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Facts
A search action was conducted on the assessee-group, leading the Assessing Officer (AO) to make additions for alleged diversion of trust funds from Gyan Jyoti Educational and Social Welfare Society (GJESWS) for personal investments in property. The assessment year 2015-16, along with other years, was an unabated year where the return of income had already attained finality. The AO relied on seized documents and post-search enquiries to make these additions.
Held
The Tribunal, relying on the Supreme Court decision in Pr. CIT vs. Abhisar Buildwell (P.) Ltd., held that no additions could be made for completed or unabated assessment years under Section 153A in the absence of incriminating material found during the search. The seized document, a net worth certification, was not considered incriminating material to prove the alleged diversion of trust funds, and the additions were based on post-search enquiries rather than incriminating evidence. Consequently, all additions made by the AO were deleted.
Key Issues
Whether additions can be made under Section 153A for an unabated assessment year without incriminating material found during a search, and if a net worth certification constitutes incriminating material for alleged diversion of funds.
Sections Cited
139, 153A, 143(3), 132(1), 132, 132A, 147, 148, 143(1)
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee have identical facts. First, we take up for Assessment Year (AY) 2015-16 which arises out of a common order of learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] dated 31-12-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 153A(1)(b) r.w.s. 143(3) of the Act on 26-09-2022. In the assessment order, Ld. AO has made addition of Rs.12.50 Lacs which represent alleged diversion of funds from Gyan Jyoti Educational and Social Welfare Society (GJESWS).
The Ld. AR advanced arguments and relied on various judicial decisions to contend that in the absence of any incriminating material as found during the course of search action, impugned addition could not be made in the hands of the assessee. The Ld. AR stated that this year was unabated year. The Ld. CIT-DR, on the other hand, controverted the arguments of Ld. AR and advanced arguments favoring the case of the revenue. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Assessment Proceedings 3.1 The assessee filed return of income u/s 139 on 07-09-2015 declaring income of Rs.6.14 Lacs which had already attained finality. However, the assessee-group was subjected to search action u/s 132(1) on 28-01-2021 which led Ld. AO to issue notice u/s 153A to the assessee. In response, the assessee offered same return of income. The assessee acted as a Vice President of Universal Educational Society (UES) which was also covered under search action. The assessee also acted as President of Gyan Jyoti Educational and Social Welfare Society (GJESWS). M/s GJESWS was registered with Registrar of Societies and it was running Punjab Group of colleges at Chunni Kalan, Fatehgarh Sahib, Punjab. During search, incriminating documents were found and seized which were marked as Annexure A- 1 to A-4. On the basis of the same, it was alleged by Ld. AO that the assessee and his wife was involved in diversion of trust funds of GJESWS for personal purposes / benefits. The said funds were alleged to be diverted for investment in three plots at Mohali as detailed in the assessment order. 3.2 During the course of search on assessee, a document containing list of assets and liabilities of the assessee was seized as Page No.81 of Annexure A-1. The same, inter-alia, detailed assessee’s half-share in a 2 Kanal Plot represented as Plot No.E-291, Phase-8A, Mohali having market value of Rs.85 Lacs. The payment thereof was made by the assessee and his wife jointly. Upon examining the assessee’s sources of investment in the said plot, it was observed by Ld. AO that trust funds of Rs.27 Lacs were utilized by the assessee during FYs 2014-15, 2015-16 & 2018-19 for investment in this property as under: - No. FY Amount (Rs.) 1. 2014-15 Rs. 12.50 Lacs 2. 2015-16 Rs. 5.00 Lacs 3. 2018-19 Rs. 9.50 Lacs Total Rs. 27.00 Lacs Accordingly, the assessee was show caused. 3.3 The assessee contended that it had opening unsecured loans of Rs.55,49,961/- as on 01-04-2014 with M/s GJESWS and all the payments as received by the assessee were out of opening balance of these loans. The said explanation was rejected by Ld. AO. Finally, the addition of Rs.12.50 Lacs pertaining to this year was added to the income of the assessee. 3.4 During first appeal, the assessee contested the additions on legal grounds as well as on merits by way of elaborate written submissions which have been extracted in the impugned order. However, Ld. CIT(A) rejected the same and confirmed the assessment against which the assessee is in further appeal before us. Our findings and Adjudication 4. The first and foremost contention of Ld. AR is that this being unabated year, no addition could be made in the hands of the assessee in the absence of any incriminating material found during search on assessee. To support the same, Ld. AR has placed on record Page No.81 of Annexure A-1 to state that impugned addition do not emanate from this document and the document do not fortify the allegation of Ld. AO. Reference has been made to the decision of Hon’ble Apex Court in the case of Pr. CIT vs. Abhisar Buildwell (P.) Ltd. (149 Taxmann.com 399) holding that no addition could be made for completed assessment year in the absence of any incriminating material found during the course of search on assessee.
Upon careful consideration of Page No.81 of Annexure A-1 (extracted on Page No.6 of the assessment order as well as separately placed before us), we find that the same is merely net worth certification from M/s A. Kumar & Co. (CA) certifying net worth of the assessee as on 28-10-2019. The same do not narrate any fact of diversion of trust fund to the assessee to make such investments. The same also do not contain any entry indicating unaccounted money / investment by the assessee. This being so, this documents could not be treated as incriminating documents vis-à-vis the assessee so as to make conclusion of diversion of trust money by the assessee. Whatever conclusion has been made by Ld. AO, the same are on the basis of post search enquiries only and that too, merely on the basis of financial statements and tax returns. Therefore, the said information / documents could not be treated as incriminating documents so as to enable jurisdiction of Ld. AO u/s 153A. On these facts, the ratio of decision of Hon’ble Apex Court in the case of Pr. CIT vs. Abhisar Buildwell (P.) Ltd. (149 Taxmann.com 399) would squarely apply wherein it has been held that no addition could be made for completed assessment in the absence of any incriminating material found during the course of search on assessee. The Hon’ble Court, considering all the earlier decisions holding the field, held as under: -
In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or 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 returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.
Approving the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (380 ITR 573) as well as the decision of Hon’ble Gujarat High Court in Saumya Construction (P.) Ltd. (387 ITR 529), it was held by Hon’ble Court that in respect of completed assessments / unabated assessments, no addition could be made by Assessing Officer in the absence of any incriminating material found during course of search under section 132 or requisition made under section 132A. Similar is the decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [2015; 374 ITR 645] which has been followed in subsequent decision in CIT V/s Gurinder Singh Bawa (79 Taxmann.com 398 05/10/2015) which deals with a situation wherein the original return of income was processed u/s 143(1). It was held by Hon’ble Court that in respect of non-abated assessment, the additions are to be strictly based on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property discovered during search. We find that similar is the view of Hon’ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia (82 Taxmann.com 287) which has primarily followed the decision of Kabul Chawla (supra). We also find that Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02-07- 2018. The ratio of all these decisions would squarely apply to the facts of present case before us. In these decisions, it has been held that concluded assessment could not be disturbed in search proceedings u/s 153A and the additions have necessarily to be based on incriminating material found during the course of search. The co- ordinate bench of Ahmadabad Tribunal in the case of ACIT vs. Real Marketing Pvt. Ltd. (ITSS No.128-133/Ahd/2021), relying upon the decision of Hon’ble Gujarat High Court in the case of Soumya Construction (387 ITR 529), confirmed quashing of assessment u/s 153A on the ground that there was no seized material in the case of the assessee. The Ld. AR also referred to various other judicial decisions including the decision of Hon’ble High Court of Delhi in the case of PCIT vs. Anand Kumar Jain (HUF) (ITA No.23/2021 dated 12-02-2021); the decision in PCIT vs. Best Infrastructure (India) (P.) Ltd. (397 ITR 82); the decision in CIT vs. Harjeev Aggarwal, (290 CTR 263) and the decision in CIT vs. Raj Pal Bhatia, (333 ITR 315) holding the same consistent view. All these decisions support the argument of Ld. AR that in the absence of any incriminating material, impugned addition could not be made. Respectfully following all these binding judicial precedents, the impugned addition of Rs.12.50 Lacs stand deleted. The assessee succeeds on this foremost legal ground alone which render all other grounds mere academic in nature. The appeal stand allowed. 6. Facts in for AY 2016-17 are quite similar wherein Ld. AO has made addition of Rs.5 Lacs on identical facts. The return of income as filed by the assessee u/s 139 on 08-07- 2016 had already attained finality. Therefore, our adjudication as above shall, mutatis mutandis, apply to this appeal also. The assessee succeeds in its legal grounds. The impugned addition of Rs.5 Lacs stand deleted. 7. In AY 2018-19 wherein Ld. AO has made addition of Rs.7.61 Lacs for car facility. The return of income as filed by the assessee u/s 139 on 16-07-2018 had already attained finality. Therefore, our adjudication as above shall, mutatis mutandis, apply to this appeal also. The assessee succeeds in its legal grounds. The impugned addition of Rs.7.61 Lacs stand deleted. 8. Similar are the facts in for AY 2019-20 wherein Ld. AO has made addition of Rs.9.50 Lacs for diversion of trust fund and also made another addition of Rs.7.61 Lacs for car facility. The return of income as filed by the assessee u/s 139 on 10- 08-2019 had already attained finality. Therefore, our adjudication as above shall, mutatis mutandis, apply to this appeal also. The assessee succeeds in its legal grounds. The impugned additions stand deleted.
All the appeals stand allowed in terms of our above order. Order Pronounced on 18-08-2025. Sd/- Sd/- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18-08-2025 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR
ITAT CHANDIGARH