2022 (9) TMI 1424 - AT - Income Tax

Assessment u/s 153A - Unsecured loan u/s 68 - incriminating material found during the search or not? - HELD THAT - As in the absence of any incriminating material found during the search action and duly following the judgements in the cases of CIT (Central-III) vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT hold that the assessment u/s 153A/143(3) of the Act in the instant case was not justified and therefore is quashed. Thus we hold that the addition made vide the assessment u/s 153A in the absence of any incriminating material is not sustainable. Appeal of the Revenue is dismissed.

Summary

Issues:
- Disputed addition of unsecured loan under section 68 of the IT Act
- Disputed addition of undisclosed investment in shares
- Quashing of assessment order by AO under section 153A/143(3) without incrementing material

Issue 1: Disputed addition of unsecured loan under section 68 of the IT Act

The appeal by the Revenue challenges the deletion of an addition of Rs. 12,50,000 on account of an unsecured loan under section 68 of the IT Act. The facts reveal that a search and seizure action was conducted under section 132 of the Income Tax Act in 2016, relating to the Assessment Year 2010-11. It is noted that the assessment for the year in question was completed prior to the search, and no incriminating material was found during the search. The Revenue argued that the literal interpretation of section 153A should be followed, empowering the Assessing Officer to assess or reassess the total income of the assessee. However, the Tribunal held that in the absence of incriminating material, the addition of the unsecured loan was not sustainable based on various judicial pronouncements cited.

Issue 2: Disputed addition of undisclosed investment in shares

Another ground of appeal by the Revenue was the deletion of an addition of Rs. 4,95,17,100 on account of undisclosed investment in shares. The Revenue contended that the assessment under section 153A allows for a comprehensive assessment of disclosed and undisclosed income, irrespective of the presence of incriminating documents. The Revenue relied on various judgments to support their argument. However, the Tribunal, after considering the arguments of both parties and the relevant case laws, held that the addition made without any incriminating material was not sustainable. The Tribunal emphasized that the settled legal position required the existence of incriminating material to support such additions.

Issue 3: Quashing of assessment order by AO under section 153A/143(3) without incrementing material

The final issue pertains to the quashing of the assessment order passed by the Assessing Officer under section 153A/143(3) by the ld. CIT(A). The Revenue argued that the AO had wrongly assumed jurisdiction under section 153A and made additions to the returned income without any incriminating material. The Revenue cited various judgments to support their position that additions can be made even without incriminating material. However, the Tribunal, after analyzing the facts and relevant case laws, dismissed the appeal of the Revenue. The Tribunal held that the addition made without any incriminating material was not sustainable, emphasizing the need for a legal basis supported by incriminating material for such assessments under section 153A.

In conclusion, the Tribunal dismissed the appeal of the Revenue, holding that the additions made without any incriminating material during the assessment under section 153A were not sustainable. The Tribunal relied on various judicial pronouncements and emphasized the importance of incriminating material to support additions in such cases.