2013 (8) TMI 1084 - AT - Income Tax

Summary

Issues Involved:
The issues involved in this case are related to the deletion of additions made by the Assessing Officer on account of unexplained cash credit and disallowance of interest paid on unsecured loans, interpretation of section 153A of the Income Tax Act, reliance on the second proviso to section 153A(1), adherence to Circular No. 7 of 2003 issued by the CBDT, and the requirement of finding documents during a search operation u/s 132 or 132A.

Assessment Year 2001-02:
The Revenue challenged the deletion of additions by the CIT (A) regarding unexplained cash credit and disallowance of interest paid on unsecured loans. The CIT (A) held that no material was found during the search operation to support the additions. The CIT (A) emphasized that under section 153A, assessments or reassessments should be based on material found during the search. The CIT (A) also referred to Circular No. 7 of 2003 to support the abatement of pending assessments. The CIT (A) concluded that since no income was found to have escaped assessment and no relevant documents were seized during the search, no additions could be made u/s 153A.

Assessment Year 2003-04:
Similar to the previous assessment year, the Revenue contested the deletion of additions by the CIT (A) concerning unexplained cash credit and disallowance of interest on unsecured loans. The CIT (A) reiterated that the additions were not supported by any material discovered during the search. The CIT (A) again highlighted the provisions of section 153A and Circular No. 7 of 2003 to argue against the additions. The CIT (A) emphasized that without the presence of incriminating documents or assets seized during the search, no additions could be justified u/s 153A.

Judgment Summary:
The ITAT Delhi, comprising Shri J. S. Reddy and Shri C. M. Garg, considered the appeals by the Revenue against the CIT (A) orders for assessment years 2001-02 and 2003-04. The ITAT observed that the CIT (A) had granted relief to the assessee based on the absence of material found during the search operation. However, the ITAT noted that the CIT (A) did not address the information received by the Assessing Officer regarding accommodation entries. As per the statutory scheme, the Assessing Officer is not authorized to issue notices u/s 147/148 during proceedings u/s 153A. Therefore, the ITAT remanded the issue back to the CIT (A) for fresh consideration, instructing a reevaluation of the appeals with proper opportunity for the assessee. The ITAT set aside the CIT (A) orders and directed a comprehensive review of all issues without prejudice. The appeals of the Revenue were disposed of accordingly.