2019 (2) TMI 334 - AT - Income Tax

Validity of assessment u/s 153A/153C - additions to income - as per revenue none of the provisions confine the enquiry of the AO to evaluating incriminating materials - Held that - As decided in case in case of Pro.CIT vs. Ram Avtar Verma 2017 (2) TMI 1212 - DELHI HIGH COURT we could not found that there is any incriminating material referred by the AO which is found during the course of search for making these additions. The non-obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the pre-existing provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the AO during block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in Section 153A. But for such a non-obstante clause, the Revenue could possibly have faced hurdles in regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under Sections 153A/153C. - Decided against revenue

Summary

Issues:
1. Challenge to additions made under Section 153A without incriminating material.
2. Sustaining additions of MCD conversion charges.
3. Sustaining additions for personal expenses.
4. Sustaining additions for commission paid to specified persons.
5. Sustaining additions for unexplained purchases.

Analysis:

Issue 1: Challenge to additions under Section 153A without incriminating material
The appeal challenged the additions made by the Assessing Officer (AO) under Section 153A without any incriminating material. The argument was that without such material, the additions were not legally sustainable. The appellant relied on the decision of the Delhi High Court in the case of CIT vs Kabul Chawla. The contention was that since the assessment was completed before the search, any additions under Section 153A should be based on incriminating material. The Tribunal agreed with the appellant, citing the decision in Pro.CIT vs. Ram Avtar Verma, which emphasized the need for incriminating material for additions under Section 153A. Consequently, the Tribunal allowed ground no.1 raised by the assessee.

Issue 2: Sustaining additions of MCD conversion charges
The appeal contested the additions of MCD conversion charges. However, as the Tribunal allowed ground no.1 challenging the additions under Section 153A, this issue became academic in nature and was not specifically addressed in the judgment.

Issue 3: Sustaining additions for personal expenses
Similar to the previous issue, the challenge to the additions for personal expenses became academic due to the Tribunal's decision on ground no.1 regarding additions under Section 153A.

Issue 4: Sustaining additions for commission paid to specified persons
The appeal raised concerns about the additions for commissions paid to specified persons. However, since the Tribunal allowed ground no.1, this issue also became academic and was not individually addressed in the judgment.

Issue 5: Sustaining additions for unexplained purchases
The appeal contested the additions made for unexplained purchases. Again, due to the Tribunal's decision on ground no.1, this issue became academic, and no specific analysis or decision was provided in the judgment.

In conclusion, the Tribunal allowed the appeal filed by the assessee as it found merit in the challenge against additions made under Section 153A without incriminating material. The other grounds of appeal related to specific additions were not individually addressed due to the primary issue being decided in favor of the assessee.