2025 (8) TMI 527 - AT - Income Tax

No Additions Allowed Under Section 153A Without Incriminating Material in Unabated Assessments

The ITAT Kolkata held that in an unabated assessment framed under section 143(3) read with section 153A, the AO cannot make additions without ... Assessment framed u/s. 143(3) read with sec. 153A -absence of any incriminating material found and seized during the course of search in an unabated assessment -whether the AO has jurisdiction to make additions without there being any incriminating materials seized during the search? HELD THAT:- Addition in case of unabated assessment can only be made with reference to incriminating materials seized during search and not otherwise. We note that in the appellate order, Ld. CIT(A) has clearly recorded a finding of fact that AO has not referred to any incriminating materials found during the course of search qua the share capital/share premium and scrip sold by the assessee during the impugned financial year. Accordingly, we are in agreement with the CIT(A) that addition in case of unabated assessment year can only be made on the basis of search material found and seized during search. The case of the assessee is squarely covered by the decision of ABHISAR BUILDWELL P. LTD., RITU AGARWAL [2023 (4) TMI 1056 - SUPREME COURT] wherein the Hon’ble Supreme Court has held that in the case of non-abated/completed assessments, no addition can be made by the AO in an assessment carried out u/s.153A of the Act in the absence of any incriminating material found during the search action. Accordingly, the cross objection by the assessee is allowed. ISSUES: Whether the Assessing Officer (AO) has jurisdiction to make additions in an unabated assessment year under section 153A of the Income Tax Act, 1961, in absence of any incriminating material found or seized during the search.Whether additions made under section 68 of the Income Tax Act, 1961, in respect of share capital/share premium and profit on sale of shares can be sustained without reference to incriminating material seized during search.Whether delay in filing appeal by the revenue can be condoned on administrative grounds. RULINGS / HOLDINGS: The delay in filing the revenue appeal was condoned considering the administrative reasons, and the appeal was admitted for adjudication.The AO does not have jurisdiction to make additions in an unabated assessment year under section 153A of the Act without any incriminating material found or seized during the search; additions must be based on 'incriminating materials found and seized during search.'The additions made under section 68 regarding share capital/share premium of Rs. 4,08,45,000/- and profit on sale of shares of Rs. 3,00,140/- were deleted as there was no incriminating material found during the search related to these additions.The cross objection challenging the jurisdiction of the AO to make additions in an unabated assessment year in absence of incriminating material was allowed.The revenue appeal challenging the deletion of additions was dismissed as infructuous following allowance of the cross objection. RATIONALE: The legal framework applied includes provisions of the Income Tax Act, 1961, specifically sections 132, 139(1), 143(2), 153A, and 68.The Court relied on the principle that for an unabated or completed assessment year on the date of search, the Assessing Officer's jurisdiction to make additions under section 153A is limited to cases where incriminating material is found and seized during the search.The Court referenced the authoritative precedent set by the Hon'ble Supreme Court in 'Pr. CIT Vs. Abhiser Buildwell (P) Ltd.' [2023], which held that no addition can be made by the AO in non-abated/completed assessments under section 153A without incriminating material found during the search.The Court emphasized that the impugned assessment was unabated on the date of search as there were no pending proceedings and the time limit for issuing notice under section 143(2) had expired, thereby attaining finality.The Court noted that the AO had not referred to any incriminating material related to the share capital/share premium or the profit on sale of shares during the search, and thus additions on these grounds were not sustainable.The appellate authority's dismissal of the legal ground raised by the assessee was overruled based on the above legal principles and factual findings.