In Sri Krishna Ghosh v. ACIT, the Income Tax Appellate Tribunal (ITAT), Kolkata bench held that assessment under section 153A of the Income Tax Act must be made only on the basis of incriminating material found during search.
Search conducted in the business premises of the assessee was followed by the assessment proceedings under section 153A of the Income Tax Act. The assessee objected the proceedings mainly on ground that the search has not resulted in recovery of any incriminating material which is a pre-requisite for initiating assessment against the assessee. On appeal, the first appellate authority dismissed the appeal filed by the assessee and held that the CIT-A dismissed the appeal of by observing that there was no regular assessment u/s. 143(3) of the Act prior to the search operation and it is paradoxical to equate the intimation as issued u/sec 143(1) of the Act to that of regular assessment u/sec 143(3) of the Act.
The bench observed that, as per the provisions of s. 153A, where search is conducted under section 132 of the Act, AO is empowered to assess or reassess total income of six assessment years preceding the assessment year in which search was conducted. “The section also provides that assessment or reassessment relating to any assessment year falling within period of six assessment years if pending on the date of initiation of search shall abate. There have been divergent views regarding scope of application of section 153A in cases where no incriminating material was found indicating any undisclosed income. The Coordinate Benches of Tribunal had taken the view that in case no incriminating material was found AO had no jurisdiction to make assessment or reassessment under section 153A while some other Benches held that jurisdiction under section 153A was automatic to reassess six immediate preceding assessment years irrespective of the fact whether any incriminating material was found or not. Another aspect on which there had been divergent views was whether even if AO had jurisdiction under section 153A, addition can be made in assessment /reassessment only when some incriminating material has been found.”
Relying upon the decision in Alcargo Global Logistics Ltd., the bench held that “the AO can make additions in the assessment in a case where assessment has abated, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the Assessee filed his return on 27-03-2002 for the year under consideration at page no-9 of paper book and assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search.”
Read the full text of the order below.
