2023 (12) TMI 92 - AT - Income Tax

Validity of assessment made u/s 153C - reliance on statement recorded u/s 132(4) of the Act and without and any incriminating material - addition of unexplained cash credit u/s 68 towards the share premium received from around 17 entities - Share Premium received from different entities was a mere sham transaction as one of the Directors of the company has in his oath during the search proceedings stated that he was not aware of any transaction in the assessee company - AO held that the adverse inference has been drawn as per section 114 of Indian Evidence Act where the assessee has failed to furnish explanation or documentary evidences in support of its claim CIT(A) has deleted the impugned addition made u/s 68 of the Act on the ground that no addition can be made in the absence of any incriminating material found during the course of search in the case of unabated assessment - HELD THAT - We find no infirmity in the finding of the Ld. CIT(A) in this context. It is also evident that as per the provisions of section 153C it is mandatory that the Ld. AO of the searched person should have recorded satisfaction. In the present case in hand it is evident that AO was unable to conclusively state that satisfaction note was duly recorded. In the case of failure to prove that the AO has recorded satisfaction we do not find any justification in upholding the addition made by the Ld. AO and hence the assessment order is in itself void abintio. Therefore the order of Ld. CIT(A) in deleting the impugned addition is upheld. Appeal filed by the revenue is dismissed.

Summary

Issues involved:
The appeal challenges the order of the Learned Commissioner of Income Tax (Appeals)-49 regarding the assessment made under section 143(3) read with section 153C of the Income Tax Act for the Assessment Year 2008-09.

Summary:

1. Jurisdiction of AO under section 153C:
The appeal questioned the assessment made under section 143(3) read with section 153C of the Act, contending that the AO did not have the jurisdiction as there was no recorded satisfaction before invoking proceedings under section 153C.

2. Validity of Addition under section 68:
The AO made an addition of Rs. 9,39,55,000 as unexplained cash credit under section 68 for share premium received by the assessee. The AR argued that the AO had previously verified the source of share premium and issued notices to investors, finding no discrepancies. Additionally, it was contended that without incriminating material, no addition could be made in an unabated assessment year.

3. Reliance on Statement vs. Incriminating Material:
The AO based the addition on the statement of a director, alleging sham transactions. However, the CIT(A) found that no incriminating material was seized during the search, and reliance solely on a statement without corroborative evidence was insufficient. The CIT(A) deleted the addition under section 68, emphasizing the necessity of incriminating material for additions in unabated assessments.

4. Recording of Satisfaction Note:
The bench noted that the AO failed to conclusively prove the recording of satisfaction as required under section 153C. Without this proof, the addition made by the AO was deemed unjustified, rendering the assessment order void ab initio. Consequently, the CIT(A)'s decision to delete the addition was upheld.

In conclusion, the appeal by the revenue challenging the CIT(A)'s order was dismissed, affirming the deletion of the impugned addition due to the absence of incriminating material and the lack of recorded satisfaction by the AO as mandated under section 153C.