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2015 (4) TMI 399 - AT - Income TaxDeemed dividend u/s 2(22)(e) - assessment in pursuance of search action u/s 132(1) - addition made while passing the assessment order u/s 153A - Held that - In this case the assessment for the A.Ys. 2002-03 and 2004-05 had attained finality and admittedly there being no incriminating material found during the course of search relating to the addition made on account of deemed dividend therefore such an addition de hors any material found during the course of the search cannot be roped in the assessment made u/s 153A by the assessing officer. Accordingly the addition on account of deemed dividend of Rs. 1, 69, 68, 750/- in the A.Y. 2002-03 and addition of Rs. 4, 62, 91, 123/- on account of deemed dividend u/s 2(22)(e) is deleted as same is beyond the scope of assessment u/s 153A. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction and validity of assessment orders under Section 153A. 2. Addition of deemed dividend under Section 2(22)(e). Detailed Analysis: Jurisdiction and Validity of Assessment Orders under Section 153A: The assessee challenged the jurisdiction of the assessment orders passed under Section 153A read with Section 143(3) for the Assessment Years (A.Y.) 2002-03 and 2004-05. The returns for these years were filed on 31.03.2003 and 31.03.2005, respectively, and no notices under Section 143(2) were issued within the prescribed time limits, thus the returns stood assessed and attained finality. A search under Section 132(1) was conducted on 19.06.2007, and subsequent notices under Section 153A were issued. The assessee argued that no incriminating documents or unaccounted assets were found during the search, and the additions made were based on information already available in the returns. The Tribunal admitted the additional grounds raised by the assessee, citing the Supreme Court's decision in National Thermal Power Company Ltd. Vs. CIT, which allows for the admission of purely legal grounds arising from facts on record. The Tribunal noted that, as per the second proviso to Section 153A, assessments that have attained finality before the date of search do not get abated. The Tribunal cited the jurisdictional High Court's ruling in CIT Vs. M/s. Murli Agro Products Ltd., which held that no addition can be made under Section 153A if no incriminating material is found during the search. This principle was reiterated by the Rajasthan High Court in Jai Steel (India) Vs. ACIT. The Tribunal concluded that the assessment for A.Ys. 2002-03 and 2004-05 had attained finality before the date of search, and no incriminating material was found during the search. Therefore, the additions made were beyond the scope of assessment under Section 153A. Addition of Deemed Dividend under Section 2(22)(e): The assessee challenged the addition of deemed dividend of Rs. 1,69,68,750/- for A.Y. 2002-03 and Rs. 4,62,91,123/- for A.Y. 2004-05. The Tribunal observed that the Assessing Officer (AO) made these additions based on information from the returns and not on any incriminating material found during the search. The Tribunal referenced the decision in All Cargo Global Logistics Ltd. Vs. DCIT and the jurisdictional High Court's ruling in Murli Agro Products Ltd., which clarified that additions under Section 153A require incriminating material found during the search. The Tribunal also considered the Rajasthan High Court's analysis in Jai Steel (India) Vs. ACIT, which emphasized that completed assessments can only be disturbed if new incriminating material is found. The Tribunal rejected the reliance on the ITAT Mumbai Bench's decision in Satish L. Babladi Vs. DCIT, as it did not consider the jurisdictional High Court's ruling in Murli Agro Products Ltd. The Tribunal held that the additions of deemed dividend were beyond the scope of Section 153A and deleted the additions for both assessment years. Conclusion: The Tribunal allowed the appeals filed by the assessee for both assessment years, holding that the additions made were beyond the scope of assessment under Section 153A due to the lack of incriminating material found during the search. The Tribunal did not address the merits of the additions, as they became purely academic. Order Pronouncement: The order was pronounced in the open court on 13th February 2015.
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