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2021 (12) TMI 1434 - AT - Income TaxAssessment u/s 153A - addition qua unabated assessment - incriminating material found during the course of search and seizure or not? - where no assessment proceeding for the year under consideration is pending, in that eventuality, in the absence of any incriminating material found during the course of search and seizure proceedings, whether the addition can be made qua unabated assessment for the said year? - HELD THAT - Since, the facts of the instant case are exactly identical to the facts of the Smt. Sanjana Mittal Vs. DCIT 2019 (3) TMI 1757 - ITAT AMRITSAR hence we hold that in the absence of incriminating material, in the case of the appellant assessee, no addition can be made qua unabated assessment for the year under consideration. Appeal of the assessee is allowed.
Issues Involved:
1. Jurisdiction and validity of assessment under Section 153A/143(3) of the Income Tax Act. 2. Addition of Rs. 1,77,72,706/- as deemed dividend under Section 2(22)(e) of the Income Tax Act. 3. Shareholding percentage and its impact on the deemed dividend addition. Detailed Analysis: 1. Jurisdiction and Validity of Assessment under Section 153A/143(3): The primary contention was whether the Assessing Officer (AO) had the jurisdiction to frame the assessment under Section 153A/143(3) of the Income Tax Act in the absence of any incriminating material found during the search. The assessee argued that no incriminating material was found during the search operation conducted on 11.02.2016, and hence, the addition made was not permissible in law. The assessee cited several judicial precedents, including the jurisdictional bench of ITAT Amritsar in the case of Smt. Sanjana Mittal vs. DCIT, which held that no addition can be made if no incriminating material is found during the search and the assessment proceedings remain un-abated. The Tribunal agreed with the assessee's contention, noting that the assessment for the relevant year had already attained finality and no incriminating material was found during the search. The Tribunal relied on the judgment of the Hon’ble Delhi High Court in CIT vs. Kabul Chawla, which was upheld by the Supreme Court, confirming that no addition can be made in the absence of incriminating material for completed assessments. 2. Addition of Rs. 1,77,72,706/- as Deemed Dividend under Section 2(22)(e): The AO made an addition of Rs. 1,77,72,706/- as deemed dividend under Section 2(22)(e) of the Act, based on the loan received by the assessee from M/s Bhagwati Lacto Foods Pvt. Ltd. The assessee contended that the addition was made without considering the submissions and without observing the principles of natural justice. The Tribunal noted that the AO's addition was based on the disclosed bank statements and the return of income filed by the assessee, which were already part of the records and not based on any incriminating material found during the search. 3. Shareholding Percentage and Its Impact on the Deemed Dividend Addition: The assessee argued that his shareholding in M/s Bhagwati Lacto Foods Pvt. Ltd. was less than 10%, and hence, the provisions of Section 2(22)(e) were not applicable. The assessee submitted that he held only 10,000 shares, constituting 0.2163% of the total shareholding, as per the revised Annual Return filed with the ROC. The AO, however, mentioned that during the post-search enquiry, it was found that the assessee held 10,10,000 shares as on 31.03.2015. The Tribunal did not delve deeply into this issue as it had already decided the matter in favor of the assessee based on the absence of incriminating material. Conclusion: The Tribunal concluded that in the absence of any incriminating material found during the search, no addition could be made for the year under consideration. The Tribunal deleted the addition made by the AO and allowed the appeal of the assessee. The order was pronounced on 23.12.2021.
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