2021 (3) TMI 822 - AT - Income Tax

Assessment u/s 153A - addition on account of credit entries in the bank account is in the nature of incriminating material found during the course of search or the bank account was undisclosed account - HELD THAT - It transpires that these are the bank accounts of the assessee duly disclosed in the balance sheet and even the amounts received as advances have been duly disclosed and shown in the respective balance sheets of the individuals. In all these cases, the original return of income was filed on July 2011 and thereafter, no notice u/s 143(2) was issued, which inter alia means that the return of income had attained finality and is to be reckoned as assessed income. On the date of search i.e., on 20.3.2016 the assessment for the assessment year 2011-12 is to be treated as unabated assessment in terms of second proviso to section 153A. If that be the situation, then any addition which has to be made should be based on incriminating material qua that assessment year during the course of search and seizure operation. There are now plethora of various high Court judgments which have reiterated the principle that in case of unabated assessment, the addition can be made in the assessment framed u/s 153A only when there is any incriminating material found during the course of search and it is only in the cases of abated assessment AO has power to assess or reassess the undisclosed income and the other income. CIT (A) in the impugned order has not disputed the fact that the additions made by the AO in all the four cases are based on any incriminating material found during the course of search albeit they are based on entries in the regular bank account duly disclosed by the assessee. It is not the case of the AO that these are unaccounted bank statements which were unearthed during the course of search. Hence it can be concluded that these additions are not based on any incriminating material found during the course of search and thus in such a situation thus such an addition are beyond the scope of assessment u/s 153A therefore, the same are directed to be deleted. Appeals filed by the assessee are allowed.

Issues Involved:
1. Legality of disturbing completed assessments without incriminating material found during search.
2. Non-consideration of additional evidence admitted under Rule 46A.
3. Justification of addition of ?2,00,00,000/- based on credit entries.
4. Failure of AO to submit remand report after receiving direct confirmation under Section 133(6).

Detailed Analysis:

1. Legality of Disturbing Completed Assessments Without Incriminating Material Found During Search:

The assessees contended that the assessments for the year 2011-12 had attained finality and should not be disturbed without any incriminating material found during the search. They cited the judgments of the Hon’ble Delhi High Court in Kabul Chawla (2016) 380 ITR 573 and PCIT vs. Meeta Gutgutia 395 ITR 526. The Tribunal observed that the original returns filed in July 2011 had attained finality as no notice under Section 143(2) was issued. Consequently, the assessments were treated as unabated. The Tribunal noted that additions in unabated assessments could only be made based on incriminating material found during the search. The Tribunal cited various judgments supporting this principle, including Jai Steel (India), Jodhpur v. ACIT, and Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. The Tribunal concluded that the additions made by the AO were not based on any incriminating material found during the search and thus were beyond the scope of assessment under Section 153A.

2. Non-Consideration of Additional Evidence Admitted Under Rule 46A:

The assessees argued that the CIT(A) erred in not considering the additional evidence admitted under Rule 46A due to the AO's failure to submit a remand report. The Tribunal noted that the CIT(A) had forwarded the additional evidence to the AO for a remand report, but the AO did not submit the report despite reminders. The Tribunal held that the CIT(A) erred in law and on facts by rejecting the additional evidence solely on the ground of the AO's non-submission of the remand report. The Tribunal emphasized that the CIT(A) should have considered the additional evidence in the absence of the remand report.

3. Justification of Addition of ?2,00,00,000/- Based on Credit Entries:

The AO observed credit entries of ?2,00,00,000/- in the assessees' bank accounts from M/s. Sunview Retail Pvt. Ltd. and M/s. Siddheswari Vyapaar Pvt. Ltd., which were not reflected in the balance sheets or profit and loss accounts. The AO made additions under Section 69 as the assessees could not furnish satisfactory explanations or corroborating evidence. The assessees contended that the amounts were received as advances against the sale of properties and were disclosed in their balance sheets. They provided agreements to sell, confirmations of accounts, bank statements, annual accounts of the companies, and records of loans and advances. The Tribunal observed that the documents filed by the assessees supported their claims and that the amounts were disclosed in the balance sheets. The Tribunal concluded that the additions were not justified as the transactions were duly accounted for and disclosed.

4. Failure of AO to Submit Remand Report After Receiving Direct Confirmation Under Section 133(6):

The assessees argued that they had discharged their primary onus by providing direct confirmations under Section 133(6) and that the AO failed to submit the remand report. The Tribunal noted that the AO did not submit the remand report despite adequate time and reminders from the CIT(A). The Tribunal held that the AO's failure to submit the remand report should not prejudice the assessees' case. The Tribunal concluded that the CIT(A) erred in upholding the additions without considering the additional evidence and the direct confirmations provided by the assessees.

Conclusion:

The Tribunal allowed the appeals filed by the assessees, holding that the additions made by the AO were beyond the scope of assessment under Section 153A as they were not based on any incriminating material found during the search. The Tribunal also held that the CIT(A) erred in rejecting the additional evidence and upholding the additions without considering the direct confirmations provided by the assessees. The Tribunal directed the deletion of the additions of ?2,00,00,000/- in each case.

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