2021 (4) TMI 439 - AT - Income Tax

Assessment u/s 153A - whether the Assessing Officer is justified to complete the assessment u/s.153A of the Act by making impugned additions for the assessment years under consideration even in the absence of any incriminating material deemed to be found during the search conducted u/s.132 ? - HELD THAT - From the entire assessment order, the AO has not referred any seized materials, if any found during the course of search and seizure operation and we also observe that the assessee has not cooperated during the entire proceedings of assessment. If the assessee does not appear before the AO after giving several notices/opportunities then the AO can utilize the remedy provided in the Act. The AO has huge power to require the presence of the assessee before him as defined in the Income Tax Act. He can also impose the penalty but not done so. The books of accounts and other seized documents were available before him while completing the assessment. From the assessment order, it is clear that that in the opinion of the AO that there was no any incriminating material. Had it been found some incriminating material during the course of search, then the AO must have taken into cognizance while framing the assessment order but he did not refer to any incriminating materials/documents. Even the ld. CIT(A) in his order has not referred any incriminating material. He has simply made addition on adhoc basis as stated supra in para no.8. Further we notice that the AO has added the 20% of the aforesaid expenditure without referring to any seized/incriminating material. The impugned assessment year is abated assessment year and in case of abated assessment year for making addition there must be incriminating material as decided by various courts. Since these four years are unabated assessment years and no any incriminating material referred by the AO, therefore, the argument advanced by the ld. CITDR is not accepted. Thus the assessment is unabated and the Tribunal is bound by the judicial precedence we allow legal ground raised by the assessee for the assessment years 2009-2010 to 2012-2013 challenging the assessment framed u/s.153A of the Act in the absence of any incriminating materials nor observed by the AO while framing the assessment order. Accordingly, we set aside the orders of both the authorities below and held that assessment framed u/s.153A of the Act for all the four years under consideration are not sustainable being unabated assessment and, therefore, also no addition can be made while framing the assessment under section 153A of the Act having no incriminating material found during the course of search, which is clear from the assessment order. - Decided in favour of assessee. Addition of the total expenditure for films, drugs chemicals and salary to staffs in the abated assessments - HELD THAT - We found that the assessee could not furnish the details for the expenditure claimed on account of films, drugs chemicals and salary to staffs, therefore, the AO restricted the disallowance to 20% of the total expenditure claimed, which has been upheld by the CIT(A) in the appellate order. Before us, the ld. AR of the assessee requested to restrict the disallowance to 10% as against 20% made by the AO, which has also not been objected by the ld.CIT-DR. Accordingly with the consent of both the parties and considering the observations made by both the authorities below, we restrict the disallowance to 10% as against 20% made by the AO and confirmed by the CIT(A). Thus, this ground of appeal of the assessee is partly allowed

Issues Involved:
1. Legality of assessment orders passed under section 153A without incriminating documents.
2. Timeliness of assessment orders.
3. Validity of assessments under section 144.
4. Ad-hoc disallowance of expenses.
5. Admission of additional grounds regarding lack of prior approval under section 153D.

Detailed Analysis:

Legality of Assessment Orders Passed under Section 153A without Incriminating Documents:
The primary issue contested was whether assessments under section 153A could be made without any incriminating documents found during the search. The Tribunal noted that the assessee's original returns for the years 2009-2010 to 2012-2013 were filed and assessed before the search conducted on 28.05.2014. It was observed that no incriminating documents were found during the search. The Tribunal relied on precedents, including the Delhi High Court's decision in *Kabul Chawla*, which held that in the absence of incriminating material, no additions could be made in assessments under section 153A for years where assessments were already completed. Consequently, the Tribunal quashed the assessments for the years 2009-2010 to 2012-2013.

Timeliness of Assessment Orders:
The assessee argued that the assessment orders were barred by limitation, as they were dispatched beyond the prescribed date. However, this ground was not pressed by the assessee during the hearing, and thus, it was dismissed by the Tribunal.

Validity of Assessments under Section 144:
The assessee contended that the assessment orders under section 144 were invalid as the provisions of sections 142(1) and 143(2) were complied with during the assessment proceedings. This ground was also not pressed by the assessee, leading to its dismissal.

Ad-hoc Disallowance of Expenses:
The Tribunal addressed the issue of ad-hoc disallowance of 20% of expenses related to films, drugs, chemicals, and staff salaries. The assessee's non-compliance during assessment proceedings led to this disallowance. However, upon appeal, the Tribunal, considering the nature of the profession and the submissions made, restricted the disallowance to 10% for the years 2013-2014 and 2014-2015, and similarly for the year 2015-2016.

Admission of Additional Grounds Regarding Lack of Prior Approval under Section 153D:
The assessee raised additional grounds regarding the lack of prior approval under section 153D, claiming that the approval mentioned in the assessment order was not valid. However, these additional grounds were not pressed during the hearing and were consequently dismissed by the Tribunal.

Conclusion:
The Tribunal quashed the assessments for the years 2009-2010 to 2012-2013 due to the absence of incriminating material found during the search. For the years 2013-2014 to 2015-2016, the Tribunal restricted the ad-hoc disallowance of expenses to 10%. The appeals were partly allowed, providing relief to the assessee on the primary issue of assessments under section 153A without incriminating documents.

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