2019 (6) TMI 890 - AT - Income Tax

Assessment u/s 153A - nothing found during the search i.e. incriminating material revealing undisclosed income - HELD THAT - No addition can be made to the income of the assessee that has already been assessed except on the basis of some any incriminating material. In the absence of any incriminating material the completed the assessment can be reiterated while framing u/s 153A. AO is not permitted to disturb the income has finalized in the completed assessment dehors incriminating material while making the assessment U/s 153A. The reassessment U/s 153A shall have connection with something found during the search i.e. incriminating material revealing undisclosed income. Therefore, any addition or disallowance can be made only on the basis of material gathered during the search and requisition and in case has no incriminating material is found the earlier assessment would have to be reiterated while completed U/s 153A. Since, in the case in hand, no incriminating material was found indicating undisclosed investment by the assessee on account of on money for purchase of agricultural land then the addition made by the AO on the basis of the information received from the ACB and consequential inquiry conducted by the AO during the assessment proceedings cannot be treated as incriminating material to justify the addition on account of on money when the assessment was completed and not pending at the time of search. Accordingly, in the facts and circumstances of the case and in view of the binding precedents the addition made by the AO is not sustainable in law and the additional ground is hereby allowed in favour of assessee.

Summary

Issues Involved:
1. Legality of addition made under Section 153A without incriminating material found during the search.
2. Whether statements recorded under Section 131 and 161 of Cr.P.C. constitute incriminating material.

Detailed Analysis:

1. Legality of Addition Made Under Section 153A Without Incriminating Material Found During the Search:

The appeal was directed against the order of CIT(A), Jaipur, and concerned the assessment year 2005-06. The Tribunal had to adjudicate on whether the addition made by the AO under Section 153A was valid when no incriminating material was found during the search. The assessee argued that the addition made under Section 69 for undisclosed investment was based on information from the Anti-Corruption Bureau (ACB) and statements recorded under Section 131, not on any incriminating material found during the search. The Tribunal noted that the assessment for the year under consideration was not pending on the date of the search, as the order under Section 143(3) had already been passed. It was also noted that no incriminating material indicating undisclosed income was found or seized during the search. The Tribunal cited several judicial precedents, including the Delhi High Court's decision in *Pr. CIT vs. Meeta Gutgutia* and the Rajasthan High Court's decision in *Jai Steel India vs. ACIT*, which held that additions under Section 153A can only be made based on incriminating material found during the search. The Tribunal concluded that, in the absence of such material, the addition made by the AO was not sustainable in law.

2. Whether Statements Recorded Under Section 131 and 161 of Cr.P.C. Constitute Incriminating Material:

The assessee contended that statements recorded under Section 161 of Cr.P.C. by the ACB and under Section 131 by the AO during the assessment proceedings did not constitute incriminating material. The Tribunal agreed with this contention, noting that these statements were recorded after a significant gap from the date of the search and did not reveal any undisclosed income. The Tribunal referred to the Delhi High Court's decision in *Chetan Das Lachman Das*, which held that assessment under Section 153A must be based on seized material or material with a nexus to the seized material. The Tribunal also cited the Gujarat High Court's decision in *Principal Commissioner of Income Tax v. Saumya Construction Pvt. Ltd.*, which emphasized that additions can only be made based on material collected during the search. The Tribunal concluded that the statements recorded under Sections 131 and 161 did not constitute incriminating material and, therefore, could not justify the addition made by the AO.

Conclusion:

The Tribunal held that no addition could be made under Section 153A in respect of a concluded assessment without any incriminating material found during the search. The appeal of the assessee was allowed, and the addition made by the AO was deleted. The Tribunal emphasized that reassessment under Section 153A must have a connection with incriminating material found during the search, and in the absence of such material, the completed assessment should be reiterated. The order was pronounced in the open court on 16/05/2019.