Facts of the Case

A search and seizure operation under Section 132 of the Income-tax Act, 1961 was conducted in the case of the assessee, Shri Surendra Kumar Garg, Allahabad. Pursuant to the search, proceedings under Section 153A were initiated, requiring the assessee to file returns for the relevant assessment years. During assessment, the Assessing Officer made additions treating certain amounts as undisclosed income.

The assessee contested the additions, contending that the impugned amounts were not based on any incriminating material discovered during the search and that the assessments for the relevant years had already attained finality prior to the search.

Issues Involved

Whether additions can be validly made in proceedings under Section 153A for assessment years where assessments had already been completed, in the absence of any incriminating material found during the search.

Petitioner’s (Revenue’s) Arguments

The Revenue contended that once a search is conducted, the Assessing Officer is empowered under Section 153A to reassess or recompute the total income of the assessee for the relevant assessment years. It was argued that the scope of Section 153A is wide and permits additions even without specific incriminating material, as the provision mandates fresh assessment of income.

 

Respondent’s (Assessee’s) Arguments

The assessee argued that additions made by the Assessing Officer were unsustainable because they were not based on any material unearthed during the search. It was submitted that completed assessments cannot be reopened or disturbed in Section 153A proceedings unless supported by incriminating evidence discovered during the search operation. The assessee maintained that the additions were arbitrary and beyond the permissible scope of the provision.

Court Order / Findings (ITAT)

The Tribunal examined the statutory framework of Sections 132 and 153A and the material available on record. It observed that where assessments for certain years had already been completed prior to the search, additions in Section 153A proceedings must be supported by incriminating material found during the search.

In the absence of such material, the Assessing Officer is not justified in making additions merely on review or reconsideration of earlier records. The Tribunal therefore held that additions not based on search-related evidence cannot be sustained for completed assessment years.

Important Clarification

The decision reiterates the settled legal principle that Section 153A does not grant unfettered power to reassess concluded matters. For non-abated (completed) assessment years, additions must be founded on incriminating material discovered during the search. This ruling provides important guidance for taxpayers facing post-search assessments.

 Link to download the order –https://itat.gov.in/public/files/upload/1589349057-SK%20GARG-183.pdf

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