2024 (11) TMI 1376 - AT - Income Tax

Addition u/s 153A - whether no incriminating document/material found during the course of search? - addition u/s 56(2)(viii)(c) - HELD THAT - We find that the factual matrix of the instant case shows that the only seized document referred to in the assessment order by the AO at Para 3 of the assessment order is the list of shareholders of M/s Confident Distributors Pvt. Ltd, which included the assessee. CIT(A) correctly held that the document is available in public domain and hence cannot be categorized as incriminating document. Addition is made u/s 56(2)(viii)(c) on account of difference in the face value of fresh issue of shares by the company and book value of shares. We find that there is no whisper, in the assessment order, of any incriminating documents/records or any other evidence found or seized during the course of search proceedings which prompted such addition made in the case of the assessee. Section 56(2)(viii) of the Act is a deeming provision and the issue in this case under consideration is the pricing of the shares without any reference to any incriminating material found during the search. Further, the existence, identity and genuineness of the transaction has not been doubted by the AO. We also note that the assessee had filed return of income originally u/s 139 of the Act on 29.09.2012 which was processed u/s 143(1) of the Act. At the time of search action on 29.12.2015, no assessment/reassessment proceedings were pending in the case of assessee. The impugned AY is thus an unabated assessment AY and, therefore, the ratio laid down in the case of Abhisar Buildwell 2023 (4) TMI 1056 - SUPREME COURT squarely apply wherein it has been held that assessment u/s 153A of the Act can be framed only on the basis of incriminating material found at the time of search. The issue of addition in an unabated assessment year and the role of incriminating material has been finally settled by the decision of case of Abhisar Buildwell supra wherein held once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. As the addition made in the case of the assessee in the instant year is devoid of any incriminating materials, we direct the AO to delete the impugned addition. Decided in favour of assessee.

Summary

Issues:
Revenue's appeal against deletion of addition made under section 153A of the Income-tax Act, 1961 due to lack of incriminating material found during search.

Analysis:
The Revenue appealed against the deletion of an addition of Rs. 6,87,75,000/- made under section 153A of the Income-tax Act, 1961. The key issue was the absence of incriminating documents/material found during the search. The search and seizure operation under section 132 of the Act was conducted on the residential and office premises of the assessee and the Mapsko Group, leading to the addition based on the alleged colorable transaction involving shares of M/s Confident Distributors Pvt Ltd. The Assessing Officer added the amount to the assessee's income under section 56(2)(viii)(c) without any reference to incriminating material found during the search.

The assessee challenged the addition before the ld. CIT(A) citing the lack of incriminating material as per the decision in Kabul Chawla case. The ld. CIT(A) allowed the appeal, emphasizing the absence of incriminating material referred to by the Assessing Officer. During the ITAT proceedings, the Assessing Officer's findings were supported by the ld. DR, while the assessee's counsel relied on the Supreme Court's decision in Abhisar Buildwell.

The ITAT analyzed the factual matrix and documents on record, noting that the only seized document mentioned in the assessment order was publicly available and not incriminating. The addition under section 56(2)(viii)(c) lacked any reference to incriminating material, and the genuineness of the transaction was not questioned by the AO. It was highlighted that the assessment year was unabated, and the principles laid down in Abhisar Buildwell case regarding the necessity of incriminating material for section 153A assessments were applicable.

The ITAT referred to the Supreme Court's decision in Abhisar Buildwell, which clarified the jurisdiction of the AO in cases of search and seizure operations, emphasizing the requirement of incriminating material for additions in unabated assessments. The ITAT dismissed the Revenue's appeal, directing the deletion of the impugned addition due to the absence of incriminating material. The judgment aligned with the principles established in Abhisar Buildwell, emphasizing the importance of incriminating material for additions in unabated assessment years.