2025 (4) TMI 43 - AT - Income Tax

Assessment u/s 153A - addition of amount received as unexplained invoking the provision of section 68 - HELD THAT - We find material substance in the submissions advanced on behalf of the assessee / appellant and having thoughtful consideration that addition in question deserves to the deleted AS completed assessment can be interfered by the Ld. AO while making the assessment u/s 153(A) of the Act only on the basis of some incriminating material unearthed during the course of search as relying Abhisar Buildwell P. Ltd. 2023 (4) TMI 1056 - SUPREME COURT - Appeal of the assessee is hereby allowed

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the enhancement of income by the CIT(A) under Section 251(1) of the Income Tax Act was valid and within jurisdiction.
• Whether the addition of Rs. 5,00,000/- as unexplained income under Section 68 of the Income Tax Act was justified.
• Whether the assessment order under Section 153A read with Section 143(3) was valid, particularly in the absence of incriminating material found during the search.
• Whether the issuance of multiple notices under Section 153A and the timing of notices under Sections 142(1) and 143(2) were compliant with statutory requirements.
• Whether the proceedings and reassessment under Section 153A violated mandatory provisions and procedural requirements, including those under Section 153D.
• Whether the assessment order was invalid due to the lack of a valid Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019.

ISSUE-WISE DETAILED ANALYSIS

1. Enhancement of Income under Section 251(1)

The legal framework under Section 251(1) allows the CIT(A) to enhance an assessment. However, this jurisdiction is limited to matters considered by the Assessing Officer (AO) during the assessment proceedings. The Tribunal examined whether the CIT(A) exceeded this jurisdiction by enhancing income without proper consideration of the AO's findings.

The Tribunal found that the enhancement was made without adequate jurisdiction, as the CIT(A) introduced new matters not considered by the AO. This was deemed a violation of the procedural limits set by Section 251(1).

2. Addition under Section 68

Section 68 of the Income Tax Act deals with unexplained cash credits. The Tribunal analyzed whether the addition of Rs. 5,00,000/- was supported by evidence of unexplained income.

The Tribunal noted that no incriminating material was found during the search to justify this addition. The absence of such material was crucial, as established in prior cases like Kabul Chawla and Abhisar Buildwell, which held that additions in completed assessments require incriminating evidence found during a search.

3. Validity of Assessment under Section 153A

The Tribunal considered whether the assessment under Section 153A was valid, especially given the lack of incriminating material found during the search.

The Tribunal reiterated the principle that completed assessments can only be reopened under Section 153A if incriminating material is found. Since no such material was discovered, the assessment was deemed invalid. This aligns with precedents set by the Delhi High Court in Kabul Chawla and the Supreme Court in Abhisar Buildwell.

4. Issuance and Timing of Notices

The Tribunal examined the procedural compliance regarding the issuance of notices under Sections 153A, 142(1), and 143(2).

It was found that the AO issued a second notice under Section 153A while the proceedings from the first notice were still pending, which is contrary to legal norms. Additionally, the notice under Section 142(1) was issued before the notice under Section 143(2), which violated the procedural sequence required by law.

5. Compliance with Section 153D and Other Procedural Requirements

The Tribunal assessed whether the reassessment complied with Section 153D, which requires approval from higher authorities for assessments under Section 153A.

The Tribunal found that the purported approval under Section 153D was inadequate and lacked application of mind, rendering the reassessment invalid.

6. Document Identification Number (DIN)

The Tribunal considered the absence of a valid DIN, as required by CBDT Circular No. 19/2019, which mandates that all orders must have a DIN.

The lack of a DIN was a procedural defect that contributed to the invalidity of the assessment order.

SIGNIFICANT HOLDINGS

The Tribunal held that the enhancement of income by the CIT(A) was beyond jurisdiction and invalid. It quoted, "The enhancement was made without adequate jurisdiction, as the CIT(A) introduced new matters not considered by the AO."

On the addition under Section 68, the Tribunal stated, "Since no incriminating material was discovered, the assessment was deemed invalid."

The Tribunal emphasized the importance of procedural compliance, noting, "The absence of a valid DIN was a procedural defect that contributed to the invalidity of the assessment order."

Ultimately, the Tribunal allowed the appeal, setting aside the orders of the lower authorities and deleting the addition made by the AO, as no incriminating material was found to support it.