The Income Tax Appellate Tribunal (ITAT), ruled that no addition can be made in absence of any incriminating material found during the search.
The assessee, USG Buildwell Pvt. Ltd. is a company incorporated under the Companies Act, 1956. It had filed its original return of income for Assessment Year 2005-06 declaring total income at Rs.2,71,770. The Assessing Officer issued a notice under section 153A of the Act.
In response to the notice, a return was filed declaring the total income at Rs.2,71,770. The Assessing Officer issued a show-cause notice in which the Assessing Officer raised a query related to the statement of Shri Suresh Kumar Gupta wherein certain accommodation entry to the assessee company was depicted.
The Assessing Officer observed that the sum of Rs.30,00,000 was received as accommodation entries and asked the assessee to establish the identity and creditworthiness of this creditor and genuineness of transaction under section 68. The assessee filed its submission and details before the Assessing Officer. After taking cognizance of the same, the Assessing Officer made additions of Rs. 30,00,000 which was credited by the assessee in its books of accounts in the form of sale of an investment to M/s Namrata Marketing Pvt. Ltd. during Financial Year 2004-05 and treated the same as the deemed or undisclosed income of the assessee under section 68 of the Income Tax Act, 1961.
The assessee submitted that a sum of Rs. 30,00,000 was received by way of sale of shares of M/s Alliance Buildcon (India) Pvt. Ltd. to M/s Namrata Marketing Pvt. Ltd. and sale proceeds were received by cheque from M/s Namrata Marketing Pvt. Ltd. The said shares were allotted to the assessee company in the preceding year by making payment through cheque. The copies of the share certificates were filed before the Assessing Officer for reference.
Therefore, the source of the amount is traced back to the preceding year, and credit during the year is nothing but the redemption of an earlier investment. During the assessment proceedings the assessee filed a detailed reply and submitted that since the said sum was received on account of the sale of an investment, the same cannot be held as undisclosed income under Section 68 of the Act.
The assessee urged that notice under section 148 was not served at the time of the search. Thus, the Assessing Officer as well as the CIT(A) has not taken a proper cognizance of the assessee’s claim and made additions.
“No incriminating material was found in the assessee’s case, no addition can be made in the present case. Besides this, the assessee has made investments in prior periods and sold the said investment in this particular year which was clearly set out from the submissions and the evidence produced before the Assessing Officer and the CIT(A). Therefore, the appeal of the assessee being ITA No. 2155/Del/2015 for Assessment Year 2005-06 is allowed,” the ITAT ruled.