2017 (10) TMI 60 - AT - Income Tax

Validity of assessment u/s 153A - proof of incriminating material found in search - Held that - As admittedly no incriminating material relating to these assessment years or as a matter of fact for any of the assessment years were found during the course of search and accordingly, the originally assessed income, i.e., income disclosed by the assessee in the original return of income and reiterated in the return filed in response to notice u/s 153A deserves to be accepted and the same has to be reckoned as assessment of the income in terms of section 153A and no further addition can be made by the Assessing Officer over and above the returned income. Accordingly, the additions made by the AO are deleted on the ground that they are beyond the scope of assessments u/s 153A.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Validity of additions made under Section 153A of the Income Tax Act in the absence of incriminating material.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeals:
The appeals filed by the assessee were delayed by 262 days. The delay was attributed to renovation work in the office of the assessee's representative, which led to the misplacement of related files. The representative, Shri Sanjay Kumar, filed an affidavit explaining the reasons for the delay and prayed for condonation. The Tribunal considered the affidavit and the reasons provided, finding them to be plausible and constituting a "sufficient and reasonable cause." The Tribunal emphasized that the courts should not deny substantial justice due to technicalities if there is no negligence or lack of bona fide on the part of the litigant. Citing the Supreme Court's judgment in N. Balkrishnan vs. M. Krishna Murti, the Tribunal condoned the delay, stating that the rules of limitation are not meant to destroy the rights of the parties. Consequently, the delay was condoned, and the appeals were admitted for hearing on merits.

2. Validity of Additions Made Under Section 153A:
The primary contention was whether additions could be made under Section 153A when no incriminating material was found during the search. The assessee argued that no incriminating material was found during the search conducted on 19/1/2009, and therefore, no additions could be made for the assessment years 2003-04 and 2004-05. The Tribunal noted that the search did not yield any books of account, documents, money, bullion, jewellery, or any other incriminating material. The Tribunal referred to several judgments, including CIT vs. Kabul Chawla and Pr. CIT vs. Meeta Gutgutia, which established that in the absence of incriminating material, no additions could be made under Section 153A for completed assessments. The Tribunal found that the assessments for the years in question were not pending at the time of the search and thus were unabated. Since no incriminating material was found, the Tribunal concluded that the additions made by the Assessing Officer were beyond the scope of Section 153A and should be deleted.

The Tribunal emphasized that the purpose of Section 153A is to assess or reassess the total income based on the evidence found during the search. In the absence of such evidence, the completed assessments should remain unchanged. The Tribunal allowed the appeals for both assessment years 2003-04 and 2004-05, deleting the additions made by the Assessing Officer.

Conclusion:
The Tribunal condoned the delay in filing the appeals and allowed the appeals on the ground that no incriminating material was found during the search, making the additions under Section 153A invalid. The appeals for both assessment years were allowed, and the additions were deleted.