Manual cash book found during search cannot be used for additions without invoking Section 153C properly

The ITAT Delhi allowed the assessee's appeal, ruling that a manual cash book found at the company's premises during search could not be considered incriminating material under Section 153A for making additions in the searched person's hands, as the company's assessment was already concluded. The tribunal held that Section 153C should have been invoked instead, making the CIT(A)'s exercise of jurisdiction under Section 153A invalid. Additionally, the tribunal found no justification for treating expenditures as taxable perquisites under Section 2(24)(iv), noting the assessee was entitled to telescoping benefit given the disclosure made under IDS, resulting in no addition being warranted.

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Issues Involved:
1. Legality of assessment orders u/s 153A r.w.s. 143(3).
2. Validity of additions made u/s 69C based on seized material from a related entity.
3. Appropriateness of sustaining additions u/s 2(24)(iv) by the Ld. CIT(A).

Summary:

Issue 1: Legality of Assessment Orders u/s 153A r.w.s. 143(3)
The appellant contended that the assessment orders passed u/s 153A r.w.s. 143(3) were illegal and arbitrary as no incriminating material was found during the search at the appellant's premises. The Tribunal noted that the manual cash book, which formed the basis of the additions, was seized from the premises of M/s. Lion Manpower Solutions Pvt. Ltd., where the appellant is a director. The Tribunal agreed with the appellant's reliance on the Supreme Court judgment in PCIT Vs Abhisar Buildwell Pvt. Ltd., asserting that no addition can be made in the absence of incriminating material found during the search on the appellant.

Issue 2: Validity of Additions Made u/s 69C Based on Seized Material from a Related Entity
The Ld. AO made additions of Rs. 28,20,658/- and Rs. 9,25,074/- u/s 69C based on a manual cash book found at the premises of Lion Manpower. The Tribunal observed that the manual cash book contained entries related to cash transactions of the company and the appellant. The Tribunal held that the same set of books could not be considered incriminating material for the purpose of Section 153A for the appellant, as the assessments for the relevant years were concluded. The Tribunal emphasized that the provisions of Section 153C should have been invoked instead.

Issue 3: Appropriateness of Sustaining Additions u/s 2(24)(iv) by the Ld. CIT(A)
The Ld. CIT(A) partially sustained the additions by modifying them u/s 2(24)(iv), considering the expenses as benefits or perquisites obtained by the appellant from the company. The Tribunal found no justification for this modification, noting that the expenditures were personal expenses incurred by the company on behalf of the appellant and were not claimed as deductions by the company. The Tribunal also acknowledged the appellant's disclosure of Rs. 50 lacs in the Income Declaration Scheme, 2016, and concluded that the source of the impugned expenditures should be accepted. The Tribunal ruled that the appellant was entitled to the telescoping benefit and thus, no addition was warranted.

Conclusion:
The Tribunal allowed the appeals, concluding that the assessment orders u/s 153A r.w.s. 143(3) were not justified in the absence of incriminating material found during the search on the appellant. The additions made u/s 69C were invalid as they were based on material seized from a related entity, and the modifications made by the Ld. CIT(A) u/s 2(24)(iv) were unwarranted. The Tribunal pronounced the order in the open court on 16.04.2024.

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