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2018 (3) TMI 957 - AT - Income TaxAddition u/s 153A - proof of incriminating material found in search - Held that - DR was fair enough to accept that no incriminating material, whatsoever, was found during the course of the search. The addition/s have been made on the basis of the subsequent information received by the AO. Such information, had it been related to the incriminating material found during the course of the search, the AO could well have been within its jurisdiction to take into consideration such information and make additions relating to the search material found during the search. In absence of any incriminating material being found during the course of the search AO will be without jurisdiction in making such additions. It is the incriminating material found during search which gives jurisdiction to the AO to make additions in the assessment proceedings under Section 153A of the Act in respect of assessments which have not abated. In the absence of incriminating material in such cases, as held in the case of Kabul Chawla in Para 37 (v) 2015 (9) TMI 80 - DELHI HIGH COURT the completed assessment is not to be disturbed. - Decided in favour of assessee
Issues Involved:
1. Legality and jurisdiction of the order passed under Section 153A of the Income Tax Act. 2. Requirement of incriminating material for additions under Section 153A. 3. Validity of additions made on account of share capital and commission. 4. Procedural fairness in the assessment process. Detailed Analysis: 1. Legality and Jurisdiction of the Order Passed Under Section 153A: The assessee challenged the legality of the order passed by the AO under Section 153A following a search operation. The AO issued a notice under Section 153A requiring the assessee to file the return of income, which the assessee complied with by declaring the same income as initially declared. The AO, however, made additions to the assessee's income based on the share capital received. The assessee contended that the search did not yield any incriminating material, thus rendering the AO's additions unjustified. The CIT(A) upheld the AO's actions, stating that a search alone suffices to invoke Section 153A without the necessity of incriminating material. 2. Requirement of Incriminating Material for Additions Under Section 153A: The core issue was whether the AO could make additions without any incriminating material found during the search. The assessee argued that since no incriminating material was found, the additions were unsustainable. The ITAT referred to the judgment of the Delhi High Court in CIT vs. Kabul Chawla, which established that in the absence of incriminating material, the completed assessments should not be disturbed. The ITAT reiterated that the existence of seized material is essential for making additions in non-abated assessments. 3. Validity of Additions Made on Account of Share Capital and Commission: The AO made additions of ?1,28,00,000 on account of share capital and ?1,28,000 on account of commission. The assessee contended that these additions were made without any basis and were arbitrary. The CIT(A) sustained these additions, rejecting the assessee's detailed explanations and evidence regarding the identity and creditworthiness of the shareholders. The ITAT, however, found that in the absence of any incriminating material, such additions were beyond the AO's jurisdiction. 4. Procedural Fairness in the Assessment Process: The assessee also raised concerns about procedural fairness, arguing that the additions were based on material collected at the back of the assessee without providing an opportunity to rebut the same or to cross-examine the statements recorded. The ITAT did not delve into these procedural issues in detail, as it had already decided in favor of the assessee on the primary ground of the absence of incriminating material. Conclusion: The ITAT concluded that the AO's additions were beyond jurisdiction due to the absence of incriminating material found during the search. It directed the AO to delete the additions made for both assessment years under consideration. The ITAT's decision was primarily based on the legal precedent set by the Delhi High Court in the case of Kabul Chawla, emphasizing that completed assessments should not be disturbed without incriminating material. Order: Both appeals of the assessee were allowed, and the order was pronounced in the Open Court on 19/03/2018.
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