2017 (9) TMI 530 - HC - Income Tax

Initiation of assessments under section 153A - proof of incriminating material was found during the search - Held that - There is nothing on record to suggest that the observations of the Tribunal that no incriminating material was found during the search with the aid of which the additions could have been made was inaccurate. In that view of the matter as held by this Court and the Delhi High Court, the Tribunal was correct in quashing the assessments under section 153A(1) of the Act. In that view of the matter, we see no reason to interfere. The second subsidiary observation and conclusion of the matter with respect to the pendency of the assessment in terms of second proviso to subsection (1) of section 153A, we need not comment.

Issues:
1. Validity of assessment under section 153A of the Income Tax Act, 1961
2. Existence of incriminating material during search for making additions
3. Interpretation of the second proviso to section 153A(1) of the Act

Issue 1: Validity of assessment under section 153A of the Income Tax Act, 1961
The Tax Appeals in question pertain to the assessment year 2009-10 and involve the respondent assessee. The assessee filed the return of income under section 139(1) of the Act on 19.09.2009. Subsequently, a search was conducted at the assessee's premises on 20.01.2010. The Assessing Officer issued a notice for filing a return under section 153A of the Act, to which the assessee responded by filing the return on 10.10.2011. The Assessing Officer then passed the assessment order under section 153A of the Act on 28.11.2011, making several additions that were challenged before the Commissioner and eventually reached the Tribunal. The Tribunal allowed the assessee to raise a legal contention challenging the validity of the assessment order under section 153A on the basis that no incriminating material was found during the search to support the additions made. The Tribunal, relying on precedents, concluded that the Assessing Officer could not have made the additions without incriminating material, thereby quashing the assessments under section 153A(1) of the Act.

Issue 2: Existence of incriminating material during search for making additions
The crux of the issue lies in whether there was any incriminating material found during the search that could have justified the additions made by the Assessing Officer in the assessment order under section 153A of the Act. The Tribunal, following the decision of the Delhi High Court and previous judgments of the Court, held that no incriminating material was found during the search to support the additions. Consequently, the Tribunal deemed the additions invalid and quashed the assessments under section 153A(1) of the Act. The High Court concurred with the Tribunal's findings, stating that there was no evidence to suggest the Tribunal's observations regarding the absence of incriminating material were inaccurate. Therefore, the High Court upheld the Tribunal's decision to quash the assessments under section 153A of the Act.

Issue 3: Interpretation of the second proviso to section 153A(1) of the Act
The final issue pertains to the interpretation of the second proviso to section 153A(1) of the Act in relation to the pendency of assessments for the relevant assessment years. The Tribunal concluded that the assessments for the three years in question could not be considered pending under the second proviso to section 153A(1) as the time limit for issuing notices had expired before the search was conducted. While the High Court did not delve into this aspect in detail, it affirmed the Tribunal's decision to quash the assessments under section 153A(1) based on the absence of incriminating material, thereby dismissing the Tax Appeals.

In conclusion, the High Court upheld the Tribunal's decision to quash the assessments under section 153A of the Income Tax Act, 1961, based on the absence of incriminating material found during the search. The judgment highlights the significance of incriminating material in justifying additions made by the Assessing Officer and emphasizes the legal principles governing the validity of assessments under section 153A.

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