2022 (3) TMI 762 - AT - Income Tax

Assessment u/s 153A/153C - Proof of incriminating material found in search - HELD THAT - Nowhere, the Ld. CIT (Appeals) has stated that the addition which has been made by the Assessing Officer are based on any seized documents mentioned in the satisfaction note recorded under Section 153C of the Act. Despite noting the fact that only those additions can be made for the unabated assessments which are based only on the incriminating material, as held by the Hon'ble Apex court in the case of CIT Vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT and in the case of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and other decisions quoted by him, he has summarily rejected the contention of the assessee that they are beyond the scope of addition or assessment for the unabated assessment years. From the perusal of the satisfaction note as incorporated above, only two documents can be said to be relevant to assessment years 2010-11 and 2012-13 and not for assessment year 2009-10 or 2011-12. Even the documents pertaining to assessment year 2010-11, we find that it is annual report of M/s. Panchmukhi Management Services Pvt. Ltd. as on 31.03.2012, which was an audit report and the financial statement of the assessee company. This document cannot be treated as incriminating, or can be inferred as indicating any undisclosed income or anything which can be corroborated by any other incriminating material found in the course of search. Thus, audited annual report per se cannot be treated as incriminating material. the original share certificates dated 9.01.2010 which were transferred to the assessee company cannot be treated as incriminating, because, firstly, the Assessing Officer himself has not taken cognizance of this document while making the additions. In any case, the original share certificates in any manner can be reckoned as incriminating without any corroborating document or material found in the course of search that they are not genuine or indicative of undisclosed income. Thus, none of the documents as mentioned can remotely be considered as incriminating so as to warrant any addition within the scope of assessment under Section 153A/153C of the Act in these years where assessments were not abated and attained finality. Accordingly, we hold that none of the additions made by the Assessing Officer in assessment year 2010-11 to 2012-13 are sustainable in the absence of any incriminating or material found during the course of search or the reservations and satisfaction note. As Assessing Officer has made protective addition in the case of the assessee and the substantive additions made in different concerns has already been deleted by the Tribunal on merits additions made on protective basis, cannot be sustained otherwise also. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made under Section 69 of the Income Tax Act, 1961 on account of unexplained investment.
2. Failure of the assessee to satisfactorily explain the source of investments.
3. Assessment jurisdiction under Section 153C of the Income Tax Act, 1961.
4. Validity of additions made without incriminating material found during search.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 69:
The Revenue challenged the deletion of additions made under Section 69 on account of unexplained investments in J.P. Minda Group Companies for the assessment years 2009-10, 2010-11, 2011-12, and 2012-13. The Assessing Officer had made protective additions in the case of the assessee company and substantive additions in the case of J.P. Minda Group Companies. The Tribunal noted that similar additions in the case of J.P. Minda Group Companies had been deleted on merits in previous Tribunal decisions.

2. Failure to Explain Source of Investments:
The Revenue contended that the assessee failed to discharge its primary onus to satisfactorily explain the source of investments. Despite this, the CIT(A) deleted the additions, observing that the requisite details and evidences were filed by the assessee to prove the genuineness of the claim. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer's additions were not based on any incriminating documents found during the search.

3. Assessment Jurisdiction Under Section 153C:
The assessee raised a legal ground under Rule 27 of ITAT Rules, challenging the initiation of proceedings under Section 153C of the Act, arguing that the assessment was without jurisdiction as no addition was made based on the satisfaction note. The Tribunal accepted this argument, noting that the satisfaction note recorded on 29.01.2016 was beyond the scope of six previous years as defined in Section 153A. The Tribunal held that the assessment year 2009-10 was beyond the scope of Section 153C, and thus, the assessment for that year was invalid and quashed.

4. Validity of Additions Without Incriminating Material:
The Tribunal examined whether the additions made by the Assessing Officer were based on any incriminating documents found during the search. The Tribunal noted that the satisfaction note mentioned certain documents, but these were not incriminating. For instance, the annual report and original share certificates could not be treated as incriminating material. The Tribunal cited several judicial precedents, including CIT Vs. Sinhgad Technical Education Society and CIT Vs. Kabul Chawla, to support the principle that additions under Section 153A/153C can only be made based on incriminating material found during the search. Consequently, the Tribunal held that the additions made by the Assessing Officer were beyond the scope of assessment under Section 153A/153C and deleted the additions for the assessment years 2010-11 to 2012-13.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s deletion of additions on the grounds that the assessments were beyond the scope of Section 153C and that no incriminating material was found during the search to justify the additions. The protective additions made by the Assessing Officer were also not sustained as the substantive additions in the related concerns had already been deleted by the Tribunal on merits.