Tribunal Invalidates Assessments for Non-Resident Assessee, Adds Deemed Income, & Expenses

The Tribunal concluded that the assessments made under Section 153A for AYs 2009-10 to 2012-13 were without jurisdiction and invalid as no incriminating material was found during the search. Additionally, the Tribunal determined that the assessee was a non-resident for the relevant assessment years and held that the additions made under Sections 28(iv) and 69C, as well as the housewarming and farm maintenance expenses, were unjustified. The appeals were allowed in ITA Nos. 1215 to 1217/Bang/2019 and partly allowed in ITA Nos. 1211 to 1214/Bang/2019.

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Issues Involved:
1. Validity of assessment under Section 153A of the Income Tax Act.
2. Determination of residential status of the assessee.
3. Addition of amounts under Sections 28(iv) and 69C of the Income Tax Act.
4. Addition of housewarming expenses as income.
5. Addition of farm maintenance charges as income.

Detailed Analysis:

1. Validity of Assessment under Section 153A:
The primary issue was whether the assessments made under Section 153A were valid in the absence of any incriminating material found during the search. The Tribunal noted that the search conducted on 07.01.2015 did not yield any incriminating material. The assessments for AYs 2009-10 to 2012-13 were already completed, and the time for issuing notice under Section 143(2) had lapsed, making these assessments non-pending and non-abating. The Tribunal referred to several judgments, including CIT Vs Kabul Chawla and CIT Vs Continental Warehousing Corporation Ltd, which held that completed assessments can only be interfered with if incriminating material is found during the search. Consequently, the Tribunal concluded that the assessments made under Section 153A for AYs 2009-10 to 2012-13 were without jurisdiction and invalid.

2. Determination of Residential Status:
The Tribunal examined whether the assessee was a resident or non-resident. The assessee claimed non-resident status, arguing that he was in India for less than 182 days each year and had left India for employment in Singapore. The AO contended that the assessee did not discharge the onus of proving his non-resident status. The Tribunal referred to the Co-ordinate Bench decision in Manoj Kumar Reddy Vs ITO and the Hon'ble Karnataka High Court in DIT Vs Manoj Kumar Reddy Nare, which held that the date of arrival should be excluded while calculating the number of days present in India. The Tribunal concluded that the assessee was a non-resident for AYs 2009-10 to 2012-13, as he was present in India for less than 182 days each year.

3. Addition of Amounts under Sections 28(iv) and 69C:
The AO added various amounts under Sections 28(iv) and 69C, alleging that the assessee was the beneficial owner of Romulus Assets Limited (RAL) and had derived benefits from its payments. The Tribunal found that the AO had not provided sufficient evidence to prove that the assessee was the beneficial owner of RAL. The Tribunal noted that the AO had acted on suspicion and had not conducted necessary enquiries to substantiate his claims. The Tribunal held that the AO had failed to discharge the burden of proof and that the additions made under Sections 28(iv) and 69C were not justified.

4. Addition of Housewarming Expenses:
The AO added housewarming expenses incurred by Embassy Knowledge Infrastructure Pvt Ltd as income of the assessee under Section 28(iv). The Tribunal found that the farmhouse belonged to the company and the expenses were recorded in the company's books. The Tribunal held that just because the assessee stayed in the farmhouse and referred to it as "my house" in invitations, it did not mean that the expenses were for his personal benefit. The Tribunal concluded that the housewarming expenses could not be treated as the assessee's income under Section 28(iv).

5. Addition of Farm Maintenance Charges:
The AO added farm maintenance charges incurred by the company as income of the assessee under Section 28(iv). The Tribunal held that the farmhouse was owned by the company and it was the company's responsibility to maintain it. The Tribunal found no basis to treat the maintenance expenses as the assessee's income, as the expenses were for maintaining the company's asset. The Tribunal deleted the addition of farm maintenance charges for both AYs 2014-15 and 2015-16.

Conclusion:
The Tribunal allowed the appeals in ITA Nos. 1215 to 1217/Bang/2019 and partly allowed the appeals in ITA Nos. 1211 to 1214/Bang/2019, concluding that the assessments under Section 153A were invalid, the assessee was a non-resident, and the additions under Sections 28(iv) and 69C, as well as the housewarming and farm maintenance expenses, were unjustified.

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