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ACIT vs. Shri Ram Vessel Scrap Pvt. Ltd. - (Income Tax Appellate Tribunal) (17 May 2023)

Completed assessment cannot be disturbed in absence of any incriminating material/documents found in the course of search


Direct Taxation

The assessee in the present case is a private limited company and engaged in the business of Ship Breaking. There was a search and seizure operation under Section 132 of the Income Tax Act, 1961 (IT Act) carried out at ship breaking group of Bhavnagar. The assessee was also part of such search proceeding. Consequence to the impugned search proceeding, the notice under Section 153A of the Act was also issued to the assessee. In the assessment framed under section143(3) read with Section 153A of the Act, the AO made an addition of ₹15,00,00,000 on account of credit of share application money and its premium being unexplained cash credit under Section 68 of the Act. Aggrieved assessee preferred an appeal before learned CIT-A.

The assessee before the Learned CIT-A submitted that, the proceedings under Section 153A of the IT Act, are a special proceeding which are initiated in consequence to search proceeding under Section 132 of the IT Act. Therefore, no addition can be made in absence of incriminating material found in the search proceeding in connection with the year under the consideration being an unabated assessment year. The learned CIT(A) deleted the addition made by the AO.

The learned CIT (A) deleted the addition made by the AO on technical ground by holding that there was no material of incriminating nature found in the course of the search with reference to year under consideration. Therefore, the year under consideration being unabated/completed assessment year, no addition should be made in absence of incriminating material.

It has been settled by various Courts including High Court that, the completed assessment cannot be disturbed in the absence of any incriminating material/ documents found in the course of the search whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in Section 153A/153C of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to the completed assessment proceedings. Gujarat High Court in the case of Saumya Construction Pvt. Ltd. has held that, there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during the course of search.

There cannot be any addition to the total income of the assessee of the regular items as made by the AO in the present case. Accordingly, there is no infirmity in the order of the learned CIT (A). The appeal of the Revenue is dismissed.


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