2019 (4) TMI 201 - AT - Income Tax

Assessment u/s 153A - No challenge to search u/s 132(1) - HELD THAT - It is the emphatic statement made on behalf of the assessee that the assessee does not challenge the search conducted on him but what is being challenged is the assessment made u/s 153A as not in accordance with law on the ground that no search u/s 132(1) was initiated against the assessee. When the search is not under challenge, and when something incriminating is found in the lockers belonging to the assessee, we have a grave doubt in our mind as to whether it is open for the assessee to contend that he doesnot want to challenge the search but he wants to challenge the consequences of such search. No substance in the argument advanced on behalf of the assessee that there is no proper search in this matter by initiating the proceedings u/s 132(1) and, therefore, the initiation of proceedings under section 153A against the assessee is bad under law. Stretching the logic to the extent of leading to absurd inferences or attributing redundancy to the wisdom of legislature is not permissible. It is something different to argue that nothing incriminating was found during the search and, therefore, it is not open for the AO to make any addition qua the assessee. We, therefore, reject the first contention of the assessee. Assessment Years 2010-11 - Except jewellery, no material much less incriminating material was found during the search that took place on 16/1/2013. It is, therefore, clear that after the search, Ld. AO sought to reopen the concluded assessment for the Assessment years 2010-11 and 2011-12. In view of the decision of the Hon ble judicial High Court in the cases of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT ; Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT ; and Lata Jain 2016 (5) TMI 1273 - DELHI HIGH COURT no assessment could be framed and section 153A of the Act in the absence of any incriminating material recovered during the search qua the assessee qua the assessment years. We are, therefore, of the considered opinion that the additions made for the Assessment Years 2010-11 and 2011-12 made in the absence of any incriminating material is bad under law and cannot be sustained. No notice u/s 143(2) was issued till 20.9.2014 beyond the period provided u/s 143(2) - HELD THAT - Notice u/s 143(2) issued in this case is beyond the prescribe time and the assessment made in violation of the statutory provision is without jurisdiction. On this ground, we find that the assessee succeeds. We, therefore, do not propose to dwell deeper into the merits of the case since the assessee gets the relief on the question of law of limitation.

Issues Involved:
1. Legality of search and seizure action under section 132 of the Income Tax Act.
2. Legality of additions made under section 153A in the absence of incriminating material.
3. Validity of the assessment for the Assessment Year 2012-13.
4. Validity of the assessment for the Assessment Year 2013-14 due to non-issuance of notice under section 143(2) within the prescribed period.

Detailed Analysis:

1. Legality of search and seizure action under section 132 of the Income Tax Act:

The assessee contended that the search and seizure action under section 132 was conducted on the Vatika group, and merely restraining the operation of lockers held by the assessee does not amount to a search initiated against the assessee under section 132(1). The Tribunal, however, found that the search was valid as the lockers were in the name of the assessee and the search was conducted in the presence of the assessee. The Tribunal rejected the contention that the search was not properly initiated under section 132(1).

2. Legality of additions made under section 153A in the absence of incriminating material:

For Assessment Years 2010-11 and 2011-12, the Tribunal noted that the returns were not scrutinized as no notice under section 143(2) was issued, and no incriminating material was found during the search, except for jewellery which was duly explained. Citing the decisions in CIT vs. Kabul Chawla, Meeta Gutgutia, and Lata Jain, the Tribunal held that no additions could be made under section 153A in the absence of incriminating material. Therefore, the additions for these years were deemed unsustainable and were deleted.

3. Validity of the assessment for the Assessment Year 2012-13:

The Tribunal observed that the due date for issuance of notice under section 143(2) for AY 2012-13 was 30/9/2013, and since the search took place on 16/1/2013, the assessment for AY 2012-13 was not concluded. The Tribunal upheld the AO's action of proceeding with the assessment without issuing notice under section 143(2), as per the decision in Ashok Chadda vs. ITO. The Tribunal also upheld the additions made for AY 2012-13 due to the assessee's failure to substantiate the claims regarding rental income and unexplained receipts.

4. Validity of the assessment for the Assessment Year 2013-14 due to non-issuance of notice under section 143(2) within the prescribed period:

The Tribunal found that the notice under section 143(2) was issued on 29/10/2014, beyond the due date of 30/9/2014. Citing the decisions in Harsingar Gutkha (P) Ltd. vs. CIT and M/s Pai Vaibhav Hotels P. Ltd. vs. CIT, the Tribunal held that the service of notice within the period provided under section 143(2) is mandatory, and any assessment made in violation of this provision is without jurisdiction. Consequently, the assessment for AY 2013-14 was deemed invalid.

Conclusion:

The Tribunal allowed the appeals for Assessment Years 2010-11, 2011-12, and 2013-14, and dismissed the appeal for Assessment Year 2012-13. The judgments were pronounced in the open court on 28th March 2019.

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