2010 (2) TMI 845 - AT - Income Tax

Condonation of delay - delay of 91 days in filing of appeals - assessee was suffering from a neurological health problem and proof of the same by way of Doctor s certificate has been furnished - assessee has been prevented by a reasonable cause in filing these appeals in time Condonation of delay accepted. Assumption of jurisdiction by the AO to frame the Assessment Order - Reasons assigned by him for adjudicating the ground of appeal against the assessee are wrong and insufficient in as much as requirement of recording reasons for the transfer of case is a mandatory direction and non communication thereof to the assessee is not saved by showing that the reasons exist in the file although not communicated to the assessee - S. 153A does not authorize the making of a de novo assessment. While under the 1st Proviso the AO is empowered to frame assessment for six years under the 2nd Proviso only the assessments which are pending on the date of initiation of search abate. The effect is that complete assessments do not abate. There can be two assessments for the same assessment year. Assessments which are not pending before the AO on the date of search but are pending before an appellate authority will survive Held that - returns had been processed u/s 143(1) the assessments were not pending and as no material was found during the search the additions could not be sustained additions deleted and allow the appeals of the assessee

Summary

Issues:
- Delay in filing appeals
- Jurisdiction of AO to frame assessment order
- Addition on account of low withdrawals

Delay in filing appeals:
The Appellate Tribunal ITAT, Mumbai addressed the issue of a 91-day delay in filing appeals by the assessee. The assessee provided a letter for condonation of delay due to a neurological health problem supported by a doctor's certificate. After reviewing the submissions and hearing the learned DR, the Tribunal found a reasonable cause for the delay and thus condoned it.

Jurisdiction of AO to frame assessment order:
The appeals raised concerns about the jurisdiction of the Assessing Officer (AO) to frame the assessment order under section 153A. The Tribunal admitted two additional grounds of appeal related to this issue. The assessee argued that the AO lacked jurisdiction as the reasons for transferring the case were not communicated, which is a mandatory requirement. The Tribunal dismissed the first additional ground as not pressed by the assessee. However, citing relevant case laws, the Tribunal concluded that the additions made by the AO were not based on any material found during the search or assessment proceedings. Following legal precedents, the Tribunal held that the AO's authority under section 153A is limited to undisclosed income unearthed during the search and cannot include disclosed items from the original assessment.

Addition on account of low withdrawals:
The primary issue in the assessment was the addition made by the AO on account of low withdrawals from the capital account. The CIT(A) had confirmed this addition, leading the assessee to appeal. The Tribunal noted that the additions were solely based on low withdrawals without any material evidence from the search or assessment. After considering the legal position and relevant case laws, the Tribunal ruled in favor of the assessee, deleting all the additions made and allowing the appeals.

In conclusion, the Tribunal allowed all the appeals of the assessee, emphasizing that the additions made by the AO lacked a legal basis and were not supported by any material evidence found during the search or assessment proceedings. The judgment highlighted the limited scope of the AO's authority under section 153A and the requirement for assessments to be based on undisclosed income unearthed during the search.