2019 (12) TMI 1603 - AT - Income Tax

Validity of the order framed u/s 153A - as argued additions have been made without any reference to any incriminating material/evidence found during the course of search and seizure proceedings - HELD THAT - It is true that the entire assessment is devoid of any reference to any incriminating material or evidence found during the course of search and seizure proceedings. We find that the AO has taken a leaf from the search operations conducted at the premises of Jain brothers and formed a belief that the assessee is one of the beneficiaries of the accommodation entries provided by the Jain brothers. However, the premises of the assessee were also searched and in the search proceedings, no incriminating material or evidence was found by the search party. Share application money/premium received by the assessee has already been recorded in its books of account and return of income was already filed on 30.03.2007. No notice u/s 143(2) of the Act was issued and served upon the assessee and by necessary implication, return of income was accepted. The ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT squarely applies on the facts of the case in hand wherein the Hon'ble High Court has held that completed assessment can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search. - Decided in favour of assessee.

Summary

Issues:
1. Validity of the assessment order framed under section 153A of the Income Tax Act, 1961.
2. Merits of the additions made during the assessment.

Analysis:
Issue 1: The validity of the assessment order under section 153A of the Income Tax Act was challenged by the assessee, claiming that the additions were made without any reference to incriminating material found during the search and seizure proceedings. The Assessing Officer believed that the assessee benefited from accommodation entries provided by certain individuals. However, no incriminating material was found during the search at the assessee's premises. The assessee relied on various court decisions to support their argument. The tribunal observed that the assessment lacked any reference to incriminating material, and as per the Delhi High Court's ruling in the case of Kabul Chawla, assessments under section 153A can only be based on such material. Following this, the tribunal allowed Ground No. 1, holding the assessment order to be bad in law and quashed it.

Issue 2: Since the tribunal quashed the assessment order due to the lack of incriminating material, it did not delve into the merits of the additions made during the assessment. Consequently, the appeal of the assessee was allowed based on the decision regarding the validity of the assessment order under section 153A of the Income Tax Act.

Overall, the tribunal's decision focused on the necessity of incriminating material for assessments under section 153A, as established by relevant court rulings, and upheld the assessee's challenge to the validity of the assessment order.