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2020 (12) TMI 350 - AT - Income TaxAssessment u/s 153A - Whether incriminating material found during the course of search on the assessee's premises? - addition of bogus exempt long term capital gains on sale of shares - HELD THAT -Addition has been made based upon the search carried out at the premises of Shirish C. Shah and documents found during such search - such documents as relied upon by the Ld. AO found from the premises of Shri Shah and not from the assessee are the dumb documents and addition on such basis in the garb of Section 153A is not sustainable in the eye of law. Loose papers or statement recorded during the course of search/survey at Shri Shah as only relied upon; no reference of any single incriminating material found during the course of search at appellant s premises has been made by the Ld. AO while making addition under Section 153A of the Act. All along and all through the Ld. CIT(A) considered the relevant judgments applicable to the instant case as discussed hereinabove and rejected the decision made by the Ld. AO in treating the exempt long term capital gain as undisclosed income not sustainable under Section 153A of the Act and finally deleted the addition made by the AO based upon no incriminating documents found during the course of search at appellant s premises without any ambiguity so as to warrant interference. - Decided in favour of assessee.
Issues Involved:
1. Validity of the reassessment order under Section 153A. 2. Addition based on non-incriminating material found during search. 3. Deletion of additions related to bogus exempt long-term capital gains on sale of shares. 4. Relevance of statements and documents seized from third parties. 5. Jurisdiction and power of the Assessing Officer under Section 153A. Detailed Analysis: 1. Validity of the Reassessment Order under Section 153A: The Revenue challenged the reassessment order made under Section 153A, arguing that the Ld. CIT(A) erred in quashing the order. The Tribunal examined the statutory provision of Section 153A, which mandates the Assessing Officer (AO) to issue a notice for reassessment based on evidence found during the search. The Tribunal noted that the reassessment was not based on any incriminating material found during the search at the assessee's premises. The Tribunal upheld the Ld. CIT(A)'s decision, citing judgments from the Hon'ble Delhi High Court in the case of Commissioner of Income Tax (Central)-III vs. Kabul Chawla and the Hon'ble Gujarat High Court in CIT vs. Saumya Construction Pvt. Ltd. These judgments establish that in the absence of incriminating material, the completed assessment cannot be reassessed. 2. Addition Based on Non-Incriminating Material Found During Search: The Tribunal emphasized that the AO's power under Section 153A is contingent upon the discovery of incriminating material during the search. In this case, no such material was found at the assessee's premises. The Tribunal reiterated that additions or disallowances can only be made based on material unearthed during the search, as supported by the judgments in PCIT vs. Sunrise Finlease Pvt. Ltd. and Krishna Kumar Singhania vs. DCIT. The Tribunal concluded that the AO's reassessment in the absence of incriminating material was invalid. 3. Deletion of Additions Related to Bogus Exempt Long-Term Capital Gains on Sale of Shares: The Revenue contested the deletion of additions amounting to ?12,18,35,125 related to bogus exempt long-term capital gains on the sale of shares of Chandni Textiles & Engineering Ltd. The Tribunal found that the AO's additions were based on documents and statements from third parties, specifically from Shirish C. Shah, an accommodation entry provider. The Tribunal noted that these documents were not found at the assessee's premises and were thus considered "dumb documents." Consequently, the Tribunal upheld the Ld. CIT(A)'s decision to delete the additions, as they were not based on any incriminating material found during the search at the assessee's premises. 4. Relevance of Statements and Documents Seized from Third Parties: The Tribunal addressed the issue of reliance on statements and documents seized from third parties, such as Shirish C. Shah. It was noted that the AO did not reference any incriminating material found at the assessee's premises. The Tribunal cited the judgment in CIT vs. Saumya Construction Pvt. Ltd., which held that in the absence of incriminating material at the assessee's premises, additions based on third-party documents are not sustainable. The Tribunal concluded that the AO's reliance on third-party documents was insufficient to justify the reassessment. 5. Jurisdiction and Power of the Assessing Officer under Section 153A: The Tribunal examined the jurisdiction and power of the AO under Section 153A, emphasizing that the AO can only reassess based on incriminating material found during the search. The Tribunal cited multiple judgments, including CIT vs. Saumya Construction Pvt. Ltd., to support the view that the AO's power is limited to reassessing based on material directly related to the search. The Tribunal found that the AO exceeded his jurisdiction by making additions without any incriminating material found at the assessee's premises. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order to quash the reassessment under Section 153A due to the absence of incriminating material found during the search at the assessee's premises. The Tribunal also dismissed the assessee's cross-objection as inconsequential. The judgments cited reinforced the principle that reassessment under Section 153A must be based on incriminating material discovered during the search, and any additions based on third-party documents or subsequent material are invalid.
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