2017 (9) TMI 638 - AT - Income Tax

Legality of the order passed under section 153A - No incriminating document found in search - Held that - The assessment made under section 153A read with section 143(3) of the Act without having any incriminating document, is untenable and bad in law. No concluded assessment can be disturbed without any material found during the course of search . See CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT . - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the order passed under section 153A read with section 143(3) of the Income Tax Act.
2. Addition of ?10,00,000/- under section 40A(3) of the Income Tax Act on account of purchase of land in cash.
3. Addition of ?10,00,000/- under section 40A(3) of the Income Tax Act on account of purchase of land in cash despite no deduction claimed in computation of income.

Detailed Analysis:

1. Legality of the Order Passed Under Section 153A Read with Section 143(3):
The primary issue was the legality of the assessment order passed under section 153A read with section 143(3) of the Income Tax Act. The assessee contended that no incriminating document or material was found during the search, which is a prerequisite for invoking section 153A/153C. The assessee argued that the provisions of section 153A/153C are triggered only on the existence of incriminating material found during the search, citing various judicial pronouncements, including the jurisdictional High Court of Rajasthan in Jai Steel India Vs. ACIT and the Delhi High Court in CIT Vs. Kabul Chawla.

The Tribunal observed that the assessment order did not reference any seized material, and the only addition made was based on a technical ground for payment made in cash disallowed under section 40A(3). The Tribunal noted that the assessment was framed without any incriminating material, making the proceedings under section 153A untenable and bad in law. Consequently, the Tribunal allowed the assessee's appeal on this ground, holding that the assessment made under section 153A read with section 143(3) without any incriminating material is invalid.

2. Addition of ?10,00,000/- Under Section 40A(3) on Account of Purchase of Land in Cash:
The second issue was the addition of ?10,00,000/- under section 40A(3) of the Income Tax Act on account of the purchase of land in cash. The assessee argued that this addition was unwarranted as the purchase was fully accounted for in the books of accounts, and no deduction was claimed in the computation of income. The Tribunal, having already decided the primary issue in favor of the assessee by holding the assessment proceedings invalid, deemed this ground academic and did not require further adjudication.

3. Addition of ?10,00,000/- Under Section 40A(3) Despite No Deduction Claimed:
The third issue was similar to the second, focusing on the addition of ?10,00,000/- under section 40A(3) despite the assessee not claiming any deduction in the computation of income. Given the Tribunal's decision on the primary issue, this ground also became academic and did not require further adjudication.

Conclusion:
The Tribunal allowed the appeals of the assessees, holding that the assessment made under section 153A read with section 143(3) without any incriminating material is invalid and bad in law. Consequently, the additions under section 40A(3) became academic and did not require further adjudication. The consolidated order disposed of both appeals in favor of the assessees.