2024 (3) TMI 1412 - AT - Income Tax

Legitimacy of additions/disallowances made u/s 153A - whether while making assessment u/s 153A Revenue is entitled to interfere with unabated assessment which stood concluded either u/s 143(1) or u/s 143(3) and not pending at the time of search in the absence of any incriminating material unearthed as a result of search in the case of assessee? HELD THAT - As pointed out on behalf of the assessee there is a total absence of reference to any incriminating material which may have any bearing to the impugned additions/disallowances. AO has relied on material found in a different search proceedings. There is no rebuttal from revenue on this pertinent aspect. Additions/disallowances have been made without reference to any specific incriminating material/document found as result of search and seizure action u/s 132 and such additions are solely based on certain information/material collected against the assessee in the course of search in another case. Guided by the principles laid down in the case of Abhisar Buildwell (P.) Ltd 2023 (4) TMI 1056 - SUPREME COURT we find force in the legal plea raised on behalf of the assessee. Hence in the absence of any incriminating material in an unabated assessment additions/disallowances made by the AO is unsustainable within the remit of sec 153A of the Act and consequently the additions under challenge in the captioned appeal requires to be quashed. Appeal of the assessee is allowed.

Summary

The appeal in this case was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the Assessment Year 2012-13. The main issue raised by the assessee was the legitimacy of additions/disallowances made under Section 153A of the Income Tax Act, 1961. The key legal question was whether the Revenue Authorities were justified in making these additions without any incriminating material found during the search action on the assessee.The assessee argued that the additions made under Section 153A should be based on incriminating material discovered during the search on the assessee, as per the Supreme Court judgment in CIT vs. Abhisar Buildwell (P) Ltd. The counsel highlighted that the incriminating material found in the search did not implicate the assessee for the additions made by the Assessing Officer. The counsel also pointed out that the additions were based on material found in the search of another person, not the assessee.The Tribunal examined the legal contentions raised by both parties. It noted that there was no reference to any incriminating material related to the additions/disallowances in the possession of the assessee. The Tribunal agreed with the assessee's argument that additions under Section 153A should be supported by incriminating material found during the search on the assessee. Since the additions in this case were not based on such material but on information from a different search, the Tribunal held that the additions were unsustainable under Section 153A.Based on the principles established in the Abhisar Buildwell case and previous decisions cited, the Tribunal concluded that the additions/disallowances made by the Assessing Officer were not valid within the scope of Section 153A. Therefore, the Tribunal allowed the appeal of the assessee and quashed the additions under challenge.In summary, the Tribunal held that additions under Section 153A must be supported by incriminating material found during the search on the assessee. Since the additions in this case were not based on such material, the Tribunal ruled in favor of the assessee and set aside the additions made by the Revenue Authorities.