2021 (7) TMI 675 - AT - Income Tax

Assessment u/s 153A - incriminating material found in search or not? - HELD THAT - There is no incriminating material qua each of the assessment year roped in u/s 153 A, then, no addition can be made while framing the assessment u/s 153 A. As admittedly no incriminating material relating to these assessment years or as a matter of fact for any of the assessment years were found during the course of search - Appeals of the assessee are allowed.

Issues Involved:
1. Validity of the ex-parte order passed by CIT (Appeals).
2. Legality of the assessment order under Section 144 read with Section 153A.
3. Consideration of the assessee's replies by the Assessing Officer (AO).
4. Treatment of deposits as unexplained by the AO.
5. Assessment of total income and additional tax liability.
6. Charging of interest under Sections 234A and 234B.

Detailed Analysis:

1. Validity of the Ex-Parte Order Passed by CIT (Appeals):
The assessee challenged the ex-parte order passed by the CIT (Appeals) on 02.02.2017, arguing that the order was confirmed without considering the reasons for non-attendance and non-submission of necessary documents. The reasons included severe illnesses, incarceration, financial crises, and professional negligence by the authorized representative. The assessee contended that the respondent should have granted further time for a fair hearing.

2. Legality of the Assessment Order Under Section 144 Read with Section 153A:
The assessment order dated 18.03.2013, passed under Section 144 read with Section 153A, was challenged as being bad in law. The assessee argued that natural justice was denied, and the assessment was not based on any incriminating material found during the search and seizure operation conducted on 11.03.2011. The Tribunal found that the additions made by the AO were not based on any material found during the search, making the additions beyond the scope of Section 153A.

3. Consideration of the Assessee's Replies by the Assessing Officer (AO):
The assessee claimed that the AO erred in not considering the replies submitted on 23.02.2013 and 15.03.2013. The Tribunal noted that the AO ignored these replies, which were dispatched through postal authorities and also submitted on the Dark Counter.

4. Treatment of Deposits as Unexplained by the AO:
The AO treated the entire deposit of ?6,27,377/- appearing in the savings bank account as unexplained deposits, leading to an addition of the same amount. The assessee argued that the AO's observations were either factually incorrect or legally untenable. The Tribunal found that the addition was not based on any seized material or incriminating evidence found during the search.

5. Assessment of Total Income and Additional Tax Liability:
The total income assessed at ?16,58,577/- and the additional tax liability created at ?2,11,175/- were challenged as arbitrary, unjust, illegal, and highly excessive. The Tribunal, relying on various judgments, including PCIT Vs. Meeta Gutgutia and CIT Vs. Kabul Chawla, held that in the absence of any incriminating material, no additions could be made under Section 153A.

6. Charging of Interest Under Sections 234A and 234B:
The AO charged interest under Sections 234A and 234B, which the assessee contended was highly excessive. The Tribunal did not specifically address the issue of interest but focused on the legality of the additions made under Section 153A.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the additions made by the AO were beyond the scope of Section 153A as they were not based on any incriminating material found during the search. The ex-parte order passed by the CIT (Appeals) was also set aside, emphasizing the need for a fair hearing and consideration of the assessee's submissions. The Tribunal relied on several judgments to support its decision, reiterating that completed assessments can only be interfered with based on incriminating material unearthed during the search.

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