Brief of the Case
ITAT Mumbai held In the case of M/s. Ideal Appliances Co. Pvt. Ltd. vs. DCIT that it is settled legal position that no addition can be made to the income already assessed since no incriminating material was unearthed during the search. Also in those cases where the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search, it will be considered that there was no assessment pending. Therefore, addition could be made only on the basis of incriminating material found during search.
Facts of the Case
The assessee is engaged in the business of financing and letting of cars and commercially exploiting properties. Assessee filed the return of income on 29.10.2005 declaring the total income of Rs. 26,52,740/- for the AY 2005-06. As a result of the scrutiny assessment, assessee’s income was determined at Rs. 26,99,231/-. A search was conducted on 6.10.2010 at the premises. Subsequently, assessee was issued notice u/s 153A. In response to the said notice, assessee filed the revised return of income declaring the total income of Rs. 26,93,886/- on 11.2.2013. In the process, AO issued notice u/s 142(1) on 14.1.2013. After considering the assessee’s submissions and relevant documents, AO passed the order u/s 143 (3) r.w.s 153A and the assessed income is determined at Rs. 45,41,618/-.
Contention of the Assessee
The ld counsel of the assessee submitted that all appeals under consideration have a legal issue and the same is summarized as and when the assessments involved are non-abated assessment (either regular assessments are completed u/s 143(3) and the quantum proceedings are not pending or the due date for issue of notice us 143(2) has expired, the additions, if any, in the search assessment can be made basing on any incriminating material seized u/s 132 of the Act and forwarded to the concerned AO as per the procedure laid down in the Act. Drawing our attention to each of the assessment order and each of the additions made by the AO in all the AYs under consideration, Ld Counsel for the assessee demonstrated that there is no reference to the seized material in any of the additions made by the AO in all the 5 AYs. Further, he mentioned that the additions made were actually in the nature of routine additions which are made under regular assessment.
Ld Counsel for the assessee also argued that such additions are unsustainable in law. In support of his contention, Ld Counsel for the assessee filed voluminous papers books and demonstrated that the additions made by the AO are unsustainable in law and no incriminating material was found during the search. Ld Counsel for the assessee relied on various decisions of the Tribunal viz., the decision of the Tribunal in the case of Shri Govind Agarwal v. ACIT being ITA No: 3389/Mum/2011 dated 10.01.2014 wherein the Hon’ble Tribunal held that in case of non-abated years, addition can only be made with respect to seized material found during the course of search. While arriving at this conclusion, the Hon’ble Tribunal has relied upon the order of the Hon’ble Tribunal in the case of All Cargo Global Logistics v. Addl.CIT 137 ITD 287(Mum)(SB) which has since been upheld by the Hon’ble Bombay High Court referred above. Hence, as per the decision of the Hon’ble Bombay high Court and the order of the Hon’ble Tribunal, no addition can be made on account of notional interest and deemed dividend since no incriminating material has been found during the course of search. In view of the above, it is the submission of the Ld AR that on the basis of the legal propositions, the additions made by the Assessing Officer are bad in law and hence are to be deleted.
Contention of the Revenue
The ld counsel of the revenue relied on the order of the AO and the CIT (A).
Held by CIT (A)
CIT (A) after considering the submissions of the assessee, dismissed the legal issue raised before him and partly allowed the appeal on merits.
Held by ITAT
ITAT held that Hon‟ble Delhi High Court in the case of CIT vs. Kabul Chawla vide ITA Nos. 707/2014 and others, dated 28.8.2015, wherein the Hon‟ble Delhi High Court has reiterated the settled legal proposition that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
From the above settled legal position of the issue that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same. Considering our decision on the legal issue in favour of the assessee, the other grounds demand no specific adjudication.
Further, regarding the non-abated nature of the assessments relating to the AYs 2007-2008, 2008-2009 and 2009-2010, it is a decided issued that the time limit for the issue of notice u/s 143(2) in the said AYs since expired on 30.9.2008 and they constitute non-abated assessments and therefore, the assessments for those AYs have to be reassessed under the special provisions in the light of the incriminating material seized during the search. The above said ratio was also followed by the Tribunal in the case of Gurinder Singh Bava vs. CIT  28 Taxmann.com 328 (Mumbai –Trib.) wherein it was held that where the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search, there was no assessment pending. In such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search.
Accordingly appeals of the assessee allowed.
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