2016 (8) TMI 362 - AT - Income Tax

Nature of assessment - seizure operation u/s 132 - whether, the order ostensibly passed u/s 143(3) of the Act, should be considered as that which is actually passed u/s 153C/u/s 153A r.w.s. 143(3)? - Held that - The impugned order passed by the A.O. was only u/s 153A r.w.s. 143(3) of the Act or 143C of the Act. As the search in the case of the assessee had taken place on 10th April, 2006, the A.Y. of search is 2007-08 and not the impugned A.Y. 2006-07. During the impugned A.Y. 2006-07, the assessment may have been framed u/s 153C of the Act, if it is an offshoot of the search at the residence of the family of the assessee on 22nd March, 2006. If it is presumed that the order was passed u/s 153C, then it has to be struck down on the ground that, the requisites of S.153C are not fulfilled. Alternatively if it is presumed that the assessment passed u/s 153A of the Act, as a consequence to a search on the locker of the assessee on 10th April, 2006, the additions made in the assessment have to be deleted for the reason that, the same are not based on any incriminating material or assets seized during the search. As in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) wherein it is laid down that no addition can be made in the assessment being framed u/s 153A, when there is no incriminating material or assets seized during the course of search. The appeals of the assessee have to be allowed for the reason that the assessment cannot be taken as an assessment passed u/s 143(3) of the Act per se and also for the reason that if the assessment has taken as passed u/s 153C r.w.s. 143(3) of the Act, then it has to be struck down on the ground that the requisite procedures laid down in the Section are not followed or in the alternative if it is taken as assessment passed u/s 153A r.w.s. 143(3) of the Act, the addition has to be deleted for the reason that, the same is not based on the assets founds in the locker of the assessee. - Decided in favour of assessee

Summary

Issues involved:
1. Validity of assessment order passed under different sections of the Income Tax Act.
2. Whether the additions made in the assessment are justified based on the search and seizure operation.
3. Applicability of incriminating material for making additions in the assessment.

Detailed Analysis:

Issue 1: Validity of assessment order passed under different sections of the Income Tax Act
The appeal was filed against the order dated 26.5.2010 of Ld.CIT(A)-II, Delhi for the Assessment Year 2006-07. The search and seizure operation under section 132 of the Income Tax Act was conducted, resulting in the discovery of undisclosed jewellery. The First Appellate Authority upheld the Assessing Officer's order. The appellant argued that the assessment order should have been framed under section 153A of the Act instead of section 143(3). The appellant cited relevant case laws to support this argument. The Tribunal referred to a decision of the Hon'ble Delhi High Court and concluded that the assessment was passed under section 153A, not 143(3).

Issue 2: Justification of additions made in the assessment
The Assessing Officer added an amount to the total income of the appellant based on the undisclosed jewellery found during the search. The appellant contended that no addition should have been made as there was no seizure from the locker. The Tribunal examined the circumstances of the search and seizure operation and concluded that the additions made in the assessment were not based on any incriminating material or assets seized during the search. Citing the decision in the case of Kabul Chawla, the Tribunal held that no addition can be made in the assessment under section 153A without incriminating material.

Issue 3: Applicability of incriminating material for making additions in the assessment
The Tribunal further emphasized that if the assessment was presumed to be passed under section 153C, it would be struck down for not fulfilling the requisites of the section. Alternatively, if the assessment was considered under section 153A, the additions made in the assessment had to be deleted as they were not based on any incriminating material found during the search. The Tribunal relied on case laws to support its decision and ultimately allowed the appeal of the assessee.

In conclusion, the Tribunal held that the assessment order was passed under section 153A, and the additions made in the assessment were not justified based on the search and seizure operation. The Tribunal emphasized the importance of incriminating material for making additions in the assessment and ruled in favor of the assessee, allowing the appeal.