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2020 (2) TMI 507 - AT - Income TaxAssessment u/s 153A - Whether additions have not been made on the basis of incriminating materials or documents found during Search seizure action u/s 132 ? - unexplained investment - HELD THAT - Considering the latest judgment of Hon ble High Court of Delhi in the case of Principal CIT Ors V/s Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT come to the conclusion that since the assessment orders in question were concluded and non abated assessments no addition can be made in the assessment proceedings u/s 153A of the Act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153A of the Act since the additions were not made on the basis of any incriminating material found during the course of search. - Decided against revenue.
Issues Involved:
1. Validity of additions made without incriminating materials found during the search. 2. Interpretation of Section 153A of the Income Tax Act. 3. Applicability of CBDT Circular No. 7 of 2003. 4. Timeliness of the assessment order under Section 153B(1)(a) of the Income Tax Act. 5. Merits of various additions made by the Assessing Officer (AO) under Section 68 and Section 69B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of Additions Made Without Incriminating Materials Found During the Search: The primary issue was whether the additions made by the AO were valid when no incriminating materials or documents were found during the search under Section 132 of the Income Tax Act. The Tribunal noted that the revenue authorities admitted no incriminating material was found for Assessment Years 2005-06 and 2009-10. For Assessment Year 2006-07, the AO's additions were based on questions asked during the search, not on any incriminating material. The Tribunal emphasized that additions in the assessments under Section 153A should be based on incriminating materials found during the search. Since no such materials were found, the Tribunal upheld the CIT(A)'s decision to quash the assessment proceedings under Section 153A for all three assessment years. 2. Interpretation of Section 153A of the Income Tax Act: The Tribunal examined the interpretation of Section 153A, which mandates the AO to issue notices and assess or reassess the total income for six assessment years preceding the year of the search. The Tribunal referred to various judicial pronouncements, including the decision of the Delhi High Court in Principal CIT vs. Meeta Gutgutia, which held that completed assessments could only be disturbed based on incriminating materials found during the search. The Tribunal concluded that in the absence of such materials, the assessments under Section 153A were invalid. 3. Applicability of CBDT Circular No. 7 of 2003: The Tribunal did not find it necessary to delve deeply into the applicability of the CBDT Circular No. 7 of 2003, as the primary issue of the absence of incriminating materials was sufficient to decide the matter. The Tribunal's focus remained on the legal requirements under Section 153A and the necessity of incriminating materials for making additions. 4. Timeliness of the Assessment Order Under Section 153B(1)(a) of the Income Tax Act: The assessee contended that the assessment orders were barred by the time limit prescribed under Section 153B(1)(a) since the orders were passed and served after the statutory deadline. The Tribunal did not specifically address this issue in detail, as the primary ground for quashing the assessments was the absence of incriminating materials. However, the Tribunal's decision implicitly supports the assessee's contention by rendering the assessments invalid on other grounds. 5. Merits of Various Additions Made by the AO Under Section 68 and Section 69B of the Income Tax Act: The assessee raised several objections regarding the merits of the additions made by the AO under Sections 68 and 69B, including unsecured loans and unexplained investments. The Tribunal noted that since the assessments were quashed due to the absence of incriminating materials, the merits of these additions became academic and were not adjudicated. The Tribunal dismissed the cross-objections as infructuous, given the primary decision to quash the assessments. Conclusion: The Tribunal upheld the CIT(A)'s decision to quash the assessments under Section 153A for the relevant assessment years due to the absence of incriminating materials found during the search. The revenue's appeals were dismissed, and the assessee's cross-objections were rendered infructuous. The judgment reinforces the principle that additions under Section 153A must be based on incriminating materials found during the search.
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