2021 (10) TMI 283 - AT - Income Tax

Assessment u/s 153A - Whether incriminating material found during the course of search? - HELD THAT - Hon ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT has held that completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Assessment for AY 2006-07 was already completed prior to the date of search and having not abated, the scope of proceedings u/s.153A of the Act had to be confined only to material found in the course of search. Since no material on the basis of which the impugned addition has been made was found in the course of search, the additions made by the AO in the order of assessment could not have been subject matter of proceedings u/s.153A. - Decided in favour of assessee.

Summary

Issues:
- Assessment Years 2006-07 & 2007-08
- Admissibility of additional ground challenging the validity of assessment framed u/s 143(3) r.w.s 153A
- Jurisdiction of AO to make additions in assessment u/s 153A without incriminating material
- Scope of assessment proceedings u/s 153A in completed assessments
- Application of legal principles from the case of Kabul Chawla
- Decision on appeals for both assessment years

Analysis:
The appeals before the Appellate Tribunal ITAT Delhi pertained to Assessment Years 2006-07 and 2007-08. The issue involved was whether the additional ground challenging the validity of the assessment framed under section 143(3) r.w.s 153A should be admitted. The Tribunal considered the legal issue raised by the assessee and admitted the additional ground for adjudication based on established legal principles allowing consideration of questions of law affecting tax liability. The Tribunal proceeded to dispose of both appeals by a consolidated order, focusing on the facts for AY 2006-07.

Regarding the jurisdiction of the Assessing Officer (AO) to make additions in the assessment under section 153A without incriminating material, the Tribunal analyzed the provisions of Sec. 153A and the second proviso to Sec. 153A(1) of the Act. It was established that in completed assessments, the scope of proceedings under Sec. 153A is limited to material found during the search. The Tribunal emphasized that additions made without incriminating material discovered during the search cannot be sustained in the assessment proceedings under Sec. 153A.

The Tribunal referred to the legal principles outlined in the case of Kabul Chawla, emphasizing that assessments under section 153A can only be based on incriminating material unearthed during the search. The Tribunal concluded that since no such material was found in the present case, the additions made by the AO in the assessment under section 153A were not valid. Therefore, the Tribunal allowed the ground raised by the Assessee, leading to the allowance of the appeal.

In the final decision, the Tribunal allowed the appeals for both Assessment Years 2006-07 and 2007-08, as the issues raised were identical, and the legal principles applied in the analysis for AY 2006-07 were found to be applicable to AY 2007-08 as well. The Tribunal pronounced the order in favor of the assessee on 06.10.2021, granting relief based on the established legal principles and the specific facts of the case.