2017 (4) TMI 718 - AT - Income Tax

Revenue's appeal dismissed, CIT(A) decision upheld, additions deleted for lack of incriminating material.

The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the additions made by the AO due to the lack of incriminating ... Assessment u/s 153A - addition to income - Held that:- On perusal of the satisfaction note as well as the reply of the assessee dated 29.11.2011 we do not find any reference to the amount of ₹ 15 lakhs pertaining to Savsuvida which is on account of advance against capital against the project finance agreement. Furthermore, the seized documents also do not referred to the issue of depreciation, travelling expenses, loss on sale of car as well as of not allowing carry forward of losses. Admittedly, the assessment for the present case was not pending at the time of search because the impugned assessment year is 2005-06 for which the due date of issue of notice expired on 31.03.2007. the date of search is 26.11.2009 therefore, obviously, on the date of search the assessment for the year under appeal was concluded. In the present case looking at the satisfaction note we do not find any material pertaining to the additions made by the ld Assessing Officer as well as no such material was put to our attention by the ld AR on the impugned additions. Therefore, we do not find any infirmity in the order of the ld CIT(A) in holding that there is no incriminating material unearth during the course of search which related to the addition and then deleting the addition. - Decided in favour of assessee Issues Involved:1. Jurisdiction and legality of additions made without material found during the course of search.2. Scope of additions under Section 153/153C of the Income Tax Act.3. Interpretation of Section 153(1)(1)(b) regarding assessment or reassessment of total income.4. Validity of the order of the CIT(A).Issue-wise Detailed Analysis:1. Jurisdiction and Legality of Additions Made Without Material Found During the Course of Search:The revenue contended that the CIT(A) erred in holding that the additions made were without jurisdiction and bad in law due to the lack of material found during the search. The CIT(A) had deleted the additions on the grounds that no incriminating material was found during the search that could justify the additions or disallowances made by the AO.2. Scope of Additions Under Section 153/153C of the Income Tax Act:The revenue argued that the CIT(A) erred in holding that no addition other than those based on seized documents could be made when completing an assessment under Sections 153/153C. The CIT(A) had held that in the absence of incriminating material, no additions or disallowances could be made in cases covered under these sections.3. Interpretation of Section 153(1)(1)(b) Regarding Assessment or Reassessment of Total Income:The revenue asserted that Section 153(1)(1)(b) does not suggest that the assessment or reassessment of total income should be confined only to the material or evidence found as a result of the search. The CIT(A) had failed to appreciate this, according to the revenue.4. Validity of the Order of the CIT(A):The revenue claimed that the order of the CIT(A) was erroneous and untenable on facts and in law. The CIT(A) had deleted the additions made by the AO, leading to the revenue's appeal.Detailed Analysis:Jurisdiction and Legality of Additions:The tribunal referred to the case of CIT v. Kabul Chawla (380 ITR 573), where the Delhi High Court held that assessments under Section 153A should be based on seized material. The tribunal examined the satisfaction note and the reply of the assessee, finding no reference to the amount of Rs. 15 lakhs pertaining to Savsuvida or other disallowances like depreciation, traveling expenses, and loss on the sale of a car. The tribunal concluded that no incriminating material was found during the search that related to these additions, thereby supporting the CIT(A)'s decision to delete the additions.Scope of Additions Under Section 153/153C:The tribunal noted that the CIT(A) had deleted the additions on the grounds that no incriminating material was found during the search. The tribunal reiterated that, as per the Delhi High Court's guidance, assessments under Section 153A should be based on seized material, and in the absence of such material, completed assessments can only be reiterated. The tribunal found that the AO's additions were not based on any incriminating material found during the search.Interpretation of Section 153(1)(1)(b):The tribunal agreed with the CIT(A)'s interpretation that assessments under Section 153A should be based on seized material. The tribunal emphasized that the assessment should not be arbitrary and must have relevance or nexus with the seized material. The tribunal found that the AO's additions lacked such relevance or nexus.Validity of the Order of the CIT(A):The tribunal upheld the CIT(A)'s order, finding no infirmity in the decision to delete the additions. The tribunal concluded that the revenue's appeal failed in light of the binding decision of the Delhi High Court in the case of CIT v. Kabul Chawla.Conclusion:The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the additions made by the AO due to the lack of incriminating material found during the search. The tribunal's decision was pronounced in the open court on 10/04/2017.