2025 (3) TMI 816 - HC - Income Tax

Retracted statement alone insufficient to justify section 153A assessment addition without corroborating incriminating material

The Principal Commissioner Of Income Tax, Guwahati, The Assistant Commissioner Of Income Tax, Guwahati Versus Rohit Karan Jain.

The Gauhati HC upheld the CIT(A) and ITAT's decision to delete an assessment under section 153A. The court found that the Assessing Officer relied solely ... Assessment u/s 153A - absence of incriminating material a completed assessment cannot be opened - CIT (A) and the ITAT deleted - HELD THAT:- We are of the view that the CIT(Appeals) as well as ITAT, after carefully scrutinizing the material collected by the AO has recorded a finding of the fact that other than the retracted statement no other evidence/material was relied upon by the Assessing Officer to invoke the addition. CIT (Appeals) and the ITAT were of the view that the said piece of evidence, i.e. retracted statement cannot be termed as incriminating material. Taking into consideration the above fact, we are of the view that the said finding of fact recorded by the Commissioner of Income Tax (Appeals) as well as ITAT is not liable to be interfered with in this appeal since this Court can only exercise jurisdiction when any substantial question of law arises. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:1. Whether the Income Tax Appellate Tribunal (ITAT) was justified in confirming the findings of the Commissioner of Income Tax (Appeals) that the assessment for the Assessment Year (AY) 2014-2015 is not abated.2. Whether the ITAT was correct in law in holding that the assessment for a particular Assessment Year is not abated when no assessment order was passed prior to the passing of an order under Section 153A of the Income Tax Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification of ITAT's Confirmation of Non-Abatement of AssessmentRelevant Legal Framework and Precedents: The legal framework revolves around Section 153A of the Income Tax Act, which deals with assessments in cases of search or requisition. The precedents considered include the decisions of the Hon'ble Supreme Court and various High Courts, particularly the Delhi High Court in the case of Kabul Chawla, which held that no addition can be made in respect of completed assessments in the absence of incriminating material.Court's Interpretation and Reasoning: The Court interpreted that the intention of Section 153A is to assess or reassess the total income based on incriminating material found during the search. The Court emphasized that completed assessments cannot be reopened unless incriminating material is found.Key Evidence and Findings: The key evidence was the retracted statement of the assessee's father, which was the sole basis for the addition made by the Assessing Officer. The Court found that there was no other incriminating material to support the addition.Application of Law to Facts: The Court applied the principles from the Kabul Chawla case, concluding that the absence of incriminating material meant the completed assessment could not be disturbed.Treatment of Competing Arguments: The appellant argued that the assessment was based on incriminating material. However, the Court found that the only evidence was the retracted statement, which could not be considered incriminating.Conclusions: The Court concluded that the ITAT was justified in confirming the findings of the Commissioner of Income Tax (Appeals) that the assessment for AY 2014-2015 is not abated.Issue 2: Legality of Holding Assessment as Non-Abated Without Prior Assessment OrderRelevant Legal Framework and Precedents: The legal framework involves Section 153A and the concept of abatement of assessments. The Court referred to the principles established in prior judgments, including those by the Supreme Court and High Courts.Court's Interpretation and Reasoning: The Court reasoned that for an assessment to be abated, there must be pending proceedings at the time of the search. Since there was no pending assessment for AY 2014-2015, the assessment was considered completed and could not be reopened without incriminating material.Key Evidence and Findings: The Court found that the assessment for AY 2014-2015 was completed, and there was no pending assessment at the time of the search.Application of Law to Facts: The Court applied the legal principles to determine that the absence of pending proceedings meant the assessment was non-abated.Treatment of Competing Arguments: The appellant contended that the assessment should be considered abated. However, the Court found no legal basis for this argument in the absence of pending proceedings.Conclusions: The Court concluded that the ITAT was correct in law in holding that the assessment for AY 2014-2015 was not abated.3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: 'The Hon'ble Supreme Court, in Abhisar Buildwell (P) Ltd. (supra), while affirming the view taken by the Delhi High Court in the case of Commissioner of Income Tax, Central III CIT Vs. Kabul Chawla, ... has held that no addition can be made in respect of completed assessment in absence of any incriminating material.'Core Principles Established: The Court established that in the absence of incriminating material, completed assessments cannot be reopened under Section 153A. The Court also reinforced the principle that only pending assessments can be abated.Final Determinations on Each Issue: The Court determined that the ITAT was justified in confirming the non-abatement of the assessment and that the assessment for AY 2014-2015 was not abated due to the absence of pending proceedings and incriminating material.