2020 (2) TMI 1037 - AT - Income Tax

Assessment u/s 153C - non abated assessments - HELD THAT - Considering the latest judgment of Hon ble High Court of Delhi in the case of Principal CIT Ors V/s Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT come to the conclusion that since the assessment orders in question were concluded and non abated assessments no addition can be made in the assessment proceedings u/s 153C of the Act unless there is any incriminating material found during the course of search. We therefore reverse the orders of Ld. CIT(A) and quash the assessment proceedings u/s 153C r.w.s. 143(3) of the Act dated 28.3.2016 being without jurisdiction and bad in law. In the result legal ground raised by the assessee in Ground No.1 stands allowed.

Issues Involved:
1. Addition to income on account of client code modification by the broker.
2. Validity of assessment under section 153C of the Income Tax Act in the absence of incriminating documents.
3. Limitation of time for passing the assessment order.
4. Charging of interest under section 234B of the Income Tax Act.

Detailed Analysis:

1. Addition to Income on Account of Client Code Modification:
The assessee challenged the addition of ?2,20,500/- for AY 2009-10 and ?2,72,226/- for AY 2010-11 on the grounds that no incriminating documents were found during the search, and no reasons were recorded by the assessing officer prior to issuing the notice under section 153C. The Tribunal observed that the additions were based on information received from PDIT (Investigation) regarding client code modification, which was part of a 593-page survey report. However, no addition was made based on the documents seized during the search. The Tribunal concluded that additions could only be made on the basis of incriminating material found during the search, which was not the case here.

2. Validity of Assessment under Section 153C:
The Tribunal noted that the search was conducted on 20.06.2012, and the documents found pertained to the sale of property by the assessee. The notice under section 153C was issued based on these documents. However, the Tribunal emphasized that for non-abated assessments, additions could only be made on the basis of incriminating material found during the search. Since no such material was found, the assessment proceedings under section 153C were deemed to be without jurisdiction and invalid. This was supported by several judicial precedents, including CIT Vs Kabul Chawla and CIT Vs RRJ Securities Ltd.

3. Limitation of Time for Passing the Assessment Order:
The assessee argued that the assessment order was barred by limitation as the information from the assessing officer of the person searched was received during the financial year 2015-16. The Tribunal did not specifically address this issue in detail, as the primary ground of the absence of incriminating material was sufficient to quash the assessment proceedings.

4. Charging of Interest under Section 234B:
The assessee contended that the interest charged under section 234B was not justified. However, the Tribunal did not adjudicate this issue separately, as the main ground of quashing the assessment proceedings rendered this issue academic.

Conclusion:
The Tribunal quashed the assessment proceedings under section 153C for both AY 2009-10 and AY 2010-11, as the additions were not based on any incriminating material found during the search. Consequently, the other grounds raised by the assessee were deemed academic and dismissed as infructuous. The appeals for both assessment years were allowed on legal grounds.

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