2019 (4) TMI 97 - AT - Income Tax

Assessment u/s 153A - assessment for the year under consideration was not abated as on the date of search and CIT holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases - No opportunity of cross examination of witnesses - addition u/s 68 - HELD THAT:- Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.

In the instant case, we find that the time limit prescribed for issue of notice u/s 142(1)/143(2) of I.Tax Act for AY 2010-11 & AY 2011-12 has expired before the search. Therefore, the assessment for AY 2010-11 & A.Y 2011-12 was deemed completed.

Not providing opportunity to cross examination - relying on the decision of the Tribunal in the case of M/s Kota Dall Mill Vs. DCIT [2019 (1) TMI 344 - ITAT JAIPUR] for the A.Y. 2010-11 and 2015-17, it was held that addition made without providing opportunity of cross examination is not sustainable.

The details clearly show that at the time of granting of loans to the assessee these companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As we have discussed that the AO has not pointed out any discrepancy in the financial statements or in the bank account statements of the loan creditors to show that there was deposit or introduction of the cash prior to giving the loan to the assessee no addition to be made.

No addition in case of not abated assessment, when no incriminating material is found, is covered by the decision of the Tribunal in the case of M/s Kota Dall Mills Vs. DCIT. [Supra]

Tribunal have confirmed the order of the ld. CIT(A) with respect of the share application money accepted at premium from following three concerns namely M/s Sangam Distributors Pvt. Ltd., M/s Teac Consultants Private Limited and M/s ISIS Mercantiles Pvt. Ltd. Similarly we found that the unsecured loan taken from M/s Jalsagar Commerce Pvt. Ltd. have also been dealt by the Tribunal after dfealing threadbare in the case of M/s Kota Dall Mill Vs. DCIT (supra) for the assessment years 2010-11 to 2015-16. As the facts and circumstances during both the assessment years are same as have elaborately discussed by the Tribunal in the above years, respectfully following the same, we do not find any merit in the addition so made with respect to unsecured loan taken from M/s Jalsagar Commerce Pvt. Ltd. and share application money with premium from M/s Sangam Distributors Pvt. Ltd., M/s Teac Consultants Private Limited and M/s ISIS Mercantiles Pvt. Ltd.

Disallowance u/s 14A - non recording any satisfaction as to the correctness of the claim made by the assessee - CIT(A) has deleted the addition by observing that AO has mechanically applied the Rule 8D as amended w.e.f. 02/6/2016, which was not even applicable to the relevant assessment years under consideration - HELD THAT:- AO has not established any nexus of investment with the borrowed funds, rather availability of sufficient interest free funds justifies the case of the assessee that the disallowance U/s 14A is unwarranted. Detailed findings were recorded by the ld. CIT(A) are as per material on record which do not require any interference on our part. Accordingly, grounds taken by the revenue in both the years with regard to the disallowance U/s 14A of the Act are dismissed.