2023 (12) TMI 279 - AT - Income Tax

Assessment u/s 153A pursuant to a search - assessee submitted that no addition in this case has been done by referring to seized material found during the search - HELD THAT - We note that the additions are not based upon any incriminating material found during search. DR also could not dispute this proposition. As per the decision of the Hon ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd 2023 (5) TMI 587 - SUPREME COURT no addition can be made the assessment framed u/s 153A dehors incriminating material found during the search. Since, the AO himself admitted that the addition is made dehors any seized incriminating material during the search, respectfully following the precedent of Hon ble Apex Court, we set-aside the order of the Ld. CIT(A) and decide the issue in favour of the assessee.

Summary

Issues involved:
The judgment involves issues related to the failure to provide proper opportunity of being heard, completion of assessment on a non-est return, addition of undisclosed income from bank deposits u/s 68, invoking of section 153A without incriminating material, and charging of interest on tax illegally imposed.

Issue 1: Opportunity of being heard
The appellant contended that the ld. CIT (A) failed to appreciate that no proper opportunity of being heard was provided, contravening the principles of natural justice. The appellant argued that the assessment lacked a reasonable and sufficient opportunity for explanation, as required by legal precedents.

Issue 2: Non-est return assessment
The appellant raised concerns that the assessment was completed on a non-est return without seeking an explanation about cash deposits in the bank account. This lack of inquiry into the source of funds deposited by the assessee was highlighted as a key oversight by the assessing authority.

Issue 3: Addition of undisclosed income
The CIT (A) confirmed the addition of Rs. 2,10,000 in bank deposits u/s 68 as undisclosed income from undisclosed sources. The appellant challenged this addition, arguing that the deposits made in Kotak Mahindra Bank and Axis Bank were in the normal course of business, and the CIT (A) erred in treating them as undisclosed income.

Issue 4: Invocation of section 153A
The appellant contested the invoking of section 153A for assessment in the absence of incriminating material relevant to the year under consideration. The appellant argued that this action was contrary to established judgments of higher courts and lacked a legal basis for assessing the income under this provision.

Issue 5: Charging of interest on tax
The appellant raised objections to the arbitrary charging of interest on the tax imposed, emphasizing that the interest was levied unlawfully. The appellant argued that the imposition of interest was disproportionate and lacked a valid legal justification.

The appellate tribunal noted that the assessment was framed u/s 153A without any addition based on seized material from the search. The assessing officer acknowledged the absence of seized material related to the assessment year and made additions solely based on bank statements. The tribunal observed that the addition under section 68 of the IT Act was made without explaining the source of deposits, leading to the computation of taxable income including the disputed amounts. The tribunal highlighted that the addition lacked a basis in incriminating material found during the search, which was a crucial requirement as per legal precedents.

In light of the absence of incriminating material and the principles established by the Hon'ble Supreme Court, the tribunal set aside the order of the CIT (A) and decided the issue in favor of the assessee. The tribunal emphasized that no addition can be made in an assessment u/s 153A without seized incriminating material, as per legal precedents. Consequently, the appeal of the assessee was allowed, and the decision was pronounced in open court on 5th December 2023.