Assessments under Section 153C require corroborating evidence and cannot rely solely on assumptions; additions for cessation of liabilities must be substantiated by clear evidence of said liabilities ceasing to exist.

ORDER

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

These two appeals by assessee are directed against different orders of CIT(A)-2, Panaji for the assessment years 2017-18 & 2018- 19 both are dated 18.3.2024. First we take ITA No.1018/Bang/2024 for assessment year 2017-18. The assessee has raised following grounds of appeal:

1. The learned CIT(A) on the facts and in the circumstances of the case is not justified in law in making additions under section 41 (1) of the act a sum of Rs. 1,94,18,130 by overlooking the explanation and submission made by the appellant during the course of assessment.

2. The learned CIT(A) has failed to understand the fact that additions on account of cession or remission of liability cannot be made under section 41 (1) unless it is established that liability has been ceased.

3. The learned CIT(A) ought to have appreciated that the assessing officer has made an addition under section 153C without having found any incriminating material, hence assessment is bad in law.

4. The learned CIT(A) has grossly ignored that the voluntarily declared.income of Rs.7.50 crores has additional income which subsumed the said alleged additions made under section 41(1) amounting to Rs.1,94,18,130/-.

5. For these and other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeal may be allowed.

2. Facts of the issue are that the assessee is a partnership firm engaged in wholesale trading of raw fishes. During the year under question, assessee filed his return of income on 12.10.2017 declaring a total income of Rs.67,06,650/-. Consequent to the search and seizure operation conducted under section 132 of the Act, at the residential premises of Mr. Bava U.K., partner of the assessee on 8.2.2018, there was survey u/s 133A of the Act was conducted on 8.2.2018 at the business premises of the assessee and certain documents were impounded during the course of survey. Consequent to the search and seizure u/s 153A, the notices u/s 153C of the Act dated 21.2.2019 were issued by the ld. AO for the assessment years 2012-13 to 2018-19. In response to the said notice assessee has filed return of income for the AY under section on 18.3.2019 declaring income of Rs.8,17,06,650/-. Subsequently, assessment selected for scrutiny and notice under sub-sec.2 of section 143 of the Act was issued on 26.3.2019 calling for the details. In response thereto, assessee through his ld. A.R. appeared before the ld. AO from time to time and furnished the details called for. Finally, assessment was completed u/s 143(3) r.w.s. 153C of the Act vide order dated 17.12.2019. In the order of assessment, the ld. AO has made disallowance of Rs.1,94,18,130/- u/s 41(1) as cessation of liability and thereby raised tax demand of Rs.1,76,67,975/-. Aggrieved by this addition made, assessee went in appeals before ld. CIT(A) and the ld. CIT(A) confirmed the same. Against this assessee once again is in appeal before us.

3. The ld. A.R. submitted that this is the assessment framed u/s 143(3) r.w.s. 153C of the Act. According to her, section 153C of the Act pertain to the non-searched entity and in respect of whom any material, books of accounts or documents would found seized and were found to belong to or pertain to a person other than the searched person. In terms of this provision, the ld. AO empowered to undertake and initiate assessment in respect of non-searched entity for these assessment years as well as for the “relevant assessment year” in which search took place. Thus, consequently, the ld. AO could frame the assessment for these assessment years u/s 153C of the Act and