2023 (8) TMI 225 - AT - Income Tax

Tribunal directs deletion of additions for unexplained cash credit and agriculture income, emphasizing legal requirements.

Estate of Late - Smt. Jayanthi Krishnamurthy, Rep. by J. Thentral Kumar Versus The Asst. Commissioner of Income Tax, Central Circle-III (4), Chennai.

The Tribunal allowed the appeal, directing the AO to delete the addition made towards unexplained cash credit, emphasizing the legal requirement for ... Assessment u/s 153A - unexplained cash credit addition - addition made towards capital introduced in Dragon Movies - incriminating material found as a result of search or not? - HELD THAT:- It is a well-established principle of law by the decision of Abhisar Buildwell Pvt. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] that no addition can be made in absence of incriminating material found as a result of search, if the assessment is unabated/concluded as on the date of search. A similar view has been taken in the case of PCIT v. Meeta Gutgutia [2017 (5) TMI 1224 - DELHI HIGH COURT] as clearly held that in absence of any incriminating material, no addition can be made in the assessment framed u/s. 153A/153C. In the present case, there is no dispute with regard to the fact that additions made by the AO towards cash credit being capital introduced in Dragon Movies is not based on any incriminating material found as a result of search. Therefore, additions made by the AO towards unexplained cash credit is unsustainable under law. Addition deleted - Decided in favour of assessee. Issues involved:The appeal filed against the order of the Commissioner of Income Tax (Appeals)-19, Chennai, dated 07.02.2017, pertaining to assessment year 2005-06.Delay in filing appeal:The delay of 352 days in filing the appeal was due to the death of the assessee and her son, leading to a reasonable cause. The delay was condoned in the interest of substantial justice after considering the petition and relevant pleadings.Unexplained cash credit addition:A search and seizure under section 132 of the Income Tax Act, 1961, led to the assessment for AY 2005-06. The Assessing Officer (AO) made an addition of Rs. 10,40,000 as unexplained cash credit since the source was not explained. The First Appellate Authority upheld this addition. The legal ground challenging the validity of this addition was raised during the appeal, citing precedents where additions without incriminating material were deemed unsustainable. The Tribunal admitted the additional grounds and directed the AO to delete the addition made towards unexplained cash credit.Jurisdiction and assessment validity:The AO's jurisdiction to make additions without incriminating material found as a result of search was questioned. The Tribunal held that in the absence of such material, no addition can be made, as established by legal precedents. The AO was directed to delete the addition made towards capital introduced in Dragon Movies as unexplained cash credit.Legitimate expectation and tax provisions:The appellant challenged the CIT(A)'s order on various grounds, including lack of jurisdiction, failure to consider the source of investment, and misapplication of tax provisions. The Tribunal found in favor of the appellant, emphasizing the need for incriminating material for additions and the appellant's compliance with tax laws.Agriculture income and tax implications:The CIT(A) erred in treating agriculture income as taxable, which was beyond the legislative competence of the central government. The Tribunal directed the AO to delete the addition made towards agriculture income, emphasizing the legal principles governing such income.Additional grounds and legal arguments:The appellant sought to file additional grounds challenging the validity of additions made, which were admitted by the Tribunal for adjudication based on legal precedents allowing such grounds to be raised at any stage of proceedings.Decision and outcome:The Tribunal allowed the appeal, directing the AO to delete the addition made towards unexplained cash credit, emphasizing the legal requirement for incriminating material to support such additions.Judgment Highlight:Separate judgments were not delivered by the judges.