By TIOL News Service

NEW DELHI, JUNE 30, 2018: THE ISSUE IS - Whether in case of unabated assessment, the Revenue is allowed to assume their jurisdiction u/s 153A while making any additions even when, no incriminating material was found during the course of search. AND THE ANSWER IS NO.

Facts of the case:

The assessee, an individual, had returned income u/s 139(1) for the AY 2005-06. However, he was subjected to a search and seizure operation. Consequent to such search action, notice u/s 153A was issued. In reply, the assessee had filed his return including long term capital gain against which exemption u/s 54F was also claimed. During the assessment proceeding, the AO stated that the claim of deduction u/s 54F was not available to the assessee since, the amount which was received by him was on account of surrender of tenancy rights. Further, to prove the tenancy rights, the assessee failed to give plausible explanation. Accordingly, the AO treated such an amount as income from other sources and computed the assessee's total income by making addition. On appeal, the CIT(A) deleted the addition made by the AO.

ITAT held that,

++ on the date of search, i.e., 15.11.2007, the assessment for the AY 2005-06 was not pending and hence, it cannot be reckoned as abated assessment in terms of 2nd proviso to Sec. 153A. It is now a well settled law by the Delhi High Court that in case of unabated assessment, if no incriminating material has been found or seized during the course of search, then no addition can be made merely based on information already available on record, i.e., in the return of income filed originally/original assessment. The AO himself in the assessment order has not referred to any seized documents or incriminating material found during the course of search albeit has proceeded on the perusal of the computation of income filed in the original return of income;

++ the Delhi High Court in the case of CIT vs. Kabul Chawla, after considering catena of decision has held that if in relation to any AY, no incriminating material is found then no addition or disallowance can be made in relation to that AY in exercise of power u/s 153A. This principle has been reiterated by the Delhi High Court in the case of Pr.CIT vs. Meeta Gutgutia, and again in the case of Pr.CIT vs. Best Infrastructure (India) Pvt. Ltd. In view of the binding judicial precedent of the Delhi High Court, we hold that no addition can be roped in the assessment made u/s 153A in absence of any incriminating found during the course of search, especially in the case of unabated assessment. Thus, the observation and the finding of the CIT(A) is affirmed.

(See 2018-TIOL-976-ITAT-DEL)