2018 (5) TMI 1922 - AT - Income Tax

Charging of the interest u/s 234A 234B - assessee submitted that as per section 234A(3) of the Act, interests is to be charged starting from the month following expiry of time allowed to file return u/s 153A and the date of filing of the return - HELD THAT - Submissions of the assessee to be correct because submission of assessee is not rebutted by Department. Ld. DR relied upon the judgement of the Hon ble Delhi High Court in the case of Prannoy Roy Anr. vs Commissioner Of Income Tax 2001 (12) TMI 68 - DELHI HIGH COURT in which it was held that interests u/s 234A would be payable only in a case where tax had not been deposited prior to the date of filing of the return. In this judgement, the amended provision inserted in section 234A(3) w.e.f. 01.06.2003 have not been considered. Therefore, this decision would not support the case of the Revenue. The charging of interest u/s 254A is to be restricted to 07 months only and cash seized to be adjusted against demand u/s 234B as discussed above. However, the same issue does not require detailed discussion because legal issue has already been decided in favour of the assessee that entire addition would stand deleted, therefore, this ground is left for academic discussion only. These grounds are accordingly allowed in terms above. Addition made in assessment u/s 153A - HELD THAT - Original assessment stands completed on the date of the search and no incriminating material was found during the course of search, therefore, no addition could have been made to the income of the assessee which is already assessed. It is well-settled law that completed assessment can be interfered with by the AO by making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. Therefore, no addition could be made against the assessee. In view of the above decisions, we set aside the orders of the authorities below and delete all the additions. Levy of penalty u/s 271(1)(c) - HELD THAT - After considering the rival contentions, we are of the view that penalty is not leviable in the matter. On quantum appeal, we have deleted all the additions therefore, penalty cannot be levied against the assessee. Further, the AO has issued a show cause notice which is bad in law because it did not specify under which limb of section 271(1)(c), penalty proceedings have been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The issue is covered in favour of the assessee by the judgement of Karnataka High Court in the case of CIT vs SSA Emarald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT in which similar view was taken and departmental appeal is dismissed.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of additions made under section 153A in absence of incriminating material.
3. Charging of interest under sections 234A and 234B.
4. Admission and consideration of additional evidence by CIT(A).
5. Deletion of specific additions made by AO.
6. Validity of penalty under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee's appeal was delayed by 436 days. The delay was attributed to the inadvertent mixing of files in the office, which prevented timely notice to the counsel handling the taxation work. The Tribunal found the explanation satisfactory and condoned the delay, stating that the assessee had a prima facie case and would not gain anything by delaying the appeal.

2. Validity of Additions Made Under Section 153A in Absence of Incriminating Material:
The Tribunal examined whether additions could be made under section 153A when no incriminating material was found during the search. It was established that the original assessments were completed before the search, and no incriminating material was found. Citing the judgments in *Kabul Chawla* and *Meeta Gutgutia*, the Tribunal held that in such cases, no additions could be made. The Tribunal also noted that the jurisdictional High Court for the assessee was the Punjab & Haryana High Court, which had similar rulings. Consequently, all additions made by the AO were deleted.

3. Charging of Interest Under Sections 234A and 234B:
The assessee challenged the interest charged under sections 234A and 234B. The Tribunal found that the interest under section 234A should be restricted to seven months, not twenty months, as calculated by the AO. Regarding section 234B, the Tribunal noted that the seized cash should have been adjusted against the demand from the date of seizure. The Tribunal directed the AO to adjust the cash seized and restrict the interest as per the correct period.

4. Admission and Consideration of Additional Evidence by CIT(A):
The Revenue challenged the admission of additional evidence by CIT(A). The Tribunal upheld the CIT(A)'s decision, noting that the assessee had little time to produce the required documents during the assessment proceedings. The Tribunal found that the additional evidence was necessary for a fair decision and that the CIT(A) had rightly admitted it.

5. Deletion of Specific Additions Made by AO:
The Tribunal addressed various specific additions made by the AO, such as unexplained credits, unexplained investments, and unexplained expenditures. The Tribunal found that these additions were made based on the records produced by the assessee and not on any incriminating material found during the search. Consequently, these additions were deleted.

6. Validity of Penalty Under Section 271(1)(c):
The Tribunal examined the penalty levied under section 271(1)(c). It was noted that the show cause notice issued by the AO was defective as it did not specify the exact charge against the assessee. Citing the judgment in *SSA Emarald Meadows*, the Tribunal held that the penalty notice was bad in law. Additionally, since all the additions were deleted on merit, the penalty under section 271(1)(c) could not be sustained. The Tribunal thus canceled the penalty.

Conclusion:
The appeals of the assessee were allowed, and all additions made by the AO were deleted. The Tribunal also canceled the penalties imposed under section 271(1)(c), and the departmental appeals were dismissed.

← Previous Next →