2020 (7) TMI 597 - AT - Income Tax

Assessment u/s 153A - enhancement of income without following the mandatory/statutory requirement - non complying with the provisions of section 251(2) - HELD THAT - We set aside the order of learned Commissioner (Appeals) on the issue and restore the matter back to his file for deciding afresh after complying with the provisions of section 251(2) of the Act. As regards second contention of the assessee that in the absence of any incriminating material the disputed addition could not have been made we must observe that since we have restored the issue back to the file of learned Commissioner (Appeals) for not complying with the provisions of section 251(2) of the Act it is not desirable for us to express any conclusive opinion on the aforesaid contention of the assessee. However it is trite law in absence of any incriminating material found as a result of search no addition can be made in an unabated assessment completed under section 153A r/w section 143(3). Appeal is allowed for statistical purposes. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI .

Issues Involved:
1. Legality of enhancement of assessed income without issuing a show cause notice under section 251(2) of the Income Tax Act, 1961.
2. Validity of addition in an unabated assessment in the absence of incriminating material.
3. Procedural issue relating to the pronouncement of the order beyond the stipulated 90-day period due to COVID-19 lockdown.

Issue-wise Detailed Analysis:

1. Legality of Enhancement of Assessed Income:
The primary issue in this appeal is whether the learned Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to enhance the assessed income by Rs. 10,73,406 without providing the assessee an opportunity to be heard as required under section 251(2) of the Income Tax Act, 1961. The assessee argued that the enhancement was done without issuing a show cause notice, which is a mandatory requirement under section 251(2). The Tribunal observed that section 251 empowers the first appellate authority to confirm, reduce, enhance, or annul the assessment. However, sub-section (2) mandates that no enhancement or reduction shall be made unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. The facts on record indicated that the Commissioner (Appeals) did not issue a show cause notice before enhancing the income, making the enhancement legally unsustainable. Consequently, the Tribunal set aside the enhancement order and remanded the matter back to the Commissioner (Appeals) for fresh adjudication after complying with section 251(2).

2. Validity of Addition in an Unabated Assessment:
The second contention was that in the absence of any incriminating material found during the search, no addition could be made in an unabated assessment. The Tribunal noted that the issue of the assessee's investment in shares, which were sold during the year, was not part of the original assessment order passed under section 153A read with section 143(3). This issue emerged only during the appellate proceedings when the Commissioner (Appeals) directed the Assessing Officer to verify the evidences and submissions made by the assessee. The Tribunal highlighted that in the absence of incriminating material found during the search, no addition could be made in an unabated assessment completed under section 153A read with section 143(3). The Tribunal referred to its earlier order dated 7th August 2018, where it had deleted other additions made by the Assessing Officer on similar grounds. Therefore, the Commissioner (Appeals) was directed to consider this aspect while deciding the issue afresh.

3. Procedural Issue Relating to Pronouncement of the Order:
The Tribunal addressed the procedural issue concerning the delay in pronouncing the order beyond the stipulated 90-day period due to the nationwide COVID-19 lockdown. As per rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, the order should be pronounced within 90 days from the conclusion of the hearing. However, due to the unprecedented situation caused by the lockdown, the Tribunal could not pronounce the order within this period. The Tribunal referred to the decision in DCIT V/s JSW Limited, where it was held that the lockdown period should be excluded from the 90-day time limit for pronouncement of orders. The Tribunal emphasized that the extraordinary circumstances of the lockdown warranted a pragmatic interpretation of the time limits set out in rule 34(5). Consequently, the Tribunal proceeded to pronounce the order by placing it on the notice board in compliance with rule 34(4).

Conclusion:
The appeal was allowed for statistical purposes, with the enhancement issue remanded back to the Commissioner (Appeals) for fresh adjudication in compliance with section 251(2) and consideration of the absence of incriminating material. The procedural delay in pronouncing the order was justified due to the COVID-19 lockdown.

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