The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) quashed the assessment under Section 153A of the Income Tax Act, 1961 as no incriminating material was found during the course of the search proceedings.
The assessee trust was running a school namely Sri Vidya Mandir Matriculation Higher Secondary School which was started in 1987. During the relevant period i.e., from assessment year 2011-12 relevant to financial year 2010-11, the students strength was around 2900 with 120 teaching staff and 150 non-teaching staff. During the elections of Tamil Nadu State Assembly, information was received from the District Collector of Krishnagiri that the trust was having unaccounted cash to the tune of Rs.2.75 crores and gold coins of 245 grams.
Accordingly, the investigation wing of the Income-tax Department issued a warrant of authorization under Section 132 of the Income Tax Act by Director of Income Tax (Inv.), Tamilnadu & Pondicherry and accordingly, income-tax search was conducted on 25.04.2016. During the course of search operation on the premises of the assessee and its trustees, cash, gold coins and books of accounts and other incriminating material was found and seized.
Further, notices under Section 153A of the Income Tax Act dated 28.03.2018 were issued for assessment years 2011-12 to 2013-14. The assessee in response to the notices issued under Section of the Income Tax Act 153A of the Act filed its returns of income on 06.08.2008 under Section 153A of the Income Tax Act. Accordingly, assessee’s returns for these three assessment years i.e., 2011-12 to 2013-14 were scrutinized by issuing notice under Section 143(2) of the Income Tax Act asking the assessee to produce books of accounts, documents in connection with assessment proceedings.
The bench noted that the assessee trust was created vide trust deed dated 23.03.1987 and is running a school. During the course of Tamil Nadu State Assembly Elections, election officials conducted a search on the assessee from where they found cash of Rs.2.75 crores and gold coins of 245 grams.
Further information was passed on to the Income-tax Department and accordingly, a search warrant authorizing the Officer of the Department u/s.132 of the Act was issued by the Director of Income Tax (Inv.), Tamilnadu & Puducherry. Accordingly, income-tax search was also conducted on 25.04.2016. During the course of search apart from cash and gold coins, rough daybooks for 3 months for assessment year 2014-15, for 5 months for assessment year 2015-16, for 9 months for assessment year 2016-17 and for 23 days for assessment year 2017-18 were found and seized.
The two member bench of the tribunal comprising G. Manjunatha ( Accountant member) and Mahavir Singh (Vice president) noted that there was no incriminating material or seized material pertaining to assessment years 2011-12 to 2013-14 and the estimated additions made by the AO on account of disallowances of unexplained investment under Section 69, unproved expenditure, annual day and food expenses, other expenses, disallowance of excess claim of depreciation and disallowance of claim of deduction under Section 10 & 11 of the Income Tax Act on the basis of amounts extrapolated on the basis of incriminating material found relating to assessment year 2014-15 and onwards.
There was no incriminating material found during the course of search, ITAT upholds the order of CIT (A) in regard to these three assessment years quashing the assessment framed by the AO under Section 153A of the Income Tax Act. Accordingly, the appeal filed by the revenue are dismissed.
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