2018 (1) TMI 131 - AT - Income Tax

Additions in the search assessment framed u/s 153A/143(3) - absence of any incriminating material found during the course of search to that effect - Held that - The assessments for the Asst Years 2009-10 and 2012-13 fall under the category of completed assessments and hence the additions made by the ld AO which are contested before us by the assessee cannot be made in the assessments framed u/s 153A of the Act as they are not backed by any incriminating materials found in the course of search. Accordingly the grounds raised by the assessee for all the appeals are allowed.

Summary

Issues Involved:
1. Justification of additions in search assessment under section 153A/143(3) without incriminating material.
2. Legality of additions based on documents not seized from the assessee's premises.
3. Validity of additions for previously concluded assessments without new incriminating evidence.
4. Specific additions made towards long-term capital gains, bogus development expenses, perquisites, and unsecured loans.

Issue-wise Detailed Analysis:

1. Justification of Additions in Search Assessment Under Section 153A/143(3) Without Incriminating Material:
The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding additions in the absence of any incriminating material found during the search. The Tribunal noted that no incriminating documents were seized from the assessee's premises except for loose sheets (KKS/1), which were satisfactorily explained and not used for any addition. The documents used by the Assessing Officer (AO) were seized from the business premises of Cygnus group companies, not from the assessee. The Tribunal emphasized that for concluded assessments, additions under section 153A require incriminating material found during the search, which was absent in this case.

2. Legality of Additions Based on Documents Not Seized from the Assessee's Premises:
The AO relied on documents seized from the Cygnus group companies' premises. The Tribunal held that as per section 292C, documents found in a person's premises are presumed to belong to them unless proven otherwise. If documents from another entity's premises are to be used, the AO must follow section 153C, recording satisfaction and transferring those materials to the assessee's AO. The Tribunal found that this procedure was not followed, making the use of such documents in the assessee's assessment legally untenable.

3. Validity of Additions for Previously Concluded Assessments Without New Incriminating Evidence:
The Tribunal reiterated that for assessments concluded before the search (where the time limit for issuing notice under section 143(2) had expired), no additions could be made under section 153A without new incriminating material found during the search. The Tribunal cited several judicial precedents, including the Delhi High Court's decision in CIT vs. Kabul Chawla, which held that completed assessments can only be disturbed based on incriminating material unearthed during the search. The Tribunal concluded that since no such material was found, the additions were not justified.

4. Specific Additions Made Towards Long-Term Capital Gains, Bogus Development Expenses, Perquisites, and Unsecured Loans:
- Long-Term Capital Gains: The addition of Rs. 12,39,892/- as bogus LTCG was contested. The Tribunal noted that this gain was disclosed in the original return and no new incriminating material was found during the search to justify this addition.
- Bogus Development Expenses: For Krishna Kumar Singhania (AY 2009-10), the addition of bogus development expenses was part of the original return and not backed by new search material.
- Perquisites: Additions for perquisites under section 17(2)(iv) for Krishna Kumar Singhania, Vijay Kumar Singhania, and Ajay Kumar Singhania (AY 2012-13) were based on insufficient drawings, not supported by any search material.
- Unsecured Loans: For Ajay Kumar Singhania (AY 2012-13), the addition of Rs. 21,79,580/- towards unsecured loans was due to lack of confirmation, not based on search material. This addition was deleted by the CIT(A) and not contested by the Revenue.

Conclusion:
The Tribunal allowed the appeals, holding that the assessments for AY 2009-10 and 2012-13 were concluded assessments and could not be disturbed without incriminating material found during the search. The additions made by the AO were not backed by such material, rendering them invalid. The Tribunal's decision applied uniformly to all assessees involved in the case, leading to the allowance of all appeals.