S. 153A Additions not based on incriminating material are invalid

Case Law Details
Case Name : DMA Investment P. Ltd. vs. DCIT (ITAT Delhi
Appeal Number : I.T.A. Nos. 5688-5691/DEL/2013
Date of Judgement/Order : 05.04.2016
Related Assessment Year : 2006-07-2009-10
Brief of the case:

The ITAT Delhi bench in the above cited case held that in case of completed assessment if notice u/s 153A is issued then addition can be made only on the basis of incriminating material found during the course of search. Therefore, any other addition which has nothing to do with the incriminating material found during the search cannot be sustained.

Facts of the case:

A search and seizure operation was carried out u/s. 132 of the Income Tax Act, 1961 on 22.03.2011 in the case of Amtek Group of Cases. The assessee company was also covered u/s. 132(1) of the Income Tax Act, 1961 which is a group company of Amtek Group.
Notice u/s 153A was served upon assessee in response to which assessee filed a NIL return on 09.11.2011. In response to various statutory notices, necessary details were filed by the Assessee’s Authorized Representative from time to time.AO completed the assessment at Rs. 50,000/- for making the disallowance u/s. 14A of the I.T. Act, 1961.
CIT(A) partly allowed assessee’s appeal. Aggrieved assessee is in appeal before ITAT.
Contention of the Assessee:

The learned counsel for the assessee contended that during the search and seizure operation, no documentary evidence has been found by the Investigation Wing of the Department on the issue in dispute. The addition in dispute has been made without any incriminating material, hence, this issue is squarely covered by the decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla .
In the aforesaid case , the court held that in case of completed assessments any addition made without correlating it to the incriminating material found during the search is not allowed.
Contention of the Revenue:

It was submitted that the provision of section 153A has rightly been applied in the case of the assessee on the material available with them and further stated that the case of the assessee is covered against the assessee by the decision dated 23.5.2007 of the Hon’ble Supreme Court of India in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. in Appeal (Civil) No. 2830 of 2007 reported in 291 ITR 500 (SC).
It was also submitted that the case of CIT vs. Kabul Chawla relied upon by assessee was completed u/s. 143(3) of the I.T. Act and not under section 143(1) of the I.T. Act, because on the date of search the said assessment has already been stood completed.
Held by ITAT Delhi:

The tribunal also relied on the case of CIT vs. Kabul Chawla decided by Hon’ble Delhi HC referred by assessee wherein the court held that in case of completed assessment if notice u/s 153A is issued then addition can be made only on the basis of incriminating material found during the course of search. Therefore, any other addition which has nothing to do with the incriminating material found during the search cannot be sustained.
As far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one and AO can proceed to make additions with or without incriminating material Only one assessment shall be made separately for each.
Since in the present case the assessment for the relevant AYs already stood completed , no addition can be sustained in the absence of incriminating material found during the course of search.
In result the appeal of the assessee was allowed.

CA Saurabh Chokhra