2021 (1) TMI 1275 - AT - Income Tax

Assessment u/s 153A - Proof of incriminating material found during the course of search or not? - HELD THAT - In the case of unabated assessments of an assessee no addition is permissible in the order u/s 153A unless it is based on any incriminating material found during the course of search. See Majestic Commercial (P) Ltd. 2020 (3) TMI 1077 - ITAT KOLKATA As the undisputed fact is that the additions are not based on any incriminating material found during search and as the assessment has not abated we delete the additions by applying the principles laid down by Rashmi Infrastructure Pvt. Ltd. 2020 (2) TMI 1463 - CALCUTTA HIGH COURT on this issue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Bogus unsecured loans.
3. Commission on unsecured loans.
4. Validity of additions not based on incriminating material found during search.

Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act:
The assessee, a Non-Banking Financial Company (NBFC), filed its return for the Assessment Year 2012-13. The Assessing Officer (AO) determined the total income at Rs. 52,73,003, making various additions and disallowances, including under Section 14A of the Act. The assessee argued that no incriminating documents were found during the search, and thus, disallowances under Section 14A were not justified. The Tribunal, referencing the case of Pr. CIT vs. Rashmi Infrastructure Pvt. Ltd., concluded that additions not based on any incriminating material found during the search cannot be sustained.

2. Bogus Unsecured Loans:
The AO made additions for bogus unsecured loans. The assessee contended that no incriminating material was found during the search to justify these additions. The Tribunal agreed with the assessee, citing the Calcutta High Court judgment in CIT vs. Veerprabhu Marketing Ltd., which held that in the absence of incriminating material, additions cannot be made under Section 153A/143(3) of the Act.

3. Commission on Unsecured Loans:
Similarly, the AO added commission on unsecured loans to the assessee's income. The assessee maintained that these additions were not based on any incriminating material found during the search. The Tribunal upheld this argument, relying on the precedent set by the Calcutta High Court in the case of Principal Commissioner of Income Tax vs. M/s. Salasar Stock Broking Ltd., which emphasized that additions in assessments under Section 153A must be based on incriminating material found during the search.

4. Validity of Additions Not Based on Incriminating Material Found During Search:
The primary contention was whether the additions made by the AO were valid, given that they were not based on any incriminating material found during the search. The Tribunal referred to multiple judgments, including those from the Calcutta High Court and the Delhi High Court, which consistently held that for assessments under Section 153A, any addition must be based on incriminating material found during the search. The Tribunal noted that the AO failed to point out any incriminating material that justified the additions. Consequently, the Tribunal deleted the additions, emphasizing the principle that no addition is permissible in the order under Section 153A unless it is based on incriminating material found during the search.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the additions made by the AO. The judgment reiterated the legal principle that in cases of assessments under Section 153A, additions must be based on incriminating material found during the search, especially when the original assessment has not abated. The Tribunal's decision was in line with the precedents set by the jurisdictional High Court and other relevant case laws.