2021 (7) TMI 1222 - AT - Income Tax

Assessment u/s 153A - Non-service of notice - HELD THAT - There is no dispute of the fact that the search seizure operation in this case took place on 20.06.2014, by which date the time period to issue notice u/s. 143(2) for assessment year 2009-10 stood expired. There is also no dispute that no incriminating material was found during the search and seizure operation to base any addition qua this assessment year. In CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Hon'ble Delhi High Court held that the assessment cannot be made arbitrarily without any relevance or nexus with the seized material and the assessment in such cases has to be made only on the basis of incriminating material found during the search and completed assessments cannot be interfered with arbitrarily. In such circumstances, the finding of the ld. CIT(A) cannot be interfered with. - Decided against revenue.

Summary

Issues:
1. Validity of additions made by the Assessing Officer based on interest computation and loss on shares/derivatives.
2. Consideration of incriminating material in assessment proceedings.
3. Non-representation of the assessee during the appeal proceedings.

Analysis:
1. The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning additions made by the Assessing Officer. The Assessing Officer computed interest on advances given to group companies, noting a significant difference between the interest rate charged and the cost of funds received. Additionally, the Assessing Officer made additions on account of loss on shares/derivatives and under section 14A of the Income-tax Act. The CIT(A) allowed the assessee's contention, citing the decision in CIT vs. Kabul Chawla, emphasizing the necessity of incriminating material for such additions. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

2. The Tribunal highlighted that the search and seizure operation took place before the expiration of the period to issue notice under section 143(2) for the relevant assessment year. No incriminating material was discovered during the operation to support the additions made by the Assessing Officer. Citing the precedent in CIT vs. Kabul Chawla, the Tribunal emphasized the requirement for a nexus with seized material for assessments and the prohibition on arbitrary additions without such a connection. Consequently, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of incriminating material in assessment proceedings.

3. During the appeal proceedings, the assessee was not represented, and the notice sent to the provided address was not acknowledged. The Tribunal noted that non-service of notice was due to the conduct of the assessee and proceeded with the appeal based on the available record. Despite the absence of representation from the assessee, the Tribunal considered the arguments presented by the learned DR, ultimately dismissing the Revenue's appeal based on the lack of incriminating material to support the additions made by the Assessing Officer.

In conclusion, the Tribunal's decision emphasized the necessity of incriminating material to support additions in assessment proceedings, as highlighted in the CIT vs. Kabul Chawla case. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision and underscoring the importance of a valid basis for additions in income tax assessments.