2022 (4) TMI 1503 - AT - Income Tax

Assessment u/s 153A - incriminating material found or seized during the course of search or not - HELD THAT - As in CIT Vs. Sinhaghad Technical Educational Society 2017 (8) TMI 1298 - SUPREME COURT that no such proceedings initiated u/s 153A of the Act sustainable in law for want of incriminating material found or seized during the course of search. We make it clear that although the Revenue has vehemently argued that there indeed exists sufficient seized material in light of the annexures attached with the DRP s directions (supra) a perusal thereof sufficiently indicates that this so called material parts already formed of the assessee s books which had already been considered in both the corresponding scrutiny assessments pending on the date of search. This tribunal s Special Bench s decision in All Cargo Global Logistics Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) holds that incriminating material is that material which is found during the course of search and not produced in the course of original assessment and undisclosed income or property disclosed during the course of search as the case may be. We find from a perusal of the case(s) records and more particularly in light of the DRP s compilation of the alleged seized material it only includes the assessee s expenses / claims or EBIDTA details etc. which could hardly be termed as anything incriminating in the foregoing terms. Decided in favour of assessee.

Summary

Issues involved:
Validity of impugned assessments for lack of incriminating material found or seized during search.

Analysis:
1. The judgment pertains to twin appeals for assessment years 2012-13 and 2013-14 against the assessments framed by the Asst. Commissioner of Income Tax, Central Circle - 2(3), Hyderabad, based on directions from the Dispute Resolution Panel (DRP) in Bangalore. The primary issue raised is the validity of the assessments due to the absence of incriminating material found or seized during the search conducted at the assessee's premises on 09.11.2016.

2. The assessee argued, citing relevant case laws, that assessments without incriminating material should be quashed. However, the CIT-DR contended that the Act does not mandate the presence of incriminating material for section 153A proceedings. He emphasized that the purpose is to assess or reassess the total income of the assessee, not solely based on seized material. The DRP's directions listed seized documents to support the assessments' basis on seized material.

3. After considering the arguments, the tribunal found no merit in the Revenue's stance. The assessments were deemed "abated" under section 153A(1) due to the search action following the filing of returns and TPO orders. The tribunal referenced case laws and the apex court's decision to conclude that section 153A proceedings without incriminating material are not sustainable in law. The seized material provided by the Revenue was found to be part of the assessee's books already considered in previous assessments.

4. The tribunal rejected the Revenue's argument that other material could be considered in a search assessment, as the issue at hand was the lack of incriminating material. Relying on case law and the DRP's compilation of seized material, which included expenses and details already disclosed, the tribunal ruled in favor of the assessee. Consequently, both assessments were quashed, rendering other arguments on merits irrelevant.

5. In conclusion, the tribunal allowed the assessee's appeals, ordering the quashing of both assessments. The judgment highlights the importance of incriminating material in search assessments under section 153A, emphasizing that assessments without such material are not sustainable in law.