2020 (3) TMI 1257 - AT - Income Tax

Assessment u/s 153A - As per assessee no undisclosed income being unearthed during such search - absence of any addition on the basis of incriminating material having been found in course of search - HELD THAT - No merit in objection raised by the assessee that in the absence of any incriminating material having been found in course of search section 153A cannot be invoked because we feel that the condition precedent for invocation of Section 153A is this that there should be a search under Section 132 and initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. This objection is rejected. Absence of any addition on the basis of incriminating material having been found in course of search - As u/s 153A the AO can reopen and/or assess the return with respect to six preceding years but there must be some incriminating material available with the AO in respect of the relevant year in which addition is being made. In the present case no such incriminating material leading to undisclosed income was seized because in none of the assessment order any addition is made by the AO on the basis of any seized material. Judgment in the case of PCIT vs. Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT duly approved by Hon ble apex court should be followed 2018 (7) TMI 569 - SC ORDER None of various additions in these five years has any connection with any incriminating material found in course of search and even if these incomes escaped assessment action could have been taken u/s 147 or 263 as per law but in the absence of any incriminating material having been found in course of search for any year out of relevant six years addition u/s 153A is not justified and we delete the same. - Decided in favour of assessee.

Issues Involved:
1. Invocation of Section 153A without incriminating material.
2. Validity of additions in the absence of incriminating material found during the search.

Issue-wise Detailed Analysis:

1. Invocation of Section 153A without incriminating material:
The first technical objection raised by the assessee was that in the absence of any incriminating material found during the search, Section 153A cannot be invoked. The Tribunal found no merit in this objection, stating that the condition precedent for invoking Section 153A is the occurrence of a search under Section 132. The initiation of proceedings under Section 153A is not dependent on the discovery of undisclosed income during such a search. Therefore, this objection was rejected.

2. Validity of additions in the absence of incriminating material found during the search:
The second technical objection raised by the assessee was that in the absence of any addition based on incriminating material found during the search, no other addition can be made in the assessment order passed under Section 153A. The assessee relied on various judicial precedents, including the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. vs. DCIT and several High Court judgments, which supported the view that additions under Section 153A should be based on incriminating material found during the search.

In response, the revenue relied on the judgment of the Karnataka High Court in the case of Canara Housing Development Company vs. CIT, which held that all additions can be made in proceedings under Section 153A, even if no incriminating material was found. The revenue argued that this judgment should be followed over other High Court judgments.

The Tribunal analyzed the applicability of the Canara Housing judgment and found that it was not applicable to the present case for two reasons:
1. In the Canara Housing case, incriminating material leading to undisclosed income was seized, whereas in the present case, no such material was found.
2. The proceedings in Canara Housing were under Section 263, whereas in the present case, proceedings were under Section 153A.

The Tribunal then reviewed various judgments from different High Courts, including the Gujarat High Court in the case of PCIT vs. Saumya Construction (P) Ltd., which held that additions under Section 153A can only be made based on incriminating material found during the search. The Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. also supported this view, emphasizing that the scope of inquiry under Section 153A revolves around the search or requisition.

The Tribunal further noted the judgment of the Delhi High Court in the case of PCIT vs. Meeta Gutgutia, which was approved by the Supreme Court. This judgment reinforced the view that in the absence of incriminating material, no additions can be made under Section 153A.

Based on these precedents, the Tribunal concluded that in the absence of any incriminating material found during the search, no additions can be made under Section 153A. The Tribunal observed that in the present case, none of the additions made by the AO were based on incriminating material found during the search. Therefore, the additions were not justified, and the Tribunal deleted them.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that in the absence of incriminating material found during the search, no additions can be made under Section 153A. The Tribunal's decision was based on various judicial precedents, including those approved by the Supreme Court, which supported the view that additions under Section 153A should be based on incriminating material found during the search.

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