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2026 Supreme(Online)(ITAT) 9440
INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
Rajesh Kumar, Accountant Member, Pradip Kumar Choubey, Judicial Member
Deputy Commissioner of Income Tax – Appellant
Versus
Aadhunik Cement Limited – Respondent
ITA No. 1983s/KOL/2024|CO No. 45/Kol/2024
For the Appellants/Petitioners: Shri Navin Verma, Shri Nitesh Agarwal
For the Respondents: Shri Praveen Kishore
No addition under section 153A without incriminating search material; share applications upheld if identity, creditworthiness, genuineness proved by documents despite inspector reports; post-amalgamation assessment against non-entity void.
Headnote:(A) Income-tax Act, 1961 - Sections 68, 132, 153A r.w.s 143(3), 170(2) - Search and seizure - Unexplained cash credits - Share application money - Addition of Rs.41.90 Crore disallowed - Assessment order passed in name of amalgamated non-existing entity void ab initio lacking jurisdiction - No incriminating material found during search relating to share application money - Addition solely based on investigation report and inspector's verification unsustainable - Assessee discharged onus under section 68 by proving identity, creditworthiness, and genuineness via PAN, bank statements, audited accounts, ITR acknowledgements - Onus shifted to AO who failed to disprove - Addition deleted on technical and merits grounds, consistent with prior year decision. (Paras 3, 6, 7, 9.3, 9.4)
(B) Assessment post-amalgamation - Assessment in name of non-existing entity invalid per Supreme Court precedent unless scheme specifies otherwise - Fact of amalgamation disclosed to AO, yet order passed against defunct entity. (Para 6)
(C) Evidentiary value - Inspector's report alone insufficient for addition if assessee provides supporting documents - No opportunity for cross-examination of inspector - Statements from directors under coercion inadmissible. (Paras 9.3.1-9.3.5)
Facts of the case:
Search conducted on assessee's premises; no incriminating material on share application money found. AO added Rs.41.90 Crore as unexplained under section 68 relying on investigation wing report listing share applicants as paper companies, non-existent addresses per inspector, and directors' admissions. Assessee amalgamated w.e.f. 01.01.2015; fact notified to AO. CIT(A) deleted addition; Revenue appealed to Tribunal.
Findings of Court:
No infirmity in CIT(A) order deleting addition of Rs.41.90 Crore; assessment void for want of jurisdiction; no incriminating material; assessee proved transaction genuineness.
Issues: Validity of assessment post-amalgamation; permissibility of addition under section 153A sans incriminating material; sufficiency of assessee's evidence under section 68 against inspector/investigation reports.
Ratio Decidendi: In section 153A assessments, additions require incriminating material from search; absent it, no jurisdiction. Assessee satisfies section 68 by documentary proof of identity, capacity, transaction nature; AO cannot reject solely on external reports without rebuttal. Post-amalgamation assessments against non-entity invalid.
Result: Revenue's appeal dismissed; Cross Objection dismissed as not pressed.
ORDER
Per Pradip Kumar Choubey, Judicial Member:
This appeal filed by the Revenue and Cross Objection by the assessee are directed against the order dated 26.07.2024 of the Income Tax Department passed under Section 153Ar.w.s143(3) of the Assessment Year 2011-12 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”)
2. Brief facts Of the case is that a search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted on 11.03.2016 by the Investigation Wing, Guwahati, in the office/business premises of the appellant company. The said search was completed on 03.05.2016. Accordingly, notice u/s 153A dated 21.02.2018 was issued and duly served. In response, to the said notice, return of income for the relevant assessment year was filed on 03.04.2018 disclosing total loss of Rs.63,85,56,979/-. Thereafter, Notices u/s 143(2) and 142(1) were issued and duly served. Subsequently assessment was completed under section 153A/143(3) by disallowing a sum of Rs. 41.90 Crore on account of share application money held to be unexplained cash credit under section 68 of the Income Tax Act, 1961.
3. Aggrieved by the said order, assessee preferred appeal before the CIT(A) wherein appeal of the assessee has been allowed by observing thus:-
9.3.1 The third technical ground as raised by Appellant Company is with regard to addition made by the AO despite no incriminating material was found during the course of search proceedings. The Appellant submitted that in the course of search proceedings, various documents were seized which substantially consist of regular documents in relation to the business of the appellant. Explanation regarding the seized documents has been duly offered to the AO during the course of assessment proceeding u/s 153A of the Act. The AO was duly satisfied with the explanation given in respect of seized materials and no adverse inference was drawn by the AO. The submissions filed by the appellant during the course of assessment proceedings before the AO for explanation of the seized documents were produced before me and those replies were carefully perused by me. Perusal of the said details reveals that the seized documents consist of documents in connection of the business of the appellant company and there were no incriminating documents in relation to the issue of share application money.
9.3.2 It is seen that the AO had issued notice under section 142(1) dated 12.11.2018 and 10.12.2018 (at page 145 to 160 of the appellant's submission). This notices raised issues on 2 aspects - First relates to furnish page-wise and entry-wise explanation in respect of all the seized and impounded documents and second relates to issue of share application money. The primary basis for verifying the details of share application money by the AO was based on the report of the Investigation Wing, Kolkata wherein the names of the share applicants were appearing in the list of jamakharchi/paper companies and the share applicants companies do not exist at the given address. Further, the report also states that the directors of such shareholders companies have admitted on oath that they provide accommodation entries of bogus share application money to the appellant. Accordingly, the AO carried out the verification based on above information only. Thus, the additions were made not on basis of the material unearthed during the course of search. This itself proves that there was no incriminating material found during the course of search proceedings in so far application money is concerned.ME TAX DEPARTS.
9.3.3 It is a settled legal principle that Revenue has no jurisdiction under section 153A in the absence of any 'incriminating material found during a search under section 132. The said view has been affirmed by Hon'ble Supreme Court in PCIT vs Abhisar BuildwellPvt. Ltd (2023) 149 taxmann.com 399 (SC).
9.3.4 Further, Hon'ble Delhi High Court in CIT Vs. Kabul Chawla 380 ITR 573 has laid down the principle that incriminating ma
