2019 (9) TMI 1709 - AT - Income Tax

Assessment proceedings u/s 153C(1) - determining the six assessment years - HELD THAT - As going by sec. 153A (1)(b) applicable in such a scenario except that to the extent of its exclusion in view of the first proviso to sec. 153C(1), the six assessment years in this taxpayer s case preceding the assessment year relevant to the previous year in which the search is conduced (AY 2017-18 herein since the reference to date of search brings us to August, 2016) are 2016-17, 2015-16, 2014-15, 2013-14 2012-13 assessment year 2011-12 and not beyond that. Hon'ble Delhi high court s twin decisions RRJ Securities Ltd 2015 (11) TMI 19 - DELHI HIGH COURT and SSP Aviation Ltd. 2012 (4) TMI 335 - DELHI HIGH COURT decide the very question in assessee s favour going by the very reasoning. We conclude in these facts that the impugned assessments in assessment years 2009-10 and 2010-11 not sustainable in law. The same stand quashed. Assessment proceedings u/s 153C(1) - addition u/s 68 - Whether any incriminating material found or seized during the course of search? - HELD THAT - Although the search assessment provision nowhere contemplates that addition should be strictly made on the basis of evidence found in the course of search or other post search material or information available with the AO which can be related to the evidence found, it does not mean that an assessment can be arbitrarily made without any relevance or nexus with the seized material. Such an assessment under this provision has to be made only on the basis of seized material. Learned CIT-DR fails to dispute that there is no such incriminating material so far as the twin sec. 68 addition(s) of cash deposits in question. We accordingly hold that the impugned assessment(s) deserve to be quashed for this precise reason alone since they are not based on any incriminating material found or seized during the course of search.

Summary

Issues:
1. Validity of assessments under sec. 153C r.w.s. 143(3) for assessment years 2009-10 and 2010-11.
2. Sec. 68 additions of unexplained cash deposits in bank for assessment years 2011-12 and 2013-14.

Issue 1: Validity of assessments under sec. 153C r.w.s. 143(3) for assessment years 2009-10 and 2010-11

The judgment dealt with four assessee's appeals arising from separate orders of the Commissioner of Income Tax (Appeals)-21, Kolkata, for assessment years 2009-10 to 2011-12 and 2013-14. The appeals were related to proceedings under sec. 153C r.w.s. 143(3) of the Income Tax Act, 1961. The appeals stemmed from a search seizure operation in the case of the "M/s Sarojini" group, leading to sec. 153C proceedings against the assessee. The main issue was whether the assessments for the years 2009-10 and 2010-11 were valid under sec. 153C. The Assessing Officer initiated sec. 153C proceedings based on the search conducted in 2014. The assessee argued that the assessments for these years were beyond the six assessment years immediately preceding the relevant assessment year. The Tribunal, citing relevant legal provisions and precedents, ruled in favor of the assessee, holding that the assessments for 2009-10 and 2010-11 were not sustainable under the law.

Issue 2: Sec. 68 additions of unexplained cash deposits in bank for assessment years 2011-12 and 2013-14

The second part of the judgment focused on the sec. 68 additions of unexplained cash deposits in the bank for the years 2011-12 and 2013-14. The assessee contended that these additions were not supported by any incriminating material found during the search. The Revenue argued that the purpose of assessments under sec. 153A and 153C was to assess total income, not solely based on incriminating material. However, the Tribunal analyzed relevant legal provisions and decisions, including those from high courts, emphasizing that search assessments must be based on incriminating material. As there was no such material supporting the cash deposit additions, the Tribunal ruled in favor of the assessee, quashing the assessments for these years. The judgment highlighted the importance of incriminating material in search assessments and upheld the assessee's position in both appeals related to the sec. 68 additions.