Appeals allowed for 2006-07, 2007-08 but dismissed for 2011-12 due to admitted expenses inflation.

The appeals for the assessment years 2006-07 and 2007-08 were allowed, resulting in the deletion of additions under section 153C of the Income Tax Act due to lack of incriminating material found during the search operation. However, for the assessment year 2011-12, where the assessee admitted to inflating expenses, the addition made by the Assessing Officer was upheld, and the appeals were dismissed. The Tribunal's decision was pronounced on 6th August 2015 in Chennai.

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Issues:
Assessment years 2006-07, 2007-08, and 2011-12 - Addition u/s 153C of the Income Tax Act - Material found during search operation - Inflated expenses - Composite order for undisclosed income and normal income.

Analysis:
For the assessment years 2006-07 and 2007-08, the appeals were against the orders of the Commissioner of Income-tax (Appeals)-18, Chennai. The contention was whether there was any material found during the search operation to justify the addition u/s 153C of the Act. The assessee argued that no material was found during the search, and hence, no addition should be made. On the other hand, the Departmental Representative stated that incriminating material was found during the search regarding suppression of sales and inflation of expenditure, justifying the addition made by the Assessing Officer. The Tribunal observed that the assessment proceedings based on the returns filed by the assessee were terminated by law before the search, and as no material was found during the search to indicate inflation of expenditure, the addition based solely on a statement was unwarranted. Consequently, the orders for the assessment years 2006-07 and 2007-08 were set aside, and the additions were deleted.

Moving to the assessment year 2011-12, it was noted that no return of income was filed under section 139, and the return was filed only after a notice was issued u/s 153C. The Tribunal held that in such cases, the Assessing Officer must pass a composite order for undisclosed income and normal income for the block period. As the assessee admitted to inflating expenses, the addition made by the Assessing Officer and confirmed by the CIT(A) was deemed appropriate. Therefore, the Tribunal upheld the order of the CIT(A) for the assessment year 2011-12, and the appeals for that year were dismissed.

In conclusion, the appeals for the assessment years 2006-07 and 2007-08 were allowed, leading to the deletion of additions. However, the appeals for the assessment year 2011-12 were dismissed, affirming the addition made by the Assessing Officer. The Tribunal pronounced the order on 6th August 2015 in Chennai.

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