Tribunal Deletes Additions Under Section 2(22)(e) on Protective Basis

The Tribunal allowed the appeal, deleting additions made under section 2(22)(e) and Rs. 3.30 crore on a protective basis. Other grounds were considered academic and dismissed. The order was pronounced on 20th August 2019.

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Issues Involved:
1. Legality of the order passed by the Ld. CIT(A) under section 250 of the Income Tax Act, 1961.
2. Rejection of additional grounds by the Ld. CIT(A) under section 250(5) of the Income Tax Act.
3. Addition under section 2(22)(e) of the Income Tax Act without incriminating material.
4. Addition of Rs. 3.30 crore on a protective basis based on documents found from a third party.
5. Principles of natural justice.

Detailed Analysis:

1. Legality of the order passed by the Ld. CIT(A) under section 250 of the Income Tax Act, 1961:
The assessee contested that the order passed by the Ld. CIT(A) was bad in law and on facts. This issue was rendered academic and not adjudicated upon since relief was granted on other grounds.

2. Rejection of additional grounds by the Ld. CIT(A) under section 250(5) of the Income Tax Act:
The Ld. CIT(A) rejected additional grounds raised by the assessee, stating that they were factual and not legal, thus not applicable under the judgment of the Hon'ble Supreme Court in NTPC 229 ITR 383. This issue was also rendered academic and not adjudicated upon due to the relief granted on other grounds.

3. Addition under section 2(22)(e) of the Income Tax Act without incriminating material:
The assessee argued that the addition under section 2(22)(e) was made without any incriminating material found during the search, which contravenes the judgment of the Hon'ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi). The Tribunal found that the addition of Rs. 6 lakh was made based on submissions during assessment proceedings and not on any incriminating material. As the assessments were completed before the search and no notice under section 143(2) was issued, the Tribunal held that no addition could be made in the absence of incriminating material. Thus, the addition under section 2(22)(e) was deleted, and ground No. 3 of the appeal was allowed.

4. Addition of Rs. 3.30 crore on a protective basis based on documents found from a third party:
The addition of Rs. 3.30 crore was made based on documents found from the premises of a third party, Sh. Ashok Chowdhary, and was upheld by the Ld. CIT(A) on a substantive basis. The Tribunal noted that the material relied upon was not found from the premises of the assessee and that the procedure under section 153C of the Act was not followed. The Tribunal emphasized that the Assessing Officer must adhere to the provisions of the Act and cannot devise shortcuts. The addition made under section 153A based on documents found from a third party was held as bad in law and void-ab-initio. Consequently, the addition of Rs. 3.3 crore was deleted, and ground No. 6.2 of the appeal was allowed.

5. Principles of natural justice:
The assessee argued that the order passed by the Ld. CIT(A) was against the principles of natural justice. This issue was rendered academic and not adjudicated upon due to the relief granted on other grounds.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the additions made under section 2(22)(e) and Rs. 3.30 crore on a protective basis. Other grounds were rendered academic and dismissed as infructuous. The order was pronounced in the open court on 20th August 2019.

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