2023 (8) TMI 1542 - HC - Income Tax

No addition under section 153A assessment without incriminating material found during search under section 132(1)

THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT Versus BIRJU CHHOTALAL SHAH

THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT Versus BIRJU CHHOTALAL SHAH - TMI Issues Involved:1. Whether the Income Tax Appellate Tribunal (ITAT) erred in dismissing the Revenue's appeal, holding that additions during assessment under Section 153A must be based on incriminating material found during a search.2. Whether the ITAT failed to appreciate that Section 153A requires reassessment of total income for six assessment years, even without incriminating material.3. Whether the ITAT erred in affirming the CIT(A)'s decision that no disallowance of Long Term Capital Gain (LTCG) exemption could be made without incriminating material.4. Whether the ITAT erred in deleting the addition of Rs.22,89,898/- for alleged bogus LTCG claims without appreciating the department's possession of information regarding accommodation entries.Detailed Analysis:Issue 1: Incriminating Material and Section 153AThe appellant argued that the ITAT erred by limiting additions during assessment under Section 153A to incriminating material found during a search, contrary to the absence of such stipulation in the section. The court examined the ITAT's decision, which was consistent with the precedent set by various high courts, including the Gujarat High Court in CIT Vs. Saumya Construction Pvt. Ltd., which held that no additions can be made in completed/unabated assessments without incriminating material. The court affirmed that the ITAT correctly applied this principle, noting that the absence of pending assessments or abatement meant no additions could be made without incriminating evidence.Issue 2: Reassessment of Total IncomeThe appellant contended that Section 153A mandates reassessment of total income for six assessment years, regardless of incriminating material. The court reiterated that the legal position, as clarified in the case of Kabul Chawla by the Delhi High Court, is that completed assessments can only be interfered with based on incriminating material found during a search. The court found that the ITAT correctly interpreted Section 153A in line with established judicial interpretations, emphasizing that the absence of incriminating material precludes additional assessments.Issue 3: Disallowance of LTCG ExemptionThe appellant challenged the ITAT's affirmation of the CIT(A)'s decision, which granted LTCG exemption under Section 10(38) due to the lack of incriminating material. The court noted that the ITAT and CIT(A) relied on the principle that no disallowance can be made without incriminating evidence, as established in Saumya Construction and other cases. The court upheld the ITAT's decision, emphasizing that the exemption was part of the books of accounts and no incriminating material was found during the search.Issue 4: Alleged Bogus LTCG and Accommodation EntriesThe appellant argued that the ITAT erred in deleting the addition of Rs.22,89,898/- for alleged bogus LTCG claims, despite possessing information about accommodation entries. The court observed that the ITAT's decision was based on the absence of incriminating material found during the search at the assessee's premises. The court highlighted that the ITAT's findings were consistent with the legal position that additions require a nexus with seized material, and mere possession of information without incriminating evidence does not justify additions.Conclusion:The court concluded that the ITAT's decision was based on clear factual aspects and consistent with established legal principles regarding Section 153A. The appeal was dismissed at the admission stage, with no substantial question of law involved. The court emphasized that findings of fact by the ITAT cannot be disturbed in the absence of a substantial question of law, as per the Supreme Court's guidance on appeals under Section 260A.