2014 (9) TMI 1071 - AT - Income Tax

Assessment u/s 153A - validity of additions made - Held that - The underlying purpose of making assessment of total income u/s 153A is to assess income which is not disclosed or would not have been disclosed. Second proviso to section 153A providing for abatement of assessment or reassessment which is applicable only in proceedings pending on the date of search or requisition for the reason that there cannot be two assessments for a single assessment year. See CIT Vs. M/s Murali Agro Products vide 2010 (10) TMI 1052 - BOMBAY HIGH COURT . It is also a settled position of law that reassessment is permitted in an assessment u/s 153A only if incriminating material is found during the course of search. In the case in hand the question is whether any incriminating material has been found in the course of search relating to the additions made. The Revenue could not show any incriminating material found in the course of search which would warrant the impugned additions. Therefore we are of the considered opinion that there is no justification for the authorities below to consider the issues in the assessment passed u/s 153A. In view of that matter both the additions made in the impugned assessment order are not justified. - Decided in favour of assessee.

Summary

Issues: Validity of assessment made u/s 153A of the Income Tax Act, Disallowance of business loss and bad debts written off

Validity of assessment made u/s 153A of the Income Tax Act:
The appeal challenged the decision of the Ld. CIT(A) confirming the AO's disallowance of business loss and bad debts written off. The assessee filed an additional ground of appeal regarding the validity of the assessment made u/s 153A. The Tribunal admitted this legal ground based on the decision of the Hon'ble Apex Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383. The Tribunal analyzed the search and seizure action u/s 132 conducted in the SSKI group and the assessee's coverage under search. Since the assessment for the relevant year had attained finality before the search, the Tribunal held that the AO lacked jurisdiction to review finalized assessments. Citing precedents like All Cargo Global Logistic Ltd. Vs. DCIT and Jai Steel (India) Vs. ACIT, the Tribunal emphasized that reassessment under section 153A requires the presence of incriminating material found during the search. As no incriminating material was shown by the Revenue, the Tribunal concluded that the additions made in the impugned assessment order were unjustified. Consequently, the Tribunal quashed the disallowances made by the authorities below for the assessment year in question.

Disallowance of business loss and bad debts written off:
The assessee contested the disallowance of business loss and bad debts written off by the AO, which was upheld by the Ld. CIT(A). The Tribunal, after considering both sides and the material on record, found that the assessment for the relevant year had attained finality before the search conducted under section 132. Referring to legal principles and precedents, the Tribunal held that the AO lacked jurisdiction to review assessments that had already been finalized. The Tribunal stressed that reassessment under section 153A necessitates the presence of incriminating material found during the search, which was not demonstrated by the Revenue in this case. Therefore, the Tribunal deemed the disallowances made by the authorities below as unjustified and quashed them. Consequently, the appeal filed by the assessee was allowed, pronouncing the order in open court on September 23, 2014.