CA Suraj R. Agrawal
Brief of the Case:-
If no incriminating documents/evidences were found during the course of search of third party, and hence, re computing the income u/s 153A is bad in law and liable to be quashed.
Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.
Facts of the case:
1. The assessee is engaged in the business of financing and letting of cars and commercially exploiting properties.
2. Assessee filed the return of income on 29.10.2005 declaring the total income of Rs. 26,52,740/- for the AY 2005-06.
3. As a result of the scrutiny assessment, assessee”s income was determined at Rs. 26,99,231/-.
4. A search action u/s 132 of the Act was conducted on 6.10.2010 at the premises of M/s. Ideal Appliance Company Private Limited, Mumbai.
5. Subsequently, assessee was issued notice u/s 153A of the Act and in response to the said notice u/s 153A of the Act, assessee filed the revised return of income declaring the total income of Rs. 26,93,886/- on 11.2.2013.
6. In the process, AO issued notice u/s 142(1) of the Act on 14.1.2013.
7. After considering the assessee‟s submissions and relevant documents, AO passed the order u/s 143 (3) r.w.s 153A of the Act and the assessed income is determined at Rs. 45,41,618/-.
8. During the proceedings before the first appellate authority, assessee contended that only pending assessments can abet and not the completed assessments, and therefore, the AO‟s order made u/s 143(3) r.w.s 153A of the Act is unsustainable and bad in law.
9. Assessee further contended that, where the original assessment was made u/s 143(3) of the Act after appreciating all the documents / material on record and with due application of mind, re-computing the income u/s 153A basing on the same documents is bad in law and liable to be quashed.
10. Assessee further submitted that since, no incriminating material / evidences were found during the course of search, therefore, no addition can be made u/s 153A of the Act.
11. After considering the submissions of the assessee, CIT (A) dismissed the legal issue raised before him and partly allowed the appeal on merits. Again aggrieved with the said decision of the CIT (A), assessee is in appeal before the Tribunal.
Contentions of Appellant:
1. Ld Counsel for the assessee demonstrated that all appeals under consideration have a legal issue and the same is summarized as and when the assessments involved are non-abated assessment (either regular assessments are completed u/s 143(3) and the quantum proceedings are not pending or the due date for issue of notice us 143(2) has expired, the additions, if any, in the search assessment can be made basing on any incriminating material seized u/s 132 of the Act and forwarded to the concerned AO as per the procedure laid down in the Act.
2. Ld Counsel for the assessee demonstrated that there is no reference to the seized material in any of the additions made by the AO in all the 5 AYs. Further, he mentioned that the additions made were actually in the nature of routine additions which are made under regular assessment.
3. Ld Counsel for the assessee filed voluminous papers books and demonstrated that the additions made by the AO are unsustainable in law and no incriminating material was found during the search.
4. On the basis of the legal propositions, the additions made by the Assessing Officer are bad in law and hence are to be deleted.
Contention by Revenue:
Ld DR relied on the order of the AO and the CIT (A). Further, on the legal propositions, Ld DR has nothing to controvert except relying on the decisions of the Revenue Authorities.
Ruling of Honorable ITAT/Court:
1. They find cited decision are relevant for the proposition that “when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law”.
2. In the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, they are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, they delete the same.
3. Considering their decision on the legal issue in favour of the assessee, the other grounds demand no specific adjudication.
4. Thus, on the legal ground the assessee succeeds and rest of the grounds are dismissed as academic.
5. Regarding the non-abated nature of the assessments relating to the AYs 2007-2008, 2008-2009 and 2009-2010, it is a decided issued that the time limit for the issue of notice u/s 143(2) in the said AYs since expired on 30.9.2008 and they constitute non-abated assessments and therefore, the assessments for those AYs have to be reassessed under the special provisions in the light of the incriminating material seized during the search.
6. The issues raised in all the AYs under consideration i.e. AY 2005-06 to 2009-2010, therefore, there decision given on the legal issue raised the AY 2005-06, squarely applies to the rest of the AYs i.e. 2006-07 to 2009-10 too. Considering the same, legal issue raised in all the AYs under consideration is allowed in favour of the assessee and rest of the grounds are dismissed as academic.
7. In the all the five appeals filed by the assessee are allowed.