2014 (11) TMI 1002 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - Held that - In absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. Thus in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. - Decided in favour of assessee.

Issues Involved:
1. Deletion of addition of Rs. 89,00,000 under Section 68 of the Income-tax Act, 1961 on bogus share capital.
2. Validity of proceedings initiated under Section 153A of the Income-tax Act, 1961 in the absence of incriminating material found during the search under Section 132.
3. Reliance on the Supreme Court decision in the case of M/s. Lovely Exports (P) Ltd.
4. Charging of interest under Section 234A of the Income-tax Act, 1961 due to late filing of return.
5. Charging of interest under Section 234A if the addition is made under Section 153A without incriminating material.
6. Overall validity and correctness of the CIT(Appeals) order.

Detailed Analysis:

1. Deletion of Addition under Section 68:
The revenue challenged the deletion of an addition of Rs. 89,00,000 made by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961, treating the share capital as bogus. The CIT(Appeals) deleted this addition, and the revenue questioned this action. However, the ITAT upheld the CIT(Appeals) decision, noting that no incriminating material was found during the search to justify the addition under Section 68.

2. Validity of Proceedings under Section 153A:
The core issue was whether the provisions of Section 153A could be invoked in the absence of incriminating material found during the search. The learned AR argued that this issue was covered by several decisions from various ITAT benches and High Courts, which supported the assessee's case. The CIT(DR) contended that the plain reading of Section 153A did not require incriminating material for initiating proceedings, relying on the decision of the Delhi High Court in CIT vs. Anil Kumar Bhatia.

The ITAT found that no incriminating material relevant to the addition under Section 68 was found during the search. The CIT(Appeals) had correctly held the proceedings under Section 153A as invalid in the absence of such material. The ITAT relied on the Special Bench decision in All Cargo Global Logistics Ltd., which stated that in non-abated assessments, additions could only be made based on incriminating material found during the search.

3. Reliance on Supreme Court Decision in M/s. Lovely Exports (P) Ltd.:
The revenue argued that the CIT(Appeals) erred in relying on the Supreme Court decision in M/s. Lovely Exports (P) Ltd., as the facts differed from the present case. However, the ITAT did not find this argument persuasive since the primary issue was the validity of proceedings under Section 153A without incriminating material, which was adequately addressed by other relevant case laws.

4. Charging of Interest under Section 234A:
The CIT(Appeals) held that no interest could be charged under Section 234A if the return was filed late due to the non-receipt of copies of seized material. The ITAT did not specifically address this issue independently, as it became academic following the decision on the primary issue of Section 153A proceedings.

5. Charging of Interest under Section 234A in Absence of Incriminating Material:
Similarly, the CIT(Appeals) held that no interest could be charged under Section 234A if the addition was made under Section 153A without incriminating material. The ITAT's decision on the primary issue rendered this point academic and did not require separate adjudication.

6. Overall Validity and Correctness of CIT(Appeals) Order:
The ITAT found that the CIT(Appeals) order was fully supported by the relevant case laws, particularly the decisions of the Delhi High Court and the Rajasthan High Court, which held that in the absence of incriminating material, no addition could be made under Section 153A for completed assessments. The ITAT upheld the CIT(Appeals) order, rejecting the revenue's grounds.

Conclusion:
The appeal was dismissed, and the CIT(Appeals) order was upheld, confirming that no addition could be made under Section 153A in the absence of incriminating material found during the search. The issues regarding the deletion of the addition under Section 68 and the charging of interest under Section 234A became academic and did not require further adjudication.

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