In Assessment U/s. 153A/153C additions cannot be made unless they are based on any incriminating material or inquiries based on such material

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.

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