2015 (11) TMI 540 - AT - Income Tax

Validity of assessment order u/s 143(3) r.w.s 153C - Addition u/s 68 - Held that - For the proposition that when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law. See case of Shri Govind Agarwal 2014 (2) TMI 810 - ITAT MUMBAI In the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the additions made in the assessment u/s 68 on account of share application money. Decided in favour of the assessee.

Issues Involved:
1. Validity of assessment proceedings under Section 143(3) read with Section 153C of the Income Tax Act.
2. Applicability of Section 292BB.
3. Addition of Rs. 7 lakhs under Section 68 of the Income Tax Act.
4. Requirement of incriminating material for making additions in non-abated assessment years.

Issue-wise Detailed Analysis:

1. Validity of Assessment Proceedings under Section 143(3) read with Section 153C:
The assessee contended that the assessment proceedings and consequential assessment orders under Section 143(3) read with Section 153C were without jurisdiction due to the absence of mandatory legal notices under Sections 143(2) and 142. The Tribunal noted that the search and seizure operation was conducted on 10.08.2006, and the notice under Section 153C was issued on 05.09.2008. The Tribunal emphasized that for non-abated assessment years, any addition must be based on incriminating material found during the search. The Tribunal cited the Bombay High Court decision in CIT v. All Cargo Global Logistic, which held that in non-abated assessments, additions can only be made based on incriminating material found during the search. The Tribunal found that the additions made by the AO were routine and not based on any seized material, thus unsustainable in law.

2. Applicability of Section 292BB:
The CIT (A) had held that the provisions of Section 292BB were applicable and clarificatory in nature. However, this issue was not specifically adjudicated by the Tribunal as the primary contention regarding the absence of incriminating material was sufficient to decide the appeals.

3. Addition of Rs. 7 Lakhs under Section 68:
The assessee challenged the addition of Rs. 7 lakhs under Section 68, arguing that it was not based on any incriminating material found during the search. The Tribunal agreed with the assessee, stating that the addition was not backed by any incriminating evidence and was a routine addition. The Tribunal cited several judgments, including the Delhi High Court in CIT vs. Kabul Chawla, which reiterated that no additions could be made to the income already assessed if no incriminating material was unearthed during the search.

4. Requirement of Incriminating Material for Additions in Non-Abated Assessment Years:
The Tribunal extensively discussed the legal position regarding the requirement of incriminating material for making additions in non-abated assessment years. It cited multiple judgments, including the Rajasthan High Court in Jai Steel (India) vs. ACIT and the Special Bench decision in All Cargo Global Logistics Ltd., which held that in non-abated assessments, additions could only be made based on incriminating material found during the search. The Tribunal concluded that since no incriminating material was found in the assessee's case, the additions made by the AO were unsustainable.

Consolidated Judgment:
The Tribunal allowed all six appeals of the assessee for the assessment years 2001-02 to 2006-07, holding that the additions made by the AO were not based on any incriminating material found during the search and thus were unsustainable in law. Consequently, the Tribunal dismissed the four appeals filed by the Revenue as academic.

Order Pronounced:
The order was pronounced in the open court on 12th October 2015.

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