2022 (8) TMI 1226 - AT - Income Tax

Proceedings u/s 153A - disallowances under section 80- IA - Assessee argued since the original assessment was already concluded and no incriminating material was found during the course of search, such additions are not sustainable under section 153A - HELD THAT - From the facts placed on record, we observe that there was no incriminating material found during the course of search on the basis of which deduction claimed under section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals). The Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search. in view of well settled proposition of law that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, the Ld. CIT(A) has erred in facts and in law in upholding the additions for assessment years 2005-06 and 2006-07. Since we have set aside the assessment order on the issue of jurisdiction itself, we are not separately discussing the merits of the case. Appeal of assessee allowed.

Summary

Issues Involved:
1. Validity of the order passed under section 153A read with section 143(3) of the Income Tax Act.
2. Disallowance of deduction under section 80IA(4) for various infrastructure projects.
3. Classification of the assessee as a "Developer" versus a "Work Contractor" for the purpose of claiming deductions under section 80IA(4).
4. Additional grounds raised by the Department regarding the treatment of employer's contribution to Provident Fund (P.P.).

Detailed Analysis:

1. Validity of the Order Passed Under Section 153A Read with Section 143(3) of the Income Tax Act:
The primary contention raised by the assessee was the validity of the assessment framed under section 153A, particularly when no incriminating material was found during the search. The assessee argued that since the original assessment had attained finality and no new incriminating evidence was discovered, the additions made under section 153A were not sustainable. The Tribunal noted that the assessment order was not based on any incriminating material found during the search but rather on a revision of the order based on the insertion of a new Explanation to section 80-IA, which was not existing at the time of the original assessment. The Tribunal cited various judicial precedents, including the Supreme Court's decision in PCIT v. Meeta Gutgutia and the Gujarat High Court's decision in Pr. CIT v. Saumya Constructions, to support the view that in the absence of incriminating material, the invocation of section 153A to reopen concluded assessments was not justified. Consequently, the Tribunal held that the assessment orders for the years 2005-06 and 2006-07 were invalid.

2. Disallowance of Deduction Under Section 80IA(4) for Various Infrastructure Projects:
The assessee challenged the disallowance of deductions claimed under section 80IA(4) for various infrastructure projects. The Assessing Officer (AO) had disallowed these deductions on the grounds that the assessee was not eligible for such deductions as clarified by a new Explanation inserted in section 80IA(4). The Tribunal observed that the AO's disallowance was not based on any incriminating material found during the search but was rather a revision of the original assessment based on the new Explanation. Since the Tribunal had already held the assessment orders under section 153A to be invalid, the disallowance of deductions under section 80IA(4) was also set aside.

3. Classification of the Assessee as a "Developer" Versus a "Work Contractor":
The Department argued that the assessee should be treated as a "Work Contractor" rather than a "Developer" for the purpose of claiming deductions under section 80IA(4). The CIT(A) had allowed the deductions by treating the assessee as a "Developer." The Tribunal, however, did not delve into the merits of this issue separately, as it had already set aside the assessment orders on the grounds of jurisdictional invalidity under section 153A.

4. Additional Grounds Raised by the Department Regarding the Treatment of Employer's Contribution to Provident Fund (P.P.):
For the assessment year 2006-07, the Department raised additional grounds regarding the treatment of employer's contribution to Provident Fund (P.P.), arguing that the CIT(A) erred in allowing contributions paid beyond the due date specified under the P.P. Act. The Tribunal did not address this issue separately, as the primary contention regarding the validity of the assessment orders under section 153A had already been decided in favor of the assessee.

Conclusion:
The Tribunal allowed the appeals of the assessee for the assessment years 2005-06 and 2006-07, holding that the assessment orders under section 153A were invalid in the absence of any incriminating material found during the search. Consequently, the disallowance of deductions under section 80IA(4) was also set aside. The appeals of the Revenue were dismissed.