2023 (10) TMI 392 - AT - Income Tax

Assessment u/s 153A - unabated / completed assessment - Date of completion of original assessment or where no assessment was made, before search proceedings - Issue of no notice u/s 143(2) - whether additions made in these two years are based on any incriminating material found during the course of search? - HELD THAT - We noticed earlier that the search operations were conducted in the hands of the assessee on 13-06- 2014. We notice that the original assessment was completed for AY 2010-11 u/s 143(3) of the Act on 19-03-2013, i.e., prior to the date of search. Hence this year would fall under the category of unabated/completed assessment year. For AY 2012-13, the assessee had filed return of income on 29.11.2012. No assessment u/s 143(3) has been passed, but the time limit for issuing notice u/s 143(2) has expired prior to the date of search. The Hon ble Delhi High Court has held in the case of Chintels India Ltd 2017 (7) TMI 746 - DELHI HIGH COURT has held that the return filed would become final if no notice u/s 143(2) of the Act was issued within the limitation period prescribed for issuing the same. Accordingly, the AY 2012- 13 would also fall under the category of unabated/completed assessment . The additions made by the Assessing Officer in both the years under consideration are not based upon any incriminating material found during the course of search operations. Since both the years under consideration fall under the category of unabated assessment years , the Assessing Officer could not have made addition in both years in the absence of any incriminating material relating to the same. The above said decision of ours is based upon the decision rendered in the case of Abhishir Buildwell P Ltd 2023 (5) TMI 587 - SUPREME COURT as held no addition can be made in respect of completed assessments in absence of any incriminating material. Accordingly, the AO could not have made the impugned additions in the assessment completed u/s 153A of the Act, since no incriminating material relating to both the years under consideration was found during the course of search. Thus we are of the view that the additions made by the Assessing Officer in both the years under consideration are liable to the deleted. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves issues related to additions made by the Assessing Officer in assessment years 2010-11 and 2012-13, based on alleged commission expenses, interest disallowance, and disallowance under section 14A of the Income Tax Act.

Assessment Year 2010-11:
The Assessing Officer made additions for alleged commission expenses and interest expenditure under sections 69C and 36(1)(iii) of the Act. The CIT(A) held that since the additions were not based on incriminating material and the own funds of the assessee exceeded interest-free loans, the additions could not be sustained. The interest disallowance was also deemed unnecessary due to the availability of interest-free funds. The CIT(A) allowed the appeal of the assessee.

Assessment Year 2012-13:
The Assessing Officer added alleged commission expenses and disallowed a sum under section 14A of the Act. The CIT(A) upheld the commission payment addition but directed the disallowance under section 14A to be restricted to the exempt income earned by the assessee. The Revenue challenged the relief granted by the CIT(A) on the disallowance, while the assessee appealed against the confirmed additions.

Legal Contention and Decision:
The assessee argued that both years were "unabated/completed" assessment years, and additions made by the AO lacked incriminating material and should be deleted. The Tribunal analyzed the legal contentions and held that incriminating material was absent for the additions made in both years. Relying on precedent, the Tribunal concluded that additions in completed assessments without incriminating material were impermissible. The Tribunal cited the decision in the case of Abhishir Buildwell P Ltd to support its ruling.

Judgment and Conclusion:
The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeal, emphasizing that additions made by the Assessing Officer lacked incriminating material and were therefore liable to be deleted. The Tribunal's decision obviated the need to address the issues on merit, leading to the final verdict in favor of the assessee.

Separate Judgment:
The judgment was delivered by SHRI B.R. BASKARAN (AM) & SHRI RAHUL CHAUDHARY (JM) of the Appellate Tribunal ITAT MUMBAI, with legal representation from both parties.