2017 (7) TMI 1315 - AT - Income Tax

Assessment u/s 153A - whether there was no incriminating material and assessments for the assessment years under consideration were not abated? - HELD THAT - CIT (Appeals) has held that in absence of incriminating material found during the course of search and in absence of abetment of assessment on the date of search, the additions made under section 153A of the Act is not sustainable. In absence of rebuttal of these findings of the CIT (Appeals), the addition made by the Assessing Officer cannot be sustained. The audit report directed during the course of assessment proceedings in the case of Dharampal Satyapal Ltd., in our view, cannot be treated as incriminating material found during the course of search to justify the addition made in the assessment under section 153A. It is also not the case of the Revenue that on the date of search assessments in the case of assessee were abetted. We thus, respectfully following the ratio laid down in the above cited decision of the Hon ble jurisdictional High Court of Delhi in the case of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT hold that the ld. CIT (Appeals) was justified in deleting the addition made by the Assessing Officer in the assessment framed under section 153A - Decided in favour of assessee

Summary

Issues:
Whether the ld. CIT (Appeals) was justified in deleting the addition made by the Assessing Officer in the assessments framed under section 153A of the Act on the basis that there was no incriminating material and assessments for the assessment years under consideration were not abated.

Analysis:
The Revenue challenged the first appellate order on various grounds, including the contention that the CIT (A) erred in not appreciating all facts and adopting a restrictive interpretation of the scope of assessment under section 153A. The CIT (A) was accused of not considering the material facts and circumstances of the case as brought out in the assessment order. The crux of the issue was whether the ld. CIT (Appeals) was justified in deleting the addition made by the Assessing Officer under section 153A due to the absence of incriminating material and non-abatement of assessments for the relevant years.

The ld. CIT [DR] argued that the special audit report under section 142(2A) was incriminating material, as it was linked with the search and complexity of accounts. He relied on court decisions to support the contention that additions can be made beyond seized material, even without incriminating evidence. On the other hand, the ld. AR justified the first appellate order by emphasizing the absence of incriminating material during the search and the timing of the special audit directed by the Assessing Officer.

The Tribunal examined various legal precedents, including decisions of the Hon'ble jurisdictional High Court of Delhi, to determine the legality of the addition made under section 153A. The Tribunal emphasized the need to consider the entirety of the High Court's decision and concluded that in the absence of incriminating material found during the search and abetment of assessment on the search date, the addition made under section 153A could not be sustained. The Tribunal upheld the decision of the ld. CIT (Appeals) to delete the addition made by the Assessing Officer.

In summary, the Tribunal dismissed the appeals and pronounced the order on 4th July 2017, based on the legal principles established by the High Court regarding the necessity of incriminating material for additions under section 153A and the abatement of assessments on the search date. The decision reaffirmed the importance of legal precedents in interpreting and applying tax laws.