2021 (9) TMI 889 - AT - Income Tax

Tribunal partially allows appeals, stresses incriminating material for Section 153A additions.

Siddarth Gupta, Smt. Sapana Gupta, Santosh Kumar Agarwal, Manish Agarwal, Smt. Ruchi Agarwal Versus DCIT-2, Central Circle I, Kanpur

The Tribunal partly allowed the appeals of the assessees, emphasizing that additions under Section 153A of the Income Tax Act must be based on ... Assessment u/s 153A - importance of existence of incriminating material for making the additions - as case where proceedings are not pending, could not be applied in absence of any incriminating material - HELD THAT:- Assessing Officer had not made the addition on the basis of any incriminating material and rather he has made the addition on the basis of entries in the books of account which is not in accordance with law with the settled position of law in a number of cases it has been held by various High Courts that in case of concluded assessment the addition can be made only on the basis of incriminating material found during search. Even Hon'ble Supreme Court in the cases of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia [2018 (7) TMI 569 - SC ORDER] has dismissed the SLPs filed by the Department against the order of Hon'ble High Courts. The Lucknow Bench in a number of cases has allowed this ground of appeal under similar facts and circumstances after placing reliance on the order of Hon'ble Supreme Court in the case of Meeta Gutgutia [2018 (7) TMI 569 - SC ORDER] The existence of incriminating material for making additions u/s 153A is strengthened from the decision of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society[2017 (8) TMI 1298 - SUPREME COURT]where Hon'ble Supreme Court in a case u/s 153C has again highlighted the importance of existence of incriminating material for making the additions. The Hon'ble Supreme Court went on to hold that the Assessing Officer, while relying on the incriminating material, has to make reference in the satisfaction note regarding year-wise existence of incriminating material. Since there is an interplay between section 153A and section 153C, the findings of Hon'ble Supreme Court in a case u/s 153C are also applicable for making additions u/s 153A of the Act. We find that in these appeals also the additions has not been made on the basis of any incriminating material and rather has been made on the basis of entries in the books of accounts. The dates of filing of returns as mentioned in the chart reproduced earlier in this order are found to be correct from the copies of returns placed in respective paper book pages. The period of issue of notice u/s. 143(2) in the above cases expired on 30.09.2012 and 30.09.2013 respectively whereas the search took place on 31.08.2015 therefore assessments in these cases also stood completed before the date of search . - Decided in favour of assessee. Issues Involved:1. Validity of assessment orders under Section 153A of the Income Tax Act in absence of incriminating material.Detailed Analysis:Issue 1: Validity of Assessment Orders under Section 153AArguments by Assessee:- The assessments were completed under Section 153A following a search and seizure operation on 31.08.2015.- The additions made by the Assessing Officer (AO) were based on entries in the books of accounts and not on any incriminating material found during the search.- The legal position, as confirmed by various High Courts and the Supreme Court in cases like *Kabul Chawla* and *Meeta Gutgutia*, is that additions in concluded assessments can only be made based on incriminating material found during the search.Arguments by Revenue:- The CIT(A) upheld the assessment orders, stating that under Section 153A, there is no requirement for incriminating material to make additions.- The CIT(A) relied on several judicial pronouncements, including *E.N. Gopalkumar vs. CIT* and *CIT vs. Raj Kumar Arora*, which support the view that additions can be made without incriminating material.Tribunal's Findings:- The Tribunal noted that the assessment years involved were 2011-12 and 2012-13, and the original returns were filed and processed before the search date.- The Tribunal observed that the AO made additions based on entries in the books of accounts without referring to any incriminating material found during the search.- The Tribunal referred to the CIT(A)’s findings, which dismissed the appellant's grounds by stating that Section 153A does not require incriminating material for making additions.Judicial Precedents Considered:- The Tribunal cited several cases, including *Ashish Kumar Chaurasia HUF vs. DCIT* and *M/s Accumen Poly Pack Pvt. Ltd. vs. DCIT*, where it was held that additions in concluded assessments under Section 153A must be based on incriminating material found during the search.- The Tribunal heavily relied on the case law of *Meeta Gutgutia* decided by the Hon'ble Supreme Court, which supports the assessee's contention that additions in concluded assessments can only be made based on incriminating material.Conclusion:- The Tribunal concluded that the AO's additions were not based on any incriminating material found during the search, which is contrary to the settled legal position.- The Tribunal allowed Ground Nos. 1 and 2 in IT(SS) No. 417/Lkw/2019 and similar grounds in the other appeals, following the judicial precedents and the Supreme Court's decision in *Meeta Gutgutia*.- The Tribunal did not adjudicate the remaining grounds as they became infructuous after allowing the primary grounds.Final Order:- The appeals of the assessees were partly allowed, with the Tribunal emphasizing that the additions under Section 153A must be based on incriminating material found during the search.Pronouncement:- The order was pronounced in the open court on 14/09/2021.