THE issue before the bench is - Whether addition u/s 153A can be made in the absence of incriminating material found during the course of search where the original assessment was already framed on the date of search. NO is the answer.
Facts of the case
The assessee belongs to J Group of Companies headed by S and is in the area of assembly of DG Sets. The search operation was conducted in the group. Notice u/s 153A was issued and in response the assessee filed return and assessment was framed u/s 153A r.w. s.143(3) of the Act. During the course of assessment proceedings the assessee questioned the validity of initiation of proceedings u/s 153A of the Act on the basis that no incriminating material was found during the course of search and the assessment u/s 143(3) was already framed before the date of search. The AO did not agree with the assessee and rejected the objection with this finding that there was no requirement that an assessment made u/s 153A of the Act should based on any material seized in the course of search. The AO also made disallowance on account of scrap sale for the purposes of deduction u/s 80IB of the Act and disallowance u/s 14A. CIT(A) upheld order of AO.
Having heard the parties, the Tribunal held that,
+ ITAT in the case of AL Cargo Global Logestic Ltd. vs. CIT, held that the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search;
++ In the case of Kusum Gupta also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla and others has expressed the similar view. It has also discussed the decision of Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia 2012-TIOL-641-HC-DEL-IT, it was held that the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search;
++ the decision of the Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia supports the case of the assessee that in absence of incriminating material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder;
++ Rajasthan High Court in the case of Jai Steel has been pleased to hold that if any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed;
++ in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search;
++ in absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly held as null and void.
The assessee belongs to J Group of Companies headed by S and is in the area of assembly of DG Sets. The search operation was conducted in the group. Notice u/s 153A was issued and in response the assessee filed return and assessment was framed u/s 153A r.w. s.143(3) of the Act. During the course of assessment proceedings the assessee questioned the validity of initiation of proceedings u/s 153A of the Act on the basis that no incriminating material was found during the course of search and the assessment u/s 143(3) was already framed before the date of search. The AO did not agree with the assessee and rejected the objection with this finding that there was no requirement that an assessment made u/s 153A of the Act should based on any material seized in the course of search. The AO also made disallowance on account of scrap sale for the purposes of deduction u/s 80IB of the Act and disallowance u/s 14A. CIT(A) upheld order of AO.
Having heard the parties, the Tribunal held that,
+ ITAT in the case of AL Cargo Global Logestic Ltd. vs. CIT, held that the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search;
++ In the case of Kusum Gupta also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla and others has expressed the similar view. It has also discussed the decision of Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia 2012-TIOL-641-HC-DEL-IT, it was held that the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search;
++ the decision of the Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia supports the case of the assessee that in absence of incriminating material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder;
++ Rajasthan High Court in the case of Jai Steel has been pleased to hold that if any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed;
++ in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search;
++ in absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly held as null and void.
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