2017 (8) TMI 1359 - AT - Income Tax

Tribunal allows assessee's appeals, overturns CIT's Section 263 orders for assessment years.

A Swarna Lakshmi Versus Dy. Commissioner of Income-Tax, Central Circle Vijayawada

A Swarna Lakshmi Versus Dy. Commissioner of Income-Tax, Central Circle Vijayawada - TMI Issues Involved:1. Validity of the order passed under Section 263 by the CIT directing the assessing officer to redo the assessment.2. Examination of capital account differences for A.Y. 2005-06.3. Nature of expenses under the head 'repairs and maintenance' for A.Ys. 2006-07 and 2007-08.4. Non-admission of additional income declared during the search for A.Y. 2009-10.5. Non-declaration of undisclosed income of Rs. 35 lakhs for A.Y. 2010-11.Detailed Analysis:Issue 1: Validity of the Order Passed under Section 263The appellant argued that the CIT's direction to redo the assessment was beyond the scope of Section 153A of the I.T. Act. The assessments completed under Section 143(3) read with Section 153A were not based on any incriminating material found during the search. The CIT's revision under Section 263 was challenged as bad in law and without jurisdiction. The Ld. DR contended that the validity of the assessments should be challenged separately and not in the appeal against Section 263 proceedings. The tribunal held that the CIT's revision under Section 263 was not permissible without referring to incriminating material in the case of completed assessments.Issue 2: Examination of Capital Account Differences for A.Y. 2005-06The CIT observed a discrepancy between the closing balance as on 31.03.2005 and the opening balance as on 01.04.2005. However, the appellant provided evidence that there was no such discrepancy. The tribunal found no difference as observed by the CIT and set aside the order, allowing the appeal of the assessee.Issue 3: Nature of Expenses under the Head 'Repairs and Maintenance' for A.Ys. 2006-07 and 2007-08The CIT directed the assessing officer to treat the expenses as capital expenditure and allow depreciation. The appellant argued that the expenses were verified during the original assessment, and a conscious decision was made. The tribunal held that reassessment under Section 153A is permissible only with incriminating material found during the search. Since the assessments were unabated and there was no incriminating material, the tribunal set aside the CIT's orders and allowed the appeals for A.Ys. 2006-07 and 2007-08.Issue 4: Non-Admission of Additional Income Declared During the Search for A.Y. 2009-10The CIT observed that the additional income of Rs. 17 lakhs declared during the search was not added to the returned income. The appellant provided evidence that the revised return included the additional income. The tribunal found no error in the assessment order and set aside the CIT's order, allowing the appeal for A.Y. 2009-10.Issue 5: Non-Declaration of Undisclosed Income of Rs. 35 Lakhs for A.Y. 2010-11The CIT revised the assessment, citing undisclosed income of Rs. 35 lakhs. The appellant argued that the revised return declared the total income as Rs. 35.09 lakhs, and no additional income was admitted. The tribunal found no error prejudicial to the interest of the revenue and set aside the CIT's order, allowing the appeal for A.Y. 2010-11.Conclusion:The tribunal allowed all the appeals of the assessee, setting aside the orders passed under Section 263 by the CIT for the respective assessment years. The judgments were pronounced in the open court on 9th Aug 2017.