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2014 (11) TMI 99 - AT - Income TaxAd hoc estimated disallowance of expenses – Scope of assessment u/s 153A – Applicability of section 158BB – Held that:- The language of section 153A has been structured in such a way so as not to permit the making of addition for the assessment year of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search - as decided in Sanjay Aggarwal Ver1sus DCIT, Central Circle-5, New Delhi. [2014 (7) TMI 254 - ITAT DELHI ] - no addition can be made for any assessment u/s 153A of the Act, the assessment for which is not pending on the date of search unless any incriminating material found in the course of search - the action of the AO assuming jurisdictional u/s 153A of the Act was contradictory to the second proviso to section 153A of the Act inasmuch as the assessment for the concern assessment year was not pending - where none of the assessment was pending on the date of search the AO precluded from the re-agitating issues u/s 153A of the Act, which have attained finality in the original assessment dehors any incriminating material found during the course of search – the contention of the assessee is accepted that the only action left for the AO in that respect as no addition was conceived on incriminating material as to drop the proceedings - under the provision of the Act only the proceedings which are pending shall got abated - any proceedings that has reached its finality shall not be disturbed unless there is incriminating material found indicating the existence of income embedded in the said incriminating material/document/evidence. No incriminating material has been proved to have been found during the course of search operation which belonging to the assessee warranting the reassessment u/s 153A r.w.s. 143(3) of the Act for the AY - the AO has invoked provision of section 14A of the Act read with Rule 8D of the IT Rules 1962 for the AY 2006-07 but the provision of Rule 8D of the Rules have prospective effects from A.Y. 2008-09 onwards - the AO made addition on wrong and unjustified reasons and basis which was upheld by CIT(A) without considering the factual matrix of the case and without affording due opportunity of hearing for the assessee - adhoc estimated disallowance by invoking provision of section 14A read with Rule 8D of the Rules is not permissible in AY 2006-07 because as per second proviso to section 153A of the Act inasmuch as the assessment for the year was not pending on the date of search then the AO is precluded from re-agitating the issues during reassessment proceedings u/s 153A of the Act which have attained finality in the original assessment dehors any incriminating material found during the course of search - there was no incriminating material was found during the course of search for the year – the addition made by the AO has upheld by the CIT(A) is not sustainable – Decided in favour of assessee.
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