2015 (6) TMI 173 - AT - Income Tax

Disallowance on account of scrap sale for the purpose of deduction u/s 80IB - initiation of proceedings u/s 153A - Held that - In absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. In the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly held as null and void. See CIT vs. Anil Kr. Bhatia (2012 (8) TMI 368 - DELHI HIGH COURT)- Decided in favour of assesse.

Issues Involved:
1. Validity of initiation of proceedings under Section 153A of the Income Tax Act.
2. Framing of assessment under Section 153A read with Section 143(3) in the absence of incriminating material found during the course of search.
3. Disallowance on account of scrap sale for the purpose of deduction under Section 80IB.
4. Disallowance made under Section 14A.

Detailed Analysis:

1. Validity of Initiation of Proceedings under Section 153A:
The assessee challenged the initiation of proceedings under Section 153A on the grounds that no incriminating material was found during the search, and the assessment under Section 143(3) was already completed before the search. The AO rejected this argument, stating that there is no requirement for the assessment under Section 153A to be based on seized material during the search. The Tribunal, however, found that the initiation of proceedings under Section 153A is not justified in the absence of incriminating material, citing several judicial precedents including the Special Bench decision in Al-Cargo Global Logistic Ltd. vs. ACIT and the Delhi High Court's decision in CIT vs. Anil Kumar Bhatia. The Tribunal concluded that the assessment under Section 153A should be based on incriminating material found during the search.

2. Framing of Assessment under Section 153A read with Section 143(3):
The Tribunal held that the assessment framed under Section 153A read with Section 143(3) is invalid in the absence of incriminating material found during the search. The Tribunal relied on the principle that in cases where the original assessment is completed, the assessment under Section 153A should be made only on the basis of incriminating material found during the search. The Tribunal cited several decisions, including those from the Delhi High Court and Rajasthan High Court, which support this view. The Tribunal emphasized that the jurisdictional Delhi High Court's decisions are binding and must be followed.

3. Disallowance on Account of Scrap Sale for Deduction under Section 80IB:
Since the Tribunal held that the assessment itself is null and void, the issue of disallowance on account of scrap sale for the purpose of deduction under Section 80IB became infructuous and academic. Therefore, this ground did not require adjudication.

4. Disallowance Made under Section 14A:
Similarly, the disallowance made under Section 14A also became infructuous and academic due to the Tribunal's finding that the assessment is null and void. This ground was also disposed of without adjudication.

Conclusion:
The Tribunal allowed the appeal, holding that the assessment framed under Section 153A read with Section 143(3) is null and void in the absence of incriminating material found during the search. Consequently, the other issues regarding disallowances under Sections 80IB and 14A were rendered academic and did not require adjudication. The order was pronounced in the open court on 27.5.2015.

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