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Facts
The assessee, an individual, filed her income tax return for AY 2015-16. A search was conducted under Section 132 of the Income Tax Act, 1961, at the assessee's residential premises on 31.10.2017. Subsequently, the AO passed an assessment order under Section 143(3) read with Section 153A, making additions of Rs. 1,11,00,396/- as unexplained cash credits (LTCG from penny stock transactions) and Rs. 2,22,008/- as commission. The CIT(A) allowed the assessee's appeal, which the Revenue then challenged before the ITAT.
Held
The ITAT upheld the CIT(A)'s decision, ruling that the assessment order passed under Section 153A was invalid as no search was actually conducted on the assessee and no incriminating material was found. Citing the Supreme Court's judgment in Abhisar Buildwell, the Tribunal held that additions in an unabated assessment cannot be made without incriminating material. Consequently, the Revenue's appeal, including the additional ground challenging the invalidation of the assessment order, was dismissed.
Key Issues
The primary issue was the validity of the assessment order passed under Section 153A when no search was conducted on the assessee and no incriminating material was found. A secondary issue concerned whether additions for unexplained cash credits (LTCG from penny stocks) and commission could be sustained in an unabated assessment without incriminating material.
Sections Cited
250, 1961, 68, 69C, 153A, 132, 143(2), 142(1), 143(3), 132(4), 2(45), 132A, 147, 148, 37
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM
The present appeal has been filed by the Revenue against the order of ld. CIT (Appeals), Udaipur-2 dated 12.06.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2015-16. The Revenue has raised the following grounds of appeal :-
Whether on facts and in circumstances of the case, the ld. CIT (A) is justified in granting relief to the assessee without deciding the issue on merits specifically when the assessee was not able to satisfactorily discharge his onus u/s 68 with regard to unexplained cash credits of Rs. 1,11,00,396/- in respect of penny stock transaction.
Whether on facts and in circumstances of the case, the ld. CIT (A) is justified in granting relief to the assessee without deciding the issue on merits specifically when the assessee was not able to satisfactorily discharge his onus u/s 69C with regard to unexplained expenditure of Rs. 2,22,008/- for commission to acquire accommodation entries of Rs. 1,11,00,396/- in respect of penny stock transaction.
The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appeal proceedings. The revenue has also raised an additional groundvide letter dated 31.12.2024 which reads as under :-
"Whether on facts and circumstance of the case, the ld. CIT (A) is justified in invalidating the assessment order u/s 153A despite the fact that search proceedings u/s 132 of the IT Act, 1961 at the residence premise of the assessee was conducted on 31.10.2017 and duly discussed in the assessment order."
We have heard the ld. A/R as well as the ld. D/R on the admission of additional ground. The additional ground raised by the revenue is nothing but new legal plea arising out of the appellate order passed by ld. CIT (A)-2, Udaipurwhich is under challenge before this Tribunal. The new legal plea does not require investigation into factual aspects before either accepting or rejecting the contentions. The appellant submits that the new plea go to the very basis of wrongly invalidating the assessment order under section 153A despite the fact that search proceedings under section 132 of the Income Tax Act, 1961. Consequently, as per the ratio laid down by the Hon'ble Apex Court in the case of NTPC vs. CIT (1998) 229 ITR 383 (SC) the new plea is admissible. Therefore, this issue raised by the revenue can be adjudicated on the basis of the facts and material available on the assessment record. Thus when the additional ground is not raising a new issue or plea, then in the facts and circumstances of the case, we admit the additional ground raised by the revenue for adjudication on merit. Since the additional ground raised by the revenue is purely legal in nature and goes to the root of the matter, therefore, first we take up for adjudication of the additional ground.
The brief facts of the case are that the assessee is an Individual and derives income from salary, house property and income from other sources during the year under consideration. The appellant filed her return of income on 31.08.2015 declaring total income of Rs. 27,12,600/-. Search proceedings under section 132 of the Income Tax Act, 1961 was conducted at the residential premises of the assessee on 31.10.2017. Pursuant to this, the case was selected for compulsory scrutiny. Notice under section 153A of the IT Act, 1961 was issued by the AO to the assessee on28.03.2019. In compliance to the notice the assessee filed return on 25.04.2019 declaring the total income of Rs. 27,12,600/- as filed by the assessee in her earlier return filed on 31.08.2015. Accordingly, notice under section 143(2) of the IT Act, 1961 was issued by the AO on 16.09.2019. Further notice under section 142(1) was also issued by the AO the assessee. In compliance to the said notice, the assessee furnished required documents and details which were examined and placed on record. Assessment Order under section 143(3) read with section 153A of the IT Act, 1961 was passed by the AO at assessed total income of Rs. 1,40,35,004/- on 28.12.2019 after making addition of Rs. 1,11,00,396/- on account of deemed income under section 68 of the IT Act, 1961 and Rs. 2,22,008/- on account of commission on accommodation entry. Aggrieved by the order of AO, the assessee preferred an appeal before the ld. CIT (A). The ld. CIT (A) after considering the submissions of the assessee and elaborately discussing the matter, allowed the appeal of the assessee.
Now, the Revenue has filed the present appeal before us. The additional ground relates to challenging the invalidating the assessment order passed under section 153A of the Income Tax Act, 1961. 5. Before us, the ld. D/R has submitted the written submission which are reproduced hereunder :- "4.4 The appellant has challenged the ground of appeal that no incriminating material was unearthed during the course of search and seizure action and hence no addition could have been done in the assessment order under section 153A of the Act. The appellant has also relied upon various judgements in support of his legal argument. The issue is no longer res integra after the judgement of Honourable Supreme Court in the case of 'Abhisar Buildwell' (supra). As per principles emanating from the Judgements of Hon'ble High Courts and Hon'ble Supreme Court the addition in assessment u/s 153A should be connected with something found during the search or requisition and that in such a scenario the ld. assessing authority while determining the total income may also make addition on other issues even if not emanating from incriminating material found in search. Principal Commissioner of Income-tax, Centra-3 v. Abhisar Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023] In para 7.1 Hon'ble Supreme Court has observed as under :- "7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of the Act 1961, has sut aised the legal position as under. “Summary of the legal position”. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under : ii. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153A onlyon the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” (emphasis supplied) In para 7.2 Hon'ble Supreme Court has observed as under :-
2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no juri iction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under :- “When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition ....