9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (3) TMI 296 - AT - Income TaxAssessment u/s 153C - Whether material seized during the course of search show undisclosed income? - HELD THAT - All documents cannot be considered as incriminating materials on the facts of the case. Insofar as the contention that balance sheet filed for assessment years 2004-2005 and 2005-2006 (as comparative) is different from the balance sheet filed before the AO is concerned, it is relevant to state that whenever there is a change in accounting policy followed by the assessee, the assessee is required to disclose the same in accordance with the Accounting Standard-1 Disclosure of Accounting Policies issued by the Institute of Chartered Accountants of India (ICAI) as applicable then and also required to regroup /reclassify the figures of the previous year so as to make them comparable with current year figures in the financial statements. It is pertinent to state that, the assessee had offered capital gains even after reclassification and it was not disputed by the Assessing Officer in the order dated 28.12.2007. There is no incriminating materials seized during the course of search, which can be linked to the three additions made in the assessment completed u/s 143(3) r.w.s. 153A of the I.T.Act. Hence, in view of the Hon ble jurisdictional High Court judgment in the case of CIT v. IBC Knowledge Park (P) Ltd. 2016 (5) TMI 372 - KARNATAKA HIGH COURT and Pr.CIT v. Delhi International Airport Pvt. Ltd. 2021 (11) TMI 928 - KARNATAKA HIGH COURT these additions cannot be sustained. - Decided in favour of assessee.
Issues Involved:
1. Nature of income from the sale of land and relinquishment of rights. 2. Disallowance of selling expenses. 3. Disallowance under Section 40(a)(ia) of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Nature of Income from Sale of Land and Relinquishment of Rights: The primary issue was whether the income from the sale of land and relinquishment of rights should be classified as business income or capital gains. The Assessing Officer (A.O.) initially treated the income as capital gains in the assessment order dated 28.12.2007. However, during the search proceedings under Section 153A, the A.O. reclassified it as business income based on certain documents, including a legal opinion from a Senior Advocate. The CIT(A) later reverted the classification back to capital gains. The Tribunal held that the original assessment was already completed, and the reassessment under Section 153A could only be based on incriminating material found during the search. The Tribunal cited various judicial pronouncements, including the Karnataka High Court's decision in IBC Knowledge Park Pvt. Ltd. v. CIT, which stated that additions in a reassessment could only be made based on incriminating material found during the search. The Tribunal found that the documents used by the A.O. to reclassify the income were already available during the original assessment and thus were not incriminating. Therefore, the Tribunal concluded that the reclassification to business income was not justified and upheld the CIT(A)'s decision to treat the income as capital gains. 2. Disallowance of Selling Expenses: The A.O. disallowed selling expenses amounting to ?1,40,48,960. The Tribunal noted that the disallowance was not based on any incriminating material found during the search. The Tribunal reiterated the principle that in the absence of incriminating material, no addition could be made in a reassessment under Section 153A. Consequently, the disallowance of selling expenses was not sustainable. 3. Disallowance under Section 40(a)(ia): The A.O. also disallowed an amount of ?9,65,175 under Section 40(a)(ia) of the Income Tax Act. Similar to the disallowance of selling expenses, the Tribunal found that this disallowance was not based on any incriminating material found during the search. Therefore, the Tribunal held that the disallowance under Section 40(a)(ia) could not be sustained in the reassessment under Section 153A. Conclusion: The Tribunal allowed the appeal filed by the assessee, holding that the reclassification of income from capital gains to business income and the disallowances of selling expenses and under Section 40(a)(ia) were not justified as they were not based on any incriminating material found during the search. Consequently, the Tribunal dismissed the appeal filed by the Revenue, which had challenged the CIT(A)'s decision to treat the income as capital gains. Order Pronounced: The appeal filed by the assessee was allowed, and the appeal filed by the Revenue was dismissed. The order was pronounced on 02nd March 2022.
|
