2015 (9) TMI 188 - AT - Income Tax

Tribunal rules addition invalid without incriminating material under section 153A

The tribunal allowed the appeal, ruling that additions could only be made based on incriminating material found during search operations under section ... Assessment under section 153A - additions or disallowances other than on the basis of incriminating material found during search operations challenged by assessee - Held that:- No addition can be made for any assessment year u/s 153A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search. See Sanjay Aggarwal vs. DCIT [2014 (7) TMI 254 - ITAT DELHI] - Decided in favour of assessee. Issues:Challenge to correctness of CIT(A)'s order in assessment under section 143(3) r.w.s. 153A(1)(b) for Assessment Year 2006-07.Analysis:The appellant challenged the correctness of the CIT(A)'s order regarding the assessment under section 143(3) r.w.s. 153A(1)(b) for the Assessment Year 2006-07. The main contention was whether additions or disallowances could be made without any incriminating material found during search operations. The appellant argued that if this plea was upheld, all other issues raised in the appeal would be rendered academic. The search and seizure operation on the assessee led to the issuance of a notice under section 153A, with the assessee declaring a total income. However, the assessment order did not mention any incriminating material found during the search. The only addition made was not based on incriminating material but on statements by individuals. The CIT(A) confirmed the action of the Assessing Officer, stating that the notice issued under section 153A was valid, and the assessment could not be deemed illegal due to the absence of incriminating material. The appellant further appealed.The appellant's grievance was not against the assessment under section 153A but against making additions without incriminating material found during the search operations. A coordinate bench of the tribunal approved the plea that additions could only be made based on incriminating material found during the search. The tribunal referred to a judgment where it was held that the Assessing Officer could reassess total income considering undisclosed income unearthed during the search. The tribunal emphasized that additions for completed assessments should only be based on incriminating material found during the search. In the absence of such material, the total income should be computed based on the originally determined income. The tribunal held that no addition could be made for any assessment year under section 153A if incriminating material was not found during the search. Consequently, the addition made in the present case, not supported by incriminating material, was deleted.The tribunal also noted that the impugned addition was challenged on merits, citing a jurisdictional High Court's judgment and lack of opportunity for cross-examination. However, these issues were deemed academic due to the deletion of the addition based on the absence of incriminating material. The appeal was allowed based on the above findings, and the decision was pronounced on August 21, 2015.