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2017 (11) TMI 73 - AT - Income TaxAssessment covered u/s 153A - no incriminating material qua each of the assessment year roped in under section 153A, then no addition can be made while framing the assessment under section 153A - Held that - As admittedly no incriminating material relating to this assessment year was found during the course of search and accordingly, the originally assessed income, i.e., income disclosed by the assessee in the original return of income and reiterated in the return filed in response to notice u/s 153A deserves to be accepted and the same has to be reckoned as assessment of the income in terms of section 153A and no further addition can be made by the Assessing Officer over and above the returned income. Accordingly, the additions made by the AO are deleted on the ground that they are beyond the scope of assessments u/s 153A. Appeal of the assessee is allowed.
Issues Involved:
1. Scope of additions under Section 153A read with Section 143(3) of the Income Tax Act, 1961. 2. Treatment of rental income as business income versus income from house property. 3. Ad-hoc disallowance of various expenses. Detailed Analysis: 1. Scope of Additions under Section 153A r.w.s. 143(3) of the Income Tax Act, 1961: The primary issue raised by the assessee was regarding the scope of additions made under the assessment passed under Section 153A read with Section 143(3). The counsel for the assessee argued that the additions made by the Assessing Officer (AO) were not based on any incriminating materials found during the course of the search. The original return of income was filed on 31/10/2007, and no notice under Section 143(2) was issued by the last date, 31/10/2008. Therefore, the assessment stood finalized and was not pending at the time of the search on 19/10/2010, falling within the scope of 'unabated assessment' as per the second proviso to Section 153A. The Tribunal noted that the additions made by the AO were not based on any material or document found during the search. This was corroborated by the fact that the CIT(A) did not dispute this. The Tribunal emphasized that for making any addition under Section 153A for an unabated assessment, it is essential that some incriminating material or documents should have been found during the search. This principle has been well settled by the Hon'ble Delhi High Court in the cases of CIT vs. Kabul Chawla and Pr. CIT vs. Meeta Gutgutia. 2. Treatment of Rental Income: The AO treated the rental income of ?1,03,750/- as income from house property, whereas the assessee had treated it as business income. The Tribunal found that this addition was not based on any incriminating material found during the search. Therefore, this addition was beyond the scope of assessment under Section 153A. 3. Ad-hoc Disallowance of Various Expenses: The AO made an ad-hoc disallowance of ?30,69,374/- on account of various expenses claimed under the head purchase, labor charges, and other expenses. Similar to the treatment of rental income, this addition was also not based on any incriminating material found during the search. Hence, this addition was also considered beyond the scope of assessment under Section 153A. Conclusion: The Tribunal concluded that no incriminating material was found during the search for the assessment year in question. Therefore, the originally assessed income should be accepted, and no further additions could be made by the AO over and above the returned income. The appeal of the assessee was allowed on this preliminary issue, and other grounds raised in the appeal were treated as infructuous. Order: The Tribunal allowed the appeal of the assessee and pronounced the order in the open Court on 26th October 2017.
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