ITAT deletes bogus purchase additions under section 153A assessment without incriminating material for unabated years

ITAT Delhi ruled in favor of the assessee regarding bogus purchase transactions under section 153A assessment. The tribunal found that search findings pertaining to AY 2014-15 were not relevant to the current unabated assessment year. Since no incriminating material was discovered relating to the specific assessment year in question, and the original assessment under section 143(3) had already addressed the same transactions, the tribunal applied settled legal principle that additions cannot be made under section 153A without incriminating material for unabated years. Consequently, all additions made in the assessment order were deleted.

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ISSUES PRESENTED and CONSIDERED

The Tribunal considered several core legal issues in this appeal:

1. Whether the assessment order under section 153A was valid given the absence of incriminating material found during the search.

2. The validity of the reliance on the statement of Mr. Kapil Tyagi recorded under section 132(4) without corroborative evidence.

3. Whether the approval granted under section 153D was mechanical and lacked application of mind.

4. The genuineness of the purchases from M/s. Raja Construction and whether the burden of proof was adequately discharged by the assessee.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Assessment under Section 153A

The relevant legal framework involves section 153A of the Income-tax Act, which allows for assessment or reassessment post-search. The Tribunal noted that the assessment year in question was unabated, meaning it had already been completed before the search. The Court referenced the Supreme Court's decision in Pr. CIT v. Abhishar Buildwell Pvt. Ltd., which established that additions under section 153A can only be made based on incriminating material found during the search. The Tribunal found that no such material was discovered for the assessment year 2013-14, leading to the conclusion that the assessment under section 153A was invalid.

2. Reliance on the Statement under Section 132(4)

The Tribunal examined the reliance on the statement of Mr. Kapil Tyagi, recorded under section 132(4), which allegedly admitted to the bogus nature of M/s. Raja Construction. The Tribunal emphasized that such statements require corroboration by material evidence, as established in CIT vs. Kabul Chawla and CIT vs. Harjeev Aggarwal. The statement pertained to AY 2014-15, not the year in question, and lacked corroborative evidence, rendering it insufficient for the addition.

3. Approval under Section 153D

The Tribunal scrutinized the approval process under section 153D, which requires the Additional Commissioner to approve assessments under section 153A. The Tribunal found that the approval was granted for multiple cases in a short span, suggesting a lack of detailed consideration. This mechanical approach, as argued by the assessee and supported by precedents like Pr. CIT v. Anuj Bansal, rendered the approval invalid.

4. Genuineness of Purchases from M/s. Raja Construction

The Tribunal evaluated the evidence provided by the assessee to substantiate the genuineness of purchases, including invoices, bank statements, and ledger accounts. The Tribunal noted that the burden of proof shifted to the Revenue once the assessee provided prima facie evidence of genuineness. The Revenue failed to disprove the evidence or conduct further inquiries, thus failing to meet its burden of proof.

SIGNIFICANT HOLDINGS

The Tribunal held that no additions could be made under section 153A for an unabated year without incriminating material. It stated, "Therefore, it is settled position of law that no addition can be made u/s 153A without there being any incriminating material relating to unabated assessment year." This principle was pivotal in the Tribunal's decision to delete the additions made by the Assessing Officer.

The Tribunal also highlighted the necessity for corroborative evidence when relying on statements recorded under section 132(4), reinforcing established precedents.

Regarding the approval process under section 153D, the Tribunal underscored the need for individualized, non-mechanical consideration, which was lacking in this case.

Finally, the Tribunal acknowledged the sufficiency of the assessee's evidence in proving the genuineness of the purchases, emphasizing the Revenue's failure to discharge its burden of proof.

In conclusion, the Tribunal allowed the appeal in part, primarily on the grounds of invalid assessment under section 153A and improper reliance on uncorroborated statements.

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