2019 (5) TMI 1977 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - incriminating material as found during the course of search or not?HELD THAT - Assessees have admittedly filed original returns of income which were accepted and no assessment proceedings were pending on the date of search. No incriminating material was found during the course of search so as to make addition u/s.68 - assessees have shown commission / brokerage income received in cash in the original return of income. AO in the orders passed u/s.153A / 144 of the Income Tax Act in absence of explanation from the side of the assessee treated this said receipt of cash as commission / brokerage unexplained cash credit u/s.68 of the Act. Thus, no incriminating material was found during the course of search against all the three assessee for making addition u/s.68 - The issue is therefore covered by above judgments reproduced above. No addition could be made of this nature in the assessment order u/s.153A of the Income Tax Act. Appeal of assessee allowed.

Summary

Issues:
Challenges to assessment orders under section 153A of the Income Tax Act regarding unexplained cash credits u/s.68, additional grounds of appeal, jurisdiction of assessment, absence of incriminating material, legality of additions made, reliance on legal precedents, assessment on the basis of search-related income.

Analysis:
1. The appeals were against orders of the CIT(A) for assessment years following a search action under section 132 of the Income Tax Act in a group case. The assessees challenged additions made under section 68 of the Act for unexplained cash credits. The assessees contended that the original returns filed prior to the search should be considered compliant with section 153A notices. The Assessing Officer treated commission and brokerage income as unexplained cash credits due to lack of explanation and evidence, leading to the dismissals by the CIT(A).

2. The assessees sought admission of additional grounds challenging the jurisdiction of assessment under section 153A without incriminating material found during the search. The legal representative argued that no new investigation was necessary as all relevant materials were on record. Citing legal precedents, the assessees claimed that the assessment lacked jurisdiction and was void ab initio. The Tribunal allowed the additional grounds for consideration.

3. The Tribunal found that no incriminating material was discovered during the search, and the additions made under section 68 lacked legal basis. Relying on legal judgments, including the requirement for incriminating material to justify assessments under section 153A, the Tribunal held that completed assessments cannot be interfered with without such material. The Tribunal concluded that the additions under section 68 were unjustified and deleted them, allowing the appeals of all assessees.

4. The Tribunal emphasized that assessments under section 153A must be based on material disclosed during the search, and without such material, no additions can be made. The decisions cited by the assessees supported the view that only search-related income could be assessed under section 153A. As no incriminating material was found, the Tribunal set aside the orders and deleted the additions under section 68 of the Income Tax Act.

5. In light of the legal principles and the absence of incriminating material, the Tribunal allowed the appeals of all assessees, emphasizing the necessity of such material for justifying additions under section 68 and upholding the jurisdiction of assessments under section 153A based on search-related income.

This detailed analysis covers the various legal issues, arguments presented, and the Tribunal's decision in the judgment.