2015 (10) TMI 2569 - AT - Income Tax

Assessment u/s 153A - Held that - Factually speaking, in the present case the assessment for the year under consideration stood completed on the date of search. As perused the assessment order and find that there is nothing brought on record to suggest that any material was found during course of search in relation to the impugned addition. The entire discussion on this point in para-3 of the assessment order does not refer to any material found during the course of search leave alone any incriminating material. Therefore, in this factual background, no justification for the Assessing Officer to make the impugned addition in an assessment finalized under section 153A of the Act in the absence of incriminating material having not been found during the course of search, qua the impugned addition. Thus set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition made as the same is purported to be beyond the scope and ambit of assessment envisaged under section 153A of the Act. - Decided in favour of assessee

Summary

Issues:
1. Jurisdiction of Assessing Officer under section 153A of the Income Tax Act, 1961.
2. Addition of notional rent without incriminating material found during search.

Jurisdiction of Assessing Officer under section 153A:
The appeal involved a dispute regarding the jurisdiction of the Assessing Officer under section 153A of the Income Tax Act, 1961. The assessee contended that the impugned addition of notional rent was made without the requisite jurisdiction as no incriminating material was found during the search. The second proviso to section 153A(1) of the Act was analyzed, which states that assessments pending on the date of search shall abate. The scope of assessment under section 153A was discussed, emphasizing that only one assessment shall be made for the identified assessment years based on search findings or other material. The judgment of the Bombay High Court in CIT vs. Continental Warehousing Corporation was referenced to determine the scope of assessment under section 153A. The Delhi High Court's decision in CIT(Central)-III vs. Kabul Chawla was also cited to elaborate on the legal position regarding assessments and additions in the absence of incriminating material.

Addition of Notional Rent without Incriminating Material:
The issue of adding notional rent of properties without incriminating material found during the search was a crucial point of contention. The assessee argued that the addition of notional rent was unjustified as no material was discovered during the search related to this addition. The judgment highlighted that assessments without incriminating material should not be made under section 153A. The assessment order did not mention any material found during the search regarding the impugned addition. Relying on the judgments of the Bombay High Court and the Delhi High Court, it was concluded that the impugned addition of notional rent could not be sustained for an assessment that had become final without any incriminating material found during the search. Consequently, the order of the CIT(A) was set aside, directing the Assessing Officer to delete the addition of notional rent. The assessee succeeded in this aspect, and the appeal was allowed.

In conclusion, the judgment extensively analyzed the jurisdiction of the Assessing Officer under section 153A of the Income Tax Act, 1961, and the validity of adding notional rent without incriminating material. The legal positions established by the Bombay High Court and the Delhi High Court were crucial in determining the outcome of the appeal, ultimately leading to the deletion of the impugned addition.