2023 (7) TMI 167 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - incriminating material found or not? - HELD THAT - As original return was filed by the assessee on 30.09.2013. The time limit to scrutinize this return was expired much before the search, i.e. 17.09.2015. Department was unable to lay its hand on any incriminating material. AO is examining the loans shown by the assessee in the books of account. AO has observed that during the accounting year, assessee has taken unsecured loans from three companies. This part is already available in the regular books and must have been reflected in the return. If Department wish to undertake an exercise for examining, then, it ought to have scrutinised the return. AO has not made reference of any document seized during the course of search. He has examined the Bank accounts and already available amounts in the accounts. The only reference to the seized material made by the AO is that during the course of search and seizure action, Inspector of the Department was deputed to verify the existence of the above. This is only a passing reference in the assessment order the weightage to this observation could be made if AO has power to tinker with the completed assessment. An inquiry, which could be made in the regular assessment, cannot be construed as seized material for just bringing an item in the scope of section 153A - Case followed Abhisar Buildwell Pvt. Limited 2023 (4) TMI 1056 - SUPREME COURT - Decided against revenue.

Summary

Issues Involved:

1. Whether an addition of Rs. 2,05,00,000/- can be made in an assessment order passed under section 153A without unearthing any incriminating material during the course of search.

Summary:

Issue 1: Addition under Section 153A Without Incriminating Material

The core issue in this case revolves around whether an addition of Rs. 2,05,00,000/- can be made in an assessment order passed under section 153A without unearthing any incriminating material during the course of search. The assessee, a Real Estate Developer, was subject to a search under section 132 of the Income Tax Act on 17.09.2015, and a notice under section 153A was issued. The assessee filed its return declaring total income at Rs. 19,82,260/-. The Assessing Officer observed that the assessee had taken unsecured loans from three Kolkata-based companies, which were alleged to be shell companies providing accommodation entries. Consequently, the Assessing Officer made additions under section 68, citing that the loans were not genuine due to lack of identity, creditworthiness, and genuineness of the transactions.

The assessee contended that no incriminating material was found during the search, and the loans were already declared in the accounts and available in the books. The assessee argued that the addition could not be justified under section 153A without incriminating material, relying on the Delhi High Court's decision in CIT vs. Kabul Chawla (380 ITR 573).

The Tribunal considered the rival contentions and reviewed authoritative judgments on the scope of section 153A. It referred to the Delhi High Court's decision in Kabul Chawla, which established that additions under section 153A should be based on evidence found during the search. The Tribunal also noted the Gujarat High Court's concurrence with this view in Pr.CIT vs. Saumya Construction. The Supreme Court in PCIT vs. Abhisar Buildwell Pvt. Limited further affirmed that no addition can be made in respect of completed assessments in the absence of incriminating material found during the search.

In this case, the original return was filed on 30.09.2013, and the time limit for scrutiny expired before the search on 17.09.2015. The Department did not find any incriminating material during the search. The Assessing Officer's examination of the loans was based on already available information in the books, not on any seized material. Therefore, the Tribunal concluded that the addition could not be justified under section 153A without incriminating material and allowed the assessee's appeal, deleting the addition.

Conclusion:

The Tribunal allowed the appeal of the assessee and deleted the addition, emphasizing that additions under section 153A require incriminating material found during the search, which was not present in this case.