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Facts
A search and survey operation under Sections 132 and 133A of the Income Tax Act was conducted at the assessee's and related premises. Subsequent reassessment proceedings under Section 153A resulted in additions related to non-deposit of employee contributions (Sec. 36(1)(va)), proportionate interest on advances (Sec. 36(1)(iii)), and interest paid without TDS (Sec. 40(a)(ia)). The assessee challenged these additions, contending that no incriminating material was found during the search to justify them in completed assessments.
Held
The Tribunal found that the Assessing Officer relied on documents already furnished by the assessee, not on any incriminating material unearthed during the search. Citing the Supreme Court judgment in PCIT vs. Abhisar Buildwell Pvt. Ltd., the Tribunal reiterated that additions under Section 153A in completed assessments can only be made based on incriminating materials found during the search. Since no such material was found, the Tribunal held that the additions and the entire reassessment proceedings were unsustainable and quashed them.
Key Issues
Whether additions can be made under Section 153A of the Income Tax Act in completed assessments when no incriminating material is found during a search or survey operation.
Sections Cited
250(6), 153A, 143(3), 132, 133A, 127, 143(1), 115JB, 139, 143(2), 142(1), 36(1)(va), 36(1)(iii), 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: MS. MADHUMITA ROY & SH. AVDHESH KUMAR MISHRA
Date of Hearing 20.05.2024 Date of Pronouncement 28.05.2024 O R D E R PER MS. MADHUMITA ROY – JUDICIAL MEMBER :
The bunch of appeals filed by the assessee are directed against the orders all dated 22.03.2023 passed by the Commissioner of Income Tax (Appeals)–3, Gurgaon under Section 250(6) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) arising out of the assessment orders , 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 2 - all dated 23.04.2021 passed by the Deputy Commissioner of Income Tax, Central Circle, Karnal (‘the AO’) under Section 153A read with Section 143(3) of the Act for the Assessment Years (A.Y.) 2013-14, 2014-15, 2015-16 & 2016-17 respectively.
Since all the appeals relate to the same assessee, these are heard analogously and are being disposed of by a common order.
A search & seizure operation under Section 132 of the Act and survey operation under Section 133A of the Act was conducted at the business premises of M/s. Jai Bharat Gourp of cases, Samalkha (Panipat) and residential premises of Directors and their family members on 03.05.2018. A survey under Section 133A of the Act was also conducted at the factory premises of the assessee situated at Piau Maniyari, Kundli on 03.05.2018 whereas incriminating documents were claimed to have been found and seized/impounded. The case was centralized with the office in consequence to Pr. CIT, Delhi-2 under Section 127 of the Act dated 26.10.2018.
The assessee, engaged in the business of copper, copper alloys, pipes, rods and strips etc., filed its return of income for the year under consideration on 28.09.2013 declaring total income at Rs. Nil after claiming set off of brought forward unabsorbed depreciation of Rs.9,77,372/- against current year business income of Rs.9,77,372/-. The same was processed under Section 143(1) of the Act at returned income.
, 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 3 - Tax to the tune of Rs.6,83,785/- under Section 115JB of the Act on the book profit of Rs.35,88,482/- was paid by the assessee. However, in the reassessment proceedings, notice under Section 153A of the Act was issued on 30.01.2020 directing the assessee to file return of income for the year under consideration against which, return was filed on 25.02.2020 through electronic media declaring total income at Rs. Nil as the same was declared in the original return filed under Section 139 of the Act on 28.09.2013. Further statutory notices under Section 143(2) & 142(1) of the Act both dated 18.12.2020 were served upon the assessee along with the detailed questioner directing the assessee to furnish the information on or before 31.12.2020. Pursuant thereto, the representative of the assessee duly appeared before the authorities below, filed written submissions from time to time, which was further examined and placed on record. Relevant to mention that the books of accounts and bills/vouchers were also produced and the same were test- checked. The re-assessment proceedings was finalized upon making addition of Rs.27,572/-, Rs.18,04,614/- & Rs.26,004/- under Section 36(1)(va), 36(1)(iii) and 40(a)(ia) of the Act respectively, which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us.
At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee argued on the maintainability of the proceeding to this effect that the impugned additions were made though under Section 153A of the Act, no incriminating material was found for , 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 4 - the year under consideration. While making addition no reference of incriminating material has been made by the Assessing Officer as also stated by him. Therefore, if no incriminating material is unearthed the same tantamount of abuse of the process of law. The very reason to belief forming the basis of search stands vitiated and may say to be bad in the eye of law and therefore, liable to be quashed as the main argument advanced by the assessee’s Counsel.
On the other hand, Learned DR relied upon the order passed by the authorities below.
We have heard the rival submissions made by the respective parties, we have also perused the relevant materials available on record.
It appears that while dealing with the issue of non deposit of Employee’s Contribution within the prescribed date under the relevant Act, the Learned AO relied upon the details revealed from Audit Report filed by the assessee, which is appearing at page 4 of the order passed by the Learned AO. The relevant portion whereof is as follows:
“on perusal of Audit Report, it is noticed that Employee’s Contribution towards EPF and ESIC were deposited after the due dates prescribed under the relevant Act as under……..”.
, 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 5 - 8. Finally, addition to the tune of Rs.27,572/- was made under Section 36(1)(va) of the Act.
While making addition under Section 36(1)(iii) of the Act of proportionate interest of Rs.18,04,614/-, the details of advances given by the assessee to various persons were obtained from the records submitted by the assessee including the accounts of these persons as appearing at paragraphs 5, 5.1 & 5.2 of the order passed by the Learned AO.
Further that, only on the examination of details furnished by the assessee to Learned AO, it was found that interest of Rs.26,004/- was paid to Hindalco Industries Ltd. but tax was not deducted on the same as alleged. The same was reflected at paragraph 6 of the order passed by the Learned AO.
Upon careful consideration of the order passed by Learned AO, we find that no reference of incriminating material has been made while making addition to the total income of the assessee by Learned AO in respect of any of the issues as already discussed hereinabove. Meaning thereby, the documents, which were relied upon by the Learned AO, were already made available to him by the assessee for the relevant Assessment Year and not the documents unearthed during the search or survey said to be incriminating in nature while making addition. It is a settled principle of law that there has to be incriminating material in the hands of the Revenue in order to assume jurisdiction to initiate , 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 6 - proceedings under Section 153A of the Act. In the absence of incriminating material unearthed during the search, the AO cannot assess or reassess taking into consideration the other materials in respect of unabated assessment. In this regard, we have also considered the judgment passed by the Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. in Civil Appeal No.6580 of 2021, as relied upon by the Learned AR wherein, it was held that the completed assessments can be interfered with by the AO by making assessment under Section 153A of the Act only on the basis of some incriminating materials unearthed during the course of search.
In a completed assessment; no addition is permissible in the absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, otherwise, this will tantamount to abuse of process of law. In that view of the matter, the order passed by the Learned AO making addition under Section 153A of the Act, in the absence of any incriminating material is not sustainable in the eye of law. The entire proceeding is vitiated and, therefore, liable to be quashed. With the aforesaid observation, we, thus, quash the entire proceeding initiated against the assessee.
In the result, appeal of the assessee is allowed. , 1580, 1581 & 1582/Del/2023 B. L. Foundry Pvt. Ltd.. vs. CIT Asst.Years–2013-14, 2014-15, 2015-16 & 2016-17 - 7 - 14. The issue involved in all the appeals is identical to that of the issue already been dealt with by us and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, these appeals preferred by the assessee are also allowed.