2024 (5) TMI 1537 - AT - Income Tax

Assessment u/s 153A - addition made on account of the same being devoid of any incriminating material found during the course of search rendering the assessment order bad in law - HELD THAT - The ratio laid down by in the case of Abhisar Buildwell . 2023 (4) TMI 1056 - SUPREME COURT squarely apply to the facts and circumstances of the instant case. The impugned addition is not based on any incriminating material found relevant to the A.Ys under consideration. Therefore we do not find any reason to interfere with the findings of the ld. CIT(A) and consequently the action of the CIT(A) in quashing the orders of the AO is confirmed. However it is pointed out that the CIT(A) has held that Assessing Officer was not justified in assuming jurisdiction u/s 153C whereas the correct position is that AO has passed order u/s 153A r.w.s 143(3) of the Act. To that extent the decision of the CIT(A) is modified. Decided against revenue.

ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether the assessment orders for the Assessment Years (AY) 2014-15, 2015-16, and 2016-17 were valid given the absence of incriminating material found during the search operation. The core legal question was whether the principles laid down by the Delhi High Court in Kabul Chawla, affirmed by the Supreme Court in Abhisar Buildwell, applied, thereby rendering the assessment orders null and void.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework revolves around Section 153A and Section 153C of the Income Tax Act, 1961, which pertain to assessments following a search or requisition. The precedents considered include the Delhi High Court's decision in Kabul Chawla and the Supreme Court's affirmation in Abhisar Buildwell, which establish that in the absence of incriminating material found during a search, no addition can be made under Section 153A for completed or unabated assessment years.

Court's Interpretation and Reasoning

The Tribunal interpreted the law by emphasizing that for an assessment under Section 153A to be valid, there must be incriminating material found during the search that pertains to the assessment year in question. The Tribunal noted that the incriminating documents found during the search pertained to AYs 2013-14, 2017-18, 2018-19, and 2019-20, not the years under appeal. Thus, the Tribunal concluded that the Assessing Officer (AO) lacked jurisdiction to make additions for AYs 2014-15, 2015-16, and 2016-17 under Section 153A.

Key Evidence and Findings

The key evidence was the absence of incriminating material for the AYs under consideration (2014-15, 2015-16, and 2016-17). The AO's own admission that the seized materials pertained to different years was crucial. The Tribunal found that the AO made additions based on assumptions and extrapolations from unrelated assessment years, which was not permissible under the law.

Application of Law to Facts

The Tribunal applied the legal principles from Kabul Chawla and Abhisar Buildwell to the facts, determining that the absence of incriminating material for the AYs in question meant that the AO could not justify the additions made. The Tribunal noted that the AO's reliance on extrapolation from other years was not supported by any incriminating evidence for the years under appeal.

Treatment of Competing Arguments

The Tribunal considered the Revenue's argument, which relied on the decision in Chetan Das Laxman Das, suggesting that extrapolation could be made even when no seized material was found for certain AYs. However, the Tribunal favored the assessee's argument that without incriminating material specific to the AYs in question, the additions were unjustified. The Tribunal also noted the AO's incorrect application of jurisdiction under Section 153C when the correct section was 153A.

Conclusions

The Tribunal concluded that the AO's additions for AYs 2014-15, 2015-16, and 2016-17 were invalid due to the lack of incriminating material. The Tribunal upheld the CIT(A)'s decision to quash the assessment orders, albeit with a correction regarding the applicable section under which the AO had acted.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"In absence of any incriminating material found during search, the AO was not justified in assuming jurisdiction U/s 153C of the Act so as to proceed against the appellant and hence the proceedings initiated u/s 153C of the Act was void ab initio and the order passed U/s 153C of the Act is quashed."

Core Principles Established

The Tribunal reaffirmed the principle that in the absence of incriminating material found during a search, no additions can be made under Section 153A for completed or unabated assessment years. This principle is consistent with the rulings in Kabul Chawla and Abhisar Buildwell.

Final Determinations on Each Issue

The Tribunal confirmed the CIT(A)'s decision to quash the assessment orders for AYs 2014-15, 2015-16, and 2016-17 due to the lack of incriminating material. The Tribunal dismissed the Revenue's appeals and modified the CIT(A)'s decision to clarify that the AO had acted under Section 153A, not 153C.

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