2018 (11) TMI 1614 - AT - Income Tax

Assessment u/s 153A - no incriminating materials found during the search - addition u/s 68 - HELD THAT - The question that really calls for our consideration is whether, in the absence of any incriminating material found during the search operations as a result of which the assessments u/s 153A are framed, the completed assessments can be disturbed by making the additions on the basis of material other than incriminating material found during the search operations. This issue is no longer res integra. Upholding the stand of this Tribunal that during the post search assessment proceedings under section 153A in respect of completed assessments additions cannot be made other than on the basis of incriminating material found during search operations . See SAUMYA CONSTRUCTION PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-1 (3) , AHMEDABAD 2016 (7) TMI 911 - GUJARAT HIGH COURT Once it is not in dispute that the additions in questions are not based on any incriminating material found during the search operation, as is the undisputed factual position in this case, the very foundation of the additions ceases to be sustainable in law. That is precisely what the learned CIT(A) has held. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. - Decided against revenue.

Summary

Issues Involved:
1. Applicability of Section 153A of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to make additions based on non-incriminating material found during search operations.
3. Deletion of additions under Sections 68 and 69C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Applicability of Section 153A:
The primary issue revolves around the interpretation of Section 153A of the Income Tax Act, 1961. The Assessing Officer (AO) contended that the total income should be brought under tax without any restrictions, irrespective of whether incriminating material was found during the search operations. The CIT(A) held that assessments or reassessments under Section 153A should be restricted only to incriminating materials found during the search. The Tribunal upheld this view, citing precedents such as Kabul Chawla and Saumya Construction, which establish that additions in assessments under Section 153A can only be made based on incriminating material found during the search.

2. Jurisdiction of the Assessing Officer:
The jurisdiction of the AO to disturb completed assessments based on non-incriminating material found during search operations was challenged. The Tribunal affirmed the CIT(A)'s decision that the AO exceeded his jurisdiction by making additions based on post-search enquiries and verification of information already available in pre-search returns. The Tribunal emphasized that in the absence of incriminating material, the AO is duty-bound to "reiterate" the total income which had attained finality before the date of the search. This view was supported by decisions in Saumya Construction and Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax.

3. Deletion of Additions under Sections 68 and 69C:
The AO made additions of unexplained cash credits under Section 68 and unexplained expenses under Section 69C for the assessment years 2008-09 and 2010-11. The CIT(A) deleted these additions, citing the lack of incriminating material found during the search operations. The Tribunal upheld this deletion, reiterating that the AO's action of making additions was not based on any seized documents but on post-search enquiries. The Tribunal concluded that such additions are not sustainable in law when the assessments had attained finality and remained unabated as of the date of the search.

Conclusion:
The Tribunal dismissed the appeals filed by the AO, affirming the CIT(A)'s decision to delete the additions made under Sections 68 and 69C. The Tribunal held that in assessments under Section 153A, additions can only be made based on incriminating material found during search operations. The Tribunal's decision was consistent with the established legal position that the AO cannot disturb completed assessments based on non-incriminating material. The appeals were dismissed, and the conclusions arrived at by the CIT(A) were approved, with no interference in the matter.