S. 153A — In an assessment u/s.153A of the Act addition can be made only on the basis of material found as a result of search.

The assessee was the proprietor of M/s. Ronak Enterprises
trading in oil and electrical contract works. In an action conducted u/s.132A of
the Act about 4 kgs of gold and cash of Rs.79,000 was seized from the assessee.
Earlier the assessee had filed returns of incomes. In response of notice issued
u/s.153A the assessee filed the same return of income, as was originally filed.
For all the assessment years, the Assessing Officer (AO) completed the
assessments u/s.143(3) read with S. 153A by making addition on account of low
withdrawal and from opening
balance in capital account. None of the additions were based on any material
found during the course of search. Aggrieved the assessee preferred an
appeal to the CIT(A).

The CIT(A) deleted the addition made on account of opening
capital account. On the issue of additions made on account of low withdrawals,
he confirmed the same.

Aggrieved the assessee preferred an appeal to the Tribunal.

The Tribunal noted that the only addition in each of the
assessment years was on account of low withdrawals and that the addition was not
based on any material found either during the course of search or during the
course of assessment proceedings. The Tribunal made a reference to the decision
of the Delhi Bench of ITAT in the case of Anil Kumar Bhatia v. ACIT, where it
has been held that :

(i) S. 153A does not authorize the making of a de novo
assessment. While under the 1st proviso, the AO is empowered to frame
assessment for six years, under the 2nd proviso, only the assessments which
are pending on the date of initiation of search abate. The effect is that
complete assessments do not abate. There can be two assessments for the same
assessment year. Assessments which are not pending before the AO on the date
of search but are pending before an Appellate Authority will survive.

(ii) An assessment can be said to be ‘pending’ only if the
AO is statutorily required to do something further. If a S. 143(2) notice has
been issued, the assessment is pending. However, the assessment in respect of
a return processed u/s.143(1) is not ‘pending’ because the AO is not required
to do anything further about such a return.

(iii) The power given by the proviso to ‘assess’ income for
six assessment years has to be confined to the undisclosed income unearthed
during search and cannot include items which are disclosed in the original
assessment proceedings.

(iv) On facts, the returns had been processed u/s. 143(1),
the assessments were not ‘pending’ and as no material was found during the
search, the additions could not be sustained.

Following the ratio laid down by the above- mentioned
decision, the Tribunal deleted all the additions and allowed the appeals filed
by the assessee.

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