2021 (7) TMI 14 - AT - Income Tax

Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - Revenue could not controvert the fact that the additions as made by the Assessing Officer are not on the basis of material gathered during the course of search. Admittedly, the additions are not linked with incriminating material found during the course of search. Moreover, it is not disputed that the assessment was not abated in the year under consideration, the assessment had been completed. As relying on KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT we hereby quash the impugned assessment order being not in the conformity with law laid - Decided in favour of assessee. Deemed dividend addition u/s 2(22)(e) - HELD THAT - No effort was made to ascertain the veracity of the confirmation made by the assessee. there is no evidence suggesting that the amount of ₹ 20 Lakhs from M/s. ATS infrastructure Ltd. was loan on advance to the assessee. In the absence of evidences, we are not inclined to affirm the view of Ld.CIT(A) when undisputedly during the original appellate proceedings. CIT(A had categorically stated that the impugned amount represents repayment of pre-existing liability. Ld.CIT(A) has not brought any material to take a contrary view. Even during the appellate proceedings, Ld.CIT(A) has recorded the factum of confirmation furnished by the assessee. Hence, we hereby delete the addition. Ground raised by the assessee in this appeal are allowed. Addition on account of benefit derived on purchases of flat for lower consideration - Assessee contended that the Assessing Officer erred in adopting market price at ₹ 3.5 crore in utter disregard to the fact that the value adopted by Stamp Valuation Authority is much lower than the value as disclosed by the assessee - HELD THAT - Mr. Geetambar Anand, Co-director of the company are identical and in the case of Mr. Geetambar Anand, Co-director of the company, the addition has been deleted 2017 (6) TMI 1347 - ITAT DELHI CIT(A) was not justified in making the addition in the case of the assessee when in the similarly situated Co-director, addition was deleted. Moreover, in the original proceedings, Ld.CIT(A), Meerut considered the facts in depth and relying on the judgement of Hon ble Supreme Court rendered in the case of M/s. Dhakeshwari Cotton Mills 1954 (10) TMI 12 - SUPREME COURT observed that the additionwas liable to be deleted. He had categorically given a finding that the assessee had filed an Agreement for allotment dated 02.09.2006 between M/s ATS Infrastructure Ltd. and Mr. Prabodh Nath Aggarwal for consideration of ₹ 1.5 crore. It was further observed that the Assessing Officer neither conducted any inquiry from Mr. Prabodh Nath Aggarwal nor the Assessing Officer tried to find out the market price of K-Villa at the time of allotment in Financial Year 2006-07 - As considering these facts for the purpose of stamp duty, the value of K-Villa was only ₹ 81,04,355/- and the HDFC Bank also granted a loan of ₹ 1.35 crore against the market price of ₹ 1.5 crore. Therefore, he held that market price of ₹ 1.5 crore at the time of allotment was fair and reasonable. It is further observed that Ld.CIT(A) has not brought any new material to rebut the finding of Ld.CIT(A) in the original proceedings, therefore, the addition cannot be sustained. - Decided in favour of assessee.

Issues Involved:
1. Validity of assessment orders due to lack of incriminating material.
2. Legality of reversing previous CIT(A) decisions without fresh evidence.
3. Application of Rule 46A of IT Rules, 1962.
4. Justification of additions under Section 69 of the Income Tax Act, 1961.
5. Treatment of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.
6. Treatment of long-term capital gains as income from other sources.
7. Addition based on benefit derived from purchase of flat at lower consideration.

Detailed Analysis:

1. Validity of Assessment Orders Due to Lack of Incriminating Material:
The primary issue raised by the assessee was the invalidity of the assessment orders as there was no incriminating material found during the search. The Tribunal noted that the additions made by the Assessing Officer were not based on any material gathered during the search. The Tribunal referenced the Delhi High Court's judgment in CIT vs Kabul Chawla, which established that completed assessments can only be interfered with based on incriminating material found during the search. Since the assessments for the years 2004-05 to 2006-07 were not abated and no such material was found, the Tribunal quashed the assessment orders for these years.

2. Legality of Reversing Previous CIT(A) Decisions Without Fresh Evidence:
The assessee contended that the CIT(A) in Kanpur had reversed the judgments of the previous CIT(A) in Meerut without bringing any fresh material on record. The Tribunal observed that no new evidence was presented by the CIT(A) or the Assessing Officer to justify the reversal of the previous decisions. Consequently, the Tribunal found the reversal of decisions to be unjustified.

3. Application of Rule 46A of IT Rules, 1962:
The assessee argued that the provisions of Rule 46A were not applicable in respect of the additions made. The Tribunal did not find any specific discussion on Rule 46A in the judgment, indicating that this issue was not a significant factor in the final decision.

4. Justification of Additions Under Section 69 of the Income Tax Act, 1961:
The additions under Section 69 related to unexplained investments in the PPF account and cash deposits in bank accounts. The Tribunal quashed the assessment orders for the years 2004-05 to 2006-07, rendering these additions academic in nature and not adjudicated.

5. Treatment of Deemed Dividend Under Section 2(22)(e) of the Income Tax Act, 1961:
For the assessment year 2007-08, the addition of ?20 lakhs as deemed dividend was contested. The Tribunal noted that the CIT(A) in Meerut had previously deleted this addition, recognizing it as a repayment of a pre-existing liability. The Tribunal found no new material to support the reversal of this decision and deleted the addition.

6. Treatment of Long-Term Capital Gains as Income from Other Sources:
For the assessment year 2005-06, the assessee contested the treatment of long-term capital gains as income from other sources. The Tribunal quashed the assessment order for this year, making this issue academic and not adjudicated.

7. Addition Based on Benefit Derived from Purchase of Flat at Lower Consideration:
The addition of ?2 crore for the assessment year 2007-08 was based on the benefit derived from purchasing a flat at a lower consideration. The Tribunal noted that a similar addition in the case of a co-director was deleted and not challenged by the Revenue. The Tribunal found no justification for a different treatment in the assessee's case and directed the deletion of the addition.

Conclusion:
The Tribunal quashed the assessment orders for the years 2004-05 to 2006-07 due to the lack of incriminating material found during the search. For the year 2007-08, the Tribunal deleted the additions related to deemed dividend and benefit derived from the purchase of a flat. All appeals filed by the assessee were allowed.

← Previous Next →