2018 (1) TMI 1032 - ITAT DELHI

Assessment u/s 153A - addition u/s 68 - Held that:- A.O. made the addition under section 68 of the I.T. Act only on the basis of facts already on record which has also been considered in original assessment proceedings under section 143(3) of the I.T. Act and claim of assessee has been accepted by the A.O. prior to the search. Therefore, no assessment was pending against the assessee on the date of search. The completed assessments can be interfered with by the A.O. while making assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. However, the department has failed to produce any material to justify the addition made in assessment under section 153A under section 68 of the I.T. Act.

Invocation of section 153A by the A.O. for assessment year under appeal was without any legal basis as there were no incriminating material found in search for assessment year under appeal. The issue is therefore, covered in favour of the assessee by Judgments of the jurisdictional High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia (2017 (5) TMI 1224 - DELHI HIGH COURT) - Decided in favour of assessee.

Addition u/s 68 - assessee produced sufficient documentary evidence before A.O. to prove the ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further enquiry on the documents filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the investor company and the assessee because investor was a foreign entity established in Mauritius. Even the reply received from Mauritius Revenue Authorities proved the identity of the investor, its creditworthiness and genuineness of the transaction. It is not reported if any, cash was found deposited in the account of the investor before making investment in assessee company - as assessee discharged its initial onus to prove the identity of the investor company, its creditworthiness and genuineness of the transaction.

The material on record clearly support the explanation of assessee that not only in assessment year under appeal but in earlier years also, M/s. STL made investment in assessee company through banking channel supported by the documentary evidence. The Ld. CIT(A) on proper appreciation of the evidence before him, correctly deleted the addition - Decided in favour of assessee

Addition u/s 14A - Held that:- Justification to interfere with the orders of the Ld. CIT(A) in deleting the substantial addition under section 14A because A.O. did not record satisfaction under section 14A of the I.T. Act because assessee pleaded that it did not incur any expenditure to earn exempt income. The A.O. re-stated addition made in the original assessment under section 143(3). As per the order of the Ld. CIT(A), assessee has already suo moto disallowed part amount. It was also found that assessee used its own funds for making investments. The Ld. CIT(A), therefore, correctly deleted the substantial additions

Disallowance u/s 37(1) on the penalty under VAT Act - Held that:- Assessee did not make any claim of deduction in the P & L A/c. Therefore, it was correctly deleted by the Ld. CIT(A). We may also note here that both these additions are part of the regular books of account which were already disclosed to the Revenue in the original return of income and A.O. has accepted the same. No assessments were pending prior to the date of search and assessments were already completed. The assessments are therefore, illegal and bad in law under section 153A of the I.T. Act. The additions have already been rightly deleted by the Ld. CIT(A) - Decided in favour of assessee