Material /document Uncovered during Search Raises no doubt or suspicion against Taxpayer: ITAT deletes addition u/s 153A [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) deleted addition under Section 153A of the Income Tax Act, 1961 as material uncovered during search raises no doubt or suspicion against taxpayer.

The assessee was a co-operative credit society and is a registered Multi-State Co-operative Urban Credit Society established under the Multi-State Co-operative Societies Act, 2002 and is involved in the facility of providing credits and other banking facilities to its members.

Its primary function is to offer credit and banking services to its members, operating in several states including Maharashtra, Gujarat, Madhya Pradesh, Andhra Pradesh, Karnataka, and Delhi, with approximately 100 branches nationwide.

Additionally, it provided ATM card and RTGS facilities to its members. Governed by the Multi-State Cooperative Societies Act, 2002, and its bylaws, the society comprises two categories of members: ordinary and nominal.

The AO noticed that the KYC documents were not completely filled in and the documents obtained supporting KYC were not verifiable. Further, several instances of improper filing and maintenance of account opening forms were also noticed from the seized and impounded material and the evidence gathered during the course of search and survey proceedings at the premises of the assessee.

Further treated these documents as incriminating evidence and held that the assessee could not substantiate the veracity of the cash depositors and the identity, genuineness, and creditworthiness of the depositors were also not established.

The CIT (A) treated the gaps found in KYC requirements as incriminating. Therefore, in the present case, in order to decide the jurisdictional issue raised. by the assessee, it is firstly relevant to examine whether the material/evidence found during the course of the search action under section 132 of the Income Tax Act,  was  incriminating in nature.

The coordinate bench further observed that the nature of the evidence or information gathered during the course of the search should be of such nature that it should not merely raise doubt and suspicion but should be of such nature which would prima facie prove that the real and true nature of the transaction between the parties is something different from the one recorded in the books documents maintained in the ordinary course of business.

The bench of B.R. Baskaran (Accountant member) and Sandeep Singh Karhail (Judicial member) found that in certain cases proceedings under the Act were initiated against the members on the basis of material/documents found during the course of the search and survey at assessee’s premises. Thus, it is established that the material/documents found during the course of search are not incriminating in nature. Therefore, the AO could not have made any addition under Section 153A of the Income Tax Act, in respect of concluded/unabated assessments for the assessment years 2012-13 to 2015-16.

The ITAT concluded that the material/documents found during the course of the search are not of such a nature which incriminates or militates against the assessee. Further, viewed that the material/documents found during the course of search also do not raise any doubt or suspicion against the assessee, and if at all the material/documents may only incriminate against the members in whose account the money was deposited.

Accordingly, the additions made by the AO for the assessment years 2012-13 to 2015-16 are deleted. The appeal by the assessee for the assessment years 2012- 13 to 2015-16 are allowed.

To Read the full text of the Order CLICK HERE

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