S. 153A: In case of completed assessments, addition can be made only if incriminating document found during search

Pursuant to a search and seizure operation u/s 132, the AO passed an assessment order u/s 153A in which he held that the accumulated loss and unabsorbed depreciation of the amalgamating company was not allowable u/s 72A of the Act. The assessee claimed that as the assessment for that year had not abated, an addition u/s 153A could be made only if there was incriminating material found during the search and as the issue of amalgamation was a part of the record in the original assessment, it could not be assessed u/s 153A. The CIT(A) rejected the claim. On appeal by the assessee to the Tribunal HELD allowing the appeal:

There are three possible circumstances that emerge on the date of initiation of search u/s 132 (1): (a) proceedings are pending; (b) proceedings are not pending but some incriminating material found in the course of search indicating undisclosed income and/or assets and (c) proceedings are not pending and no incriminating material has been found. In circumstance (a), since the proceedings are pending, they are abated and the AO gets a free hand to make the assessment. In circumstance (b), there is no question of abatement as the proceedings are not pending and the AO has to pass an assessment order u/s 153A to assess the undisclosed income. In circumstance (c), the AO has to pass an assessment order though as there is no incriminating material no income can be assessed. On facts, as the assessments were completed and there was no incriminating material found during the search, the AO was not entitled to make any addition (All Cargo Global Logistics 137 ITD 287 (Mum)(SB), Anil Kumar Bhatia 80 DTR 169 (Del), Pratibha Industries (ITAT Mum) & Gurinder Singh Bawa (ITAT Mum) followed)