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Facts
The assessee's return for A.Y. 2015-16 was processed u/s 143(3). A search and seizure operation u/s 132 was carried out, during which the Assessing Officer identified an unsecured loan of Rs. 3.50 crores from M/s Fitworth Constructions Pvt Ltd. The Assessing Officer invoked Section 68 and made an addition, concluding the assessee failed to establish the genuineness and capacity of the lender.
Held
The Tribunal noted that A.Y. 2015-16 was an unabated assessment year where assessment was already completed u/s 143(3) prior to the search. Relying on the Supreme Court's decision in Abhisar Buildwell, the Tribunal held that a completed assessment can only be reopened and reassessed based on incriminating material relevant to that A.Y. Since the addition was not based on any incriminating material found during the search, the Tribunal upheld the CIT(A)'s decision to delete the addition.
Key Issues
Whether an addition made under Section 68 for an unsecured loan can be sustained for a completed assessment year when the addition is not based on any incriminating material found during a search and seizure operation.
Sections Cited
143(3), 132, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A) - 29, New Delhi dated 03.03.2021 pertaining to A.Y. 2015-16.
The solitary grievance of the Revenue is that the ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 3.50 crores made by the Assessing Officer on account of undisclosed income.
Briefly stated, the facts of the case are that the assessee filed its return of income which was processed u/s 143(3) of the Income-tax Act, 1961 [the Act, for short]. Search and seizure operation u/s 132 of the Act was carried out on 23.03.2018 on Luv Kush Group of cases.
The case of the assessee was covered u/s 132 of the Act
During the course of search and seizure operation, various incriminating documents, books of account, digital devices were found and seized at the premises of the group companies and persons.
Statutory notices were issued and served upon the assessee, pursuant to which, the assessee filed its return of income on 07.11.2019 declaring its income at Rs. 4,76,09,730/-.
During the course of assessment proceedings and on perusal of the seized material documents, hard-disk, the Assessing Officer found that the assessee has made certain transactions amounting to Rs. 3.50 crores with M/s Fitworth Constructions Pvt Ltd. The assessee was asked to explain the nature of transaction alongwith documentary evidences.
It was explained that the assessee has taken unsecured loan from M/s Fitworth Constructions Pvt Ltd.
Invoking provisions of section 68 of the Act, the Assessing Officer came to the conclusion that the assessee has grossly failed to establish the genuineness of the transaction and capacity of the lender and made addition of Rs. 3.50 crores.
The assessee agitated the matter before the ld. CIT(A) and vehemently contended that the entire addition is devoid of any incriminating material found at the time of search and since the addition has been made without there being any incriminating material, it should be deleted.
It was further contended that during the course of original assessment proceedings, the assessee has filed complete details of the loan transactions which were verified by the Assessing Officer and proceedings were completed at an assessed income of Rs. 4,77,78,680/-.
The ld. CIT(A), after considering the facts and submissions, was convinced that the said transaction is part of audited accounts and return of income is not in the nature of incriminating material and went on to delete the addition.
Before us, the ld. DR could not point out any factual error in the findings of the ld. CIT(A).
Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
We have carefully perused the orders of the authorities below.
Search was conducted on 23.03.2018 and the A.Y under consideration is A.Y 2015-16, which means that the impugned A.Y is an unabated A.Y in which assessment has been completed u/s 143(3) of the Act prior to the date of search. Therefore, as per the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell 454 ITR 212, completed assessment can only be reopened and reassessed only on the basis of incriminating material relevant to the A.Y under consideration.
Since the impugned addition is not based on any incriminating material found at the time of search, the ratio laid down by the Hon'ble Supreme Court [supra] squarely apply. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 31.01.2024.