2023 (5) TMI 539 - AT - Income Tax

Tribunal quashes assessment order due to lack of incriminating material

The DCIT, Central Circle 5 (1), Mumbai Versus M/s. Saket Infra Projects Pvt Ltd.

The Tribunal upheld the CIT(A)'s decision to quash the assessment order under section 143(3) read with section 153A, as no incriminating material was ... Assessment u/s 153A - unabated assessments - incriminating material as found during the course of search proceedings or not? - HELD THAT:- We find that there is no dispute with regard to the facts that the Assessments relating to AY 2014-15, 2015-16, 2016-17 & 2017-18 fall under the category of “unabated assessments”. There is also no dispute that the department did not unearth any incriminating material relating to the additions of bogus purchases, bogus job works & labour charges, subcontracts payments, unexplained cash credits of loans and interest on loans and hence the AO, in the absence of any incriminating material relating to the above said additions, could not have made any addition in unabated assessment years. In support of the above said proposition, we rely upon the decision rendered in the case of Continental Corporation (Nhava Sheva) Ltd [2015 (5) TMI 656 - BOMBAY HIGH COURT] and Gurinder Singh Bawa [2015 (10) TMI 1761 - BOMBAY HIGH COURT] wherein held that the unabated assessments (finalized assessments) cannot be touched by resorting to the provisions of sec.153A unless some incriminating materials relating to the said assessments, which are contrary to and/or not disclosed during regular assessment proceedings, are found. Whereas the provisions of sec.153A of the Act provide for issuing of notice u/s 153A of the Act for six assessment years immediately preceding the year of search and thereafter, the AO shall assess or reassess the total income for the above said six years. This section further provides that all pending assessment or re-assessment pending as on the date of search shall abate. Hence the assessments of the assessment years falling within the period of above said six years which are not pending, i.e., which have attained finality shall not abate. Assessments of such assessment years are called “unabated/completed/finalized” assessments. The question as to whether the AO is entitled to interfere with such kinds of unabated/completed/ finalized assessments or not without there being any incriminating material found during the course of search, was examined in the case of All Cargo Logistics Ltd [2012 (7) TMI 222 - ITAT MUMBAI(SB)] wherein it was held that the AO could interfere with the unabated/completed/finalized assessments only if the incriminating materials found during the course of search warrant such interference, meaning thereby, if the search action did not bring out any incriminating material, then the AO cannot disturb the completed assessments and he has to simply reiterate the earlier total income in the present assessment order. We also rely on the decision rendered by Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] wherein identical view was expressed. We considering the facts and judicial decisions as discussed above are of the view that the CIT(A) has passed a reasoned and conclusive order. We do not find any infirmity in the order of the CIT(A) in quashing the assessment order and uphold the same and dismiss the grounds of appeal of the revenue. Issues Involved:1. Quashing of assessment order under section 143(3) read with section 153A due to lack of incriminating material.2. Reliance on the judgment of the Hon'ble Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd.3. Deletion of additions on account of bogus purchase expenses.4. Deletion of additions on account of sub-contract expenses.5. Deletion of additions on account of bogus jobwork and labour expenses.6. Deletion of additions under section 68 for unsecured loans.7. Deletion of disallowance of interest expenses on unsecured loans.Summary:Issue 1: Quashing of Assessment OrderThe Tribunal upheld the CIT(A)'s decision to quash the assessment order passed under section 143(3) read with section 153A, as no incriminating material was found during the search proceedings. The CIT(A) noted that the assessment years in question were 'unabated assessments,' and thus, without incriminating material, the AO could not make any additions.Issue 2: Reliance on Bombay High Court JudgmentThe CIT(A) relied on the jurisdictional Hon'ble Bombay High Court's decision in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd, which held that no addition can be made in respect of assessments that have become final if no incriminating material is found during the search. The Tribunal supported this reliance, noting that the Supreme Court had not conclusively adjudicated on this issue.Issue 3: Deletion of Additions for Bogus Purchase ExpensesThe CIT(A) deleted the addition of Rs. 61,57,440/- on account of bogus purchase expenses, observing that the assessee failed to prove the genuineness of purchases. However, the Tribunal upheld the deletion as no incriminating material was found during the search to support the addition.Issue 4: Deletion of Additions for Sub-Contract ExpensesThe addition of Rs. 8,42,369/- for sub-contract expenses was deleted by the CIT(A), who noted the lack of incriminating evidence. The Tribunal upheld this decision, emphasizing that the AO could not make additions without incriminating material.Issue 5: Deletion of Additions for Bogus Jobwork and Labour ExpensesThe CIT(A) deleted the addition of Rs. 7,91,302/- for bogus jobwork and labour expenses, citing the absence of incriminating material. The Tribunal agreed, reiterating that additions cannot be made without such material.Issue 6: Deletion of Additions under Section 68 for Unsecured LoansThe CIT(A) deleted the addition of Rs. 7,73,00,000/- under section 68 for unsecured loans, as the assessee did not prove the genuineness of the transaction and the identity and credit-worthiness of the creditors. The Tribunal upheld this deletion due to the lack of incriminating material found during the search.Issue 7: Deletion of Disallowance of Interest ExpensesThe CIT(A) deleted the disallowance of Rs. 1,75,69,766/- for interest expenses on unsecured loans, finding no incriminating material to justify the disallowance. The Tribunal upheld this decision, supporting the CIT(A)'s reliance on judicial precedents and the absence of incriminating evidence.Conclusion:The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s quashing of the assessment order and deletion of various additions due to the absence of incriminating material found during the search proceedings. The Tribunal relied on established judicial precedents, including the Hon'ble Bombay High Court's decision in Continental Warehousing Corporation (Nhava Sheva) Ltd, to support its conclusions.