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Facts
A search operation was conducted at the assessee's group premises. The Assessing Officer initiated proceedings under section 153A and made additions based on share capital introduced by certain individuals. The CIT(A) confirmed these additions.
Held
The Tribunal held that the addition of share capital was not based on incriminating material found during the search. The Tribunal further noted that the Hon'ble Supreme Court decision in PCIT vs. Abhisar Buildwell (P.) Ltd. states that additions under section 68 based on regular books of account cannot be sustained without incriminating material.
Key Issues
Whether the additions made under section 153A and 68 of the Income Tax Act, 1961, were based on incriminating material found during the search, and whether section 115BBE was rightly invoked.
Sections Cited
153A, 68, 115BBE
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax (Appeals)-18, Chennai [hereinafter “CIT(A)”] dated 06.03.2023 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 153A of the Income-tax Act, 1961 (hereinafter “the Act”) dated 25.09.2021.
“1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an additions in the assessment completed U/s.143(3) r.w.s. 153A of the Act without any incriminating documents is being found during the course of search.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs. 10,00,000/- u/s.68 of the Income Tax Act, 1961, by treating the share capital as alleged unexplained cash credit, without considering the facts & circumstances of the case.
3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in invoking the provision of Section 115BBE of the Act, without considering the facts & circumstances of the case.”
The brief facts of the case are that a search u/s. 132 of the Act has been conducted at the residential/business premises in the cases of Golden Shelters Pvt. Ltd., NKV Krishna Group on 16.10.2019 and the office premises of the assessee-company being the group concern was also covered in the search operation. The A.O initiated assessment proceedings u/s. 153A of the Act and made the addition of share capital introduced by Shri NKV Krishna and Smt. K Preetha of Rs.5,00,000/- each in cash u/s. 68 of the Act. The A.O in the assessment order has noted that during the course of search and seizure action it was found that there are 137 concerns for which books of accounts are maintained in the Rutland Towers office and Mr Sarvan Kumar who was maintaining the tally data stated the cash stated that Sri Bagavan, Shri NKV Krishna and Smt. Preetha Krishna were conducting wellness programmes, homams, meditations and other related activities and from these activities unaccounted income was generated by way of cash. A pen drive was also found and seized from the residence of Shri Badri Narayan Kota, friend of Shri NKV Krishna and director of group company handling unaccounted transactions and unaccounted cash of the group. Shri Saravana Kumar, Accounts Manager of the group company has explained the modus operandi and stated that unaccounted cash were brought in either as the share capital or advance/unsecured loan. The A.O has made the addition of share capital introduced by Shri NKV Krishna and Smt. Preetha of Rs. 5,00,000/- each in cash in the books of account u/s. 68 of the Act. In appeal before Ld. CIT(A), assessee has submitted that the share capital of Rs 10,00,000 in the name of Shri NKV Krishna and Smt. K . Preetha has already been recorded in the books of account of the company and therefore, the addition made by the Ld. AO is not based on any incriminating material and therefore should be deleted in order passed u/s 153A. The Ld. CIT(A) has confirmed the addition holding that the addition made was based on the pen drive seized from the residence of Shri Badri Narayan Kota, and statement made during the search by various persons revealing investment in various companies, in the form of share capital , therefore the addition made emanated from the incriminating material found during the course of search. The Ld. CIT(A) confirmed the addition made u/s. 68 of the Act as nature and source has not been proved and affirmed that it is to be taxed at special rate as per provisions of section 115BBE.
The Ld. Authorized Representative (A.R) of the assessee before us has argued that the share capital of Rs. 10 Lakhs has already been recorded in regular books of account, therefore in view of the decision of Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. [2023] 454 ITR 212 (SC), addition u/s 68 on the basis of regular books of account cannot be sustained The Ld. AR has argued that the addition has been made on the basis of regular books of accounts, but not on the basis of incriminating material. The Ld. AR has also took us through various annexures, seized documents to impress upon the point that the assessee company name is not mentioned in the documents of details of introducing unaccounted cash in the share application money and unsecured loan/advances.
The Ld. CIT(A) therefore prayed for deletion of addition made u/s 68 in order passed u/s 153A.
The Ld. Departmental Representative (DR), on the other hand, supported the order of Ld. CIT(A) and argued that the A.O has made the addition on the basis of pen drive seized during the search and statement made by the persons maintaining the account elaborating the modus operandi of generation of unaccounted cash and their introduction in the company as a share capital.
We have heard the rival submissions, and perused the materials available on record. The assessee-company as a part of group company of NKV Krishna group, where search was conducted on 16.10.2019 u/s 132 of I T Act. The A.O has made the addition of share capital of Rs. 5,00,000/- each introduced by Shri NKV Krishna and Smt. Preetha u/s. 68 of the Act. The Ld. CIT(A) has noted that the assessee has not been able to explain the source of cash deposit and the nature of cash recorded in the books of account and confirmed the addition. The Ld AR took us to the seized documents of Annexure-I, II, III and IV where details of introducing unaccounted cash into share application money and unsecured loan /loan and advance was listed and assessee company name does not figure in any of these documents. The AO has made the addition based on the general statement that unaccounted cash was introduced as share capital without referring to any specific documents. The documents produced 6 -: by the Ld DR as incriminating material was the copy of cash book and ledger account of Shri NKV Krisha and Preetha ji, which are entries of regular books of account . We therefore hold that addition of share capital of Rs 10,00,000/ has not been made based on incriminating material found during search The AO in the assessment order u/s 153A has assessed income at Rs 9,40,000/- against returned loss of Rs 60,000 , thus making only addition of share capital of Rs 10,00,000 u/s 68 of the Act. Therefore, in view of Honorable Supreme Court decision in the case of Abhisar Buildwell (P) Ltd addition cannot be sustained in present case without there being incriminating material. We accordingly delete the addition of share capital of Rs.10,00,000 u/s 68 of Income Tax Act made by the AO .
In the result, the appeal of the assessee is allowed.
Order pronounced on 25th October, 2024.