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2017 (5) TMI 1720 - AT - Income TaxAssessment u/s 153A - conversion of firm into company - assessment of capital gains - land shown as capital contribution in the hands of the firm and the same was revalued subsequently in the hands of the firm and converted into a company under the provisions of Schedule IX of the Companies Act, 1956 - HELD THAT:- An assessment u/s. 153A can be made only based on the incriminating material found as a result of action u/s. 132 of the Act. In the present cases, the alleged incriminating material was in the form of partnership deed and minutes of the Board meeting - this material does not indicate any undisclosed income in the form of money, bullion or other valuable assets. It only indicates that the assessee adopted a tax planning device in order to escape the clutches of the provisions of section 45 - legality or otherwise of these transactions can only be examined in the regular assessment proceedings. The minutes of the Board meeting of the said company or the partnership deep does not reveal that the transactions per se is illegal or the transaction of conversion of firm into a company is per se illegal nor indicates any undisclosed income. Hon'ble jurisdictional High Court in the case of CIT v. IBC Knowledge Park (P) Ltd. [2016 (5) TMI 372 - KARNATAKA HIGH COURT] held that when no material was found during the course of search indicating undisclosed income, no addition can be made based on the inference of undisclosed income under the provisions of section 153A and 153C of the Act. In the present cases, the AO had not referred to any incriminating material which indicates that the tax planning adopted by the respondent-assessee is not legally permissible nor indicating any undisclosed income. These are all the public documents which are available for inspection by anybody and that cannot be called incriminating material. By no stretch of imagination these material can be called incriminating material. The Assessing Officer had not recorded any satisfaction as to how the material found is incriminating in nature. Further no addition can be made in the assessment u/s. 153A based on inferences drawn from already disclosed / public documents found. This kind of issues can be examined only in the regular assessment proceedings. Therefore, the assessments made cannot be upheld in law as the additions have not been based on any incriminating material. - Decided in favour of assessee.
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