2016 (8) TMI 764 - AT - Income Tax

Assessment under section 153A - disallowance made u/s 14A - Held that - No disallowance made u/s 14A by the Assessing Officer was bad in law in absence of any incriminating material having been found in the course of search qua the said disallowance - Decided in favour of assessee

Summary

Issues involved:
- Disallowance u/s 14A made by Assessing Officer under section 153C of the Income Tax Act without any incriminating material found during the search operation.

Analysis:
The appeals were filed against the orders of the Commissioner of Income-tax (Appeals) for assessment years 2007-08 & 2008-09 under section 143(3) r.w.s. 153C of the Act. The main issue was the disallowance u/s 14A made by the Assessing Officer without any incriminating material found during the search operation. The appellant argued that since the original returns were filed and accepted before the notice under section 153C was received, the assessments did not abate. The Tribunal had previously ruled in favor of the assessee in a similar case, emphasizing the importance of incriminating material for making additions under section 153A. The Tribunal highlighted the legal position emerging from relevant judgments, stating that additions should be based on seized material and not made arbitrarily. The Tribunal concluded that the disallowance made by the Assessing Officer was illegal and directed the deletion of the disallowance for both years.

The Tribunal noted that no incriminating material was found regarding the disallowance u/s 14A. Referring to previous judgments, the Tribunal emphasized the necessity of incriminating material for making additions under section 153A. The Tribunal analyzed the assessment order and found that the disallowance was made without any incriminating material, rendering it unjustified. Citing judgments by the Bombay High Court and the Delhi High Court, the Tribunal held that the disallowance was beyond the scope of assessment under section 153A and directed the deletion of the addition. The Tribunal found the facts and circumstances identical to a previous case and ruled in favor of the assessee, allowing the appeals and directing the deletion of the disallowance made by the Assessing Officer for both years.

In conclusion, the Tribunal held that the disallowance u/s 14A made by the Assessing Officer was unlawful as no incriminating material was found during the search operation. The Tribunal relied on legal precedents to establish the requirement of incriminating material for making additions under section 153A, ultimately ruling in favor of the assessee and directing the deletion of the disallowance for both assessment years.