2019 (7) TMI 1050 - HC - Income Tax

Assessment u/s 153A - no incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search - HELD THAT - As in present case as no incriminating documents during course of search are found, the order in appeal cannot be said to have suffered the illegality as would give rise to the proposed substantial question of law. SEE KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT

Summary

Issues Involved:
1. Justification of the Assessing Officer in making additions in non-abated assessment orders under Section 153A read with Section 143(3) of the Income Tax Act, 1961, in the absence of incriminating documents seized during the search.

Issue-wise Detailed Analysis:

1. Justification of the Assessing Officer in making additions in non-abated assessment orders under Section 153A read with Section 143(3) of the Income Tax Act, 1961, in the absence of incriminating documents seized during the search:

The appeals under Section 260A of the Income Tax Act, 1961, were directed against a common order dated 08.06.2018 passed by the Income Tax Appellate Tribunal, Agra Bench. The central issue was whether the Assessing Officer (AO) was justified in making additions in non-abated assessment orders under Section 153A read with Section 143(3) of the Act, in the absence of any incriminating documents seized during the search.

Assessment Years and Tribunal's Consideration:
The assessment years in question were 2005-2006 to 2011-2012. The Tribunal dealt with appeals and cross-appeals arising from orders passed by the Commissioner of Income Tax (Appeals) [CIT (Appeals)], which were directed against the addition of income by the AO on a presumptive basis and estimated income.

Lack of Incriminating Material:
It was undisputed that the addition was not based on any incriminating material found during the search. The CIT (Appeals) noted that the impugned addition of ?13,74,332/- was made by the AO due to the assessee's failure to furnish certain details. However, the remand report confirmed that the appellant had furnished all required details during assessment proceedings, and the addition was made without proper findings, based on general observations and without any corroborative material.

Production of 'Gutka' and Reliance on Notification:
In another instance, the AO relied on Notification No.30/2008 Central Excise (NT) dated 01.07.2008 and the statement of Shri Gulzarilal Gupta to conclude unaccounted production and sale of 'Gutka'. However, the CIT (Appeals) observed that the appellant maintained regular audited books of account without any defects pointed out by the AO. No documents showing unaccounted production or suppression of sale were found during the search. The appellant's production was accepted by both the Excise and Sales Tax/Commercial Tax departments.

Relevance of Notification and Statements:
The CIT (Appeals) noted that the notification relied upon by the AO was relevant only for the period starting from 01.07.2008 and had no applicability to earlier financial years. Additionally, the statement of Shri Gulzarilal Gupta, who joined the company in 2009, was deemed irrelevant for assessing activities in prior years. The AO's addition was found to be based on imagination, presumption, and suspicion, and thus unsustainable.

Legal Provisions and Judicial Precedents:
Section 153A(1) of the Act mandates the AO to issue a notice and assess or reassess the total income for six assessment years preceding the year of search. The Delhi High Court in CIT Vs. Kabul Chawla (2016) 380 ITR 573 clarified that additions should be based on evidence found during the search or other related material. In the absence of incriminating material, completed assessments can only be reiterated, and abated assessments can be made based on seized material.

Conclusion:
The High Court agreed with the Tribunal's view that in the absence of incriminating documents found during the search, the AO's additions were unjustified. Consequently, the appeals were dismissed, and no substantial question of law arose from the impugned order. The appeals failed and were dismissed with no costs.