The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)], stating that no incriminating evidence was found during the search, leading to the unexplained cash credit addition of Rs. 1,52,00,000/- being declared invalid, and concluded that the assessments under Section 153A of the Income Tax Act, 1961, could not have been completed; hence, the findings of the CIT(A) require no interference.
A search operation was conducted at the office premises of Krish Group of Companies, leading to the issuance of a notice under Section 143A of the Income Tax Act, 1961. The respondent / assessee, Frost Falcon Distilleries Ltd engaged in the manufacturing of liquor beverages, allegedly had various incriminating documents seized during the search on November 9, 2011, from both the office premises and the residential premises of directors, including Amit Katyal.
The Assessing Officer documented that these documents were duly presented to the Krish Group during the search proceedings. Additionally, it was revealed during the search and subsequent inquiries that the Krish Group companies had introduced unaccounted money in the form of share capital and share premium through non-existing companies. The Assessing Officer relied on the report from the Investigation Unit in New Delhi, which highlighted the involvement of the Surendra Kumar Jain Group, alleged entry operators controlling over 100 companies.
The Assessing Officer observed that some of the investor companies in the assessee’s case had names similar to those related to the Surendra Kumar Jain Group. Consequently, the officer opined that the assessee failed to establish the identity, creditworthiness, and genuineness of the individuals and transactions from whom the share capital was received. As a result, additions were made under Section 68 of the Income Tax Act. However, these additions were later deleted by the CIT (A), leading the revenue to appeal, raising grounds that were consistent across both years, except for the amounts involved.
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During the hearing, the departmental representative T. James Singson, primarily relied on the observations of the Assessing Officer, arguing that all circumstances arising from the search and subsequent inquiries demonstrated that the assessee had received share premiums through accommodation entries from non-existent companies. It was contended that the CIT (A)’s finding that there was no incriminating material was incorrect.
Conversely, V. K. Bindal, representing the assessee, supported the CIT(A)’s order, asserting that no incriminating evidence was found during the search.
The CIT (A) explicitly noted that it is an undisputed fact, evident from the assessment order, that no incriminating documents, records, or other evidence were found or seized during the search proceedings that led to any addition in the appellant’s case. The only addition made under section 153A, read with section 143(3), pertains to unexplained credit under Section 68 amounting to Rs.1,52,00,000/-, which is not supported by any incriminating material discovered during the search.
Upon reviewing the assessment order, the bench noted that not a single document, with its contents and context, was mentioned in the assessment order. The Assessing Officer appeared to rely solely on existing financial information regarding the form and source of fresh capital introduced by various investors in the assessee company. The officer also relied on inquiries conducted by the Investigation Wing, attempting to link the investment transactions in the assessee company with information gathered during the search of the S.K. Jain Group. Additionally, the officer referenced actions by the Enforcement Directorate against Pankaj Kapoor and his companies, allegedly hawala operators.
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Further the bench observed that the CIT (A)’s findings could not be rebutted by the departmental representative, who failed to present any documents from the record or paper book to challenge the factual findings. The Departmental Representative’s case was based on inferences drawn from investigation reports related to other individuals, while the assessment of the assessee was completed under Section 153A(1)(b) read with Section 143(3) of the Income Tax Act. Therefore, the two-member bench, comprising M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member), concluded that in the absence of any incriminating evidence, the assessments could not have been completed under Section 153A of the Income Tax Act. As such, the CIT (A)’s findings required no interference, and the grounds raised by the revenue were deemed unsubstantial, leading to the dismissal of the appeals.
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