2015 (10) TMI 2305 - AT - Income Tax

Assessment u/s.153A - Assessing Officer treating the gifts received from Non-resident individuals as unexplained, within the meaning of section 68 - Held that - No justification for the Assessing Officer to make the impugned addition in an assessment finalized under section 153A of the Act in the absence of any incriminating material having been found during the course of search, qua the impugned gifts from the Non-Resident individuals. We may categorically mention here that on the date of initiation of search, qua the assessment year 2004-05 under consideration, assessment was not pending and, accordingly, the assessment for this year did not abate in terms of the second proviso to Section 153A(1) of the Act. Therefore, the ratio of the judgment of Hon ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava-Sheva) (2015 (5) TMI 656 - BOMBAY HIGH COURT) is clearly attracted and the impugned addition could not have been made in respect of an unabated assessment which had become final in the absence of any incriminating material having been found in the course of search, qua the impugned gift. Thus, we set aside the order of CIT(A) and direct the Assessing Officer to delete the addition as the same is purported to be beyond the scope and ambit of an assessment envisaged under section 153A of the Act. - Decided in favour of assessee.

Summary

Issues:
Assessment under section 153A of the Income Tax Act - Addition of unexplained cash credits under section 68 - Jurisdictional issue regarding incriminating material found during search.

Analysis:
The judgment pertains to two appeals by the same assessee for the assessment year 2004-05, clubbed and heard together. The primary issue revolves around the addition of Rs. 1,29,53,823 as unexplained cash credits under section 68 of the Income Tax Act. The assessee contested the addition on the grounds that no incriminating material was found during the search to question the genuineness of the gifts received from two Non-Resident Indians. The assessee argued that since no notice under section 143(2) was issued within the prescribed period, the assessment stood completed, and the assessment for the year under consideration did not abate under section 153A(1) of the Act.

The assessee relied on various decisions to support the argument that without any incriminating material found during the search, no addition could be made in an assessment under section 153A. The Departmental Representative, on the other hand, defended the addition, stating that the Assessing Officer was empowered to assess or reassess the total income of preceding years under section 153A, and the addition was justified under section 68 as the assessee failed to establish the creditworthiness of the donors.

The Tribunal analyzed the provisions of section 153A, emphasizing that the assessment under this section is based on findings from the search or other material brought on record. Referring to a judgment by the Bombay High Court, the Tribunal highlighted that an unabated assessment under section 153A should not include additions if no incriminating material was found during the search. In this case, the Tribunal found no material to suggest the gifts were ingenuine, as the assessee had provided documentation to establish the genuineness of the gifts. Consequently, the Tribunal set aside the addition, stating it was beyond the scope of assessment under section 153A.

Regarding the penalty imposed under section 271(1)(c) in relation to the now-deleted addition, the Tribunal ruled in favor of the assessee, as the basis for the penalty no longer existed. Therefore, both appeals of the assessee were allowed, and the penalty was deleted.

In conclusion, the Tribunal's judgment focused on the jurisdictional issue of incriminating material found during a search and its relevance to additions made under section 153A of the Income Tax Act, ultimately ruling in favor of the assessee due to the lack of such material in this case.