Additions for unabated years under section 153A invalid without incriminating material; reopening possible under sections 147/148

ITAT held that for unabated assessment years covered by a search, assessment u/s 153A can be made only on the basis of incriminating material found during the assessee's own search. In the absence of such material for a particular year, the original assessment for that unabated year must remain undisturbed and no addition can be made u/s 153A. However, such years may still be reopened u/s 147/148 subject to statutory conditions, consistent with the SC ruling in Abhisar Buildwell (P.) Ltd. As no incriminating material was found for the relevant unabated years, the additions were deleted and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether assessments framed under section 143(3) read with section 153A for unabated assessment years could validly include additions in absence of incriminating material found during the assessee's own search under section 132.

1.2 Whether, for the assessment year 2017-18, the selection of the case for scrutiny assessment under section 143(3) suffered from jurisdictional infirmity in the absence of incriminating material and non-fulfilment of the prescribed criteria for compulsory scrutiny.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of assessments under section 143(3) r.w.s. 153A for unabated years without incriminating material

Legal framework (as discussed):

2.1 The Tribunal examined the scope of section 153A in light of the law laid down by the Supreme Court in the decision reported as Abhisar Buildwell (P.) Ltd., and the Delhi High Court decision in Kabul Chawla, as well as the principles applied by the Supreme Court in Sinhgad Technical Education Society regarding the requirement of incriminating material in search-based assessments.

Interpretation and reasoning:

2.2 The Tribunal accepted the assessee's contention that, for unabated/completed assessment years, jurisdiction to make additions under section 153A arises only where incriminating material pertaining to the concerned year is found during the assessee's own search under section 132.

2.3 It was held that the presence of incriminating material is an "indispensable requirement" on a year-wise basis, and that such material must be (i) found during the search, and (ii) directly relatable to the specific assessment year sought to be disturbed.

2.4 The Tribunal agreed that unabated assessments cannot be arbitrarily revisited under section 153A in the absence of such incriminating material; if no incriminating material is found in the assessee's own search for a particular year, the original assessment for that year must remain undisturbed.

2.5 The contention of the Departmental Representative that "incriminating material" for the purposes of section 153A could be sourced from searches or materials relating to the group or third parties, and that section 153A does not require seizure from the assessee specifically, was rejected. The Tribunal held that, for unabated years, incriminating material must emanate from the assessee's own search.

2.6 The Tribunal noted that no material was brought on record by the revenue authorities to demonstrate that any incriminating material was found or seized from the assessee during the search under section 132 for the relevant unabated years.

2.7 It was emphasised that, in the absence of incriminating material, while unabated years cannot be reassessed under section 153A with additions, they may still be subjected to reopening under sections 147/148, subject to satisfaction of those provisions, as clarified by the Supreme Court in Abhisar Buildwell (P.) Ltd.

Conclusions:

2.8 For assessment years 2011-12 and 2013-14 to 2016-17, being unabated years, and there being no incriminating material found during the assessee's own search relatable to those years, the assessments framed under section 143(3) read with section 153A were held to be invalid.

2.9 All such assessments were quashed, and the corresponding appellate orders were set aside.

2.10 All other grounds and additions on merits, including those relating to cash credits, unexplained investments, search warrant, limitation, special audit under section 142(2A), and alleged lack of opportunity, were treated as academic and left open in view of the jurisdictional finding.

Issue 2 - Validity of scrutiny selection and assessment under section 143(3) for assessment year 2017-18

Interpretation and reasoning:

2.11 For the assessment year 2017-18, the assessee challenged the assessment under section 143(3) on the ground that the case did not fall within the categories for compulsory scrutiny and that there was no incriminating material to justify such scrutiny.

2.12 The Tribunal noted that the assessee did not bring any material on record to rebut or contradict the findings of the appellate authority on this issue.

2.13 The Departmental Representative contended, and the Tribunal accepted, that this was a case of abated assessment and that it was within the Assessing Officer's prerogative to select the case for scrutiny in accordance with CBDT guidelines, and no irregularity in such selection was shown.

Conclusions:

2.14 In absence of any contrary material from the assessee, the Tribunal found no infirmity in the appellate order upholding the assessment under section 143(3) for assessment year 2017-18.

2.15 The jurisdictional challenge to the selection of the case for scrutiny for assessment year 2017-18 was rejected, and the appeal for that year was dismissed.

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