2017 (12) TMI 662 - AT - Income Tax

Scope of assessment u/s 153C - addition u/s 68 - Held that - Additions made by the AO are beyond the scope of section 153C because no incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment framed under section 153A/143(3) of the Income Tax Act, 1961.
2. Deletion of additions made under section 68 of the Income Tax Act, 1961 in respect of share application money and unsecured loans.

Detailed Analysis:

1. Validity of the Assessment under Section 153A/143(3):

The assessee contested the legality of the assessment framed under section 153A/143(3) of the Income Tax Act, 1961, arguing that no incriminating material was found during the search conducted on 21.3.2007. The Tribunal referred to the decision of the Hon'ble Supreme Court in Commissioner of Income Tax-III, Pune vs. Sinhgad Technical Educational Society (2017) 84 taxmann.com 290 (SC), which held that for an assessment under section 153C, the incriminating material must pertain to the assessment years in question. Additionally, the Tribunal cited the Hon'ble Delhi High Court's decision in Commissioner of Income Tax vs. Kabul Chawla (2016) 380 ITR 573 (Del.), which stated that in the absence of any incriminating material, completed assessments can only be reiterated and not interfered with. The Tribunal found that the AO did not refer to any seized material or other evidence during the search that could justify the additions made. Consequently, the Tribunal quashed the assessment made under section 153C/143(3) of the Income Tax Act, 1961, deeming it beyond the scope of jurisdiction and based on conjectures and surmises.

2. Deletion of Additions under Section 68:

The Revenue challenged the deletion of additions made by the AO under section 68 of the Income Tax Act, 1961, concerning share application money and unsecured loans. The Tribunal noted that the AO made these additions without any incriminating material found during the search. The Tribunal upheld the CIT(A)'s decision to delete these additions, aligning with the legal precedent that additions must be based on evidence found during the search. The Tribunal referenced multiple judgments, including the Hon'ble Supreme Court's decision in Sinhgad Technical Educational Society and the Hon'ble Delhi High Court's decisions in Kabul Chawla and Index Securities Ltd., which emphasized that additions should be based on seized material and not arbitrary.

Conclusion:

The Tribunal allowed the assessee's cross-objections, quashing the assessments made under section 153C/143(3) of the Income Tax Act, 1961, for the assessment years 2001-02 and 2002-03. Consequently, the Revenue's appeals were dismissed as infructuous. The Tribunal's decision was pronounced in the Open Court on 07/12/2017.