2021 (7) TMI 701 - AT - Income Tax

Assessment u/s 153A - additions made by the AO does not relate to any incriminating material found during search and rather the AO has made the additions on the basis of examination of books of account - whether the assessment years under question in these appeals stood completed or not it has to be seen as to whether the assessments in these years were completed u/s.143(3) and if not whether the time for issuing notices u/s. 143(2)? - HELD THAT - It is seen that assessment in these years stood concluded and Assessing Officer has not made additions on the basis of any incriminating material and therefore the additions sustained by the ld. CIT(A) are not sustainable and therefore, Ground No.2 in all these appeals is allowed.

Issues Involved:
1. Application of Section 153A/153C of the Income Tax Act in the absence of incriminating material.
2. Validity of additions made by the Assessing Officer based on entries in the books of account rather than incriminating material found during a search.
3. Interpretation of legal precedents regarding concluded assessments and incriminating material.

Issue-Wise Detailed Analysis:

1. Application of Section 153A/153C of the Income Tax Act in the Absence of Incriminating Material:
The primary contention raised by the assessees was that the assessments were completed under Section 153A/153C of the Income Tax Act following a search and seizure operation on 27.11.2015. The assessees argued that the reopening of six assessment years did not result in any additions based on incriminating material found during the search. They cited various High Court decisions and the Supreme Court's confirmation that concluded assessments could only be disturbed based on incriminating material found during such searches.

2. Validity of Additions Made by the Assessing Officer:
The Assessing Officer had made additions based on entries in the books of account, specifically regarding unsecured loans and commissions, without any reference to incriminating material found during the search. The assessees challenged this by presenting a chart showing the completion status of assessments and the absence of any incriminating material. The CIT(A) upheld the Assessing Officer's actions, stating that Section 153A did not necessitate the presence of incriminating material for making additions once assessments were reopened.

3. Interpretation of Legal Precedents:
The Tribunal examined various case laws, including:
- CIT (Central)-III vs. Kabul Chawla: Held that additions in concluded assessments could only be made based on incriminating material found during the search.
- Pr. CIT-1 vs. Devangi: Supported the same principle.
- Pr. CIT-2, New Delhi vs. Meeta Gutgutia: Confirmed by the Supreme Court, reinforcing that additions in concluded assessments must be based on incriminating material.

The Tribunal noted that the Assessing Officer's additions were based on book entries and not on any incriminating material found during the search. This was contrary to the settled law that in cases of concluded assessments, additions could only be made on the basis of incriminating material. The Tribunal referenced its own decision in M/s Sigma Castings Ltd. vs. DCIT, where it had ruled in favor of the assessee on similar grounds.

Conclusion:
The Tribunal concluded that the assessments in question were completed without any incriminating material found during the search. Therefore, the additions made by the Assessing Officer were not sustainable. The Tribunal allowed Ground No. 2 in all the appeals, thereby ruling in favor of the assessees. Other grounds of appeal were dismissed as infructuous since they were neither argued nor adjudicated.

Final Judgment:
All the appeals filed by the assessees were partly allowed, with the specific finding that additions in concluded assessments must be based on incriminating material found during the search, aligning with the principles established by higher judicial authorities. The order was pronounced in the open court on 27/05/2021.

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