2017 (10) TMI 996 - AT - Income Tax

Revision u/s 263 - AO not considered the aspect of deemed dividend and claim of depreciation on motor lorries at 30% while framing the search assessment u/s 153A - Held that - It is not in dispute that as on the date of search the original assessment for Asst Year 2010-11 was completed u/s 143(3) of the Act and hence stood unabated. It is now well settled by various high courts including the Hon ble Jurisdictional High Courts relied upon supra that the concluded assessments could be disturbed only in the event of presence of any incriminating materials found in the course of search. We find from the above explanation of various seized documents found in the course of search there was absolutely no material much less any incriminating material so as to disturb the earlier concluded assessment for the Asst Year 2010-11. Hence the ld AO had rightly not considered the aspect of deemed dividend and claim of depreciation on motor lorries at 30% while framing the search assessment u/s 153A of the Act. The assessee had given proper explanations regarding these items before the lower authorities as reproduced above. We find that the assessee had also duly explained the complete contents of the seized documents relied upon by the ld CIT in his order. In our considered opinion those materials are not incriminating at all and are forming part of regular books of accounts of the assessee. These explanations have been completely ignored by the ld CIT while directing the ld AO to frame the assessment afresh. We hold that when an addition could not be made as per law in section 153A proceedings then the said order cannot be construed as erroneous warranting revisionary jurisdiction u/s 263 of the Act by the ld CIT. Thus we find that the order of the ld CIT u/s 263 of the Act deserves to be quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of invoking revisionary jurisdiction under Section 263 of the Income Tax Act.
2. Examination of deemed dividend under Section 2(22)(e) of the Income Tax Act.
3. Claim of depreciation on motor lorries at 30%.

Issue-wise Detailed Analysis:

1. Validity of Invoking Revisionary Jurisdiction under Section 263:

The primary issue in this appeal was whether the Principal Commissioner of Income Tax (CIT) could validly invoke his revisionary jurisdiction under Section 263 of the Income Tax Act. The assessee argued that the original assessment for the Assessment Year 2010-11 was completed under Section 143(3) and stood unabated as of the search date. It was contended that no incriminating materials were found during the search to justify disturbing the concluded assessment. The Tribunal noted that it is well settled by various high courts that concluded assessments could be disturbed only if incriminating materials are found during the search. The Tribunal concluded that there was no incriminating material found to disturb the earlier concluded assessment, and thus, the Assessing Officer (AO) had rightly not considered the aspects of deemed dividend and depreciation on motor lorries while framing the search assessment under Section 153A. Consequently, the Tribunal held that the CIT's order invoking Section 263 was not justified and quashed the order.

2. Examination of Deemed Dividend under Section 2(22)(e):

The CIT sought to revise the assessment framed under Section 153A, treating it as erroneous and prejudicial to the interest of the revenue because the AO did not enquire into the aspect of deemed dividend under Section 2(22)(e) concerning advance money received from M/s Shalimar Hatcheries Ltd. The assessee argued that the total credit transactions were misinterpreted as an advance, whereas they were actually purchase payments and balance transfers. The Tribunal noted that the assessee had provided detailed explanations and supporting evidence to the CIT that no advance or loans were received from the said party, and therefore, the question of deemed dividend did not arise. The Tribunal found that the explanations provided by the assessee were ignored by the CIT and concluded that there was no case for making any addition towards deemed dividend.

3. Claim of Depreciation on Motor Lorries at 30%:

The CIT also sought to revise the assessment on the grounds that the AO did not enquire into the claim of depreciation on motor lorries, which was claimed at 30% instead of 15%. The assessee explained that the motor lorries were used for business purposes and were eligible for a higher depreciation rate of 50% as per the Income Tax Rules. However, due to an error, the depreciation was claimed at 30%. The Tribunal noted that the assessee had provided detailed explanations and evidence supporting the claim of depreciation and that the AO had duly examined these aspects during the assessment proceedings. The Tribunal concluded that the claim of depreciation was justified and that the CIT's contention was not warranted.

Conclusion:

The Tribunal held that the CIT's order under Section 263 was not justified as there were no incriminating materials found during the search to disturb the concluded assessment. The Tribunal also found that the assessee had provided proper explanations and evidence regarding the deemed dividend and depreciation claims, which were ignored by the CIT. Therefore, the Tribunal quashed the CIT's order and allowed the appeal of the assessee.