2017 (9) TMI 850 - HC - Income Tax

Assessment u/s 153A/153C - proof of incriminating material in support of the additions made under Section 68 and under Section 14A - Held that - Additions made by the Assessing Officer were in the absence of any incriminating material. Therefore, they are not sustainable and they came to be deleted. We do not think that any view other than the one taken by the Division Bench of this Court in the case of The Commissioner of Income Tax, Central -IV vs. M/s. SKS Ispat & Power Limited 2017 (7) TMI 813 - BOMBAY HIGH COURT or the reported judgment in Continental Warehousing Corporation and All Cargo Global Logistics (2015 (5) TMI 656 - BOMBAY HIGH COURT ) can be taken. Tribunal has not committed any error because the addition made under Section 68 of the IT Act deserves to be deleted. See Govind Agarwal (HUF) vs. DCIT 2013 (5) TMI 874 - ITAT MUMBAI - Decided against revenue

Issues Involved:
1. Interpretation and application of Sections 68 and 153A of the Income Tax Act.
2. Validity of additions made under Section 68 for unexplained gifts.
3. Assessment under Section 153A based on incriminating material found during a search.

Detailed Analysis:

1. Interpretation and application of Sections 68 and 153A of the Income Tax Act:
The primary issue revolves around whether assessments under Section 153A can only be made based on incriminating material found during a search. The Tribunal had relied on its Special Bench decision in the case of All Cargo Global Logistics Ltd., which stated that assessments under Section 153A should be based on incriminating material found during the search. The Revenue argued that this interpretation was incorrect and cited the Karnataka High Court's disapproval in the Canara Housing Development Co. case. However, the Tribunal's view was upheld by referring to the Division Bench judgment in Continental Warehousing Corporation and All Cargo Global Logistics, which supported the Tribunal's interpretation.

2. Validity of additions made under Section 68 for unexplained gifts:
The Tribunal had deleted the additions made under Section 68 for unexplained gifts, stating that no incriminating material was found during the search to support these additions. The Revenue contended that the Tribunal did not consider the merits of the case and argued that the unexplained gifts should be added to the income. However, the Tribunal's decision was upheld, emphasizing that without incriminating material, such additions are not sustainable. The Tribunal had also relied on its earlier order in the case of Govind Agarwal (HUF) vs. DCIT, which followed the same principle.

3. Assessment under Section 153A based on incriminating material found during a search:
The Tribunal concluded that the assessments under Section 153A could not include additions unrelated to the incriminating material found during the search. The Revenue's argument that the Tribunal's decision was incorrect was dismissed. The court referred to the Supreme Court judgment in Rajesh Jhaveri Stock Brokers Private Limited, which dealt with the reassessment proceedings under Section 148 and clarified that the intimation under Section 143(1)(a) cannot be treated as an assessment order. The court distinguished this case from the present matter, indicating that the Tribunal's reliance on the absence of incriminating material for additions under Section 153A was appropriate.

Conclusion:
The court dismissed the Revenue's appeals, affirming the Tribunal's decision that assessments under Section 153A must be based on incriminating material found during the search. The additions made under Section 68 for unexplained gifts were also deleted due to the lack of incriminating material. The court upheld the Tribunal's reliance on the Special Bench decision in All Cargo Global Logistics Ltd. and the Division Bench judgment in Continental Warehousing Corporation. The appeals were found to be without merit, and no substantial questions of law were raised. The pending Notices of Motion were also disposed of.

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