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2023 (3) TMI 318 - AT - Income TaxAssessment u/s 153A - Addition on account of unexplained credit - search u/s 132 was conducted at the residential premises of the assessee where certain paper/documents belongs to the assessee were found and seized - HELD THAT - As it is evident that the above additions were made by the A.O. are not emanating from any incriminating material found during the search. But the additions were made on the basis of the documents produced during the assessment proceedings. The Hon ble Delhi High Court in the case of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT held that in the absence of any incriminating material, no addition can be made in the assessment order passed u/s 153A/143(3) of the Act - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction and validity of proceedings under Section 153A. 2. Additions made under Section 153A in the absence of incriminating material. 3. Addition on account of suppressed profit in purchases. 4. Addition on account of unexplained credit. 5. Disallowance of deduction claimed under Section 24(b). 6. Deletion of addition on account of bogus purchases. Detailed Analysis: 1. Jurisdiction and Validity of Proceedings under Section 153A: The assessee challenged the jurisdiction of the Assessing Officer (AO) to initiate proceedings under Section 153A and the subsequent order passed under Section 153A/143(3). The assessee contended that the search itself was unlawful and invalid, making the proceedings and the order bad in law. The Tribunal, however, did not provide a detailed analysis on this issue, as it was more focused on the presence of incriminating material. 2. Additions Made under Section 153A in the Absence of Incriminating Material: The assessee argued that the additions made by the AO were not based on any incriminating material found during the search but were instead based on documents submitted during the assessment proceedings. The Tribunal noted that the search conducted under Section 132 did not result in any incriminating material for the assessment year 2016-17. Citing the judgment in CIT Vs. Kabul Chawla, the Tribunal held that in the absence of incriminating material, no addition could be made in the assessment order passed under Section 153A/143(3). Consequently, the Tribunal allowed the assessee's appeal on this ground, setting aside the additions sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. 3. Addition on Account of Suppressed Profit in Purchases: The CIT(A) had confirmed an addition of Rs. 11,75,140/- on account of suppressed profit in purchases, estimating the profit percentage arbitrarily. The assessee contended that the quantity purchased and sold completely tallied, making the allegations unsustainable. However, since the Tribunal allowed the appeal on the legal issue of the absence of incriminating material, it refrained from adjudicating this issue in detail. 4. Addition on Account of Unexplained Credit: The AO had added Rs. 1,00,000/- to the assessee's income as unexplained credit under Section 68, as the assessee failed to provide satisfactory evidence that the amount was transferred from a savings account. The CIT(A) confirmed this addition. Again, the Tribunal did not delve into this issue further, as it allowed the appeal based on the absence of incriminating material. 5. Disallowance of Deduction Claimed under Section 24(b): The CIT(A) had confirmed the disallowance of Rs. 2,00,000/- claimed by the assessee under Section 24(b) for interest paid on a home loan. The Tribunal did not address this issue separately, given its decision to allow the appeal on the broader legal ground. 6. Deletion of Addition on Account of Bogus Purchases: The Revenue appealed against the CIT(A)'s deletion of an addition of Rs. 4,71,56,854/- on account of bogus purchases from unverifiable parties. The Tribunal noted that the AO had made the addition based on documents submitted during the assessment proceedings and not on any incriminating material found during the search. Following the Kabul Chawla judgment, the Tribunal dismissed the Revenue's appeal, as no addition could be made without incriminating material. Conclusion: The Tribunal allowed the assessee's appeal in part, setting aside the additions made by the AO due to the absence of incriminating material found during the search. Consequently, the Revenue's appeal was dismissed. The Tribunal's decision was pronounced on 24.02.2023.
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