2014 (5) TMI 1098 - AT - Income Tax

Additions made u/s 153C - Held that - Additions are not sustainable when there is no indication of incriminating material having been found in the course of search to be used against the assessee. Regarding the addition of ₹ 3.60 lakhs, being income from Bombay Rayon Fashions Ltd, it is submitted that the Assessing Officer made estimated additions based on the statement recorded during the assessment proceedings u/s 131 of Act. It is the case where AO estimated the income for personal use at the rate of ₹ 30,000/- per month and the same is not supported by any incriminating material. As stated above, such additions are not sustainable in law. Therefore, we are of the opinion that the additional ground raised by the assessee is allowed in his favour.

Summary

Issues: Assessment based on additions made under Sec.143(3) r.w.s. 153C of the Act in absence of incriminating seized material; Validity of additional grounds raised by the assessee; Sustainability of additions made without incriminating material; Estimation of income from Bombay Rayon Fashions Ltd without supporting incriminating material.

Analysis:
1. The appeal was filed against the order of the CIT (A)-41, Mumbai for the assessment year 2006-07. The appellant raised an additional ground questioning the additions made under Sec.143(3) r.w.s. 153C of the Act without any incriminating seized material found during the search. The additions included amounts based on bank deposits, salary and wages paid, capital introduced, and income from a specific company.

2. The appellant's counsel emphasized the legal nature of the additional grounds and submitted written justifications for filing additional evidences. It was argued that the additions lacked support from any incriminating material seized during the search action. The counsel specifically mentioned that the addition related to salary and wages paid was not pressed. The rest of the additional ground was admitted as being legal in nature.

3. The counsel contended that the additions made in the assessment lacked the support of any incriminating material seized during the search action. The appellant argued that the additions based on bank deposits and capital introduced were made from an accounted bank account with Axis Bank (formerly UTI Bank). The counsel presented bank extracts and balance sheet details to support the argument that the additions were not based on incriminating material. The Tribunal found merit in the counsel's arguments and referred to a previous decision to support the proposition that additions without incriminating material are not sustainable.

4. Regarding the addition of income from a specific company, the appellant argued that the Assessing Officer estimated the income for personal use without any supporting incriminating material. The Tribunal agreed that such additions without incriminating material are not sustainable in law. Therefore, the additional ground raised by the assessee was allowed in their favor.

5. Considering the Tribunal's decisions on the additional ground and the validity of the additions made without incriminating material, the adjudication of regular grounds filed by the assessee on merits was deemed an academic exercise and dismissed as academic. Consequently, the appeal of the assessee was allowed based on the arguments presented and the lack of incriminating material to support the additions made during the assessment.

6. The order was pronounced in the open court on 28th May 2014, and the appeal of the assessee was allowed based on the findings and arguments presented during the proceedings.