2020 (12) TMI 729 - AT - Income Tax

Assessment u/s 153A - addition for unexplained deposits - HELD THAT - AO has made the addition for these six years on account of unexplained deposits in the bank account of the assessee. As assessee has contended that the additions were made by the AO by considering the deposits only made during the year without taking into account the corresponding withdrawals by the assessee. Thus it is pleaded that the addition if any can be made only for the peak credit in the bank account of the assessee. Since this issue of considering the withdrawals requires verification of the record and therefore, in view of the submissions of both the parties the matters for all these six years is remanded to the record of the Assessing Officer for re-adjudication of the issue of addition on merits after considering the explanation of the assessee including withdrawals made by the assessee from the bank account. Needless to say the assessee be given a proper opportunity of hearing. As regards, the legal issue raised by the assessee challenging the validity of the addition made by the AO in the absence of any incriminating material found and seized during the course of search and seizure operation the same is kept open to be agitated by the parties, if need arises. AO is directed to give finding of fact whether any incriminating material was found and seized during the course of search and seizure action disclosing any undisclosed income of the assessee on account of the deposits made in the bank account.

Issues:
- Validity of assessment under section 153A r.w.s. 143(3) of the Income Tax Act
- Addition made by AO in absence of incriminating material found during search and seizure
- Challenge to the order passed by CIT(A) under section 250 and 154 of the Act
- Proper consideration of withdrawals along with deposits by the AO
- Legal issue regarding the validity of addition without incriminating material

Analysis:

1. Validity of Assessment under Section 153A r.w.s. 143(3) of the Income Tax Act: The assessee challenged the assessment under section 153A for the years 2008-09 to 2013-14. The AO made additions on account of unexplained deposits in the bank account of the assessee under section 69 of the Income Tax Act. The CIT(A) confirmed the additions made by the AO, leading to the filing of appeals by the assessee against the orders passed under section 250 and 154 of the Act.

2. Addition Made by AO in Absence of Incriminating Material: The assessee contended that the additions were made without any incriminating material found during the search and seizure operation. The CIT(A) did not adjudicate on this issue, prompting the assessee to file a petition under section 154 for consideration of this ground. However, the petition was dismissed by the CIT(A), leading to the filing of appeals against both orders.

3. Challenge to the Orders Passed by CIT(A) under Section 250 and 154 of the Act: The appeals raised various grounds challenging the validity of the assessment, the legality of additions made, and the consideration of withdrawals along with deposits. The assessee argued that the AO and CIT(A) did not properly consider the corresponding withdrawals by the assessee and that the additions should have been based on peak credits in the bank account.

4. Proper Consideration of Withdrawals by the AO: The learned counsel for the assessee argued that the AO did not consider the withdrawals made by the assessee while making additions for unexplained deposits. The matter was remanded to the AO for re-adjudication to consider withdrawals along with deposits for each year, ensuring the assessee is given a proper opportunity of hearing.

5. Legal Issue Regarding Validity of Addition without Incriminating Material: The legal issue challenging the validity of additions made by the AO in the absence of incriminating material was kept open for further consideration. The AO was directed to ascertain whether any incriminating material was found during the search and seizure action, which could disclose undisclosed income related to the bank account deposits.

In conclusion, all the appeals were allowed, emphasizing the need for proper consideration of withdrawals along with deposits by the AO and leaving the legal issue regarding the validity of additions without incriminating material open for further examination.

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