INCOME TAX ACT, 1961

Section 153A

Search and seizure - Assessment under section 153A - Scope - No incriminating material unearthed to allowability or otherwise or loss in share transaction being sham

In response to the notice under section 153A, the assessee filed return of income declaring total income at Rs. Nil. The assessment was thereafter completed under section 143(3) read with section 153A. AO also took note of the certain submissions made by the assessee but however, found the huge loss claimed by the assessee to be a sham transaction. The loss in sale of shares of ACFSL amounting to Rs. 5 Crore was accordingly rejected and added to the total income of the assessee. CIT(A), in conclusion, quashed the additions made towards disallowane of loss on sale of shares alleged to be sham by AO on the ground that such additions were not sustainable in the absence of any incriminating material found in the course of search. What was in challenge was whether impugned additions/disallowances made de hors the incriminating material was permissible as per the scheme of assessment embodied in section 153A. It was thus the case of assessee that AO was prohibited from making additions/disallowances unconnected to the material found in the course of search in an such, unabated assessment. Held: CIT(A) was under bounden duty to make suitable inquiry to find the presence or otherwise of the incriminating material and should simply ought not to have brushed aside the additions and determine the viability of additions/disallowance upon a vague and non-descript remand report where pertinent points raised by CIT(A) remains unanswered. The findings of CIT(A), lacks comprehension. As a matter of course and to reach to a logical conclusion, CIT(A) ought to have repeated the inquiry on incriminating material from AO where the remand report allegedly did not cogently address the pertaining issue raised by CIT(A) himself at the first instance. CIT(A) could have called the assessment record himself to ascertain to the alleged claim of absence of incriminating material while discharging its appellate functions. No such inquiry had been made as enjoined in law towards corroboration of assertions made by AO in support of its challenge to jurisdiction for additions. The plea of assessee towards absence of any incriminating material in the light of such an aggravating written statement cannot obfuscate reality. CIT(A) ought to have examined these crucial aspects with a degree of objectivity by making inquiries and verification in this regard in accordance with law. Thus, the appellate order passed by the CIT(A) was set aside in entirety and remit the matter back to the file of CIT(A) for re-consideration of the whole issue in an orderly manner in accordance with law.

Relied:Fidelity Business Services India (P) Ltd. v. Asstt. CIT (2018) 95 Taxmann.com 253 (Karn: 2018 TaxPub(DT0 4602 (Karn-HC), CIT v. Jansampark Advertising and Marketing (P) Ltd. (2015) 56 Taxmann.com 286 (Del-HC) : 2015 TaxPub(DT) 992 (Del-HC), ITO (TDS) v. Thyrocare Technology Ltd. (Bom) ITA No. 53 of 2016 & Ors. judgment, dated 11-9-2017 and CIT v. Chalisgaon People's Co-op. Bank Ltd. [Tax Appeal No. 31 of 2005 & Ors. judgment, dated 23-3-2015].

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2010-11

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