2021 (7) TMI 730 - AT - Income Tax

Assessment u/s 153A - incriminating material found in search or not? - HELD THAT -Findings of learned CIT(A) clearly demonstrate that there was no incriminating material on the basis of which the Assessing Officer had made the additions. The existence of incriminating material for making additions u/s 153A is further strengthened from the decision of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT where Hon'ble Supreme Court in a case u/s 153C has again highlighted the importance of existence of incriminating material for making the additions. The Hon'ble Supreme Court went on to hold that the Assessing Officer, while relying on the incriminating material, has to make reference in the satisfaction note regarding year-wise existence of incriminating material. Since there is an interplay between section 153A and section 153C, the findings of Hon'ble Supreme Court in a case u/s 153C are applicable for making additions u/s 153A also.

Summary

Issues Involved:
1. Legality of assessment orders under Section 153A of the Income Tax Act.
2. Requirement of incriminating material for additions in completed assessments under Section 153A.

Issue-wise Detailed Analysis:

1. Legality of Assessment Orders under Section 153A:
The appellants challenged the assessment orders passed by the Assessing Officer (AO) under Section 153A of the Income Tax Act, arguing that these orders were not in consonance with the settled position of law vis-à-vis search cases. The appellants contended that the AO made additions based on entries in the books of account without referring to any incriminating documents, which is impermissible under the law for completed assessments. The appellants cited the case of Pr. CIT vs. Meeta Gultutia [2017] 395 ITR 526, where the Delhi High Court held that in the absence of incriminating documents, additions cannot be made in completed assessments. This position was affirmed by the Supreme Court, which dismissed the SLP filed by the Revenue. The Tribunal noted that the assessments for the years involved were completed before the date of search, and thus, any additions should have been based on incriminating material only.

2. Requirement of Incriminating Material for Additions in Completed Assessments:
The appellants argued that the law requires incriminating material for making additions under Section 153A in cases where assessments are completed. They relied on various judicial precedents, including the landmark decision of the Supreme Court in CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC), which held that the existence of incriminating material is sine qua non for making additions under Section 153A/153C. The Tribunal found that in the cases at hand, the AO did not refer to any incriminating material while making the additions. The Tribunal also noted that the CIT(A) had dismissed the appellants' grounds by holding that the law does not require additions under Section 153A to be based only on incriminating material. However, the Tribunal disagreed with this view, citing the Delhi High Court's decision in Pr. CIT vs. Meeta Gultutia, which was upheld by the Supreme Court. The Tribunal also referred to several other decisions by the Lucknow Bench of the Tribunal, which supported the appellants' position that additions in completed assessments can only be made based on incriminating material.

Conclusion:
The Tribunal concluded that the assessments for the years involved were completed before the date of search, and any additions should have been based on incriminating material only. Since the AO did not rely on any incriminating material, the additions made were not sustainable. The Tribunal allowed the appeals on this ground and did not adjudicate other grounds of appeal. The Tribunal's decision was based on the judicial precedents, including the Supreme Court's decision in CIT vs. Sinhgad Technical Education Society and the Delhi High Court's decision in Pr. CIT vs. Meeta Gultutia. The appeals were partly allowed, and the additions made by the AO were deleted.