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2016 (4) TMI 855 - AT - Income TaxAssessment under Section 153 - addition u/s 50C - Held that - AO has made addition by invoking deeming provision of section 50C of the Act and addition for A.Y 2005-06 has been made on the basis of facts and evidence which was already available with the AO at the time of original assessment proceedings as well as subsequent assessment proceedings which were completed on 26.12.2007 u/s 143(3) r.w.s. 153A of the Act. It is pertinent to note that the AO has not made any addition in the other A.Ys which fall within the block of A.Ys as well as in the A.Y wherein search and seizure operation was conducted. In this situation, when there was no incriminating material with the AO, found during the course of search and seizure action u/s 132 of the Act on 19.1.2009 which was second search operation in sequence, then no addition can be held as sustainable de hors incriminating material found during the course of search. On the basis of foregoing discussion, we are inclined to held that the addition made for the year under consideration, which is not based on any incriminating material found during the course of search is not sustainable and respectfully following the precedent laid down by the Hon ble High Court, in the case of Kabul Chawla supra addition made by the AO and upheld by the ld. CIT(A) is demolished. - Decided in favour of assessee
Issues Involved:
1. Sustaining the addition of Rs. 4,03,000 on account of long-term capital gain by invoking the provisions of Section 50C. 2. Charging of interest under Sections 234A and 234B. 3. Validity of the assessment order in light of principles of natural justice. Issue-wise Detailed Analysis: 1. Sustaining the Addition of Rs. 4,03,000 on Account of Long-Term Capital Gain by Invoking Section 50C: The assessee challenged the addition of Rs. 4,03,000 made by the Assessing Officer (AO) under Section 50C of the Income Tax Act, 1961. The property in question was agreed to be sold in June 2003 for Rs. 20 lakhs, with an advance of Rs. 5 lakhs received by cheque on 14.06.2003, but the sale deed was registered on 11.05.2004. Despite two search and seizure actions under Section 132, no incriminating material was found. The initial assessment made under Section 153A on 26.12.2007 did not draw any adverse inference on the same set of facts. The assessee argued that no addition should be made under Section 50C as the sale deed was already available during the original assessment, and no reference was made to the District Valuation Officer (DVO). The CIT(A) upheld the AO's decision, stating that the stamp valuation was higher than the sale consideration, and the property was registered on 11.05.2004, making Section 50C applicable. The CIT(A) also noted that the assessee did not provide evidence to claim that the stamp valuation exceeded the market value, which is necessary for invoking Section 50C(2). 2. Charging of Interest Under Sections 234A and 234B: The assessee contended that the CIT(A) erred in stating that charging of interest is consequential. The assessee argued that no interest under Section 234A is chargeable, and the interest charged under Section 234B is excessive. However, the judgment did not provide a detailed analysis or separate findings on this issue, as it became academic due to the quashing of the reassessment proceedings. 3. Validity of the Assessment Order in Light of Principles of Natural Justice: The assessee argued that the assessment for A.Y. 2005-06 was completed prior to the search, and no incriminating material was found during the search to justify the addition. The Hon'ble Jurisdictional High Court's decision in the case of Kabul Chawla was cited, which held that assessments under Section 153A should be based on seized material. The Tribunal observed that the addition made by the AO was not based on any incriminating material found during the search. The AO's action of invoking Section 50C was based on facts already available during the original assessment, and no new material was discovered during the search. The Tribunal quashed the reassessment proceedings, holding that the addition made under Section 50C without any incriminating material found during the search was not sustainable. The Tribunal followed the precedent set by the Hon'ble High Court in the case of Kabul Chawla, which emphasized that additions in assessments under Section 153A must be based on seized material. Conclusion: The Tribunal allowed the appeal of the assessee on legal grounds, quashing the reassessment proceedings. Consequently, other grounds on merits became academic and infructuous. The order was pronounced in the open court on 26.02.2016.
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