2021 (2) TMI 1294 - AT - Income Tax

Assessment u/s 153 A - assessment in respect of seized documents - Proof of incriminatory material was found during the search - HELD THAT - In view of the admitted position of fact in this case that no incriminatory material was found during the search operations pertaining to this particular assessment year, AO could not have proceeded to frame assessment under section 153A of the Act and on this score we uphold the findings of the Ld. CIT(A) and decline to interfere with the same. - Decided against revenue.

Summary

Issues:
1. Validity of assessment under section 153A of the Income Tax Act.
2. Requirement of approval under section 153D of the Act for assessment.

Analysis:

Issue 1: Validity of assessment under section 153A of the Income Tax Act:
The case involved a challenge to the assessment under section 153A of the Income Tax Act for the assessment year 2006-07. The search operations conducted at the premises of the assessee did not yield any incriminating material relevant to this assessment year. The Revenue made additions totaling Rs. 7,00,55,940/- under section 68 of the Act and towards unverifiable expenses. The assessee appealed before the Ld. CIT(A) who upheld the addition under section 68. The Tribunal, in a previous order, remanded the matter to the Assessing Officer for further verification. Subsequently, the Assessing Officer reiterated the additions, leading to another appeal by the assessee. The Ld. CIT(A) accepted the assessee's contentions, stating that without incriminating material, the additions under section 153A were not justified. Citing legal precedents, the Tribunal concurred with the Ld. CIT(A) and dismissed the Revenue's appeal, emphasizing the necessity of incriminating material for such assessments.

Issue 2: Requirement of approval under section 153D of the Act for assessment:
The Revenue contended that the Ld. CIT(A) erred in entertaining challenges to the validity of the proceedings under section 153A in the absence of any objection raised during the first round of litigation. The Revenue argued that approval under section 153D was not necessary for the assessment under section 254 of the Act. In response, the assessee maintained that the absence of incriminating material during the search invalidated the assessment under section 153A. Citing legal judgments, the assessee emphasized the significance of approval under section 153D for assessments. The Tribunal analyzed the arguments and found that the absence of incriminating material rendered the assessment under section 153A invalid, thereby dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the necessity of incriminating material for assessments under section 153A and dismissing the Revenue's appeal. The Tribunal found that the absence of such material rendered the assessment invalid, thereby declining to interfere with the Ld. CIT(A)'s findings. The discussion on the aspect of section 153D of the Act was deemed academic in light of the Tribunal's findings on the merits of the case.