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2019 (3) TMI 1757 - AT - Income TaxAssessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - absence of any incriminating evidence found during the course of search and seizure proceedings - HELD THAT - In the case before us no incriminating material was found during the course of the search and seizure proceedings conducted under section 132 of the I.T. Act on 11.02.2016. Apart therefrom the fact that the assessment proceedings in the case of the assessee were not abated at the time when the search and seizure proceedings were conducted has also not been controverted by the learned D.R in the course of the proceedings before us. In a case where no assessment proceedings are pending on the date of the search and seizure proceedings the assessment under section 153A can be carried out only on the basis of seized material. In a case where no incriminating material is unearthed during the course of search proceedings and the assessment proceedings remain unabated as on the said date no additions can be validly made in the hands of the assessee. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Delhi in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Thus as on the date of the search and seizure proceedings no assessment proceedings were pending in the case of the assessee therefore in the absence of any incriminating material having been found in the course of such proceedings no addition could have been validly made in the hands of the assessee. - Decided in favour of assessee.
Issues involved:
1. Jurisdiction of AO under Sec. 153A r.w.s.143(3) of the Income Tax Act, 1961. 2. Addition of deemed dividend u/s 2(22)(e) of the Act without incriminating material. 3. Validity of addition under section 2(22)(e) in absence of incriminating material. Analysis: Issue 1: Jurisdiction of AO under Sec. 153A r.w.s.143(3) of the Income Tax Act, 1961: The appeal challenged the jurisdiction of the Assessing Officer (AO) in framing the assessment order under Section 153A r.w.s.143(3) of the Income Tax Act, 1961. The appellant contended that the AO's assumption of jurisdiction was not sustainable on legal and factual grounds. The appellant argued that the additions made in the assessment order were beyond jurisdiction as no incriminating material was found during the search, warranting the additions. The Tribunal considered the facts and circumstances of the case and ultimately set aside the AO's order, vacating the additions made. Issue 2: Addition of deemed dividend u/s 2(22)(e) of the Act without incriminating material: The AO made an addition of ?1,00,000 as deemed dividend u/s 2(22)(e) of the Act, based on the assessee's loan from a company in which she had substantial interest. The CIT(A) upheld this addition. However, the appellant argued that no incriminating material was found during the search and seizure proceedings, hence no addition under section 2(22)(e) was warranted. The Tribunal noted that the loan was duly recorded in the company's audited balance sheet and was not based on any incriminating material. Considering the absence of incriminating evidence, the Tribunal set aside the addition of ?1,00,000 made by the AO. Issue 3: Validity of addition under section 2(22)(e) in absence of incriminating material: The Tribunal deliberated on whether additions could be made in the absence of incriminating material found during search and seizure proceedings when assessment proceedings were unabated. Citing relevant case law, including the judgment in CIT vs. Kabul Chawla, the Tribunal held that in such cases, additions could only be made based on seized material. As no incriminating evidence was found during the search, and assessment proceedings were unabated, the Tribunal concluded that no valid additions could be made. Relying on established legal principles, the Tribunal set aside the CIT(A)'s decision and vacated the addition of ?1,00,000 in the hands of the assessee. In conclusion, the Tribunal allowed the appeal, setting aside the additions made by the AO under section 2(22)(e) of the Income Tax Act, emphasizing the necessity of incriminating material for such additions in the absence of pending assessment proceedings.
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