2024 (6) TMI 1408 - AT - Income Tax

Tax officer cannot add income without incriminating material found during search operations under section 153A

Naresh Manakchand Jain Versus Asst. CIT Central Circle-2 (1) Mumbai

ITAT Mumbai allowed the assessee's appeal, deleting additions made under section 153A assessment. The tribunal held that AO cannot make additions without ... Validity of the addition made in assessment u/s 153A without the aid of any incriminating material - whether any addition could be made qua the assessment year under consideration without the aid of incriminating material ? HELD THAT:- AO has made addition for credit card expenses only on the basis of the Annual Information Return available with the Income Tax Department and there is no reference of any incriminating material found during the course of search action at the premises of the assessee. Therefore, following the ratio of Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] and Abhisar Buildwell (P) Ltd [2023 (4) TMI 1056 - SUPREME COURT] no addition could have been made in the year under consideration without the aid of incriminating material. The addition made by the AO and sustained by the CIT(A) is accordingly deleted. Additional Ground No. 1 of the assessee is accordingly allowed. Addition of commission income merely relying on the statement of the assessee as well as the statements of other parties - HELD THAT:- CIT(A) observed that main motive of the assessee was to bring unaccounted cash of various beneficiaries to the mainstream of books of accounts by claiming the same as long-term capital gain and in this whole process the assessee played a very crucial role by interlinking beneficiaries, brokers, intermediaries and exit provider for which he charged a specific commission. But the analysis of the seized document submitted by the learned departmental representative before us do not indicate any such lead regarding the role of the assessee in interlinking of beneficiaries, brokers, intermediaries and exit provider. In the entire seized documents there is no reference of any commission charged by the assessee. This entire addition made by the Assessing Officer is merely based on the confessional statement of the assessee, statement recorded in earlier search and addition proposed in earlier assessment years. The said statements cannot be held to be incriminating material in view of the decisions of the various Hon’ble High Courts discussed above. The addition of commission income made by the AO merely relying on the statement of the assessee as well as the statements of other parties, cannot be sustained in absence of an incriminating material corroborating those statements, in view of the decision of Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] which has been upheld by the Hon’ble Supreme Court Abhisar Buildwell (P) Ltd [2023 (4) TMI 1056 - SUPREME COURT] The additional ground No. 1 of the appeal of the assessee is accordingly allowed. Issues Involved:1. Validity of additions made under Section 153A without incriminating material.2. Jurisdictional issues concerning multiple notices under Section 153A.3. Validity of assessment orders and notices without Document Identification Number (DIN).4. Consideration of statements and seized materials as incriminating evidence.Issue-wise Detailed Analysis:1. Validity of Additions Made Under Section 153A Without Incriminating Material:The primary issue was whether the addition for unexplained credit card expenses and commission income could be made without any incriminating material found during the search. The court referred to the decision of the Hon'ble Bombay High Court in CIT v. Continental Warehousing Corporation and the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P) Ltd., which held that in unabated assessments, no additions could be made without incriminating material. In the case of AY 2011-12, the addition was based solely on the Annual Information Return (AIR) and not on any incriminating material, leading to the deletion of the addition. Similarly, for AYs 2013-14 to 2017-18, the court found no incriminating material linking the alleged commission income to the seized documents. The statements of the assessee and third parties, without corroborating incriminating material, were insufficient to justify the additions.2. Jurisdictional Issues Concerning Multiple Notices Under Section 153A:The assessee challenged the jurisdiction of the Assessing Officer (AO) in issuing multiple notices under Section 153A for the same search. The court noted that the assessment order was passed without jurisdiction as no incriminating material was found during the search. The court emphasized that there cannot be two notices under Section 153A for the same search, and the assessment order was deemed invalid.3. Validity of Assessment Orders and Notices Without Document Identification Number (DIN):The assessee argued that the assessment orders and notices were void ab initio as they did not bear a Document Identification Number (DIN), as mandated by CBDT Circular No. 19/2019. Although this issue was raised, the court did not adjudicate on it, considering it academic due to the resolution of the primary issue regarding the absence of incriminating material.4. Consideration of Statements and Seized Materials as Incriminating Evidence:The court analyzed whether the statements recorded under Section 132(4) and the seized materials could be considered incriminating. It was held that statements alone, without corroborating incriminating material, could not justify additions. The court found that the seized documents did not substantiate the allegations of accommodation entries or commission income. The documents were general in nature and did not establish any link with the alleged transactions. The court concluded that the statements and documents did not qualify as incriminating evidence, leading to the deletion of the additions for commission income.Conclusion:The appeals were partly allowed, with the court deleting the additions made for unexplained credit card expenses and commission income due to the absence of incriminating material. The jurisdictional issues and the validity of notices without DIN were rendered academic and not adjudicated upon.