2020 (4) TMI 11 - AT - Income Tax

Assessment u/s 153A - necessity of any incriminating material for initiating the proceedings u/s 153 - where no assessment proceedings for the year under consideration are pending, in that eventuality, in the absence of any incriminating material found during the course of search and seizure proceedings, whether addition can be made qua unabated assessment for the said year - HELD THAT - In this case Income Tax Return filed by the assessee for the relevant assessment year 2011-12 has already been processed and completed on dated 17.04.2011 by the Revenue Department u/s 143(1) of the Act and it is not the case of the Revenue Department that the assessment proceedings were still alive as on the date of search operation, therefore the case cited by the Ld. CIT DR is distinguishable on facts. Even from the orders passed by the authorities below there is nothing to suggest as to what incriminating material has been found on dated 11.02.2016 during the search u/s 132(1) of the Act from the assessee possession or his premises, on the basis of which the additions have been made. As the issue involved in the instant case is squarely covered by the decisions of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Pr. CIT vs., Meeta Gut Gutia 2017 (5) TMI 1224 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
Assessment proceedings under section 153A of the Income Tax Act, 1961 based on search operation - Addition of deemed dividend under section 2(22)(e) of the Act - Interpretation of incriminating material requirement for making additions - Judicial precedents favoring the assessee's contention.

Detailed Analysis:

1. Assessment Proceedings under Section 153A of the Income Tax Act:
The appeals were against separate orders passed by the Ld. CIT(A)-5, Ludhiana under section 250(6) of the Act. The issue was whether the assessment proceedings initiated under section 153A were valid in the absence of incriminating material found during the search operation. The assessee contended that no incriminating material was discovered, and the assessment for the relevant year had already been completed. The Revenue argued that incriminating material was not necessary for initiating proceedings under section 153A. The Tribunal analyzed various High Court judgments and concluded that the absence of incriminating material during the search operation could prevent additional assessments.

2. Addition of Deemed Dividend under Section 2(22)(e) of the Act:
The Assessing Officer added a deemed dividend to the assessee's income based on loans received by a firm in which the assessee and his son had substantial interests. The AO calculated the deemed dividend amount and added it to the assessee's income. The Ld. CIT(A) upheld this addition. The Tribunal reviewed the facts and legal provisions, ultimately deciding in favor of the assessee based on the principles laid down by the Delhi High Court in similar cases.

3. Interpretation of Incriminating Material Requirement:
The core issue revolved around whether additions could be made under section 153A without incriminating material if no assessment proceedings were pending. The Tribunal referred to various judgments favoring both the assessee and the Revenue. However, it relied on the principle that when two interpretations of a taxing provision are possible, the one favoring the assessee should be adopted. Following the Delhi High Court's decisions in relevant cases, the Tribunal held that no additions could be made without incriminating material in the absence of pending assessment proceedings.

4. Judicial Precedents Favoring the Assessee's Contention:
The Tribunal considered multiple judgments from different High Courts and the Supreme Court supporting the assessee's argument. Notably, the decisions in the cases of CIT vs. Kabul Chawla and CIT vs. Meeta Gutgutia were crucial in determining that no additions could be made without incriminating material if assessment proceedings were already completed. The Tribunal emphasized following judgments favoring the assessee to resolve the issue in the present case.

In conclusion, the Tribunal allowed the appeals filed by the assessee, deleting the additions made by the Assessing Officer and upheld by the Ld. CIT(A). The decision was based on the principles established by the Delhi High Court and other relevant judicial precedents, emphasizing the necessity of incriminating material for making additions under section 153A in the absence of pending assessment proceedings.