2014 (7) TMI 254 - AT - Income Tax

Computation u/s 153A of the Act - Sale of flat Computation of LTCG Held that - Chapter XIV-B of the Act deals with computation of undisclosed income, whereas section 153A, etc., provides for the computation of total income - the language of section 153A has been structured in such a way so as not to permit the making of addition for the AY of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search - where a search is initiated u/s 132 of the Act etc., the AO shall issue a notice requiring the person searched etc. to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made - a duty has been cast on the AO to determine the total income of the assessee for such six assessment years. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income - if some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search - In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material - no addition can be made for any assessment year u/s 153A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search - The assessment order is silent on both the counts as to whether the assessment for AY 2003-04 was pending as on the date of search and whether any incriminating material was found during the course of search having bearing on the addition so made the matter is to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Issues Involved:
1. Legitimacy of the addition made under Section 68 of the Income-tax Act, 1961.
2. Admissibility of additional grounds raised before the Tribunal.
3. Applicability of Section 153A in the absence of incriminating material.
4. Interpretation of judicial precedents and their applicability to the present case.

Detailed Analysis:

1. Legitimacy of the Addition Made Under Section 68:
The case arose from a search and seizure operation under Section 132 of the Income-tax Act, 1961, conducted on 31.07.2008. The assessee declared a long-term capital loss on the sale of a flat, claiming it was inherited and sold at a loss. The Assessing Officer (AO) noticed discrepancies due to the absence of a Conveyance deed and held that the property was sold before 15.06.2002, thus treating the transaction as a story made up to introduce unaccounted funds. This led to an addition of Rs. 9,90,050 under Section 68, which was upheld by the CIT(A).

2. Admissibility of Additional Grounds Raised Before the Tribunal:
The assessee raised an additional ground before the Tribunal, arguing that no incriminating evidence was found during the search to justify the addition under Section 153A. Despite the Revenue's opposition, the Tribunal, relying on the Supreme Court's decision in National Thermal Power Company Ltd. vs. CIT (1998) 229 ITR 383 (SC), admitted the additional ground as it was a pure legal question arising from the facts found by the authorities below and impacting the tax liability.

3. Applicability of Section 153A in the Absence of Incriminating Material:
The Tribunal examined whether the addition could be sustained under Section 153A in the absence of incriminating material. The Tribunal referred to several judicial precedents, including the Special Bench decision in All Cargo Global Logistics Ltd. vs. DCIT (2012) 137 ITD 287 (SB) (Mum), which held that no addition can be made for concluded assessments unless incriminating material is found during the search. The Tribunal distinguished the present case from SSP Aviation Ltd. vs. DCIT (2012) 252 CTR (Del) 291 and CIT vs. Chetan Das Lachman Das (2012) 254 CTR (Del) 392, noting that these cases dealt with different contexts.

4. Interpretation of Judicial Precedents and Their Applicability:
The Tribunal emphasized the need to follow the superior wisdom of the High Court over the Tribunal's decisions. It clarified that the judgments in SSP Aviation Ltd. and Chetan Das Lachman Das did not apply to the present case as they dealt with different issues. The Tribunal also cited the Delhi High Court's obiter dicta in CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del), which suggested that additions in non-pending assessments should be based on incriminating material found during the search. The Tribunal concluded that the AO could not make additions for assessment years not pending on the date of search unless incriminating material was found.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the AO to decide afresh, considering whether the assessment for AY 2003-04 was pending on the date of search and whether any incriminating material was found. The appeal was allowed for statistical purposes, and the order was pronounced in the open court on 16.06.2014.

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