2019 (4) TMI 1372 - AT - Income Tax

Assessment u/s 153A - absence of incriminating materials found in search - HELD THAT - In the absence of any connection with the incriminating material, the additions/disallowances in respect of concluded assessments are not permissible in law. Thus, in the absence of incriminating materials found in search, the action of the AO is contrary to the position of law judicially enumerated. Where the additions/disallowances itself are unsustainable and bad in law, the controversy cropped up in the Revenue s appeal on merits of additions/disallowances is rendered non est . Therefore, the appeal of the Revenue requires to be dismissed at the threshold as the action of the AO itself suffers from lack of jurisdiction. - Decided in favour of assessee.

Summary

Issues:
Jurisdiction usurped by Assessing Officer under s.153A of the Income Tax Act, 1961 for Assessment Years (AYs) 2008-09 & 2009-10.

Analysis:
The appeals were filed by the Revenue against the orders of the Commissioner of Income Tax(Appeals) concerning the assessment years in question. The assessee also filed cross objections alleging jurisdictional defect in the assessment order. The primary issue revolved around the jurisdiction exercised by the Assessing Officer under s.153A of the Act for additions/disallowances made in the assessment proceedings following search operations. The assessee contended that the additions/disallowances lacked a rational connection with any incriminating material found during the search. The scope of assessment under s.153A was debated, emphasizing that only undisclosed income/assets detected during search can be taxed under this provision. The Revenue's authority to make additions/disallowances unrelated to incriminating material was challenged, citing legal precedents, including the decision of the Hon'ble Gujarat High Court in a specific case. The Revenue, however, failed to counter the absence of incriminating material supporting the additions/disallowances.

The Tribunal carefully examined the arguments presented. It was established that the additions/disallowances made under s.153A must be linked to incriminating material found during the search. Assessments for the relevant years were already concluded and not pending during the search, limiting the scope of s.153A assessments. Legal precedents were cited to support the narrower spectrum of assessment under s.153A. The Tribunal referenced a specific case to highlight that additions/disallowances made without any connection to incriminating material found during search operations are not legally sustainable. Consequently, the Tribunal found the Revenue's actions lacking jurisdiction and dismissed their appeals while allowing the assessee's cross objections.

In conclusion, the judgment delved into the jurisdictional aspects of assessments under s.153A of the Income Tax Act, emphasizing the necessity for a nexus between additions/disallowances and incriminating material found during search operations. The Tribunal's decision was based on legal precedents and established principles, ultimately leading to the dismissal of the Revenue's appeals and the allowance of the assessee's cross objections.