2017 (7) TMI 252 - AT - Income Tax

Appeal allowed: Jurisdiction lacking for section 153A additions.

The Tribunal allowed the assessee's appeal, ruling that in the absence of incriminating material found during the search and with assessment proceedings ... Assessment under section 153A - deemed dividend addition u/s 2(22)(e) - incriminating material concerning such additions was found during the course of search - Held that:- Since the facts in the present case are identical to that in the case of M/s Mala Builders Pvt. Ltd. (2016 (11) TMI 1046 - ITAT CHANDIGARH) with assessment having been framed under section 153A of the Act making addition on account of deemed dividend under section 2(22)(e) of the Act, admittedly, in the absence of any incriminating material found during the course of search and the assessment in all the above cases having been completed under section 143(1) of the Act, the aforestated decision of the Chandigarh Bench in the case of M/s Mala Builders Pvt. Ltd. (supra) squarely applies to the present case also, following which we hold that the Assessing Officer had no jurisdiction to make the impugned addition in the present case. - Decided in favour of assessee. Issues Involved:1. Admittance of additional ground challenging the addition made under section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during search.2. Legality of additions made under section 153A of the Income Tax Act, 1961, in the absence of any incriminating material found during search.Detailed Analysis:1. Admittance of Additional Ground:The assessee raised an additional ground challenging the addition made under section 153A of the Income Tax Act, 1961, in the absence of any incriminating material found during the search. The Tribunal admitted this additional ground, citing the judgment of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC). The Tribunal noted that the additional ground was a legal ground and could be adjudicated based on the materials and facts available on record.2. Legality of Additions Made Under Section 153A:The core issue was whether additions under section 153A could be made in the absence of any incriminating material found during the search, particularly in cases where assessments had already been completed under section 143(1) or 143(3). The Tribunal referenced the decision in the case of M/s Mala Builders Pvt. Ltd. Vs. ACIT, where it was held that additions under section 153A could only be made based on incriminating material unearthed during the search. This principle was supported by various High Court decisions, including CIT Vs. M/s Murli Agro Products Ltd. and CIT Vs. Anil Kumar Bhatia, which emphasized that completed assessments could not be disturbed unless incriminating material was found during the search.The Tribunal highlighted that the Bombay High Court in CIT Vs. Continental Warehousing and the Delhi High Court in CIT Vs. Kabul Chawla had upheld the view that additions under section 153A should be based on incriminating material found during the search. The Tribunal also noted that the Delhi High Court in CIT Vs. RRJ Securities and Pr. CIT Vs. Lata Jain reiterated this position.The Tribunal further elaborated that the requirement under section 153A is limited to assessing or reassessing the total income of the preceding six assessment years prior to the year of search. It does not specifically mandate the nature of additions, implying that in cases of completed assessments, additions should be restricted to incriminating material found during the search.The Tribunal rejected the arguments of the learned DR, including the reliance on the statement of Sh. Kishan Kumar Goyal, which was considered general and not specifically linked to the disallowance made. The Tribunal also referenced the Delhi Bench of the ITAT in M/s Best Infrastructure (India) Pvt. Ltd. Vs. ACIT, which held that statements recorded during search cannot, on a standalone basis, be treated as evidence found during the search.In conclusion, the Tribunal held that in the absence of any incriminating material found during the search and with the assessment proceedings not abated at the time of search, the Assessing Officer had no jurisdiction to make additions under section 153A. Consequently, the appeals of the assessee were allowed, and the additions made under section 153A were deleted.