DCIT, CENTRAL CIRCLE- 2, FARIDABAD vs. SRS REAL ESTATE LTD., FARIDABAD

Grounds of appeal taken by the Revenue read as under :- “i) Whether on facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of the Income Tax Act, 1961 for an abated assessment and for a completed assessment. ./2018 ii) Whether on facts and in the circumstances of the case the Ld. CIT(A) was right in holding that no addition can be made u/s 153A in respect of completed assessment if no incriminating material is found during search. iii) Whether there is any restriction on the power of the Assessing officer under section 153A of the Income Tax Act, 1961 to confine only to the "incriminating material found during the search", even though such words or conditions are not mentioned in the section per se. iv) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was correct in interpreting section 153A which starts with a non- obstinate clause stating therein that the operation of section 139,147,148,149,151 & 153 was deposed meaning thereby that in search cases the Assessing officer is duty bound to take up the assessment u/s 153A and that the above mentioned sections cannot be invoked. Therefore, even if incriminating material is not found during search, but if any escaped income or under-assessed income undisclosed income has to be assessed for such completed assessment, then it has to be done in the proceedings u/s 153A in search cases as during the pendency of the proceedings u/ s 153A, the proceedings u/s 147 of the Income Tax Act, 1961 cannot be initiated. v) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in following Delhi High Court decision in the case of CIT vs. Kabul Chawla, 380 ITR 173 when the Hon'ble HC itself admits in para 37(iv) that "Although Section 153A does not say that additions should strictly be made on the basis of evidence found in course of search ..... " there by interpreting the statue in the manner which were never worded or intended by the legislature. vi) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in ignoring the principles of strict interpretation of statute when the words used in the statute i.e. section 153A(1)(b) of the IT Act, 1961 are assess or reassess the "Total Income". vii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not deciding the issue of addition of Rs.1,87,00,000/- as unexplained share application/ share capital money made u/s 68 of the Income Tax Act, 1961 on merits.”

In this case, a search action under section 132(1)(A) of the Income-tax Act, 1961 (for short 'the Act') was carried out in the case of the assessee on 09.05.2012. Subsequently, assessment proceedings were initiated and order under section 153(1)(b) read with section 143 (3) of account of unexplained credit u/s 68 of the Act.

Upon assessee’s appeal, ld. CIT (A), upon a finding that no incriminating documents/records or any other evidence was found or seized during the course of search, deleted the addition referring to Hon’ble Delhi High Court decision in the case of CIT vs. Kabul Chawla.

“5.3 It is an undisputed fact, apparent from the assessment order that no incriminating documents/records or any other evidence was found or seized during the course of search proceedings which resulted in any addition in the case of the appellant. The only addition made in the assessment order under section 153A read with section 143(3) is on account of share capital received amounting Rs.1,87,00,000/-. This addition is not borne out of search action. 5.4 It is also undisputed fact that the appellant had submitted return of income originally u/s 139 of the Act on 29.10.2007.Assessment order u/s 143(3) was passed by the AO on 10.12.2009, w.r.t return filed u/s 139 of the Act, wherein the returned income of the appellant was assessed at Rs.3,77,76,730/- as against Rs.3,67,58,515/- declared by the appellant. At the time of search action on 26.05.2011, no assessment/reassessment proceedings were pending nor abated. 5.5 It is clear from the above that neither any incriminating material/ evidence were found and seized during the course of search in case of the appellant during the year under consideration nor any addition has been made emanating out of the search proceedings and no proceedings were pending nor abated in terms of the provision of section 153A of the Act. The addition has been made on account of unexplained credit u/s 68 as discussed in the assessment order.”

Against this order, assessee is in appeal before us. We have heard both the parties and perused the records.

Ld. Counsel of the assessee reiterated that there is a clear finding by the ld. CIT (A) that there is no incriminating material found during the course of search on the basis of which addition was made. He submitted that this is an undisputed fact. He further submitted that recent Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. reported in (2023) 149 taxmann.com 399 (SC) upheld this proposition. Hence, he submitted that order of ld. CIT (A) is to be upheld.

Per contra, ld. DR for the Revenue relied upon the order of AO but he could not dispute the proposition that there is no incriminating material found during search on the basis of which impugned addition has been made.

Upon careful consideration, we find that it is now judicially settled that addition u/s 153A in case of unabated assessment can only be made on the basis of incriminating material found during search. Since, in the sustainable. Hence, respectfully following the precedents as above, we confirm the order of ld. CIT (A) in this regard.

Since we have decided the issue on the validity of jurisdiction itself, adjudication of merits of the case is only of academic interest, hence we are not engaging into the same. 10. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 21st day of September, 2023.