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2020 (8) TMI 817 - AT - Income TaxAssessment framed u/s.153A - Whether incriminating material found during the course of search? - addition on account of unaccounted purchases, undisclosed income from professional services and disallowances of preliminary expenses - HELD THAT - There is no incriminating material found during the course of search for preliminary expenses or for payment of profession services or alleged bogus purchases. The Assessing Officer himself observed that all these issues were raised during the course of assessment proceedings and there is no specific material pertaining to Assessment Years 2006-07 and 2007-08. Only an inference has been drawn based on subsequent inquiries relevant for the Assessment Years 2009-10 and 2010-11 in the impugned Assessment Year, otherwise there is no whisper of any incriminating material qua these assessment years. It is a well settled within the jurisdiction of the Delhi High Court that where for any of the assessment years falling within 6 years preceding the year in which search took place, the assessments which are not pending or had attained finality before the date of search, the additions can be made only on the basis of incriminating material found during the course of search qua that assessment year, i.e., the material should pertained to that Assessment Year - see MEETA GUTGUTIA PROP. M/S. FERNS N PETALS 2017 (5) TMI 1224 - DELHI HIGH COURT As none of the additions made by the Assessing Officer in the impugned Assessment Years 2006-07 and 2007-08 are based on any incriminating material found during the course of search pertaining to these assessment years, and therefore, we hold that these additions are beyond the scope of assessment framed u/s.153A/143(3). On this legal ground alone, the additions made by the Assessing Officer are deleted. - Decided in favour of assessee.
Issues Involved:
1. Whether the additions made by the Assessing Officer on account of unaccounted purchases, undisclosed income from professional services, and disallowances of preliminary expenses are beyond the scope of assessment under Section 153A as they are not based on any incriminating material found during the course of search. Detailed Analysis: Issue 1: Scope of Assessment under Section 153A The core issue in these appeals is whether the additions made by the Assessing Officer (AO) on account of unaccounted purchases, undisclosed income from professional services, and disallowances of preliminary expenses are valid under Section 153A, given that these additions were not based on any incriminating material found during the search. Facts and Background: - The assessee's appeals pertain to the Assessment Years (AY) 2006-07 and 2007-08. - A search and seizure action was conducted on 24.09.2009. - The returns for AY 2006-07 and 2007-08 had attained finality before the search, making them unabated assessments as per the second proviso to Section 153A. - The AO made additions based on observations from the balance sheet and statements recorded during the search, particularly focusing on bogus purchases and preliminary expenses. Assessing Officer's Observations: - The AO noted that the assessee had wrongly claimed deductions under Section 35D and made additions for unaccounted purchases based on statements recorded during the search, specifically the statement of the CMD of the Tulip Group, who admitted to bogus purchases in subsequent years. - However, there was no incriminating material found specifically for AY 2006-07 and 2007-08. Appellate Authority's Confirmation: - The CIT(A) confirmed the AO’s additions, relying on the CMD's declaration of ?75 crores on account of bogus purchases in various group companies in subsequent years. Assessee's Argument: - The assessee contended that the additions were not based on any incriminating material found during the search relevant to AY 2006-07 and 2007-08. - Cited precedents from Hon'ble Jurisdictional High Court cases (CIT vs. Kabul Chawla and PCIT vs. Meeta Gutgutia) which established that additions can only be made based on incriminating material found during the search for the specific assessment year. Revenue's Argument: - The CIT-DR argued that the statements and inquiries, even though related to subsequent years, should be considered as incriminating material for the years under appeal. Tribunal's Findings: - The Tribunal observed that none of the additions were based on any material or evidence found during the search relevant to AY 2006-07 and 2007-08. - The AO’s references to the CMD’s statements pertained to subsequent financial years and did not relate to the specific years under appeal. - Citing the legal principle established by the Delhi High Court, the Tribunal reiterated that additions under Section 153A can only be made based on incriminating material found during the search for the specific assessment year. - The Tribunal emphasized that for completed assessments, the AO can only make additions if incriminating material pertaining to those years is found during the search. Conclusion: - The Tribunal held that the additions made by the AO for AY 2006-07 and 2007-08 were beyond the scope of Section 153A as they were not based on any incriminating material found during the search. - Consequently, the additions were deleted, and the appeals of the assessee were allowed. Order Pronounced: - The appeals of the assessee were allowed, and the order was pronounced in the open court on 27th August 2020.
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