No addition can be made u/s 153A & 153C if If no incriminating material was found during the course of the search

No addition can be made u/s 153A & 153C if If no incriminating material was found during the course of the search

Reetu | Oct 9, 2021 |

No addition can be made u/s 153A & 153C if If no incriminating material was found during the course of the search

No addition can be made u/s 153A & 153C if If no incriminating material was found during the course of the search

If no incriminating material was found during the course of the search in respect of an issue then no addition can be made in the assessment under sections 153A and 153C of the IT Act 1961

PR. Commissioner of Income Tax vs M/S Bhadani Financiers Pvt. Ltd.; High Court of Delhi; 09.09.2021

The Appeals have been filed u/s 260A, Income Tax Act, 1961 (for short ‘the Act’) challenging the order passed by the ‘ITAT’ for Assessment Years 2008-09, 2009-10 and 2010-11 on the following grounds:

i. Because the Ld. ITAT erred in confirming the order of the Ld. CIT(A) in directing the AO to delete the addition made u/s 68 on account of unexplained credits and u/s 69C on account of unexplained expenses.

ii. Because the ITAT erred in dismissing the appeal of Revenue and deleting the adiitions made by the AO u/s 68 and 69 of the Income Tax Act relying only upon the decision of the Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla (2016) 380 ITR 573, without adverting to merit of case.

iii. Because the Ld. ITAT erred in deleting the additions made by the AO in the assessment framed u/s 153A of the Act without appreciating the fact that the decision of Hon’ble high Court of Delhi in the case of CIT vs Kabul Chawla was not accepted by the Department and SLPs have been filed and final decisions in teh said SLPs were pending.

iv. Because the Ld. ITAT has erred in restricting the applicability of the section u/s 153A of the Act in respect of completed assessment as in the present case, only to undisclosed income and assets detected during search u/s 132 of the Act.

v. Because on the facts and in circumstances of the case and in law, the Ld. ITAT failed to consider the mandatory provision of section 153A of the Act that the AO has to assess the total income of six assessment years u/s 153A of the Act and this cannot be done if the scope of Section 153A is limited to only undisclosed income.

Observations and Findings

I. Appellant’s Contention:

Apart from aforesaid grounds, the Appellant submitted that ITAT has misread and misinterpreted section 153 A of the Act and has failed to appreciate that the mandatory provision of section 153A of the Act requires the AO to assess the total income of six assessment years under section 153A of the Act and this cannot be done if the scope of Section 153A is limited to only undisclosed income. It further submitted that the mandate under Section 153A of the Act is to issue the notice for six assessment years and assess the total income irrespective of incriminating material discovered during the search.

It was further submitted that in the present cases incriminating documents/materials had been found during the course of the searches and consequently by virtue of Section 153A of the Act, the Assessing Officer had to assess the total income of six years under Section 153A of the Act. The assessments were not completed under Section 143(3) in the present cases, consequently, prior to the date of search i.e. 18th June, 2013, the assessment of the respondents had not attained finality.

II. Scope of section 260 A of the Act

Section 260 A (1) of the Act provides for appeal against the order of the ITAT only on substantial questions of law. “Substantial” means “having substance, essential, real, of sound worth, important or considerable.” To be “substantial”, a question of law must be debatable, not previously settled. A High Court under Section 260A of the Act has limited jurisdiction to interfere with findings of fact recorded by the Tribunal. If findings of Tribunal are irrational, perverse or unreasonable, then only interference of court would be justified.

III. The assessment of the Respondents had attained finality prior to the date of search.

A perusal of the paper book reveals that Income Tax Returns in the present batch of matters had been duly accepted and intimation under Section 143(1) of the Act had been issued. Neither notices under Section 143(2) of the Act nor reassessment notices under Section 148 of the Act had been issued. Consequently, the assessment of the respondents had attained finality prior to the date of search.

IV. Both Tribunals had held that no incriminating material had been found and seized during searches u/s 132 of the Act.

The Hon’ble Delhi High Court found that even in the present appeals filed by the appellant/Revenue there is no specific ground that any incriminating material had been found during the search. The Tribunal’s finding that “It is an admitted fact that in the search action under Section 132 of the Act, no incriminating document/material was found and seized at the time of search and also subsequently” is correct and suffers from no perversity. Consequently, it is not open to the appellant to contend that incriminating documents/materials had been found and seized during searches.

V. CIT VS Kabul Chawla, (2016) 380 ITR 573; operative and squarely covers the present case.

It was held in the said case that if no incriminating material was found during the course of the search in respect of an issue, then no addition in respect of an issue can be made in the assessment under sections 153A and 153C of the Act. It was further noted that the judgment in the said case though has been challenged in connected matters and is pending before the Supreme Court yet there is no stay of the said judgment till date. Therefore, the Court found no ground to not follow the said judgment.

Held:

Keeping in view the aforesaid, the Hon’ble Delhi High Court was of the opinion that the questions of law raised in present appeals had been settled by earlier Division Bench in Kabul Chawla (supra) and assessment of the respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search.

Consequently, no addition could be made under Section 153A of the Act as the cases of respondents were of non-abated assessments. Accordingly, the present appeals and applications being bereft of merit were dismissed.

To Read Official Order Download PDF Given Below:

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