The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) ruled that reopening of assessments under Section 153A of the Income Tax Act,1961 is not permitted without incriminating material.
JMC Projects,appellant-assessee,company involved in civil construction and infrastructure development, filed its income tax returns, including revised ones, for the relevant assessment years. A search operation was carried out at its registered premises on 17-11-2011 under section 132 of the Act, leading to the initiation of proceedings under section 153A of the Act.
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The assessee filed returns for various assessment years, some revised, and faced additions/disallowances by the Assessing Officer (AO) during the search and assessments. These involved deductions under section 80IA, defect liabilities, leave encashment, gross profit, arbitration awards, and more. The assessee appealed, with the Commissioner of Income Tax (Appeals) [CIT(A)] granting partial or full relief in some cases and confirming others.
The assessee counsel stated that the search under section 132 on 17-11-2012 made A.Y. 2008-09 to 2010-11 unabated. No incriminating material was found, and the AO’s order and CIT(A)’s remand report lacked any reference to such material. The counsel argued that additions under section 153A based on regular items disclosed in the books were invalid, citing the jurisdictional High Court’s judgment in PCIT vs. Friends Salt Works and Allied Industries.
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The Departmental Representative(DR) argued that unverified vendors and their non-response to notices indicated guilt, leading to additions based on comparable gross profits. The assessee counsel countered that no vendor admitted to issuing bogus bills, and the AO’s assumption lacked search evidence. The DR claimed the revised return filing date determined the year’s status, while the assessee counsel argued the status depended on the notice issue deadline under section 143(2), citing a supporting case.
The two member bench comprising Suchitra Kamble(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) considered the rival contentions and reviewed the material on record. The assessee raised an additional ground challenging the validity of assessments under section 143(3) read with section 153A for A.Y. 2009-10 and A.Y. 2010-11, arguing that no incriminating material was found during the search.
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The appellate tribunal referred to various judicial precedents, including the Gujarat High Court’s ruling in Friends Salt Works, the Supreme Court’s decision in Abhisar Buildwell, and the ITAT ruling in Vijaykumar D. Agarwal, which stated that assessments in unabated years cannot be reopened without incriminating evidence.
The tribunal concluded that, since no incriminating material was found, the assessments for A.Y. 2009-10 and A.Y. 2010-11 were invalid. As a result, it quashed the assessments and allowed the additional ground raised by the assessee.
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