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2016 (4) TMI 517 - AT - Income TaxAssessment u/s. 153 - AAddition on account of excess depreciation - Held that - CIT(A) has rightly held that in the absence of any material found during the search, as a result, no disallowance / additions can be made in the assessment u/s. 153A of the I.T. Act. As per record, of this case the depreciation claim restricted by the AO is not based upon incriminating material/ documents found in the search operations. Therefore, the additions made by the AO is not sustainable in the eyes of law. Thus, the Ld. CIT(A) has rightly adjudicated the issue in favour of the Assessee and against the Revenue. - Decided in favour of assessee
Issues Involved:
1. Legality of additions made by the AO on account of excess depreciation claimed by the assessee. 2. Applicability of Section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during a search operation. Detailed Analysis: Issue 1: Legality of Additions on Account of Excess Depreciation The Revenue challenged the deletion of an addition of ?50,19,494/- made by the AO due to excess depreciation claimed by the assessee. The original assessment under Section 143(3) was completed without this addition. However, during the search and seizure operation on 15.12.2010, no incriminating material was found that could justify the addition. The AO nonetheless included this amount in the assessment completed under Section 153A/143(3). Issue 2: Applicability of Section 153A in Absence of Incriminating Material The core issue revolved around whether the AO could make additions under Section 153A without any incriminating material found during the search. The CIT(A) and the ITAT Delhi both concluded that such additions were not sustainable. The CIT(A) relied on multiple judicial precedents, including the Hon’ble Delhi High Court’s decisions in CIT vs. Kabul Chawla and CIT vs. Jakson Engineers Ltd., which established that in the absence of incriminating material, no additions could be made under Section 153A. Analysis by CIT(A): The CIT(A) noted that Section 153A allows the AO to assess or reassess the total income for six assessment years preceding the year of the search. However, the section does not explicitly state that the assessment should be based solely on incriminating material found during the search. Despite this, judicial discipline and various High Court rulings, including those from the Hon’ble Delhi High Court and the Hon’ble Rajasthan High Court, have clarified that completed assessments can only be interfered with based on incriminating material unearthed during the search. Key Findings: 1. Legal Precedents: The CIT(A) cited several cases, including All Cargo Global Logistics Ltd. vs. DIT, Anil Kumar Bhatia, and Jai Steel (India) v ACIT, which supported the view that assessments under Section 153A should be based on incriminating material found during the search. 2. Section 153A Interpretation: The CIT(A) emphasized that while Section 153A does not explicitly mention ‘incriminating material,’ judicial interpretations have consistently held that additions should be linked to such material. 3. Judicial Discipline: The CIT(A) adhered to the principle that in the absence of jurisdictional High Court rulings, decisions favoring the assessee should be followed, as established in CIT vs. Vegetable Products Ltd. ITAT Delhi’s Conclusion: The ITAT Delhi upheld the CIT(A)’s decision, reiterating that in the absence of any incriminating material found during the search, no additions could be made under Section 153A. The ITAT referenced the Hon’ble Delhi High Court’s rulings in CIT vs. Kabul Chawla and CIT vs. Jakson Engineers Ltd., which clearly stated that completed assessments could only be disturbed based on incriminating material discovered during the search. Final Judgment: The ITAT Delhi dismissed the Revenue’s appeal, affirming that the addition made by the AO on account of excess depreciation was not sustainable in the absence of incriminating material. The CIT(A)’s order was upheld, and the appeal was pronounced dismissed in the open court on 01/04/2016.
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