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2017 (1) TMI 444 - AT - Income TaxValidity of assessment order passed u/s 143(3) r.w.s 153A - addition to income u/s 14A - Held that - AO cannot dispute and disturb already completed and finalized assessment by making additions which have no connections or relevance with the seized material. In the present case before us we find that there was no materials found during search by search party with respect to addition made by the AO. The assessment in the present year was complete and finalized on the date of search and therefore addition as made by the AO u/s 14A in respect of expenses relating to the exempt income is without jurisdiction u/s 143(3) read with section 153A and accordingly, the AO is directed to delete the addition. - Decided in favour of assessee
Issues Involved:
Jurisdiction of AO to make addition under section 143(3) read with section 153A of the Income Tax Act, 1961. Detailed Analysis: 1. Issue of Jurisdiction of AO to Make Addition: The appeal challenged the order passed by the ld.CIT(A)-1, Mumbai for the assessment year 2008-09. The assessee raised the issue of jurisdiction of the AO to make additions under section 143(3) read with section 153A of the Act, which was not raised before the First Appellate Authority. The assessee argued that the issue was legal in nature and fundamental to the case, justifying its consideration by the Tribunal. The Tribunal admitted the legal issue for adjudication, citing the precedent set in National Thermal Power Co Ltd Vs. CIT 229 ITR 383(SC). The Tribunal found that the issue raised was of legal nature concerning the AO's jurisdiction to make additions, and it decided to entertain and adjudicate the issue to ensure justice and fairness without causing prejudice to the revenue. 2. Facts and Legal Arguments: The case involved the filing of the return of income by the assessee, a subsequent search, and the issuance of a notice under section 153A. The assessee contended that since no notice under section 143(2) was issued within the stipulated time frame, the assessment had attained finality before the search. The AO had made an addition related to expenditure attributable to exempt income without any incriminating material found during the search. The assessee argued that the addition was without jurisdiction under section 153A. The assessee relied on the decision in CIT V/s Gurinder Singh Bawa (2016) 386 ITR 483(Bom) to support the argument that the assessment had attained finality before the search, and the addition made by the AO was unjustified. 3. Tribunal's Decision and Rationale: After considering the arguments and the legal provisions, the Tribunal found that the assessment for the year under consideration had attained finality before the search. The Tribunal emphasized that under section 153A, the AO's powers are limited to making additions based on incriminating material found during the search. Since no such material was found in this case, the AO's addition under section 14A was deemed to be without jurisdiction. The Tribunal referred to the decision in Gurinder Singh Bawa to support its conclusion that an assessment that had attained finality could not be subject to proceedings under section 153A without incriminating materials. Therefore, the Tribunal directed the AO to delete the addition made under section 14A. 4. Conclusion: The issue raised in ground no.2 was considered academic in nature due to the finding on the legal issue of jurisdiction. Consequently, the appeal of the assessee was partly allowed, and the Tribunal pronounced the order on 4th Jan, 2017, in favor of the assessee.
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