2018 (11) TMI 1975 - AT - Income Tax

Assessment u/s 153A - incriminating material was found during the search or not? - HELD THAT - Admittedly the assessment for the year under consideration stood completed on the date of search. No incriminating material whatsoever in relation to the share application money was found. It has been time and again held by the various High Courts that if no incriminating material is found during the search action the addition in the case of already concluded assessment cannot be made while framing assessment u/s 153A of the Act. See Continental Warehousing Corporation 2015 (5) TMI 656 - BOMBAY HIGH COURT and Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Additions made/confirmed by the lower authorities for one assessment year under consideration are hereby ordered to be deleted. Appeals of the assessee are hereby allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the delay of 397 days in filing the appeals by the assessee should be condoned.

2. Whether the additions made by the Assessing Officer under Section 153A of the Income Tax Act, following a search action, were justified given that no incriminating material was found during the search.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay

The relevant legal framework involves the discretion of the appellate authority to condone delays in filing appeals if sufficient cause is shown. The assessee argued that the delay was due to the non-cooperative attitude of their previous counsel, who failed to file the appeals and did not inform the assessee about it. The new counsel discovered the oversight, leading to the filing of the appeals.

The Tribunal considered the precedent set in the assessee's own case, where a previous delay was condoned due to similar circumstances. The Court found the explanation credible and the delay unintentional, thus condoning the delay and allowing the appeals to be heard on their merits.

2. Justification of Additions under Section 153A

The legal framework involves Section 153A of the Income Tax Act, which allows for reassessment following a search action. However, as established in various precedents, including the Bombay High Court's decision in 'CIT Vs. Murli Agro Products Pvt Ltd' and the Delhi High Court's decision in 'CIT Vs. Kabul Chawla', if no incriminating material is found during the search, additions cannot be made for already concluded assessments.

The Court noted that the assessments for the relevant years were completed before the date of the search, and no incriminating material was found. The Department admitted that the facts of the case were covered by the cited precedents, which consistently held that without incriminating material, no additions could be justified under Section 153A.

The Tribunal applied these principles to the facts, concluding that the additions made by the Assessing Officer were not warranted and should be deleted. The Court emphasized the need for incriminating evidence to justify reassessment under Section 153A.

SIGNIFICANT HOLDINGS

The Tribunal held that:

"If no incriminating material is found during the search action, the addition in the case of already concluded assessment cannot be made while framing assessment u/s 153A of the Act."

This principle was reaffirmed by referencing the decisions in 'CIT Vs. Continental Warehousing Corporation' and 'CIT Vs. Kabul Chawla'. The Tribunal ordered the deletion of the impugned additions, thereby allowing all the appeals filed by the assessee.

In conclusion, the Tribunal's decision emphasized the necessity of incriminating evidence for making additions under Section 153A in cases of already concluded assessments, aligning with established judicial precedents. The appeals were allowed, and the additions were deleted as no such evidence was found.