2021 (7) TMI 676 - AT - Income Tax

Assessment u/s 153A - Disallowance of expenses - HELD THAT - There is no incriminating material qua each of the assessment year roped in under section 153A, then, no addition can be made while framing the assessment u/s 153 A.

Summary

Issues Involved:
1. Deletion of addition on account of disallowance of expenses.
2. Deletion of addition on account of disallowance of purchases.
3. Validity of additions based on the decision of CIT Vs Kabul Chawla and pending SLP in the Supreme Court.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Disallowance of Expenses:
The revenue challenged the deletion of ?76,43,975 made on account of disallowance of expenses by the CIT(A). The assessee failed to file any evidence in support of the expenses claimed. The Tribunal noted that the additions made by the Assessing Officer (AO) were not based on any material found and seized during the course of the search and seizure action. The Tribunal relied on the principle that in the absence of any incriminating material found during the search, no addition can be made under Section 153A. This principle was upheld in various judgments, including PCIT Vs. Meeta Gutgutia, CIT Vs. Kabul Chawla, and CIT Vs. Lancy Constructions.

2. Deletion of Addition on Account of Disallowance of Purchases:
The revenue also contested the deletion of ?3,18,84,338 made on account of disallowance of purchases. Similar to the first issue, the Tribunal observed that the additions were not based on any incriminating material found during the search. The Tribunal emphasized that Section 153A proceedings require additions to be based on seized material. Since the AO's additions were not based on such material, they were deemed beyond the scope of Section 153A. The Tribunal referenced judgments such as CIT Vs. Kabul Chawla and Pr. CIT Vs. Meeta Gutgutia to support this view.

3. Validity of Additions Based on CIT Vs Kabul Chawla and Pending SLP:
The revenue argued that the CIT(A) erred in deleting the additions based on the decision in CIT Vs Kabul Chawla, as the Department's SLP against this order was accepted by the Supreme Court and was pending adjudication. The Tribunal reiterated that the additions made by the AO were not based on any incriminating material found during the search. The Tribunal cited the legal proposition laid down in CIT Vs. Kabul Chawla, which states that completed assessments can only be interfered with based on incriminating material unearthed during the search. The Tribunal also noted that the High Court in Pr. CIT Vs. Meeta Gutgutia reiterated this principle.

Conclusion:
The Tribunal concluded that since no incriminating material was found during the search for the relevant assessment years, the additions made by the AO were beyond the scope of Section 153A. The Tribunal dismissed all the appeals of the revenue, upholding the deletions made by the CIT(A). The order was pronounced in the open court on 12/07/2021.