2022 (12) TMI 675 - AT - Income Tax

Assessment u/s 153A - absence of any incriminating material, no addition can be made in the assessment proceedings u/s 153A r.w.s.143(3) - whether, in the absence of any incriminating material found during the course of the search operations, any addition can be made in an assessment u/s 143(3) read with Section 153A? - HELD THAT - As in the case of CIT vs. Thana Electricity Supply Ltd. 1993 (4) TMI 37 - BOMBAY HIGH COURT to the effect The decision of one High Court is neither binding precedent for another High Court nor for the Courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect . Unlike the decisions of the Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of the Hon'ble non-jurisdictional High Court are followed by the lower authorities, only in the absence of benefit of guidance by the Hon ble jurisdictional High Court on that issue, on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course, and that too is limited only on the issues on which there is no guidance of the Hon ble jurisdictional High Court. In the present case, we have the benefit of guidance on the subject by the Hon ble jurisdictional High Court. There is thus no occasion for us to consider the judgments of the Hon ble non-jurisdictional High Courts. In view of these discussions, the decisions of the Hon ble non-jurisdictional High Court have no relevance in the present context. It is also elementary in law that the mere pendency of the appeal, against a binding judicial precedent, in a higher judicial forum does not dilute, curtail or otherwise narrow down its binding nature. As long as the binding judicial precedent holds good in law, as it does unless it is upturned or reversed by a higher judicial forum, it binds the lower judicial forums. As also bearing in mind the entirety of the case, we uphold the plea of the assessee, and respectfully following the coordinate bench in the case of LUXORA REALTORS PVT. LTD. 2022 (2) TMI 866 - ITAT MUMBAI as also Hon ble jurisdictional High Court s judgments in the cases of Continental Warehousing and All Cargo Global Logistics 2015 (5) TMI 656 - BOMBAY HIGH COURT hold that the impugned additions, in respect of share capital subscriptions from the two Mauritius based entities, namely Access Investment India and Aanya Properties (2) Limited must be deleted for this short reason alone. We, therefore, delete the impugned additions. The assessee gets the relief accordingly.

Summary

Issues Involved:
1. Whether any addition can be made in an assessment under section 143(3) read with Section 153A in the absence of any incriminating material found during the course of search operations.

Issue-wise Detailed Analysis:

1. Absence of Incriminating Material for Addition under Section 153A:
The primary issue in this appeal is whether, in the absence of any incriminating material found during the search operations, any addition can be made in an assessment under section 143(3) read with Section 153A. The assessee, a company engaged in construction and development, was subjected to search operations by the income tax department, leading to a fresh return filing under section 153A. The Assessing Officer (AO) required the assessee to furnish details supporting the credibility and genuineness of share transactions with two Mauritius-based entities. Despite the assessee providing necessary details, the AO added receipts from these entities as unexplained credit under section 68, citing similar additions in the case of a sister concern, Luxora Realtors Pvt Ltd.

2. Jurisdictional High Court's Binding Precedent:
The learned counsel for the assessee argued that the issue is covered by a coordinate bench decision in the case of Luxora Realtors Pvt Ltd, where similar facts were involved. The CIT(A) had previously allowed the appeal on the ground that no incriminating material was found during the search, which was upheld by the ITAT. The revenue's appeal against this decision was based on the argument that under section 153A or 153C, the AO can make additions on any issue, irrespective of whether incriminating material was found during the search.

3. Conflicting Decisions of Non-Jurisdictional High Courts:
The revenue relied on several non-jurisdictional High Court decisions, such as CIT v. Raj Kumar Arora (Allahabad), E.N. Gopakumar v. CIT (Kerala), and others, which supported the view that additions can be made even in the absence of incriminating material. However, the jurisdictional Bombay High Court's decision in CIT v. Continental Warehousing & All Cargo Global Logistics, which favored the assessee, was binding. The ITAT noted that while non-jurisdictional High Court decisions have persuasive value, they do not override the binding precedent set by the jurisdictional High Court.

4. Legal Precedent and Binding Nature:
The ITAT emphasized that the binding nature of the jurisdictional High Court's decision remains intact unless overturned by a higher judicial forum. The mere pendency of an appeal against a binding judicial precedent does not dilute its binding nature. The ITAT, therefore, upheld the assessee's plea, following the jurisdictional High Court's judgments in Continental Warehousing and All Cargo Global Logistics, and deleted the impugned additions.

Conclusion:
The appeal was allowed on the ground that no incriminating material was found during the search operations, and therefore, no additions could be made under section 153A read with section 143(3). The ITAT did not find it necessary to deal with the merits of the additions, as the jurisdictional issue was decisive. The decision was pronounced in open court on October 21, 2022.