2021 (7) TMI 365 - AT - Income Tax

Tribunal overturns assessment, stresses need for incriminating material in tax appeals

The tribunal allowed the appellant's appeal, setting aside the impugned assessment under Section 153A r.w.s. 143(3) of the Income Tax Act, emphasizing the ... Assessment u/s 153A - absence of incriminating material found or seized during the course of survey - HELD THAT:- We are dealing with an 'unabated' assessment as on the date of search 20.10.2005 since regular assessment hereunder had already been framed on 18.11.2003. DR fails to dispute this assessment in issue as well as twin additions are nowhere based on any incriminating material found or seized during the course of search/survey. And also that the assessee had already recorded the same in its regular books of accounts which has resulted in latter disallowance. We thus quote CIT Vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]; CIT Vs. Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] and CIT Vs. Salasar Stock Broking Ltd. [2016 (8) TMI 1131 - CALCUTTA HIGH COURT] holding that an assessment u/s. 153A framed in absence of any incriminating material found or seized during the course of survey is not valid. We adopt the very reason mutatis mutandis herein to quash the impugned assessment - Decided in favour of assessee. Issues: Validity of impugned assessment under Section 153A r.w.s. 143(3) of the Income Tax Act, 1961.Analysis:1. Challenge to Validity of Assessment: The primary legal issue in this case pertains to the validity of the assessment conducted under Section 153A r.w.s. 143(3) of the Income Tax Act. The appellant contested the assessment on various grounds, including the absence of a search warrant issued in the name of the assessee company and the lack of incriminating material found during the search. The appellant relied on legal precedents to argue that the ITAT has jurisdiction to examine questions of law not raised before the AO but arising before the ITAT for the first time, emphasizing the importance of correct tax liability determination based on existing facts.2. Factual Background: The assessment under contention was initiated following a search conducted in the case of M/s. Madhucon Group Companies, subsequent to the appellant's original return of income filed in 2001. The Assessing Officer disallowed certain expenses claimed by the appellant, leading to the appeal against the assessment. The CIT(Appeals) upheld the Assessing Officer's decision, prompting further legal action.3. Judicial Interpretation: The tribunal deliberated on the validity of the assessment, particularly in the absence of any incriminating material discovered during the search. Citing legal precedents such as CIT Vs. Kabul Chawla and CIT Vs. Continental Warehousing Corporation, the tribunal concluded that an assessment under Section 153A without incriminating material is invalid. The tribunal, therefore, quashed the impugned assessment based on the absence of such material, rendering other arguments moot.4. Decision and Outcome: Ultimately, the tribunal allowed the appellant's appeal, setting aside the impugned assessment under Section 153A r.w.s. 143(3) of the Income Tax Act. The order was pronounced on 2nd July 2021, emphasizing the importance of incriminating material in conducting assessments under the specified provisions of the Act.