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Facts
A search and seizure operation was conducted on the Brindavan group, leading to a notice u/s 153A for AY 2016-17. The Assessing Officer found the assessee had sales of Rs. 4,01,00,081/- to M/s Faith Jewellers, which a subsequent search revealed to be providing accommodation entries. The AO treated these sales as unaccounted income; the CIT(A) sustained an addition of 2% of the sales value (Rs. 8,02,002/-) as profit, assuming sales in the grey market.
Held
The Tribunal held that AY 2016-17 was an unabated year, and no incriminating material linking the addition was found during the search on the assessee. The AO's reliance on third-party statements from M/s Faith Jewellers, obtained prior to the assessee's search, did not constitute incriminating material for an unabated year. Citing the Supreme Court's decision in PCIT v. Abhisar Buildwell (P) Ltd., the Tribunal concluded that no addition could be made in an unabated year without incriminating material found during the assessee's own search.
Key Issues
Whether additions made in an unabated assessment year based solely on information from a third-party search, without incriminating material found during the assessee's own search, are legally sustainable under Section 153A of the Income Tax Act.
Sections Cited
Section 153A, Section 143(3), Section 132, Section 132(4), Section 133A, Section 143(2), Section 142(1), Section 69A, Section 153C
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI YOGESH KUMAR US, JUDICIALMEMBER AND
statement and findings in the case of M/s Faith Jewellers in order to make the addition in the case of the assessee and there is no material available linking to the case of the assessee. There is only a common thread between M/s Faith Jewellers and the assessee that assessee has sold certain jewellery to M/s Faith Jewellers and assessee has received the sale proceeds from them on the same day. Apart from that the findings in the case of M/s Faith Jewellers are that they are providing accommodation entries and if we accept that assessee has provided accommodation entries to M/s Faith Jewellers then we might have to treat the sales declared by the assessee as bogus and since the assessee has already declared the sales we cannot proceed to make separate addition which was already declared as income in the books of the assessee. Leave apart the above, we notice that the impugned assessment year is unabated, as per the facts brought on record by the assessee and we observe that there is no link to the proceedings initiated in Faith Jewellers and the assessee. Further there is no incriminating material found during the search in this case and Assessing Officer has proceeded to complete the assessment merely on the basis of statement recorded in the case of third party in post search proceedings. Even otherwise the statements were recorded prior to the search. These findings in third party cannot be treated as incriminating material Therefore, we are inclined to agree with the assessee that there is no incriminating material found during the search qua making addition in the assessment year which is unabated, by relying on Abhisar Buildwell (P) Ltd. (supra), no addition can be year. In the result, ground no. 1 raised by the assessee is allowed in favour of the assessee.
The other grounds raised by the assessee are not adjudicated at this stage.
Accordingly, appeal filed by the assessee is partly allowed as indicated above.
Since we have already adjudicated the appeal preferred by the assessee on jurisdictional issue, therefore, the assessment itself is bad in law. Therefore, the appeal preferred by the Revenue is also dismissed.
In the result, appeal filed by the assessee is partly allowed and the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 18th day of December, 2024.