2015 (12) TMI 702 - AT - Income Tax

Assessment u/s 153A - disallowance u/s 14A - Held that - In the absence of any incriminating material found during the course of search and the assessment proceedings having not been abated at the time of search, the Assessing Officer has no jurisdiction to make the addition under sect ion 153A of the Act . - Decided in favour of assessee.

Summary

Issues:
Validity of assessment under section 153A (1) (b) of the Income Tax Act - No incriminating material found during search
Disallowance made under section 14A of the Act
Interpretation of section 153A regarding abatement of pending assessments

Validity of assessment under section 153A (1) (b) of the Income Tax Act - No incriminating material found during search:
The appeal involved a challenge to the validity of an assessment framed under section 153A (1) (b) of the Income Tax Act due to the absence of incriminating material found during the search. The assessee contended that no incriminating material was discovered during the search, citing a judgment of the Rajasthan High Court. The learned CIT (Appeals) allowed the appeal on merits but decided against the assessee on the legal issue. The appellate tribunal examined various judgments and held that in the absence of incriminating material found during the search, the Assessing Officer lacked jurisdiction to make additions under section 153A of the Act. The Cross Objection filed by the assessee was allowed, leading to the dismissal of the Department's appeal.

Disallowance made under section 14A of the Act:
The Department challenged the action of the learned CIT (Appeals) in deleting the disallowance under section 14A of the Act. The assessee also filed a Cross Objection on the same issue. The assessee argued that assessments not abated at the time of search should be based only on material unearthed during the search. The appellate tribunal referred to judgments by various High Courts and the Special Bench of the I.T.A.T., emphasizing that assessments not abated should be made solely on the basis of incriminating material found during the search. Relying on legal precedents, the tribunal held that in the absence of incriminating material during the search and no abatement of assessment proceedings, the Assessing Officer lacked jurisdiction to make additions under section 153A of the Act. Consequently, the Cross Objection of the assessee was allowed.

Interpretation of section 153A regarding abatement of pending assessments:
The appellate tribunal analyzed the provisions of section 153A of the Act, which empower the Assessing Officer to assess or reassess the income of the assessee for six assessment years preceding the year of search. The tribunal referred to a Special Bench decision and subsequent High Court judgments to clarify that assessments abated due to a search should be based on material found during the search. In cases where assessments are not abated, assessments under section 153A should rely only on incriminating material discovered during the search. The tribunal concluded that in the absence of incriminating material and non-abatement of assessment proceedings, the Assessing Officer lacked jurisdiction to make additions under section 153A of the Act. Consequently, the appeal of the Revenue was dismissed, and the Cross Objections of the assessee were allowed.