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2022 (4) TMI 492 - AT - Income TaxAssessment u/s 153A - validity of the search assessment - HELD THAT - All the additions as confirmed by Ld. CIT(A) in the impugned order are liable to be deleted since the same are not based on any incriminating material unearthed during the course of search operations. We order so. The assessee s legal grounds succeed. Interest on borrowed capital - assessee claimed interest in borrowed capital under the head Income from House Property - CIT(A) held that interest on subsequent loan could be allowed provided the same was taken to repay earlier loans and deduction would be allowable only to the extent of interest on earlier loan used for acquiring the property and not on the unpaid interest on earlier loans - HELD THAT - We concur with the findings of Ld. CIT(A) since the same are based on facts. The interest is allowable only if the loan has been utilized to acquire the property. To that extent, interest has already been allowed to the assessee. Finding no infirmity in the impugned order, on this issue, we dismiss the ground raised by the assessee. Rental Income - We find that in case of property which has been let out for part of the year, the assessee would be entitled for vacancy allowance if the property remains vacant for part of the year. It is undisputed position that the property has remained unoccupied for part of the year. Therefore, the assessee is entitled for vacancy allowance and this addition has no legs to stand. By deleting the same, we allow the ground of appeal. Legal grounds are concerned, we find that the assessee was subjected to search action on 11.05.2012. The assessee had already filed return of income on 14.03.2012. However, the time limit to issue notice u/s 143(2) had not expired and Ld. AO could have issued said notice by 30.09.2012. Therefore, it is not a case of concluded assessment. Rather Ld. AO was well within his right to make any addition after examination of assessee s books of account. The legal proposition laid down by Hon ble Delhi High Court in Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT also supports this view. No infirmity has been shown to us in the jurisdiction acquired by Ld. AO. - Decided in favour of assessee.
Issues Involved:
1. Validity of search assessment and jurisdiction. 2. Timeliness of the assessment order and jurisdictional issues. 3. Disallowance of interest payments in the computation of income from house property. 4. Lack of proper opportunity and violation of principles of natural justice. 5. Additions based on the absence of incriminating material during search operations. 6. Specific additions for different assessment years (AYs) 2007-08 to 2013-14. Detailed Analysis: 1. Validity of Search Assessment and Jurisdiction: The assessee challenged the validity of the search assessment, arguing that the CIT(A) erred in sustaining the assessment without proper reasons and justification, particularly in the absence of search/seized materials. The CIT(A) upheld the assessment, relying on statutory provisions that mandated the AO to issue notice for preceding six years and assess total income, even if no incriminating materials were found. The Tribunal, however, found that the additions were not based on any incriminating material and thus could not be sustained, referencing the legal position established in CIT V/s Kabul Chawla and other similar judgments. 2. Timeliness of the Assessment Order and Jurisdictional Issues: The assessee contended that the assessment order was passed beyond the limitation period and was therefore invalid. The CIT(A) dismissed these grounds, but the Tribunal found that since no incriminating material was found during the search, the additions could not be justified, thus rendering the assessment invalid for the years where the time limit to scrutinize returns had already expired. 3. Disallowance of Interest Payments: The CIT(A) partly sustained the disallowance of interest payments claimed under the head 'income from house property.' The Tribunal examined the facts and upheld the disallowance only to the extent that the loan was not utilized for acquiring the property. For AY 2011-12, the Tribunal concurred with the CIT(A) that interest on subsequent loans could be allowed if used to repay earlier loans used for acquiring the property. 4. Lack of Proper Opportunity and Violation of Principles of Natural Justice: The assessee argued that the CIT(A) failed to provide a proper opportunity before passing the impugned order, thus violating principles of natural justice. The Tribunal did not find sufficient grounds to overturn the CIT(A)'s decision on this basis but focused on the absence of incriminating material for the additions. 5. Additions Based on the Absence of Incriminating Material: The Tribunal emphasized that for non-abated assessments, any additions must be based on incriminating material found during the search. Since no such material was presented, the Tribunal deleted all additions for AYs 2007-08 to 2010-11. This position was supported by multiple judicial precedents, including the decisions in CIT V/s Kabul Chawla and Pr. CIT V/s Meeta Gutgutia. 6. Specific Additions for Different Assessment Years: - AY 2007-08 to 2010-11: The Tribunal deleted all additions as they were not based on any incriminating material. - AY 2011-12: The Tribunal allowed the vacancy allowance for rental income but upheld the disallowance of interest on borrowed capital to the extent that the loan was not used for acquiring the property. - AY 2012-13: The Tribunal confirmed the disallowance of interest on borrowed capital and deleted the additions of notional rent and notional interest. - AY 2013-14: The Tribunal upheld the disallowance of interest on borrowed capital and deleted other additions, including notional rental income and notional interest. Conclusion: The appeals for AYs 2007-08 to 2010-11 were allowed, and the appeals for AYs 2011-12 to 2013-14 were partly allowed, with the Tribunal's decisions primarily based on the absence of incriminating material to justify the additions made by the AO. The Tribunal's findings aligned with established legal precedents, ensuring that assessments were conducted based on substantive evidence rather than procedural technicalities.
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