2020 (10) TMI 87 - AT - Income Tax

Assessment u/s 153A - no incriminating documents or assets were found during the search - Addition unexplained cash deposit u/s 68 - HELD THAT - Since in this case assessment was already completed prior to the date of search as not disputed by the authorities below and no material was found during the course of search, therefore, the issue is covered in favour of the assessee by the above Judgments MEETA GUTGUTIA PROP. M/S. FERNS N PETALS 2017 (5) TMI 1224 - DELHI HIGH COURT . No preference can be given to the Judgments of Hon ble Kerala High Court and Hon ble Allahabad High court as against the Judgments of Hon ble Jurisdictional Delhi High Court. In view of the above, the Departmental appeal stands dismissed.

Summary

Issues:
1. Interpretation of section 153A of the Income Tax Act regarding the conditionality of incriminating documents or assets for assessment.
2. Deletion of addition made on account of unexplained cash deposit under section 68 without incriminating material found during search.

Analysis:
1. The first issue in this case revolved around the interpretation of section 153A of the Income Tax Act concerning the necessity of incriminating documents or assets for assessment. The Revenue contended that the Assessing Officer could proceed to frame assessment under section 153A without the condition of incriminating material. However, the Ld. CIT(A) held that the assessment under section 153A can only be based on incriminating material found during the search. The Ld. CIT(A) referred to the judgment in the case of CIT vs. Kabul Chawla, emphasizing that completed assessments can only be interfered with based on such incriminating material. The Ld. CIT(A) deleted the addition of ?3,59,45,000 made under section 68 as no incriminating material was found during the search, thereby ruling in favor of the Assessee.

2. The second issue involved the deletion of the addition of ?3,59,45,000 made on account of unexplained cash deposit under section 68 without any incriminating material being found during the search. The Assessee argued that the addition was arbitrary as it was based on cash deposits made into the bank account without any seized incriminating material. The Ld. CIT(A) agreed with the Assessee, citing the judgment in the case of CIT vs. Kabul Chawla, which emphasized the necessity of incriminating material for making additions under section 153A. The Ld. CIT(A) noted that the Assessing Officer made the addition without issuing any show cause notice or providing an opportunity to explain, leading to the deletion of the addition. The Departmental Representative relied on judgments from Kerala High Court and Allahabad High Court, but the Tribunal dismissed the appeal, citing the precedence of judgments from the Delhi High Court, which favored the Assessee.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition, emphasizing the requirement of incriminating material for assessments under section 153A and highlighting the precedence set by the Delhi High Court judgments. The appeal of the Revenue was dismissed, affirming the decision in favor of the Assessee.