Concluded Assessment/ Reassessment cannot be disturbed in Absence of Incriminating Material during Search: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that concluded assessment/ reassessment cannot be disturbed in absence of incriminating material received during the search.

M/s. Essel Mining & Industries Limited the assessee company is engaged in the business of raising Iron ore, manufacturing Nitrogen Gas, Ferro Alloys, Trading Iron Ore and Ferro Alloys, generation of electricity (Windmill) and Railway Siding for captive use. The original return of income was filed by the assessee company for the A.Y.2009-10 on 30/09/2009 declaring a total income of Rs.1345,80,61,460/- which was revised on 31/03/2011.

The case of the assessee was transferred from Kolkata to Mumbai jurisdiction vide order u/s.127(2) of the Income Tax Act dated 30/09/2014 by the Administrative Commissioner of Income Tax of Kolkata. Strangely yet another notice u/s.148 of the Act was issued by the Kolkata Officer on 13/10/2014 seeking to reopen the assessment of the assessee.

A limited search and seizure action was conducted by the Investigation Wing, New Delhi based on information passed on by the CBI. A petty cash book of the assessee was seized from the premises of Aditya Birla Management Corporation Pvt. Ltd (ABMCPL) which was subjected to search u/s.132 of the Act. The said entries in the petty cash book suggested that the ownership of unaccounted cash lies in the hands of M/s. Essel Mining & Industries Ltd., therefore, has a direct bearing on the determination of its total income.

The assessment was completed u/s.153C r.w.s. 143(3) of the Act by the AO on 29/03/2016 for the A.Y.2009-10 by determining the total income at Rs.1513,83,22,160/- under normal provisions of the Act and book profits of Rs.1446,88,86,081/- u/s.115JB of the Act. Under normal provisions of the Act, various disallowances/additions were made.

It was contented by the appellant assessee that none of the additions was made based on the incriminating material in the form of a petty cash book received from the Assessing Officer of ABMCPL(being the searched person u/s.132 of the Act).

Further stated that the A.Y.2009-10 was a concluded assessment as on the date of assumption of jurisdiction u/s 153C of the Income Tax Act by the AO and no addition or disallowance could be made in the search assessments framed either u/s.153C of the Income Tax Act without the existence of any incriminating material relatable to the such assessment year.

It was viewed that the provisions of section 132 of the Act relied upon by the revenue would be relevant only to conduct the search action and initiate proceedings u/s 153A of the Income Tax Act.  Once the proceedings u/s 153A of the Income Tax Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. 

The ITAT bench concluded that none of the additions that were made by the AO was based on reliance placed on search materials received from the Assessing Officer of the searched person and the assessment for A.Y.2010-11 had originally been completed u/s.143(3) of the Income Tax Act dated 28/03/2013.

Since no proceeding was pending against the assessee at the time of issuance of notice under section 153 C, the Coram comprising  Shri M Balaganesh, Accountant Member & Shri Pavan Kumar Gadale, Judicial Member held that A.Y.2010-11 becomes an unabated / concluded assessment on the date of assumption of jurisdiction u/s.153C of the Act and the earlier assessment completed should not be disturbed in the search assessments without the existence of any incriminating material relatable to the such assessment year.

The bench directed the AO to recompute the total income of the assessee by accepting the income declared in the return filed in response to notice u/s.153C of the Act without making any additions or disallowances thereon, both under normal provisions of the Act as well as in the computation of book profits u/s 115JB of the Act.  The appeal of the assessee was allowed and the appeal of the Revenue got dismissed.

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