The Chandigarh Bench of Income Tax Appellate Tribunal ( ITAT ) has held that no addition u/s 153Ccan be made in absence of any incriminating material for a completed assessment.
A search and seizure operation under section 132(1) was conducted at the business and residential premises of M/s Longowalia Group of Cases and the appellant, Mr. Sanjay Garg also was one of the persons covered in such search. The Assessing Officer (AO) required the assessee to submit complete details of Rs.70 lakhs which was received in AY 2011-12 from a Delhi-based company and the amount was shown under the head ‘current liability’ in the Balance Sheet. Without satisfying with the details, placing reliance on the concept of preponderance of probability, the AO added the amount of Rs.70 lacs u/s 68 of the Act and completed the assessment at Rs.85,45,490/. CIT (A) confirmed the order of AO against which the assessee filed an appeal before the ITAT.
Mr. Ashwani Kumar, CA, for the appellant, submitted the assessee had entered into an agreement during the assessment year under consideration with Delhi based, M/s Namo Resorts Private Limited to sell a property at Ludhiana which he co-owned with his brother and had received an advance of Rs.70 lacs, but the company with whom the agreement to sell had been entered into did not appear for the purpose of execution of the registry and, therefore, in terms of the agreement, the assessee forfeited the amount received as advance.
The appellant further submitted that the allegation of the AO that the amount remained unexplained in terms u/s 68 of the Act, was incorrect because the same stand was explained. In absence of any incriminating material found during the course of search, no addition could be made u/s 153A of the Act.
By relying the decision of Kerala High Court in the case of CIT Vs. K.P.Ummer, Mr. Ranjeet Kaur, counsel for the revenue submitted that when a notice u/s 153A of the Act is issued, it enables the Department to carry out assessment/re-assessment with respect to six immediately preceding years and this does not require any incriminating material recovered during search relating to those prior years in which there is no time left on the date of the search for framing of assessment u/s 143(3) of the Act.
The Tribunal observed that in the case of completed assessments, no addition can be made in the absence of any incriminating material. Though the Tribunal agrees with the decisions of High courts which hold otherwise and state that u/s 153A, addition in case of completed assessments need not be restricted to incriminating material, but in view of the Apex court decision in CIT vs Vegetable Products which states that where there are two reasonable constructions of a statute, the construction favoring the assessee should be adopted.
The Coram of Mr. N.K. Saini, Vice President, and Mr. Sudhanshu Srivastava, Judicial Member have held that “we hold that in absence of any incriminating material found during the course of search with respect to the impugned transaction, the AO did not have any power to make the impugned addition. We set aside the order of the CIT (A) and direct the AO to delete the addition”.
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