Material Found from  Premises of Third Parties  cannot be Utilized against Assessee for making Assessment u/s 143(3) r.w.s. 153A of IT Act :ITAT [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that material found from premises of third parties could not be utilized against assessee for  assessment  under Section 143(3) read with Section 153A of Income Tax Act 1961.

The Assessee Real Marketing Private Limited  is a private company and claims to be engaged in the business of Investment and Trading in Shares & Securities.

A search and seizure action under section 132 of the Income Tax Act, 1961 carried out at the premises of “Barter/ Accommodation Entry Provider Group” and the assessee being part of the group was also subject to such search proceedings.

As a result of search, proceeding under section 153A of the Act was initiated and in response to which the assessee declared income at Rs. NIL in the return filed under section 153A of the Income Tax Act.

The Assessing Officer during the assessment  proceedings found that the assessee has received the accommodation entry in the form of share capital along with the premium and unsecured loan from the entities controlled and managed by the various  entry providers. Also found assessee received share capital, premiums and unsecured loan from other parties too.

Further AO noticed that the documents found from the premises of  providers mentioned parties co-relate with the documents found during the search at the assessee group.

Accordingly, the AO treated the credit of Share Capital along with premium and unsecured loan received during the year as unexplained cash credit under section 68 of the Income Tax Act and added to the total income of the assessee.

Against the order the assessee filed  an appeal before the  Commissioner of Income Tax (Appeals) [CIT(A)] who deleted the addition made by the AO and held that no addition can be made in absence of incriminating material found from the premises of the assessee.

Aggrieved by the order of the CIT(A)  the revenue filed an appeal before the tribunal.

Raman Kumar Goyal, the counsel for revenue submitted that there was no mention under the provisions of the Act to restrict the addition based on the incriminating documents found on the premises of the search person. Hence there was no prohibition from using the documents found on the premises of the third parties while framing the assessment under Section 153A read with section 143(3) of the Income Tax Act.

Sudhendu Das, the counsel for the assessee submitted that assessment under search proceedings is limited to the extent of the incriminating documents found on the premises of the search person.

Further, the documents found on the premises of the third parties cannot be used while framing the assessment under section 153A read with section 143(3) of the Income Tax Act without complying with the provisions of section 153C of the  Income Tax Act.

The tribunal during the hearing observed that proceedings under section 153A of the Income Tax Act, the assessment can only be made based on incriminating materials found/collected during the search from the premises of the assessee.

Moreover, the AO treated the credit of share capital along with premium thereon as unaccounted/undisclosed income of the assessee brought in the books in the guise of bogus/accommodation transaction.

The entire thrust of the AO for holding so was based on the outcome of an independent search proceeding carried out at Chandrakant Shah and Parveen Kumar Jain. The view of AO was entirely proceedings was not correct  under section 153A of the Income Tax Act and no assessment/reassessment can be made in the absence of incriminating material found during the search.

Thus the two member bench of Waseem Ahmed, (Accountant Member) and Madhumita Roy, (Judicial Member) determined that the  materials found from the premises of third cannot be utilized against the assessee for making assessment under Section 143(3) read with section 153A of the  Income Tax Act. Therefore the  bench dismissed the appeal filed by the revenue.

To Read the full text of the Order CLICK HERE

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