The Raipur Bench of Income Tax Appellate Tribunal (ITAT) upholding the decision of Commissioner of Income Tax (Appeals) held that in the absence of any incriminating material found at the time of search, the assessment proceedings u/s 68 shall not be reopened u/s 153A of the Act.
The present matter was brought before the Bench by the aggrieved Revenue Authorities on an appeal where the Revenue has questioned the deletion of the addition made by the Assessing Officer (AO) u/s 68 of the Act.
The assessee on the other hand has challenged the reopening of the assessment by the issue of notice u/s 148 of the I.T. Act.
The reasons for the reopening of the proceedings by the AO were based on an investigation which found out that the assessee has taken accommodation entries from various parties which did not find place in the assessee’s book of accounts.
During the proceedings, the assessee contended that when the entries are not found in the books of the assessee, the same could not be made a basis for reopening the completed assessment unless it was tested on the basis of the notice. The assessee cited Proviso to Section 143, according to which, if an assessment has already been made and 4 years from the end of such assessment have been passed, no action can be taken unless the income has escaped for assessment by reason of Failure on the part of the assessee to make a return under Section 139 or In response to a notice issued under Section 142(1) or 148 or Disclose fully and truly all material facts necessary for his assessment.
The assessee further submitted that the Revenue never whispered any of the reasons for reopening of the assessment inscribed in the provision. The counsel for the assessee cited a sequence of cases (ranging from Delhi High Court, Punjab & Haryana High Court, Madras High Court, Gujarat High Court where such reason was not mentioned by the AO and the same had led to setting aside of reopening of assessment.)
The Bench after taking into consideration the submission made by both the parties held that “the entire assessment is bad in law as it has been framed u/s.153A r.w.s. 143(3) of the Act without there being any incriminating material found at the time of search. Strong reliance was placed in on the decision of the Hon’ble High Court of Delhi in the case of Kabul Chawla 380 ITR 573 and the decision of the Tribunal Kolkata Bench in the case of Peerless General Finance and Investment Company Ltd. 21 SOT 440.”
Ruling in favor of the assessee, the Bench while referring to the facts of the present case held that it is now a settled position that in the absence of any incriminating material found at the time of search, no assessment u/s 153A of the of the Act can be framed and there exists no dispute in concluding that no incriminating material has been found in the present case.
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