2024 (10) TMI 923 - AT - Income Tax

Assessment u/s 153A - additions solely based on a sketchy statement of accountant u/s 132(4) - such statement is, in turn, based on confessional statement of the director in the previous search carried out in the case of Shri Praveen Kumar Jain - whether incriminating material discovered during the search or not? - HELD THAT - As pointed out on behalf of the assessee, we observe that admittedly, no demonstrable incriminating material has been found in the course of search in the case of the assessee carried out in June, 2017. The statement of Shri Praveen Kumar Jain given in the previous search in the search case of Shri Praveen Kumar Jain on 01.10.2013 was confronted to the accountant of the assessee in the present search and certain confessions were obtained. The statement of Shri Praveen Kumar Jain was thus adopted for the purposes of additions u/s 153A of the Act proceedings in the case of the assessee. The same statement was the basis for assessment under section 153C of the Act previously carried out in the case of the assessee. The issue already stood resolved in favour of the assessee by the ITAT in the earlier proceedings u/s 153C of the Act. In view of the judgment delivered in the case of Pr. CIT vs. Abhisar Builwell Pvt. Ltd 2023 (4) TMI 1056 - SUPREME COURT it is trite that in the absence of incriminating material found in the course of search, the legal foundation for making additions under section 153A in unabated assessment do not exist. Coupled with this, mere statement of a person under section 132(4) of the Act in the course of search, by itself, cannot be regarded as incriminating material found in the course of search as held in the case of Pavitra Realcon Pvt. Ltd. and Anand Kumar Jain (HUF) 2021 (3) TMI 8 - DELHI HIGH COURT . The additions made on the basis of confessional statement without other material is thus unsustainable in law. Thus, seen from any angle, additions made under section 153A of the Act for the captioned appeals are not permissible in law. Assessee appeal allowed.

Summary

Issues Involved:

1. Legitimacy of additions made under Section 153A of the Income Tax Act based on statements without corroborative material.
2. Applicability of statements from previous searches to subsequent assessment years.
3. Requirement of incriminating material for making additions in search assessments.
4. Validity of protective versus substantive additions in related cases.

Detailed Analysis:

1. Legitimacy of Additions under Section 153A:

The primary issue revolves around the validity of additions made under Section 153A of the Income Tax Act based solely on statements obtained during search operations. The Tribunal observed that the additions were primarily based on the statement of Shri Manish Jain, an accountant, which was itself derived from a previous statement by Shri Praveen Kumar Jain. The Tribunal noted that no incriminating material was found during the search conducted on 02.06.2017 on the assessee company. The Tribunal emphasized that mere statements, without tangible evidence, cannot substantiate additions under Section 153A, as reiterated by the Supreme Court in PCIT vs. Abhisar Builwell P. Ltd.

2. Applicability of Statements from Previous Searches:

The Tribunal addressed the issue of whether statements from a previous search in 2013 could be applied to subsequent assessment years. It was argued that the statement of Shri Praveen Kumar Jain, recorded in 2013, was irrelevant for the years following the search. The Tribunal agreed, stating that statements should pertain to the period prior to the search and cannot be extrapolated to subsequent years without supporting evidence.

3. Requirement of Incriminating Material:

The Tribunal reiterated the necessity of incriminating material for making additions in search assessments. Citing the Delhi High Court's judgments in PCIT vs. Anand Kumar Jain (HUF) and PCIT vs. Pavitra Realcon Pvt. Ltd., it was underscored that the absence of incriminating material renders the additions unsustainable. The Tribunal found that the assessments for A.Ys. 2012-13 to 2015-16 were concluded without any incriminating evidence, thereby invalidating the additions made under Section 153A.

4. Validity of Protective vs. Substantive Additions:

The Tribunal examined the issue of protective versus substantive additions, particularly in the case of Olive Overseas Pvt. Ltd. and Nakshatra Business Pvt. Ltd. It was noted that the ITAT had previously confirmed substantive additions in the hands of Shri Praveen Kumar Jain while dismissing protective assessments against the assessee companies. The Tribunal concluded that since substantive additions were upheld in the case of Shri Praveen Kumar Jain, similar protective additions against the assessee companies were unsustainable.

Conclusion:

The Tribunal allowed the appeals for the assessment years in question, striking down the additions made under Section 153A due to the absence of incriminating material and reliance solely on statements without corroborative evidence. The Tribunal emphasized the need for tangible evidence and the inadmissibility of applying statements from prior searches to subsequent years without proper substantiation. The appeals were allowed for both Olive Overseas Pvt. Ltd. and Nakshatra Business Pvt. Ltd., reinforcing the principle that search assessments require concrete evidence beyond mere statements.