2020 (10) TMI 794 - AT - Income Tax

Tribunal dismisses Revenue & assessee appeals, upholds CIT(A)'s decision deleting additions under Section 153A.

Sanket Jitendrabhai Shah Versus DCIT Central Circle - 1 (2), Ahmedabad And (Vice-Versa)

The Tribunal dismissed the Revenue's appeal and the assessee's cross-appeal as infructuous. It upheld the CIT(A)'s decision to delete the additions made ... Assessment u/s 153A - Unexplained receipts from share transactions - sale of shares treated as unexplained receipts - case of the assessee that the additions/disallowances could not be made in the assessment framed u/s 153A de hors reference to any incriminating material found in the course of search in this regard - HELD THAT:- We find total absence of reference to any incriminating material which may have any bearing to impugn additions/disallowances. On the contrary, it is manifest that the impugned addition has been made based on appreciation of certain data routinely poured into the department system named as Individual Transaction Statement (ITS) unconnected to search. No error in the view taken by the CIT(A) that impugned addition made by the AO is clearly beyond the scope of authority vested u/s153A owing to absence of any incriminating material or evidence deduced as a result of search. CIT(A) has rightly adjudicated the legal issue emanating on the facts available on record that in the absence of incriminating material/evidence, the additions/disallowances cannot be sustained within the pale of Section 153A - See SAUMYA CONSTRUCTION PVT. LTD. [2016 (7) TMI 911 - GUJARAT HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Legality of assessment under Section 153A of the Income Tax Act, 1961.2. Validity of additions made by the Assessing Officer (AO) based on Individual Transaction Statement (ITS) data.3. Partial confirmation of additions by the Commissioner of Income Tax (Appeals) [CIT(A)].4. Jurisdiction of the AO under Section 153A in the absence of incriminating material.5. Application of mind by the Joint Commissioner of Income Tax (JCIT) under Section 153D.Issue-wise Detailed Analysis:1. Legality of assessment under Section 153A of the Income Tax Act, 1961:The assessee argued that the assessment under Section 153A was invalid as it was based on ITS data, not on any incriminating material found during the search. The CIT(A) agreed, citing the Hon’ble Gujarat High Court's decision in CIT-4 vs. Saumya Construction Pvt. Ltd. (387 ITR 529), which held that additions cannot be made under Section 153A if no incriminating document is found during the search. The Tribunal upheld this view, stating that the AO's additions were beyond the scope of Section 153A due to the absence of incriminating material.2. Validity of additions made by the Assessing Officer (AO) based on Individual Transaction Statement (ITS) data:The AO added Rs. 4,11,06,995 based on ITS data showing share transactions. The assessee contended that these transactions were routine and already known to the department, thus not justifying additions under Section 153A. The CIT(A) found that the ITS data was not connected to any incriminating material found during the search and deleted the addition. The Tribunal agreed, emphasizing that the ITS data alone does not justify additions under Section 153A without incriminating material.3. Partial confirmation of additions by the Commissioner of Income Tax (Appeals) [CIT(A)]:The CIT(A) partially confirmed an addition of Rs. 37,07,242, comprising Rs. 27,07,242 as unreported profit and Rs. 10,00,000 as unexplained investment. The Tribunal did not adjudicate this issue on merits, as the assessee was granted full relief on the jurisdictional ground.4. Jurisdiction of the AO under Section 153A in the absence of incriminating material:The Tribunal affirmed the CIT(A)’s decision that the AO lacked jurisdiction to make additions under Section 153A in the absence of incriminating material. The Tribunal referenced the Gujarat High Court decision in Pr.CIT vs. Saumya Construction (P.) Ltd. (387 ITR 529) and other similar judicial pronouncements, concluding that routine ITS data does not constitute incriminating material.5. Application of mind by the Joint Commissioner of Income Tax (JCIT) under Section 153D:The assessee argued that the approval under Section 153D by the JCIT was without application of mind. The Tribunal dismissed this additional ground, stating that the swift approval by the JCIT does not automatically imply non-application of mind. The Tribunal found no cogent evidence to support the claim of non-application of mind by the JCIT.Conclusion:The Tribunal dismissed the Revenue's appeal and the assessee's cross-appeal as infructuous. The Tribunal upheld the CIT(A)’s decision to delete the additions made by the AO under Section 153A due to the absence of incriminating material, thereby affirming the lack of jurisdiction for such additions. The Tribunal did not address the partial confirmation of additions on merits, as the jurisdictional issue rendered it moot.