2024 (3) TMI 708 - AT - Income Tax

Section 153A additions require incriminating material found during search operations, not just bank statements or third-party seizures

ITAT Amritsar held that additions under section 153A cannot be made without incriminating material found during search operations. In the first case, ... Assessment u/s 153A - Addition u/s 69A on Investment in FDR and difference in credits received in bank accounts but not considered in the ITR - Whether CIT(A) has erred in confirming the addition without bringing on record any incriminating material found during the course of search? - HELD THAT:- As undisputed facts from the record, that nothing incriminating material was found during the course of search and that the additions made by AO were not based on any incriminating materials/paper seized during search operation in respect of the assessment year 2013-14 and 2014-15. It is seen that the whole additions have been made on the basis of bank statement submitted in response to questionnaire issued by the AO. In our view, it is settled law that no addition can be made u/s 153A otherwise than on the basis of incriminating document. In view of the judgement of Abhisar Buildwell Pvt Ltd. (2023 (4) TMI 1056 - SUPREME COURT] in absence of incriminating material, AO would not assume the jurisdiction to assess or reassess total income of the appellant in the present case. As such, the additions made by the AO and sustained by the Ld. CIT(A) are liable to be deleted. Thus, ground of assessee is allowed. Assessment u/s 153A or 153C - addition has been made on the basis of material seized during search conducted on a person other than the assessee (i.e., an independent search warrant was issued) - AY 2018-19 - HELD THAT:- It is admitted facts on record that in the present case, the assessment proceedings were imitated and completed u/s 153A of the Act, based on material seized during search conducted on a person other than the assessee. In the present case, in our view, the assessment proceedings could only be initiated u/s 153C and not 153A of the act, and that to only after satisfaction was so arrived in the case of proceedings of M/S Golden Tulip Hospitality Pvt. that the material found and seized during search were being pertains to the appellant. Thus, the CIT (A) has failed to appreciate the fact that the searched premises from where the ledger was found does not belong to the assessee, and therefore, the assessment order passed by the AO u/s 153A is liable to be held without jurisdiction. Issues Involved:1. Addition made under Section 69A.2. Validity of assessment framed under Section 153A without mentioning DIN.3. Jurisdiction of assessment under Section 153A vs. Section 153C.Summary:1. Addition made under Section 69A:The assessee challenged the confirmation of additions made under Section 69A by the AO, including Rs. 300,000 for investment in FDR and Rs. 373,918 for differences in bank credits not considered in the ITR. The assessee argued that the FDRs were made from the opening bank balance and during FY 2011-12, and that all bank credits were sales-related, thus the addition should be restricted to the profit element as per Section 44AD. The Tribunal found that no incriminating material was found during the search, and the additions were based solely on bank statements submitted in response to the AO's questionnaire. Citing the Supreme Court's judgment in *Abhisar Buildwell Pvt Ltd.*, the Tribunal held that no addition can be made under Section 153A without incriminating documents, thus allowing the appeal on this ground.2. Validity of assessment framed under Section 153A without mentioning DIN:The assessee contended that the assessment framed under Section 153A was invalid as it did not mention the Document Identification Number (DIN), which is a mandatory requirement. The Tribunal did not specifically address this issue as the relief granted on the primary legal issue rendered other grounds academic.3. Jurisdiction of assessment under Section 153A vs. Section 153C:For the assessment year 2018-19, the assessee argued that the assessment under Section 153A was invalid as the material relied upon was found during a search at the premises of M/S Golden Tulip Hospitality. The proper procedure under Section 153C, which involves transferring seized material to the AO of the assessee, was not followed. The Tribunal agreed, citing legal precedents that materials found during a search of a third party cannot be used for assessments under Section 153A without following Section 153C procedures. Consequently, the Tribunal held the assessment order void-ab-initio and quashed it.Conclusion:The Tribunal allowed the appeals for the assessment years 2013-14, 2014-15, and 2018-19, primarily on the ground that the additions made under Section 153A were not based on any incriminating material found during the search, thus rendering other grounds academic and not requiring adjudication.