2019 (11) TMI 1244 - AT - Income Tax

Assessment u/s 153A - incriminating materials were found / seized under aforesaid search and seizure action u/s 132 - HELD THAT - No assessment proceedings were pending in the case of the assessee on 05.12.2007, the date of search and seizure action u/s 132. It is also a fact that time limit for service of notice under Section 143(2) in respect of return filed on 22.07.2006. Assessment Order dated 30.12.2009 u/s 153A has not been passed after abatement of any pending assessment proceedings under second Proviso to Section 153A(1). There is also no dispute between the two sides that no incriminating materials were found / seized under aforesaid search and seizure action under Section 132 of I.T. Act. In these facts and circumstances, the issue, whether, the AO had the jurisdiction to make the aforesaid addition is squarely covered in favour of the assessee by Kabul Chawla vs. CIT 2015 (9) TMI 80 - DELHI HIGH COURT .

Summary

Issues Involved:
1. Legality and jurisdiction of the notice issued and assessment order passed under Section 153A/143(3).
2. Validity of additions made by the Assessing Officer (AO) based on incriminating material.
3. Justification of the addition/disallowance of ?5,31,000/- under Section 69.
4. Treatment of the deposit of ?5,31,000/- as a gift or income.
5. Consideration of evidence and material on record.
6. Basis of the addition made by the AO.
7. Legality of interest charged under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Legality and Jurisdiction of Notice and Assessment Order:
The Assessee challenged the notice issued and the assessment order passed under Section 153A/143(3) as illegal, bad in law, and without jurisdiction. The original return of income was filed under Section 139(1) on 22.07.2006, declaring an income of ?5,77,411/-. A search and seizure action under Section 132 was carried out on 05.12.2007. At the time of the search, no assessment proceeding was pending. The Assessee argued that no incriminating materials were found during the search, thus the AO had no jurisdiction under Section 153A to make the assessment.

2. Validity of Additions Based on Incriminating Material:
The Assessee contended that the additions made by the AO were not based on any incriminating material found during the search. The Tribunal noted that no incriminating materials were found during the search and seizure action under Section 132. The issue was covered in favor of the Assessee by the jurisdictional High Court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Delhi), which held that in the absence of any incriminating material, completed assessments can only be reiterated and not disturbed.

3. Justification of Addition/Disallowance of ?5,31,000/- under Section 69:
The CIT(A) had sustained an amount of ?5,31,000/- out of the addition of ?7,77,649/- made by the AO on account of unexplained deposits in Standard Chartered Bank in the name of the Assessee’s minor son. The Assessee argued that the deposit represented a gift from the grandfather/uncle of the mother to the minor son and should not be treated as income.

4. Treatment of Deposit as Gift or Income:
The Tribunal considered whether the deposit of ?5,31,000/- should be treated as a gift or income. The Assessee claimed it was a gift, but the AO treated it as unexplained income. The Tribunal found that the explanations given and evidence produced by the Assessee were not properly considered by the AO.

5. Consideration of Evidence and Material on Record:
The Assessee argued that the explanations, evidence, and material placed on record were not properly considered and judicially interpreted. The Tribunal agreed that the evidence and material on record did not justify the addition made by the AO.

6. Basis of Addition Made by AO:
The Assessee contended that the addition made was based on mere surmises and conjectures without any material on record. The Tribunal found that the addition was not justified by any material on record, aligning with the Assessee's argument.

7. Legality of Interest Charged under Sections 234A, 234B, and 234C:
The Assessee argued that the interest under Sections 234A, 234B, and 234C was wrongly and illegally charged and worked out. The Tribunal did not provide a specific ruling on this issue, focusing instead on the primary issues of jurisdiction and validity of additions.

Conclusion:
Respectfully following the decision of the Hon’ble Delhi High Court in Kabul Chawla vs. CIT and the ITAT, Delhi in H.B.N. Dairies & Allied vs. ACIT, the Tribunal decided the issue in favor of the Assessee. The additions made by the AO were deleted, and the appeal was allowed for statistical purposes. The order was pronounced in the Open Court on 26/11/19.