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Facts
The assessee filed two appeals against orders confirming additions made by the Assessing Officer under section 153A, following a search operation. The additions were based on non-current liabilities in the balance sheet, not on any incriminating material found during the search.
Held
The Tribunal held that in cases of unabated/completed assessments, additions cannot be made under section 153A if no incriminating material is found during the search, following the Supreme Court's decisions in Abhisar Buildwell and U.K. Paints.
Key Issues
Whether additions can be made in a search assessment under section 153A in the absence of incriminating material for completed/unabated assessments.
Sections Cited
153A, 144, 68, 132, 147, 148, 153C
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.:
These two appeals, by the assessee are directed against the two different orders of the Learned Commissioner of Income-tax (Appeals), Lucknow-3 [hereinafter referred as to “Ld. CIT(A)”] dated 09.03.2023 & 17.03.2023, pertaining to the assessment years 2013 – 14 & 2014-15. For the sake of convenience, these two appeals are hereby disposed of through this consolidated order. The grounds of appeal
are as under: -
1. Because the learned CIT(A) erred in law and on facts in confirming addition of Rs.2,00,00,000/- made by the learned assessing officer under section 68 of the Income Tax Act, 1961 by treating the same as unexplained cash credit. 2.1. Because the learned CIT(A) erred in law and on facts in refusing to admit additional evidence submitted by the assessee during the appellate proceedings. 2.2 Because, without prejudice, in the interests of justice, the learned CIT(A) ought to have admitted additional evidence submitted by the assessee during the appellate proceedings since the same go to the root of the issue before the learned CIT(A).
3. Because, without prejudice, the learned CIT(A) erred in law and on facts in confirming addition of Rs. 2,00,00,000/made by the learned assessing & 147/LKW/2023 Page 2 of 7 officer despite the fact that no incriminating document was found against the assessee during the course of search.
4. Because the learned CIT(A) has passed the appellate order on the basis of conjectures and surmises and without considering the facts, the applicable law and without application of mind.
5. Because the CIT(A) did not allow the assessee sufficient opportunity to make compliance of the reasons relied upon for confirming disallowances and additions made by the learned assessing officer.
6. Because the order appealed against is contrary to the fact, law and principles of natural justice.
Any other ground that may be taken at the time of hearing.”
In this case, a search & seizure operation under section 132 of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) was conducted in the case of the assessee, in pursuance whereof assessment orders, each dated 21.12.2018 were separately passed for Assessment Year 2013-14 and Assessment Year 2014-15 under section 153A read with section 144 of the Act. In the assessment years 2013-14 and 2014-15, additions amounting to Rs.2,00,00,000/- and Rs.72,00,000/- were made respectively. In the assessment year 2013-14, the aforesaid addition of Rs.2 crore was on account of non-current liabilities of the assessee as per the balance-sheet as on 31.03.2013. In the assessment year 2014-15, the non-current liabilities, as per the balance sheet as on 31.03.2014 was Rs.2,72,00,000/-. Thus, there was increase in non-current liabilities of Rs.72,00,000/-, which is difference between the aforesaid amounts of Rs.2,72,00,000/- and Rs.2,00,00,000/-. The assessee filed appeals against the aforesaid assessment orders in the office of the Ld. CIT(A). During appellate proceedings, the assessee took the ground, inter-alia, that the Assessing Officer erred in law as well as on facts in making addition to the returned income without any incriminating documents being found during the course of search. The Ld. CIT(A) rejected this contention of the assessee, relying on the judgment in the case of Raj Kumar Arora (2014) 367 ITR 517 (All)/52 taxmann.com 172 (All). Aggrieved, & 147/LKW/2023 Page 3 of 7 the assessee has filed the present two appeals in Income Tax Appellate Tribunal (ITAT).
At the time of hearing, the Ld. Counsel for the assessee submitted that the issue as to whether addition can be made in a search assessment in the absence of any incriminating material is now well settled in favour of the assessee by the order of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/(2023) 454 ITR 212 (SC). He further submitted that the Lucknow Bench of ITAT in the case of Smt. Shashi Agarwal (2024) 167 taxmann.com 687 (Lucknow Trib.), considered aforesaid decision of Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd (supra) and decided the issue in favour of the assessee relying on the same. He further submitted that in the present appeals, the additions made by the Assessing Officer are not based on any incriminating documents found in the course of search. He further submitted that the additions have been made only on the basis of figures reported in the balance- sheet of the assessee. Relying on the aforesaid cases of Abhisar Buildwell (P.) Ltd (supra), and Smt. Shashi Agarwal (supra), he contended that the additions made in the assessment orders for Assessment Year 2013-14 and Assessment Year 2014-15 should be deleted. The Ld. Departmental Representative for Revenue supported the orders of the Assessing Officer as well as Ld. CIT(A) and relying on the same.
We have heard both sides. We have perused the materials on record. In the case of Smt. Shashi Agarwal (supra), co- ordinate bench of ITAT Lucknow has decided the matter in favour of the assessee, relying on Abhisar Buildwell (P.) Ltd (supra), on the issue whether additions can be made in a search assessment in the absence of any incriminating material found during search. The relevant portion of the order of Smt. Shashi Agarwal vs. DCIT (supra) is reproduced as under: -
“(C) We have heard both sides. We have perused materials on record. There is no dispute regarding relevant facts. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Further, as no assessment proceedings were pending at the time of search & seizure operation u/s 132 of the Act on 08/07/2016, the case of the assessee falls in the category of unabated/completed assessments within the meaning of orders passed by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and within the meaning of order passed in the case of Kabul Chawla 380 ITR 573 (Delhi), which stands approved by Hon'ble Supreme Court by dint of orders of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra). Further, in paragraph 14 of the aforesaid order of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra), the Hon'ble Supreme Court concluded as under: “14. 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 fulfillment 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.” (C.1) Hon'ble Supreme Court in the case of U. K. Paints (Overseas) Ltd. (supra) widened the application of the order in the case of Abhisar Buildwell (supra) to assessments conducted u/s 153C of the IT Act also. In both orders of Hon'ble Supreme Court i.e. in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), the Hon'ble Supreme Court held that in respect of the completed/unabated assessments, no additions can be made in assessment order passed u/s 153A or passed u/s 153C of the IT Act in respect of which incriminating materials were not found in the course of search action u/s 132A of the Act; although Hon'ble Supreme Court held that the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers u/s 147/148 of the IT Act subject to fulfillment of the conditions as envisaged/mentioned u/s 147/148 of the IT Act. Thus, although the powers of the Assessing Officer u/s 147/148 of the IT Act were saved by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), subject to fulfillment of conditions envisaged u/s 147/148 of the IT Act; it has been categorically held that in respect of completed/unabated assessments, no additions can be made u/s 153A or under section 153C of the Act if incriminating material was not found / unearthed during the course of search u/s 132 of the IT Act in respect of the additions made. (C.2) The issue whether additions can be made in assessment orders passed u/s 153A or u/s 153C of IT Act in cases falling under unabated/completed assessments, when no incriminating material was found at the time of search u/s 132 of the IT Act, was a disputed issue in the past. While a view in favour of assessee was taken, for example, in cases such as CIT vs. Kabul Chawla (supra), Pr. CIT vs. Saumya Construction 387 ITR 523 (Guj), CIT vs. Continental Warehousing 374 ITR 645 (Bom.), Smt. Jami Nirmala vs. Pr.CIT 437 ITR 673 (Orissa), CIT vs. Veerprabhu Marketing Ltd. 388 ITR 574 (Cal.), Pr.CIT vs. Delhi International Airport (P.) Ltd. 443 ITR 574 (Kar.), Pr.CIT vs. Meeta Gutgutia 395 ITR 526 (Delhi), Dr. A. V. Sreekumar vs. CIT 404 ITR 642 (Ker.), Pr. CIT vs. Smt. Daksha Jain 2019 (8) TMI 474 (Rajasthan), etc.; courts took a view in favour of Revenue in cases reported as CIT vs. Rajkumar Arora (supra), CIT vs. Mahndipur Balaji 447 ITR 517 (All.), CIT vs. K. P. Ummer 413 ITR 251 (Ker.), Sunny Jacob Jewellers and Wedding Centre vs. DCIT 362 ITR 664 (Ker.), E. N. Gopakumar 75 taxmann.com 215 (Kerala), etc. The issue has now been finally settled by decisions of Hon'ble Supreme Court in the aforesaid cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) wherein view in favour of assessee has been taken. (C.2.1) In the present appeals before us, the additions have been made by the Assessing Officer in assessment orders passed u/s 153A of the IT Act. Further, we have already noted earlier that the relevant facts are not in dispute. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Furthermore, as no assessment proceedings were pending in the case of the assessee at the time when (on 08/07/2016) search u/s 132 of the IT Act was conducted, the case of the assessee in the present appeals before us, falls in the category of completed/unabated assessments within the meaning of orders passed by Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and in the case of CIT vs. Kabul Chawla (supra) which was approved by Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell (supra). In view of the foregoing, and having regard to the relevant facts and circumstances of the present case before us, and further, as representatives of both sides are in agreement with this, we are of the view that the issue in dispute is squarely covered in favour of the assessee by the orders of Hon'ble Supreme Court in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and by the aforesaid instruction No. 1 of 2023 of CBDT, which is binding on Revenue authorities. Accordingly, we direct the Assessing Officer to delete the additions made amounting to a total of Rs.2,24,81,900/- for assessment year 2015-16 and addition amounting to Rs.44,25,000/- for assessment year 2016-17. (C.2.2) Since we have directed that the aforesaid additions be deleted, the other issues regarding merits of the additions made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to make any order with regard to the merits of the various additions made.”
& 147/LKW/2023 Page 6 of 7 5. In view of the foregoing, and respectfully following the orders of the Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and DCIT vs U.K. Paints (Overseas) Ltd (2023) 150 Taxmann.com 108 (SC), and further relying instruction of Central Board of Direct Taxes (CBDT) [Instruction No.1 of 2023 (F. No.279/Misc./M-54/2023-IT)] directing the field authorities to implement the aforesaid orders of Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and U.K. Paints (Overseas) Ltd (supra), in uniform manner; we direct the Assessing Officer to delete the aforesaid additions of Rs.2,00,00,000/- for Assessment Year 2013-14 and Rs.72,00,000/- for Assessment Year 2014-15 respectively.
Since we have directed that the aforesaid additions be deleted, the other issues regarding merits of the additions made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to make any order with regard to the merits of the various additions made.
(6.1) All the grounds of appeals are treated as disposed of as aforesaid.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 21/01/2025.