ITAT Delhi sets aside section 153A assessment lacking incriminating material from search premises

ITAT Delhi held that assessment under section 153A cannot be framed without incriminating material found during search. The tribunal found no incriminating material from assessee's premises, only electronic conversations unrelated to assessee and statements from third parties. Following Supreme Court precedent in Abhisar Buildwell, the assessment order was set aside. Additionally, section 68 addition was deleted as there was no dispute regarding goods movement, purchases, or stock details. The tribunal criticized inconsistent profit margin application by CIT(A) and ruled against revenue on both issues.

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Issues:
Appeals against assessment order, Treatment of sales as unexplained cash credit, Estimation of profit margin, Jurisdiction under section 153A, Reopening of completed assessments.

Analysis:
The judgment involves appeals by the assessee and the Revenue against the assessment order pertaining to Assessment Years 2012-13 & 2013-14. The facts revolve around a search and seizure operation at premises related to Bajaj Group and associates, including the assessee. The Assessing Officer treated certain sales as unexplained cash credit under section 68 of the Income-tax Act, resulting in substantial additions for both assessment years.

The assessee argued that the sales in question were already part of its turnover and contended against double addition. The Assessing Officer doubted the sales to specific parties but accepted corresponding purchases. The ld. CIT(A) upheld the addition but estimated a profit margin on the turnover, leading to confirmed additions for both years. The assessee challenged the profit estimation, while the Revenue contested the non-treatment of entire sales as bogus.

The Tribunal analyzed the incriminating material found during the search and emphasized the necessity of such material for assessments under section 153A. Referring to a Supreme Court judgment, the Tribunal concluded that no incriminating material related to the assessee was found, rendering the assessment invalid. The Tribunal highlighted the importance of incriminating material for assessments post-search.

Regarding the merits, the Tribunal noted no dispute on the movement of goods or corresponding purchases. It questioned the invocation of section 68 for the additions and criticized the differential profit margin applied by the ld. CIT(A). Ultimately, the Tribunal found errors in both the assessment order and the first appellate authority's decision. Consequently, the appeals of the assessee were allowed, and those of the Revenue were dismissed for both assessment years.

The judgment also delved into the jurisdiction to reopen completed assessments based on undisclosed income found during a search. It referenced a High Court decision emphasizing the AO's authority to reassess total income even for completed assessments post-search. In light of this discussion, the Tribunal dismissed appeals related to the reopening of completed assessments.

In conclusion, the Tribunal set aside the assessment order due to lack of incriminating material, allowed the assessee's appeals on merits, and dismissed the Revenue's appeals. The order was pronounced in open court, resolving the issues raised by both parties comprehensively.

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