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2022 (8) TMI 255 - AT - Income TaxValidity of assessment u/s 153A - scope of materials found in search - HELD THAT - As decided in the case of Pr. CIT and ors. vs. Meeta Gutgutia Prop. Ferns N Patels and Ors. ( 2017 (5) TMI 1224 - DELHI HIGH COURT Hon ble Delhi High Court reiterated with approval their observations in Kabul Chawala s case ( 2015 (9) TMI 80 - DELHI HIGH COURT ) that completed assessments could be interfered with by AO while making assessment under section 153A only on basis of some incriminating material unearthed during course of search. If in relation to any assessment year, no incriminating material was found, no addition or disallowance could be made in relation to that assessment year in exercise of powers under section 153A and earlier assessment should have to be reiterated. This decision has been affirmed by the Hon ble Supreme Court by dismissing the Revenue s SLP in PCIT vs. Meeta Gutgutia 2018 (7) TMI 569 - SC ORDER We hold that the assessment for AY 2013-14 was already completed prior to the date of search and having not abated, the scope of proceedings under section 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 addition made by the Ld. AO in the order of the assessment could not have been subject matter of proceedings under section 153A of the Act. Consequently, impugned addition could not be made. - Decided in favour of assessee.
Issues Involved:
1. Validity of search warrant and search on the assessee company. 2. Validity of assessment under section 153A in the absence of pending assessment and incriminating material. 3. Justification of additions made by the AO based on alleged accommodation entries. Detailed Analysis: 1. Validity of Search Warrant and Search on the Assessee Company: The assessee contended that the search warrant was not issued in its name but in the name of M/s. Automobiles Component (India) Ltd., which later became M/s. AGM Properties Pvt. Ltd. The search was conducted at the premises of a director, Shri Nem Chand Gupta, and not directly on the assessee company. The assessee argued that no incriminating material was found or seized during the search. 2. Validity of Assessment under Section 153A: The assessee argued that for a valid assessment under section 153A, there must be a pending assessment or incriminating material found during the search. Since the return for AY 2013-14 was filed and assessed under section 143(1) on 15.11.2013, and no notice under section 143(2) was issued by the due date of 30.09.2014, the assessment was deemed concluded. The search conducted on 17.09.2015 did not find any incriminating material, rendering the assessment under section 153A invalid. The Tribunal referred to the Delhi High Court's decision in CIT vs. Kabul Chawala, which held that completed assessments could only be interfered with based on incriminating material found during the search. 3. Justification of Additions Made by the AO: The AO added a current liability of Rs. 59,98,500/- and 2% commission thereon amounting to Rs. 1,19,970/- on a protective basis to the income shown by the assessee. The assessee argued that if it was involved in providing accommodation entries, the amount could not be its income but should be added to the person who obtained the accommodation entry. The Tribunal noted that no incriminating material was found during the search to justify these additions. Tribunal's Findings: The Tribunal concluded that the assessment for AY 2013-14 was already completed and not pending at the time of the search. Since no incriminating material was found during the search, the assessment under section 153A was invalid. The Tribunal quashed the assessment order, citing the legal position established in the Delhi High Court's decisions in CIT vs. Kabul Chawala and Meeta Gutgutia. Conclusion: The Tribunal allowed the appeal, holding that the assessment order was bad in law and quashed it. The other grounds raised by the assessee were not adjudicated as the assessment order itself was invalidated. Order Pronouncement: The order was pronounced in the open court on 19th July 2022.
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