2017 (2) TMI 1194 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - Bogus gift received - unabated assessments - search activities - Held that - We find from the record that the return of income was filed on 29.10.2004 whereas the search was conducted on 17.1.2008 meaning thereby the assessee for the assessment year 2004-05 had attained finality on the date of search. In terms of section 153A of the Act, the already finalised assessment can only be disturbed if the search team has found some incriminating documents or material and which was relied upon by the AO at the time of framing the assessment or the addition is made in the order passed under section 143(3) r.w.s.153A of the Act by referring to seized material and not otherwise. As in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT ) held that where the assessments have abated upon the issuing the notice u/s 153A of the Act the AO has original jurisdiction as well as jurisdiction under section 153A so far as assessments for six assessment years are concerned. The Hon ble High Court further held that no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. The facts of the assessee are identical to one as has decided by the co-ordinate Bench of the Tribunal in assessee s husband case 2015 (1) TMI 658 - ITAT MUMBAI where the search was conducted simultaneously and the fact are identical. We, therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal and set aside the order of ld.CIT(A) and direct the AO to delete the addition made u/s 68 of the Act. - Decided in favour of the assessee

Summary

Issues Involved:
1. Addition of ?23,78,000 under section 68 of the Income Tax Act without incriminating material.
2. Penalty imposed under section 271(1)(c) for the same addition.

Issue 1: Addition of ?23,78,000 under section 68 of the Income Tax Act without incriminating material:
The appeal was filed by the assessee against the order passed by the ld.CIT(A) regarding the addition of ?23,78,000 under section 68 of the Income Tax Act. The AO added this amount to the total income of the assessee, considering it non-genuine. The assessee received this amount as a gift in the financial year 2003-04. The FAA dismissed the appeal, stating that the genuineness of the gift was not proven. The assessee argued that the assessment was already finalized before the search, and no incriminating material was found during the search. The assessee relied on previous tribunal decisions and case laws to support their claim. The tribunal noted that the assessment can only be disturbed if incriminating material is found during the search, as per section 153A of the Act. Referring to a similar case involving the assessee's husband, the tribunal concluded that the addition made by the AO without reference to any seized material was incorrect and void ab-initio. The tribunal also cited relevant case laws to support its decision. Consequently, the tribunal directed the AO to delete the addition of ?23,78,000 made under section 68 of the Act.

Issue 2: Penalty imposed under section 271(1)(c) for the same addition:
The second appeal by the assessee was against the penalty of ?7,84,740 imposed under section 271(1)(c) for the addition of ?23,80,000. Since the tribunal had already deleted the quantum addition in the previous appeal for the assessment year 2004-05, the penalty levied under section 271(1)(c) was deemed not to survive. Therefore, the penalty imposed was also allowed in favor of the assessee. Both appeals of the assessee were ultimately allowed by the tribunal.

This judgment by the Appellate Tribunal ITAT Mumbai addressed the issues of addition under section 68 of the Income Tax Act without incriminating material and the penalty imposed under section 271(1)(c) for the same addition. The tribunal ruled in favor of the assessee, directing the AO to delete the addition of ?23,78,000 and allowing the appeal against the penalty imposed.