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2021 (4) TMI 155 - AT - Income TaxAssessment u/s 153A - disallowance of deduction claimed by the assessee in respect of purchase of Zinc from M/s Hindustan Zinc Ltd (HZL), Haridwar and transport expenses paid to M/s Mewar Transport Company - AO made addition in respect of the above two items based on the evidence gathered in the search carried out by the Director General of Central Excise Department, Khopoli Unit at the premises of the assessee and subsequent order passed by the Customs and Central Excise Settlement Commission - HELD THAT - The only source of information is the tax evasion petition received during assessment proceeding. DR also could not rebut the finding of the Ld. CIT(A) that no incriminating material was found during the course of the search under section 132 of the Act and the case is squarely covered by the decision of the Hon ble High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT . We uphold the finding of the Ld. CIT(A) on the issue in dispute and the grounds No. 1 and 2 of the appeal of Revenue are accordingly dismissed.
Issues Involved:
1. Validity of the addition made under section 153A of the Income-tax Act, 1961 in absence of incriminating material found during the search. 2. Legality of the assessment order framed under section 153A. 3. Justification of the additions/disallowances made by the Assessing Officer. 4. Legitimacy of the enhancement of income by the Commissioner of Income-tax (Appeals). 5. Initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. Detailed Analysis: Issue 1: Validity of the Addition Made Under Section 153A in Absence of Incriminating Material The primary issue revolves around whether additions can be made under section 153A of the Income-tax Act, 1961, in the absence of incriminating material found during the search. The assessee argued that no incriminating material was found during the search, and thus, no additions could be made. The CIT(A) allowed the legal ground in favor of the assessee by relying on the decision of the Delhi High Court in the case of CIT vs. Kabul Chawla, which held that in the absence of incriminating material, no addition can be made under section 153A in completed assessments. The Tribunal upheld the CIT(A)'s finding, noting that no incriminating material was found during the search, and thus, the additions could not be sustained. Issue 2: Legality of the Assessment Order Framed Under Section 153A The Revenue challenged the CIT(A)'s decision to quash the assessment order framed under section 153A. The Tribunal examined whether the conditions for applying the Kabul Chawla decision were met. It was confirmed that no assessment proceedings were pending on the date of the search and no incriminating material was found during the search. Therefore, the Tribunal upheld the CIT(A)'s decision to quash the assessment order, as it was not based on any incriminating material found during the search. Issue 3: Justification of the Additions/Disallowances Made by the Assessing Officer The Assessing Officer had made additions based on a tax evasion petition and evidence gathered by the Director General of Central Excise Department, not on any incriminating material found during the search. The CIT(A) and the Tribunal both noted that the source of the information leading to the additions was a tax evasion petition and not any incriminating material found during the search. Consequently, the Tribunal upheld the CIT(A)'s decision that the additions were not justified under section 153A. Issue 4: Legitimacy of the Enhancement of Income by the Commissioner of Income-tax (Appeals) The assessee contested the CIT(A)'s decision to enhance the income by applying the best judgment method. However, since the Tribunal upheld the CIT(A)'s decision to quash the assessment order under section 153A, the issue of enhancement became academic. The Tribunal did not adjudicate on this issue as it was rendered infructuous by the decision on the primary issue. Issue 5: Initiation of Penalty Proceedings Under Section 271(1)(c) The CIT(A) had initiated penalty proceedings under section 271(1)(c) for alleged concealment and furnishing of inaccurate particulars of income. However, since the Tribunal upheld the quashing of the assessment order under section 153A, the penalty proceedings were also rendered infructuous. The Tribunal did not need to adjudicate on this issue separately. Conclusion: The Tribunal dismissed the appeals of both the Revenue and the assessee for the assessment years 2009-10 and 2010-11. The primary reason was the absence of incriminating material found during the search, which meant that no additions could be made under section 153A. Consequently, the assessment orders were quashed, and the related issues of enhancement and penalty proceedings were rendered academic and infructuous.
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