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Facts
A search operation under Section 132 was conducted on the assessee for A.Y. 2012-13. The AO made an addition of Rs. 6,87,75,000/- under Section 56(2)(viii)(c) for alleged receipt of shares at a discounted price against their fair market value, treating it as a colourable transaction.
Held
The CIT(A) deleted the addition as no incriminating material was found. The ITAT confirmed this, citing the Supreme Court's ruling in Abhisar Buildwell that for unabated assessment years, additions under Section 153A require incriminating material unearthed during the search. Since only public domain documents were referenced, the addition was unsustainable, and the AO was directed to delete it.
Key Issues
Can an addition under Section 56(2)(viii)(c) in an unabated assessment year be sustained based on a search assessment without any incriminating material found during the search?
Sections Cited
Section 153A, Section 132, Section 56(2)(viii)(c), Section 132A, Section 147, Section 148, Section 139, Section 143(1), Section 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI MAHAVIR SINGH, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A) - 3, Gurgaon dated14.08.2019 pertaining to A.Y. 2012-13.
Though the Revenue has raised as many as 12 grounds of appeal, the solitary grievance raised by the Revenue relates to the deletion of the addition of Rs. 6,87,75,000/- made by the Assessing Officer u/s 153A of the Income-tax Act, 1961 [the Act, for short] when there was no incriminating document/material found during the course of search.
The representatives of both the sides were heard at length, the case records carefully perused and we have duly considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules.
Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] was conducted on 29.12.2015 on the residential as well as office premises of the Mapsko Group of cases including the assessee.
Accordingly, statutory notices were issued and served upon the assessee.
Briefly the facts of the case are that there was search u/s 132 of the I T act in the case of the assessee. In the instant year, the AO held that the assessee had been allotted, in a colourable transaction, shares of M/s Confident Distributors Pvt Ltd at a discounted price of Rs 10/-
per share against the fair market value of Rs 78.75 per share. The AO held that the assessee received shares having Fair Market Value of Rs 7,87,75,000/- for a consideration of Rs. 1 crore. Accordingly, the difference of Rs. 6,87,75,000/- was added to the income of the assessee u/s 56(2)(viii)(c).
Addition was challenged before the ld. CIT(A) claiming that the additions are devoid of any reference to incriminating material found during the course of search and, therefore, the ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla 61 Taxmann.com 412.
After considering the facts and submissions, the ld. CIT(A) was convinced that no incriminating material has been referred to by the Assessing Officer while making the impugned addition. Therefore, relying upon the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra] the ld. CIT(A) allowed the appeal of the assessee.
Before us, the ld. DR strongly supported the findings of the Assessing Officer.
Per contra, the ld. counsel for the assessee reiterated that no incriminating materials were found with regard to the addition made and relied on the decision of the Supreme Court in Abhisar Buildwell.
We have heard the rival submissions and have carefully perused the orders of the authorities below and the relevant material on record. Having heard the rival submissions, we find that the factual matrix of the instant case shows that the only seized document referred to in the assessment order by the AO at Para 3 of the assessment order is the list of shareholders of M/s Confident Distributors Pvt. Ltd, which included the assessee. The CIT(A) correctly held that the document is available in public domain and hence cannot be categorized as incriminating document.
We find that the addition is made u/s 56(2)(viii)(c) on account of difference in the face value of fresh issue of shares by the company and book value of shares, amounting Rs. 6,87,75,000/-. We find that there is no whisper, in the assessment order,of any incriminating documents/records or any other evidence found or seized during the course of search proceedings which prompted such addition made in the case of the assessee.
We also note that Section 56(2)(viii) of the Act is a deeming provision and the issue in this case under consideration is the pricing of the shares without any reference to any incriminating material found during the search. Further, the existence, identity and genuineness of the transaction has not been doubted by the AO.
We also note that the assessee had filed return of income originally u/s 139 of the Act on 29.09.2012 which was processed u/s 143(1) of the Act. At the time of search action on 29.12.2015, no assessment/reassessment proceedings were pending in the case of assessee. The impugned AY is thus an unabated assessment AY and, therefore, the ratio laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell 454 ITR 212 squarely apply wherein it has been held that assessment u/s 153A of the Act can be framed only on the basis of incriminating material found at the time of search.
The issue of addition in an unabated assessment year and the role of incriminating material has been finally settled by the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell [supra] wherein the Hon'ble Supreme Court has held as under:
“In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii)all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.
Insofar as the aforesaid Civil Appeals preferred by the assessee – M/s Kesarwani Zarda BhandarSahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 06.09.2016 passed in 269/2014, 15/2015, 16/2015, 268/2014 and 17/2015, as also, against the order dated 21.09.2017 passed in the review applications.
It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under Section 143(1)(a) or 143(3) of the Act, 1961 and to re- assess the total income taking notice of undisclosed income even found during the search and seizure operation.
15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was available at the time of original assessment does not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs.”
As the addition made in the case of the assessee in the instant year is devoid of any incriminating materials, the case is squarely covered by the decision in the case of Abhisar Buildwell. Respectfully following the decision of the Hon'ble Supreme Court (supra), we direct the Assessing Officer to delete the impugned addition.
In the result, the appeal of the Revenue in ITA No.
8435/DEL/2019 is dismissed.
The order is pronounced in the open court on 28.11.2024.
Sd/- Sd/- [MAHAVIR SINGH] [NAVEEN CHANDRA] VICE PRESIDENT ACCOUNTANT MEMBER Dated: 28th NOVEMBER, 2024.
VL/ Copy forwarded to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi