2023 (3) TMI 285 - AT - Income Tax

Assessment u/s 153C - incriminating documents or books of accounts “belonging to” the assessee were found during the course of search action u/s 132 or not? - whether no additions were made by the A.O. on the basis of documents “belonging to” the assessee? - HELD THAT:- We are of the considered view that since the search was conducted prior to amendment in section 153C of the Act, it was an essential pre-requisite that the incriminating documents on the basis of which the assessment was framed must “belong” to the assessee. From the contents of the assessment order and the observations made by Ld. CIT(Appeals), even the Ld. A.O. has not alleged that additions were made on the basis of incriminating documents “belonging to” the assessee found during the course of search. Therefore, in the instant set of facts, we find no infirmity in the order of the Ld. CIT(Appeals) wherein he has held that since assessment was not framed on the basis of any incriminating documents “belonging to” the assessee found during the course of search, then in light of the various judicial precedents, additions are not liable to be sustained.

Additions for Unabated assessment year can only be made on the basis of incriminating material found during the course of search - We observe that Ld. CIT(Appeals) while disposing of the objections raised by the in respect of initiation of proceedings under section 153C of the Act, has categorically held that there was no incriminating material which formed the basis of assessment framed under section 153C of the Act. The same is evident from the relevant paragraphs of Ld. CIT(Appeals) order disposing of the objections raised by the assessee in respect of initiation of proceedings under section 153C.

In the instant set of facts, no incriminating materials was found during the course of search which formed the basis of initiation of proceedings under section 153C of the Act. We also observe that the instant year is an unabated assessment year where the time limit of completing the assessment proceedings have already been concluded. It is well-settled law that in absence of any incriminating material found during the course of search, proceedings under section 153A/153C of the Act cannot be initiated in case of unabated assessment year.

As noted by Ld. CIT(Appeals), is an unabated assessment year. During the search operation which was carried by the Department, admittedly, no incriminating material was discovered, which formed the basis of additions made in respect of order for assessment year 2009-10 passed u/s. 153C of the Act, for which the time limit of initiation of assessment has already concluded. It is a settled position of law that in case of unabated assessment year, no addition could be made de-hors the material found during the search.

In our view, CIT(Appeals) has not erred in law and in fact in holding that the initiation of proceedings u/s. 153C of the Act on the assessee are not sustainable in the instant facts. Appeal of the Department is dismissed on ground of jurisdiction itself.