2013 (11) TMI 677 - AT - Income Tax

Tribunal rejects Department's appeal, upholds CIT (A)'s decision on income tax additions and disallowance.

ACIT, New Delhi Versus Pradeep Kumar Kumra

The Tribunal dismissed the Department's appeal regarding the deletion of additions and disallowance in the case. It upheld the CIT (A)'s decisions to ... Assessment u/s 153A after search - No assessment is pending u/s 143(2) - whether addition/disallowance can be made to the income of the appellant u/s 153A of the Act which is not based on any incriminating material found and seized during the search - Held that:- In keeping with the Special Bench decision in 'Alcargo'[2012 (7) TMI 222 - ITAT MUMBAI(SB)], as considered in 'Kusum Gupta' [2013 (11) TMI 665 - ITAT DELHI], particularly in the absence of any judgement to the contrary having been brought to our notice, following the said decisions, since undisputedly in the present case, no incriminating material was recovered during the search against the assessee, as is also evident from the assessment orders for the all the concerned six assessment years, copies whereof have been placed on record, no addition was called for in the assessment u/s 153A of the Act – Decided against the Revenue. Issues:1. Appeal against deletion of addition of unexplained gift received by the assessee.2. Appeal against deletion of addition of unexplained loan received by the assessee.3. Appeal against deletion of disallowance made under section 24(b) of the Income Tax Act.4. Appeal against holding that no addition/disallowance can be made to the income of the appellant under section 153A of the Act without incriminating material found during the search.Analysis:Issue 1:The Department appealed the deletion of the addition of Rs.17,00,000 made under section 68 of the Income Tax Act, 1961, on account of an unexplained gift received by the assessee. The CIT (A) had deleted this addition, stating it was made without any material found as a result of the search. The Department contended that the assessment under section 153A did not require incriminating material for framing assessments. However, the Tribunal found that since no incriminating material was found during the search, the addition was not justified, as per the decision in 'Kusum Gupta vs. DCIT'. The appeal on this issue was rejected.Issue 2:The Department challenged the deletion of the addition of Rs.50,000 made under section 68 of the Income Tax Act, 1961, on account of an unexplained loan received by the assessee. Similar to the first issue, the Tribunal upheld the CIT (A)'s decision to delete this addition, as no incriminating material was found during the search, rendering the addition invalid under section 153A. The appeal on this issue was dismissed.Issue 3:The Department contested the deletion of the disallowance of Rs.56,791 made under section 24(b) of the Income Tax Act. The CIT (A) had deleted this disallowance, which was accepted by the assessee during the assessment proceedings. However, the Tribunal did not delve into this issue as it was dependent on the outcome of the legal issue raised in the fourth ground of appeal.Issue 4:The pivotal issue revolved around whether additions could be made under section 153A of the Act without incriminating material found during the search. The Department argued that incriminating material was not a prerequisite for such additions. However, the Tribunal, following the decision in 'Kusum Gupta vs. DCIT', held that in the absence of incriminating material, no additions were warranted under section 153A. The Tribunal emphasized that the assessment u/s 153A must be based on material found during the search. The appeal on this crucial issue was dismissed, leading to the rejection of the entire appeal filed by the Department.In conclusion, the Tribunal upheld the CIT (A)'s decisions to delete the additions and disallowance, emphasizing the necessity of incriminating material for making additions under section 153A of the Income Tax Act. The judgment provided a detailed analysis of each issue raised by the Department, ultimately leading to the dismissal of the appeal.