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2018 (5) TMI 1993 - AT - Income TaxAssessment u/s 153A - Addition u/s 68 Section 36(1) (iii) - Whether any incriminating material found in search or not? - HELD THAT - In clause (vii), it is stated Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be reiterated and the abated assessment or reassessment can be made . In clause (vii), it is stated Completed assessments can be interfered with by the AO while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search. Reliance upon the decision of CIT vs. Sri. Raj Kumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT by the Ld. DR will not be appropriate in the present case as the Hon'ble Delhi High Court has categorically stated that completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search. Thus, there is no need to interfere with the findings of the CIT(A) as the issue herein is already covered in favour of the assessee by the Hon'ble Delhi High Court decision of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - Decided against revenue.
Issues Involved:
1. Validity of additions under Section 68 and Section 36(1)(iii) of the Income Tax Act, 1961 in assessments completed under Section 153A without incriminating material found during the search. 2. Applicability of jurisdictional High Court decisions in assessment proceedings under Section 153A. 3. Confirmation of proceedings in the absence of incriminating material found during the search. 4. Allowance of set-off of carried forward losses in the absence of incriminating material. Issue-wise Detailed Analysis: 1. Validity of Additions under Section 68 and Section 36(1)(iii) in Assessments Completed under Section 153A: The primary issue revolves around whether additions under Section 68 (unexplained cash credits) and Section 36(1)(iii) (interest on borrowed capital) can be made in assessments completed under Section 153A without any incriminating material found during the search. The Assessing Officer (AO) had added ?1,65,70,730 as unexplained income due to the assessee's failure to prove the source and genuineness of unsecured loans. However, the CIT(A) deleted these additions, noting that no incriminating materials were found during the search related to these transactions. The Tribunal upheld this view, citing the judgment in All Cargo Global Logistics which states that additions in Section 153A assessments should be based on incriminating material found during the search. 2. Applicability of Jurisdictional High Court Decisions: The Revenue argued that the CIT(A) erred by not following the Allahabad High Court's decision in CIT vs. R.K. Arora, which allows for the reassessment of total income under Section 153A. However, the Tribunal noted that the jurisdictional Delhi High Court's decision in CIT vs. Kabul Chawla takes precedence. The Delhi High Court held that in the absence of incriminating material, completed assessments cannot be disturbed under Section 153A. Therefore, the Tribunal found no merit in the Revenue's reliance on the Allahabad High Court's decision. 3. Confirmation of Proceedings in the Absence of Incriminating Material: The Tribunal emphasized that the AO lacked jurisdiction to scrutinize the assessee's return on points where no incriminating material was found during the search. This aligns with the principle established in Kabul Chawla that completed assessments can only be interfered with based on incriminating material unearthed during the search. Thus, the Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO. 4. Allowance of Set-off of Carried Forward Losses: The CIT(A) allowed the assessee to set off carried forward losses of ?1,42,726, as no incriminating material was found during the search to disallow them. The Tribunal supported this decision, reiterating that in the absence of incriminating material, the AO cannot disturb the set-off of carried forward losses. This is consistent with the legal position that completed assessments can only be interfered with based on incriminating material found during the search. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection. The judgment reinforced that additions under Section 153A must be based on incriminating material found during the search, and jurisdictional High Court decisions take precedence in such matters. The Tribunal upheld the CIT(A)'s decision to delete the additions and allow the set-off of carried forward losses, aligning with the legal principles established by the Delhi High Court in Kabul Chawla. Order Pronouncement: The order was pronounced in the Open Court on 18th May, 2018.
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