2022 (5) TMI 611 - AT - Income Tax

Invalid Notice under Section 153A - Assessments for 2011-12 and 2012-13 Deleted

The Tribunal held that the notice under Section 153A was invalid as no incriminating material was found during the search proceedings. The Tribunal ... Assessment u/s 153A - Proof of incriminating material found in search - HELD THAT:- On the date of search, there was no assessment pending for the impugned assessment year, therefore, this year shall be treated as unabated assessment. In case of unabated assessment for making addition there must be some incriminating material. On perusal of the entire order of the AO we do not find anywhere that seized material has been used by the AO for making the addition, which could be treated as incriminating material. As per the decision of various courts in case of completed assessments, the addition can be made only on the basis of incriminating material. In support of our observations, we rely on the judgment of the Hon’ble High Court of Delhi in the case of CIT Vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] Since no incriminating material was unearthed during search, no additions could have been made to income already assessed. Therefore, we direct the AO to delete the additions made by the AO on the assessment framed u/s 153A - Decided in favour of assessee. Issues Involved:1. Validity of Notice under Section 153A.2. Requirement of Incriminating Material for Additions under Section 153A.3. Jurisdictional Authority for Issuing Notice under Section 153A in Connected Group Cases.Issue-wise Detailed Analysis:1. Validity of Notice under Section 153A:The appellant argued that the notice issued under Section 153A was invalid and without jurisdiction because the warrant of authorization under Section 132 was not issued in the name of the appellant company nor at its business premises. The appellant claimed that the assessment under Section 153A should be annulled as it was not based on a valid search warrant. The appellant further argued that the search was conducted in the residential premises of the directors, not in the business premises of the appellant company, and thus, the notice under Section 153A was invalid.2. Requirement of Incriminating Material for Additions under Section 153A:The appellant contended that no incriminating material was found during the search proceedings, and the additions made were based merely on the financial statements filed during the assessment proceedings. The appellant cited various case laws to support the argument that in the absence of incriminating material, no additions could be made under Section 153A. The appellant emphasized that the assessment was completed under Section 143(1) and no notice under Section 143(2) was issued within the stipulated time, making the proceedings concluded and not pending as on the date of the search.3. Jurisdictional Authority for Issuing Notice under Section 153A in Connected Group Cases:The appellant argued that there is no provision in the Income Tax Act that allows the Assessing Officer (AO) to issue a notice under Section 153A in respect of connected group cases where the search was conducted in one of the cases of such connected group cases. The appellant asserted that the AO lacked the jurisdiction to issue the notice under Section 153A as the search was conducted in the case of Shri Imtiaz Farooqi, with whom the appellant had business dealings, and not in the appellant's premises.Judgment:The Tribunal considered the rival submissions and material on record. It was noted that the AO issued the notice under Section 153A on 20.06.2016, and the appellant filed the computation of income at Rs. 92,90,980/-. The original return was filed on 28.09.2011, and the assessment was completed under Section 143(3) on 25.02.2014. On the date of the search, no assessment was pending for the impugned assessment year, making it an unabated assessment. The Tribunal observed that no incriminating material was used by the AO for making the addition, which could be treated as incriminating material. The Tribunal relied on the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Kabul Chawla, which held that in the absence of any incriminating material, the completed assessment could not be interfered with.The Tribunal found that the case law relied upon by the ld. DR in the case of Gopal Lal Bhadruka was distinguishable on facts. The Tribunal concluded that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Therefore, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the additions made in the assessment framed under Section 153A of the Act.Conclusion:The Tribunal allowed the appeals of the assessee, holding that the notice under Section 153A was invalid, and no additions could be made in the absence of incriminating material. The Tribunal directed the AO to delete the additions made in both assessment years 2011-12 and 2012-13.