2018 (5) TMI 1322 - AT - Income Tax

Assessment u/s 153A - addition to income - Held that - The Co-ordinate Benches in the case of Y.V. Anjaneyulu Vs. DCIT, Vijayawada 2017 (6) TMI 547 - ITAT VISAKHAPATNAM) held that assessments U/s. 153A could not be made on the basis of income returned by assessee or on the basis of books of account of assessee where no incriminating material had been found from possession of assessee. CIT(A) inspite of written submissions made before him and contentions raised, did not consider the above principles laid down by the judicial authorities. Instead the issue discussed by the AO whether the proceedings U/s. 153A are mandatory or not have been upheld, when there is no dispute with reference to initiation of proceedings. The dispute is only with reference to additions made which assessee contends that they are not based on any incriminating material found in the course of search. This aspect has not been examined by the Ld.CIT(A) at all. Once the legal issue is examined, it is incumbent on the CIT(A) to decide the merits of the addition also. If he finds that this issue was already decided in earlier round of appeals, then, he should follow the same rather than dismissing the grounds raised. For these reasons, we are not in a position to upheld the orders of the CIT(A). Since the AO has already considered (wrongly) the directions of ITAT, we do not find it necessary to set aside again to the file of AO. Therefore the issue is set aside to the file of CIT(A) to examine the additions in the light of the principles laid down by the higher judicial authorities and give clear findings whether any proceedings are pending on the date of search or whether any proceedings have been abated, whether any incriminating material was found for making additions in each of the assessment years and on each of the additions made.

Summary

Issues:
Appeals against Commissioner of Income Tax (Appeals) orders - Interpretation of Section 153A - Validity of assessment without seized material - Applicability of legal principles from previous judgments.

Analysis:
The appeals were filed against the orders of the Commissioner of Income Tax (Appeals) by the respective assessees challenging the additions made in their assessments. The common legal ground raised before the ITAT was whether the assessment framed in these cases was lawful without seized material. The ITAT set aside the issue to the AO for consideration as it was fundamental to the matter and had not been examined by lower authorities.

In the subsequent proceedings, the AO determined that the provisions of Section 153A were applicable, emphasizing that the initiation of a valid search under Section 132 was sufficient for issuing a notice under Section 153A. The AO reiterated the total income as assessed in earlier orders. The assessees appealed, citing judgments like CIT Vs. Kabul Chawla and Pr.CIT Vs. Lata Jain, arguing against the assessment without seized material. However, the CIT(A) dismissed the contentions, stating that the assessment order was valid.

Upon review, the ITAT found that neither the AO nor the CIT(A) had addressed the issue set aside for consideration regarding the necessity of seized material for making additions. The ITAT emphasized the principles established by the Delhi High Court in CIT Vs. Kabul Chawla, which were followed in various cases. The ITAT criticized the CIT(A) for not considering these principles and set aside the orders, directing the CIT(A) to re-examine the additions in light of the legal precedents and provide clear findings on the pending or abated proceedings and the presence of incriminating material.

Consequently, the ITAT allowed all appeals for statistical purposes, setting aside the CIT(A) orders and restoring the appeals for a thorough examination of the legal issues and merits of the additions made, ensuring adherence to principles of natural justice.

This detailed analysis highlights the crucial legal aspects addressed in the judgment, including the interpretation of Section 153A, the necessity of seized material for assessments, and the application of legal principles from previous judgments to determine the validity of the assessments.