By TIOL News Service

NEW DELHI, DEC 13, 2016: THE ISSUE IS - Whether when search operations did not yield any fresh material warranting addition u/s 153A, could it clothe CIT with the authority to add an amount on the basis of fresh appraisal of the existing materials that already form part of original assessment. NO IS THE VERDICT.

Facts of the case:

The assessee is an individual. As a result of search and seizure proceedings, assessee had filed its returns u/s 153A. After initial assessment by AO, CIT observed that assessment order was prejudicial & erroneous to interest of Revenue, thus it directed its revision in as much as an addition u/s 2(22)(e) was mandated. On appeal, Tribunal concluded that search and seizure operations did not yield any fresh material warranting addition u/s 153A, and therefore, could not clothe CIT with the authority to add an amount on the basis of a fresh appraisal of the existing materials that formed part of original assessment.

On appeal, the ITAT held that,

++ Search and seizure proceedings in this case did not result in anything. The amounts paid were in fact originally declared in the assessment returns of the assessee. The CIT, therefore, had opportunity to exercise his powers as it were on the basis of returns as filed originally and validly u/s 263. In the circumstances in the absence of any material disclosing that the issue of deemed dividend had been wilfully derived or had been deemed or otherwise withheld from the assessment an addition u/s 153A was warranted – based on the proposition taught by HC in ITA 707/2014 titled: CIT vs Kabul Chawla;

++ Therefore, we concur with the ITAT's opinion in this regard. The search and seizure proceedings in such cases are undoubtedly meant to bring to tax amount that are to be determined on the basis of materials seized in the course of such searches; permitting anything over and above that would virtually amount to letting the Revenue have a third or fourth opinion as it were. Searches – to quote the view of Attorney-General (NSW) vs Quin (1990) HCA 21 in another context are "not the key which unlocks the treasury" of the Revenue's jurisdiction in regard to matters that had attracted attention in the regular course of assessment.

(See 2016-TIOL-2994-HC-DEL-IT)