2022 (3) TMI 899 - AT - Income Tax

Assessment u/s 153A - Additions on account of certain items of income - whether addition apparently was not made based on seized materials - search and seizure operation under section 132 - HELD THAT - We are convinced that the addition of agricultural income as income from other sources was not based on any incriminating/seized material found as a result of search. Even, the disallowance of loss claimed against house property income is also not with reference to any seized material. It is a fact on record that on the date of search, the assessment proceedings relating to the impugned assessment years did not abet As per the ratio laid down by the Hon ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT in a proceeding under section 153A of the Act, addition has to be made on the basis of seized/incriminating materials found as a result of search. Since, the decision of the Assessing Officer to treat the agricultural income as income from other sources and disallowance of loss claimed against house property income are not based on incriminating/seized material, no such addition/disallowance could have been made by the Assessing Officer. Accordingly, we delete the addition/disallowance made on account of agricultural income and set off of loss against house property income - Assessee appeal allowed.

Summary

Issues:
Sustainability of additions made on account of certain items of income without seized materials in assessment years 2008-09, 2009-10, and 2010-11 under section 153A of the Income-tax Act, 1961.

Analysis:

1. Controversy Regarding Additions on Income Items:
The appeals revolve around the sustainability of additions made on income items without seized materials in assessment years 2008-09, 2009-10, and 2010-11 under section 153A of the Income-tax Act, 1961. The Assessing Officer treated agricultural income offered by the assessee as income from other sources and disallowed a loss claimed against house property income. The assessee contended that without incriminating/seized material, no additions could be made under section 153A. However, the Commissioner (Appeals) did not uphold this argument.

2. Assessment Proceedings and Legal Basis:
The search and seizure operation under section 132 of the Act was conducted at the assessee's premises, leading to proceedings under section 153A for the relevant assessment years. The Assessing Officer, in the absence of incriminating/seized material, treated agricultural income as income from other sources and disallowed the claimed loss against house property income. The key legal issue was whether such additions could be sustained without seized materials as per the provisions of section 153A.

3. Judicial Interpretation and Decision:
The ITAT Delhi, considering the arguments and assessing the departmental orders, emphasized that additions must be based on seized/incriminating materials found during the search in section 153A proceedings. Referring to the precedent set by the Hon'ble Jurisdictional High Court in CIT vs. Kabul Chawla, it was established that additions without such materials were impermissible. As the additions and disallowances were not supported by seized materials, the ITAT ruled in favor of the assessee, deleting the additions/disallowances made on agricultural income and house property loss. Consequently, other grounds raised by the assessee were deemed academic and not deliberated upon.

4. Final Decision and Outcome:
In conclusion, the ITAT allowed the appeals, overturning the additions made on agricultural income and disallowance of house property loss for the assessment years 2008-09, 2009-10, and 2010-11. The judgment highlighted the necessity for additions in section 153A proceedings to be substantiated by seized/incriminating materials, ensuring a fair and lawful assessment process.