2020 (2) TMI 86 - AT - Income Tax

Tribunal allows appeals for incorrect assessment orders citing improper initiation and unwarranted additions

Mr. S.P.S. Ahluwalia, C/o Manoj Kumar Mittal & Co., New Delhi Versus ACIT, Central Circle-12, New Delhi

Mr. S.P.S. Ahluwalia, C/o Manoj Kumar Mittal & Co., New Delhi Versus ACIT, Central Circle-12, New Delhi - TMI Issues:1. Jurisdictional issue regarding notice under section 153A of the Act.2. Addition of unexplained cash credit under section 68 of the Act.3. Protective basis addition under section 160 and 163 of the Act.Jurisdictional Issue Regarding Notice under Section 153A of the Act:The appeals were against orders of the CIT(A) for assessment years 1998-99, 1999-2000, 2001-02, and 2004-05 under section 153A of the Act. The main issue was the validity of the notice issued under section 153A. The AO initiated proceedings under section 153A read with section 153C, instead of solely under section 153A, which was incorrect as the assessee was the person searched. The notice issued was not in accordance with the law, leading to the assessment orders being deemed invalid. The Tribunal held that the assessment orders were bad in law and canceled them, allowing the appeal in favor of the assessee.Addition of Unexplained Cash Credit under Section 68 of the Act:In the appeal for the assessment year 2004-05, the AO made additions under section 68 for unexplained cash credits. The entries were found on a seized document related to the sale of a property. The Tribunal noted that the property was sold in assessment year 2002-03, and the cash component should have been taxed in that year. As no cash was found during the search, and with no books of accounts maintained, the addition under section 68 was deemed unwarranted. The Tribunal directed the AO to delete the addition of cash components, as there was no merit in the additions made.Protective Basis Addition under Section 160 and 163 of the Act:The protective basis addition was made in the hands of the assessee on account of cash components belonging to brothers/sisters under sections 160 and 163. However, no substantive addition was made in the hands of those individuals for the relevant assessment years. The Tribunal held that without a separate notice under section 163(2) and in the absence of books of accounts, no addition could be justified. Therefore, the Tribunal directed the AO to delete the protective basis addition, as there was no merit in making such additions. All the appeals of the assessee were allowed by the Tribunal.This summary provides a detailed analysis of the legal judgment, covering the jurisdictional issue, addition of unexplained cash credit, and protective basis addition comprehensively.