No Additions allowed in Completed/Unabated Assessments u/s 153A or 153C without Incriminating Material found during Search: ITAT [Read Order]

The Lucknow Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that no additions were allowed in completed/unabated assessments under Section 153A or 153C of the Income Tax Act, 1961 without incriminating material found during the search.

Shashi Agarwal, the assessee was subjected to search and seizure operations on July 8, 2016, under Section 132 of the Income Tax Act. The search was part of a broader operation related to the "Ramesh Group" of cases.

After the search, the income tax authorities issued an assessment order under Section 153A for the assessment years 2015-16 and 2016-17. For 2015-16, the Assessing Officer (AO) assessed the income at Rs. 2,49,09,460 against a returned income of Rs. 24,72,560. For 2016-17, the assessed income was Rs. 58,99,020 against a returned income of Rs. 14,74,020, with an addition of Rs. 44,25,000 under Section 69 for unexplained investments.

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On appeal, the Commissioner of Income Tax (Appeal) [CIT(A)] ex parte against the assessee due to non-compliance. Aggrieved, the assessee appealed before the ITAT, arguing that no incriminating documents were found during the search justifying the additions made by the Assessing Officer (AO) under Section 153A of the Income Tax Act.

The assessee relied on various Supreme Court rulings, such as Principal Commissioner of Income-tax vs. Abhisar Buildwell (2023) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (2023), which established that additions for completed/unabated assessments under Section 153A are not permissible in the absence of incriminating material and Central Board of Direct Taxes (CBDT) instructions which supported their argument.

On the other hand, the revenue admitted that the rulings from the Supreme Court came after the assessments were made. In light of the recent Supreme Court decisions mentioned by the assessee, the issue now legally favors the assessee.

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The two-member bench comprising Anadee Nath Misshra (Accountant Member) and Subhash Malguria (Judicial Member) observed that the main issue was the validity of additions in the absence of incriminating evidence when assessments were completed/unabated.

The tribunal referenced the Supreme Court rulings, particularly the Abhisar Buildwell case, which clarified that such additions are not allowed unless incriminating material is found during the search.

The tribunal noted that no assessments were pending at the time of the search, placing the case in the category of "completed/unabated assessments." The tribunal further observed that both parties agreed on the legal standing as clarified by recent Supreme Court decisions.

Therefore, the tribunal deleted the additions made for the assessment years 2015-16 and 2016-17. The appeal of the assessee allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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