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2019 (2) TMI 2051 - AT - Income TaxAssessment u/s 153A r.w.s. 143(3) - Proof of incriminating material found during the course of search - whether, an addition can be made in an assessment u/s 153A r.w.s. 143(3) of the Act, which is not based on any incriminating material found during the course of search and seizure, when the assessment for the Assessment Year in question has not abated? - HELD THAT - In the case on hand, the assessee filed its original return of income on 26/09/2010. The time limit for issual of notice u/s 143(2) of the Act, was 14/08/2014. The search and seizure operation was conducted in this case on 18/02/2013. The statutory period for issual of notice u/s 143(2) of the Act, in the case of the Assessment Years had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Year has not abated. Additions in question are not based on any incriminating material found during the course of search. DR could not controvert this factual finding of the ld. CIT(A). His arguments do not reflect the findings and basis on which the Assessing Officer made the additions. Only addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A of the Act. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements - when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. Cross-examination a witness - The Hon ble Supreme Court in the case of Kishinchand Chellaram 1980 (9) TMI 3 - SUPREME COURT had held that opportunity of cross-examination must be provided to the assessee. The Jurisdictional High Court in the case of CIT Vs Eastern Commercial Enterprises 1993 (12) TMI 26 - CALCUTTA HIGH COURT held as matter of fact, the right to cross-examination a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation or whether the statements were recorded during the course of survey operations. It is well settled that a statement recorded during the course of survey operation cannot be used as an evidence under the Act. As none of these material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Thus, we hold that the additions in question are not based on any incriminating material. Appeal of the revenue is dismissed.
Issues Involved:
1. Delay in filing the appeal. 2. Legality of additions made under Section 153A/143(3) without incriminating material. 3. Jurisdiction and authority of the Assessing Officer (AO) in making additions. 4. The requirement of providing evidence and opportunity for cross-examination to the assessee. 5. The relevance of judgments from higher courts and their applicability to the case. Issue-wise Detailed Analysis: 1. Delay in Filing the Appeal: The appeal filed by the revenue was delayed by 26 days. The Tribunal, after perusing the petition for condonation, was convinced that the department was prevented by sufficient cause from filing the appeal on time. Hence, the delay was condoned, and the appeal was admitted. 2. Legality of Additions Made Under Section 153A/143(3) Without Incriminating Material: The assessee's original return of income was filed on 26/09/2010, declaring a total income of Rs.78,000/-. A search and seizure operation was conducted on 18/02/2013, and a notice under Section 153A was issued. The AO completed the assessment on 31/03/2015, determining the total income at Rs.11,06,55,380/-. The First Appellate Authority granted part relief, relying on the decisions of the Hon’ble Calcutta High Court and other judgments, holding that incriminating material is a prerequisite for making additions in assessment under Section 153A/143(3), wherever assessments have not abated. The Tribunal upheld this view, emphasizing that the additions were not based on any incriminating material found during the course of the search. 3. Jurisdiction and Authority of the Assessing Officer (AO) in Making Additions: The AO made the additions based on statements recorded from various entry operators and a cash trail prepared during the post-search enquiry. The Tribunal noted that the additions were not based on any incriminating material found during the search and emphasized that the AO's additions were not justified as they were not based on evidence found during the search. 4. The Requirement of Providing Evidence and Opportunity for Cross-Examination to the Assessee: The Tribunal highlighted that the assessee was not provided with copies of the bank statements of third parties or the statements recorded from entry operators. The assessee was also not given an opportunity to cross-examine these parties. The Tribunal cited the Hon’ble Supreme Court's decision in Kishinchand Chellaram vs. CIT, which mandates that the opportunity of cross-examination must be provided to the assessee. The Tribunal found that the AO did not bring any evidence on record to prove that the alleged cash deposits in the bank accounts of third parties were the assessee's money. 5. The Relevance of Judgments from Higher Courts and Their Applicability to the Case: The Tribunal relied on several judgments, including those of the Hon’ble Calcutta High Court and the Hon’ble Delhi High Court, which held that additions in assessments under Section 153A can only be made based on incriminating material found during the search. The Tribunal also noted that the Hon’ble Supreme Court had dismissed the department's special leave petition in a similar case, reinforcing the principle that no additions can be made without incriminating material. Conclusion: The Tribunal concluded that the additions made by the AO were not based on any incriminating material found during the search and that the assessee was not provided with an opportunity to cross-examine the witnesses or evidence used against them. The Tribunal upheld the order of the First Appellate Authority, which had deleted the additions made by the AO. The appeal of the revenue was dismissed.
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