2022 (5) TMI 1220 - AT - Income Tax

Revision u/s 263 - Validity of assessment orders completed u/s 143(3) r.w.s. 153A - eligibility of deduction u/s 80IB - HELD THAT - Admittedly, there is no incriminating material found during the course of search u/s 132 and the assessment orders for the relevant assessment years, namely, A.Y. 2011-2012 and 2012-2013 had already been concluded as on the date of search. Hence, deduction u/s 80IB which is already allowed in the assessments completed u/s 143(3) (for assessment year 2011-2012 the assessment completed vide order dated 10.05.2013 and for assessment year 2012-2013, the assessment u/s 143(3) was concluded on 14.08.2014) cannot be denied unless incriminating material is found during the course of search, warranting disallowance. Therefore, on the fact of the instant case, in an assessment completed u/s 143(3) r.w.s. 153A pursuant to search u/s 132 A.O. could not have disallowed the claim of deduction u/s 80IB - Pr.CIT is seeking to revise the assessment orders completed u/s 143(3) r.w.s. 153A of the I.T.Act. When the Assessing Officer u/s 143(3) r.w.s. 153A of the I.T.Act, cannot deny the claim of deduction u/s 80IB of the I.T.Act (in absence of incriminating material), the Pr.CIT in a revisionary proceeding cannot direct the AO to disallow the claim of deduction. In other words, there is no error in the assessment orders completed u/s 143(3) r.w.s. 153A (since there is no incriminating material found during the course of search pertaining to the claim of deduction u/s 80IB of the I.T.Act), warranting interference by Pr.CIT u/s 263. In the light of the aforesaid reasoning and the ITAT order in the case of Shri S.R.Ravishankar v. Pr.CIT 2022 (2) TMI 1238 - ITAT BANGALORE we quash the impugned orders u/s 263 of the I.T.Act, since the assessment orders passed u/s 143(3) r.w.s. 153A of the I.T.Act cannot be stated to be erroneous. Appeal of assessee allowed.

Summary

Issues Involved:
1. Legality of proceedings initiated under Section 263 of the Income Tax Act.
2. Validity of the Principal Commissioner of Income Tax's (Pr.CIT) order setting aside the assessment orders for re-examination of the deduction under Section 80IB of the Income Tax Act.
3. Requirement of incriminating material for reassessment under Section 153A of the Income Tax Act.

Detailed Analysis:

1. Legality of Proceedings Initiated under Section 263 of the Income Tax Act:
The appeals were filed against two orders of the Pr.CIT passed under Section 263 of the Income Tax Act, which were challenged on the grounds of being opposed to law, equity, and facts of the case. The Pr.CIT had initiated proceedings under Section 263, questioning the allowability of the deduction under Section 80IB, despite no incriminating documents being found during the search operations under Section 132.

2. Validity of the Pr.CIT's Order Setting Aside the Assessment Orders:
The Pr.CIT had set aside the assessment orders passed under Section 143(3) read with Section 153A, directing the Assessing Officer (AO) to re-examine the claim of deduction under Section 80IB. The assessee argued that the assessments for the relevant years had already been completed, and the claim of deduction under Section 80IB had been accepted. The Pr.CIT's action was deemed unjustified as there was no incriminating material found during the search to warrant such a revision.

3. Requirement of Incriminating Material for Reassessment under Section 153A:
The Tribunal referred to various judicial pronouncements, including the Karnataka High Court's decision in IBC Knowledge Park Private Limited v. CIT and the Delhi High Court's decision in CIT v. Kabul Chawla, which held that additions in assessments under Section 153A can only be made based on incriminating material found during the search. The Tribunal noted that in the absence of any such material, the completed assessments could not be disturbed. The Tribunal concluded that since no incriminating material was found during the search, the deduction under Section 80IB, which had already been allowed, could not be denied. Consequently, the Pr.CIT's orders under Section 263 were quashed as the original assessment orders were not erroneous.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, quashing the Pr.CIT's orders under Section 263. The assessment orders completed under Section 143(3) read with Section 153A were upheld, as there was no incriminating material found during the search to justify the denial of the deduction under Section 80IB. The Tribunal emphasized that the Pr.CIT could not direct the AO to disallow the deduction in the absence of any incriminating evidence.