2020 (10) TMI 349 - AT - Income Tax

Assessment u/s 153A - Validity of additions made within the scope of assessment framed u/s 153A/143(3) - whether any incriminating material found during the course of search? - HELD THAT - There are majorly two kinds disallowances/additions; firstly, brand launch expenses including the advertisement/publicity and sales promotion and secondly, the disallowance of expense u/s 40(a)(i) on account of various discounts and incentives. Both these additions admittedly are not based on any seized document or material and neither there is any whisper in the impugned orders. Now it is a well established jurisprudence that in the case of unabated assessment which had attained finality on the date of search, no addition can be made unless any incriminating material or evidence has been found during search qua that addition and for that particular assessment year. Admittedly, no such incriminating material or evidence has been found on such disallowance/addition during the course of search and, therefore, following the ratio laid down in CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Pr. CIT Vs. Meeta Gutgutia (2018) 2017 (5) TMI 1224 - DELHI HIGH COURT the additions are deleted. - Decided in favour of assessee.

Summary

Issues:
Challenging disallowance/additions without incriminating material
Disallowance of brand launch expenses, marketing expenses, discounts, and incentives

Analysis:
The appeals were filed against a common order for the assessment years 2007-08, 2008-09, and 2009-10. The assessee challenged the disallowances made by the Assessing Officer without any incriminating material found during the search. The main issues raised were related to brand launch expenses, marketing expenses, discounts, and incentives.

The counsel for the assessee argued that no incriminating material was found during the search related to the additions made in the assessment order. It was contended that assessments for the relevant years had already attained finality before the search, making them unabated assessments. The counsel relied on the legal principle that no addition can be made without incriminating material in the case of unabated assessments.

The Revenue objected to the additional ground raised by the assessee, arguing that it was not raised before the Assessing Officer or the CIT (Appeals). However, the Tribunal admitted the additional ground as it challenged the validity of additions made under section 153A/143(3) based on legal precedents set by the High Court.

The Tribunal, after considering the arguments and relevant legal principles, concluded that the additions made by the Assessing Officer were not supported by any incriminating material found during the search. As per established jurisprudence, in the absence of such material for unabated assessments, no additions can be made. Citing the judgments of the Delhi High Court, the Tribunal ruled in favor of the assessee and deleted the additions.

In the final decision, the appeals of the assessee were allowed on the legal ground, and the additions made without incriminating material were deleted. The Tribunal pronounced the order on 27th May 2020.