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2022 (9) TMI 1357 - AT - Income TaxAssessment u/s 153A - Admission of additional evidence by CIT - whether CIT(A) has erred in admitting the additional evidence in absence of fulfillment of conditions mentioned in Rule 46A of the Income-tax Rules, 1962 and in deleting the addition made on account of unsecured loan in spite of the failure of the assessee to establish the genuineness of the unsecured loan during the assessment as well as remand proceedings? - HELD THAT - CIT-DR could not show us, from the first appellate order, which piece of evidence which was not before the AO was considered by the ld.CIT(A) while granting relief to the assessee in violation of Rule 46A of the IT Rules. Therefore, ground No.3 of the Revenue being devoid of merits is being dismissed. Findings of the CIT(A), wherein he granted relief to the assessee by following the judgement of the jurisdictional High Court of Delhi in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - A search and seizure operation u/s 132 of the Act was carried out on the assessee on 08.07.2015 and as on the date of search, i.e., 08.07.2015, the assessment year 2010-11 was the year of completed assessment or unabated assessment. On being specifically asked from the CIT-DR, CIT-DR did not dispute the above noted facts and could not point out any incriminating material in the hands of the AO supporting the additions made by him in the assessment order dated 29.12.2017 passed u/s 153A r.w.s 143(3) - We are compelled to hold that the ld.CIT(A) was right in granting relief to the assessee by following the judgement of Kabul Chawla (supra) wherein their Lordships, speaking for the jurisdictional High Court, categorically held that when, on the date of search, the assessment already stood completed, therefore, no new incriminating material was unearthed during the search, no additions could have been made to the income already assessed in the hands of the assessee for AY 2010-11. Grounds of the Revenue are dismissed.
Issues Involved:
1. Reliance on the ratio held in Kabul Chawla and the requirement of incriminating material for assessment under Section 153A. 2. Deletion of specific additions by CIT(A) based on Kabul Chawla. 3. Admission of additional evidence by CIT(A) in violation of Rule 46A. 4. Deletion of additions related to unsecured loans and the genuineness of the unsecured loans. 5. General challenge to the order of CIT(A) by the Revenue. Issue-wise Detailed Analysis: 1. Reliance on the ratio held in Kabul Chawla and the requirement of incriminating material for assessment under Section 153A: The Revenue contended that the CIT(A) erred in relying on the judgment of the Delhi High Court in the case of Kabul Chawla, which held that completed assessments could not be interfered with by the AO without incriminating material. The Revenue argued that Section 153A does not stipulate such conditionality. However, the assessee's counsel maintained that the CIT(A) correctly applied the Kabul Chawla judgment, which has been consistently upheld by various judicial precedents, including the Delhi High Court, emphasizing that no addition can be made in the absence of incriminating material found during the search. 2. Deletion of specific additions by CIT(A) based on Kabul Chawla: The CIT(A) deleted several additions made by the AO, including: - Addition of Rs. 20,99,129 on account of undervaluation of closing stock for A.Y. 2009-10. - Addition of Rs. 18,87,840 on account of unexplained investment in shares. - Addition of Rs. 8,80,000 on account of undisclosed capital gain on the sale of property. - Addition of Rs. 2,52,07,230 on account of unsecured loans. The CIT(A) held that these additions were unsustainable as no incriminating material was found during the search. The Tribunal observed that the CIT(A) rightly applied the legal position established in Kabul Chawla, which states that completed assessments can only be interfered with based on incriminating material found during the search. 3. Admission of additional evidence by CIT(A) in violation of Rule 46A: The Revenue argued that the CIT(A) admitted additional evidence without fulfilling the conditions mentioned in Rule 46A of the Income-tax Rules, 1962. However, the Tribunal found no merit in this ground as the CIT-DR could not show any evidence that was not before the AO but considered by the CIT(A) in violation of Rule 46A. Thus, this ground was dismissed. 4. Deletion of additions related to unsecured loans and the genuineness of the unsecured loans: The Revenue contended that the CIT(A) erred in deleting the addition made on account of unsecured loans, arguing that the assessee failed to establish the genuineness of the loans during the assessment and remand proceedings. However, the Tribunal upheld the CIT(A)'s decision, noting that the assessment was completed, and no incriminating material was found during the search to justify the addition. 5. General challenge to the order of CIT(A) by the Revenue: The Revenue's general challenge to the CIT(A)'s order was also dismissed. The Tribunal upheld the CIT(A)'s findings, noting that the assessment for A.Y. 2010-11 was completed, and no new incriminating material was found during the search. The Tribunal found no reason to interfere with the CIT(A)'s decision, which was consistent with the legal position established in Kabul Chawla and other related judicial precedents. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that granted relief to the assessee based on the judgment in Kabul Chawla. The Tribunal confirmed that no additions could be made in the absence of incriminating material found during the search when the assessment was already completed. The appeal filed by the Revenue was dismissed.
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