2018 (1) TMI 1567 - AT - Income Tax

Assessment u/s 153C - information collected by the A.O. without any basis of incriminating material - HELD THAT - During the appeal hearing, the D.R. did not place any evidence with regard to the incriminating material found in the premises of the searched person relating to the assessee. Now it is settled issue that for initiating the proceedings u/s 153C it is incumbent upon the A.O. to have the incriminating material evidencing the undisclosed income. In the assessee s case no such evidence was found during the course of search in the group cases. As per the provisions of section 153C it is mandatory to have the satisfaction of the A.O. that money, bullion, jewellery or other valuable article or thing or any books of accounts, documents seized or requisitioned pertains to or relates to the assessee, which means that unless there is an incriminating material belonging to the assessee is found, the action u/s 153C of the Act is not permissible. In the assessee s case there was no incriminating material found and seized from the premises of the group cases. We hold that the notice issued u/s 153C is not sustainable and accordingly quashed. This view is upheld by the Hon ble Supreme Court in the case of CIT Vs. Sinhagad Technical Education Society ( 2017 (8) TMI 1298 - SUPREME COURT ) . Respectfully following the judgement of the Hon ble Supreme Court, we hold that the notice issued u/s 153C is unsustainable and accordingly quashed. Appeal filed by the assessee is allowed

Summary

Issues:
Validity of notice u/s 153C of the Income Tax Act for assessment year 2008-09 based on incriminating material.

Analysis:
The appeal was against the Commissioner of Income Tax (Appeals) order for the assessment year 2008-09. The assessee declared income of ?63,920 on 29.7.2008. A search operation was conducted on 3.2.2009, and the Assessing Officer (A.O.) issued a notice u/s 153C of the Act on 3.3.2010. The A.O. completed the assessment u/s 143(3) r.w.s. 153C of the Act estimating the total income at ?11,69,338, with an addition of ?11,05,418 on estimation basis. The assessee admitted additional income for the assessment year 2009-10 during the search proceedings. The A.O. determined undisclosed income based on market information and recorded statements, estimating the undisclosed income at ?11,05,500.

The assessee appealed before the CIT(A) who partly allowed the appeal. The assessee contended that for the assessment year 2008-09, no incriminating material was available to invoke provisions u/s 153C of the Act, challenging the validity of the notice. The Departmental Representative argued that the notice was valid based on the assessee's admission of additional income u/s 132(4) for the subsequent year.

The Tribunal observed that no incriminating material was found during the search related to the assessment year 2008-09. The A.O. invoked section 153C without recorded satisfaction or incriminating material, solely based on estimation. The assessee maintained books of accounts, audited them, and followed a consistent accounting method. The CIT(A) acknowledged the maintenance of accounts and rejected the A.O.'s basis for rejection. The Tribunal held that without incriminating material, action u/s 153C is impermissible, following Supreme Court precedent.

Given the absence of incriminating material and failure to establish the link to the assessee, the Tribunal quashed the notice u/s 153C, upholding the appeal. The judgment emphasized the necessity of incriminating material for invoking section 153C and aligned with the Supreme Court's ruling in a similar context.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of incriminating material for invoking provisions u/s 153C of the Income Tax Act and ensuring a valid basis for assessments.