2021 (3) TMI 917 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - bogus LTCG - HELD THAT - There was no reference to any of the incriminating material found and seized in the premises of the assessee in the course of the search proceedings. The Assessing Officer in the Assessment Order refers to the seized incriminating material in the case of one Shri Shirish C. shah and the post search enquiries made in his case to make an addition in the hands of the assessee denying the long term capital gain claimed by the assessee. Except the statement of the assessee u/s. 132(4) agreeing for the addition there is no seized incriminating material found in the premises of the assessee in the course of assessment proceedings. When there is no incriminating material found in the course of search in assessee s premises the addition/disallowance cannot be made merely on the statements recorded in the course of the search proceedings. As relying on SH. BRIJ BHUSHAN SINGAL 2018 (10) TMI 1635 - ITAT DELHI and various circulars of CBDT held that the assessments made pursuant to search operation are required to be based on incriminating material discovered as a result of search operation in assessee s case but not on the recorded statements. Thus since no incriminating material found in the course of search in the premises of assessee assessment made making addition by the Assessing Officer in respect of long term capital gain is bad in law. Thus, direct the Assessing Officer to delete the addition made in respect of long term capital gain - Decided in favour of assessee.

Issues Involved:
1. Natural Justice
2. Reassessment under Section 153A of the Income Tax Act, 1961
3. Addition under Section 68 for alleged bogus/unexplained long-term capital gain
4. Addition under Section 69 for alleged estimated unexplained expenses

Detailed Analysis:

1. Natural Justice:
The assessee contended that the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] failed to provide a proper, sufficient, and adequate opportunity of being heard, thereby breaching the principles of natural justice. However, during the hearing, the assessee's counsel did not press this ground seriously. Consequently, this ground was dismissed as not pressed.

2. Reassessment under Section 153A:
The primary issue was whether the reassessment under Section 153A was valid given that no incriminating material was found during the search. The assessee argued that the assessment year in question was an unabated assessment year since the original assessment had attained finality with no pending proceedings under Sections 143(3) or 148. The counsel for the assessee cited several judicial precedents, including decisions from the Delhi High Court and the Bombay High Court, to support the argument that no addition can be made in an unabated assessment if no incriminating material is found during the search.

The tribunal noted that the assessment was indeed unabated at the time of the search and that the assessment order did not refer to any incriminating material found during the search. The tribunal also observed that the Assessing Officer's reliance on the statement recorded under Section 132(4) of the Income Tax Act, which was later retracted, was not sufficient to justify the addition in the absence of incriminating material.

3. Addition under Section 68 for Alleged Bogus/Unexplained Long-Term Capital Gain:
The tribunal examined whether the addition of Rs. 27,00,630 under Section 68, on account of alleged bogus/unexplained long-term capital gain, was justified. Since the tribunal had already determined that the assessment was invalid due to the lack of incriminating material, it directed the Assessing Officer to delete the addition made in respect of the long-term capital gain. The tribunal did not delve into the merits of the addition, considering it academic in nature after deciding the preliminary ground.

4. Addition under Section 69 for Alleged Estimated Unexplained Expenses:
Similarly, the tribunal addressed the addition of Rs. 1,41,783 under Section 69 for alleged estimated unexplained expenses. Given the tribunal's decision on the preliminary ground regarding the invalidity of the assessment, it did not further examine the merits of this addition.

Conclusion:
The tribunal concluded that the reassessment under Section 153A was invalid due to the absence of incriminating material found during the search. Consequently, the additions made by the Assessing Officer under Sections 68 and 69 were directed to be deleted. The appeal filed by the assessee was allowed, and the tribunal did not consider the merits of the additions, deeming them academic in nature.

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