Proceedings u/s 153C cannot be initiated in absence of incriminating material found during search: ITAT [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) held that proceedings under Section 153C of the Income Tax Act, 1961 cannot be initiated in absence of incriminating material found during search.

During the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee, A. Gandhimathi has made unregistered dealer purchases. The assessee had also made cash payment against unregistered dealer purchases. Therefore, the AO after considering relevant facts opined that unregistered dealer purchases claims to have made from certain persons, is not genuine which is not supported by necessary evidences. Therefore, disallowed total purchases claims to have been made from unregistered dealers amounting to Rupees five crores to total income.

Being aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)). Before the CIT(A), the assessee challenged the assessment order passed by the AO under Section 143(3) r.w.s.153C of the Income Tax Act, 1961 on the ground that the conditions precedent for invoking provisions of Section 153C of the Income Tax Act, are not satisfied. Because, the AO has not recorded his satisfaction to issue notice under Section 153C of the Income Tax Act, having regard to the books of accounts and other relevant documents found during the course of search in the case of the other person, which belongs to the assessee.

The CIT(A) after considering relevant submissions of the assessee and also taken note of certain facts opined that the AO is erred in making additions towards purchases from unregistered dealers in the assessment framed under Section 153C of the Income Tax Act, in absence of incriminating material found as a result of search. Aggrieved the Revenue is in appeal before the Tribunal.

A Bench consisting of held that “Therefore, in our considered view, in absence of any incriminating material found during the course of search of other person, the AO cannot initiate proceedings u/s.153C of the Income Tax Act, and complete assessment, when a simultaneous survey u/s.133A of the Income Tax Act, was carried out on very same day in the case of the assessee.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates