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Facts
The appeals were restored by the Apex Court. The issue was whether the Assessing Officer (AO) could make additions under section 153A when no incriminating material was found during the search. The assessment orders were for the assessment years 2005-06 & 2006-07, which were unabated at the time of the search on 06/10/2017.
Held
The Tribunal held that for unabated assessments, additions under section 153A can only be made based on incriminating material found during the search. Since no such material was found, the additions made by the AO and confirmed by the CIT(A) were considered bad in law and quashed.
Key Issues
Whether additions made under section 153A are valid when no incriminating material was found during search for unabated assessments.
Sections Cited
153A, 143(3), 132, 132A
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Income Tax Appellate Tribunal, JAIPUR BENCHES, “A” JAIPUR
Before: SH. SANDEP GOSAIN & DR. M. L. MEENA
allowing Appellants SLP Nos. 733/2020 and 374/2020 being filed against the order passed by Honourable High Court of Rajasthan in ITA No.169/ -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 2018 dated 06 dot 08 dot 2018 vide CIVIL APPEAL NO. 6157/2023 and 6158/2023 in the case of M/s GUPTA EMERALD MINES PVT LTD. VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -1, dated: 25th September 2023. The relevant part of the judgement is reproduced as under:
5. In view of the above, we set aside the order passed by the Income Tax Appellate Tribunal dated 16.02.2018, followed by decisions of the High Court dated 06.08.2018 & 01—08—2018 and restore the matters back on the file of the Income Tax Appellate Tribunal for consideration of the matters on merits.
Since the CIT (A), Ajmer has decided the appeal by common order, so we adjudicate the appeal by this common order where the appellant has also raised common grounds of appeal in respect of both the assessment years as under:
That the order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio.
2. The learned assessing officer has erred in initiating proceedings under section 153A of the act that no material was found during the search. -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 3. In the facts and Circumstances of the case the Learned CIT(A) has erred in confirming the action of the Assessing Officer has erred in rejecting the books of accounts. 4. In the facts and Circumstances of the case the Learned CIT(A) has erre in sustaining the trading addition of Rs. 46,96,846/- by applying GP rate. 5. The assessee craves your indulgence to add grounds of appeal before or at the time of hearing.
3. Apropos ground no. 1 the appellant challenge that the order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio.
4. At the outset, the Ld. AR for the appellant submitted that the issue involved is purely legal in as much as the Learned Assessing Officer was not competent to issue notice u/s 153A in the present case and no addition could be made as no incriminating material was found during the course of search against the appellant assessee. He submitted a brief note where relevant part reads as follows:
1. No justification for action u/s 153A — In the case of the assessee search and seizure operation took place u/s 132(1) on 20.05.2009. As mentioned in the assessment order on page 2 the background of the search was that in Financial Year 2007- 08 during the course of surveys conducted by the BCTT wing of the -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 department it transpired that the assessee was obtaining large amount of purchase bills of jewellery from Vijay Group and Lalwani Group without any actual delivery of goods and similarly was issuing sale bills without any actual delivery. In the course of search the same thing was noticed. Thus in a way nothing new was found in search and what was found was already in the knowledge in the department. The fact of receiving and issuing bogus vouchers of purchase and sales was already in the knowledge in the department as a result of surveys conducted by the BCIT Wing. Further in the assessments for the Assessment Year 2005-06 and 2006-07 in the case of the M/S Clarity Gold Pvt. Ltd. the issue of bogus purchase examination is allowed in such a case also. So even if the Learned Assessing Officer treated Shri Ameria as director representing the company even then the opportunity of cross examination is a must. Therefore, in the absence of cross examination of these persons the assessment proceeding stand vitiated. The assessee was not allowed a fair play. The principles of natural justice stand violated. It is settled principle of law that the Assessing Officer cannot utilized any material or document without affording any opportunity of cross examination to -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 the assessee. Therefore, also the assessment order needs to be quashed. Similarly the Learned Assessing Officer has utilized the information gathered from BCTT Wing during the course of surveys conducted by it without supplying the same to the assessee. The following case law is quoted in support — (a) CIT vs. s.M. Agarwal (2007) 211 CTR 180 (Del)
The seized documents have no probative value without examination of the writer thereof. It is well settled that the only person competent to give evidence on the truthfulness of the contents of the documents is the writer thereof. So unless and until the contents of the document are proved against a person the possession of the document by itself cannot prove the content of the document.
In this case the additions were deleted on the ground that the writer of the document was not subjected to the examination. The ratio of this case is fully applicable to the facts of the case. -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 The Learned Assessing Officer has not made any effort verify the contents of the documents and also not tried to find out the writer thereof or examined him.
(b) Mohd. Usif AIR 1968 Bombay 112; (c) Ramji Das Daya Wala & sons vs. Invert Import AIR 1981 Supreme Court 2085 The ratio of the aforesaid cases is fully applicable to the facts of the case. In view of this the assessment framed deserves to be quashed.
The additions made have no relation with the material found during search — It is submitted that the Learned Assessing Officer has completed the assessment making the following addition - (i) Trading addition of Rs. 2554787/- has been made by way of GP rate application of 17%.
It is submitted that the aforesaid addition is not based on material found or seized during the course of search. The GP rate addition is on account of rejection of books of accounts with reference to bogus -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 purchase vouchers. The issue of bogus purchase vouchers was not new in the case of the assessee. Even before the search took place the issue of bogus purchases vouchers have cropped up in the case of the case of the sister concern M/S Clarity Gold Pvt. Ltd. in the be completed with reference to search material only. But in this case, as no incriminating material was found, additions have not been made with reference to incriminating material. In the entire assessment order, there is no reference by the Learned Assessing Officer to any seized document/incriminating material.
Before the Learned CIT(A), it was pleaded that as no incriminating material was found during search, the learned Assessing Officer was precluded from making any other addition. In their latest decision, the Hon'ble Supreme Court has held in the case of PCIT Vs. Abhisar Buildwell P. Ltd (Civil Appeal No.6580 of 2021 dated 24/04/2023 held that "..
………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 -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 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. In view of this, no additions in this case survive.
Thus, the ld. counsel for the assessee has submitted that the assessment order was framed by the AO u/s 153A r.w.s. 143(3) of the Act while additions made are not based on any incriminating document found/seized during the course of search or any other finding recorded by AO on account of search action u/s 132 of the Income Tax Act, 1961 without rebuttal and opportunity of cross examination. He argued that the ld. AO has wrongly assumed the jurisdiction and made addition without reference to any seized documents and therefore, the additions so made on account of estimated profit is void ab-initio and the assessment order deserves to be quashed. He contended that the ld. CIT(A) has erred in confirming the estimated profit addition made by the ld. AO without -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 reference to any seized documents. He prayed that th eimpugne dorder may be quashed as void ab initio.
The ld. DR vehemently supported the impugned order. He contended that as per the principal emanating from judgment of Hon’ble High Court and Hon’ble Supreme Court regarding 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 and other issues even if not emanating from incriminating seized material.
We have heard the rival contentions, perused the material on record, impugned orders and case laws before us. Admittedly, the assessment for Assessment Year 2005-06 and 2006-07 were unabated as on the date of search on 06/10/2017. Therefore, in our view, the assessment u/s 153A was required to be completed by the AO based on or with reference to search material only.
It is seen that in the entire assessment order, there is no reference by the Learned Assessing Officer to any seized document/incriminating material. In the present case, as there was no incriminating material -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 found/seized during the course of search, and therefore, additions have been made by the AO without reference to any incriminating material. The Learned CIT(A) has ignored the pleading of the appellant that as no incriminating material was found during search, the learned Assessing Officer was precluded from making any other addition of estimated profit based on either comparable cases or 3rd party statement without reference to incriminating material and rebuttal of the same to the appellant by providing opportunity ofin view of principles of natural justice. The Hon'ble Supreme Court in the recent decision, in the case of PCIT Vs. Abhisar Buildwell P. Ltd (Civil Appeal No.6580 of 2021 dated 24/04/2023 has held that 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. Accordingly, we hold that the order of the Ld. CIT (A) is infirm and perverse to the fact on record. -17/JPR/202014 Assessment Year: 2005-06 & 2006-07 9. Respectfully, following the Apex Court Judgement (Supra), in the present cases, in respect of completed/unabated assessments, we hold that no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 of the act and as such the impugned order is bad in law and accordingly, the assessment orders are quashed as void ab initio.
In the result, both the appeals of the assesse are allowed.
Order pronounced in open court as on 10.04.2024 Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member DOC* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File By Order, Asstt. Registrar -17/JPR/202014 Assessment Year: 2005-06 & 2006-07
Date Initial 1. Draft dictated on DOC Sr.PS/PS 2. Draft placed before author 08.04.24 Sr.PS/PS 3. Draft proposed & placed before the JM/AM Second Member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr. Sr.PS/PS P.S./P.S. 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order