2016 (4) TMI 701 - AT - Income Tax

Assessment framed u/s. 153A - addition of deemed annual letting value - Held that - As per clause IV, an assessment framed u/s. 153A cannot be arbitrarily made without any relevance or nexus with the seized material and the same has to be framed only on the basis of seized material found in the course of search. We revert back to the facts of the instant case and repeat that the impugned addition of deemed annual letting value does not have relevance and nexus with the seized material in question. We accept assesee s arguments and quash the impugned assessment on this legal issue itself. His other pleas on merits challenging the impugned addition have been rendered infructuous. - Decided in favour of assessee.

Summary

Issues Involved:
Assessment of deemed annual letting value additions under section 22 in income from house property for assessment years 2003-04 to 2008-09 based on section 143(3) r.w.s. 153C r.w.s. 153A(1)(b) of the Income Tax Act, 1961.

Analysis:

1. Identification of Identical Issues:
The six appeals by the assessee for different assessment years raised the same issue of the addition of deemed annual letting value in income from house property without any incriminating evidence found during the search.

2. Factual Background and Proceedings:
The assessee, an individual involved in a joint concern, had his properties assessed under section 153C without any incriminating material found during the search. The Assessing Officer calculated the deemed letting value of the properties resulting in additions to the income.

3. Legal Challenge and CIT(A) Decision:
The assessee challenged the section 153C proceedings and the addition on merits before the CIT(A), but both grounds were rejected. This decision left the assessee dissatisfied, leading to further appeal.

4. Legal Argument and Case Law Reference:
The assessee argued that the addition was based on a deeming fiction without any incriminating material, citing a case law precedent from the Delhi High Court. The case law emphasized that assessments under section 153A must be based on seized material, which was lacking in this scenario.

5. Revenue's Defense and Judicial Analysis:
The Revenue supported the addition made by the lower authorities. However, the Tribunal analyzed the provisions of sections 153A and 153C, emphasizing the necessity for assessments to be linked to seized material, as highlighted in the Delhi High Court case law.

6. Judicial Decision and Outcome:
The Tribunal concluded that the addition of deemed annual letting value lacked relevance to the seized material, thereby quashing the assessment on legal grounds. The other challenges by the assessee on merits were deemed irrelevant, leading to the success of the appeal.

7. Final Verdict and Order:
The Tribunal allowed all six appeals by the assessee, highlighting the legal requirement for assessments under section 153A and 153C to be substantiated by seized material, ultimately leading to the favorable outcome for the assessee.

This detailed analysis of the judgment highlights the legal intricacies involved in the assessment of deemed annual letting value additions and the significance of seized material in such proceedings under the Income Tax Act, 1961.