2021 (2) TMI 654 - AT - Income Tax

Assessment u/s 153A - incriminating material found and seized during the course of conduct of search or not? - Addition relating to agricultural income on lease hold lands - HELD THAT - We find that no documents relating to agriculture land taken on lease were found during the course of search, therefore, no addition should have been made in absence of any incriminating material found during the course of search relating to agriculture income. In search assessment, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded assets / material found or any incriminating documents found as representing undisclosed income earned. Thus, it is evident that the A.O has not made any specific reference to the incriminating material found during the search in respect of additions made by him. Under these facts non reference to the incriminating material by the A.O is contrary to the settled position of law. Thus, the assessments, so framed, are bad in law. Therefore, we quash the assessment orders under consideration - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment orders under section 153A read with section 143(3) without reference to any incriminating material found during the search.
2. Admissibility of additional grounds raised by the assessee regarding the jurisdiction of the assessing officer.
3. Validity of additions made concerning agricultural income on leasehold lands.

Detailed Analysis:

1. Legality of the Assessment Orders under Section 153A read with Section 143(3):
The primary issue raised by the assessee was the legality of the assessment orders passed under section 153A read with section 143(3) of the Income Tax Act, without reference to any incriminating material found during the search. The Tribunal noted that the Assessing Officer (AO) made additions relating to agricultural income on leasehold lands without referring to any specific incriminating material found during the search. The Tribunal referenced the judgment of the Hon'ble jurisdictional High Court in the case of Nandlal Sachdeva vs. CIT, which emphasized that legal issues could be raised at any stage and that the legality of proceedings undertaken without proper notice is a purely legal issue. The Tribunal concluded that the AO's actions were not justifiable and were contrary to judicial pronouncements, thus quashing the assessment orders.

2. Admissibility of Additional Grounds Raised by the Assessee:
The assessee raised an additional ground during the appellate proceedings, challenging the jurisdiction of the AO in making the additions without reference to any incriminating material found during the search. The Tribunal admitted this additional ground for adjudication, citing the wide powers vested in the Tribunal under section 254 of the Income Tax Act. The Tribunal also referenced several judicial precedents, including the judgments of the Hon'ble M.P. High Court in DCIT vs. Torquoise Investment & Finance Ltd. and the apex court in National Thermal Power Co. Ltd. vs. CIT, which supported the admissibility of new legal grounds if the relevant facts are already on record. The Tribunal emphasized that the legal issue raised by the assessee was purely legal and deserved to be accepted.

3. Validity of Additions Made Concerning Agricultural Income on Leasehold Lands:
The Tribunal examined whether the additions made by the AO concerning agricultural income on leasehold lands were valid in the absence of any incriminating material found during the search. The Tribunal noted that no documents relating to the agricultural land taken on lease were found during the search, and thus, no addition should have been made. The Tribunal referenced its own earlier decision in IT(SS)A No.126 to 128/Ind/2016, where it was held that additions made without reference to incriminating material found during the search are contrary to the settled position of law. The Tribunal concluded that the assessments were bad in law and quashed the assessment orders.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, quashing the assessment orders under consideration. The Tribunal emphasized that the AO's actions were not supported by any incriminating material found during the search and were contrary to judicial pronouncements. The additional ground raised by the assessee was admitted for adjudication, and the Tribunal concluded that the assessments were bad in law. The order was pronounced in the open court on 16.02.2021.