2019 (5) TMI 741 - AT - Income Tax

Assessment u/s 153A - proof of incriminating material found during the search operation - HELD THAT - The issue has already been decided in the matter of Asst. Commissioner of Income Tax-vs-The Jayesh Steel Pvt. Ltd. 2018 (11) TMI 1614 - ITAT AHMEDABAD in favour of the assessee wherein it was decided that since the additions in question are not based on any incriminating material found during the search operation, as is the undisputed factual position in this case, the very foundation of the additions ceases to be sustainable in law - Decided against revenue

Summary

Issues Involved:
1. Validity of additions made under Section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during the search.
2. The applicability of the judgments in Kabul Chawla and Saumya Construction cases to the present case.
3. The finality and abatement of assessments under Section 153A.

Issue-wise Detailed Analysis:

1. Validity of Additions under Section 153A:
The core issue was whether the additions made by the Assessing Officer (AO) under Section 153A were valid when no incriminating material was found during the search operation. The AO had added unexplained cash credits to the assessee's income based on an increase in share capital, which was not supported by any incriminating documents found during the search. The AO also added a commission on the introduced share capital.

2. Applicability of Judgments in Kabul Chawla and Saumya Construction:
The appellant contended that the assessments for the years 2009-10 and 2010-11 had attained finality before the date of the search and did not abate within the meaning of the second proviso to Section 153A. They argued that the additions were not based on any incriminating documents found during the search, making the additions unsustainable in law. The appellant relied on the judgments in Kabul Chawla (61 Taxmann.com 412) and Saumya Construction (ITA No.24/2016), where it was held that no additions could be made in the absence of incriminating documents found during the search. The CIT(A) deleted the additions, agreeing with the appellant's reliance on these judgments.

3. Finality and Abatement of Assessments:
The CIT(A) observed that the time limit for issuing notice under Section 143(2) had expired before the date of the search, and thus, the assessments had attained finality and did not abate. The CIT(A) noted that the AO's reliance on the case of Shivanath Red Harnarain (India) Ltd. was misplaced as it was no longer good law, following the judgments in Kabul Chawla and Saumya Construction. The CIT(A) concluded that the AO exceeded his jurisdiction by making additions based on post-search inquiries and not on any incriminating material found during the search.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the additions made by the AO were not based on any incriminating material found during the search. The Tribunal noted that the issue was already decided in favor of the assessee in a related case (ACIT vs. Jayesh Steel Pvt. Ltd.), where it was held that additions could not be made other than on the basis of incriminating material found during search operations. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal.

Final Judgment:
The revenue's appeal was dismissed, confirming that the additions made under Section 153A were invalid in the absence of incriminating material found during the search. The Tribunal's decision was pronounced in open court on 08/05/2019.