2013 (12) TMI 1578 - AT - Income Tax

Assessment u/s 153C - Held that - To invoke the jurisdiction for Assessment in case of search or requisition there are two aspects, the searched person on whom notice u/s 153A shall be served and as a consequence of which assessment u/s 143(3)/153A shall be made. The other aspect is that in the course of search if certain documents are found, which would pertain to a third person, in such a situation, the AO having jurisdiction over the searched person shall record reasons and hand over the material to the AO having jurisdiction over the third person. In that case, the AO having jurisdiction over the person other then the person searched, shall initiate the proceedings by the issue of notice u/s 153C. The instant case pertains to this aspect, i.e. proceedings u/s 153C. In the case before us, search took place on the new management and admittedly no document as such was found which indicated that there was certain income belonging to the assessee, which had not been disclosed to the department in the impugned assessment years. Since the search was on the new management, the assessee company became the person other then the person searched. In these circumstances, issue of notice u/s 153C and assessment to be framed under this provision is imperative, as the provision is non obstante. In these circumstances, we hold that the additions made u/s 153C are sustainable.

Summary

Issues Involved:
1. Validity of assessment under Section 143(3) read with Section 153C of the Income Tax Act, 1961.
2. Legality of additions made in the absence of any incriminating seized material during the course of search.

Issue-Wise Detailed Analysis:

1. Validity of Assessment under Section 143(3) read with Section 153C:
The appeals were filed by the assessee against the orders of CIT(A), which affirmed the action of the AO in making additions under Section 143(3) read with Section 153C. The assessee argued that the assessments were invalid as there was no incriminating material found during the search. The CIT(A) relied on the judgment of the Hon'ble Andhra Pradesh High Court in the case of Gopal Lal Bhadruka vs. Dy. Commissioner of Income-tax, which held that for the purposes of Sections 153A/153C, the AO could take into consideration material other than what was available during the search and seizure operation. The Tribunal noted that the search was conducted on the new management and no documents indicating undisclosed income of the assessee were found. The Tribunal concluded that the initiation of proceedings under Section 153C was not justified as there was no incriminating material found.

2. Legality of Additions Made in Absence of Incriminating Seized Material:
The assessee contended that the additions made by the AO were not based on any incriminating material found during the search. The AR argued that the assessments for the years 2004-05 to 2007-08 were completed under Section 143(1) and no notices for reopening were issued before the search. The Tribunal referred to the Special Bench decision in All Cargo Global Logistics Ltd. vs. DCIT, which stated that no addition could be made unless there was incriminating material. The Tribunal held that since no incriminating material was found during the search, the additions made under Section 153C were not sustainable. The Tribunal also noted that the decision in Pratibha Industries Ltd. supported the view that if no incriminating material was found, the assessment should be framed at the figure which stands finalized.

Separate Judgments Delivered:
The Tribunal consolidated the appeals for the assessment years 2004-05 to 2007-08 and delivered a single judgment for convenience. The Tribunal allowed the appeals for all the assessment years, holding that the additions made under Section 153C were not sustainable in the absence of incriminating material.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for the assessment years 2004-05 to 2007-08, holding that the additions made under Section 153C were not sustainable in the absence of any incriminating material found during the search. The Tribunal emphasized that the initiation of proceedings under Section 153C requires the discovery of incriminating material indicating undisclosed income.