2014 (12) TMI 1205 - AT - Income Tax

Addition u/s 153A - Held that - We held that u/s 153A additions in the case of completed assessments can only be made if so the additions are based upon incriminating documents. Since additions were not based upon incriminating documents, therefore, additions were not validly made. Since we have decided the legal issue in favour of assessee

Summary

Issues:
1. Addition made in search assessment u/s 153A without incriminating seized material.
2. Ad-hoc addition of foreign traveling expenses.
3. Addition of unexplained cash deposited in the bank.

Analysis:

Issue 1: Addition made in search assessment u/s 153A without incriminating seized material
The appeal was filed against the order of Ld. CIT(A) dated 31.12.2012. The case was reopened due to a search and seizure operation on 19.02.2008, and the assessment was completed u/s 153A, with additions related to cash deposits in the bank and foreign travel expenses. The appellant argued that these additions were not based on seized material and, as the assessment was completed before the search, the additions were invalid without any incriminating material. The appellant cited various case laws to support this argument. The Departmental Representative contended that the appellant had raised this ground before Ld. CIT(A) but did not press it, leading to its dismissal. However, the appellant argued that as it was a legal issue, it could be raised at any time. The Tribunal admitted the additional ground and held that additions without incriminating material in completed assessments u/s 153A were legally invalid, citing precedents and case laws. As no incriminating material existed, the additions were deemed invalid, and the appeal was allowed.

Issue 2: Ad-hoc addition of foreign traveling expenses
The appellant challenged the ad-hoc addition of Rs. 1 lac for estimated foreign travel expenses, arguing that it was based on surmises as the A.O. did not consider relevant evidence, such as the husband's travel expenses already accounted for. The appellant provided supporting documents, including a copy of the invitation card and a list of gift-givers, to justify the cash deposit of Rs. 5,72,300 as shagun collected during his son's marriage. The Departmental Representative contended that similar additions were made in previous years, and the appellant's failure to appeal against them implied acceptance. However, the Tribunal found the additions unjustified without incriminating material and ruled in favor of the appellant.

Issue 3: Addition of unexplained cash deposited in the bank
Regarding the addition of Rs. 5,72,300 as unexplained cash deposited in the bank, the appellant clarified that it was from shagun collected during his son's marriage, supported by evidence. The Departmental Representative argued that the list of gift-givers was unverifiable. However, the Tribunal found the explanation reasonable and accepted the appellant's claim, emphasizing that the marriage expenses were accepted, making the rejection of gifts received unwarranted.

In conclusion, the Tribunal allowed the appeal, holding the additions without incriminating material in completed assessments u/s 153A as legally invalid, and ruled in favor of the appellant on all issues.