2022 (1) TMI 1155 - AT - Income Tax

ITAT Delhi: Incriminating material essential for additions in unabated assessments

Shri Vijay Pal Garg Versus ACIT, Central Circle : 5, New Delhi.

Shri Vijay Pal Garg Versus ACIT, Central Circle : 5, New Delhi. - TMI Issues:1. Validity of proceedings u/s 153A of the Income Tax Act and framing of assessment without incriminating material.2. Disallowance of deduction for interest paid on loans raised for business purposes.3. Addition on account of low household withdrawals.Analysis:Issue 1:The appeals were filed against the order passed by the Commissioner of Income Tax (Appeals) for assessment years 2004-05, 2005-06, 2006-07, and 2008-09 under Section 153A / 143(3) of the Income Tax Act. The primary contention was the initiation of proceedings u/s 153A and framing of assessment without any incriminating material. The Assessing Officer made various additions without any material found during the search. The appellant argued that additions can only be made based on incriminating material. However, the CIT (Appeals) held that there is no such requirement and that the assessment under 153A can be done even without evidence related to undisclosed income found during the search. The ITAT Delhi, after considering the facts, held that in cases of unabated assessments where the assessments have been finalized before the search, no additions can be made without incriminating material found during the search. The judgments in CIT Vs. Kabul Chawla and Pr. CIT Vs. Meeta Gutgutia were relied upon to support this position.Issue 2:Regarding the disallowance of deduction for interest paid on loans raised for business purposes, the appellant contested the disallowance of Rs. 1,08,000 out of Rs. 6,89,008 under Section 36(1)(iii) of the Act. The CIT (Appeals) upheld the disallowance, which the appellant argued was based on incorrect findings and contrary to the evidence on record. However, the ITAT Delhi found that the disallowance was not justified as it was made without proper appreciation of the appellant's case, statutory provisions, and evidence submitted.Issue 3:The addition on account of low household withdrawals was also challenged by the appellant. The Assessing Officer made an addition of Rs. 2,00,000 out of Rs. 2,50,000 on this ground. The CIT (Appeals) confirmed this addition, but the appellant argued that it was erroneous and not supported by the facts and circumstances of the case. The ITAT Delhi found that since no incriminating material was found during the search, such additions were beyond the scope of assessment proceedings under Section 153A of the Act.In conclusion, the ITAT Delhi allowed all the appeals filed by the assessee, emphasizing the importance of incriminating material for making additions in cases of unabated assessments finalized before the search. The judgments in similar cases were instrumental in supporting the decision to set aside the additions made without such material.