2024 (12) TMI 1162 - AT - Income Tax

Validity of Assessment u/s 153A - based on incriminating material or no incriminating material in the case of an unabated assessment - primary contention is that incriminating material is necessary for framing such an assessment - HELD THAT - Admitted facts are that the nature of additions made by the Assessing Officer (i) unsecured loans, unsecured cash credits, expenditure noted in the profit and loss account, and advances from customers, i.e, suspense account, which is part of account of the assessee, are disclosed in the financials of the assessee. It means that the addition is based on the accounts of the assessee filed in the financial statements along with return of income originally. It means that there is no incriminating material or seized material pertaining to these four assessment years, and the addition is based on the financials filed by the assessee along with the original return. An assessment u/s 153A of the Act is linked with the search and requisition made u/s 132 and 132A of the Act, and the objects of Section 153A is to bring under tax the undisclosed income, which is found during the course of search or pursuant to search or requisition. Hon ble Supreme Court in Abhisar Buildwell 2023 (4) TMI 1056 - SUPREME COURT held that only in a case where the undisclosed income was found on the basis of incriminating material, the AO would frame the jurisdiction to assess or reassess the total income for the entire six block assessment year period in the case of unabated assessment. As there is no incriminating materials in these four appeals, we quash the assessment framed u/s 153A of the Act for all these four years and also set aside the orders of CIT(A). Hence, these four appeals of the assessee are allowed for this jurisdictional issue.

Summary

Issues Involved:

1. Assumption of jurisdiction by the Assessing Officer (AO) under Section 153A of the Income Tax Act in the absence of incriminating material.
2. The mechanical nature of approval under Section 153D for framing assessments.

Detailed Analysis:

1. Assumption of Jurisdiction under Section 153A:

The primary issue in these appeals was whether the Assessing Officer (AO) could assume jurisdiction under Section 153A of the Income Tax Act to make assessments in the absence of incriminating material found during a search conducted under Section 132. The assessee contended that the assessments for the years 2010-11 to 2013-14 were framed without any incriminating material, making such assessments unsustainable. The Tribunal noted that the issue of framing assessments under Section 153A based on incriminating or non-incriminating material is a purely legal issue and goes to the root of the matter. The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell, which held that in the absence of incriminating material, the AO cannot assess or reassess the income for completed or unabated assessments. The Tribunal found that the additions made by the AO were based on the financials filed with the original returns, and no incriminating material was found during the search. Consequently, the Tribunal quashed the assessments framed under Section 153A for all four years, as they were not based on any incriminating material.

2. Mechanical Approval under Section 153D:

The second issue raised was regarding the approval process under Section 153D, which the assessee argued was mechanical in nature. Although the Tribunal acknowledged the issue, it refrained from adjudicating on this point because the assessments under Section 153A had already been quashed due to the absence of incriminating material. The Tribunal noted that since the primary jurisdictional issue was resolved in favor of the assessee, the question of mechanical approval under Section 153D became academic and did not require further adjudication.

Conclusion:

The Tribunal allowed all four appeals, quashing the assessments under Section 153A due to the absence of incriminating material. The issue regarding the mechanical nature of approval under Section 153D was left open and dismissed as academic. The decision underscores the necessity of incriminating material for assessments under Section 153A in cases of unabated assessments and highlights the importance of non-mechanical approval processes under Section 153D.