2019 (11) TMI 583 - AT - Income Tax

Assessing Officer's Unjustified Additions for Assessment Years 2006-2010 Overturned

The Tribunal concluded that additions made by the Assessing Officer for the assessment years 2006-07 to 2009-10, without any incriminating material found ... Finality of assessment - Section 153A proceedings limited by incriminating material unearthed during search - Power of Assessing Officer to disturb concluded assessments - Deemed rent under section 23(1) - Tax can be levied only by authority of law; no estoppel to create tax liabilityFinality of assessment - Section 153A proceedings limited by incriminating material unearthed during search - Power of Assessing Officer to disturb concluded assessments - Deemed rent under section 23(1) - Tax can be levied only by authority of law; no estoppel to create tax liability - Whether additions by the Assessing Officer in search assessments under section 153A read with section 143(3) can be sustained in respect of assessment years which had attained finality on the date of search, in the absence of any incriminating material found during the search - HELD THAT: - The Tribunal examined the scheme of section 153A and the distinction between abated and unabated assessments, and held that when an assessment has attained finality the Assessing Officer, in proceedings under section 153A read with section 143(3), cannot disturb the concluded assessment unless materials unearthed in the search or in the 153A proceedings demonstrate that the reliefs granted earlier were contrary to facts revealed by those proceedings. Applying the principle, and relying on authoritative decisions of the Bombay High Court, the Tribunal found that the impugned assessment years were unabated as on the date of search and that no incriminating material was found during the search to justify reopening or making additions in respect of amounts already finally assessed. The Tribunal further observed that tax can be levied only by authority of law and an assessee's ad hoc or voluntary offer cannot be the basis to levy tax where statutory authority for such levy is absent. Consequently, additions relating to deemed rental income under section 23(1) in the concluded assessment years could not be sustained and were required to be deleted; the Tribunal refrained from entertaining merits of the additions beyond the jurisdictional question. [Paras 6, 11]Additions made in the search assessments for A.Y. 2006-07 to 2009-10 in respect of concluded (unabated) assessments, without any incriminating material having been found during the search, are deleted; grounds of appeal allowed.Final Conclusion: All appeals are partly allowed: the Tribunal set aside the additions made under the search assessments for the concluded assessment years 2006-07 to 2009-10 in the absence of any incriminating material unearthed during the search and directed deletion of those additions, while refraining from adjudicating the merits of the claims beyond this jurisdictional finding. Issues Involved:1. Jurisdiction of the Assessing Officer under section 153A r.w.s 143(3).2. Addition in proceedings under section 153A without incriminating material.3. Addition based on a conditional offer by the appellant.4. Adoption of Annual Letting Value (ALV) by the Assessing Officer.5. Rateable value fixed by the Municipal Corporation as the Annual Letting Value.Detailed Analysis:1. Jurisdiction of the Assessing Officer under section 153A r.w.s 143(3)The primary issue was whether the Assessing Officer (AO) had the jurisdiction to complete the assessment under section 153A read with section 143(3) of the Income Tax Act. The appellant argued that the AO erred in making additions during the proceedings under section 153A, especially since no incriminating material was found during the course of the search, and the original assessment under section 143(3) had not abated.2. Addition in proceedings under section 153A without incriminating materialThe appellant contended that the additions made by the AO for the assessment years 2006-07 to 2009-10 were based on deemed rent under section 23(1) of the Act for properties that were already disclosed in the income tax and wealth tax returns. The appellant argued that since no incriminating material was found during the search, the additions were unjustified. The Tribunal agreed with the appellant, citing the Bombay High Court's decision in CIT vs. Continental Warehousing Corporation (Nhava Shiva) Ltd. and All Cargo Global Logistics Ltd., which held that in the absence of incriminating material, the AO could not disturb the finalized assessments.3. Addition based on a conditional offer by the appellantThe appellant argued that the addition was based on a conditional offer made during the assessment, which was not accepted by the AO. The Tribunal noted that tax authorities must levy tax as per the law and not based on the income agreed upon by the assessee. The Tribunal referenced the Bombay High Court's decision in Balmukund Acharya Vs. DCIT, which emphasized that tax can only be collected as provided under the Act, and any over-assessment due to mistake or misconception should be corrected.4. Adoption of Annual Letting Value (ALV) by the Assessing OfficerThe appellant challenged the ALV adopted by the AO for properties in Lonavala and Mumbai, arguing that the values were excessive and arbitrary. The Tribunal did not specifically address the merits of the ALV adopted by the AO, as the primary issue of jurisdiction and the absence of incriminating material was sufficient to decide the case in favor of the appellant.5. Rateable value fixed by the Municipal Corporation as the Annual Letting ValueThe appellant requested that the AO adopt the rateable value fixed by the Municipal Corporation as the ALV. However, since the Tribunal directed the deletion of all additions due to the lack of incriminating material, this issue became moot.ConclusionThe Tribunal concluded that the additions made for the assessment years 2006-07 to 2009-10, which were unabated assessments as of the date of the search, could not be made in the search assessments in the absence of any incriminating material found during the search. Consequently, all the additions were directed to be deleted, and the appeals of the assessee were partly allowed.Order PronouncementThe order was pronounced in the Court on 06/11/2019 at Mumbai, resulting in the appeals of the assessee being partly allowed.