Further addition in the assessments under section 153A of Income Tax Act, 1961 is overruled if it does not contain incriminating materials.
Summary: As per section 153A of Income Tax Act, if the assessment has been made under section 143(1) only, then further addition are not permitted until and unless they are not backed by incriminating material if assessment under section 143(1) has not been cancelled.
Making any addition in the assessments u/s 153A are overruled if they are not backed by any incriminating material; even when the previous assessment u/s 143(1) was ready on the date of search thus it results in non-cancellation of aforesaid assessment as per the 2nd provision of S. 153A (1).
With previous references we can affirmably say that such additions are not valid in any assessment that has been completed u/s 143(3) with respect to section 153A (1) when we consider the fact that there is no incriminating material is found during the search of such suspicious additions and the first valid assessment has not been abated as per the 2nd provision of Income tax act, section 153A (1).
There are many references available such as CIT vs. Continental Warehousing Corporation (NHAVA SHEVA) Ltd (Bombay) dated on 7th July, 2014 and Income Tax Tribunal decision CIT vs. Kabul Chawla.
Case of Anil Mahavir Gupta vs. ACIT (Bombay) Under Section 153A
Involved plaintiffs involved didn’t deny that they had sold the goods to assessee but these parties bought goods from other parties and those other parties affirmed the statement that only the accommodation invoices had been issued in favor of involved parties.
Therefore, ITAT Mumbai stated that above said dispute was not raised by the Revenue department before them. Furthermore, tribunal stated that the additional findings made by CIT have also not been disputed before them where the assessee is linked in any specific purchase of accommodation of which invoices presented by the aforesaid plaintiffs.
The reason behind it is that the AO used the power of section 68 and put the highest credit amount given in the aforesaid 8 plaintiffs’ balance sheets, claiming the balance amount as unexplained. Tribunal found this action of AO as susceptible because assessment under 68 specifies that AO can only mention that credits as unexplained which are really unexplainable but not the highest amount.
Another fact came into light that the seized questionable documents were found under the possession of Mr. Bharat G. Shah. Bharat G. Shah works under the assessee as an employee but since paper were found under his possession therefore he is the primary responsible person and he is responsible to explain whatever have been found unexplained in the seized papers. He should not have been spared by AO, regarding what was found on papers.
Tribunal found that there are no solid grounds to connect Mr. Anil Mahavir Gupta on the basis of these kind of loosely evidences found on these papers. Henceforth, considering the circumstances, tribunal didn’t interfere with the comprehensions of CIT (A) for removing the impugned addition in assessment.