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Facts
A search and seizure operation was conducted on the assessee, a cable operator, in 2010, leading to a notice under Section 153A and an assessment with multiple additions due to non-compliance. The assessee challenged these additions before the CIT(A), arguing they must be based on incriminating material, but the CIT(A) largely confirmed them while deleting minor amounts and issuing directions for one.
Held
The ITAT affirmed that the additions were validly made under Section 153A as they were solely based on incriminating materials (diaries and notebooks) seized during the search, which revealed undisclosed income. Relying on Supreme Court and High Court precedents, the Tribunal held that income estimation is permissible in search assessments when justified by incriminating evidence.
Key Issues
Whether additions made in a search assessment under Section 153A must be based entirely on incriminating material, and whether income estimation is permissible in such assessments.
Sections Cited
132, 153A, 142(1)
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Income Tax Appellate Tribunal, “SMC” BENCH, COCHIN
Before: Shri Inturi Rama Rao
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member ITA No.689/Coch/2024 : Asst.Year 2005-2006 ITA No.690/Coch/2024 : Asst.Year 2006-2007 ITA No.691/Coch/2024 : Asst.Year 2007-2008 ITA No.692/Coch/2024 : Asst.Year 2008-2009 ITA No.693/Coch/2024 : Asst.Year 2010-2011 ITA No.694/Coch/2024 : Asst.Year 2011-2012 Trivandrum Cable Network (P.) The Deputy Commissioner of Limited, Chrian Square, II Floor v. Income-tax, Central Cir.1 Abjuvilasam Road, Pulimoodu Thiruvananthapuram. Trivandrum – 695 001. PAN : AABCT8778N. (Appellant) (Respondent) Appellant by : --- None --- Respondent by : Sri.Sanjit Kumar Das, CIT-DR Date of Date of Hearing : 03.02.2025 Pronouncement : 10.02.2025 O R D E R These appeals filed by the assessee are directed against different orders of the Commissioner of Income-tax (Appeals)-3, Kochi [“CIT(A)” for short] dated 2nd May, 2024 for the assessment years 2005-2006 to 2008-2009 and 2010-2011 to 2011-2012.
Since identical facts and issues are involved in these appeals, they were heard together and are being disposed of by the common order. We take ITA No.689/Coch/2024 as the lead appeal for adjudication and the decision which would arrive at therein would be applicable to other appeals as well.
2 ITA Nos.689-694/Coch/2024. Trivandrum Cable Network (P.) Ltd.
The brief facts of the case are that the assessee is a company engaged in the business of cable operation. A search and seizure operation was carried out under the provisions of sec.132 of the Income-tax Act, 1961 (“the Act” hereinafter) on 08.11.2010. During the course of search and seizure certain incriminating materials were stated to have been found and seized. Based on the incriminating material, the assessee was issued notice u/s.153A of the Act on 28th March, 2012. However, the assessee neither complied with the notice issued u/s.153A of the Act nor filed any information as called for vide notice issued u/s.142(1) of the Act. In the above circumstances, the Assessing Officer (Assessing Officer) was constrained to complete the assessment at a total income of Rs.16,18,819. While doing so, the AO made following additions / disallowances:- (i) Addition of undisclosed advertisement & slot income. Rs.5,22,344 (ii) Addition on account of unexplained cash credit Rs.8,21,100 (iii) Addition on account of unexplained cash credit Rs. 59,100 (iv) Addition on account of disallowance of exps. Rs. 59,237 (v) Addition on account of disallowance of set off of carry forwarded loss Rs.1,57,038 4. Being aggrieved by the above assessment order, the assessee has filed an appeal before the CIT(A) and contended that the addition u/s.153A of the Act can be made wholly on the basis of incriminating material found and seized. In support of his contention, the assessee placed reliance on the judgment of the Hon’ble Supreme Court in the case of Pr.CIT v. Abhisar Buildwell P.Ltd. (Civil Appeal No.6580 of 2021). It is further contended that the AO cannot resort to
3 ITA Nos.689-694/Coch/2024. Trivandrum Cable Network (P.) Ltd. estimation of income in the assessment completed u/s.153A of the Act. However, rejecting the contention of the assessee, the CIT(A) confirmed the addition made by the AO by holding that the addition is wholly based on the incriminating material found and seized. The CIT(A) further held by placing reliance on the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Hotel Meriya (2014) 362 ITR 664 (Ker.) that the AO is empowered to estimate the income of the assessee even in the case of search assessment proceedings. However, the CIT(A) deleted the addition on account of unexplained cash credits of Rs.59,100 and addition on account of estimated disallowance of expenditure of Rs.59,237. Insofar as the addition of Rs.1,57,038 being disallowance of carried forward loss set off, is concerned, the CIT(A) issued certain directions to the Assessing Officer to settle the issue.
Aggrieved by the order of the CIT(A), the assessee is in appeal before me in the present appeal. When the matter was called for, none appeared on behalf of the assessee despite due service notice. Therefore, I proceed to dispose of the appeal on merits.
The learned Sr.DR, on the other hand, relied upon the orders of the authorities below.
I have heard the learned Sr.DR and perused the material available on record. The solitary issue that arises for my consideration is that in the assessment made u/s.153A of the Act, whether the AO made the addition wholly based on
4 ITA Nos.689-694/Coch/2024. Trivandrum Cable Network (P.) Ltd. incriminating material found and unearthed during the course of search and seizure operation or not. There is no quarrel as to the proposition of law that the addition u/s.153A can only made on the basis of incriminating material found and unearthed during the course of search and seizure operation, as held by the Hon’ble Supreme Court in the case of Pr.CIT v. Abhisar Buildwell P.Ltd. (supra). In the present case, on a mere perusal of the assessment order, it would be clear that the additions were made based on the diaries and note books seized from the residence of the assessee. The said diaries and note books clearly reveal that the assessee had received income from advertisement, not disclosed in the return of income. The receipts from said business were not disclosed in the return of income. Based on the gross receipts, the net profit was estimated at Rs.5,22,344. Similarly is the position in the case of business of UN Cable Network. Thus, it is clearly evident that the addition was made solely on the basis of the incriminating material found during the course of search and seizure. Further, the Hon’ble jurisdictional High Court in CIT v. Hotel Meriya (2014) 362 ITR 664 (Ker.) held that even in the case of an assessment made u/s.153A, the estimation of income can be made if the incriminating material justifies estimation. Thus, the contentions raised for challenging the addition made by the AO are devoid of any merit.
The other additions were made by the AO, based on incriminating materials unearthed as a result of search and
5 ITA Nos.689-694/Coch/2024. Trivandrum Cable Network (P.) Ltd. seizure action. Hence, the AO has justified in making addition u/s.153A of the Act.
In the result, the appeals filed by the assessee are dismissed. Order pronounced on this 10th day of February, 2025.
Sd/- (Inturi Rama Rao) ACCOUNTANT MEMBER Cochin; Dated : 10th February, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin