2017 (2) TMI 724 - HC - Income Tax

Addition made under Section 153 A - validity of assessment - Held that - The search conducted was on 10.02.2006. The assessment for AY 200405 was framed on the basis of material already on record much prior to the search conducted on 10.02.2006. It was a scrutiny assessment under Section 153 A of the Act and on the basis of the material on record, the assessment was framed for AY 200405. On the basis of some incriminating material found / detected during the search on 10.02.2006, which was for the period of Y 200405 onwards and in absence of any specific incriminating material detected for the AY 200405, the AO was not justified in making any addition - Decided in favour of assessee

Issues Involved:
1. Scope of assessment under Section 153A in respect of completed assessments.
2. Limitation of Section 153A to search-related income.
3. Assessment of total income for six assessment years under Section 153A.
4. Validity of Tribunal's findings regarding incriminating material.

Detailed Analysis:

1. Scope of Assessment under Section 153A in Respect of Completed Assessments:
The primary issue addressed is whether the Appellate Tribunal correctly narrowed the scope of assessment under Section 153A to include only undisclosed income and assets detected during the search. The court noted that the Tribunal directed the AO to delete additions made under Section 153A for AY 2000-01 to 2004-05, as no incriminating material was found for these years during the search conducted on 10.02.2006. The Tribunal's decision was based on the principle that only undisclosed income and assets detected during the search could be brought to tax, aligning with the court's earlier decisions. The court upheld this view, emphasizing that the assessment under Section 153A must relate to the search or requisition, and any additions or disallowances can only be made based on material collected during the search.

2. Limitation of Section 153A to Search-Related Income:
The court examined whether the Tribunal was correct in holding that Section 153A is limited to assessing only search-related income, thereby denying the Revenue the opportunity to tax other escaped income. The judgment referenced the case of Principal Commissioner of Income Tax vs. Jay Infrastructure and Properties Pvt. Ltd., which clarified that the AO could make additions only based on incriminating material found during the search. The court reiterated that the purpose of Section 153A is to assess the total income for six assessment years linked to the search, but any additions must be supported by incriminating material found during the search.

3. Assessment of Total Income for Six Assessment Years under Section 153A:
The court addressed whether the Tribunal was right in limiting the scope of Section 153A to undisclosed income when the section mandates assessing the total income for six assessment years. The judgment explained that while Section 153A requires the AO to assess or reassess the total income for six years, any additions or disallowances must be based on incriminating material found during the search. The court emphasized that if no incriminating material is found for a particular year, the earlier assessment must be reiterated, and no new additions can be made.

4. Validity of Tribunal's Findings Regarding Incriminating Material:
The court evaluated the Tribunal's findings that no incriminating material was found for the assessment years in question and whether these findings were perverse. The judgment highlighted that the search conducted on 10.02.2006 did not yield incriminating material for AY 2000-01 to 2003-04, and therefore, the AO was not justified in making additions for these years. The court found no error in the Tribunal's decision to direct the AO to delete the additions made under Section 153A, as they were not supported by incriminating material found during the search.

Conclusion:
The court concluded that the Tribunal did not commit any error in its judgment and upheld the decision to delete the additions made by the AO under Section 153A. The appeals were dismissed, and no substantial question of law was found to arise in this case. The judgment emphasized the necessity of incriminating material for making additions under Section 153A and reiterated the principles established in previous decisions regarding the scope and limitations of assessments under this section.

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