Additions Can't Be Made In Cases Of Unabated Assessments Without Incriminating Material: Mumbai ITAT
The Mumbai ITAT held that no addition can be made by AO in respect of completed/unabated assessments, in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A. Section 132A of Income tax Act empowers income tax authorities to carry out a search and seizure of books of accounts, documents, cash & jewellery. Referring to...
The Mumbai ITAT held that no addition can be made by AO in respect of completed/unabated assessments, in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A.
Section 132A of Income tax Act empowers income tax authorities to carry out a search and seizure of books of accounts, documents, cash & jewellery.
Referring to the decision rendered by the Supreme Court in the case of Abhisar Buildwell – [(2023) 149 taxmann.com 399 (SC)], the Bench of Satbeer Singh Godara (Judicial Member) and Girish Agarwal (Accountant Member) reiterated that “in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments”.
Facts of the case:
During search proceedings in assessee's company, the AO issued notices u/s 153A after finding that the assessee had sold stock at zero invoice value to one of its sister concerns. The AO noticed that the total value of such sales was Rs.1,16,73,202/-, and the assessee has earned Rs.7,78,367/- as share of profit from partnership firm which is exempt from income-tax. However, the assessee has not made any disallowance u/s. 14A in the return filed in response to notice u/s 153A of the Act, even though the assessee has earned exempt income during the relevant assessment year. The AO therefore completed the assessment by making an addition of Rs.1,16,73,202/- by holding it as sales suppressed by the assessee and also made a disallowance of Rs.92,61,952/- u/s. 14A r.w.r. 8D. On appeal, the CIT(A) deleted the additions made by AO.
Observations of the Tribunal:
From a perusal of the order of AO, the Bench found that there is no reference to any incriminating material found and seized during the course of search in respect of the addition towards suppressed sales and disallowance u/s 14A.
The observations made by AO are routine in nature which have been found from the accounts of the assessee and submissions made thereon, added the Bench.
The Bench also noted that the year under consideration is an unabated year considering the date of conduct of search within the meaning of section 153A, wherein admittedly, no incriminating material has been referred to which has been found in the course of search of the assessee.
The Bench clarified that the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act.
The ITAT therefore concluded that since no incriminating material has been unearthed during the course of search for the relevant assessment years, no addition can be made by the AO in the assessments.
Hence, the ITAT quashed the assessment and dismissed the appeals of Revenue.
Counsel for Appellant/ Assessee: Priyanka Sharma
Counsel for Respondent/ Revenue: Sanyogita Nagpal,
Case Title: Assistant Commissioner of Income Tax vs. Mansha Agencies Pvt. Ltd
Case Number: ITA Nos.1570 & 1571/MUM/2024