2019 (7) TMI 120 - AT - Income Tax

Assessment u/s 153A - HELD THAT - On the date of search carried on 3.3.2011, the assessment for the assessment year 2006-07 was not pending as already assessment order was passed on 24.12.2009 as stated above. Thus, in terms of 2nd proviso to section 153A, the assessment for the assessment year 2006-07 cannot be held to be abated assessment. Further, from the records it is clear that no incriminating material was found qua the addition made during the course of search and therefore, in view of the proposition laid down in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and MEETA GUTGUTIA PROP. M/S. FERNS N PETALS 2017 (5) TMI 1224 - DELHI HIGH COURT no addition can be made in case of unabated assessment if no incriminating material has been found during the course of the search qua that assessment year. Here in this case AO has simply made the addition on the basis of already material available on record during the course of the original assessment proceedings, therefore, the addition made is beyond the scope of section 153A and same is directed to be deleted. Disallowance u/s 14A - HELD THAT - Fresh proceedings u/s 153(A) was initiated in wake of search and seizure action carried out on 3.3.2011. Thus, on the date of search, assessment proceedings for the assessment year 2005-06 was not pending and in view of 2nd proviso to section 153A, such an assessment is reckoned as unabated assessment. AO noted that the Tribunal in the first round of proceedings has set aside the disallowance u/s 14A read with rule 8D to be decided afresh. AO instead of passing the fresh assessment order in view of the direction of the Tribunal has made the disallowance in the present proceedings of ₹ 41,637/-, which has been confirmed by the CIT (A) also. The disallowance has been worked out by calculating 0.25% of the investment of the average investment. Here in this year also, the aforesaid addition is not based on any incriminating material and therefore, being an unabated assessment, addition could not be made without any incriminating material. Our reasoning given in the earlier appeal following the ratio and principles laid down by the Hon ble Jurisdictional High Court, we delete the said addition. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against assessment year 2006-07 - Challenge to income determination.
2. Addition of ?5 lacs under section 68 for assessment year 2006-07.
3. Appeal against assessment year 2005-06 - Disallowance under section 14A.

Analysis:
1. Assessment Year 2006-07:
- The appellant contested the income determination for the assessment year 2006-07, challenging an assessed income of ?19,74,515 against the declared ?12,43,220.
- Proceedings under section 153C were initiated due to a search and seizure action in the case of Surya Vinayak group, resulting in an income computation of ?2,64,74,515 against the declared income. The CIT(A) had previously deleted an addition of ?2,50,00,000.
- The AO added ?5 lacs under section 68, which the appellant argued was beyond the scope of section 153A as no incriminating material was found during the search. The CIT(A) upheld this addition.
- The Tribunal ruled in favor of the appellant, stating that the addition of ?5 lacs was beyond the scope of section 153A as no incriminating material was found during the search, directing its deletion.

2. Addition of ?5 Lacs under Section 68 for Assessment Year 2006-07:
- The AO added ?5 lacs under section 68, which the appellant argued was beyond the scope of section 153A due to the absence of incriminating material during the search.
- The Tribunal agreed with the appellant, citing the decision in CIT vs. Kabul Chawla and Pr. CIT vs. Meeta Gutgutia, directing the deletion of the addition as it was made based on existing records and not on incriminating material found during the search.

3. Assessment Year 2005-06:
- The appellant challenged a disallowance of ?41,637 under section 14A for the assessment year 2005-06.
- Fresh proceedings under section 153(A) were initiated after a search and seizure action, where the AO made the disallowance without any incriminating material.
- The Tribunal, following the principles established in previous cases, deleted the disallowance as it was made without any incriminating material during an unabated assessment.

In conclusion, both appeals of the assessee were allowed, with the Tribunal ruling in favor of the appellant in both the assessment year 2006-07 and 2005-06 cases, directing the deletion of additions made without any incriminating material found during the search.