2018 (8) TMI 1059 - AT - Income Tax

Assessment u/s 153A pursuant to search - completed assessment - Additions u/s 68 - unexplained unsecured loan - AO made the addition only on the reason that the assessee could not furnish complete address of the party along with confirmation etc to prove the genuineness of the credits. - Held that - the assessment year 2007-08 under consideration falls in the category of completed assessments . It is apparent from the assessment order itself, as has been candidly admitted by the ld. DR as well, that there is no reference to any incriminating material in the assessment order qua the creditor in respect of whom addition was made. In that view of the matter, the assessment cannot embrace any fresh disallowance otherwise than that supported by any incriminating material found during the course of search. - Decided in favor of asssessee.

Summary

Issues:
Confirmation of addition under section 68 of the Income Tax Act, 1961.

Analysis:
The appeal concerns the confirmation of an addition made by the Assessing Officer for a sum of ?24 lac under section 68 of the Income Tax Act, 1961. The original assessment was completed under section 143(1) before a search took place. The Assessing Officer made the addition based on the assessee's inability to provide complete details to prove the genuineness of the credits. The key issue is whether the addition is justified without any incriminating material found during the search.

The Hon'ble jurisdictional High Court's judgment in Kabul Chawla vs. CIT (2016) is crucial in this context. The court emphasized that once a search is conducted under section 132 of the Act, the assessee must file returns for the six assessment years preceding the year of the search. Assessments pending on the date of the search abate, and the Assessing Officer must compute the total income afresh. The court clarified that additions must be based on incriminating material found during the search, and without such material, the completed assessments should be repeated without further additions.

Applying the principles from the Kabul Chawla case to the present appeal, it is evident that the assessment year 2007-08 falls under completed assessments. As no incriminating material was found regarding the addition of ?24.00 lac, the Tribunal held that the ld. CIT(A) erred in sustaining the addition. Following the High Court's decision, the Tribunal deleted the addition, concluding that without incriminating material, no fresh disallowance can be made in the assessment under section 153A.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of incriminating material for justifying additions under section 68 of the Income Tax Act, 1961. The decision aligns with the legal principles established by the Hon'ble jurisdictional High Court, ensuring assessments are based on relevant evidence found during searches to maintain fairness and legality in tax proceedings.