2020 (2) TMI 146 - AT - Income Tax

Assessment u/s 153A - addition without any seized material despite the fact that these are search assessments - HELD THAT - We find that this issue is squarely covered by the decision of Bombay High court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. 2015 (5) TMI 656 - BOMBAY HIGH COURT . Once, there is no search material or incriminating material found during the course of search, no assessment can be framed under section 153A of the Act. Hence, we allowed these appeals.

Summary

Issues Involved:
1. Legality of additions made by the Assessing Officer (AO) without any seized material in search assessments under section 153A of the Income-tax Act, 1961.
2. Applicability of judicial precedents in confirming or rejecting the additions made by the AO.
3. Instructions from the assessee regarding the appeal in ITA No. 2419/Mum/2012.

Detailed Analysis:

1. Legality of Additions Made by AO Without Seized Material:
The primary issue in these appeals is whether the Assessing Officer (AO) was justified in making additions without any seized material in search assessments under section 153A of the Income-tax Act, 1961. The assessee contended that the principal condition for framing an assessment under section 153A is the presence of seized material. For AY 2003-04, the addition was on account of salary and professional fees amounting to ?7,63,537/-. For AY 2005-06, the addition was financial charges debited to the profit and loss account amounting to ?56,17,035/-. For AY 2006-07, the addition was financial charges amounting to ?26,63,006/-. The CIT(A) confirmed these additions on the basis that the assessee was unable to substantiate the genuineness of the expenses.

2. Applicability of Judicial Precedents:
The assessee cited the decision of the Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom), which held that assessments under section 153A should be based on seized material found during the search. The Special Bench's understanding was that completed assessments should not be reopened unless incriminating material is found during the search. The AO is obliged to assess or reassess the total income of the six years preceding the search, but only based on seized documents or undisclosed income discovered during the search. The learned Counsel for the assessee argued that no action was pending for the years in question, and the assessments were unabated. The Departmental Representative relied on the decision in V.D. Vachhani (HUF) vs. ACIT, which upheld additions due to lack of evidence for agricultural activities.

3. Instructions from Assessee Regarding Appeal in ITA No. 2419/Mum/2012:
The learned Counsel for the assessee informed that he had instructions not to press the appeal in ITA No. 2419/Mum/2012. Consequently, this appeal was dismissed as not pressed.

Conclusion:
The Tribunal found that the issue was squarely covered by the decision of the Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. Since no incriminating material was found during the search, the assessments under section 153A could not be sustained. Therefore, the appeals for AY 2003-04, 2005-06, and 2006-07 were allowed. The appeal in ITA No. 2419/Mum/2012 was dismissed as not pressed. The order was pronounced in the open court on 06.01.2020.