2023 (5) TMI 1356 - HC - Income Tax

Assessment under Section 153A requires incriminating material from search operations for additions to completed assessments

THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD Versus SWETABEN GHANSHYAMBHAI PATEL

The Gujarat HC ruled in favor of the assessee regarding assessment under section 153A. Following the SC decision in Abhisar Buildwell P. Ltd and ... Assessment u/s 153A - completed assessment/un-abated assessment - incriminating material found during the course of search under section 132 or not? - HELD THAT:- As in Abhisar Buildwell P. Ltd [2023 (4) TMI 1056 - SUPREME COURT] confirmed the view taken by this court in Saumya Construction [2016 (7) TMI 911 - GUJARAT HIGH COURT] as well as that of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] which were in favour of the assessee. The supreme court held that no addition can be made in respect of completed/ unabated assessment in absence of any incriminating material. Decided in favour of assessee. Issues involved:- Interpretation of section 260A of the Income Tax Act, 1961- Assessment of total income under sections 143(3) and 153A(1)(b) of the Act- Addition under sections 68 and 69C of the Act- Jurisdiction of the Assessing Officer in making assessments- Scope of assessment under section 153A of the Act- Consideration of incriminating material in assessment proceedingsAnalysis:Issue 1: Interpretation of section 260A of the Income Tax Act, 1961The High Court heard a Tax Appeal under section 260A of the Income Tax Act, 1961, arising from an order of the Income Tax Appellate Tribunal. The appeal pertained to the Assessment Year 2011-2012 and involved substantial questions of law proposed by the Revenue regarding additions made in the assessment order.Issue 2: Assessment of total income under sections 143(3) and 153A(1)(b) of the ActThe Assessing Officer had passed an assessment order under section 143(3) read with section 153A(1)(b) of the Act, determining the total income and making additions under sections 68 and 69C of the Act. The Commissioner of Income Tax (Appeals) subsequently allowed the appeal of the assessee by deleting the additions.Issue 3: Jurisdiction of the Assessing Officer in making assessmentsThe High Court considered the jurisdiction of the Assessing Officer in making assessments, particularly in cases where no incriminating material was found during a search. The court referred to the Supreme Court's decision in Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd., which clarified the scope of assessment under section 153A of the Act.Issue 4: Scope of assessment under section 153A of the ActThe Supreme Court in Abhisar Buildwell P. Ltd. held that for completed assessments, the Assessing Officer's jurisdiction is limited to incriminating material found during a search. The court confirmed the view that no addition can be made in respect of completed assessments in the absence of any incriminating material.Issue 5: Consideration of incriminating material in assessment proceedingsThe High Court emphasized that assessments under section 153A must be based on seized material and that no arbitrary additions can be made without relevance to the seized material. The court reiterated that completed assessments cannot be reopened without incriminating material.Conclusion:The High Court dismissed the appeal, citing the Supreme Court's decision in Abhisar Buildwell P. Ltd., which clarified that no substantial question of law arose in the case. The judgment reaffirmed that no addition can be made in completed assessments without incriminating material, aligning with the legal principles laid down by the Supreme Court and previous High Court decisions.