2022 (1) TMI 180 - AT - Income Tax

Assessment u/s 153A - Proof of incriminating material as recovered during the course of search - addition on account of long-term capital gain - HELD THAT - As it is clear that the original assessment stood completed on the date of the search and no assessment proceedings were pending as regards the assessment order under appeal i.e., 2007-08. It is an undisputed fact that no incriminating material was recovered during the course of search concerning the addition made on account of long-term capital gain. It is well settled law that seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment. We are of the view that completed assessment can be interfered with by the AO while making assessment under section 153A of the Act only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. We, therefore, are of the view that invocation of section 153A of the Act by the Revenue for assessment year 2007-08 was without any legal basis as there was no incriminating material qua the assessment order under appeal. Assessing Officer was not justified in making the addition on account of long-term capital gains. - Decided in favour of assessee.

Issues Involved:
1. Assessment under section 153A of the Income Tax Act, 1961.
2. Validity of addition made by the Assessing Officer.
3. Interpretation of incriminating material in relation to additions under section 153A.
4. Applicability of settled legal principles on incriminating material to the case.

Analysis:

Assessment under section 153A of the Income Tax Act, 1961:
The case involved an appeal against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The Assessing Officer had made additions to the declared income of the assessee under section 153A of the Act. The Tribunal had earlier set aside the assessment order and directed the Assessing Officer to provide a reasonable opportunity of being heard to the assessee.

Validity of addition made by the Assessing Officer:
The Assessing Officer, in the subsequent assessment, made additions to the income of the assessee based on the sale consideration and cost of acquisition different from what was declared by the assessee. The assessee contended that since the assessment was completed under scrutiny assessment before the search, no addition could be made without any incriminating material found during the search.

Interpretation of incriminating material in relation to additions under section 153A:
The assessee argued that the Assessing Officer can only make additions based on incriminating material found during the search. The absence of such material would render the additions invalid. The Hon'ble Delhi High Court's decisions in various cases were cited to support this argument, emphasizing the necessity of a nexus between seized material and additions made.

Applicability of settled legal principles on incriminating material to the case:
The Tribunal, after considering the facts and legal precedents, concluded that the Assessing Officer was not justified in making the addition on account of long-term capital gains without any incriminating material found during the search. The Tribunal held that the invocation of section 153A of the Act for the assessment year 2007-08 was without legal basis. The additions were deleted, following the principles established by the Hon'ble Delhi High Court in similar cases.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the orders of the authorities below and deleting the additions made by the Assessing Officer. The judgment emphasized the importance of incriminating material in justifying additions under section 153A of the Income Tax Act, 1961.

← Previous Next →