2017 (4) TMI 1420 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - procurement of accommodation entries through share application money from non-descript companies - Held that - Additions have been made by the AO despite the fact that there was no incriminating material (whether by way of statement or document or asset etc.) unearthed during the course of search relevant for any assessment year. Also no proceedings were pending for this assessment year on the date of search. In these facts and circumstances we are of the considered view that the matter is squarely covered in favour of the assessee by precedent of Hon ble Jurisdictional High Court in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) In the absence of any incriminating material unearthed during the course of search the AO had no jurisdiction to initiate proceedings u/s 153A of the Act when no assessment proceedings were pending for this. Assessment Year on the date of search. Accordingly we hold that the assessment order dated 29.12.2011 u/s 143(3) r.w.s. 153A of the I.T.Act and the additions made therein were without jurisdiction. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of addition under section 68 of the Act, appeal against deletion of commission addition, admission of additional evidence under Rule 46A, jurisdictional issue regarding proceedings under section 153A of the Act.

Analysis:

(A) Appeal against Deletion of Addition under Section 68:
The Revenue filed an appeal against the deletion of an addition of Rs. 83,00,000 under section 68 of the Act related to accommodation entries through share application money. The CIT(A) had deleted this addition on merits, stating that the allegations had no basis. The Revenue challenged this deletion in the appeal.

(B) Appeal against Deletion of Commission Addition:
Another ground of appeal was the deletion of an addition of Rs. 41,500 made by the AO for commission paid for procurement of accommodation entries. The CIT(A) had also deleted this addition, and the Revenue contested this decision in the appeal.

(C) Admission of Additional Evidence under Rule 46A:
One of the issues raised was the admission of additional evidence under Rule 46A by the CIT(A). This was challenged by the Revenue in the appeal.

(D) Jurisdictional Issue Regarding Proceedings under Section 153A:
The core issue revolved around the jurisdictional aspect of proceedings under section 153A of the Act. The AO had made additions despite no incriminating material being found during the search relevant for any assessment year. The Tribunal referred to the decision in CIT vs. Kabul Chawla, emphasizing that in the absence of incriminating material, the AO had no jurisdiction to initiate proceedings under section 153A.

The Tribunal held that since there was no incriminating material found during the search and no pending proceedings for the assessment year in question, the AO lacked jurisdiction to proceed under section 153A. Consequently, the assessment order and the additions made therein were deemed without jurisdiction. The Tribunal dismissed the appeal of the Revenue on the jurisdictional issue, clarifying that they did not need to address the merits of the additions due to the jurisdictional dismissal.

In conclusion, the Tribunal dismissed the appeal of the Revenue for statistical purposes, upholding the decision based on the jurisdictional issue as per the precedent set by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla.