2025 (7) TMI 1661

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....mpugned disalloewance made by the assessing officer and sustained by the learned CIT(A) are bereft of jurisdiction and bad in law. 4. The learned CIT(A) ought to have seen that the impugned disallowance made by the Ld. A.O and sustained by the Ld.CIT(A) are bereft of jurisdiction and bad in law, since no incriminating material has been found/ discovered during the course of the Search and Seizure operations whicht is the basic requirement for making addition in proceedings initiated under section 153A. 5. The learned CIT(A) ought to have seen that although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search it does not mean that the assessment can be arbitrary made without any relevance or nexus with the seized material, obviously meaning that an assessment under section 153A has to be made only on the basis of seized material. 6. The Ld.CIT(A) has wrongly sustained the impugned disallowance of interest claimed on borrowed capital made u/s 24(b) in an unwarranted, whimsical and arbitrary manner, purely on the basis of surmises and conjectures. 7. The CIT(A) ought to have seen that the impugned disal....

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....e assessee specifically challenged the jurisdiction of the AO to make an addition u/s.153A of the Act, in the absence of any incriminating material found during the course of the search. In support of this contention, reliance was placed on the judgment of the Hon'ble Supreme Court in the case of PCIT v. Abhisar Buildwell Pvt. Ltd. 7. The ld.CIT(A) vide order dated 30.08.2024 (Pages 9 -10, paragraphs 7.3 and 7.4 of the appellate order), upheld the jurisdiction of the AO, inter alia, on the following grounds: a) That the assessee had not filed any return of income prior to the date of search, despite having taxable income of Rs. 3,20,570/-, as evident from the return filed pursuant to the notice issued u/s.153A of the Act; b) That for the Assessment Year 2015-16, the time limit to issue notice u/s.148 was available up to 31.03.2022. Since the search was conducted on 16.03.2021 and the time limit for issuing notice u/s.148 of the Act had not expired as on the date of search, the assessment year in question was treated as an abated assessment. 8. Being aggrieved by the order of the First Appellate Authority, the assessee has preferred an appeal before us. 9. The ld.AR of the ....

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....d that assessment for AY 2015-16 was not pending and must be regarded as "unabated" within the meaning of law. Consequently, in the absence of incriminating material, no addition was legally sustainable. 4. Section 153A(1) mandates the AO to issue a notice requiring the assessee to furnish returns for six preceding assessment years. Sub-section (2) provides that if any assessment or reassessment proceeding is pending on the date of the search, such proceeding shall abate. The corollary is that where no such proceeding is pending, the earlier assessment survives, and the AO is restricted to reassessing only based on search-related material. Thus, the statutory framework draws a clear distinction between: a. Abated assessments, where the AO has full power to reassess the entire income; and b. Unabated assessments, where the AO can only assess income based on incriminating material found during search. 13. In the instant case, the impugned additions do not stem from any such material, and hence the reassessment is infirm in law. In the light of the above submission the ld.AR submitted that the assessment order passed u/s.153A r.w.s. 143(3) for AY 2015-16 may kindly be quash....

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....e having taxable income of Rs. 3,20,570/-, as evident from the return filed pursuant to the notice issued u/s.153A of the Act; b) That for the Assessment Year 2015-16, the time limit to issue notice u/s.148 was available up to 31.03.2022. Since the search was conducted on 16.03.2021 and the time limit for issuing notice u/s.148 of the Act had not expired as on the date of search, the assessment year in question was treated as an abated assessment. 17. In the present case, the additions made by the AO particularly the disallowance of interest on borrowed capital are not supported by any incriminating material discovered during the search conducted u/s.132 of the Act on 16.03.2021. We find that the AO has not whispered a word about the incriminating material found during the search corresponding to the additions made in the assessment order. In the absence of any such material, the action of the AO in proceeding with the disallowance is without jurisdiction and vitiates the assessment order. In support of the aforesaid submission we take the guidance of the law laid down by multiple High Courts and confirmed by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd.....

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....tion is not sustainable in law. Hence, we set aside the order of the ld.CIT(A) by quashing the order of the AO as void ab initio. ITA No.2729/Chny/2024 for the A.Y. 2019-20 21. For the Assessment Year (AY) 2019-20 the assessee filed his return of income on 16.07.2019 u/s.139 of the Income Tax Act, 1961 (the Act) admitting total income of Rs. 4,57,820/-. Pursuant to the search operation, a notice u/s.153A of the Act was issued to the assessee on 11.12.2021, requiring the assessee to file a return of income for six assessment years preceding the year of search, including Assessment Year 2019-20. 22. In compliance with the said notice, the assessee filed his return of income u/s.153A on 03.03.2022, declaring total income at Rs. 12,07,820/-. Thereafter, the AO issued notice u/s.142(1) dated 17.02.2022, followed by notice u/s.143(2) dated 26.03.2022. The AO thereafter passed assessment order u/s.153A r.w.s.143(3) on 31.03.2022, determining the total income of the assessee at Rs. 15,72,420/- and in doing so the AO disallowed the claim of interest on borrowed capital on the ground that the assessee had failed to furnish evidence to substantiate that the borrowed funds were utilised fo....