2020 (7) TMI 64 - AT - Income Tax

Assessment u/s 153A - Whether any incriminating material was found with regard to the addition made ? - HELD THAT - Once a search takes place u/s 132 of the Act, the assessee is obliged to file returns for the six assessment years immediately proceeding the previous year relevant to the assessment year in which the search took place. In so far as the completed assessment as on the date of the search are concerned, the same are to be repeated as increased by additions, only if, based on incriminating material found during the course of search. If no incriminating material is found during the course of search, then, the amount of total income determined under the earlier completed assessments is to be adopted in a fresh assessments u/s 153A without making any further addition. Juxtaposing these principles to the facts of the instant case, we find that the case of the assessee doesn t fall under the category of abated assessment. It falls under the category of completed assessments. In the completed assessment, it is an admitted position that if no incriminating material was found during the search, no addition is called for. In the instant case too, no incriminating material was found with regard to the addition made by the Assessing Officer. DR failed to establish that the additions made in the case of the assessee were based on any incriminating material found in the course of search u/ s 132 of the Act. On perusal of the assessment order and on examination of the order of the ld. CIT (A), we find that the addition made is not based on any incriminating material. Since, the addition was not based on incriminating material and the fact that assessment has not been abated, these twin conditions go against the order of the revenue as declared by the judicial pronouncement of the Hon ble Jurisdictional High Court in the case of CIT Vs Kabul Chawala 2015 (9) TMI 80 - DELHI HIGH COURT and PCIT Vs Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT . Hence the addition is liable to be deleted. - Decided in favour of assessee.

Summary

Issues:
- Addition u/s 68 of the Income Tax Act of ?3,50,00,000 against advance received for sale of agricultural land
- Validity of addition u/s 68 despite independent verification and refund of the advance
- Assessment under Section 153A for unsecured loans received during a specific assessment year
- Whether addition u/s 68 can be made without incriminating material post search
- Interpretation of Section 153A regarding assessment powers and incriminating material
- Applicability of judicial pronouncements on additions without incriminating material

Analysis:
1. The appeal was filed against the CIT(A)'s order regarding the addition of ?3,50,00,000 under Section 68 of the Income Tax Act for advance received against the sale of agricultural land. The appellant contested that all necessary documents were submitted to prove the genuineness of the transaction, and the addition was made arbitrarily without incriminating material.

2. Despite independent verification and the subsequent refund of the advance, the addition was upheld. The appellant argued that the addition was unjustified as it was already assessed under Section 143(3) and no incriminating evidence was found during the search.

3. The case involved assessment under Section 153A concerning unsecured loans received during a specific assessment year. The AO treated a loan as bogus, leading to the addition under Section 68. The main issue was whether such additions, part of the books of accounts, could be made without incriminating material post search.

4. The Tribunal analyzed Section 153A, emphasizing that additions under this section should be based on seized material. If no incriminating material is found, completed assessments should be reiterated without further additions. The Tribunal concluded that in the absence of incriminating material, the addition was unjustified.

5. Referring to judicial pronouncements, the Tribunal highlighted that additions without incriminating material and when assessments are not abated are not valid. Citing relevant cases, the Tribunal ruled in favor of the appellant, stating that the addition was not based on incriminating material and should be deleted.

6. Ultimately, the Tribunal allowed the appeal, emphasizing that the addition under Section 68 was not supported by incriminating material post search. The order was pronounced on 20/04/2020, favoring the appellant and highlighting the importance of incriminating evidence in making such additions under the Income Tax Act.