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2016 (6) TMI 1344 - AT - Income TaxAssessment u/s 153A - seized material to reassess the total income on the basis of search operation - Held that - As no incriminating material unearthed during the search to proceed u/s 153A, addition made in both the cases u/s 153A read with section 143(3) is not sustainable in the eyes of law, hence deleted. See CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT . Consequently, both the appeals filed by the assessee are hereby allowed.
Issues Involved:
1. Validity of the assessment order under Section 153A of the Income-tax Act. 2. Confirmation of additions by disallowing business expenditures. 3. Lack of incriminating material found during the search. 4. Procedural aspects related to the issuance of notices and abatement of proceedings. Detailed Analysis: 1. Validity of the Assessment Order under Section 153A: The primary issue was whether the assessment orders under Section 153A were valid in the absence of any incriminating material found during the search. The Tribunal noted that the assessments for AY 2006-07 and 2007-08 were completed before the search. The Tribunal referred to the judgment in CIT vs. Kabul Chawla - 380 ITR 173 (Del.), which held that completed assessments could only be interfered with based on incriminating material unearthed during the search. Since no such material was found, the Tribunal concluded that the assessment orders under Section 153A were not sustainable. 2. Confirmation of Additions by Disallowing Business Expenditures: The assessee challenged the confirmation of additions of ?2,34,50,000/- for AY 2006-07 and ?7,12,00,000/- for AY 2007-08 by disallowing genuine business expenditures. The Tribunal observed that the Assessing Officer (AO) had made these additions based on pre-search enquiries and not on any incriminating material found during the search. The Tribunal emphasized that additions under Section 153A should be based on evidence found during the search, which was not the case here. 3. Lack of Incriminating Material Found During the Search: The Tribunal highlighted that the AO had not referred to any incriminating material found during the search in the assessment orders. The Tribunal reiterated that, as per the legal position established in Kabul Chawla, completed assessments could only be disturbed based on such material. The Tribunal found that the AO had relied on pre-search enquiries and the inability of the assessee to produce certain parties, which was insufficient to justify the additions under Section 153A. 4. Procedural Aspects Related to Issuance of Notices and Abatement of Proceedings: The Tribunal noted that for AY 2006-07, the assessment was completed under Section 143(1) and no notice under Section 143(2) was issued within the prescribed period before the search. Therefore, no assessment was pending, and the question of abatement did not arise. For AY 2007-08, the assessment was completed under Section 143(3) prior to the search. The Tribunal emphasized that, in both cases, the AO could only make additions based on incriminating material found during the search, which was absent. Conclusion: The Tribunal concluded that the additions made by the AO under Section 153A were not sustainable in the absence of incriminating material found during the search. The Tribunal allowed the appeals filed by the assessee, deleting the additions of ?2,34,50,000/- for AY 2006-07 and ?7,12,00,000/- for AY 2007-08. The order was pronounced in open court on June 27, 2016.
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