2016 (12) TMI 1572 - AT - Income Tax

Tribunal rules additions by AO without jurisdiction under Section 153C, dismisses revenue appeals

Dy. Commissioner of Income Tax- Central Circle-8 (1), Mumbai Versus Ramakant Gaggar

Dy. Commissioner of Income Tax- Central Circle-8 (1), Mumbai Versus Ramakant Gaggar - TMI Issues Involved:1. Jurisdiction of the Assessing Officer (AO) under Section 153A/153C of the Income Tax Act.2. Validity of additions made by the AO without incriminating material found during the search.3. Application of Rule 27 of the Income Tax Appellate Tribunal Rules, 1963.Detailed Analysis:1. Jurisdiction of the Assessing Officer (AO) under Section 153A/153C of the Income Tax Act:The primary issue raised by the appellant was that the AO lacked jurisdiction to make additions except on the basis of seized materials because the assessments for the years in question had attained finality on the date of the search. The appellant contended that under Section 153C read with Section 153A of the Act, the AO can only disturb assessments that are pending on the date of the search. For assessments that have attained finality, the AO's jurisdiction is confined to making additions based on seized materials.2. Validity of additions made by the AO without incriminating material found during the search:The appellant argued that no incriminating material was found during the search, and therefore, the AO's additions were without jurisdiction. The appellant cited the Bombay High Court's decision in CIT vs. Murli Agro Products Ltd, which held that the AO cannot disturb finalized assessments unless materials gathered during the search establish that the reliefs granted were contrary to the facts unearthed during the search proceedings. The Tribunal agreed with this argument, noting that the assessment for the relevant year had attained finality on the date of the search, and thus, the AO's jurisdiction was limited to making additions based on seized materials.3. Application of Rule 27 of the Income Tax Appellate Tribunal Rules, 1963:The appellant invoked Rule 27, which allows a respondent to support an order on any ground decided against them, even if they have not appealed. The Tribunal noted that Rule 27 permits the respondent to support the order appealed against on any ground decided against them. The Tribunal cited the Supreme Court's interpretation in CIT vs. Manick Sons, which clarified that while the Tribunal has wide powers, it must exercise them within the bounds of the law and the matters arising in the appeal. The Tribunal admitted the additional ground under Rule 27 and adjudicated it, ultimately agreeing with the appellant that the AO's additions were without jurisdiction as they were not based on seized materials.Conclusion:The Tribunal set aside the order of the CIT(A) upholding the AO's additions, ruling that the additions were without jurisdiction under Section 153C of the Act. The Tribunal held that the AO could only make additions based on seized materials for assessments that had attained finality on the date of the search. Consequently, the appeals of the revenue were dismissed as infructuous.