No addition can be made u/s 153A in absence of incriminating evidence found as a result of search, if the assessment is unabated: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal held that in absence of any incriminating material, no addition can be made in the assessment framed under Section 153A/153C of the Income Tax Act.

A search and seizure under Section 132 of the Income Tax Act, 1961 was conducted in the residence of the assessee on 16.05.2007. Consequent to search, notice under Section 153A of the Act, was served on the assessee calling for true and correct return of income for AY 2005-06.

In response to notice under Section 153 of the Income Tax Act, the assessee has filed her return of income on 28.10.2009. The case was selected for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee had filed her return of income under Section 139 of the Income Tax Act.

It was further noticed that the assessee has introduced a capital of Rs.10,40,000/- in Dragon Movies. Since, the assessee could not explain source for capital, the AO has made addition of Rs.10,40,000/- as unexplained cash credit. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeed. The CIT(A) for the reasons stated in their appellate order dated 07.02.2017, sustained the additions made by the AO towards unexplained cash credit. Aggrieved by the order of the CIT(A), the assessee appealed before the tribunal.

After hearing both the parties, the tribunal noted that it is a well-established principle of law by the decision of the Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell Pvt. Ltd. that no addition can be made in absence of incriminating material found as a result of search, if the assessment is unabated/concluded as on the date of search.

A similar view has been taken by the Hon’ble Delhi High Court in the case of PCIT v. Meeta Gutgutia, where the Hon’ble Delhi High Court clearly held that in absence of any incriminating material, no addition can be made in the assessment framed under Section 153A/153C of the Income Tax Act. In the present case, there is no dispute with regard to the fact that additions made by the AO towards cash credit being capital introduced in Dragon Movies is not based on any incriminating material found as a result of search.

The two member bench consisting of Mahavir Singh (Vice president) and Manjunath G (Accountant member) held that the additions made by the AO towards unexplained cash credit is unsustainable under law. Thus, by following the decision of the Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell Pvt. Ltd., the tribunal directed the AO to delete the addition made towards capital introduced in Dragon Movies as unexplained cash credit. Thus the appeal was allowed.

To Read the full text of the Order CLICK HERE

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