Siddhartha Nautiyal ORDER
Waseem Ahmed, Member (A)
1. The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-5, Ahmedabad (in short "Ld. CIT(A)") dated 18.09.2020 arising in the matter of assessment order passed under s. 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2008-2009.
2. The only effective issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 15 crores made under section 68 of the Act on account of unexplained credit of share application money and premium by holding that no assessment can be made in absence of incriminating materials.
3. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of Ship Breaking. There was a search and seizure operation under section 132 of the Act dated 17-02-2012 carried out at ship breaking group of Bhavnagar. The assessee was also part of such search proceeding. Consequence to the impugned search proceeding, the notice under section 153A of the Act was also issued to the assessee. In the assessment framed under section 143(3) read with section 153A of the Act, the AO made an addition of ` 15,00,00,000/- on account of credit of share application money and its premium being unexplained cash credit under section 68 of the Act.
4. Aggrieved assessee Preferred an appeal before learned CIT-A.
5. The assessee before the Learned CIT-A submitted that the proceedings under section 153A of the Act, are a special proceeding which are initiated in consequence to search proceeding under section 132 of the Act. Therefore, no addition can be made in absence of incriminating material found in the search proceeding in connection with the year under the consideration being an unabated assessment year.
6. The learned CIT(A) after referring the judgment of Hon'ble Gujarat High Court in case of Saumya Construction Pvt. Ltd reported in MANU/GJ/1051/2016 : 387 ITR 529 deleted the addition made by the AO. The relevant finding of the learned CIT(A) reads as under:
"The Hon'ble Gujarat High court in above referred case has categorically considered decision of Anil Kumar Bhatia (relied upon by AO) and observed that Section 153A bears the heading 'assessment in case of search or requisition'. From the heading of section 153, the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition, In case no, incriminating material is found, the earlier assessment would have to be reiterated.
4.7 The above decisions have categorically dealt with both the arguments as were raised by AO in assessment order and binding decisions need to be followed. The AO in assessment order has not referred to any incriminating material found during the course of search which can justify addition u/s 68 of the Act. The AO has not brought anything on record which can prove that during the course of search any cash trail was found from the premises of appellant which can prove that appellant has made cash payment against cheques received by it from both the concerns. On the contrary, AO himself has observed that seizure of incriminating material is not precondition for invoking above provisions of the Act which also support the contention of appellant that no incriminating material was found during the course of search which can justify addition u/s 68 of the Act in completed assessments.
4.8 Further on perusal of assessment order, it is apparent that AO at para 4.1 of has referred to share capital received during the year under consideration from two parties. The AO at page No 3 to 14 of assessment order has referred to show cause notice issued by it which mainly contains facts regarding share capital received by appellant and facts of assessment order passed in case of appellant for A.Y. 2009-10 wherein share capita! received was treated as unexplained cash credits by AO. The AO at page no 4 and 5 of assessment order has observed that on verification of income tax returns of two concerns referred supra, he found that such companies have shown meager income and made huge share applications to appellant. The AO has there referred to investigation inquiries conducted by ADIT, Kolkata and statement of directors were taken by them. The AO in such show cause notice has discussed contents of such statements, finding of AO in assessment order passed u/s 143(3) of the Act for A.Y. 2009-10 making similar additions u/s 68 of the Act, post search inquiries etc. It is observed that even in show cause notice issued to appellant there was no reference to any incriminating material found during the course of search which can prove that addition u/s 68 of the Act was based upon such intimating material. Even in assessment order, there is no whisper regarding such material found during the course of search which can prove that appellant has bogus share capital or made cash payment against cheques received as share capital. It is observed that decisions of various High Courts relied upon by Appellant have discussed the provisions of Section 153A of the Act. The Hon'ble Courts have held that completed assessments can be interfered with by AO while making assessment under Section 153A of the Act only on the basis of incriminating material found during the course of search or undisclosed income discovered during the course of search.
4.9 Further, the Hon'ble Gujarat High Court has taken a similar view in case of PCIT v/s Anil Bholabhai Patel dated 30.08.2017 tax Appeal No. 469 of 2017 wherein the following was held:
"2. Brief facts are that a search operation was undertaken at the premises of the respondent assesses on 09.08.2011. Pursuant to the search, assessment under section 153A of the Act for the assessment year 2007-08 was framed on 28.03.2014. Certain additions in terms of business income were made in such assessment. The Tribunal by the impugned judgment set aside the assessment on the ground that there was no incriminating material found during the search which would permit the Assessing Officer to make the additions. The Tribunal noted that the return filed by the assessee in the ordinary course was accepted without a scrutiny and the time limit for scrutiny assessment was over. Essentially therefore what the Assessing Officer had done was to realign the income from capital gain to business income. Since this was without the aid of any material unearthed during the search, the Tribunal reversed the assessment order as confirmed by the Commissioner of Income Tax (Appeals).
3. As per the settled law, the approach before the Tribunal cannot be faulted particularly when the Revenue is unable to dispute the factual findings of the Tribunal. We notice that there are additional questions raised by the Revenue which pertained to the actual additions. However, when we hold the main issue against the Revenue, it is not necessary to enter into the subsidiary questions."
Similar view has also been taken by Hon'ble Gujarat High Court in the case of PCIT V/s Sunrise Finlease (P) Ltd MANU/GJ/2228/2017 : [2018] 89 taxmann.com 1, and PCIT V/s Sanghi Fincap Ltd in Tax Appeal No. 142 of 2018, dated 20th February, 2018, Hon'ble Bombay High Court in case of Learned. CIT (Appeals) V/s Continental Warehousing Corporation (Nhava Sheva) Ltd MANU/MH/0802/2015 : [2015] 58 taxmann.com 78 (Bombay) and Hon'ble Delhi High Court in case of Commissioner of Income Tax - 7 V/s RRJ Securities Ltd MANU/DE/3306/2015 : 962 taxmann.com 391).
4.10 It is observed that Hon'ble Ahmedabad ITAT in its recent decision in the case of DCIT vs. Shayona Land Corporation in ITA No 240 to 243/Ahd/2017 dated 19/08/2020, Shri Suresh Ranchhodbhai Patel in ITA No IT(SS)A Nos. 394, 395, 396 & 397/Ahd/2017 dated 19/08/2020 has also decided similar issue in favour of appellant. During the course of appellate hearing, appellant has also submitted copies of CIT(A) order in various assessee wherein also they have held that addition cannot be made without any incriminating material found during the course of search for complete assessments.
4.11 Relying upon decisions referred to above, addition made in the year under consideration for Rs 15,00,00,000/- is deleted, as same is beyond the scope of Section 153A of the Act. This ground of appeal is allowed."
7. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.
8. The learned DR before us vehemently argued that there is no provision under section 153A of the Act which restricts the assessment or reassessment in case of search to the extent of incriminating material only. The ld. DR vehemently supported the order of the AO.
9. On the other hand, the learned AR vehemently supported the order of the ld. CIT-A.
10. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was search action under section 132 of the Act dated 17th February2012 carried out on the assessee and its group concern "Ship Breakers Group of Bhavnagar" and in consequence to the same proceeding under section 153A of the Act was initiated in case of respondent assessee for year under consideration. The assessment under section 153A r.w.s section 143(3) of the Act for the year under consideration i.e. A.Y. 2008-09 was framed after making additions on account of credit of share application money and premium thereon for Rs. 15 Crores. On appeal by the assessee the learned CIT (A) deleted the addition made by the AO on technical ground by holding that there was no material of incriminating nature found in the course of the search with reference to year under consideration. Therefore, the year under consideration being unabated/completed assessment year, no addition should be made in absence of incriminating material. The learned DR before us vehemently argued that there is no provision under section 153A of the Act which restricts the assessment or reassessment in case of search to the extent of incriminating material only.
11. In this regard, we find that it has been settled by various Hon'ble Courts including Hon'ble Jurisdictional High Court that the completed assessment cannot be disturbed in the absence of any incriminating material/ documents found in the course of the search whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in Section 153A/153C of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to the completed assessment proceedings. The Hon'ble Gujarat High Court in the case of Saumya Construction Pvt. Ltd. reported in MANU/GJ/1051/2016 : 81 taxmann.com 292, has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during the course of search. The word incriminating has not been defined under the Act, but it refers to those materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case on hand, we note that addition was made based on the statement of director of investing companies recorded in an independent proceedings under section 132/133A/131(1) of the Act and the finding of inquiry or investigation was carried in case of investing companies without referring to incriminating document found from the premises of the assessee in this regard which would have made basis for the addition in the assessment.
12. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so, we draw support and guidance from the judgment of Hon'ble Gujarat High Court in case of Saumya Construction (P.) Ltd (supra) wherein it was held as under:
Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, the earlier assessment would have to be reiterated.
12.1. In view of the above, we hold that there cannot be any addition to the total income of the assessee of the regular items as made by the AO in the present case. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence, we uphold the same. Thus, the ground of appeal of the Revenue is hereby dismissed.
13. In the result, the appeal of the Revenue is hereby dismissed.
Order pronounced in the Court on 17/05/2023 at Ahmedabad.
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