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2022 (3) TMI 305 - AT - Income TaxValidity of Assessment u/s 153C - Proof of incriminating material found in search - HELD THAT - Nothing belonging to the assessee was found at the time of search at the premises of Abhay Maheshwari. The laptop was found from the premises of Abhay Maheshwari and as per the provisions of section 132 (4A) (i) and 292 C of the Act the presumption is that the document and assets found in the course of search from premises of a person it may be presumed that such item belong to the person whose premises are searched. It can be seen from the satisfaction note there is no reference to any laptop found at the time of search and as mentioned here in above whatever was found at the time of search belonged to Abhay Maheshwari. The Hon'ble High court of Gujarat in the case of Anilkumar Gopikishan Aggarwal 2019 (6) TMI 746 - GUJARAT HIGH COURT has held that section 153C as amended w.e.f. 01.06.2015 would not be applicable to cases where search is initiated prior to the date. In the present case since the search was conducted on 27.11.2014 the un-amended provision as mentioned elsewhere would apply. A bare perusal of the assessment order would show that there is no reference to any incriminating material for the addition made by the AO, therefore, the ratio laid down by the Hon'ble Supreme Court in the case of Singhad Technical Education Society (supra) squarely apply.
Issues:
1. Jurisdiction under section 153C of the Income Tax Act. 2. Validity of assessment based on search operation. 3. Application of legal provisions regarding incriminating material. 4. Compliance with the amendment made by Finance Act. 5. Consideration of evidence and Rule 46A application by CIT(A). Issue 1: Jurisdiction under section 153C of the Income Tax Act: The appeals were against the order of the CIT(A) pertaining to A.Y. 2011-12 and 2012-13. The appellant contended that assumption of jurisdiction under section 153C was illegal as there was no satisfaction that the items belonged to them. The Tribunal noted that the laptop found did not belong to the appellant, and no incriminating material was found during the search. The satisfaction note referred to post-search investigation, which was deemed impermissible. The Tribunal held that the assessment order was bad in law due to lack of jurisdiction under section 153C. Issue 2: Validity of assessment based on search operation: A search and seizure operation was conducted in the case of certain entities, including the appellant, where a laptop was found at Abhay Maheshwari's residence. It was discovered that the appellant had obtained unsecured loans from doubtful entities. The AO initiated assessment proceedings under section 153C and made additions under section 68 of the Act due to lack of satisfactory explanations from the appellant. The CIT(A) dismissed the appellant's challenge on legal grounds. However, the Tribunal found that no incriminating material was found during the search, rendering the assessment bad in law. Issue 3: Application of legal provisions regarding incriminating material: The satisfaction note for initiating proceedings under section 153C did not establish any connection of the seized items with the appellant. The Tribunal referred to legal provisions and precedents to emphasize that the absence of incriminating material during the search invalidated the assessment. The Tribunal also highlighted the importance of adhering to the provisions of the Act and relevant case laws in determining the legality of the assessment. Issue 4: Compliance with the amendment made by Finance Act: The appellant argued that the assumption of jurisdiction under section 153C was illegal due to non-compliance with the amendment by Finance Act. The Tribunal, after considering the legal aspects and the specific provisions of the Act, concluded that the assessment order was not in accordance with the law and thus, liable to be quashed. Issue 5: Consideration of evidence and Rule 46A application by CIT(A): The appellant raised concerns about the CIT(A) failing to adjudicate on the balance addition of a specific amount and not considering the evidence presented along with an application under Rule 46A. The Tribunal noted the appellant's contentions and highlighted the importance of a thorough consideration of all relevant evidence and applications. The Tribunal emphasized that the CIT(A) should have duly considered the application under Rule 46A, indicating a procedural lapse in the assessment process. In conclusion, the Tribunal found multiple legal flaws in the assessment proceedings, including lack of jurisdiction under section 153C, absence of incriminating material, and non-compliance with legal provisions. The Tribunal, after detailed analysis and consideration of relevant legal precedents, quashed the assessment orders and allowed the appeals in favor of the appellant.
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