2023 (11) TMI 944 - HC - Income Tax

Assessment u/s 153A - Difference in scope of proceedings for abated assessment and for a completed assessment - Jurisdiction u/s 153A to make additions in case of completed assessment if no incriminating material found during search - unexplained share application money received in the books of the assessee and being unexplained share money received had been added back to the returned income of the assessee - HELD THAT - Keeping in view the fact that no incriminating material had been found during the search, the Revenue had been precluded from considering any other material derived from any other source. See Abhisar Buildwell P. Ltd 2023 (4) TMI 1056 - SUPREME COURT as held if no assessment proceeding is pending on the date of initiation of the search, the AO may consider only the incriminating material found during the search and is precluded from considering any other material derived from any other source. As decided in Kabul Chawla case 2015 (9) TMI 80 - DELHI HIGH COURT no addition can be made in respect of completed assessment in absence of any incriminating material Assessing Officer gets jurisdiction to assess or re-assess the total income in respect of each assessment year falling within six assessment years. As per the proviso s, if any assessment or re-assessment is pending on the date of initiation of the search for making requisition under Section 132A of the Act, as the case may be, shall abate. It was thus held that the intention of the legislature was that in the case of a search, only the pending assessment/ re-assessment proceedings shall abate and the Assessing Officer could assess or re-assess for the entire set of 6 years for the period/block assessment period until any incriminating material was found. The intention could not be given to reopen the completed unabated assessment. Thus we are of the considered opinion that no question of law arises in the present set of appeals in view of the fact that the same has been settled by the Apex Court and a factual finding was recorded which has not been rebutted by counsel for the appellant . ITAT was right in holding that no addition can be made u/s 153A in respect of completed assessment if no incriminating material is found during search.

Summary

Issues involved:
The judgment involves the interpretation of Section 153A of the Income Tax Act, 1961 and the jurisdiction of the Assessing Officer in making assessments based on incriminating material found during a search action. The key issues include the difference in scope of proceedings under section 153A for abated and completed assessments, the authority of the Assessing Officer to make additions under section 153A in the absence of incriminating material, and the restriction on the Assessing Officer's powers to confine assessments only to incriminating material found during a search.

Issue 1: Scope of Proceedings under Section 153A
The Tribunal concluded that no additions could be made under section 153A for completed assessments if no incriminating material was found during the search. The judgment of the Division Bench in Commissioner of Income Tax Vs. Kabul Chawla was cited to support this conclusion, emphasizing that in the absence of incriminating material during a search action when no pending assessment abated, additions cannot be made. The Tribunal referred to other relevant cases such as Smt. Dayawanti Vs. CIT and Principal Commissioner of Income Tax Central-2 New Delhi Vs. Meeta Gutgutia Prop. M/s Ferns 'N' Petals to support its decision.

Issue 2: Jurisdiction of Assessing Officer under Section 153A
The Appellate Authority decided the jurisdictional issue based on the presence of incriminating material during the search. It held that the Assessing Officer's addition of unaccounted black money into the regular books of accounts without incriminating material was not justified. The authority considered the decision of the Delhi High Court in Kabul Chawla to support its reasoning.

Issue 3: Interpretation of Section 153A
The judgment analyzed the provisions of Section 153A in detail, emphasizing that the Assessing Officer's jurisdiction is limited to assessing or reassessing total income based on incriminating material found during a search. The legislative intent was interpreted to allow assessments for a six-year period/block assessment period only if incriminating material is discovered. The judgment highlighted that in the absence of incriminating material, the Revenue's remedy lies in initiating reassessment proceedings under sections 147/148 of the Act.

Separate Judgment by Judges:
The High Court approved the views of the Delhi and Gujarat High Courts regarding the interpretation of Section 153A, stating that no additions can be made for completed assessments without incriminating material. The Apex Court's judgment in Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell P. Ltd. was referenced to support this position. Consequently, the appeals were dismissed in limine as the legal issues had been settled by higher courts and factual findings were not rebutted.