2013 (12) TMI 135 - AT - Income Tax

Assessment u/s 153A - Sub-Contract payments Books of accounts not maintained - Held that - The assessee was reopened under section 153A - In all the four years the assessments have been completed u/s 143(3) after examining the books of account - The issues have been crystallized in the respective assessment years no appeals were filed in those cases therefore the orders would not get abated Following All Cargo Global Logistics Ltd. Vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) - The assessments that are pending the AO retains original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of these assessment years separately - The assessment u/s 153A will be made on the basis of incriminating material which in the context of relevant provisions means a) books of account other documents found in the course of search which were not produced in the course of original assessment and b) undisclosed income or property disclosure in the course of search - The AO cannot make any other regular additions as done in the original assessment in the course of reassessment u/s 153A unless there is fresh material found during the course of search relevant to the assessment years under consideration There was no reference to any specific seized document which has a direct relevance for the year under consideration which means that there was no incriminating material against the appellant for this assessment year that can prompt the AO to re-agitate the issues which was otherwise settled in the regular assessment completed earlier - Decided against Revenue.

Issues Involved:
1. Legality of additions made by the Assessing Officer (AO) under section 153A in the absence of incriminating material.
2. Justification for disallowance of sub-contract payments and other expenses by the AO.
3. Validity of reassessment under section 153A when original assessments were completed under section 143(3).
4. Whether the CIT(A) erred in not adjudicating other grounds of appeal raised by the Assessee.

Issue-wise Detailed Analysis:

1. Legality of Additions Made by the AO under Section 153A in the Absence of Incriminating Material:
The core issue was whether the AO could make additions under section 153A without any incriminating material found during the search. The Assessee argued that the additions should be confined to the material found during the search, relying on the decision of the Special Bench of ITAT, Mumbai in the case of All Cargo Global Logistics Ltd. The CIT(A) agreed, citing various judicial decisions, including LMJ International Ltd Vs. DCIT and the Hon'ble ITAT, Hyderabad, which held that additions in assessments under section 153A should be based on incriminating material found during the search. The CIT(A) noted that the AO did not point out any specific seized documents relevant to the assessment years under consideration. Consequently, the additions made by the AO were not legally sustainable, leading to their deletion.

2. Justification for Disallowance of Sub-Contract Payments and Other Expenses by the AO:
The AO had disallowed 50% of the sub-contract payments and other expenses due to the absence of books of account and supporting details. The CIT(A) found that the AO's disallowances were not justified as there was no incriminating material to support these additions. The CIT(A) emphasized that the original assessments were completed after examining the Assessee's books of account, and no fresh material was found during the search to warrant these disallowances. The Tribunal upheld the CIT(A)'s decision, stating that the AO could not make such disallowances without incriminating material.

3. Validity of Reassessment under Section 153A When Original Assessments Were Completed under Section 143(3):
The Assessee contended that the reassessment under section 153A was invalid as the original assessments were completed under section 143(3) and no incriminating material was found during the search. The CIT(A) and the Tribunal agreed, referencing the Special Bench decision in All Cargo Global Logistics Ltd., which held that in cases where assessments were already completed, the AO could only make additions based on incriminating material found during the search. The Tribunal noted that the AO's jurisdiction to reassess was limited to the material found during the search, and since no such material was found, the reassessment was not justified.

4. Whether the CIT(A) Erred in Not Adjudicating Other Grounds of Appeal Raised by the Assessee:
The Assessee argued that the CIT(A) failed to adjudicate other grounds of appeal. However, since the Tribunal upheld the CIT(A)'s decision on the primary legal issue, it deemed the other grounds as academic and infructuous. The Tribunal dismissed the Assessee's Cross Objections (COs) as they were in support of the CIT(A)'s order, making them redundant in light of the decision on the primary issue.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO under section 153A, as there was no incriminating material found during the search. The reassessment was deemed invalid since the original assessments were completed under section 143(3). Consequently, the Tribunal dismissed the Revenue's appeals and the Assessee's COs as infructuous.

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