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2022 (10) TMI 216 - AT - Income TaxAssessment u/s 153A - Proof of incriminating material found during the course of search or not? - scope of unabated assessment year - HELD THAT - As decided in SINHGAD TECHNICAL EDUCATION SOCIETY 2017 (8) TMI 1298 - SUPREME COURT AO has nowhere made reference to any seized material in the assessment order. The Assessing Officer has been examining the matter as if he is passing a regular assessment order u/s 143(3) or 147 of the Act - addition can only be made if some incriminating material regarding receipt of bogus share application money was found during the course of search. AO did not make reference to this effect. CIT(A) is on the same line. CIT(A) has discussed the issue on merits but did not address whether the issue can be examined in an assessment framed u/s 153A of the Act or not. The judgment of the Hon ble Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT is very specific which has been discussed above. The time limit to issue notice u/s 143(2) of the Act has expired long back. Hence, it is an unabated assessment year and this assessment can be tinkered with only if incriminating material pertaining to this year has been found during the course of search - we allow the preliminary ground of the appeal and delete the additions made in the assessment passed u/s 153A r.w.s. 143(3) - Decided in favour of assessee.
Issues Involved:
1. Legality of the assessment proceedings under Section 153A of the Income Tax Act. 2. Addition of amounts related to bank accounts in HSBC Bank, Geneva. 3. Disallowance under Section 14A of the Income Tax Act. Issue-wise Detailed Analysis: 1. Legality of the Assessment Proceedings under Section 153A of the Income Tax Act: (i) The Tribunal noted that no incriminating documents or material were found during the search conducted under Section 132 of the Act. The only additions made were in respect of the alleged bank accounts at HSBC and a disallowance under Section 14A. (ii) The Tribunal emphasized that the addition of INR 4,73,20,709 (comprising INR 4,52,40,074 for Gingest Marketing Ltd. and INR 20,80,685 for Masonic Limited) was made without reference to any incriminating material found during the search. The documents related to the alleged bank accounts were in the possession of the Department prior to the search. (iii) The Tribunal highlighted that the Assessing Officer (AO) alleged the existence of the accounts during the search, but the assessee clarified that these accounts were in the name of Masonic Ltd., where his NRI son held shares. The assessee consistently asserted that he was neither a director nor a shareholder in these companies. (iv) The Tribunal concluded that since no incriminating material or documents were found during the search and the assessment for AY 2006-07 had not abated, the AO had no jurisdiction to frame the assessment under Section 153A/143(3) without any incriminating evidence. (v) The Tribunal referred to various judgments, including those of the Hon'ble Apex Court, Calcutta High Court, and other High Courts, which consistently held that in the case of unabated assessments, additions can only be made if supported by incriminating material found during the search. 2. Addition of Amounts Related to Bank Accounts in HSBC Bank, Geneva: (i) The assessee argued that the alleged bank accounts belonged to Gingest Marketing Ltd. and Masonic Ltd., both non-resident corporate entities registered in the British Virgin Islands, and that he had no interest in these accounts. The assessee provided confirmatory letters from HSBC, Geneva, and other supporting documents to substantiate this claim. (ii) The AO, without any positive evidence, held that the assessee was the beneficial owner of the bank accounts and added the sums of INR 4,52,40,074 and INR 20,80,685 to the assessee's income. The AO's conclusion was based on suspicion and the inability of the assessee to furnish details of a trust mentioned by HSBC, Geneva. (iii) The Tribunal found that the AO had no legal evidence to support the claim that the assessee was the beneficial owner of the bank accounts. The Tribunal noted that the assessee had never admitted to any transactions in these accounts and no evidence was found that the assessee made any deposits in these accounts. (iv) The Tribunal concluded that the addition of the amounts related to the bank accounts was erroneous and directed the deletion of these additions. 3. Disallowance under Section 14A of the Income Tax Act: (i) The assessee contended that the disallowance of INR 587 under Section 14A was made without any incriminating material found during the search and that Rule 8D was not in force in the relevant assessment year. (ii) The Tribunal noted that the disallowance under Section 14A was based on a legal interpretation of the section and not on any incriminating documents found during the search. (iii) The Tribunal held that the disallowance under Section 14A was wrong and directed its deletion. Conclusion: The Tribunal quashed the assessment proceedings under Section 153A r.w.s. 143(3) as bad in law, and all the additions made therein, including the amounts related to the bank accounts in HSBC Bank, Geneva, and the disallowance under Section 14A, were deleted. The appeal was partly allowed.
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