2014 (8) TMI 520 - AT - Income Tax

Assessment order u/s 153A - Absence of any incriminating material belonging to assessee Held that - The return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment - addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search Relying upon Kusum Gupta Versus DCIT, Central Circle-15 New Delhi 2013 (11) TMI 665 - ITAT DELHI CIT(Appeals) was not justified in upholding the validity of the proceedings initiated under sec. 153A of the Act and the assessment framed under sec. 153A read with section 143(3) in furtherance thereto - the initiation of proceedings under sec. 153A of the Act and framing of assessment under sec. 153A read with sec. 143(3) in furtherance thereto in absence of any incriminating material found during the course of search were not valid Decided in favour of Assessee. Unexplained cash credits u/s 68 Held that - CIT(A) has rightly come to the conclusion that there is no actual credit in the books of the assessee on account of M/s. Jayna Closure, Proprietor Rakesh Kumar as stated by the AO whereas the same was accounting adjustment passed in the accounts of S.H. Ltd. and that since the identity of S.H. Ltd., the source of payment is also not in dispute as well as the transaction entered into by the assessee with S.H. Ltd. are also not in dispute the order of the CIT(A) in deleting the addition made by the AO u/s 68 is justified - Revenue has also not been able to rebut the finding of the CIT(A) that the amount of ₹ 19,17,500 was outstanding in the AY 2001-02 also, which was a carried forward balance in the current year from the last many years - CIT(A) has rightly deleted the addition made by the AO. Creditworthiness and genuineness of transaction Held that - CIT(A) has rightly come to the conclusion that the creditor was in existence and the assessee had filed sufficient evidence to support its contention regarding the creditworthiness and genuineness of the transaction as the payments have been received through banking channel and the bank statement filed also supports the case of the assessee CIT(A) was justified in deleting the addition of ₹ 2,87,10,000 made by the AO u/s 68 Decided against Revenue.

Issues Involved:
1. Jurisdiction of proceedings under section 153A.
2. Validity of search and seizure operation.
3. Requirement of incriminating material for proceedings under section 153A.
4. Legality of reassessment proceedings without incriminating material.
5. Validity of additions made by the Assessing Officer under section 153A/143(3).

Detailed Analysis:

1. Jurisdiction of Proceedings under Section 153A:
The assessee contested that the proceedings initiated under section 153A were without jurisdiction as no incriminating material was found during the search. The Tribunal noted that the assessment had reached its finality in the absence of any notice under section 143(2) within the prescribed time limit. It was held that in the absence of incriminating material, the initiation of proceedings under section 153A and the subsequent assessment were not valid. The Tribunal quashed the assessment, allowing objections 1 to 5 of the cross-objection.

2. Validity of Search and Seizure Operation:
The assessee argued that the search itself was unlawful and invalid. However, the Tribunal did not specifically rule on the validity of the search operation itself but focused on the absence of incriminating material, which rendered the subsequent proceedings and assessment invalid.

3. Requirement of Incriminating Material for Proceedings under Section 153A:
The Tribunal emphasized that for completed assessments, additions under section 153A should be based on incriminating material found during the search. Citing the Special Bench decision in All Cargo Global Logistics Ltd., it was reiterated that in cases where assessments are not pending, the assessment under section 153A should be confined to incriminating material found during the search. The Tribunal found that no such material was found in the present case, leading to the quashing of the assessment.

4. Legality of Reassessment Proceedings without Incriminating Material:
The Tribunal observed that the reassessment proceedings under section 153A were not valid in the absence of any incriminating material found during the search. The Tribunal referred to various decisions, including the Delhi High Court's decision in Anil Kumar Bhatia, to support its conclusion that additions in completed assessments must be based on incriminating material.

5. Validity of Additions Made by the Assessing Officer under Section 153A/143(3):
The revenue's appeal against the deletion of additions by the CIT(A) was dismissed. The Tribunal upheld the CIT(A)'s decision to delete the additions of Rs. 6,44,11,974 and Rs. 2,87,10,000 made by the Assessing Officer under section 68. The Tribunal noted that the CIT(A) had thoroughly examined the evidence, including balance sheets, bank statements, and confirmations from creditors, and found no basis for the additions. The Tribunal agreed with the CIT(A) that the transactions were genuine and the creditors' identities and creditworthiness were established.

Conclusion:
The cross-objection by the assessee was allowed, and the appeal by the revenue was dismissed. The Tribunal quashed the assessment under section 153A read with section 143(3) due to the absence of incriminating material. The additions made by the Assessing Officer were also deleted, and the CIT(A)'s detailed and reasoned order was upheld.

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