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

ITAT Mumbai allowed the assessee's appeal, deleting additions made under section 153A assessment. The tribunal held that AO cannot make additions without incriminating material found during search operations. Credit card expense additions based solely on Annual Information Return and commission income additions relying only on confessional statements of parties were deleted. Following Continental Warehousing Corporation and Abhisar Buildwell precedents, mere statements without corroborating incriminating material cannot sustain additions in search assessments.

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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.

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