2016 (8) TMI 725 - AT - Income Tax

Addition on material or return of income filed by the assessee prior to the date of search - Held that - As where assessments are not pending, there cannot be any abatement of the assessments and, hence, the Assessing Officer has no power to bring to tax any income on the basis of the material or return of income filed by the assessee prior to the date of search - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment under section 153A of the Income-tax Act, 1961.
2. Disallowance of interest claimed under the head "Business".
3. Unexplained credits in the capital account.

Detailed Analysis:

1. Validity of the Assessment under Section 153A:
The primary issue was whether the assessment under section 153A was valid in the absence of any incriminating material found during the search and seizure operation. The Tribunal noted that the Assessing Officer did not record any incriminating material found from the possession of the assessee during the search. The additions made were based on the returns filed by the assessee prior to the search. The assessee argued that without incriminating material, assessments under section 153A could not be made. The Tribunal referred to several judgments, including CIT v. All Cargo Global Logistics Ltd. and CIT v. Kabul Chawla, which supported the assessee's contention that completed assessments could only be interfered with if incriminating material was found during the search. The Tribunal concluded that since the assessments were not pending and no incriminating material was found, the assessments under section 153A were invalid. Consequently, ground No. 3 of the cross objection of the assessee was allowed, and the assessments for the assessment years 2003-04 to 2006-07 were quashed.

2. Disallowance of Interest Claimed:
The assessee had claimed interest under the head "Business," which was disallowed by the Assessing Officer. The Commissioner of Income-tax (Appeals) deleted the disallowance of interest of ?6,62,998. The Revenue appealed against this deletion. However, since the Tribunal quashed the assessments under section 153A, the issue of disallowance of interest became academic and was not adjudicated further.

3. Unexplained Credits in the Capital Account:
The Assessing Officer made additions for unexplained credits in the capital account. The Commissioner of Income-tax (Appeals) confirmed the addition to the extent of ?1,90,000. The assessee filed a cross objection against this confirmation. Similar to the disallowance of interest, this issue also became academic due to the quashing of the assessments under section 153A and was not further adjudicated.

Conclusion:
The Tribunal quashed the assessments for the assessment years 2003-04 to 2006-07 due to the absence of incriminating material found during the search, rendering other grounds on the merits of the additions academic. Consequently, the Revenue appeals for these years were dismissed, and the cross objections of the assessee were partly allowed.