2019 (7) TMI 1537 - AT - Income Tax

Assessment u/s 153A - HELD THAT - As admittedly no incriminating material relating to these assessment years or as a matter of fact for any of the assessment years were found during the course of search and accordingly, we set aside the orders of both the authorities below and held that when no incriminating material has been found during the course of search then, no addition can be made while framing the assessment under section 153A of the Act. Thus, the grounds raised by the assessee for the are allowed.

Issues Involved:
1. Validity of assessment under Section 153A without incriminating material.
2. Addition of ?3,66,311 due to discrepancy between the bank loan amount as per the balance sheet and the bank account statement.

Detailed Analysis:

1. Validity of Assessment under Section 153A without Incriminating Material:
The primary issue in these appeals is whether the assessments made under Section 153A of the Income Tax Act, 1961, are valid in the absence of any incriminating material found during the search operations conducted under Section 132.

The appellants argued that the CIT(A) erred in upholding the assessment orders passed by the AO under Section 153A, despite no incriminating documents being found during the search. They contended that the assessments were arbitrary, excessive, and contrary to facts and law. The AR of the assessees emphasized that no incriminating material was found during the search, and hence, no additions could be made.

The Tribunal examined the Panchanama and found that no books of accounts or incriminating material were seized during the search. The Tribunal noted that the AO's reference to seized books of accounts in the assessment order was not substantiated by the Panchanama, which only mentioned a bunch of loose sheets.

The Tribunal relied on the judicial precedents set by the Hon’ble Delhi High Court in the case of *CIT vs. Kabul Chawla* and the Hon’ble Supreme Court in the case of *CIT vs. Sinhgad Technical Education Society*, which held that in the absence of incriminating material, no additions can be made under Section 153A. The Tribunal also noted that when there are conflicting decisions of non-jurisdictional High Courts, the decision favoring the assessee should be followed, as per the Supreme Court's ruling in *CIT vs. Vegetable Products Ltd.*

The Tribunal concluded that since no incriminating material was found during the search, the assessments under Section 153A were not sustainable. Consequently, the additions made by the AO and upheld by the CIT(A) were deleted.

2. Addition of ?3,66,311 Due to Discrepancy Between Bank Loan Amounts:
The second issue was the addition of ?3,66,311 made by the AO on account of a discrepancy between the bank loan amount as per the balance sheet and the bank account statement. The assessees argued that this addition was made without any basis in seized materials and was therefore liable to be deleted.

The Tribunal noted that the AO did not refer to any specific incriminating document or seized material while making this addition. The Tribunal found that the CIT(A) had wrongly confirmed the addition without considering the facts and details provided during the assessment proceedings.

Given the lack of incriminating material and the absence of any reference to such material by the AO, the Tribunal held that the addition of ?3,66,311 was not justified and deleted it.

Conclusion:
The Tribunal allowed all the appeals of both the assessees, holding that the assessments under Section 153A were not sustainable in the absence of incriminating material found during the search. Consequently, the additions made by the AO and upheld by the CIT(A) were deleted. The Tribunal's decision was pronounced in the open court on 08/07/2019.

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