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Facts
The assessee filed appeals against the order of CIT(A). The appeals pertained to assessment years 2012-13 to 2016-17, for which returns were not pending on the date of search. During the search, the AO found bills related to "other discounts" and made additions based on these, contending that the expenses were not reflected in the invoices, although claimed in the P&L.
Held
The Tribunal held that the presence of incriminating material is a prerequisite for making assessments under Section 153A for years that were not abated. Since no incriminating material was found, and only a statement from the Manager Accounts was considered, which is not incriminating material on its own, the additions made by the AO were not tenable.
Key Issues
Whether additions can be made under Section 153A in the absence of any incriminating material found during the search, for assessment years where returns were not pending at the time of search.
Sections Cited
153A, 143(3), 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV
All these appeals of the assessee are arising from Order of CIT(A) dated 25.03.2024 having DIN numbers mentioned in the title of the appeals. The facts leading to the filing of the present appeals are discussed herein under: - ITA No-963 to 967 for AY 2012-13 to 2016-17(Five Appeals)
In all these five appeals the admitted facts are that the assessee has filed the return of income for the years as per the chart mentioned below. These returns were not pending on the date of search.
Assessment Year Date of filing of return Status on date of search i.e., on 29.11.2017 2012-13 29.09.2012 Assessed u/s 143(3) on 25.03.2015.. 2013-14 31.10.2013 Not pending 2014-15 12.11.2014 “ 2015-16 26.09.2015 “ 2016-17 28.09.2016 “
Perusal of the above table would show that so far as Assessment Years 2012-13 to 2016-17 are concerned, the returns of income filed by the assessee were not pending on the date of search. This fact is crucial and goes to the route of the matter.
In this case, search was conducted at the premises of the assessee on 29.11.2017. It is admitted fact as coming out from the Assessment Orders itself that return of income for all the above-mentioned Assessment Years were not pending on the date of search and in fact in Assessment Year 2012-13, the assessment was completed under section 143(3) of the Act. Be that as it may, it is the case of the Revenue that certain incriminating materials were found during the course of search viz., bills related to “other discounts” given by the assessee. On the basis of these bills it is observed by the AO that assessee has not reflected an expenses namely “other discount” in the invoices though expenses under this nomenclature have been claimed in the P&L. Accordingly the AO took the view that amount
which is not found mentioned in the bills not allowable as revnue expense to the assessee.
3. Aggrieved by the Order of the AO, assessee has preferred appeals before CIT(A) and, inter alia, contended that the AO has erred in making the addition under section 153A of the Act would there being any incriminating material found during the course of search and ignoring that the return of income filed by the assessee were not pending on the date of search. However, the CIT(A) dismissed the appeal of the assessee and affirmed the Order of the AO.
4. Aggrieved with the Order of the CIT(A), assessee has come up in appeal before the us and has raised several grounds. At the outset, learned Counsel for the assessee vide ground No.11 has contended that the case of the assessee is squarely covered by the judgment of Hon’ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd. reported in [2023] 149 taxmann.com 399 (SC). The learned Counsel for the assessee contended that it is a settled position of law that in absence of any incriminating material the AO cannot assess an assessee for such years for which no assessments are pending on the date of search. The learned Counsel for the assessee also argued that reliance by the Departmental authority on the statement of the Manager Accounts of the assessee company, dehors the support of any incriminating material, is not tenable in law.
The learned DR relied on the Orders of the authorities below.
After considering the rival submissions, we observe that the assessee has incurred certain expenses under the head “other discount” and has duly reflected those amounts in the Profit and Loss account, and the AO has examined this issue only dehors any incriminating material. Therefore, it is not a case where some document exhibiting some income not disclosed by assessee have been found, rather it is case where assessee books of account were recording certain entries have been examined by the AO under section 153A read with 143(3) of Act.
It is settled position of law that under section 153A of the Act, presence of incriminating material is sine-qua- non for assessing those years which were not abated on the date of search. In other words, there has to be some incriminating material unearthed during search qua those years which are not pending on the date of search. Recently, Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra), affirming the view of Kabul Chawla, has held as under:
“23. 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 reopened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment 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.”
In the present case except the statement of Manager accounts, who is third party, there is nothing on record to suggest that there was some manipulation in the accounts of the assessee. A statement on standalone basis cannot be treated as incriminating material as held by various High Courts including Delhi High Court in the case of CIT Vs Harjeev Aggarwal reported in 290 ITR 263(Del) and and CIT Vs Best Infrastructure reported in 397 ITR 82(Del). Therefore, respectfully following the verdict of the Hon’ble Apex Court in the case of Abhisar(Supra), we allow the appeals of the assessee on this ground alone. Since we have already allowed the appeal of the assessee on this legal aspect, we deem it appropriate not to go into the merits of the case.
Hence, the appeals of the assessee in for AY 2012-13 to 2016-17 are allowed.