2019 (11) TMI 1549 - AT - Income Tax

Validity of order passed u/s.153A - deduction claimed originally and allowed in original order u/s.143(3) of the Act and not related to any incriminating material found during action u/s.132 - whether in respect of unabated assessments (no pending proceedings) as on the date of search, the AO could frame the search assessment u/s 153A of the Act by making certain additions without any incriminating materials found during the course of search? - HELD THAT - The scheme of the Act provides for abatement of pending proceedings as on date of search. It is not in dispute that the assessment for the assessment year 2005-06 and 2006-07 falls under the ambit of unabated assessment as on the date of search. There is no differentiation as found in the intent of the legislature to discriminate whether the assessments were originally framed u/s 143(1) or 143(3) or 147 - if any incriminating material is not found during the course of search related to those concluded years, the Act does not confer any power to the Ld. AO to disturb the finding given thereon and income determined thereon as finality has already been reached and no proceeding was pending on the date of search. Once the proceeding u/s 153A of the Act is initiated which are special proceedings, the legislature provides different treatments for abated and unabated assessments. However, in respect of unabated assessments the legislature has conferred powers on the Ld. AO to just follow the assessments already concluded unless incriminating materials are found in the course of search. For the reasons stated above and on basis of various judicial pronouncements, we hold that the various disallowances made for the Assessment years i.e. 2005-05 and 2006-07 which were unabated/concluded assessments as on date of search cannot be made in the search assessments in the absence of any incriminating material found in the course of search and accordingly all those additions are directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of order passed under section 153A read with section 143(3) of the Income Tax Act.
2. Disallowance of deduction under section 80IA(4) for various infrastructure projects.
3. Classification of the assessee as a "Developer" versus "Work Contractor" for infrastructure projects.
4. Allowance of employees' contribution to Provident Fund beyond the due dates.

Issue-Wise Detailed Analysis:

1. Validity of Order Passed Under Section 153A Read With Section 143(3):
The preliminary issue to be decided was whether the Assessing Officer (AO) could frame the search assessment under section 153A of the Act by making certain additions without any incriminating materials found during the course of the search. The Tribunal noted that the assessments for the years 2005-06 and 2006-07 were unabated as on the date of the search, meaning no proceedings were pending. The Tribunal referenced the judgments of the Hon’ble Gujarat High Court in PCIT vs. Saumya Construction (387 ITR 529) and the Hon’ble Bombay High Court in CIT vs. Continental Warehousing Corporation (374 ITR 645), which held that in the absence of incriminating material, the AO could not disturb the concluded assessments. The Tribunal concluded that the various disallowances made for the Assessment Years 2005-06 and 2006-07, which were unabated/concluded assessments as on the date of the search, could not be made in the search assessments without any incriminating material found during the search.

2. Disallowance of Deduction Under Section 80IA(4):
The assessee challenged the disallowance of the deduction under section 80IA(4) for various infrastructure projects. The Tribunal observed that the deduction under section 80IA(4) was subject to regular assessment under section 143(3) of the Act. The Tribunal held that in the absence of any incriminating material found during the search, the disallowance made by the AO could not be sustained. Therefore, the disallowances for the Assessment Years 2005-06 and 2006-07 were directed to be deleted.

3. Classification of the Assessee as "Developer" Versus "Work Contractor":
The Revenue contended that the assessee should be treated as a "Work Contractor" rather than a "Developer" of infrastructure projects, as treated by the AO. The Tribunal noted that the CIT(A) had allowed the deduction under section 80IA(4) by treating the assessee as a "Developer" for certain projects. However, since the Tribunal had already decided that no additions could be made in the absence of incriminating material, the issue of classification became irrelevant for the purpose of the present appeals.

4. Allowance of Employees' Contribution to Provident Fund Beyond Due Dates:
The Revenue argued that the CIT(A) erred in allowing the employees' contribution to the Provident Fund beyond the due dates specified as per the Provident Fund Act. The Tribunal did not specifically address this issue in detail, as it had already concluded that no additions could be made in the absence of incriminating material found during the search.

Conclusion:
The Tribunal held that the various disallowances made for the Assessment Years 2005-06 and 2006-07, which were unabated/concluded assessments as on the date of the search, could not be made in the search assessments in the absence of any incriminating material found during the search. Accordingly, all the additions were directed to be deleted. The appeals of the assessee were partly allowed, and the appeals of the Revenue were dismissed. The order was pronounced in the Court on 27/11/2019 at Ahmedabad.