2022 (11) TMI 768 - AT - Income Tax

Validity of assessment u/s 153C r.w. Section 143(3) - Change of head of income from business income to income from other sources pursuant to search - HELD THAT - As in this case the Assessing Officer pursuant to search and seizure has only changed the head of income from business income to income from other sources. In doing so, he has not referred to any incriminating material found during the search. In this view of the matter, the Ld. CIT(A) is correct that addition is not sustainable It is an undisputed fact that in the present case the Assessing Officer has only changed the head of the income from business income to income from other sources and this has not been done by reference to any seized incriminating material. Accordingly there is no infirmity in the order of the Ld. CIT(A). Hence, we uphold the same. Before parting we may refer to the pleading of the Ld. counsel for the assessee that in the case of the assessee the MAT provisions were applicable and in that view of the matter the tax effect is below the limit of CBDT circular for filing appeal before the Tribunal - Appeals of the Revenue stand dismissed.

Summary

Issues:
1. Interpretation of additions made in proceedings under Section 153C of the Income Tax Act, 1961.
2. Legal justification for not appreciating pending Supreme Court decisions against the judgment of the jurisdictional High Court.
3. Direction to confine assessment based on completed assessment under Section 143(3) despite additions made under Section 153C.
4. Validity of the CIT(A) order.

Analysis:

Issue 1:
The Revenue appealed against the CIT(A)'s orders concerning additions made under Section 153C of the Income Tax Act. The Assessing Officer shifted the income head from business income to income from other sources without referencing any seized material. The CIT(A) accepted the submission that the addition lacked incriminating material and directed the assessment to be based on the completed assessment. The Tribunal upheld this decision, emphasizing the necessity of incriminating material for such adjustments.

Issue 2:
The Revenue contended that the pending Supreme Court decisions against the High Court's judgment in CIT vs. Kabul Chawla were not considered. However, the Tribunal maintained that the absence of incriminating material during the search invalidated the additions, irrespective of pending appeals, as per established legal principles.

Issue 3:
The CIT(A) directed the Assessing Officer to confine the assessment based on the completed assessment under Section 143(3), despite additions under Section 153C. The Tribunal upheld this direction, reiterating the requirement for incriminating material to support such adjustments, as established by legal precedents.

Issue 4:
The Revenue challenged the CIT(A)'s order, arguing that the assessment shifting from business income to income from other sources was not warranted. However, the Tribunal upheld the CIT(A)'s decision, emphasizing the lack of incriminating material and the adherence to legal principles established by previous judgments.

In conclusion, the Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s orders based on the absence of incriminating material during the search, which rendered the additions unsustainable. The Tribunal's decision aligned with established legal principles and precedents, emphasizing the necessity of incriminating material to support income adjustments under Section 153C.