2017 (6) TMI 592 - AT - Income Tax

ITAT rules in favor of appellant, quashing additions made under Income Tax Act - Key takeaways

Abha Gupta Versus ACIT, CC-19, New Delhi

The Income Tax Appellate Tribunal (ITAT) ruled in favor of the appellant in a case challenging the validity of assessments conducted under sections ... Initiating action u/s 153A - Held that:- As the documents on the basis of which proceedings u/s 153C of the Act had been initiated in the case of the assessee did not belong to the assessee. Accordingly, we set aside the order of the Ld. CIT (A) and direct the Assessing Officer to delete the impugned additions. - Decided in favour of assessee. Issues:1. Validity of assessment u/s 144/1482. Legality of action u/s 148 for reassessment proceedings3. Justification of additions made by Assessing Officer4. Rejection of affidavit filed by the assessee5. Validity of action taken u/s 147/1486. Confirmation of addition of Rs. 20 Lakh by the AOAnalysis:Issue 1: Validity of assessment u/s 144/148The appellant challenged the validity of the assessment conducted under sections 144/148 of the Income Tax Act. The Assessing Officer added Rs. 20 lakh u/s 69A and interest earned on alleged advances. The first appellate authority upheld the assessment. However, the ITAT found that the seized documents did not belong to the assessee, similar to a previous case involving Shri Rajiv Gupta. The ITAT held that the Assessing Officer failed to establish that the name mentioned in the seized papers belonged to the assessee. Consequently, the ITAT directed the Assessing Officer to delete the impugned additions, ruling in favor of the appellant.Issue 2: Legality of action u/s 148 for reassessment proceedingsThe appellant contested the initiation of reassessment proceedings u/s 148. Despite receiving a notice u/s 148, no compliance was made, leading the Assessing Officer to complete the assessment under section 144 r.w.s. 148 by adding back Rs. 20 lakh u/s 69A. The appellant challenged this action before the Ld. CIT (A), who dismissed the appeal. However, the ITAT, considering the lack of evidence linking the seized documents to the appellant, directed the Assessing Officer to delete the additions, thereby ruling in favor of the appellant.Issue 3: Justification of additions made by Assessing OfficerThe Assessing Officer made additions based on seized documents indicating cash advances by the appellant. The AO initiated action u/s 153C, adding Rs. 20 lakh on a peak basis and interest earned. The first appellate authority annulled the assessment, stating that the documents did not belong to the appellant. The ITAT, following a similar case precedent, found that the Assessing Officer failed to establish the connection between the seized documents and the appellant, directing the deletion of the additions.Issue 4: Rejection of affidavit filed by the assesseeThe appellant submitted an affidavit denying any involvement in the alleged cash advances. Despite this, the Assessing Officer proceeded with the additions. The ITAT, considering the lack of evidence linking the seized documents to the appellant, directed the Assessing Officer to delete the impugned additions, ruling in favor of the appellant.Issue 5: Validity of action taken u/s 147/148The appellant challenged the validity of the action taken u/s 147/148. The Ld. CIT (A) upheld the action, leading the appellant to approach the ITAT. The ITAT, finding no conclusive evidence linking the seized documents to the appellant, directed the Assessing Officer to delete the additions, ruling in favor of the appellant.Issue 6: Confirmation of addition of Rs. 20 Lakh by the AOThe Assessing Officer added Rs. 20 lakh as income of the appellant under section 69 of the Act. The appellant contended that this addition was unjustified, presenting an affidavit denying any involvement in the alleged transactions. The ITAT, following a similar case precedent, directed the Assessing Officer to delete the impugned additions, ruling in favor of the appellant.