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2022 (5) TMI 933 - AT - Income TaxAssessment u/s 153C - incriminating material found in search or not? - HELD THAT - We are of the view that the order of the CIT(A) does not call for any interference. Admittedly, none of the additions made in these 4 appeals are based on any incriminating material found in the course of search in the case of M/s. Srinivasa Trust on 23.09.2016. In such a scenario, the additions made in the order of Assessment cannot be sustained. As far as the decision in the case of Canara Housing Development Co. Ltd. 2014 (8) TMI 642 - KARNATAKA HIGH COURT in the decision rendered in the case of M/s. Delhi International Airport Pvt. Ltd. 2021 (11) TMI 928 - KARNATAKA HIGH COURT wherein the law was explained that in an unabated assessments completed prior to search, there can be no addition in an Assessment under section 153C without material having been found in the course of search. The earlier decisions rendered by the Hon ble Karnataka High Court and other High Courts were duly considered and there is no dispute on this aspect and the fact that the said decision is the law as of today on the subject rendered by the Hon ble Karnataka High Court. We find no grounds to interfere in the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed. In view of the above conclusions, we do not deem it necessary to examine whether the initiation of proceedings under section 153C
Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act. 2. Presence of incriminating material to support the initiation of proceedings. 3. Reassessment proceedings based on search action and seized materials. 4. Duplicate additions and assessments. 5. Applicability of judicial precedents. Issue-wise Detailed Analysis: 1. Validity of Proceedings under Section 153C: The Revenue argued that the CIT(A) erred in holding that there was no incriminating material to support the initiation of proceedings under Section 153C. The CIT(A) found that the presence of incriminating material is a sine qua non for invoking the provisions of Section 153C, especially for assessment years where assessments have already been completed under Sections 143(3), 143(3) r.w.s. 147, or 143(3) r.w.s. 153A/153C. The Tribunal upheld the CIT(A)'s view, stating that no incriminating material was found during the search, thus the additions made in the assessment orders could not be sustained. 2. Presence of Incriminating Material: The CIT(A) held that the detection of incriminating material leading to an inference of undisclosed income is essential for invoking Section 153C, as per the decision in CIT Vs IBC Knowledge Park [P] Ltd. The Tribunal agreed, noting that none of the additions in the four appeals were based on any incriminating material found during the search on M/s. Srinivasa Trust. 3. Reassessment Proceedings Based on Search Action and Seized Materials: The Revenue initiated reassessment proceedings following a search action on 23.09.2016 at the office of M/s KBD Sugars and Distilleries, where incriminating evidences against the assessee were found and seized. However, the Tribunal found that the reassessment orders were not based on any new incriminating material, as the same income figures were adopted in the first assessment order under Section 153C and the original returns filed under Section 139(1). 4. Duplicate Additions and Assessments: The CIT(A) observed that the income adopted in the first assessment order under Section 153C or the total income declared under Section 139(1) was again assessed in the subsequent orders. The Tribunal noted that repeating additions made in earlier assessment proceedings resulted in duplicity of additions and demands, which was not justified. 5. Applicability of Judicial Precedents: The CIT(A) and the Tribunal referred to several judicial precedents, including the decision in ACIT Central Circle 2(3) Bangalore vs Smt. Pallavi Ravi and the Hon'ble Karnataka High Court's decision in M/s. Delhi International Airport Pvt. Ltd. The Tribunal concluded that in unabated assessments completed prior to search, no addition can be made under Section 153C without material found during the search. Conclusion: The Tribunal upheld the CIT(A)'s order, finding no grounds to interfere as the additions made were not based on any incriminating material found during the search. Consequently, the appeals by the Revenue were dismissed, and the initiation of proceedings under Section 153C was deemed unnecessary to examine further. Result: The appeals by the Revenue were dismissed.
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