S. 153A: Addition in a search assessment for a AY which is not pending can be made only if incriminating material is found during search

Sanjay Aggarwal vs. DCIT (ITAT Delhi)

The Tribunal had to consider whether in a case where a search is conducted u/s 132 but no incriminating evidence is found, the AO could make an addition u/s 153A of the Act. The assessee relied on All Cargo Global Logistics 137 ITD 287 (SB) (Mum) & Pratibha Industries 141 ITD 151 (Mum) in support of the contention that no addition can be made in respect of concluded assessments on the date of search unless some incriminating material was found during the course of search. The department claimed that the said judgements were wrong in view of SSP Aviation Ltd 252 CTR (Del) 291, Chetan Das Lachman Das 254 CTR (Del) 392 & Anil Kumar Bhatia 352 ITR 493 (Del). HELD by the Tribunal allowing the assessee’s plea:

(i) The language of s. 153A has been structured in such a way so as not to permit the making of addition for the assessment year of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search. It is manifest that a duty is cast on the AO to determine the ‘total income’ of the assessee for such six assessment years. ‘Total income’ refers to the sum total of income in respect of which a person is assessable and covers not only the income emanating from declared sources or any material placed before the AO but from all sources including the undeclared ones. However, the second proviso to s. 153A(1) eclipses the afore discussed determination of ‘total income’ by mandating that while pending assessments relating to any assessment year falling within the period of six years shall abate and that completed assessments shall remain intact. The effect of the second proviso in the entire setting of section is that the assessment for any assessment year which is not pending as on the date of search cannot include an item of income for which no incriminating material was found;

(ii) Anil Kumar Bhatia, where it was held that even if assessment order had already been passed in respect of one or any of the six relevant assessment years either u/s 143(1)(a) or 143(3) prior to the initiation of search, the AO is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search is distinguishable because there some incriminating material was found in respect of a non-pending assessment. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found was left open. There are sufficient indirect hints given by the High Court in Anil Kumar Bhatia about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search;

(iii) Also, as the Special Bench in All Cargo Global Logistics has decided this issue in this manner, it is not possible for us to deviate from the same. There has to be some consistency in the view taken by the Tribunal. Once a Special Bench has decided a particular issue in a particular manner, then, that becomes binding on all the division benches across the country unless there is a contrary judgment of the Supreme Court or that of some High Court. Accordingly, it is held that no addition can be made for any assessment year u/s 153A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search.