2014 (1) TMI 548 - AT - Income Tax

Whether addition can be made u/s 153A when no material evidence found during search - Held that - Following All Cargo Global Logistics Ltd. v/s DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) - Once no material has been found at the time of search and the earlier assessment order has attained finality, then no addition can be made in the assessment order passed under section 153A - If the material has been considered in the course of original assessment proceedings, then without any further incriminating material, addition cannot be made in the assessment order passed under section 153A - Decided in favor of assessee.

Issues:
1. Challenge to the impugned order dated 4th December 2009 passed by the Commissioner (Appeals) under sections 143(3) and 153A of the Income Tax Act, 1961 for the assessment year 2003-04.
2. Validity of the assessment order in light of principles of natural justice.
3. Jurisdictional aspect of making an addition of Rs. 5,90,538 under section 68 of the Income Tax Act on account of a gift of SBI Resurgent India Bonds.
4. Interpretation of provisions under section 153A regarding the addition of income already assessed without incriminating material found during a search.

Analysis:

Issue 1:
The appeal challenges the order passed by the Commissioner (Appeals) for the assessment year 2003-04 under sections 143(3) and 153A of the Income Tax Act. The assessee contests the validity of the said order on various grounds.

Issue 2:
The validity of the assessment order is questioned based on the alleged violation of principles of natural justice. The argument revolves around the procedural fairness in passing the assessment order.

Issue 3:
The contention arises regarding the jurisdictional aspect of adding Rs. 5,90,538 under section 68 of the Income Tax Act concerning a gift of SBI Resurgent India Bonds. The debate focuses on the legality and basis of such an addition.

Issue 4:
The interpretation of provisions under section 153A is crucial in determining whether an addition can be made without incriminating material found during a search. The discussion involves the application of legal principles and precedents in deciding the validity of such additions.

The facts reveal that the assessment under section 143(3) was completed before the search operation, and the issue of the gift in question was already examined and accepted by the Assessing Officer. The absence of any incriminating material during the search raises doubts on the validity of making additional assessments under section 153A without new evidence. Legal precedents, such as the Special Bench decision of the Tribunal and the Rajasthan High Court case, support the view that additions cannot be made without incriminating material post the original assessment.

In contrast, the Departmental Representative cited judgments emphasizing the obligation of the Assessing Officer to complete assessments under section 153A post a search, even in the absence of seized material. However, the crux of the matter lies in whether a reassessment can be made without fresh incriminating material when the issue was already addressed in the original assessment.

The decision favored the assessee, highlighting that the addition of Rs. 5,90,538 could not be sustained under section 153A due to the absence of new incriminating material and the finality of the original assessment. The judgment clarifies the limitations on making additions without fresh evidence post a search, emphasizing the importance of incriminating material in such cases.

In conclusion, the appeal was allowed, emphasizing the need for incriminating material to support additions under section 153A and the significance of not revisiting issues already addressed in the original assessment without new evidence.

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