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I-T - In absence of incriminating materials found during course of search, if assessment is not pending, assumption of jurisdiction u/s 153A is not valid: ITAT

 

By TIOL News Service

NEW DELHI, JULY 30, 2018: THE ISSUE IS - Whether if assessment is not pending, then in absence of any incriminating material found during the course of search, the assumption of jurisdiction u/s 153A for assessment is valid. NO IS THE VERDICT.

Facts of the case

The assessee company is engaged in manufacturing, packing and sale of soft drinks. A search & seizure operation u/s 132 of the Act, was carried out in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the search. During search, few documents belonging to the assessee were found and seized. In response to notice u/s 153A, the assessee filed return. During assessment, the AO observed that the assessee had raised share capital of Rs. 11,85,00,000/- from Superior Industrial Enterprises Ltd. During the course of pre-search enquiries, it was gathered that the assessee group had received substantial amount of share capital from various non-descript and shell companies. The AO observed that search action further established beyond doubt that the assessee company had received the impugned share capital from non-descript and shell entity which grossly lacked creditworthiness. The AO analyzed the tax returns and referred to the enquiries conducted on Delhi and Kolkata based companies. He further referred to the statement of various other persons, the enquiries conducted u/s 133(6) of the Act. The AO observed that it was accommodation entry to convert the undisclosed income of the assessee in the form of share capital. The AO treated the same as unexplained cash credit u/s 68 of the Act. On appeal, CIT(A) upheld the order of AO.

Tribunal held that,

++ the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect;

++ it was observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. Therefore, their is merit in contention of assessee that the addition made by the AO u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries. Statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material;

++ since the addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, it was hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. Accordingly, the addition made by the AO and upheld by the CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.

(See 2018-TIOL-1159-ITAT-DEL)


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