2018 (6) TMI 1818 - AT - Income Tax

Assessment u/s 153A - Necessity of incriminating documents found in search - HELD THAT - As it is a settled law that without any incriminating documents no adjustment to finally assessed income in completed assessment year can be tinkered with. The Ld. departmental tentative amount was any error in the order of the Ld. CIT A. In view of this, we do not have any other option but to dismiss the appeal of the revenue.

Summary

Issues Involved:
1. Whether the CIT(A) erred in annulling the assessment by holding that no document was seized during the search pertaining to the respective Assessment Years.
2. Whether the CIT(A) erred in not following Circular No. 7 of 2003 issued by the CBDT.
3. Whether the CIT(A) erred by not appreciating that there is no precondition for documents pertaining to each assessment year under Section 153C/153A.
4. Whether the CIT(A) erred by admitting additional grounds of the assessee without giving an opportunity to the AO.
5. Whether the order of the CIT(A) is perverse and untenable in law and on facts.

Issue-wise Detailed Analysis:

1. Seizure of Documents During Search:
The CIT(A) annulled the assessment by holding that no document was seized during the search pertaining to the respective Assessment Years. The revenue argued that the CIT(A) erred in this conclusion. The Tribunal noted that the CIT(A) found no incriminating material during the search that indicated undisclosed income. The Tribunal upheld the CIT(A)'s decision, emphasizing that without any incriminating documents, adjustments to the finally assessed income in completed assessment years cannot be made.

2. Circular No. 7 of 2003 Issued by the CBDT:
The revenue contended that the CIT(A) did not follow Circular No. 7 of 2003. However, the Tribunal did not find merit in this argument. The Tribunal noted that the CIT(A)'s decision was based on the absence of incriminating material, which is a settled legal position upheld by the Hon’ble Delhi High Court.

3. Precondition for Documents Pertaining to Each Assessment Year:
The revenue argued that there is no precondition that documents pertaining to each assessment year must be found during the search. The Tribunal reiterated that the CIT(A) correctly held that in the absence of incriminating material, the completed assessment cannot be disturbed. The Tribunal cited the legal position that completed assessments can only be interfered with if incriminating material is found during the search.

4. Admission of Additional Grounds Without Opportunity to AO:
The revenue claimed that the CIT(A) admitted additional grounds of the assessee without giving an opportunity to the AO. The Tribunal found no merit in this argument, noting that the CIT(A) allowed the appeal based on the absence of incriminating material, which did not require additional grounds to be admitted.

5. Order of the CIT(A) Being Pervasive and Untenable:
The revenue argued that the CIT(A)'s order was perverse and untenable. The Tribunal disagreed, stating that the CIT(A) followed the settled legal position that without any incriminating documents, no adjustments to the finally assessed income in completed assessment years can be made.

Conclusion:
The Tribunal dismissed all four appeals filed by the revenue for the respective Assessment Years. The Tribunal upheld the CIT(A)'s decision that no additions could be made to the income of the assessee under Section 153A without incriminating material found during the search. The Tribunal emphasized the settled legal position that completed assessments can only be interfered with if incriminating material is found during the search.