2024 (6) TMI 98 - AT - Income Tax

Validity of the additions made in the assessment order passed u/s 153A - unabated assessment - no incriminating material found during a search and seizure operation u/s 132 - HELD THAT - As decided in Abhisar Buildwell (P) Ltd. ( 2023 (4) TMI 1056 - SUPREME COURT ) AO cannot assess or reassess the income relating to completed/unabated assessment in case no incriminating material is unearthed during the search. Thus the above said ratio laid down by the Hon ble Supreme Court clinches the issue in favour of the assessee. Once it is established on record that the additions made by the AO are not with reference to any incriminating material found as a result of search such additions cannot survive. That being the factual and legal position we have no hesitation in deleting the additions made by the AO. Thus the addition of commission income directed to be made by learned First Appellate Authority must also stand deleted as it is not based on any incriminating material found as a result of search and seizure operation. Ground no. 1 is allowed.

Issues involved:
The judgment involves issues related to the validity of additions made in the assessment order u/s 153A/144 of the Income-tax Act, 1961 without any incriminating material found during a search and seizure operation u/s 132.

Details of the Judgment:

1. The appeals and cross-objections arose from separate orders of the Commissioner of Income Tax (Appeals) for assessment years 2008-09, 2009-10, and 2010-11, resulting from a common search and seizure operation u/s 132 of the Income-tax Act, 1961. The appeals were clubbed together for convenience.

2. The grounds raised in the appeals and cross-objections were similar, leading to the selection of specific cases to address the issues.

3. The assessee raised revised grounds challenging the assessment order passed u/s 153A/144 of the Act, questioning the additions made.

4. The assessee raised a legal issue challenging the validity of the additions made in the assessment order u/s 153A/144 of the Act.

5. The Departmental Representative objected to admitting the new ground raised by the assessee, but the Tribunal decided to address the legal and jurisdictional issue raised by the assessee.

6. The search and seizure operation was conducted on a group of cases, including the assessees, leading to the initiation of proceedings u/s 153A of the Act.

7. The assessees filed their returns of income and provided various documents during the assessment proceedings.

8. The Assessing Officer made several additions based on discrepancies found in the documents, leading to the rejection of the books of account and completion of assessments u/s 153A read with section 144 of the Act.

9. The First Appellate Authority held that the assessees were entry operators providing accommodation entries without engaging in real trading activities, leading to the estimation of commission income.

10. The assessee contended that the additions were not based on any incriminating material found during the search and seizure operation, citing legal precedents to support their argument.

11. The Departmental Representative acknowledged the absence of reference to incriminating material in the assessment order but suggested the possibility of such material found during the search.

12. The Tribunal observed that no incriminating material was referred to in the assessment order, and the additions were made based on documents provided by the assessee or the special audit report.

13. The Tribunal confirmed that no incriminating material was found during the search and seizure operation, leading to the conclusion that the additions made by the Assessing Officer were not sustainable.

14. Referring to legal precedents, the Tribunal highlighted that in cases of unabated assessments, no additions can be made without incriminating material found during the search.

15. Citing the Supreme Court's ruling, the Tribunal concluded that additions without incriminating material in unabated assessments are not permissible, leading to the deletion of the additions made by the Assessing Officer.

16. The Tribunal also directed the deletion of the commission income addition made by the First Appellate Authority, as it was not based on incriminating material.

17. The appeal filed by the Revenue was deemed redundant following the decision on the cross-objection raised by the assessee.

18. The cross-objection was partly allowed, and the Revenue's appeal was dismissed.

19. The decision was applicable to all other appeals and cross-objections.

20. Consequently, the cross-objections by the assessee were partly allowed, and the Revenue's appeals were dismissed.

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