2024 (1) TMI 750 - AT - Income Tax

Validity of assessment u/s 153A - mandation of having incriminating material unearthed as a result of search - whether Revenue is entitled to interfere with unabated assessment which stood concluded either u/s 143(1) or u/s 143(3) and not pending at the time of search in the absence of any incriminating material unearthed as a result of search in the case of assessee? - HELD THAT - There is a total absence of reference to any incriminating material which may have any bearing to the impugned additions/disallowances except some statement of witness adverse to assessee in an all together different search proceedings. As decided in ANAND KUMAR JAIN (HUF) , SATISH DEV JAIN, SAJAN KUMAR JAIN, 2021 (3) TMI 8 - DELHI HIGH COURT has observed in identical fact it is manifest that additions/disallowances have been made without reference to any specific incriminating material/document found as a result of search and seizure action under section 132 of the Act and such additions are solely based on deposition made by a witness against the assessee in the course of search in that case. Besides, the integrity of confession obtained is unknown. No cross examination of the witness was provided to the assessee either and consequently, such statement is unworthy of reliance. Guided by the principles laid down in Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT and Ananad Kumar Jain (HUF) 2021 (3) TMI 8 - DELHI HIGH COURT we find force in the legal plea raised on behalf of the assessee. Hence, in the absence of any incriminating material in an unabated assessment additions/disallowances made by AO in all captioned appeals requires to be quashed. Decided in favour of assesee.

Summary

Issues Involved:
The judgment involves issues related to the jurisdiction of the Assessing Officer under section 153A of the Income Tax Act, 1961, and the legitimacy of additions/disallowances made under this section based on incriminating material found during a search and seizure operation.

Summary of the Judgment:
Issue 1: Jurisdiction under section 153A of the Act
The appeals arose from assessment orders passed by the Assessing Officer under section 153A/143(3) of the Income Tax Act, 1961. The assessee challenged the jurisdiction of the Assessing Officer under section 153A towards the additions/disallowances made. The Tribunal examined the preliminary objections raised by the assessee regarding the legitimacy of these additions/disallowances made under section 153A.

Issue 2: Legitimacy of Additions/Disallowances
A search and seizure operation was conducted, and assessments were carried out under section 153A read with Section 143(3) of the Act, resulting in certain additions/disallowances. The assessee argued that the additions were made solely based on a statement recorded under section 132(4) of the Act of a third party, which did not have any connection with incriminating material found during the search. The assessee contended that the assessments were concluded prior to the search and stood unabated, making it impermissible for the Assessing Officer to invoke authority under section 153A to make routine examinations without any link to incriminating material.

Issue 3: Legal Interpretation and Precedents
The Revenue argued that the Assessing Officer was entitled to rely on incriminating statements recorded during a parallel search under section 153A. The Tribunal analyzed the legal contentions raised by both parties and referred to relevant case laws, including the judgment in Abhisar Buildwell (P.) Ltd. The Tribunal concluded that in the absence of incriminating material in the unabated assessments, the additions/disallowances made by the Assessing Officer required to be quashed.

Conclusion:
Based on the legal principles established in relevant case laws, the Tribunal allowed all the appeals of the assessee, ruling in favor of quashing the additions/disallowances made under section 153A due to the lack of incriminating material found during the search operation.