By TIOL News Service

AHMEDABAD, MAR 22, 2019: THE ISSUE BEFORE THE TRIBUNAL IS - Whether once assessments stood concluded on the date of search and are not pending consideration, then no adjustment to returned income is permitted u/s 153A in absence of incriminating material. YES IS THE ANSWER.

Facts of the case:

The assessee, an individual, had preferred present appeals challenging the jurisdiction usurped by the AO u/s 153A towards additions/disallowances made in the consequent assessment proceedings owing to search operations. The counsel for assessee submitted that the additions/disallowances made in both the appeals had no rational connection or live link with material found in the course of search action carried out u/s 132 in Sewani Group cases including assessee. The AR submitted that in pursuance of a notice u/s 153A for these assessment years in appeals, the assessment was inter alia completed for AYs 2008-09 & 2009-10. The assessment order was framed making certain additions and disallowances on re-appreciation of facts already disclosed/available with the department prior to search. It was further vehemently asserted that the adjustments made in the search assessments were possibly subject matter of regular assessment and did not resonate with the scheme of search assessment u/s 153A de hors reference to any incriminating material in this regard. The AR further emphasized that both these assessments stood concluded on the date of search and were not pending for assessment and hence in the absence of incriminating material, no adjustment in the returned income was permissible u/s 153A.

Tribunal held:

++ the first and foremost controversy that arises for adjudication is on the scope and ambit of assessment proceedings u/s 153A. The case propounded on behalf of the assessee that additions/disallowances made in Section 153A proceedings has no rational connection with incriminating material, if any, found as a result of search remains undisputed. It is also not dispute that assessment pertaining to the assessment years in question viz. AYs. 2008-09 & 2009-10 stood concluded either u/s 143(1) or u/s .143(3) and were not pending at the time of search. In the backdrop of these facts, it is straightway noticed that the scope of assessment u/s 153A in respect of completed assessment is circumscribed by the condition that the additions/disallowances must have some bearing with the incriminating material detected in the course of search. The scope of assessment u/s 153A in respect of concluded assessment is thus narrower in its sweep as held in long line of judicial precedents including the decision rendered by the Gujarat High Court in Devangi case. Thus, in the absence of any connection with the incriminating material, the additions/disallowances in respect of concluded assessments are not permissible in law.

(See 2019-TIOL-659-ITAT-AHM)