2017 (4) TMI 1247 - AT - Income Tax

Tribunal rules AO lacked jurisdiction for additions under Income Tax Act

The Tribunal held that the Assessing Officer (AO) had no jurisdiction to make additions under section 153A read with section 143(3) of the Income Tax Act ... Assessment u/s 153A - searches carried out under section 132 of the Act or requisition of books and other documents made under section 132A - no incriminating material found as a result of search - Held that:- The issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee’s return of income being accepted prior to the date of search and no notice having been issued u/s 143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/s 153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed. Issues Involved:1. Jurisdiction of the Assessing Officer (AO) to make additions under section 153A read with section 143(3) of the Income Tax Act, 1961.2. Validity of additions made in absence of incriminating documents found during the search.Issue-wise Detailed Analysis:1. Jurisdiction of the AO to Make Additions under Section 153A/143(3):The primary issue raised by the assessee was regarding the jurisdiction of the AO to make additions in assessments completed under section 153A read with section 143(3) of the Income Tax Act, 1961, particularly when no incriminating documents were found during the search operation under section 132 of the Act. The assessee contended that the AO had no jurisdiction to make such additions as the assessments for the relevant assessment years had already been concluded prior to the date of search, and no incriminating material was found during the search to justify the additions.The Tribunal noted that the assessee had filed returns for the assessment years 2006-07 and 2007-08, which were not processed under section 143(1) and no notices were issued under section 143(2) within the prescribed period. Therefore, the assessments were deemed to have been concluded. The Tribunal referred to the decision in the case of Shri Bishwanath Garodia vs. DCIT, where it was held that the scope of assessment under section 153A is limited to reassessing the income based on incriminating material found during the search. The Tribunal concluded that the AO had no jurisdiction to make additions not based on material found during the search when the assessments had already been concluded.2. Validity of Additions Made in Absence of Incriminating Documents:The Tribunal observed that during the search conducted on the assessee's premises, no incriminating documents or undisclosed materials were found. The AO had made additions based on information received post-search regarding a bank account in HSBC, Geneva, Switzerland, which the assessee denied owning. The Tribunal emphasized that section 153A does not authorize making a de novo assessment and is restricted to assessing income based on incriminating material found during the search.The Tribunal referred to several judicial pronouncements, including the decisions of the Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla and the Special Bench of ITAT in the case of All Cargo Global Logistics, which held that in the absence of incriminating material, the completed assessments cannot be disturbed. The Tribunal concluded that since no incriminating material was found during the search, the additions made by the AO were beyond the scope of section 153A and thus unsustainable.The Tribunal also distinguished the decisions relied upon by the Departmental Representative, including the case of Canara Housing Development Company, and followed the decisions of the Hon’ble Bombay High Court and the Hon’ble Delhi High Court, which were in favor of the assessee.Conclusion:The Tribunal held that the AO had no jurisdiction to make additions in the assessments under section 153A as the assessments for the relevant years had already been concluded prior to the search and no incriminating material was found during the search. Consequently, the additions made by the AO were deleted, and the appeals of the assessee were allowed. The Tribunal did not consider the other grounds of appeal on merits in view of its conclusion on the jurisdictional issue.