2022 (9) TMI 476 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - incriminating material found during the search or not? - HELD THAT - It is undisputed that the assessment was completed before the date of search. Nowhere it was the case of the authorities below that the said bank was not earlier disclosed. In these circumstances, by referring to the bank statement of said bank which was already disclosed, additions made cannot be said to be based upon incriminating material found during the search. As a matter of fact, ld. CIT (A) himself deleted the addition based upon the deposits in the said bank account on the ground that no incriminating material was found during search. Hence ld. CIT (A) on this issue is himself taking contradictory stand. In the orders of the authorities below, there was no mention that bank account has not been disclosed in the earlier return of income, hence addition made de hors on incriminating material found during the search is not sustainable as has been held in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - Accordingly, on the jurisdictional issue, we hold that addition is not sustainable inasmuch as it was made de hors incriminating material found during search. Since we hold that addition was without jurisdiction, the addition on merits is not dealt with - Appeal filed by the assessee stands allowed.

Summary

Issues:
1. Addition under section 68 of the Income-tax Act, 1961 based on bank statement found during search.

Analysis:
The judgment pertains to an appeal against the order of the ld. CIT (A) sustaining an addition of Rs.12,00,000 under section 68 of the Income-tax Act, 1961. The primary contention raised was that since the assessment was completed before the search and no incriminating material was found during the search related to the addition, the addition was not sustainable. The AO had made the addition based on a bank statement found during the search showing receipt of Rs.12,00,000, and the assessee's explanation was deemed unsatisfactory. The assessee argued that the bank account was already disclosed in the return of income filed before the search, rendering the addition unjustified. The ld. CIT (A) rejected this argument, leading to the appeal before the ITAT.

The ITAT carefully considered the facts and legal precedents. It noted that the assessment was completed before the search, and there was no indication that the bank account in question was undisclosed. Referring to a similar case law, the ITAT highlighted that additions based on bank statements found during a search, when the account was already disclosed, do not constitute incriminating material. The ITAT emphasized the importance of incriminating evidence for sustaining such additions, as established by the Hon'ble Delhi High Court in a specific case. Therefore, the ITAT held that the addition was not sustainable as it lacked a basis in incriminating material and was made outside the jurisdiction granted by law.

In conclusion, the ITAT allowed the appeal, declaring the addition under section 68 as unsustainable due to the absence of incriminating material found during the search. The judgment underscored the necessity of adhering to legal principles and precedents in making additions based on bank statements and reiterated the significance of incriminating evidence in such cases.