2024 (8) TMI 465 - AT - Income Tax

Assessment u/s 153A - additions made on account of deemed dividend and due to re characterisation of the land as non agricultural land instaed of agricultural land, as claimed by the assessee - incriminating material found in search or not? - HELD THAT - Assessee has disclosed in his return of income a sum of Rs. 2,55,00,000, as an exempt income and hence it is not the case that the assessee had ever tried to hide the matter from the Income Tax Authorities, because the assessee has voluntarily disclosed in the return of income. We find that the documents seized during the search are not in the nature of incriminating documents, because these were duly recorded in the books of account of the Company. The assessment year 2010 11 is undisputedly an unabated assessment year. Even upon a meticulous examination of the statement under section 132(4) of the Act and in the assessment order, there is no reference to any document that has been seized from the assessee upon which the addition has been made. As decided in Murli Agro Products Ltd. 2010 (10) TMI 1052 - BOMBAY HIGH COURT wherein it was held that once the assessment has attained finality before the date of search and no material is found in the course of proceedings under section 132 of the Act, then, no addition can be made in the proceedings under section 153A of the Act and deleted the additions made on account of deemed dividend We are in complete agreement that no incriminating materials were unearthed by the Revenue during the course of search irrespective of unabated assessment and hence no addition can be made by the AO in the absence of any incriminating material. Accordingly, there is no merit in both the additions made by the Assessing Officer and confirmed by the learned CIT(A). The very basis of assumption of jurisdiction in completing the assessment u/s 153A of the Act is fragile and unsustainable - Decided in favour of assessee.

Issues:
1. Challenge to the impugned order by the assessee for the assessment year 2010-11.
2. Grounds raised by the assessee regarding additions in completed assessments, treatment of agricultural land, deemed dividend, and short term capital gain.
3. Validity of additions made by the Assessing Officer and sustained by the CIT(A).
4. Interpretation of legal provisions regarding assessment in the absence of incriminating material.
5. Comparison with relevant legal precedents and judgments.
6. Conclusion on the merit of the additions and the appeal.

Analysis:
1. The appeal was filed by the assessee challenging the order dated 22/04/2021 by the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The grounds raised by the assessee included questioning the additions in completed assessments, treatment of agricultural land, deemed dividend, and short term capital gain under the Income Tax Act, 1961.

2. The Assessing Officer had made additions to the total income of the assessee, including Rs. 82,00,000 on account of deemed dividend and Rs. 2,55,00,000 for short term capital gains on the sale of land. The CIT(A) sustained these additions, leading to the assessee appealing to the Tribunal for further review.

3. The Tribunal analyzed the legality and merits of the additions made by the Assessing Officer and upheld by the CIT(A). The Tribunal considered the presence of incriminating material during the search and the subsequent assessment process. The Tribunal referred to judicial decisions and legal provisions to assess the validity of the additions.

4. The Tribunal highlighted the importance of incriminating material in justifying additions to the total income of the assessee. Citing the judgment of the Hon'ble Supreme Court in PCIT v/s Abhisar Buildwell Pvt. Ltd., the Tribunal emphasized that in the absence of incriminating material, the assessment can only be reopened under section 147 of the Act, subject to specific conditions.

5. By comparing the present case with legal precedents such as PCIT v/s Jignesh P. Shah, the Tribunal concluded that no incriminating materials were found during the search, and therefore, no valid basis existed for the additions made by the Assessing Officer and sustained by the CIT(A). Relying on binding judgments, the Tribunal found no merit in sustaining the additions.

6. Consequently, the Tribunal allowed the appeal filed by the assessee, stating that the additions made by the Assessing Officer and confirmed by the CIT(A) were not justified in the absence of incriminating material. The Tribunal held that the basis for assuming jurisdiction under section 153A of the Act was weak, leading to the decision to delete both additions.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and deleting the additions made to the total income. The judgment emphasized the necessity of incriminating material to support additions during assessments and highlighted the importance of legal precedents in determining the validity of such additions.

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