2021 (11) TMI 1163 - AT - Income Tax

Assessment additions deleted by Tribunal for lack of incriminating material under Section 153A

The Tribunal allowed the appeals of the assessees, concluding that no addition was sustainable in the assessments framed under Section 153A for both ... Validity of assessment order passed u/s 153A - addition made on “on-money” for purchase of land - HELD THAT:- As in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] in its concluding paragraph has observed that, on the date of the search, the assessments already stood completed and the returns in these years were accepted u/s 143(1) of the Act and these acceptance of returns processed u/s 143(1) of the Act was construed by the Hon’ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon’ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. Thus no addition is sustainable in the assessments framed under Section 153A of the Income-Tax Act, in both assessment years under consideration, in both the hands of the assessees. Therefore, we allow all these appeals and delete the additions. Issues involved:1. Validity of assessment order passed under Section 153A of the Income Tax Act, 1961.2. Addition made on account of alleged payment of 'on-money' for the purchase of land.Issue-wise detailed analysis:1. Validity of assessment order passed under Section 153A of the Income Tax Act, 1961:The appellants, father and son, challenged the validity of the assessment orders passed under Section 153A of the Income Tax Act for Assessment Years 2012-13 and 2013-14. They argued that no incriminating material was found during the search conducted on 13.11.2014, and hence, the additions made by the Assessing Officer (AO) were not justified. The learned CIT(A) had previously concluded that the reassessment proceedings were pending due to a notice under Section 148 issued on 27.04.2015, which led to the abatement of proceedings and justified the assessments under Section 153A.The Tribunal noted that the appellants had filed their returns under Section 139(1) and no notices under Section 143(2) were issued within the stipulated time. The first notice under Section 148 was issued after the search, indicating that no assessment proceedings were pending at the time of the search. The Tribunal emphasized that the assessments could only be interfered with if incriminating material was found during the search, as per the position of law established by various courts, including the jurisdictional High Court of Gujarat and the Delhi High Court in CIT vs. Kabul Chawla and PCIT vs. Saumya Construction Pvt. Ltd.The Tribunal observed that the CIT(A) had acknowledged the position of law but failed to apply it correctly to the facts of the case. The Tribunal also noted that the Revenue did not provide any evidence of a notice under Section 148 issued prior to the search, despite being given ample time. Consequently, the Tribunal concluded that the assessments under Section 153A were not justified in the absence of incriminating material found during the search.2. Addition made on account of alleged payment of 'on-money' for the purchase of land:The additions were made based on loose papers impounded from Samarpan Infrastructure Pvt. Ltd. during a survey conducted on 09.01.2013, which allegedly indicated payment of 'on-money' for the purchase of land by the appellants. The Tribunal noted that the AO had relied on these documents and statements recorded under Section 131 from the vendors of the land.However, the Tribunal held that such materials found during the survey of a third party could not be used against the appellants in assessments under Section 153A. For such materials to be used, the proper procedure would be to initiate proceedings under Section 153C or 147 of the Act. The Tribunal reiterated that assessments under Section 153A could only be based on incriminating material found during the search of the assessee's premises.The Tribunal referred to its own decision in the case of Hitesh Ashok Vaswani & Others, where it had held that materials recovered from third parties could not be used in assessments under Section 153A. The Tribunal also cited various judgments, including the Delhi High Court's decision in CIT vs. Kabul Chawla and the Gujarat High Court's decision in PCIT vs. Saumya Construction Pvt. Ltd., to support its conclusion.Conclusion:The Tribunal allowed the appeals of the assessees, concluding that no addition was sustainable in the assessments framed under Section 153A for both assessment years in question. The Tribunal ordered the deletion of the additions made by the AO.