2016 (7) TMI 1042 - AT - Income Tax

Assessment u/s 153C - Held that - Order passed u/s 153C are barred by the limitation and the addition has been made without any incriminating material found during the course of search assessment orders and addition therein are not sustainable. Similarly, we also hold for the above appeals for AY 2002-03 to 2005-06 and Cross objections therein that the orders u/s 153C are not sustainable as those are barred by limitation. The additions in those assessments are not sustainable as they are not based on incriminating found during the course of search. - Decided in favour of assessee

Issues Involved:
1. Legality of the assessment framed under section 153A/143(3) of the Income Tax Act.
2. Deletion of additions made under section 68 of the Income Tax Act regarding share application money and unsecured loans.
3. Deletion of disallowances made under section 80IB of the Income Tax Act.
4. Re-computation of trading profit after considering administrative expenses.
5. Treatment of interest income from bank deposits.
6. Barred by limitation as per section 153B of the Income Tax Act.

Detailed Analysis:

1. Legality of Assessment under Section 153A/143(3):
The assessee contended that the assessments framed under section 153A/143(3) were illegal as no incriminating material was found during the search conducted on 21.03.2007. The Tribunal noted that the search concluded on 23.03.2007 and assessments should have been completed by 31.12.2008. Since the assessments were completed on 30.12.2009, they were barred by limitation. The Tribunal relied on the decision of the Delhi High Court in CIT vs. Kabul Chawla, which held that in the absence of any incriminating material, completed assessments cannot be interfered with. Consequently, the Tribunal quashed the assessment orders for being time-barred and without incriminating evidence.

2. Deletion of Additions under Section 68:
For AY 2001-02, the revenue appealed against the deletion of additions of ?1,37,50,000/- and ?41,50,000/- made under section 68 for share application money and unsecured loans, respectively. The Tribunal found no reference to any incriminating material in the assessment order justifying these additions. Following the precedent set by the Delhi High Court in Kabul Chawla, the Tribunal held that such additions were unsustainable in the absence of incriminating material.

3. Deletion of Disallowances under Section 80IB:
The revenue contested the deletion of disallowances under section 80IB for various assessment years. The Tribunal noted that the issue of 80IB disallowances had already been settled in earlier proceedings and reaffirmed by higher judicial authorities. The Tribunal reiterated that revisiting settled issues without new incriminating evidence was impermissible, thus upholding the deletions made by the CIT (A).

4. Re-computation of Trading Profit:
For AY 2002-03, the revenue challenged the CIT (A)’s direction to re-compute trading profit after considering administrative expenses. The Tribunal found that the CIT (A) had correctly directed the re-computation based on the evidence and facts presented. The Tribunal upheld the CIT (A)’s decision, emphasizing the need for accurate computation based on verified claims.

5. Treatment of Interest Income:
The assessee objected to the treatment of interest income from bank deposits as "income from other sources" instead of "income from business and profession." The Tribunal reviewed the facts and prior adjudications, noting that similar issues had been previously decided in favor of the assessee. Consequently, the Tribunal directed that the interest income be treated as business income.

6. Barred by Limitation (Section 153B):
The Tribunal extensively discussed the limitation period under section 153B, highlighting that the assessments should have been completed by 31.12.2008. Since the assessments were completed on 30.12.2009, they were time-barred. The Tribunal relied on the Delhi High Court’s ruling in the case of J.H. Finvest Pvt. Ltd., which established that the search concluded on 23.03.2007, and any assessment beyond the stipulated period was invalid.

Conclusion:
The Tribunal quashed the assessment orders for AY 2001-02 to 2005-06, holding them barred by limitation and unsustainable due to the absence of incriminating material. The appeals by the revenue were dismissed, and the cross objections by the assessee were partly allowed. The Tribunal’s decision was pronounced in the open court on 15/07/2016.

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