2015 (9) TMI 1459 - AT - Income Tax

Assessment u/s 153A - Held that - Section 153A does not authorise the making of a denovo assessment in this particular assessment year. While under the first proviso the AO is empowered to frame assessment for six years under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued the assessment can be said to be pending. However the assessment in respect of a return processed u/s 143(1) is not pending because the AO is not required to do anything further about such a return. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings . See Commissioner of Income Tax (Central) -III Versus Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT . Thus the addition has been rightly deleted and there is no reason for interference with the order of Ld. CIT(A). - Decided against revenue.

Summary

Issues:
Deletion of addition of Rs. 21 lacs on account of gifts received by the assessee.

Analysis:
The appeal was against the deletion of an addition of Rs. 21 lacs by the Ld. CIT(A) on account of gifts received by the assessee. The Department contended that the gifts were received from an entry operator who had passed away, and the gifts were not related to any business dealings. The Department also argued that the donor lacked creditworthiness. However, the Ld. CIT(A) deleted the addition based on a similar deletion in a previous case involving the same donor.

The Ld. AR for the assessee argued that the addition was not based on any incriminating material found during the search. The AR highlighted that the capital account of the assessee reflected the gift of Rs. 21 lacs, which was disclosed in the return filed under section 143(1) of the Act. The AR also cited the second proviso of section 153A, stating that assessments finalized before the search would not abate. Additionally, reference was made to a decision of the Hon'ble High Court of Delhi in a related case.

The Tribunal analyzed the provisions of section 153A of the Act, which mandates assessing or reassessing the total income of preceding years in case of a search. It was noted that completed assessments do not abate under the second proviso of the section. The Tribunal emphasized that the power to assess income for six years under the first proviso should be limited to undisclosed income unearthed during the search, not items disclosed in the original assessment.

Considering that the return had been processed under section 143(1) and no incriminating material was found during the search, the Tribunal upheld the deletion of the addition. Referring to a judgment of the Hon'ble High Court of Delhi, the Tribunal outlined the legal position under section 153A, emphasizing the need for a nexus between additions and seized material. The Tribunal concluded that the addition of Rs. 21 lacs was rightly deleted, aligning with the decision in the related case and dismissing the Department's appeal.