The Chandigarh bench of Income Tax Appellate Tribunal (ITAT) recently held that the Assessing Officer could not disturb assessment order or re-assessment order which has attained finality except during the proceedings under section 153A of Income Tax Act 1961.
Section 153A of Income Tax Act 1961 provides that when a search was initiated against a person as per section 132 or requisitioned any document as per section 132A, the assessing officer can issue a notice to verify the return of income of each assessment year falling within the six assessment year and assessing officer shall reassessed the total income of six assessment year.
A search was conducted on the residential premises and business premise of the assessee Longowalia Yarns Limited. Thereafter, notice under section 153A was issued and assessment was framed under section 153A of the Income Tax Act 1961. After the original assessment was framed an amount of rupees 11 crore was made on account of unexplained share application money received under section 68 of the Income Tax Act 1961.
After the reassessment assessment was required to show cause as to why the commission paid to entry operator at 2% for obtaining alleged accommodation entries in the garb of share capital / share application may not be added as unexplained expenditure under section 69C of the Income Tax Act 1961.
But the assessing officer was not satisfied with the answer given by the assessee and the Assessing officer has proposed a rate of commission at 2% as appropriate and justified, and has made the addition under section 69C of the Income Tax Act 1961. Against the order assessee filed an appeal before the ITAT.
Ashwani Kumar,Counsel for the assessee submits that addition could not be sustained in the absence of any incriminating material found during the course of search proceedings.
Vivek Nangia, counsel for the revenue submits that the original assessment for the assessment year under consideration stood completed and not abated as on the date of search.
Further relied upon the decision of the Allahabad High Court in case of Sri Raj Kumar Arora revenue counsel contented that “it is open to the AO to assess / reassess the income of the assessee under section 153A of the Act even bereft of any incriminating material found during the course of search”.
After considering the contentions of the both parties the division bench of ITAT comprising Vikram Singh Yadav, (Accountant) and. Sanjay Garg, (Judicial Member) allowed the appeal filed by the assessee and held that the original assessment proceedings stood completed under section 143(3) Income Tax Act 1961 was not abated as on the date of search no incriminating material has been found during the course of search proceedings basis which the addition towards unexplained expenditure under section 69C Income Tax Act 1961 has been made Nothing has been brought on record by the Assessing officer either in the reassessment proceedings. Hence there is nothing to justify on the part of the Assessing Officer for making the impugned addition under section 69C Income Tax Act 1961 in the case of the assessee.
Further the bench observed that “The Assessing Officer cannot disturb the assessment order or reassessment order which has attained finality, unless the material gathered in the course of proceedings u/s 153A of the Act establishes that relief granted under the final assessment/reassessment was contrary to the fact unearthed 6 during the course of 153A proceedings.”
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