2018 (11) TMI 1115 - AT - Income Tax

Assessment u/s 153A - proof of incriminating material found during the search - Held that - As decided in many case laws without any incriminating material found during the course of search, no additional income can be brought to tax in the assessment u/s 153A of the Act even where earlier assessments were concluded u/s 143(3) of the Act. Respectfully, following all we hold that the assessments u/s 153A for all the A.Ys are not sustainable and they are accordingly set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of proceedings under Section 153A of the Income-tax Act, 1961.
2. Validity of additions made based on materials already available on record rather than on seized/incriminating material.
3. Evidentiary value of loose sheets and the genuineness of transactions.

Issue-wise Detailed Analysis:

1. Legitimacy of proceedings under Section 153A of the Income-tax Act, 1961:
The assessee contended that the proceedings under Section 153A were invalid as no incriminating material was found during the search. The Tribunal examined the legal framework and previous judicial pronouncements, emphasizing that assessments under Section 153A should be connected to material found during the search. The Tribunal cited multiple cases, including the Hon'ble Bombay High Court in CIT vs. SKS Ispat & Power Ltd, which held that the scope of assessment under Section 153A is limited to incriminating evidence found during the search. Similarly, the Hon'ble Gujarat High Court in Pr.CIT vs. Dipak Jashvantlal Panchal ruled that any addition or disallowance can only be made based on material collected during the search or requisition. The Tribunal concluded that in the absence of any incriminating material, the assessment under Section 143(3) read with Section 153A is not sustainable.

2. Validity of additions made based on materials already available on record rather than on seized/incriminating material:
The Tribunal noted that the Assessing Officer (AO) made additions based on information already available on record, not on any new material found during the search. The Tribunal referenced several judicial decisions, including the Hon'ble Delhi High Court in Pr.CIT vs. Meeta Gutgutia Prop. M/s. Ferns "N" Petals, which emphasized that additions should be made strictly on the basis of evidence found during the search. The Tribunal reiterated that without any new incriminating material, the AO could not justify the additions made. Consequently, the Tribunal held that the assessment made under Section 143(3) read with Section 153A was invalid.

3. Evidentiary value of loose sheets and the genuineness of transactions:
The assessee argued that loose sheets have no evidentiary value and that the transactions were genuine. The Tribunal acknowledged this argument, noting that the AO did not provide concrete evidence to substantiate the addition of ?20,00,000/- as unexplained receipt. The Tribunal referenced the Hon'ble Gujarat High Court in Pr.CIT vs. Devangi alias RUPA, which held that only undisclosed income and assets detected during the search could be brought to tax. The Tribunal found that the AO's reliance on loose sheets was insufficient to support the addition, especially when the assessee had disclosed the amount and provided an affidavit for the cancellation of the agreement.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the assessment made under Section 143(3) read with Section 153A. The Tribunal emphasized that without any incriminating material found during the search, the assessment was unsustainable. Consequently, the other grounds against the merits of the additions were not adjudicated, as it would result in an academic exercise. The judgment was pronounced in the open court on 15th November 2018.