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2019 (3) TMI 1023 - AT - Income TaxValidity of the assessment u/s 153A - addition on the basis of post search inquiry - No addition based on any incriminating material found during the course of search - unexplained expenditure u/s 69C - HELD THAT - There is no mention of any incriminating material found during the course of search with respect to the unexplained advertisement expenses. There is also no incriminating material on which the Assessing Officer has made the other addition Therefore, it is quite clear that the addition in the instant case has been made on the basis of post search inquiry and the addition is not based on any incriminating material found during the course of search. Decision of KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT will be clearly applicable to the facts of the present case wherein it has been held that completed assessments can be interfered with by the Assessing Officer while making assessments u/s 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not disclosed or not made known in the course of original assessments. Since the impugned assessment year is a completed assessment, therefore, the same, in our opinion, cannot be disturbed without any incriminating material found during the course of search. - decided against revenue
Issues Involved:
1. Validity of assessment under section 153A of the IT Act. 2. Addition of unexplained advertisement expenses under section 69C of the IT Act. Detailed Analysis: 1. Validity of Assessment under Section 153A: The primary issue examined was whether the assessments made under section 153A were valid in the absence of incriminating material found during the search. The Tribunal noted that the search and seizure operation under section 132 of the IT Act did not yield any incriminating material related to the unexplained advertisement expenses. The Tribunal referenced the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, which held that completed assessments can only be interfered with under section 153A if incriminating material is found during the search. Since the assessment years in question were completed assessments, and no incriminating material was found, the Tribunal concluded that the assessments under section 153A were not valid. 2. Addition of Unexplained Advertisement Expenses under Section 69C: The Assessing Officer (AO) had added substantial amounts to the assessee's income, treating certain advertisement expenses as unexplained under section 69C of the IT Act. The AO's basis for this addition was the lack of addresses and PAN details for several parties to whom advertisement expenses were paid, which led him to conclude that these expenses were not genuine. However, the CIT(A) and subsequently the Tribunal found this approach flawed for several reasons: - Misinterpretation of Section 69C: The Tribunal agreed with the CIT(A) that section 69C applies when an assessee cannot explain the source of funds for an expenditure. In this case, the assessee had sufficient sources to explain the advertisement expenses, which were duly recorded in the books of accounts and paid from the assessee's bank accounts. - Incorrect Approach by AO: The AO's demand for proving the identity, genuineness, and creditworthiness of parties (as if it were a case of loans or cash credits) was deemed inappropriate. The Tribunal emphasized that for business expenses, the primary requirement is the availability of proper bills and vouchers, which the assessee had provided. - Non-Compliance to Notices under Section 133(6): The AO had concluded that the transactions were bogus based on the non-compliance of third parties to notices under section 133(6). The Tribunal held that non-compliance by third parties does not automatically render the transactions bogus, especially when the assessee has maintained proper documentation. The Tribunal found merit in the CIT(A)'s deletion of the additions made by the AO, as the initial onus on the assessee to prove the expenses was adequately discharged through the production of books of accounts and supporting documents. Conclusion: The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s order that invalidated the assessments under section 153A due to the absence of incriminating material. Additionally, the Tribunal supported the deletion of additions made under section 69C, finding the AO's approach and interpretation flawed. The decision emphasized that completed assessments cannot be disturbed without incriminating evidence found during a search and that proper documentation suffices to substantiate business expenses.
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