2017 (3) TMI 1323 - AT - Income Tax

Additions made u/s 153A - addition u/s 40A - Held that - AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record. Hence, the addition in the case is deleted. See Commissioner of Income Tax (Central) -III Versus Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - Decided in favour of assessee

Summary

Issues:
1. Disallowance under section 40A(3) of the Income Tax Act, 1961.
2. Jurisdiction to pass assessment order under section 153A.
3. Charging interest under section 234B of the Income Tax Act, 1961.

Analysis:
1. The appeal involved challenging the disallowance of a sum under section 40A(3) of the Income Tax Act, 1961. The Assessing Officer (AO) added back an amount to the total income of the assessee company as payments were made in cash exceeding the limit prescribed. The CIT(A) confirmed this disallowance. However, the Tribunal found that the AO's action was not sustainable as it was based on conjectures and surmises, lacking incriminating material found during the search. Citing the decision in Commissioner of Income Tax vs. Kabul Chawla, the Tribunal allowed the appeal, deleting the addition made by the AO.

2. The issue of jurisdiction to pass the assessment order under section 153A was raised. The counsel for the assessee contended that the additions made were not based on any incriminating material found during the search operation, rendering them unsustainable. The Tribunal agreed, stating that the AO's actions were beyond the scope of section 153A as no incriminating material was found during the search. Relying on legal precedents, the Tribunal allowed the appeal, holding that the assessment and addition made by the AO were not supported by any relevant material discovered during the search.

3. Another issue raised was the charging of interest under section 234B of the Income Tax Act, 1961. The CIT(A) had not reversed the action of the AO in charging this interest. However, the Tribunal did not delve into this issue specifically in the judgment, as the primary focus was on the disallowance under section 40A(3) and the jurisdiction under section 153A. Consequently, the Tribunal allowed the appeal based on the lack of incriminating material supporting the AO's actions, without addressing the interest charged under section 234B.

In conclusion, the Tribunal allowed the appeal filed by the Assessee, primarily due to the absence of incriminating material to support the additions made by the AO. The judgment emphasized the importance of adhering to legal provisions and precedents, particularly regarding the jurisdiction under section 153A and the necessity for incriminating material to justify assessments and additions in income tax cases.