2019 (5) TMI 1893 - AT - Income Tax

Assessment u/s 153A - Addition u/s. 68 - Loose papers found and seized during the course of search - assessments abated on the date of search or not? - proof of incriminating material found in search - HELD THAT:- We note that there are some loose papers found and seized during the course of search but none of them were incriminating in nature relating to the issue of share capital. Even in the order framed under section 153A read with section 143(3), there is no whisper about the material found during the course of search or any reference thereto while making the addition. In this case, we observe that the assessment proceedings were already completed vide order dated 18.03.2013 passed under section 143(3) and the assessment has not abated on the date of search and any addition could only be made on the basis of incriminating material found during the course of search.

As the statement of Shri Rajesh Daftary recorded during the course of survey is not and can not be treated as incriminating material qua the investment in shares of the assessee company by M/s. GSD Trading and Financial Services Pvt. Ltd. In the statement of Mr Rajesh Daftary there is nothing contrary to the evidences produced by the assessee during the original assessment proceedings or during proceedings u/s 153A

We are therefore not in agreement with the conclusion drawn by Ld. CIT(A) that the statement of Shri Rajesh Daftary is an incriminating material and accordingly the order of Ld. CIT(A) is set aside on this issue and AO is directed to delete the addition. The legal issue raised in ground no 1 to 5 by the assessee is allowed.

Addition u/s 68 - creditworthiness and genuineness of the parties from whom share application money was received were not proved - assessee has submitted all the proof, documents and evidences in respect of said investment in the original assessment proceedings as well as the proceedings under section 153A of the Act in the form of share application, bank statement, audited financial statement and memorandum and article of association, ITRs, name of the bank from where the payments were made. The said investments were duly reflected in the books of GSD Trading and Financial Services Pvt. And were also shown in the schedule of investments forming part of the Balance Sheet as on 31.3.2010. Ltd The AO also verified the said transactions by issuing notice under section 133(6) of the Act to the said party which was replied by the investor confirming the investment and by filing all the necessary details and thus the AO accepted the genuineness and creditworthiness of the transactions in the original assessment proceedings. We find merit in the submissions of the Ld. A.R. that amendment in section 68 covering the share capital is applicable from A.Y. 2013-14 and is not applicable to the year under consideration - assessee has satisfied three tests of capacity , identity and genuineness of the investor and has a very strong case and no addition is called for. - Decided in favour of assessee.