2019 (4) TMI 954 - HC - Income Tax

Assessments u/s 153A - basis of the Special Auditor s Report u/s 142(2A) - AO has not relied on incriminating documents seized/impounded during the search proceedings - HELD THAT - It is settled legal position that in case of unabated assessment u/s 153A(1)(b), unless such assessment is based upon incriminating documents seized/impounded during the course of search, no addition can be made, no infirmity can be found in the impugned order passed by the Tribunal in upholding the order passed by the Commissioner (Appeals) - No substantial question of law

Summary

Issues involved:
- Challenge to the order of the Tribunal under section 260-A of the Income Tax Act, 1961
- Deletion of addition made in assessment order under section 153A(1)(b) of the Act
- Whether unabated assessments can be made under section 153A of the Act without incriminating documents seized during search operations

Analysis:
The appeals before the Gujarat High Court arose from a common order passed by the Income Tax Appellate Tribunal concerning the deletion of additions made in assessment orders under section 153A(1)(b) of the Income Tax Act, 1961. The appellant-revenue challenged the Tribunal's order, questioning the legality of deleting the additions. The issue revolved around whether unabated assessments under section 153A of the Act could be made without the presence of incriminating documents seized during search operations. The assessment years in question were 2006-07, 2007-08, and 2008-09, with specific reference made to Tax Appeal No.1394 of 2018.

In the case under consideration, the assessee initially filed a return of income, which was subsequently revised following a search action under section 132 of the Act. The assessment under section 153A(1)(b) resulted in additions being made, which were later deleted by the Commissioner (Appeals) on the grounds that no additions could be made without incriminating material seized during the search. The Tribunal upheld this decision, leading to the revenue's appeal before the High Court.

The appellant argued that assessments under section 153A were based on a Special Auditor's report under section 142(2A) of the Act, which considered the incriminating documents seized during the search. However, upon examination, it was revealed that the Special Auditors did not rely on the seized material in their report, as the assessee requested them not to consider it for audit purposes. The High Court noted that for unabated assessments under section 153A, additions could only be made based on incriminating documents seized during the search.

The court relied on precedents and held that assessments under section 153A in cases of unabated assessments must be connected to incriminating material found during the search. Since the Assessing Officer did not rely on any incriminating material in this case, the deletions made by the Commissioner (Appeals) and upheld by the Tribunal were deemed justified. The High Court found no legal infirmity in the Tribunal's decision and dismissed the appeals, emphasizing that no substantial question of law arose for consideration.