DCIT Vs Bhavya Pankaj Shah (ITAT Mumbai)
ITAT Mumbai held that addition under section 68 of the Income Tax Act unsustainable in absence of any incriminating material found during the course of search.
Facts- The assessee herein belongs to Pankaj Shah family. The assessee alongwith other family members and group companies were subjected to search operations u/s. 132 of the Act. Consequently thereto, the assessment was completed in the hands of the assessee u/s. 143(3) read with section 153A of the Act, wherein long term capital gains declared by the assessee were disallowed holding them to be bogus in nature. AO, however, assessed sale proceeds of shares sold by the assessee u/s. 68 of the Act. He also made addition towards estimated commission expenses incurred in procuring bogus capital gains.
CIT(A) deleted both the additions made by the AO. Hence, the Revenue has filed this appeal challenging the relief granted by Ld CIT(A).
Conclusion- We hold that the additions made by the Assessing Officer under section 68 of the Act towards sale of shares and also estimated commission expenditure are liable to be deleted, since they are not based on any incriminating material found during the course of search. Accordingly, we set aside the order passed by Ld CIT(A) on the above said legal issue. Since we have held that the additions could not have been made in the absence of any incriminating material, the grounds urged by the revenue on merits do not require adjudication.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Revenue has filed the appeal for A.Y. 20/4-/5 and the assessee has filed Cross Objections. In the Cross objection, the assessee is challenging the validity of additions made in the assessment completed under section 153A of the I.T. Act in the absence of any incriminating material on the ground that assessments of these years do not abate u/s 153A of the Act. Accordingly, the parties were heard on the above said legal ground.
2. Facts relating to the case are stated in brief. The assessee herein belongs to Pankaj Shah family. The assessee alongwith other family members and group companies were subjected to search operations under section /32 of the Act on 04.2.20/6. Consequently thereto, the assessment for AY 20/4- /5 was completed in the hands of the assessee under section /43(3) read with section 153A of the Act, wherein long term capital gains declared by the assessee were disallowed holding them to be bogus in nature. The Assessing Officer, however, assessed sale proceeds of shares sold by the assessee under section 68 of the Act. He also made addition towards estimated commission expenses incurred in procuring bogus capital gains.
3. Before ld CIT(A), the assessee contended that the impugned additions could not have been made in the absence of incriminating materials. However, the Ld CIT(A) held that the books of accounts of the assessee itself shall constitute incriminating material. Accordingly, he dismissed the above said legal ground of the assessee. However, the learned CIT(A) deleted both the additions made by the AO. Hence, the Revenue has filed this appeal challenging the relief granted by Ld CIT(A). The assessee has filed cross objection raising the legal contention that the impugned additions could not have been made in the absence of any incriminating material.
4. Learned AR submitted that all these years fall under the category of “unabated assessment years” and hence the assessments already completed prior to the date of search do not abate. He submitted that, in the case of unabated assessments, the Assessing Officer can make any addition only on the basis of any incriminating material found during the course of search. He submitted that the additions made by the AO in these years are not based on any incriminating material found during the course of search. Accordingly, he contended that all the additions made by the AO in these years are liable to be deleted. In support of this legal contention, the Ld A.R placed his reliance on the decision rendered by jurisdictional Hon’ble Bombay High Court in the cases of Continental Corporation (Nhava Sheva) Ltd (20/5)(58 taxmann.com 78)(Bom) and Gurinder Singh Bawa (20/7)(79 taxmann.com 398)(Bom). The Learned AR also furnished following details in support of his contentions that these years fall under the category of unabated assessment years.
