections 153C/143(3):

The assessee challenged the assessment order on the grounds that it was based on no incriminating material found during the search and was barred by limitation. The Tribunal noted that the search and seizure operations were conducted on 21.03.2007, and the assessment was completed on 24.12.2009. The assessee argued that the assessment should have been completed by 31.12.2008 as per section 153B of the Act.

The Tribunal referred to the case of Kabul Chawla (380 ITR 573), where it was held that in the absence of any incriminating material, the completed assessment can be reiterated, and the abated assessment or reassessment can be made. The Tribunal also cited the case of Meeta Gutgutia (395 ITR 526), which supported the view that no additions can be made under sections 153A and 153C without incriminating material found during the search. The Tribunal concluded that since no incriminating material was found during the search, the assessment order was bad in law and quashed it.

2. Deletion of Addition Made Under Section 68 Regarding Share Application Money:

The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 2,71,65,000/- made under section 68 of the Act concerning the share application money introduced during the year. The Assessing Officer had asked the assessee to file the source, genuineness, and identity of the share application money, which the assessee did. However, the Assessing Officer was not satisfied and made an addition of Rs. 3,12,80,000/-.

The CIT(A) deleted the addition after considering the facts and submissions. The Tribunal upheld the CIT(A)'s decision, stating that no incriminating material was found during the search to justify the addition under section 68. The Tribunal relied on the legal position established in the cases of Kabul Chawla and Meeta Gutgutia, which emphasized that additions should be based on evidence found during the search.

3. Deletion of Disallowance of Loss by the Assessing Officer:

The Revenue also argued that the CIT(A) erred in deleting the disallowance of loss of Rs. 49,338/- made by the Assessing Officer. The Tribunal did not find it necessary to dwell into this issue as it had already quashed the assessment order based on the absence of incriminating material.

Conclusion:

The Tribunal allowed the cross-objection of the assessee, quashed the assessment order, and dismissed the appeal of the Revenue. The decision was pronounced in the open court on 21.02.2022.

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