2022 (2) TMI 874 - AT - Income Tax

Assessment u/s 153A - proof of incriminating material found in search - HELD THAT - Once the requisite time limit for issuance of scrutiny notice u/s.143(2) of the Act had expired, the assessee would be justified in entertaining a honest belief that assessment for the concerned assessment year had been completed by the Assessing Officer. Infact in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT had elaborately dealt this aspect of assessment getting completed u/s.143(1) of the Act and concluded that even for such assessment, no addition could be framed in 153A proceedings unless there is incriminating material found during the course of search relatable to such assessment year. The said decision also covers all the decisions relied upon by the ld. DR before us. Special Leave Petition (SLP) preferred by the Revenue before the Hon ble Supreme Court against the decision of the Hon ble Delhi High Court in the case of Kabul Chawlahad been dismissed by the Hon ble Apex Court - Though SLP has been granted by the Hon ble Apex Court in some of the cases referred to supra on the impugned issue of existence of incriminating material found during search for framing addition in respect of unabated assessment we find that as on date, the issue is squarely covered in favour of the assessee in Continental warehousing corporation. - Decided in favour of assessee.

Summary

Issues:
Challenge to deletion of addition made on account of unexplained investment in M/s. Global Capital Markets Ltd. in search assessment under section 153A of the Income Tax Act, 1961.

Analysis:

Issue 1: Addition of unexplained investment and commission expenditure
The appeal arose from the deletion of the addition made by the ld. CIT(A) on the basis that no incriminating material was found during the search. The assessee, deriving income from various sources, filed the return of income for A.Y. 2012-13, which was processed under section 143(1) of the Act. The ld. AO observed the sale of shares in Global Capital Markets Ltd. and categorized it as an accommodation entry, adding the sale proceeds and commission expenditure as unexplained investment. The ld. CIT(A) deleted the addition, emphasizing the lack of incriminating material during the search. The Tribunal upheld this decision, citing precedents that additions in unabated assessments require incriminating material found during the search, as per the decisions of the Jurisdictional High Court and the Delhi High Court.

Issue 2: Jurisdiction of the ld. CIT(A)
The Revenue argued that the absence of incriminating material was raised for the first time before the ld. CIT(A), questioning the jurisdiction to entertain the ground. However, the Tribunal disagreed, stating that the ld. CIT(A) has co-terminus powers with the ld. AO and can address legal issues raised at any stage of proceedings. The argument that the original assessment under section 143(1) did not constitute an assessment was dismissed, with the Tribunal highlighting that the ld. AO cannot disturb unabated assessments without incriminating material, as clarified by various court decisions.

Issue 3: Legal precedents and dismissal of appeal
The ld. DR relied on Supreme Court and High Court decisions to support the argument that the impugned additions were justified in search assessment proceedings. However, the Tribunal emphasized that completed assessments without incriminating material found during the search cannot be disturbed under section 153A. Referring to the Continental Warehousing case and the Kabul Chawla decision, the Tribunal dismissed the Revenue's appeal, confirming the order of the ld. CIT(A) on the legal issue and leaving the merits issues raised by the Revenue unaddressed, deeming them academic in nature.

In conclusion, the Tribunal upheld the deletion of the addition made on account of unexplained investment, emphasizing the necessity of incriminating material in search assessment proceedings and dismissing the Revenue's appeal.