Tribunal dismisses Revenue appeal, allows assessee objections. Addition under Section 69 deleted for lack of incriminating material.

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross objections. The addition made by the AO under Section 69 was deleted due to lack of incriminating material found during the search. The assessment order under Section 153A was deemed invalid for making additions without incriminating material. However, the proceedings under Section 153A were considered validly initiated based on the warrant of authorization.

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Issues Involved:
1. Validity of the addition made by the AO under Section 69 of the Income Tax Act, 1961.
2. Whether the assessment order passed under Section 153A is ab initio void and bad in law.
3. Whether the addition made in the assessment order under Section 153A/143(3) is valid in the absence of incriminating material.
4. Whether the statements of entry operators can be used to justify the addition made by the AO.
5. Validity of the proceedings initiated under Section 153A in the absence of a search conducted against the assessee.

Detailed Analysis:

1. Validity of the Addition Made by the AO Under Section 69:
The AO made an addition of Rs. 35,54,34,500/- under Section 69, treating the loans and advances as unexplained investments. The AO relied on statements from entry operators and flow charts depicting cash trails. However, the Ld. CIT(A) found that the AO did not bring any direct or cogent evidence to establish that the proceeds realized from the sale of investments were unexplained investments. The Ld. CIT(A) noted that the investments were acquired in earlier years from genuine sources, and their sale proceeds could not be treated as unexplained investments in the year of sale.

2. Whether the Assessment Order Passed Under Section 153A is Ab Initio Void and Bad in Law:
The assessee argued that the assessment order under Section 153A was void as no incriminating material was found during the search. The Tribunal noted that the assessment for AY 2011-12 was unabated on the date of the second search (02-03-2016). The Tribunal held that for unabated assessments, additions can only be made based on incriminating material found during the search. Since no such material was found, the addition made under Section 69 was unsustainable.

3. Whether the Addition Made in the Assessment Order Under Section 153A/143(3) is Valid in the Absence of Incriminating Material:
The Tribunal reiterated the legal position that for unabated assessments, the AO can only reassess the income based on incriminating material found during the search. The Tribunal found that the AO did not rely on any incriminating material found during the search but instead on statements recorded in 2013 and 2014, which were already available during the earlier assessments. Therefore, the addition made was not justified.

4. Whether the Statements of Entry Operators Can Be Used to Justify the Addition Made by the AO:
The AO relied on statements from entry operators to justify the addition. However, the Tribunal noted that these statements did not specifically implicate the assessee or prove that the assessee received accommodation entries. The Tribunal also noted that the AO did not provide an opportunity for cross-examination of these entry operators. Consequently, the statements could not be used as a basis for the addition.

5. Validity of the Proceedings Initiated Under Section 153A in the Absence of a Search Conducted Against the Assessee:
The assessee argued that no search was conducted against it, making the proceedings under Section 153A invalid. The Tribunal noted that the assessee's name did not feature in the panchnama but was included in the warrant of authorization. Therefore, the proceedings under Section 153A were validly initiated.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross objections. The addition made by the AO under Section 69 was deleted as it was not based on any incriminating material found during the search. The assessment order under Section 153A was held to be invalid for making additions in the absence of incriminating material. The proceedings under Section 153A were, however, validly initiated based on the warrant of authorization.

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