The Income Tax Appellate Tribunal (ITAT), Chandigarh bench, held that no addition could be made under Section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during the course of a search conducted under Section 132 of the Income Tax Act.
The assessee, A.P. Refinery Pvt. Ltd., a Private Limited Company, is engaged in the business of manufacturing and trading edible oils. After completing the scrutiny assessment, the Assessing Officer (AO) passed an assessment order under Section 143(3) of the Income-Tax Act, after effecting a disallowance of Rs. 3,00,000/- out of expenses debited to the Profit and Loss Account.
When a search and seizure operation was conducted in Group Companies, including the registered office of the assessee, a notice under Section 153A of the Income-Tax Act was issued to the assessee. In response to such notice, a return of income was filed under Section 153A of the Income-Tax Act, showing income at Rs. 15,82,649/-. Thereafter, an order was passed under Section 153A read with Section 143(3) of the Income-Tax Act.
Aggrieved by the order, the assessee filed an appeal before the CIT(A), who confirmed the order. Thus, the assessee filed a second appeal before the tribunal.
Ashwani Kumar, Counsel for the assessee, argued that no incriminating material/evidence was uncovered in the course of the search conducted under Section 132 of the Income-Tax Act, so no addition could be made under Section 153A of the Income Tax Act.
Rohit Sharma, Counsel for Revenue, argued that once a search under Section 132 is conducted, the proceedings under Section 153A get automatically attracted.
Further, he argued that during the course of the proceedings, DGIT (Inv.), Chandigarh, received a TEP from Sh. Raj Kumar of Dhuri, stating that his brother Sh. Ashwani Kumar was employed by the assessee company as a supervisor and was responsible for collecting payments for sales, which were primarily made in cash and infrequently through bank checks or other payment methods. The page included detailed notes on transactions totaling Rs. 56,34,904/-, along with the names of the parties and other details.
The Tribunal, while considering the appeal, relied upon the decision of “Pr. Commissioner of Income Tax Vs. Saumya Construction” and observed that no addition can be made in respect of completed assessments in the absence of any incriminating material.
Furthermore, they observed that this is an instance of an evaluation that was completed or unabated and was verified by an order issued under Section 143(3) on March 11, 2014, which was far in advance of the search date of August 31, 2016.
Moreover, when an assessment is finished and not stopped by the start of a search under Section 132 or the creation of a requisition under Section 132A, the Assessing Officer must reevaluate the assessee’s total income. The assessment that has already been completed may be altered or questioned if evidence of the assessee’s undisclosed income is discovered during the search or requisition. Therefore, the AO would assume the jurisdiction to reassess the ‘total income,’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO, including the income declared in the return.
However, in case no incriminating material is unearthed during the search, the AO cannot reassess, taking into consideration the other material in respect of completed assessments/unabated assessments.
After reviewing the facts and records, the two-member bench of Vikram Singh Yadav (Accountant member) and Aakash Deep Jain (Vice President) observed that unquestionably, the addition made by the AO during the reassessment proceedings completed under Section 153A is based on other material/documentation available with the AO and is a case of completed/unabated assessment rather than any incriminating material found or seized during the course of search and seizure action under Section 132 of the Act.
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