×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This is appeal preferred by the Revenue against the order of the Ld. CIT(A) - 21, Kolkata dated 04.07.2017 for AY 2010-11.
2. The grounds of appeal are as under:
“1. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred under law in allowing ground no. 1 & 2 of the assessee’s appeal on technical grounds in which the assessee challenged that AO acted in excess of jurisdiction by framing assessment under section 153A/143(3) of the Income Tax Act claiming that no incriminating documents was found and / or seized during search and he did not adjudicate other grounds of appeal on merit.
2. That on the facts and in the circumstances of the case, the decision of Ld. CIT(A) of allowing ground no. 1 & 2 of the assessee’s appeal is not as per the provision of section 153A in which it is provided that once the return is filed in answer to notice u/s 153A, explanation to section 153A provides among other things, that all provisions of the act will apply to the assessment made u/s 153A of the Act as per which the assessee proceedings u/s 153A(1) can be concluded assessing the total income of the assessee including making addition without any incriminating material being available against the assessee for any particular year.
3. That on the facts and circumstances of the case, the decision of Ld. CIT(A) allowing ground no1 & 2 of the assessee’s appeal without examining the entire facts of the case in which on the basis of material found during search and seizure operation, trail of cash transactions from bank accounts was made establishing that assessee has received Rs. 80,78,400/- from two companies in form of share capital / premium liable to be treated as unexplained income in the hand of the assessee and such material is very well in the nature of incriminating material.”
3. Brief facts of the case as noted by the AO is that the assessee had filed original return of income for AY 2010-11 on 29.10.2010 declaring total income of Rs. 2,13,99,938/-. The return was originally processed u/s 143(1) of the Income Tax Act, 1961 (herein after referred to as the ‘Act’). The time limit for issue of notice u/s 142(1) expired on 30.09.2011. A search and seizure operation u/s 132 of the Act was conducted at the business and residential premises of Naredi Group at Calcutta on 20.03.2015. Pursuant thereto, the AO issued notice u/s 153A dated 23.09.2015 for the relevant AY 2010-11 which was served upon the assessee on 28.09.2015. In response to the notice, the assessee filed return of income declaring total income of Rs. 2,13,43,940/-. In the course of assessment, the AO issued notice u/s 143(2) and 142(1) inter alia calling for the details of share capital of Rs. 6,00,00,000/- issued by the assessee during the year. The AO deputed his inspector to verifythe source of funds to the share subscribers. Based on the information gathered by the inspector, the AO observed that there were cash deposits to the tune of Rs. 81,60,000/- in the bank accounts of two share subscribers namely M/s. Vasundhara Merchants Pvt. Ltd. and M/s. Sunlight Tradelink Pvt. Ltd. The AO accordingly issued show cause notice dated 23.04.2016 requiring the assessee to explain as to why the amount of Rs. 80,78,400/- received by the assessee from the aforesaid two share subscribers should not be treated as unexplained cash credit. Rejecting the explanation furnished by the assessee the AO added the sum of Rs. 80,78,400/- in the hands of the assessee by way of unexplained cash credit u/s 68 of the Act. Aggrieved the assessee carried the matter in appeal. The Ld. CIT(A) relying on the decision of the Hon’ble Calcutta High Court in the case of PCIT vs Salasar Stock Broking Ltd. (ITA No. 264 of 2016) dated 24.08.2016 and CIT vs Veer Prabhu Marketing Ltd. (2016) (73 taxmann.com 149, Calcutta HC) holding that the nexus of the incriminating material found as a result of search proceedings is a pre-requisite for making additions in an assessment framed u/s 153A / 143(3) of the Act. The Ld. CIT(A) held that the assessment of the relevant year had not abated and therefore an addition could only be made which had some live and cogent nexus with incriminating material or evidence found in the course of search. He pointed out that the Hon’ble jurisdictional High Court had concurred with the judgement of Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla (2016) 380 ITR 573 (Del). He further relied upon the decision of this Tribunal and deleted the addition of Rs. 80,78,400/- made in the assessment u/s 153A / 143(3) of the Act on the ground that same was not based on any incriminating material found during the course of search and seizure proceedings and as the assessment for this assessment year was not abated. Aggrieved by this order, the Revenue is now in appeal before us.
4. The Ld. CIT, DR assailing the decision of Ld. CIT(A) submitted that the Ld. CIT(A) erred in deleting the addition simply by relying on the decision of Hon’ble Delhi High Court in Kabul Chawla (Supra). He argued that the expression ‘incriminating material’ is not found in the provisions of the Act and it is only the Hon’ble Courts which had imported these words while rendering the decisions. Relying on the decision of the Hon’ble Karnataka High Court in he case of Canara Housing Development Co. vs. DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) and also the decisions of the Kerala High Court in the case of St. Francis Clay Decor Tiles (2016) 70 taxmann.com 234 and E.N. Gopa Kumar vs CIT (Central) (2016) 390 ITR 131, he argued that search assessments could be framed even without the existence of incriminating materials found in the course of search.
5. According to ld. CIT, DR, the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s 132 of the Act on an assessee. According to him, if the concerned authority in consequence of information in his possession, has reason to believe that :–