2023 (11) TMI 1324 - AT - Income Tax

Assessment u/s 153A - incriminating material found or not? - addition u/s 68 - HELD THAT - There is no reference to any incriminating material found from the premises of the assessee though reference to electronic conversation may be incriminating, but the same has no reference whatsoever with the assessee. The entire assessment is based upon the statement of Shri Nirmal Sarda and his brother Shri Anil Sarda. But nothing was found from the premises of the assessee, which could be termed as incriminating material and could be basis of making the impugned assessment u/s 153A and, therefore, the ratio laid down in the case of Abhisar Buildwell 2023 (4) TMI 1056 - SUPREME COURT squarely apply wherein it has been held that assessment u/s 153A of the Act can be framed only on the basis of incriminating material found at the time of search. Thus the impugned assessment order deserves to be set aside as devoid of any incriminating material. Addition u/s 68 - There is no dispute in so far as movement of goods is concerned. There is also no dispute in respect of corresponding purchases. Stock details have been accepted as such. Therefore, we fail to understand how the AO could invoke the provisions of section 68 for making the impugned addition. We further fail to understand that when the ld. CIT(A) has accepted the profit margin for rest of the sales, then why he has applied a different profit margin in respect of sales made to the three parties mentioned elsewhere. Thus, not only the assessment order is erroneous but the order of the first appellate authority is also erroneous. Decided against revenue.

Summary

Issues:
Appeals against assessment order, Treatment of sales as unexplained cash credit, Estimation of profit margin, Jurisdiction under section 153A, Reopening of completed assessments.

Analysis:
The judgment involves appeals by the assessee and the Revenue against the assessment order pertaining to Assessment Years 2012-13 & 2013-14. The facts revolve around a search and seizure operation at premises related to Bajaj Group and associates, including the assessee. The Assessing Officer treated certain sales as unexplained cash credit under section 68 of the Income-tax Act, resulting in substantial additions for both assessment years.

The assessee argued that the sales in question were already part of its turnover and contended against double addition. The Assessing Officer doubted the sales to specific parties but accepted corresponding purchases. The ld. CIT(A) upheld the addition but estimated a profit margin on the turnover, leading to confirmed additions for both years. The assessee challenged the profit estimation, while the Revenue contested the non-treatment of entire sales as bogus.

The Tribunal analyzed the incriminating material found during the search and emphasized the necessity of such material for assessments under section 153A. Referring to a Supreme Court judgment, the Tribunal concluded that no incriminating material related to the assessee was found, rendering the assessment invalid. The Tribunal highlighted the importance of incriminating material for assessments post-search.

Regarding the merits, the Tribunal noted no dispute on the movement of goods or corresponding purchases. It questioned the invocation of section 68 for the additions and criticized the differential profit margin applied by the ld. CIT(A). Ultimately, the Tribunal found errors in both the assessment order and the first appellate authority's decision. Consequently, the appeals of the assessee were allowed, and those of the Revenue were dismissed for both assessment years.

The judgment also delved into the jurisdiction to reopen completed assessments based on undisclosed income found during a search. It referenced a High Court decision emphasizing the AO's authority to reassess total income even for completed assessments post-search. In light of this discussion, the Tribunal dismissed appeals related to the reopening of completed assessments.

In conclusion, the Tribunal set aside the assessment order due to lack of incriminating material, allowed the assessee's appeals on merits, and dismissed the Revenue's appeals. The order was pronounced in open court, resolving the issues raised by both parties comprehensively.