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2023 (3) TMI 963 - AT - Income TaxAssessment u/s 153C - incriminating material unearthed during the course of search or not? - HELD THAT - Addition made vide order passed u/s 153C r/w section 143(3) of the Act is not based on any incriminating material found during the course of the search, rather the same is apparently after going through the material i.e. return of income and computation of income, already available on record. There is no mention of any incriminating material found during the search and rather reliance is placed on CBDT guidelines to support the conclusion that the same is in the nature of business income. As regards the other comments from the appraisal report, which are mentioned in the remand report, we find that either the same do not pertain to the year under consideration or no addition has been made in the assessment order in the hands of the assessee. The existence of any incriminating material is also not evident from the perusal of the assessment order. As respectfully following the decision of Continental Warehousing Corporation (Nhava Sheva) Ltd. ( 2015 (5) TMI 656 - BOMBAY HIGH COURT in absence of any incriminating material in the present case, we direct the AO to delete the addition made in the assessment order passed under section 153C r/w section 143(3) - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings under section 153C of the Income Tax Act, 1961. 2. Treatment of short-term and long-term capital gains as business income. 3. Levy of interest under sections 234B and 234C. 4. Initiation of penalty proceedings under section 271(1)(c). Detailed Analysis: 1. Validity of Proceedings under Section 153C: The primary issue raised by the assessee was the validity of the proceedings initiated under section 153C of the Income Tax Act, 1961. The assessee argued that the conditions laid down in section 153C were not satisfied and that no incriminating material was found during the search. The Tribunal noted that the search was conducted at the premises of M/s Malpani Infertility Clinic Private Limited, and jewellery was found from the residential premises and locker of the directors, leading to the initiation of proceedings under section 153C. The Tribunal emphasized that for non-abated assessments, additions can only be made based on incriminating material found during the search. Since no such material was found in this case, the Tribunal directed the deletion of the additions made in the assessment order. 2. Treatment of Short-Term and Long-Term Capital Gains as Business Income: The assessee contended that the short-term and long-term capital gains declared were wrongly treated as business income by the Assessing Officer (AO). The Tribunal observed that the AO had treated the gains as business income without any incriminating material found during the search. The Tribunal held that in the absence of any incriminating material, the gains could not be treated as business income. Consequently, the Tribunal allowed the grounds raised by the assessee regarding the treatment of capital gains. 3. Levy of Interest under Sections 234B and 234C: The assessee challenged the levy of interest under sections 234B and 234C of the Act. The Tribunal noted that the levy of interest is consequential in nature and directed that the interest be recalculated based on the revised income determined after deleting the additions made by the AO. 4. Initiation of Penalty Proceedings under Section 271(1)(c): The assessee also contested the initiation of penalty proceedings under section 271(1)(c) of the Act. The Tribunal held that the initiation of penalty proceedings is premature at this stage and dismissed this ground. Separate Judgments Delivered: The Tribunal delivered separate judgments for the cross appeals filed by the assessees and the Revenue. In the case of Shri Aniruddha N. Malpani, the Tribunal allowed the appeal partly for statistical purposes, directing the deletion of additions made based on the treatment of capital gains as business income. Similarly, in the case of Smt. Anjali A. Malpani, the Tribunal allowed the appeal partly for statistical purposes on identical grounds. The appeals filed by the Revenue were dismissed as the question of taxability of income as long-term/short-term capital gain or business income was rendered infructuous. Conclusion: The Tribunal concluded that the appeals by both assessees are partly allowed for statistical purposes, while the Revenue's appeals are dismissed. The order was pronounced in the open Court on 24/01/2023.
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