ACIT, NEW DELHI vs. M/S. BLUEMOON INFRASTRUCTURE (P) LTD., DELHI

The above appeal by the Revenue and the cross objection by assessee are directed against the order dated 24.10.2013 of ld. CIT(A)-I, New Delhi for the assessment year 2006-07. The Revenue has raised the following grounds in its appeal :

The brief facts of the case are that a search and seizure operation was carried out in Mahesh Mehta group of cases on 30.06.2009 and as per search warrant and Panchnama the assessee company was also covered u/s. 132/133A of the IT Act. Notice u/s. 153A was issued on 06.04.2010 for furnishing the return of income within 16 days from the service of notice. In response to the notice, the assessee stated that the original return already filed on 28.11.2006 declaring loss of Rs.11,300/- be treated as filed in response to notice issued u/s. 153A. The AO noticed in the assessment proceedings that during the year under consideration the assessee has shown receipt of share application money of Rs.1,50,00,000/- from the eight persons as enumerated in the table given at para 5 of the assessment order u/s. 153A.

The ld. DR reiterating the grounds of Revenue’s appeal contended that the ld. CIT(A) was not justified in deleting the additions without considering the findings of the Assessing Officer in right perspective. The share applicants did not comply with the summons issued by AO nor filed the requisite details sought by AO. The shares were not allotted despite receipt of share application money. The existence of share applicants also could not be established. Hence, the additions made by AO deserve to be sustained.

The ld. AR, on the other hand, submitted that the additions, whatsoever, made by the AO are not based on any material found during the course of search, as no evidence or documents were pointed out by the AO to have been found in the search which could indicate that the assessee had received any accommodation entry in the form of share application money. Therefore, in view of various decisions relied before the ld. CIT(A) as well as before us including the decision of jurisdictional High Court in the case of CIT(Central) vs. Kabul Chawla, 380 ITR 573 (Delhi) wherein it has been held that in the search cases, additions can be made only on the basis of incriminating material found in the course of search, the additions so made by AO have rightly been deleted by the ld. CIT(A). It was also submitted that the Assessing Officer has collected the information about share application money from the books of accounts of assessee and balance sheet. It was also submitted that the ld. CIT(A) should have also deleted the addition on further ground that there was no pending assessment proceeding on the date of search which could be abated under second proviso to section 153A(1). The AO, therefore, was not justified in making addition on the basis of material gathered in the course of assessment proceedings particularly when no assessment proceedings were abated under the provisions of the Act. He, therefore, urged that the addition so made deserves to be deleted.

We have considered the rival submissions and have gone through the entire material available on record. A perusal of impugned order shows that the ld. CIT(A) has deleted the additions after considering the assessments of six share applicants out of eight. He has also categorically recorded a finding that the additions so made are not based on any incriminating material found during the course of search. It is now settled that in the cases of search, no addition can be made unless there is incriminating material found in the search to support such additions. However, in the instant case, there is no material on record and there is no whisper in the assessment order as well as in the order of ld. CIT(A) to show as to what material was found at the time of search, which led the Assessing Officer to make the impugned addition. The search memo is not available before us to know about the material found in the search. The ld. CIT(A) has also not recorded any finding as to the material found in the course of search. Therefore, unless it is ascertained as to what material was found on search and whether it was incriminating or not, the decision of making addition by the Assessing Officer and its deletion by the ld. CIT(A) cannot be supported. Besides, the ld. CIT(A) has admitted the additional evidences u/s. 46A. The impugned order shows that the ld. CIT(A) called for the remand report of the AO, but we do not find in the impugned order as to what was the rebuttal or contention of the Assessing Officer in the said remand report on admission of additional evidence, whatsoever, submitted before the ld. CIT(A). The remand report of the AO is also not available on record before us to decide the issue of admissibility of additional evidences filed before the ld. CIT(A). We, accordingly restore the matter to the file of ld. CIT(A) for deciding the appeal afresh after making proper examination of records in the light of observations made above. Needless to say, the parties shall be given reasonable opportunity of being heard.

Since the matter under consideration has been remanded to the ld. CIT(A), the cross-objection filed by the assessee becomes infructuos and is accordingly dismissed.

In the result, the appeal of the Revenue is allowed for statistical purposes and the cross objection of the assessee is dismissed as indicated above.