The Delhi Bench of Income Tax Appellate Tribunal, recently ruled that an assessment made under section 153A must be based on the material unearthed from the search conducted. Completing assessment under the said provision only on the basis of materials found during pre-search period is not sustainable and void under the Act in the absence of any incriminating material found at the time of search.
The assessees in the instant case are engaged in the business of builders and developers of residential commercial projects. In consequent to a search conducted on the business premises of the assessee, declared an income of Rs.2,58,59,845/-. Further they declared their deemed dividend income u/s 115JB and paid tax. Thereafter, the Assesing Officer completed the assessment of two different assessment years by adding the amount of Rs.2,34,54,000/- and Rs.7,12,00,000/- treating these as bogus expenses on ground that the assessee failed to prove the genuineness of such transactions.On appeal, the Tribunal verified the legality of the order passed against the assessee.
Before the Tribunal, the assessee maintained that the reassessment is on the basis of a search conducted by the Assessing Officer, in which no material was found. The assessee relied upon the judgment of the High Court in CIT vs. Kabul Chawla – 380 ITR 173 (Del.), and contended that since on the date of search, assessment already stood completed and no fresh material was unearthed to make reassessment, the assessment order is not sustainable.
Opposing to the above arguments, it was contended on behalf of the Revenue that provisions contained u/s 153A is enabling provisions having inherent powers with the AO to make an assessment on the basis of post-search material or information already available with him which could be related to the evidence found.
Following the above decision of the High Court, the Tribunal found that the impugned order is not sustainable for the reason that no incriminating material unearthed during search and seizure operation conducted u/s 132. Rather, the officer u/s 153A of the Act on the basis of some pre-search enquiries to make an addition.The Tribunal further opined that there is not an iota of material with the AO to initiate proceedings u/s 153A what to talk of incriminating seized material.
Read the full text of the order below.
