2020 (9) TMI 1199 - AT - Income Tax

Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - In the instant case also both the CIT(A) as well as the ITAT have held that the addition is not based on any incriminating material found during the course of search and the assessment was not pending on the date of search. In the proceedings before the CIT(A) as well as the ITAT, the Revenue has not made any attempt as to disclose the incriminating material. The view taken by the tax authorities based on the decision of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT cannot be held to be perverse. The questions of law proposed by the Revenue are squarely covered by the aforesaid judgment.

Summary

Issues:
- Assessment under section 153A without incriminating material
- Addition made on account of Client Code Modification
- Interpretation of the term "total income" in section 153A
- Scope of assessment under section 153A r.w.s. 153C
- Applicability of the decision in CIT vs. Kabul Chawla
- Grounds of appeal raised by the Revenue

Analysis:
1. Assessment under section 153A without incriminating material:
The appeals were against separate orders relating to assessment years 2007-08 to 2010-11. The Assessing Officer completed the assessment under section 153A, making significant additions. However, the CIT(A) held that no incriminating material was found during the search, and the assessment was not pending on the date of the search. Citing the decision in CIT vs. Kabul Chawla, the CIT(A) concluded that the additions made without incriminating documents could not be sustained. The Tribunal upheld this view, emphasizing the absence of any incriminating material during the search.

2. Addition made on account of Client Code Modification:
The CIT(A) deleted the substantial addition made by the Assessing Officer on account of Client Code Modification, as it was not based on any incriminating material found during the search. The Tribunal concurred with this decision, citing the precedent set by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's grounds of appeal on this issue.

3. Interpretation of the term "total income" in section 153A:
The CIT(A) interpreted the term "total income" in section 153A to mean income unearthed during the search. This interpretation was crucial in determining the validity of the additions made by the Assessing Officer. The Tribunal upheld this interpretation, aligning with the decision in CIT vs. Kabul Chawla and emphasizing the absence of incriminating material during the search.

4. Scope of assessment under section 153A r.w.s. 153C:
The CIT(A) and the Tribunal scrutinized the scope of assessment under section 153A read with section 153C. They highlighted the necessity of incriminating material for making additions under section 153A and emphasized that assessments cannot be framed without such material. The decisions were based on legal precedents and statutory provisions.

5. Applicability of the decision in CIT vs. Kabul Chawla:
The decision in CIT vs. Kabul Chawla played a pivotal role in the analysis of the case. Both the CIT(A) and the Tribunal relied on this judgment to determine the validity of the additions made by the Assessing Officer. The consistent application of this decision underscored the importance of incriminating material in assessments under section 153A.

6. Grounds of appeal raised by the Revenue:
The Revenue raised various grounds of appeal challenging the CIT(A)'s decisions. These grounds included errors in law and facts, reliance on specific case laws, and interpretations of statutory provisions. The Tribunal carefully considered these grounds, evaluated the arguments presented by both sides, and ultimately dismissed the appeals filed by the Revenue.

In conclusion, the Tribunal upheld the CIT(A)'s orders, emphasizing the necessity of incriminating material for assessments under section 153A and highlighting the significance of legal precedents in tax matters. The consistent application of judicial decisions, particularly the ruling in CIT vs. Kabul Chawla, guided the resolution of the issues raised in the appeals.