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2022 (2) TMI 577 - AT - Income TaxAssessment u/s 153A v/s 153C - Addition on the basis of unsecured loans appearing in the balance-sheet - Validity of search proceedings - CIT(A) upheld the action of the A.O.- HELD THAT - Admittedly, no search has taken place at the premises of the assessee. The seized documents relating to the assessee-company were found from 17/6, Hansapal Industrial Complex. Mathura Road, Faridabad which belong to LV Rustore Appliations Pvt. Ltd., R R Carwell Pvt. Ltd., and Elvi Bardahl India Pvt. Ltd. Therefore, assumption of jurisdiction under section 153A instead of 153C, in our opinion, vitiates the entire assessment proceedings. Addition in the instant case has been made on the basis of the entries already appearing in the balance-sheet under the Head Unsecured loans and the said addition is not made on the basis of any incriminating material found during the course of search. We further find the period for issue of notice under section 143(2) expired and the assessment had attained finality. Therefore, by following the decision of Singhad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT and Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT the addition made by the A.O. and sustained by the Ld. CIT(A), in our opinion, is not in accordance with Law. We, therefore, allow the additional grounds raised by the assessee and quash the assessment proceedings initiated under section 153A instead of provisions of Section 153C - Decided in favour of assessee.
Issues Involved:
1. Validity of assessment proceedings under section 153A in the absence of incriminating material. 2. Legitimacy of the addition of ?10 lakhs as unsecured loan under section 68. 3. Jurisdictional challenge regarding the premises searched. 4. Admissibility of additional grounds raised by the assessee. Issue-wise Detailed Analysis: 1. Validity of Assessment Proceedings Under Section 153A: The assessee argued that the assessment under section 153A was invalid as no incriminating material was found during the search. The Ld. CIT(A) dismissed this contention, noting that various papers regarding the loan to Sh. Abhay Salwan and its repayment were found during the search. The Tribunal, however, found that the addition was based on entries in the balance sheet and not on any incriminating material found during the search. Citing the decisions in CIT vs. Kabul Chawla and CIT vs. Singhad Technical Education Society, the Tribunal held that in the absence of incriminating material, the addition was not justified, thereby quashing the assessment proceedings initiated under section 153A. 2. Legitimacy of the Addition of ?10 Lakhs as Unsecured Loan Under Section 68: The A.O. added ?10 lakhs to the assessee's income, treating it as undisclosed income under section 68, as the assessee failed to prove the identity, creditworthiness, and genuineness of the loan from SBN Construction. The Ld. CIT(A) upheld this addition, stating that the assessee failed to provide sufficient evidence. However, since the Tribunal quashed the assessment proceedings on jurisdictional grounds, the merits of this addition were not further adjudicated. 3. Jurisdictional Challenge Regarding the Premises Searched: The assessee contended that no search was conducted at its registered office or business premises, and the documents were seized from a different address. The Tribunal found merit in this argument, noting that the seized documents were from premises not belonging to the assessee. Thus, the assumption of jurisdiction under section 153A instead of 153C was incorrect, vitiating the entire assessment proceedings. 4. Admissibility of Additional Grounds Raised by the Assessee: The Tribunal admitted the additional grounds raised by the assessee, considering them legal in nature and going to the root of the matter. These grounds challenged the jurisdiction under section 153A due to the absence of a search at the assessee's premises and the lack of incriminating material. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the assessment proceedings initiated under section 153A due to the improper assumption of jurisdiction and the absence of incriminating material. Consequently, the other grounds raised by the assessee were deemed academic and not adjudicated. The order was pronounced on 11.02.2022.
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