2019 (1) TMI 751 - AT - Income Tax

Assessment framed u/s 153A - Held that - Assessments framed u/s 153A of the Act are without jurisdiction and the order deserves to be quashed. Addition u/s 69C - Held that - The assessee must have incurred some expenditure but there is nothing to show that the expenditure was, in fact, incurred by the assessee. The assessee had denied having incurred the expenditure and it was on the Revenue to prove that the assessee had paid kickbacks by participating in the oil for food programme. No such evidence has been brought on record except Volkar Committee Report. The Volkar Committee was constituted by the United Nations for a special purpose. In the case of International Forest Company 1974 (12) TMI 33 - JAMMU AND KASHMIR HIGH COURT has held that even if it is to be taken that the Income tax authorities are not bound by strict rules of evidence, report of Iyengar Commission could not be referred to and relied upon by the Appellate Tribunal unless it had not only invited the attention of the assessee to the passages which it intended to rely but had also given opportunity to the assessee to explain those passages and to adduce evidence against the truth of recitals contained therein. We hold that the Revenue grossly failed in discharging the onus u/s 69C of the Act without bringing any cogent direct material evidence on record. The additions so made cannot be sustained and accordingly directed to be deleted. - Decided against revenue Computation of claim of deduction u/s 80HHC as originally filed and claimed in its return of income - Held that - The findings of the CIT(A) are based upon the judgment of the Hon ble Supreme Court in the case of Sun Engineering Works 1992 (9) TMI 1 - SUPREME COURT and Chettinad Corporation Pvt. Ltd 1993 (1) TMI 72 - SUPREME COURT and the direction for computing the claim of deduction u/s 80HHC as per original return filed calls for no interference. - Decided against revenue

Summary

Issues Involved:
1. Assumption of jurisdiction under Section 153A of the Income-tax Act, 1961.
2. Addition based on Volker Committee Report and Section 69C of the Income-tax Act.
3. Claim of deduction under Section 80HHC of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction under Section 153A:
The core issue raised by the assessee was the assumption of jurisdiction under Section 153A of the Income-tax Act, 1961, in the absence of any incriminating material found during the search. The search and seizure operation was conducted on M/s Flex Group on 23.02.2006, and assessments for the years 2003-04 and 2004-05 were completed. The tribunal noted that any addition made under Section 153A must be based on incriminating material found during the search. The tribunal cited the Delhi High Court's judgment in Kabul Chawla (380 ITR 573), which held that completed assessments can be interfered with under Section 153A only on the basis of incriminating material unearthed during the search. Since no such material was found, the tribunal concluded that the assessments framed under Section 153A were without jurisdiction and quashed the orders.

2. Addition Based on Volker Committee Report and Section 69C:
The Assessing Officer made additions based on the Volker Committee Report, which alleged kickbacks in the Oil for Food Programme. The tribunal observed that the additions were made solely on the presumption that the assessee must have paid kickbacks, without any concrete evidence. The tribunal emphasized that under Section 69C, the onus is on the Revenue to prove that the assessee incurred the expenditure. The tribunal referenced the Jammu and Kashmir High Court's decision in International Forest Company (101 ITR 719), which held that reports like the Volker Committee's cannot be used for assessments unless the assessee is given an opportunity to explain. The tribunal found that the Revenue failed to provide direct evidence and directed the deletion of the additions.

3. Claim of Deduction under Section 80HHC:
The Revenue's appeal concerned the CIT(A)'s direction to compute the deduction under Section 80HHC as originally filed by the assessee. The assessee had revised its return but did not claim the deduction in the revised return. The Assessing Officer dismissed the revised return and denied the deduction. The CIT(A) relied on the Supreme Court's judgments in Sun Engineering Works (198 ITR 297) and Chettinad Corporation Pvt Ltd (200 ITR 320), which held that assessments under Section 153A cannot result in income lower than originally assessed. The tribunal upheld the CIT(A)'s decision, stating that the deduction should be computed as per the original return filed.

Conclusion:
The tribunal allowed all three appeals of the assessee and dismissed the Revenue's appeal. The order emphasized the necessity of incriminating material for additions under Section 153A, the requirement of concrete evidence for additions under Section 69C, and the proper computation of deductions as per original returns in reassessment proceedings.