Validity of Income Tax search upheld under section 132; Assessments for various years reviewed and adjusted accordingly

The Tribunal upheld the validity of the search and seizure action under section 132 of the Income Tax Act, finding it properly initiated against the assessee. It ruled that additions made under section 153A without incriminating material for certain assessment years were unsustainable and deleted. The assessment for the year 2012-13 was upheld despite non-issuance of notice under section 143(2), while the assessment for 2013-14 was deemed invalid due to late issuance of the notice. Appeals for 2010-11, 2011-12, and 2013-14 were allowed, while the appeal for 2012-13 was dismissed.

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Issues Involved:
1. Legality of search and seizure action under section 132 of the Income Tax Act.
2. Legality of additions made under section 153A in the absence of incriminating material.
3. Validity of the assessment for the Assessment Year 2012-13.
4. Validity of the assessment for the Assessment Year 2013-14 due to non-issuance of notice under section 143(2) within the prescribed period.

Detailed Analysis:

1. Legality of search and seizure action under section 132 of the Income Tax Act:

The assessee contended that the search and seizure action under section 132 was conducted on the Vatika group, and merely restraining the operation of lockers held by the assessee does not amount to a search initiated against the assessee under section 132(1). The Tribunal, however, found that the search was valid as the lockers were in the name of the assessee and the search was conducted in the presence of the assessee. The Tribunal rejected the contention that the search was not properly initiated under section 132(1).

2. Legality of additions made under section 153A in the absence of incriminating material:

For Assessment Years 2010-11 and 2011-12, the Tribunal noted that the returns were not scrutinized as no notice under section 143(2) was issued, and no incriminating material was found during the search, except for jewellery which was duly explained. Citing the decisions in CIT vs. Kabul Chawla, Meeta Gutgutia, and Lata Jain, the Tribunal held that no additions could be made under section 153A in the absence of incriminating material. Therefore, the additions for these years were deemed unsustainable and were deleted.

3. Validity of the assessment for the Assessment Year 2012-13:

The Tribunal observed that the due date for issuance of notice under section 143(2) for AY 2012-13 was 30/9/2013, and since the search took place on 16/1/2013, the assessment for AY 2012-13 was not concluded. The Tribunal upheld the AO's action of proceeding with the assessment without issuing notice under section 143(2), as per the decision in Ashok Chadda vs. ITO. The Tribunal also upheld the additions made for AY 2012-13 due to the assessee's failure to substantiate the claims regarding rental income and unexplained receipts.

4. Validity of the assessment for the Assessment Year 2013-14 due to non-issuance of notice under section 143(2) within the prescribed period:

The Tribunal found that the notice under section 143(2) was issued on 29/10/2014, beyond the due date of 30/9/2014. Citing the decisions in Harsingar Gutkha (P) Ltd. vs. CIT and M/s Pai Vaibhav Hotels P. Ltd. vs. CIT, the Tribunal held that the service of notice within the period provided under section 143(2) is mandatory, and any assessment made in violation of this provision is without jurisdiction. Consequently, the assessment for AY 2013-14 was deemed invalid.

Conclusion:

The Tribunal allowed the appeals for Assessment Years 2010-11, 2011-12, and 2013-14, and dismissed the appeal for Assessment Year 2012-13. The judgments were pronounced in the open court on 28th March 2019.

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