2022 (11) TMI 1356 - AT - Income Tax

Tribunal rejects Department's appeals for assessment years 2006-09, citing lack of incriminating material.

The Tribunal upheld the CIT(A)'s decision, dismissing the Department's appeals for the assessment years 2006-07, 2007-08, and 2008-09. The Tribunal found ... Assessment u/s 153A - completed assessment/unabated assessment in absence of any incriminating material - contention raised by assessee that addition made in Assessment Order is not based upon incriminating material found during the course of search - HELD THAT:- AO has not made additions in the impugned assessment year based upon any incriminating material found during the course of search. Even before us the Ld. DR has not pointed out to any specific incriminating document unearthed during the course of search which formed the basis of additions made in the assessments for the years before us. Therefore, in view of well settled proposition of law that completed / unabated assessment can be interfered by the AO while making assessment u/s. 153A / 153C of the Act only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, the Ld. CIT(A) has not erred in facts and in law in deleting the additions Decided in favour of assessee. Issues Involved:1. Legality of additions made by the Assessing Officer (AO) in the absence of incriminating seized material.2. Specific disallowances and additions made by the AO for various expenses and transactions.3. Jurisdictional challenge to the AO's authority to make additions in unabated assessments.Detailed Analysis:Issue 1: Legality of Additions in the Absence of Incriminating Seized MaterialThe primary issue was whether the additions made by the AO were sustainable in the absence of incriminating seized material during the search. The assessee argued that all the years under consideration were unabated assessment years, and the additions made were not based on any incriminating material found during the search. The CIT(A) accepted this contention, stating that in unabated assessments under section 153A, no addition or disallowance can be made without incriminating documents seized. The CIT(A) observed that the DR could not point out any incriminating material found during the search that would justify the additions. Consequently, the CIT(A) allowed the assessee's appeal, holding that the additions made by the AO were not sustainable as they were not based on any incriminating material.Issue 2: Specific Disallowances and AdditionsThe AO had made various disallowances and additions for the assessment years 2006-07, 2007-08, and 2008-09, including disallowances for power and fuel expenses, ROC expenses, mortgage expenses, transportation expenses, interest expenses, and under-valuation of closing stock of salt. The CIT(A) deleted these additions on the ground that they were not based on any incriminating material found during the search. The specific disallowances and additions made by the AO were as follows:- Assessment Year 2006-07: - Disallowance of Power & Fuel Expenses: Rs. 61,22,360/- - ROC Expenses: Rs. 7,71,000/- - Disallowance of Mortgage Expenses: Rs. 30,30,000/- - Disallowance of Power & Fuel - Jakhau Unit: Rs. 13,00,737/- - Interest Expenses: Rs. 72,28,537/-- Assessment Year 2007-08: - Disallowance of Power & Fuel Expenses: Rs. 81,47,598/- - ROC Expenses: Rs. 7,71,000/- - Sale Made to Group Concern: Rs. 6,30,000/- - Disallowance of Transportation Expenses: Rs. 80,00,000/- - Interest Expenses: Rs. 1,60,56,198/-- Assessment Year 2008-09: - ROC Expenses: Rs. 7,71,000/- - Sale Made to Sister Concern: Rs. 1,48,19,000/- - Under-valuation of Closing Stock of Salt: Rs. 8,73,09,636/- - Interest Expenses: Rs. 3,21,81,532/- - Depreciation on Land Cost of Windmill: Rs. 3,38,000/-Issue 3: Jurisdictional ChallengeThe assessee also challenged the jurisdiction of the AO to make the additions, arguing that the original assessments for the years under reference were completed and concluded before the date of the search, and therefore, these assessments did not 'abate' within the meaning of the second proviso to section 153A(1). The CIT(A) agreed with this contention, stating that the AO had relied on the report of the Special Auditor, which was based on the audited books of accounts already considered during the original assessment proceedings. The CIT(A) cited various judicial precedents, including All Cargo Global, Kabul Chawla, and Saumya Construction, to support the argument that no addition can be made in unabated assessments under section 153A without incriminating seized documents.Conclusion:The Tribunal upheld the CIT(A)'s decision, dismissing the Department's appeals for all the assessment years under consideration. The Tribunal agreed that the additions made by the AO were not sustainable as they were not based on any incriminating material found during the search. The Tribunal also noted that the AO had not referred to any specific incriminating document unearthed during the search that formed the basis of the additions. Consequently, the appeals of the Department were dismissed for assessment years 2006-07, 2007-08, and 2008-09, and the cross objections filed by the assessee were also dismissed.Order:The appeals of the Department and the cross objections filed by the assessee are dismissed for all the three years. Order pronounced in the open court on 23-11-2022.