2016 (4) TMI 126 - AT - Income Tax

Assessment under section 153A - Held that - The assessments of 2007-08 to 2011-12, which are not based on any incriminating and therefore the assessment framed under section 153A of the Act cannot be stand on its own leg, which are not framed on the basis of any incriminating material found during the course of search operation and they do not conform the mandate of section 153A of the Act. Accordingly, the assessments framed under section 153A r.w.s. 143(3) for the assessment years 2007-08 to 2011-12 five assessment years are quashed. Assessment year 2012-13 and 2013-14, there is a time limit to issue notice under section 143(2) of the Act and the pending assessment were abated for these assessment years and framing assessment of these assessment years are valid. Further, regarding disallowance of agricultural income in 153A assessment, when there is no material to suggest that the assessee is having lesser agricultural income, what is stated so as to reduce it and treat as income from other sources. More so in the assessment year 2008-09 vide assessment order dated 06.12.2010 and for assessment year 2009-10 dated 09.12.2011, the Assessing Officer has accepted the returned agricultural income and when no incriminating material found to suggest the agricultural income is non-agricultural income and arbitrarily disallowing the same by the Assessing Officer and the ld. CIT(A) are not justified. Accordingly, the agricultural income declared by the assessee has to be accepted. Disallowance of deduction under section 54F - The assessee having purchased the land by investing capital gains and the intention to construct a residential building, for which, the assessee have a period of three years to construct a new residential building and if at all the assessee fails to comply with the requirement of section 54F as per proviso to section 54F(1) to (4) of the Act, then only it can be denied. Interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A as held by the Tribunal in the case of ACIT v. VN. Devadoss 2013 (9) TMI 400 - ITAT CHENNAI ). The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A. Therefore, the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of reopening assessments under section 153A for assessment years 2007-08 to 2011-12.
2. Disallowance of agricultural income.
3. Disallowance of deduction under section 54F.
4. Levy of interest under sections 234A and 234B.

Detailed Analysis:

1. Validity of Reopening Assessments under Section 153A:
The primary issue was whether the assessments for the years 2007-08 to 2010-11 could be reopened under section 153A in the absence of incriminating material found during the search. The Tribunal noted that the assessments for 2008-09 and 2009-10 had already been completed under section 143(3) and that no incriminating documents were found during the search. The Tribunal referenced the Mumbai Special Bench decision in All Cargo Global Logistic Ltd. v/s DCIT, which held that reassessment under section 153A can only be made based on incriminating material found during the search. Therefore, the Tribunal concluded that the assessments for the years 2007-08 to 2011-12, which were not based on any incriminating material, could not be reopened under section 153A. The assessments for these years were thus quashed.

2. Disallowance of Agricultural Income:
The Tribunal examined the disallowance of agricultural income across various assessment years. It was noted that the Assessing Officer had previously accepted the agricultural income for the years 2008-09 and 2009-10 under section 143(3). The Tribunal found no incriminating material to suggest that the agricultural income was non-agricultural. Consequently, the disallowance of agricultural income by the Assessing Officer was deemed arbitrary and unjustified. The Tribunal ordered that the agricultural income declared by the assessee should be accepted.

3. Disallowance of Deduction under Section 54F:
Regarding the disallowance of deduction under section 54F, the Tribunal considered the assessee's argument that the land was purchased for constructing a residential building and that there was a three-year period to complete the construction to avail the exemption. The Tribunal found merit in this argument, referencing the CBDT Circular No. 667, which includes the cost of the plot in the cost of the residential house. The Tribunal concluded that the deduction under section 54F could not be denied at this stage and could only be reconsidered if the assessee failed to comply with the requirements within the stipulated period.

4. Levy of Interest under Sections 234A and 234B:
The Tribunal addressed the issue of interest under sections 234A and 234B. It held that interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A. For section 234B, interest is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A. The period for charging interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A.

Conclusion:
All the appeals of the assessee were allowed, and the assessments framed under section 153A r.w.s. 143(3) for the assessment years 2007-08 to 2011-12 were quashed. The agricultural income declared by the assessee was accepted, and the deduction under section 54F was upheld. The Tribunal also provided clarity on the levy of interest under sections 234A and 234B.