Addition on Share Capital Unsustainable In Absence Of Incriminating Material: ITAT Deletes ₹9.99 Cr Addition u/s 68 [Read Order]

The Income Tax Appellate Tribunal Chennai Bench, has held that no addition can be made under Section 68 of the Income Tax Act 1961 in the absence of incriminating material found during search proceedings. The Tribunal upheld the deletion of an addition of ₹9.99 crores made towards preference share capital.

The Tribunal dismissed the Revenue's appeal and upheld the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal held that additions made under Section 153A have to be on the basis of incriminating material unearthed during search proceedings.

The assessee Whitelotus Solar Private Limited filed its return declaring a loss. During the original assessment under Section143(3) of the Act an addition of ₹9.98 crores was made by the Assessing Officer on the issue of preference share capital under Section 68.

Further,the CIT(A) had deleted the addition in 2018 after evaluating the source of funds. The search operation under Section 132 of the Act was conducted on the group entities in 2019.The assessment was reopened by making an addition of ₹9.99 crores on the same issue under Section 153A.

However, the Revenue department contended that the CIT(A) had erred in relying on the earlier appellate order and had not taken into account the fresh findings arising out of the search operation.

Further,the assessee’s contention was that no incriminating material was found during the course of the search operation pertaining to the impugned assessment year. It was further contended that the issue had already been decided in the earlier years and there was no change in the facts.

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The Tribunal comprising Aby T. Varkey [Judicial Member] and S. R. Raghunatha [Accountant Member] observed that though some data was seized during the search there was no undisclosed income or cash transaction relating to the assessee for the relevant year. The seized material indicated NIL entries for the relevant year under consideration.

The bench observed that in case of unabated assessment additions under S. 153A can only be made on the basis of incriminating material found during search.”

Accordingly, the Tribunal upheld the deletion of the addition and dismissed the Revenue’s appeal.

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