2021 (9) TMI 652 - AT - Income Tax

ITAT Delhi Upholds Commissioner's Decision on Section 153A Additions, Emphasizes Incriminating Material

The Appellate Tribunal ITAT Delhi upheld the decision of the Commissioner of Income-tax (Appeals) to delete additions made by the AO under section 153A of ... Assessment u/s 153A - Whether no “incriminating material” was there to support the additions made by the AO? - HELD THAT:- It is settled principle of law that when no incriminating material has come on record, very initiation of assessment proceedings u/s 153A is not sustainable in the eyes of law. Ld. DR for the Revenue has failed to rebut the issue decided by the ld. CIT (A) that in the absence of any incriminating material, assumption of jurisdiction u/s 153A of the Act is bad in law. Hon’ble jurisdictional High Court in case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] has decided the identical issue by holding that, “completed assessment can be interfered by the AO while making assessment u/s 153A only on the basis of some “incriminating material” unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search, which were not there in the course of original assessment”. - Decided against revenue. Issues involved:1. Validity of assessment under section 153A of the Income-tax Act.2. Jurisdiction of the assessing officer in making additions without incriminating documents/assets.3. Deletion of additions by the Commissioner of Income-tax (Appeals).4. Legal position regarding assessments under section 153A.5. Applicability of settled legal principles to the case.Issue 1: Validity of assessment under section 153A of the Income-tax Act:The Appellate Tribunal ITAT Delhi addressed the appeal filed by the ACIT seeking to set aside the order passed by the Commissioner of Income-tax (Appeals) regarding the assessment year 2010-11. The main contention was that the AO proceeded to frame assessment under section 153A without any incriminating documents/assets found during the search operation. The Tribunal analyzed the legal position under section 153A, emphasizing that assessments pending on the date of the search abate, and the AO has the power to assess the total income for the relevant assessment years. The Tribunal held that in the absence of incriminating material, the assessment under section 153A cannot be sustained, thereby allowing the appeal on this ground.Issue 2: Jurisdiction of the assessing officer in making additions without incriminating documents/assets:The Tribunal considered whether the AO had the jurisdiction to make additions without any incriminating material found during the search and seizure operation. It was established that without such material, the initiation of assessment proceedings under section 153A is not legally sustainable. The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) that without incriminating material, assumption of jurisdiction under section 153A is invalid. The legal principle established by the Hon'ble High Court and the Tribunal was applied to dismiss the Revenue's challenge to the deletions made by the Commissioner.Issue 3: Deletion of additions by the Commissioner of Income-tax (Appeals):The Commissioner of Income-tax (Appeals) had deleted various additions made by the AO, including excess amortization, disallowed interest, and depreciation amounts. The Tribunal observed that the Commissioner's decision was based on the absence of incriminating material supporting the additions. The Tribunal emphasized the settled legal principle that assessments under section 153A must be made on the basis of seized material, and in the absence of such material, the additions could not be sustained.Issue 4: Legal position regarding assessments under section 153A:The Tribunal provided a detailed summary of the legal position under section 153A, outlining the mandatory issuance of notices to the person searched, abatement of pending assessments, and the power of the AO to assess the total income for the relevant assessment years. The Tribunal clarified that assessments under section 153A must be based on seized material and cannot be arbitrary. It was highlighted that completed assessments can only be interfered with based on incriminating material unearthed during the search.Issue 5: Applicability of settled legal principles to the case:The Tribunal applied settled legal principles established by the Hon'ble High Court and the Tribunal regarding assessments under section 153A. Citing previous judgments, including the case of CIT vs. Kabul Chawla, the Tribunal concluded that in the absence of incriminating material, the deletions made by the Commissioner of Income-tax (Appeals) were legally valid. The appeal filed by the Revenue was dismissed based on the lack of incriminating material supporting the additions made by the AO.In conclusion, the Appellate Tribunal ITAT Delhi upheld the decision of the Commissioner of Income-tax (Appeals) to delete the additions made by the AO, emphasizing the necessity of incriminating material to support assessments under section 153A of the Income-tax Act. The Tribunal dismissed the Revenue's appeal, citing the absence of such material and the application of settled legal principles to the case.