Case Law Details
Issue :- AO has alleged that at the time of hearing on 27-12-10 assessee’ s counsel expressed his inability to furnish any information. AO mode the impugned additions as mentioned above in respect of each assessment year holding that assessee could not substantiate that agricultural income declared in the regular returns of income was in facts agricultural income. The income was held to be not agricultural income and was assessed as income from unexplained sources. Thus the exempt income returned by assessee was held to be taxable income u/s 153A. The reasons, observations and findings for additions do not refer to any incriminating material.
Contention Raised by the Assessee:- Ld. Counsel for the assessee has vehemently argued that no incriminating material what so ever was found during the course of search to suggest that the agriculture income earned by the assessee and accepted by the department in earlier years was not agricultural and it represented any unexplained income of the assessee. It is also not disputed that agriculture income has been assessed year after year. In the absence of any incriminating material legally these additions cannot be made.
Held :- In our considered view this proposition is by now well settled that in 153A/C assessments additions cannot be made unless they are based on any incriminating material or inquiries based on such material. It clearly emerges from record that there is neither reference nor reliance on any incriminating material. Besides there is no reference to any inquiries conducted by AO based on any incriminating material. In these circumstances and relying on these case laws we hold that these additions have been rightly deleted by the CIT(A) on this count.
Case Law Relied by the Assessee :-
(i) All Cargo Global Logistics Ltd. v. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) – for the proposition that in assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.
(ii) Gurinder Singh Bawa v. DCIT (2012) 28 Taxmann.com 328 (Mum trib) – for the proposition that where in search assessment under section 153A all assessments pertaining to six immediately preceding assessment years were complete, Assessing Officer cannot make any addition there under unless there is any incriminating material discovered during the search.
(iii) Jai Steel India v. ACIT 259 CTR 281(HC) (Rajasthan)
29. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under s. 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition .if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A),ITAT and the high court , on a notice issued under section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court .Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon ’ble Supreme Court in the case of K.P. Varghese
(iv) Kusum Gupta v. DCIT, ITA Nos. 4873/Del/2009, (2005-06) 2510 (A.Y. 2003-04), 3312(A.Y. 2004-05) 2833/Del/2011 (A.Y. 2006-07)
15. Since there is no change on this material fact that during all these assessment years no incriminating material was recovered or statement was recorded during the course of search suggesting non-genuineness of the claimed gifts or expenses etc. and no such addition/disallowance was made in the original assessment which remained unabated, we following the decision on the issue hereinabove in the appeal preferred by the revenue for A. A 2002-03, hold that such addition/disallowance cannot be made in the assessment framed u/s 153A of the Act in this A. Y in appeals. In result the issue is decided in favour of the assessee and against the revenue. In view of this finding the remaining grounds questioning the merits of additions/disallowances do not need adjudication as they have become infructuous and academic only . Consequently appeals preferred by the assessee for the A. Ys. 2003-04, 2004-05, 2005-06 and 2006-0 7 are allowed and appeals preferred by the revenue in the A. Ys. 2002-03, 2005-06, 2006-07 are dismissed.
(v) MGF Automobiles Ltd. V. ACIT, ITA No’s 4212 & 4213/Del/2011 – In the present case it is apparent that on the date of search be on 12/09/2007, the assessments for assessment year 2004-05 & 2005-06 were already completed. There was no incriminating material found during search for these years as is apparent from arguments of Ld. AR and from records and Ld. Departmental Representative did not bring to our notice regarding any incriminating material having been found during search. Therefore following the Judicial Precedents, we are of the opinion that though assessments for the above year were bound to be reopened but additions could be made only if some incriminating document was found during search.
(vi) Tarannum Zafar Khan Vs. ACIT, ITA Nos. 5888 to 5890/Mum/2009
18.3 One more reason is there that most of the additions have been made in the routine manner as the issue has not been discussed in right perspective in taking into consideration the submission and other evidences filed. It is also a matter of fact that no incriminating material was found during the course of search as only during the assessment proceeding, these expenses were found made through credit cards. In view of the above facts and circumstances of the case, we delete the addition of Rs.9,057/-.
(vii) Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011 & ITA No.2/Del/2011
15. In view of the above, we agree with the contentions of assessee and allow ground no.1 of the appeal. In respect of second ground of appeal regarding disallowance of telephone, car expenses etc we observe that no incriminating material was found in respect of such expenses which could enable the Assessing Officer to disallow a part of it during proceedings u/s 153A. This has been held in various pronouncements of various courts and the latest being by Hon ’ble Rajasthan High Court in the case of Jai Steels India vs. CIT in 259 CTR (Raj) 281, where the Hon ’ble Court has held that in case of assessment u/s 153A, the completed assessment can be tinkered only on the basis of incriminating material found during search. Therefore, in the present case without any incriminating material Assessing Officer was not justified in making disallowance.
(viii) ITA Nos. 1153 to 1159/Hyd/2012 Mir Mazharuddin, 24.1.2013 – addition cannot be made in assessment completed u/s 153A without any reference to the seized material. He further held that it is also not the case of the AO that the seized material if any suggested inflation of agricultural income. He, therefore, concluded that such type of addition cannot be made in the assessment u/s 153A de hors the material found at the time of search
(ix) Asha Kataria, I.T.A. Nos. 3105, 3106 & 3107/Del/2011 20.5.2013
52. we find that in this case the assessment was made u/s. 153A of the I. T. Act. Hence, reliance upon the decision of the Special Bench in the case of All Cargo Global Logistics Ltd. (Supra) is also germane and support the case of the assessee. As expounded in this case assessment u/s. 153A can be made only on the basis of incriminating material found during the course of search.
