2022 (10) TMI 23 - AT - Income Tax

Tribunal rules in favor of assessee, dismisses Revenue's appeal for Assessment Year 2008-09

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal for Assessment Year 2008-09. The Tribunal held that the assessment order was ... Assessment u/s 153A - deduction claimed u/s 80IA(4) - HELD THAT:- Delhi High Court in the case of Pr. CIT v. Jaypee financial services Ltd [2021 (2) TMI 1186 - DELHI HIGH COURT] held that where AO during the course of post search proceedings under Section 153A against assessee-share trader found certain evidences showing client code modification done by assessee which were not for genuine reasons and, accordingly, made addition on account of such client code modification, since impugned addition was not made by AO based on any incriminating material found during search against assessee and assessment was not pending on date of search, impugned addition was unjustified and same was to be deleted. The Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search. In the instant case, we observe that from the facts placed on record, there was no incriminating material found during the course of search on the basis of which deduction claimed under Section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals). In view of well settled proposition of law that completed assessment can be interfered by the Ao while making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, the Ld. CIT(A) has erred in facts and in law in upholding the additions - Decided in favour of assessee. Issues Involved:1. Validity of the order passed under Section 153A read with Section 143(3) of the Income Tax Act.2. Disallowance of the claim of deduction under Section 80IA(4) for various infrastructure projects.3. Determination of whether the assessee qualifies as a developer of infrastructure facilities or merely a contractor.Issue-wise Detailed Analysis:1. Validity of the Order Passed under Section 153A r.w.s. 143(3):The primary contention raised by the assessee was the jurisdiction of passing the assessment order under Section 153A r.w.s. 143(3) of the Act, arguing that the assessment for the year in question was already concluded/unabated, and no incriminating material was found during the search to justify the additions. The assessee relied on judicial precedents, including the case of Pr. CIT v. Saumya Constructions, which held that additions under Section 153A r.w.s. 143(3) could only be made based on incriminating material found during the search.The Tribunal noted that the assessment order did not indicate any fresh incriminating material found during the search. The Ld. Assessing Officer's observations and the Ld. CIT(Appeals) order confirmed that no incriminating material was found. The Tribunal referenced multiple judicial decisions, including the Supreme Court's ruling in PCIT v. Meeta Gutgutia and the Gujarat High Court's decision in Pr. CIT v. Saumya Constructions, which supported the view that in the absence of incriminating material, the invocation of Section 153A to reopen concluded assessments was not justified.2. Disallowance of the Claim of Deduction under Section 80IA(4):The assessee's claim of deduction under Section 80IA(4) for various infrastructure projects was disallowed by the Assessing Officer, who treated the assessee's activities as works contracts rather than development of infrastructure facilities. The Ld. CIT(Appeals) upheld this disallowance.The Tribunal observed that the Assessing Officer's conclusion was based on the nature of the contracts with government bodies and the provisions of Section 80IA(4), which exclude works contracts from eligibility for deduction. However, since the assessment was framed without any incriminating material found during the search, the Tribunal held that the disallowance of the deduction under Section 80IA(4) was not justified.3. Determination of Developer Status:The assessee argued that it was a developer of infrastructure facilities and not merely a contractor. The Ld. CIT(Appeals) had held that the assessee was not a developer for the specified projects, leading to the disallowance of the deduction under Section 80IA(4).The Tribunal did not delve into the merits of whether the assessee was a developer or a contractor, as it set aside the assessment order on the issue of jurisdiction itself. The Tribunal emphasized that in the absence of incriminating material found during the search, the completed assessment could not be interfered with under Section 153A.Conclusion:The Tribunal concluded that the Ld. CIT(A) erred in upholding the additions for Assessment Year 2008-09, as the assessment order was not based on any incriminating material found during the search. Consequently, the appeal of the assessee was allowed, and the appeal of the Revenue was dismissed for Assessment Year 2008-09. The Tribunal did not separately discuss the merits of the case due to the jurisdictional issue.Order Pronouncement:The order was pronounced in the open court on 28-09-2022.