2024 (10) TMI 533 - AT - Income Tax

Additions cannot be made under sections 153A/153C when no incriminating material found during search

Smt. Shashi Agarwal Versus Dy. C.I.T., Central Circle-1, Lucknow.

ITAT Lucknow held that additions cannot be made in assessment orders under sections 153A/153C when no incriminating material was found during search under ... Assessment u/s 153A - additions can be made in assessment orders passed u/s 153A or u/s 153C of IT Act in cases falling under unabated/completed assessments, when no incriminating material was found at the time of search u/s 132 - HELD THAT:- It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the AO. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132. Furthermore, as no assessment proceedings were pending in the case of the assessee at the time when (on 08/07/2016) search u/s 132 was conducted, the case of the assessee in the present appeals before us, falls in the category of completed/unabated assessments within the meaning of orders passed in the case of Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT] and in the case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] which was approved in the case of Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT] and U. K. Paints (Overseas) Ltd. [2023 (5) TMI 373 - SC ORDER] and by the aforesaid instruction No. 1 of 2023 of CBDT, which is binding on Revenue authorities. Accordingly, we direct the Assessing Officer to delete the additions made - Decided in favour of assessee. Issues Involved:1. Whether additions can be made in assessment orders under section 153A of the Income Tax Act when no incriminating material was found during the course of a search under section 132.2. The validity of ex-parte assessment and appellate orders.3. The applicability of Supreme Court judgments on the issue of additions in completed/unabated assessments.Issue-wise Detailed Analysis:1. Additions under Section 153A without Incriminating Material:The primary issue in these appeals was whether the Assessing Officer could make additions to the assessee's income under section 153A when no incriminating material was discovered during the search under section 132. The counsel for the assessee argued that this issue has been settled in favor of the assessee by the Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell and Dy. CIT vs. U. K. Paints (Overseas) Ltd. The Supreme Court held that in cases of completed/unabated assessments, no additions can be made under section 153A unless incriminating material is found during the search. The Tribunal agreed with this position, noting that the relevant facts were undisputed: no incriminating materials were found, and no assessment proceedings were pending at the time of the search. Therefore, the additions made by the Assessing Officer were directed to be deleted.2. Ex-parte Assessment and Appellate Orders:Both the assessment orders and the appellate orders were passed ex-parte, meaning without the presence or input of the assessee. The Tribunal noted that the issues in dispute arose due to the absence of consideration of the assessee's submissions. This procedural aspect was significant because it highlighted the lack of engagement with the assessee's arguments and evidence, which could have influenced the outcome of the assessments and appeals.3. Applicability of Supreme Court Judgments:The Tribunal considered the applicability of recent Supreme Court judgments, which clarified the legal position on additions in cases of completed/unabated assessments. The Tribunal noted that the Supreme Court's decisions in Principal Commissioner of Income-tax vs. Abhisar Buildwell and Dy. CIT vs. U. K. Paints (Overseas) Ltd. were binding and settled the issue in favor of the assessee. The Tribunal also referenced the Central Board of Direct Taxes' Instruction No. 1 of 2023, which directed the implementation of these Supreme Court judgments uniformly, further supporting the assessee's position.In conclusion, the Tribunal directed the deletion of the additions made by the Assessing Officer for both the assessment years in question, aligning with the Supreme Court's rulings and the CBDT's instructions. The other issues regarding the merits of the additions were deemed academic and did not require further adjudication. The appeals were treated as allowed for statistical purposes.