2023 (8) TMI 84 - AT - Income Tax

Validity of Assessment u/s 153A - deemed dividend u/s. 2(22)(e) in view of the assessee, a partner (with 40% share) in firm stands extended sums by a company in which public is not substantially interested, and of which the assessee is an Executive Director with 97% shareholding - HELD THAT - The Revenue s case, it s merits apart, survives no longer in view of the decision in Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT inasmuch as no proceedings were pending for the years under reference as on the date of search and, two, the addition/s made in the impugned assessments does not owe its origin, or is relatable, to the material found during search. Decided against revenue.

Summary

Issues Involved:
The issues involved in this case are related to the appellate order allowing the assessee's appeals contesting assessments u/s 153A read with section 143(3) of the Income Tax Act, 1961 for Assessment Years 2011-12 and 2013-14, specifically focusing on the addition of deemed dividend u/s 2(22)(e) of the Act.

Issue 1: Maintainability of Revenue's Appeals
The Revenue's appeals were directed against the appellate order allowing the assessee's appeals contesting assessments u/s 153A read with section 143(3) of the Income Tax Act, 1961 for Assessment Years 2011-12 and 2013-14. The counsel for the assessee argued that the recent decision by the Hon'ble Apex Court in Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. clarified that the Revenue's appeals are not maintainable as the only addition made in the assessments was in relation to deemed dividend u/s 2(22)(e) of the Act. The jurisdiction to assess income u/s 153A for unabated assessments would only be based on incriminating material found during search u/s 132 or requisition u/s 132A of the Act. As the addition in this case was not based on such material, the appeals were not sustainable.

Issue 2: Merits of the Assessments
The Senior D.R. submitted that the assessee had no case on merits, but conceded that the only addition in the assessments for both years was based on duly recorded, disclosed transactions. It was noted that no assessment was pending on the date of search for both years under reference.

Judgment Summary:
The Tribunal observed that in light of the decision in Abhisar Buildwell Pvt. Ltd., the Revenue's case did not survive as no proceedings were pending for the years under reference on the date of search, and the additions made in the assessments were not based on material found during the search. The Tribunal cited the relevant part of the said decision to highlight that in case no incriminating material is found during the search, the Assessing Officer cannot make additions in respect of completed/unabated assessments. The assessee was not required to file Cross Objections (COs) as they were entitled to defend the orders by taking a legal ground. The COs filed were dismissed as not maintainable due to the delay in filing and the binding decision by the Hon'ble Apex Court. Consequently, both the Revenue's appeals and the assessee's COs were dismissed.

This summary provides a detailed overview of the issues involved and the Tribunal's decision regarding the maintainability of the appeals and the merits of the assessments in light of the legal principles discussed in the judgment.