2018 (5) TMI 2052 - HC - Income Tax

High Court Upholds ITAT Decision on Assessments, Limits Scope of Section 153A

PR COMMISSIONER OF INCOME TAX-1, AGRA Versus SMT AMITA GARG, Vice Versa

The High Court dismissed the Revenue's appeals challenging the ITAT's findings, which had reversed the Assessing Officer's addition due to lack of fresh ... Addition u/s 153A - addition made by AO in the course of the scrutiny of the assessment - whether no fresh relating material was discovered during the search and seizure proceedings under Section 132 of the Act to justify the addition under Section 154A? - HELD THAT:- A similar set of appeals on identical question were dismissed , [2018 (4) TMI 401 - DELHI HIGH COURT] wherein held the assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However an assessment which has been contested up to the High Court cannot be said to be pending. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which were disclosed in the original assessment proceedings. A perusal of the assessment order passed u/s 153A of the Act reveals that the AO has not made any reference whatsoever to any incriminating material found as a result of the search and the addition has been made entirely on the basis of allegation of accommodation entry which in turn is based on some material said to have been gathered from stock exchange but which does not specifically point out towards the assessee. The Court is of the opinion that the application of case KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT] in the circumstance was justified. In these circumstances, no question of law arises. Issues:- Challenge to ITAT findings by Revenue- Addition made by Assessing Officer- Search and seizure proceedings under Section 132- Abatement of assessments under second proviso- Interpretation of Section 153A- De novo assessment- Incriminating material- Application of Commissioner of Income Tax Vs. Kabul ChawlaChallenge to ITAT findings by Revenue:The High Court dealt with the appeals of the Revenue challenging the findings of the Income Tax Appellate Tribunal (ITAT). The ITAT had reversed the addition made by the Assessing Officer during the scrutiny of the assessment. The basis for the reversal was the absence of fresh incriminating material discovered during the search and seizure proceedings under Section 132 of the Income Tax Act.Abatement of assessments under second proviso:The Court discussed the second proviso which states that assessments pending on the date of initiation of the search shall abate. It was noted that in the case at hand, the search action had been initiated, and assessments under Section 153A were framed for different assessment years with various additions. However, the Court found that the addition made by the Assessing Officer was not justified as the material for the addition had already been disclosed in the original return and had been dealt with in previous appeals up to the High Court.Interpretation of Section 153A and De novo assessment:The Court analyzed Section 153A and emphasized that it does not authorize the making of a de novo assessment for an assessment year where completed assessments do not abate. The power to assess income for six assessment years under the first proviso is limited to undisclosed income unearthed during the search and cannot include items disclosed in the original assessment proceedings. The Court highlighted that assessments can be said to be pending only if the Assessing Officer is required to take further action, such as issuing a notice under Section 143(2).Incriminating material and Application of Commissioner of Income Tax Vs. Kabul Chawla:The Court noted that the addition made by the Assessing Officer was based on an allegation of accommodation entry without specific incriminating material found during the search. The Court relied on the decision in Commissioner of Income Tax Vs. Kabul Chawla to support its conclusion that no question of law arose in the circumstances. As a result, the appeals were dismissed, and pending applications were disposed of accordingly.