2018 (6) TMI 156 - AT - Income Tax

Assessment u/s 153A - Disallowance u/s 80IB - Disallowance u/s 40A(3) - Additions made u/s 68 for genuineness of the transactions - Proof of incriminating material found during the course of search - Held that - Without any incriminating material found during the course of search, no additional income can be brought to tax in the assessment u/s 153A of the Act even where earlier assessments were concluded u/s 143(3) - following the judgement in case of COMMISSIONER OF INCOME TAX (CENTRAL) -III VERSUS KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT the assessments u/s 153A for all the A.Ys are not sustainable and they are accordingly set aside - thus Revenue s appeals against the relief granted by the CIT (A) u/s 80IB(10) are dismissed.

Summary

Issues Involved:
1. Validity of assessment under Section 153A of the Income Tax Act.
2. Disallowance of deduction under Section 80IB(10) of the Income Tax Act.
3. Additions under Section 68 of the Income Tax Act.
4. Disallowances under Section 40A(3) of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment under Section 153A:
The primary issue raised was the validity of the assessments under Section 153A when no fresh material was found during the search. The CIT (A) upheld the initiation of proceedings under Section 153A, following the decision of the Hon'ble Delhi High Court in CIT vs. Anil Kumar Bhatia, which stated that once a search is conducted under Section 132, it is mandatory for the AO to issue notices under Section 153A for the six preceding assessment years.

The assessee argued that the assessments under Section 143(3) for the A.Ys 2002-03 to 2005-06 were completed before the search and thus should not be abated unless incriminating material was found during the search. The Tribunal, relying on multiple judicial precedents, including CIT vs. Kabul Chawla and CIT vs. Saumya Construction P Ltd, concluded that in the absence of any incriminating material found during the search, the assessments under Section 153A are not sustainable.

2. Disallowance of Deduction under Section 80IB(10):
The AO disallowed the deduction under Section 80IB(10) on the grounds that the assessee did not obtain the completion certificate from the local authorities by the due date. The CIT (A) deleted this disallowance by following the ITAT's orders in the assessee’s own case for the A.Y 2001-02, which the Revenue had accepted by not filing an appeal.

The Tribunal upheld the CIT (A)'s decision, noting that the issue of deduction under Section 80IB had attained finality in favor of the assessee in earlier years, and the Revenue's appeals on this issue were dismissed.

3. Additions under Section 68:
The AO made additions under Section 68, stating that the assessee failed to prove the genuineness of the transactions and the creditworthiness of the creditors. The CIT (A) confirmed these additions.

However, since the Tribunal set aside the assessments under Section 153A due to the lack of incriminating material found during the search, the additions under Section 68 were also not adjudicated, as it would result in an academic exercise.

4. Disallowances under Section 40A(3):
The AO disallowed payments made in cash exceeding ?20,000 under Section 40A(3). The CIT (A) confirmed these disallowances.

Similar to the additions under Section 68, the Tribunal did not adjudicate the merits of these disallowances due to the setting aside of the assessments under Section 153A.

Conclusion:
The Tribunal held that the assessments under Section 153A were not sustainable due to the absence of any incriminating material found during the search. Consequently, the other grounds against the merits of the additions and disallowances were not adjudicated. The assessee’s appeals were partly allowed, and the Revenue’s appeals were dismissed.