2019 (6) TMI 1458 - AT - Income Tax

Tribunal rules against AO's jurisdiction for additions under section 153A & 68, citing lack of incriminating evidence

The tribunal held that the Assessing Officer (AO) lacked jurisdiction to make additions under section 153A for concluded assessments without incriminating ... Assessment u/s 153A - unabated assessments, where no incriminating evidences were found during the search - HELD THAT:- As during the original assessment U/s. 143(3), the information was there with the Assessing Officer regarding issue of share capital and share premium wherein the Assessing Officer issued notices U/s. 133(6) of the Act and all the investors have responded and therefore he did not make an addition. The search party did not find any new material except the share capital and share premium which had already been assessed by the Assessing Officer U/s. 143(3) of the Act, therefore in unabated assessment proceedings, in the assessee's case, there is no any whisper of incriminating material and therefore the addition should not be made. It is settled position of law that the Assessing Officer had no jurisdiction U/s. 153A of the Act to reopen the concluded assessment when the search and seizure did not disclose any incriminating material. Since the assessee's case under consideration is squarely covered by 'M/s. A ONE Infra Projects Pvt. Ltd., [2019 (5) TMI 850 - ITAT KOLKATA] and the Ld. DR for the revenue has failed to controvert the findings of the order of the Co-ordinate Bench of IT AT, Kolkata (supra), therefore respectfully following the judgment of the Co-ordinate Bench, we note that without any incriminating material addition should not be made in case of concluded (unabated) assessments. - Decided in favour of assessee. Issues Involved:1. Legality of assessment under section 153A in case of unabated assessments without incriminating evidence.2. Non-compliance with binding precedents regarding additions in unabated assessments.3. Requirement to explain the source of funds prior to the amendment of section 68.4. Validity of additions under section 68 based on conjectures and surmises.Detailed Analysis:Issue 1: Legality of assessment under section 153A in case of unabated assessments without incriminating evidenceThe tribunal addressed whether additions could be made under section 153A in respect of concluded proceedings without incriminating materials found during the search. The assessee argued that no incriminating evidence was found during the search, and thus, the assessment should not be disturbed. The tribunal noted the statutory requirement that for assessments not pending on the date of the search, additions could only be made based on incriminating material found during the search. Since the assessments for the years 2011-12 and 2012-13 were concluded, and no incriminating material was found, the tribunal held that the Assessing Officer (AO) had no jurisdiction to make additions under section 153A.Issue 2: Non-compliance with binding precedents regarding additions in unabated assessmentsThe assessee contended that the CIT(A) failed to follow binding precedents from the Supreme Court, Jurisdictional High Courts, and the Kolkata Tribunal, which held that additions in unabated assessments should not be made without incriminating material. The tribunal reiterated that the AO could not disturb concluded assessments unless incriminating material was found during the search. The tribunal referred to the case of 'M/s. A ONE Infra Projects Pvt. Ltd.' where it was held that additions should not be made in the absence of incriminating material.Issue 3: Requirement to explain the source of funds prior to the amendment of section 68The assessee argued that prior to the amendment of section 68 on 01/04/2013, there was no requirement to explain the source of funds. The tribunal did not explicitly address this issue in detail but focused on the lack of incriminating material to justify the additions under section 153A.Issue 4: Validity of additions under section 68 based on conjectures and surmisesThe AO made additions under section 68 for unexplained share application money, asserting that the assessee failed to prove the identity, genuineness, and creditworthiness of the share subscribers. The tribunal noted that the AO relied on the disclosed bank statements and not on any new incriminating material found during the search. The tribunal held that the disclosed bank statements could not be treated as incriminating material, and thus, the addition under section 68 was not justified. The tribunal referred to various judgments, including 'PCIT vs. Salasar Stock Broking Ltd.' and 'PCIT vs. Kurele Paper Mills Pvt. Ltd.', which supported the view that additions should not be made without incriminating material.Conclusion:The tribunal concluded that the AO had no jurisdiction under section 153A to make additions for the assessment years 2011-12 and 2012-13 in the absence of incriminating material found during the search. The tribunal allowed the appeals of the assessee and deleted the additions made by the AO.