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2021 (7) TMI 320 - AT - Income TaxAssessment u/s 153A - addition on account of disallowance u/s 10(38) - HELD THAT - The impugned disallowance is not based on any incriminating material found as a result of search. CIT (A) has confirmed the addition on the ground that there is no explanation as to the contradictory stand in as much as surrender was made in Assessment years 2014-15 and 2015-16 but not in the instant year. AR has explained that the scrips in Assessment year 2014-15 and 2015-16 were M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures Services Ltd., which is different from the scrip in the instant year, namely M/s KGN Industries Ltd. DR has not been able to rebut the above factual submission and also not highlighted any incriminating material found as a result of search despite copies of panchnamas having been again placed on record by the Ld. AR. We hold that the Ld. CIT (A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the disallowance made by the Assessing Officer and as upheld by the Ld. CIT (A) in the 153A assessment proceedings being void ab initio is deleted. - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings initiated under Section 153A of the Income Tax Act. 2. Jurisdictional validity of additions made without incriminating material. 3. Validity of approval obtained under Section 153D. 4. Disallowance of exemption under Section 10(38) for long-term capital gains. 5. Levy of interest under Sections 234A and 234B. Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 153A: The primary issue is whether the initiation of proceedings under Section 153A was valid. The assessee argued that the addition made was without jurisdiction as it was not based on any incriminating material found during the search. The Tribunal observed that the disallowance made by the Assessing Officer was not based on any incriminating material found during the search but solely on the disclosure made by the Managing Director of the group. The Tribunal referenced the Delhi High Court's ruling in *PCIT v. Anand Kumar Jain (HUF)*, which held that statements recorded under Section 132(4) do not constitute incriminating material for the purpose of Section 153A assessments. 2. Jurisdictional Validity of Additions Made Without Incriminating Material: The Tribunal noted that the Assessing Officer made the disallowance based on the disclosure of ?25 crores by the Managing Director of the group, which included long-term capital gains of various family members. The Tribunal cited several judgments, including *CIT v. Kabul Chawla* and *Pr. CIT vs. Meeta Gutgutia*, which established that additions under Section 153A must be based on incriminating material found during the search. Since no such material was found in the assessee's case, the Tribunal held that the Assessing Officer lacked the jurisdiction to make the addition. 3. Validity of Approval Obtained Under Section 153D: The assessee argued that the approval obtained under Section 153D was mechanical and invalid as it lacked due application of mind. However, this issue was not elaborated upon in the Tribunal's final decision, as the primary grounds for the appeal were resolved in favor of the assessee on the basis of the absence of incriminating material. 4. Disallowance of Exemption Under Section 10(38) for Long-Term Capital Gains: The assessee claimed exemption under Section 10(38) for long-term capital gains from the sale of shares. The Assessing Officer disallowed this exemption based on the group's Managing Director's disclosure. The Tribunal noted that the scrips involved in the current assessment year were different from those in the years where the group had made a surrender. The Tribunal found that the Assessing Officer's disallowance was not justified as it was not based on any incriminating material found during the search. 5. Levy of Interest Under Sections 234A and 234B: The Tribunal did not specifically address the issue of interest levied under Sections 234A and 234B, as the primary grounds of the appeal were resolved in favor of the assessee, rendering the interest issue moot. Conclusion: The Tribunal allowed the appeals, holding that the Assessing Officer's action of assuming jurisdiction under Section 153A was not justified due to the absence of incriminating material found during the search. Consequently, the disallowance of the exemption under Section 10(38) was deleted, and the issue of interest under Sections 234A and 234B was not adjudicated. The appeals in ITA Nos. 5853/Del/2018, 5278/Del/2018, 5288/Del/2018, 5284/Del/2018, 5858/Del/2018, and 5280/Del/2018 were allowed.
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