COMPLETED ASSESSMENTS CAN BE INTERFERED WITH ONLY ON THE BASIS OF INCRIMINATING MATERIAL UNEARTHED DURING COURSE OF SEARCH: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case AGM Properties P. Ltd. Versus ACIT observed and has held that completed assessments could be interfered with by the AO while making an assessment under section 153A only on the basis of some incriminating material unearthed during the course of search. If in relation to any assessment year, no incriminating material was found and no addition or disallowance could be made in relation to that assessment year in the exercise of powers under section 153A of the Income Tax Act, 1961.

The two-member bench comprising of Astha Chandra (Judicial Member) and Anil Chaturvedi (Accountant Member) has observed that the assessment for AY 2013-14 was already completed prior to the date of search. Under Section 153A, the scope of proceedings had to be confined only to material found in the course of the search.

On September 16, 2018, the department conducted the search. A warrant of authorisation was issued in the name of the assessee i.e., M/s. Automobiles Component (India) Ltd., now which is known as M/s. AGM Properties Pvt. Ltd. On the premises of Nem Chand Gupta, who was a director of the assessee company, the search was carried out.

On 02.09.2016, under Section 153A of the Income Tax Act, 1961, a notice was issued and served requiring the assessee to file its return. A Notice under section 143(2) was issued to fix the hearing. The copy of the panchnama was asked by the assessee stating that no search has ever been conducted in respect of the company AGM Properties Pvt. Ltd. Therefore, notices issued under sections 153A and 143(2) were unwarranted. A copy of Panchnama was given by AO and intimated that a warrant of authorisation was issued in the name of the erstwhile company M/s. Automobile Component (India) Ltd. and that the proceedings initiated under section 153A had validly been taken.

In the present case, the assessee did not file a return and the AO proceeded to complete the assessment ex-parte. The total income was computed by him that by adding the current liability of Rs. 59,98,500 and 2% commission on a protective basis to the income shown as per return. Moreover, the AO completed the assessment under section 153A read with section 144 of the Income Tax Act.

An appeal was filled before the CIT (A) by the assessee. It was contended by the assessee that the warrant of search and the actual search were not on the assessee company. However, the search took place in the case of Nem Chand Gupta. During the course of searching, it is found that there was no seizure at all of any jewellery, case or any other valuable article or thing, or any documents or books of accounts, and even then, assessment under section 153A has been completed.

The observations of the AO have been extracted by the CIT (A) made in the assessment order and gave the finding that he did not find an infirmity in the order of the AO.

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