2023 (11) TMI 1311 - AT - Income Tax

Validity of exercise of jurisdiction u/s 153A - incriminating material as found during search or not? - difference of opinion between the Accountant Member and the Judicial Member - matter referred to third member - HELD THAT - As per order passed by the Third Member 2023 (10) TMI 1383 - ITAT JABALPUR appeal filed by the assessee are allowed and the addition made by the Assessing Officer, which was confirmed by learned CIT(A), is hereby deleted wherein as held matter to be covered by the decision of the Supreme Court in the case of Pr. CIT Vs Abhisar Buildwell P. Ltd 2023 (4) TMI 1056 - SUPREME COURT wherein held no addition can be made in respect of completed assessment in absence of any incriminating material. Assessee appeal allowed.

Summary

Issues:
Interpretation of Section 153A of the Income Tax Act - Jurisdiction of AO in block assessments and reassessments.

Detailed Analysis:

The judgment by the Appellate Tribunal involved a reference under Section 255(4) of the Income Tax Act due to a difference of opinion between the Accountant Member and the Judicial Member regarding the interpretation of Section 153A. The Third Member referred to a Supreme Court decision in the case of Pr. CIT Vs Abhisar Buildwell P. Ltd., where it was clarified that prior to the insertion of Section 153A, block assessments were governed by Section 158BA. The Supreme Court held that Section 153A aimed to eliminate the dual assessment system and tax undisclosed income at the normal rate. The Tribunal emphasized that for search assessments under Section 153A, incriminating material must be found, and the AO has jurisdiction to assess or reassess total income for six years only if such material is detected.

The Tribunal further highlighted that if no incriminating material is found during a search, the AO cannot make additions in completed assessments, but can reopen them under Sections 147/148. The judgment aligned with the Delhi High Court's decision in Commissioner of Income Tax, Central-III Vs Kabul Chawla and other High Courts, emphasizing the necessity of incriminating material for additions in assessments. The Tribunal concluded that in the absence of such material, completed assessments cannot be altered, preserving the AO's power to reopen them under Sections 147/148.

The Tribunal dismissed the Department's appeals and review petition based on the Supreme Court's decision in Abhisar Buildwell P. Ltd. The Tribunal ruled in favor of the assessee, stating that assessment orders passed under Section 143(3) instead of Section 153C were unjustified and invalid. Consequently, the appeals by the assessee were allowed, and the additions made by the Assessing Officer were deleted. The Tribunal's decision was based on the interpretation of Section 153A and the necessity of incriminating material for assessments, ensuring that completed assessments cannot be altered without such evidence.

In conclusion, the judgment clarified the jurisdiction of the AO in block assessments and reassessments under Section 153A, emphasizing the importance of incriminating material for making additions in assessments and preserving the AO's power to reopen completed assessments under Sections 147/148 in the absence of such material.