Assessment under section 153A not abated when search conducted before section 143(2) notice period expires

The ITAT Delhi held that an assessment under section 153A was not abated since the search was conducted before the time limit for issuing notice under section 143(2) expired. Following Chintels India Ltd., the tribunal ruled that if the notice period is still available, the assessment cannot be considered completed. The AO's addition of unexplained cash credit under section 68 was upheld as it was based on proper enquiry, not restricted to seized materials. The CIT(A)'s deletion of the addition was set aside, and the revenue's appeal was allowed.

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Issues involved:
The issues involved in this case are whether the provision of section 153A of the Income Tax Act could be applied in a situation where no material was found as a result of a search, the deletion of an addition made on account of unexplained cash credit under section 68 of the IT Act, and the correctness of the order of the CIT (Appeals) in law and on facts.

Issue 1: Application of section 153A of the IT Act
The appeal by the Revenue was directed against the order of the ld. CIT (Appeals)-XXXII, New Delhi for the assessment year 2009-10. The case involved a search and seizure operation conducted by the Directorate of Income Tax, where the Assessing Officer made an addition of Rs. 4,30,00,000/- u/s 68 of the Act on account of unexplained cash credits. The Assessing Officer issued a notice u/s 153A of the Act, and the assessee objected to the initiation of proceedings. The Assessing Officer completed the assessment, and the CIT (A) deleted the addition, stating that no incriminating material was found during the search. The Revenue contended that the assessment had not abated, and the AO was entitled to rely on his enquiry to make the addition. The Tribunal agreed with the Revenue, stating that the case was not considered as a completed assessment, and upheld the addition made by the Assessing Officer under section 68 of the Act.

Issue 2: Addition of unexplained cash credit under section 68 of the IT Act
During the assessment proceedings, the Assessing Officer noted unsecured loans taken by the assessee from certain parties. Despite being asked to furnish details and documentary evidence, the assessee did not provide the required information. It was found that the loan creditors were involved in giving accommodation entries, and the unsecured loans were treated as unexplained cash credits. The CIT (A) deleted the addition, emphasizing that no addition was made based on seized material, and transactions were recorded in the books of account and disclosed in the return prior to the search. However, the Tribunal held that the Assessing Officer's enquiry revealed the unexplained nature of the cash credits, and therefore upheld the addition under section 68 of the Act.

Issue 3: Correctness of the CIT (A)'s order
The Revenue filed an appeal against the order of the CIT (A), arguing that the assessment had not abated, and the AO was justified in making the addition based on his enquiry. The Tribunal, relying on the decision of the jurisdictional High Court, concluded that the assessment for the relevant year was not abated on the date of the search. Therefore, the addition made by the Assessing Officer under section 68 of the Act was upheld, and the order of the CIT (A) was set aside.

Separate Judgement:
No separate judgment was delivered by the judges in this case.

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