2017 (9) TMI 967 - AT - Income Tax

Assessment u/s 153A - proof of undisclosed income discovered from seized/incriminating material - Held that - In the instant case the learned CIT-(A) has given the finding that as on the date of search no assessment was pending in both the assessment years involved. The learned CIT-(A) has also given the finding that no incriminating material was found or seized in relation to the assessment years involved and the Assessing Officer has not relied on the incriminating or seized material for making additions in the both the assessment years involved. See PCIT Vs. Metta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT and CIT versus Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - Decided in favour of assessee.

Issues Involved:
1. Interpretation of "total income" under Section 153A.
2. Scope of assessment under Section 153A read with Section 153C.
3. Requirement of incriminating material for additions in completed assessments.

Detailed Analysis:

1. Interpretation of "total income" under Section 153A:
The Revenue contended that the term "total income" in Section 153A should include both undisclosed income discovered during the search and any other income. The CIT(A) concluded that "total income" should only mean undisclosed income discovered from seized/incriminating material. The Revenue cited the Karnataka High Court's decision in Canara Housing Development Company Vs. DCIT, which held that "total income" includes both undisclosed income and any other income.

2. Scope of assessment under Section 153A read with Section 153C:
The CIT(A) adopted a restrictive interpretation, stating that no additions could be made in completed assessments in the absence of incriminating material found during the search. The Revenue argued against this restrictive interpretation, citing various judgments, including SSP Aviation Ltd Vs DCIT and Rajesh Sunderdas Vaswani Vs ACIT, which suggested that the documents seized need not necessarily reflect undisclosed income for Section 153C to be invoked.

3. Requirement of incriminating material for additions in completed assessments:
The CIT(A) found that no incriminating material was found or seized in relation to the assessment years involved. The CIT(A) relied on several judicial pronouncements, including Jai Steel India Vs. ACIT and Singhad Technical Education Society Vs. ACIT, which held that additions in completed assessments under Section 153C require incriminating material. The Delhi High Court in CIT vs. Anil Kumar Bhatia and the ITAT in All Cargo Logistics Ltd. vs. DCIT supported this view. The Revenue failed to rebut these findings.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, emphasizing that no incriminating material was found during the search, and therefore, no additions could be made in the completed assessments. The Tribunal relied on the Delhi High Court's decisions in Meeta Gutgutia and Kabul Chawla, which reinforced that additions in completed assessments under Section 153A/153C require incriminating material. Consequently, the appeals filed by the Revenue were dismissed. The Tribunal did not address the issue of jurisdiction under Section 153C, considering it academic due to the primary issue's resolution.

Judgment:
Both appeals filed by the Revenue were dismissed. The decision was pronounced in the open court on 15th Sept., 2017.

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